How These Two CEOs Might Be Playing Higher Interest Rates


Insiders aren’t biting yet. The stock market struggled in the early part of last week with corporate executives staying on the sidelines. We hoped to see a surge of insider buying as a possible sign of some bottom fishing. Maybe Friday’s surge will lure executives into the market this week.

The lack of insider enthusiasm for lower prices didn’t provide any standalone ideas. So, we are taking a little different direction today. Inflation is here and so is the likelihood that the Federal Reserve is going to raise interest rates. As a result, regional bank stocks have been among the best performing sectors in the last few weeks. A couple of Chief Executive Officers (CEO) from smaller banks made some smaller purchases last week.

Banc of California, Inc. (BANC) Chief Executive Officer Jared Wolf bought 5,015 shares of the regional bank at $19.70 for a total investment of $98,796. It’s the fourth time in the last five years he’s bought shares, ranging in price from $11.50 to last week’s $19.70. On February 1st, Director James Barker joined in, buying 12,900 shares at $19.32 for a little less than a quarter-million dollars. (1)

As of December 31, 2020, the company operated 29 full-service branches in Southern California offering traditional banking products. Wall Street has a one-year price target of $24.57 on the Southern California bank, which pays a dividend of $0.24 per share, for an annual yield of 1.24%. (2)

If Banc of California hits Wall Street’s price target, its potential total return from BANC’s current price of $19.53 is 27%, including dividends.

Berkshire Hills Bancorp, Inc. (BHLB) is the second regional bank with CEO buying. Chief Executive Nitin J. Mhatre purchased 2,700 shares at $29.48, totaling $79,595. Mhatre bought a bunch of BHLB in May, came back for some more in June, again in September, and then last week. (3) We like to see a CEO continue to buy as the price moves up the ladder.

Berkshire Hills Bancorp has been around a long time, founded in 1846, and as of December 31, 2020, the company operated 130 full-service branches in Massachusetts, New York, Connecticut, Vermont, Central New Jersey, and Eastern Pennsylvania.

Analysts don’t see as much upside potential with BHLB as they do BANC. Berkshire Hills Bancorp’s 12-month price target is $32.67. However, BHLB has a little better dividend yield than Banc of California. The Boston-based bank pays a dividend of $0.48 per year for a yield of 1.62%. At its one-year price target, Berkshire Hills Bancorp potential total return is 10.68%, based on its current price of $29.95.

On the dividend front, Berkshire Hills Bancorp’s management raised the dividend every year from 2015 through the first half of 2020. Then COVID came and the annual dividend was cut in half, $0.96 a year to $0.48. (4) In our opinion, it would not be surprising to see management up the payment as business recovers.

Overall: With interest rates likely to go higher, regional banks could be strong performers. Investors looking for exposure to the sector might consider Banc of California, Inc. (BANC) and/or Berkshire Hills Bancorp, Inc. (BHLB).

Investors looking for more price appreciation might prefer BANC. Whereas, more income-oriented investors might see BHLB as a better fit.


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