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Insider Analysis on American and Canadian Banking Sector

Monica Wolfe

Monica Wolfe

119 followers
With the increase in insider buying within the American regional banking sector, I decided to look into the same sector in the Toronto Stock Exchange (TSX). Using the All-in-One Guru Screener, I looked for banking companies that matched the following criteria.

1. Reported 2+ insider buys in 2013

2. Maintained equity to asset ratio of around 10 to 15%.

3. Reported a low percentage of nonperforming assets

4. Has a P/B Ratio > 0.6

5. Trades at a price above $1

Using this criterion, I found a total of 13 American companies and none for Canada. When I removed all of the criteria, minus the insider transactions, it resulted in only 2 Canadian banks that offered insider transactions in the past five months. The following five companies most similarly matched my initial criteria and reported the largest insider buys in terms of cost ($).

American Regional Banking Companies

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1. First Security Group (FSGI)

On April 11, FSGI reported 11 insider buys as the company reported a “strategic recapitalization” program. These insiders bought a total of 557,908 shares for $1.50 per share. The total combined transaction amount for these insiders was $836,862.

Guru Michael Price also bought shares during the recapitalization. He added a total of 6,080,000 shares.



Since this buy the price of FSGI has increased 255.33%. The price is currently sitting at a 2-year high.

First Service Group is the holding company for FSGBank which serves areas of Tennessee and Georgia.

The company has a very low P/B Ratio of 0.3.

FSGI’s nonperforming assets make up 3.6% of the company’s total assets. The bank has a very low equity to asset ratio of 2.62%, but due to the recent growth of the company—I chose to keep in the analysis.

First Security announced a recapitalization program in the beginning of April, in order to jump start and reverse the past five years of revenue decline. On April 11, the company issued 9.9 million shares of its common stock to the U.S. Treasury. The Treasury then sold those shares to previously named investors of the company for $1.50 per share. First Security sold an additional 50.8 million shares at $1.50. In total investors purchased 60.735 million shares for $91.1 million.

With its shares up 31.49% today, FSGI trades at $6.89.

2. Community Bank Shares of Indiana (CBIN)

In 2013, Community Bank Shares of Indiana has reported a total of 7 insider buys coming from three different insiders. These executives have bought a total of 22,359 shares at an average price of $16.07 per share. The total transaction amount for these purchases is $358,460.



The GuruFocus analysis shows that Community Bank’s price is nearing the 3-year high it hit earlier this year. It also demonstrates that the per share revenue has been in decline for the past year.

On April 18, the Board reported a 10% increase in cash dividends per share to $0.11. The net income available to common shareholders was $1.7 million, a 4.2% increase from the same quarter 2012.

Community Bank Shares of Indiana is a bank holding company for community banks, Your Community Bank and The Scott County State Bank. The company offers deposit services as well as small business loans. The banks currently have a “strategic alliance” with Wells Fargo (WFC).

Community Bank’s P/B Ratio is at 0.6.

The company’s nonperforming assets currently make up 3.03% of its total assets. The equity to asset ratio is at 10.5%.

There are currently no gurus that hold stake in CBIN.

Community Bank Shares of Indiana currently trades at $15.82.

3. LNB Bancorp (LNBB)

LNB Bancorp has reported a total of 8 insider buys coming from 4 different insiders this year. These insiders made two separate cluster buys. In total the insiders bought 3,234 shares which cost them a cumulative $22,982. The first set of buys traded at an average price of $6.20 and the second set of buys cost $8.33 per share.

Since the first set of buys the price has increased 38.32%. The price of LNBB is currently sitting at a 3-year high.



LNB Bancorp is the holding company for Lorain National Bank. The company owns 20 banking offices and 30 ATMs throughout Ohio.

Guru Arnold Schneider holds 25,869 shares and Jim Simons holds 17,400 shares of LNBB. To see all of the guru trades at LNB, click here.

The GuruFocus analysis of LNB shows that the company’s revenue has been in decline for the past three years. The company has also issued $4.5 million of debt in the last three years, but it keeps enough cash on hand to cover all debts.

LNB Bancorp’s P/B Ratio is at 0.6.

The company has paid a $0.01 cash dividend to its common stockholders since 2010.

LNB Bancorp has an equity to asset ratio of 9.65%. The company’s nonperforming assets make up 2.48% of its total assets.

With its shares up 0.08%, LNB Bancorp trades at $8.58.

Canadian Banking Companies

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1. National Bank of Canada (TSX:NA)

National Bank of Canada has reported a total of 15 insider buys coming from 14 different insiders so far this year. These insiders have purchased a total of 2,872 shares at an average price of $75.70 per share. The total transaction amount for these insiders is $220,549.



The company’s insider buys come as the price of National Bank of Canada is nearing a 10-year high.

According to the GuruFocus analysis of National Bank, the company’s dividend is close to a 3-year high. The P/E and P/S ratios are close to 3-year lows of 7.85 and 2.1 respectively. The operating margin of the company is expanding, resulting in consistent per share revenue and earnings growth.

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The financials of the company show that it has issued $3.9 billion of debt in the past three years.

The company’s P/B ratio is at 1.7.

In their most recent quarterly results ending Jan. 31, 2013, the company reported a net income of $361 million compared to $353 million in the same quarter of 2012. The company also reported a fully diluted EPS of $2.02 for Q1 of 2013 compared to $2.00 in 2012.

The company offers an equity to asset ratio of 11.71% as of Jan. 31, 2013. The company’s nonperforming assets make up 3.53% of the company’s total assets.

National Bank of Canada provides financial services to consumers and small and medium-sized enterprises throughout Canada. The bank also has subsidiaries and alliances in the U.S. and Germany.

The Tweedy Browne Global Value and Leith Wheeler Canadian Equity both hold shares in National Bank of Canada. To see the stake these gurus hold, click here.

With its shares up 0.29%, TSX:NA trades at $75.29.

2. Pacific & Western Credit Corp (TSX:PWC)

Since February, three insiders have made ten buys into Pacific and Western Bank of Canada. These insiders added a total of 52,600 shares at an average price of $1.32 per share. These insiders spent a total of $68,331 on these transactions.



All of these buys came as the price of Pacific and Western hit an extended low in price.

The analysis on Pacific and Western shows that the company has been in an operating loss over the past three years. The company has also issued $29.202 million of debt in the past three years.

Pacific & Western Credit Corp is the holding company for Pacific & Western Bank of Canada. The bank deals primarily with deposit services and lending services for the individual or small businesses.

Pacific & Western has a P/B ratio of 2.3.

The company recently released a statement reporting that it had purchased an additional $30 million of its bank’s common equity. This increased the bank’s common equity tier one (CET1) to approximately 10.4%

The company’s equity to asset ratio was 6.17% as of Dec. 31, 2012. Pacific & Western’s nonperforming assets made up 1.7% of the company’s total assets.

There are currently no gurus with stake in Pacific & Western.

The company currently trades at $1.40.

While the regional banking industry in America is trading at relatively high prices, the Canadian banking industry has reported these insider buys as their share prices have gone down to 52-week lows. To view more banking companies in America and Canada reporting insider trades within the past week, click here.

Rating: 4.6/5 (5 votes)

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