Bank Squeeze: Here Are 10 Stocks Bucking the Trend

Here's a unique problem facing banks: too much cash. The New York Times reports "droves" of customers have been pulling money out of risky investments and stocking it away in banking accounts, and banks don't know what to do with it all.

Financial institutions, both big and small, see this as a problem. The money sitting in accounts does little to stimulate the economy, and with "fewer attractive lending and investment options for that money, it is harder for the banks to turn it around for a healthy profit."

Back in the days of growth and economic prosperity, banks couldn't open new branches and accounts fast enough. They would be quick to take the money and turn it around to finance new businesses, home purchases, and the like.

But nowadays, in a troubled economy, banks set aside less money to finance loans and earn less profit generated from new ones. "Because the Federal Reserve effectively sets the floor off which banks price their lending rates, its decision to lower interest rates to near zero means the banks earn less money on the deposits they lend out," reports New York Times.

It's also become difficult to find "quality borrowers" -- those whose credit, income, and assets suggest they would be reliably paid back. Simply put, banks aren't interested in having more cash lying around because it's becoming too difficult to make a worthwhile profit.

Of course, not all banks are upset by the heavy cash inflows. A few think the growing pile of new money will be worthwhile when the economy improves. And it may improve consumer relations compared to other banks that are finding ways to discourage the new trend, or to at least make a profit from it. For example, "in August, Bank of New York Mellon warned that it would impose a 0.13 percentage point fee on the deposits of certain clients who were moving huge piles of cash in and out of their accounts."

All in all, banking spreads are being squeezed, meaning they are making less money on each dollar they hold.

But this trend isn't concerning too many sophisticated investors. We've found a few examples where institutional investors and insider executives have been snapping up shares of banks -- we list the biggest ones below.

Insiders and hedge funds appear to be optimistic on the outlook of these banks, despite the current environment -- do you agree with their bullishness?

List sorted by market cap. (Click here to access free, interactive tools to analyze these ideas.)

List compiled by Eben Esterhuizen, CFA:

1. UMB Financial (Nasdaq: UMBF  ) : Provides banking and other financial services in the United States. Net institutional purchases in the current quarter at 2.2M shares, which represents about 6.83% of the company's float of 32.20M shares. Over the last six months, insiders were net buyers of 15,405 shares, which represents about 0.05% of the company's 32.20M share float.

2. First Financial Bankshares (Nasdaq: FFIN  ) : Provides commercial banking products and services primarily in Texas. Net institutional purchases in the current quarter at 1.1M shares, which represents about 3.73% of the company's float of 29.52M shares. Over the last six months, insiders were net buyers of 12,558 shares, which represents about 0.04% of the company's 29.52M share float.

3. Pacific Capital Bancorp (Nasdaq: PCBC  ) : Provides a range of commercial and consumer banking services to households, professionals, and businesses primarily in the central coast of California. Net institutional purchases in the current quarter at 524.5K shares, which represents about 12.86% of the company's float of 4.08M shares. Over the last six months, insiders were net buyers of 3,495,414 shares, which represents about 85.67% of the company's 4.08M share float.

4. Central Pacific Financial (NYSE: CPF  ) : Operates as the bank holding company for Central Pacific Bank that provides commercial banking services to businesses, professionals, and individuals in Hawaii. Net institutional purchases in the current quarter at 15.4M shares, which represents about 69.56% of the company's float of 22.14M shares. Over the last six months, insiders were net buyers of 515,500 shares, which represents about 2.33% of the company's 22.14M share float.

5. Tower Bancorp (Nasdaq: TOBC  ) : Operates as the holding company for Graystone Tower Bank, a state-chartered bank that provides a range of financial products to consumers, businesses, and not-for-profit customers. Net institutional purchases in the current quarter at 690.2K shares, which represents about 6.65% of the company's float of 10.38M shares. Over the last six months, insiders were net buyers of 5,000 shares, which represents about 0.05% of the company's 10.38M share float.

6. Rockville Financial (Nasdaq: RCKB  ) : Operates as the holding company for Rockville Bank that provides a range of banking services to consumer and commercial customers. Net institutional purchases in the current quarter at 2.9M shares, which represents about 10.48% of the company's float of 27.67M shares. Over the last six months, insiders were net buyers of 92,070 shares, which represents about 0.33% of the company's 27.67M share float.

7. Capital Bank (Nasdaq: CBKN  ) : Operates as the holding company for Capital Bank that provides general commercial banking products and services in North Carolina. Net institutional purchases in the current quarter at 1.1M shares, which represents about 7.87% of the company's float of 13.97M shares. Over the last six months, insiders were net buyers of 99,652 shares, which represents about 0.71% of the company's 13.97M share float.

8. Bridge Capital Holdings (Nasdaq: BBNK  ) : Operates as the bank holding company for Bridge Bank, National Association that provides commercial and retail banking services to small and medium size commercial businesses, business professionals, and retail customers in California. Net institutional purchases in the current quarter at 449.5K shares, which represents about 6.59% of the company's float of 6.82M shares. Over the last six months, insiders were net buyers of 1,083,610 shares, which represents about 15.89% of the company's 6.82M share float.

9. Bank of Kentucky Financial (Nasdaq: BKYF  ) : Operates as the holding company for The Bank of Kentucky that provides various financial product and solutions. Net institutional purchases in the current quarter at 303.4K shares, which represents about 5.51% of the company's float of 5.51M shares. Over the last six months, insiders were net buyers of 29,893 shares, which represents about 0.54% of the company's 5.51M share float.

10. Center Bancorp (Nasdaq: CNBC  ) : Operates as the holding company for Union Center National Bank that provides various banking services to individual and corporate customers in Union and Morris counties, New Jersey. Net institutional purchases in the current quarter at 591.3K shares, which represents about 4.89% of the company's float of 12.09M shares. Over the last six months, insiders were net buyers of 474,584 shares, which represents about 3.93% of the company's 12.09M share float.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.


Kapitall's Eben Esterhuizen and Rebecca Lipman do not own any of the shares mentioned above. Insider data sourced from Yahoo! Finance. Institutional data sourced from Fidelity.

The Motley Fool owns shares of Pacific Capital Bancorp. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1577576, ~/Articles/ArticleHandler.aspx, 10/21/2014 8:39:50 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement