As Coronavirus fears spike and market tanks, Bank Insiders back up the truck to buy.

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The stock market crash over the last week is drawing comparisons to the mother of all bad markets — October of 2008. There are many similarities, including this one: Bank insiders bought heavily into weakness back then, and they’re beginning to buy heavily now.

We’ve just witnessed the biggest oil-price plunge since 1991, an astonishing free-fall in Treasury yields, a 25% S&P 500 correction in barely three weeks, and a massive spike in fear. All 2008-like events, though maybe not quite on the same extreme scale. Investors who were in the market back in 2008, might have a feeling of deju vu — that gut-wrenching anxiety that accompanies watching a chunk of one’s wealth evaporate in a matter of weeks. And then the question: “How much worse can it get?”

Banks were at the center of the 2008-09 crisis. They’d spent years packaging risky subprime loans as investment grade securities and selling them to unwitting investors who lost their shirts. The contagion associated with subprime mortgages caused the deepest recession in the U.S. since the Great Depression.

In 2008, the contagion to the economy was internal — subprime mortgages. In 2020 the contagion is external — Covig-19.

But the contagion is different this time around. An exogenous shock — a global pandemic — is behind the market carnage. Banks, though they have some exposure to leveraged loans, are not nearly as vulnerable as 12 years ago — a fact banking insiders appear to be well aware of.

Banks are confronting the emerging economic threat of the Coronavirus “with more capital and better capital” than they had leading up to the 2008 crisis, Jaret Seiberg, an analyst with Cowen Washington Research Group, told American Banker. Unlike before the financial crisis, banks now undergo rigorous stress testing, he said.

“Regulators and bankers know these risks and have planned for these risks,” Seiberg said. “It is hard for us to believe that leveraged loans could become the new subprime mortgages given this focus.”

Weekly insider buys vs sells in the Finance sector have been surging. With one day left in the week, the 325 purchases by banking officers and directors is the 4th most since 2008 began. Only Aug. 2011, Nov. 2008 and March of 2009 showed more buyers. All these dates were near correction bottoms.

Seiberg added that both today’s banks and today’s housing market are more stable compared to 2008 and are “better able to withstand turbulence and economic losses associated with COVID-19 than they were for losses connected to subprime loans.”

Farley says the economic impact of the coronavirus is much more likely to be a blip rather than a cataclysmic event for mounting corporate debt.

“Given the availability and extremely low cost of capital, I think all but the most highly leveraged, directly impacted businesses will sail through,” he said.

With one day left in the week, the number of purchases by banking insiders is nearing record highs.

Banking insiders would seem to agree. Over the last four days alone, Banking sector officers and directors have made 325 purchases — 4th highest for a week since 2008 began. And there’s one day left in the week! The WhaleWisdom ratio of bank insider sales vs buys registered 0.10 as of Thursday. That’s a bullish level similar to Aug. 2011, Nov. 2008 and March of 2009 — all near correction lows.

Keep in mind that in volatile, panic-driven markets, price may overshoot value on the downside. Banking insiders buying may be early. However, if history repeats, investors following insiders into the battered financial stocks will be rewarded over time.

Here are some of the largest/most significant insider purchases by officers and directors in the banking sector from March 9 through March 12. Again, use these filings as a starting point for further research. Scale in slowly. Manage risk!

Bank insiders’ significant purchases March 9 – 12.

Most Recent FilingCompanySymbolIndustry# InsidersLast Trade Total Shares Avg. Price Total 
12-Mar-2020Prosperity Bancshares Inc.PBRegional – Southwest Banks611-Mar-2020      71,300 51.05 $     3,639,874
12-Mar-2020PNC Financial Services Grou…PNCMoney Center Banks210-Mar-2020      24,465 102.38 $     2,504,813
12-Mar-2020First Financial Bankshares …FFINRegional – Southwest Banks312-Mar-2020      77,841 23.78 $     1,851,388
12-Mar-2020Live Oak Bancshares, Inc.LOBSavings & Loans411-Mar-2020    117,869 11.67 $     1,376,106
12-Mar-2020Pinnacle Financial Partners…PNFPRegional – Southeast Banks311-Mar-2020      23,159 42.85 $        992,322
12-Mar-2020First Horizon National Corp.FHNRegional – Southeast Banks112-Mar-2020    100,000 9.08 $        907,700
11-Mar-2020Lakeland Financial Corp.LKFNRegional – Midwest Banks410-Mar-2020      22,854 37.1 $        847,830
11-Mar-2020German American Bancorp Inc.GABCRegional – Midwest Banks210-Mar-2020      19,500 26.97 $        525,825
12-Mar-2020BancFirst CorporationBANFRegional – Southwest Banks412-Mar-2020      12,950 36.42 $        471,578
11-Mar-2020Washington Federal Inc.WAFDSavings & Loans311-Mar-2020      17,919 25.75 $        461,404
12-Mar-2020Centerstate Banks of Florid…CSFLRegional – Southeast Banks412-Mar-2020      26,500 17.13 $        453,880
10-Mar-2020Synovus Financial Corp.SNVRegional – Mid-Atlantic Banks410-Mar-2020      18,733 23.11 $        432,960
12-Mar-2020Sandy Spring Bancorp Inc.SASRRegional – Mid-Atlantic Banks312-Mar-2020      16,819 25.53 $        429,344
12-Mar-2020SCBT Financial Corp.SSBRegional – Mid-Atlantic Banks211-Mar-2020        7,000 58.73 $        411,130
12-Mar-2020First Financial Corp.THFFRegional – Midwest Banks310-Mar-2020      11,441 35.83 $        409,924
12-Mar-2020First Busey CorporationBUSERegional – Midwest Banks712-Mar-2020      21,450 18.32 $        392,894
12-Mar-2020Independent Bank Group, Inc.IBTXRegional – Southeast Banks209-Mar-2020      10,450 37.26 $        389,368
12-Mar-2020Auburn National Bancorporat…AUBNRegional – Southeast Banks112-Mar-2020        7,357 46.5 $        342,101
12-Mar-2020Cornerstone Bancshares Inc.SMBKRegional – Southeast Banks311-Mar-2020      18,100 17.85 $        323,145

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