The Untold Story of What’s Happening Behind The Bad Banks

Something interesting happened last week. Of course, you’ve heard all the bad news about Silicon Valley Bank, Signature Bank and Credit Suisse – bailout or bust. While the headlines lead with blood, there wasn’t much mention of what happened behind the scenes.

We noticed insider purchases accelerated last week. Our first thought was executives believed the bank-driven drop created a buying opportunity in unaffected companies, but that’s not what caused the surge in the number of buys.

Surprisingly, or maybe not, insider after insider from small to regional banks snapped up their company stock in small, medium, and large dollar amounts. In our opinion, it looks as if many bought as much as they could afford.

A few names of note with attention catching insider buys:

    • Byline Bancorp, Inc. (BY)
    • Capital Bancorp, Inc. (CBNK)
    • East West Bancorp, Inc. (EWBC)
    • Coastal Financial Corporation (CCB)


There are plenty more, too many to list.

Customers Bancorp, Inc. (CUBI) interests us for a bunch of reasons. As we type, the stock trades at $18.52 while Wall Street has a one-year consensus price target of $44.88. (1) CUBI has $15.83 per share in cash, a book value of $39.08, and trades with a current price to earnings (P/E) of 4.04. (2)

Customers Bank is the primary subsidiary of Customers Bancorp, Inc. (NYSE:CUBI), one of the nation’s top-performing banking companies with over $20 billion in assets, making it one of the 100 largest bank holding companies in the US. Customers Bank offers commercial and consumer clients a full suite of technology-enabled tailored product experience delivered by best-in-class customer service.

A pioneer in Banking-as-a-Service and digital banking products, Customers Bank is one of the only banks that provides a blockchain-based 24/7/365 digital payment solution to its customers.

Some Major accolades include:

    • #3 top-performing bank with over $10 billion in assets at year-end 2021 per S&P Global S&P Global Market Intelligence,
    • #6 in top-performing banks with assets between $10 billion and $50 billion in 2021 per American Banker, and
    • #21 out of the 100 largest publicly traded banks in 2022 per Forbes. (3)


A couple of industry peer metrics to keep in mind.

The typical competitor trades with a P/E of 9.73 and at 1.06 times book value (P/B) compared to 0.66 for CUBI.

Last year, the Regional Bank earned $6.51 per share. The bottom line number is expected to dip to $5.61 this year and bounce back to $6.50 in 2024.  (4) If Customers Bank traded at the industry norm for P/E and hit Wall Street’s consensus forecasts for 2023 and 2024, the stock would price out at $54.89 and $63.25, respectively. If CUBI hit the industry par using P/B, it generates a possible price target of $41.42, not all that far from Wall Street’s one-year price target mentioned above.

Maybe one, or a combination or all of those, is why four directors acquired CUBI stock during the bank-driven dip last week.

    • Michael Robert Patterson bought 750 shares at $38.59 for $28,943.
    • Thomas D Lane acquired 4,280 shares at $37.38 investing $160,007.
    • In two purchases, Andrew Skotdal added 3,000 shares to his portfolio, spending $106,750.
    • Finally, Steven Hovde wrote a seven-figure check ($1.1M) for 30,000 shares at $37.71.


OVERALL: Customers Bancorp, Inc. (CUBI) does appear to be a value play based on some of its current valuations. However, the issues impacting smaller banks tend not to be one-off events. From our experience, more bad news will likely come, which could see the sectors sell off aggressively across the board again.

CUBI is only for investors with above-average risk tolerance and at least a two-year window.


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