C-Suite Buy of the Week: Bank on It with Big Bets from Top Insiders

Tell me you hate making money without actually saying you hate making money.

That is an easy one. Just say things like, ‘Bank stocks are boring.’ Perhaps one might quip, ‘Bank stocks are too hard to understand.’ Or too risky. Or irrelevant in the age of technology. Or in cahoots with global central banks to join Pinky and the Brain in a quest for global domination.

I have been investing in small banks for decades. Once you learn the rules of successful banking stock investing, it can be a wildly profitable endeavor. Historically, it has been a low beta, high alpha strategy.

Now, banks are emerging from the darkness, and the opportunity is more significant than it has been in years. The Biden administration was not kind to the banking industry. The term started with Saule Omarova’s nomination to a key regulatory post. Ms. Omarova grew up under the Soviet system and was pretty sure they had some good ideas about how to run a banking system. It ended with Biden appointees trying to hold US banks to much higher capital restrictions than those faced by European and Asian banks, creating what would have been a significant disadvantage had it been implemented. In between, it killed or delayed almost every bank deal that crossed its desk.

With Donald Trump back in the White House, I see the banking industry gearing up for another era of deregulation, consolidation, and renewed investor enthusiasm. Bank stocks, battered over the last couple of years by high interest rates, margin compression, and regulatory burdens, could finally be setting up for a powerful rally. Smart investors know that when politicians tinker with the system, it creates opportunity, especially in the world of small and regional banks.

Under Trump 2.0, I expect a significant rollback of regulatory red tape. The last administration made moves to ease restrictions under Dodd-Frank, particularly for smaller banks, and there’s every reason to believe that will continue. Banks with less than $250 billion in assets could see relaxed capital and liquidity requirements, freeing them up to lend more aggressively and improve returns on equity.

This is where the opportunity lies. Community and regional banks, long bogged down by compliance costs and stress-testing requirements that never really made sense for them, could finally breathe again. That means higher net interest margins, improved loan growth, and a more attractive operating environment overall. The market hasn’t priced this in yet, but it will.

I have long been a fan of small banks for one reason: consolidation. With nearly 4,000 banks in the U.S., we’re still long overdue for a serious round of mergers and acquisitions. The Trump administration is expected to take a much friendlier stance toward bank deal-making, particularly among regionals and smaller institutions.

The math here is simple. Larger banks are looking for growth, and organic loan expansion is slow. The fastest way to boost earnings is to acquire a smaller competitor, slash costs, and gain market share. Bank buyers have been hesitant due to regulatory uncertainty, but the floodgates could open with Trump in office and an expected rollback of Biden-era policies. The best-positioned investors will already have their watchlists filled with undervalued, high-quality community banks trading below book value.

For years, I’ve pounded the table on bank stocks, mainly those trading at or below tangible book value with strong loan portfolios and healthy deposit bases. There is massive upside in regional banks that are well-run but overlooked by the market. History shows that when regulatory burdens ease, small banks thrive.

One of the most reliable signals for excess returns in banking stocks is insider buying activity. Bank executives understand their balance sheets and growth potential better than anyone, and when they start buying shares in their own institutions, investors should pay attention. Studies have shown that banks with significant insider buying tend to outperform the market, especially when valuations are low. When you combine a favorable policy environment with strong insider conviction, you get a potent formula for gains.

Insiders have been aggressively buying several banks in the last month as they expect much better conditions and results under the new administration.

NB Bancorp NBBK is a small but promising thrift that recently completed its mutual-to-stock conversion, setting the stage for long-term value creation. The bank operates out of the Greater Boston area with a focus on traditional lending, and it’s growing steadily in all the right places. Fourth-quarter numbers showed solid momentum, with net income jumping to $15.6 million, or $0.40 per share, while deposits and loans continued their steady climb. The net interest margin ticked up to 3.52%, and asset quality remains strong, with non-performing loans down double digits. The real kicker here is the stock buyback. Management is putting its money where its mouth is, authorizing a repurchase of 5% of outstanding shares. This one is worth a closer look for patient investors who appreciate a good conversion story with a strong capital base.

The people running the show are also enthusiastic about the future; in addition to the buyback, several insiders, including the CEO and CFO, have been buying shares recently.

Mid Penn Bancorp MPB is a solid community bank operating primarily in Pennsylvania, demonstrating a consistent track record of growth and shareholder value. As of January 31, 2025, the stock is trading at $30.56 per share. In the fourth quarter of 2024, the bank reported earnings of $0.72 per share, contributing to a full-year profit increase of 32.2% to $49.4 million. Loan growth remained robust, with a $67.1 million increase in the third quarter, reflecting a 6.2% annualized growth rate. The bank’s commitment to returning capital to shareholders is evident through its repurchase of 15,500 shares at an average price of $20.81 in 2024. Additionally, CEO Rory G. Ritrievi recently acquired 3,050 shares at $30.05 each, signaling confidence in the bank’s trajectory. For investors seeking a stable, growth-oriented community bank with a shareholder-friendly approach, Mid Penn Bancorp presents a compelling opportunity.

We are coming into a golden age of bank stock returns. Tracking insiders and buying into situations where insiders have used their personal cash to express their confidence in the future should be a highly rewarding strategy.