CFO purchases can be extremely informative insider transactions. CFOs have considerable insights into their firms’ financials, and some studies have found that these insiders earn higher profits following their purchases of company shares than CEOs.
s report, we are going to highlight a CFO purchase at Flagstar Bancorp Inc (FBC:US). Flagstar is a financial services holding company which through its main subsidiary, Flagstar Bank, offers banking services to individuals and businesses. Chartered in 1987 as a federal savings bank, Flagstar has assets of nearly $30 billion today and is the sixth-largest bank mortgage originator nationally. The company is listed on the New York Stock Exchange and currently has a market capitalization of $2.4 billion.
Flagstar Bancorp Inc: Insider Buying
Our insider transaction data shows that on January 27, CFO James Ciroli purchased 5,000 shares at an average price of $45.79 per share. This trade cost the insider approximately $229,000 and increased his holding by 8%.
Mr. Ciroli has considerable company and industry experience. He joined Flagstar in 2014 as CFO and in this role, he is responsible for the bank’s accounting, financial planning/forecasting, investor relations, secondary marketing, tax, and treasury functions. Prior to joining Flagstar, he served at First Niagara, Huntington Bancshares, and KeyCorp. Overall, he has more than 30 years of experience in banking and financial services. This means he is likely to have a good understanding of his firm’s prospects. It’s worth noting that the insider made several well-timed trades in 2020.
What stands out to us here is the size of the trade. The fact that Mr. Ciroli has spent nearly a quarter of a million dollars on company stock suggests that he’s confident the share price is going higher. Our Insider Model views the trade as very bullish.
Potential Merger in 2022
In April last year, New York Community Bancorp (NYCB) announced that it was planning to acquire Flagstar in an all-stock strategic merger. Under terms of the agreement, which was unanimously approved by the Boards of Directors of both companies, Flagstar shareholders would receive 4.0151 shares of New York Community common stock for each Flagstar share they own.
Originally, this transaction was expected to close by the end of 2021. However, the deal has been delayed due to a lack of regulatory approval. "At this point, it appears that regulatory approval will not be received in time to close the merger during the fourth quarter. We now estimate an anticipated closing assumed in 2022," said New York Community Bancorp CEO Thomas Cangemi recently on an earnings call.
The purchase here from Mr. Ciroli could indicate that he expects the deal to go through shortly. Because if it is approved, we are likely to see shares in NYCB – which have drifted lower recently – bounce. This would result in a larger payout for owners of Flagstar stock.
Given the size of the purchase from Mr. Ciroli, we see his trading activity as a bullish indicator.