A number of academic studies have concluded that the most profitable insider trades tend to occur at small-cap firms. As well as being less widely researched – which leads to greater inefficiencies in the market – there is often greater scope for growth at smaller companies.
Here, we are going to highlight an insider purchase at a small US financial services company, Norwood Financial Corp (NWFL:US). Norwood Financial provides traditional banking services as well as wealth management services through its subsidiary Wayne Bank. Wayne Bank has traditionally focused on Pennsylvania as an independent community bank. However, recently, it acquired Upstate New York Bancorp which extended its geographical footprint. It’s traded on the Nasdaq Stock Exchange and currently has a market capitalization of $210 million.
Norwood Financial Corp: Insider Buying
Form 4 filings show that between 11 and 30 June, a Director of Norwood Financial, Alexandra Nolan, purchased 85,728 NWFL shares at an average price of $25.35 per share. This purchase cost the insider approximately $2.2 million and increased her holding by just over 50%.
We took notice of this insider buying because Nolan has spent a significant amount of money buying up stock. This suggests she is extremely confident that the business will perform strongly and that the share price will go up.
Additionally, our data shows that this is the largest purchase of stock by an insider in over a year. Nolan became a Director of Norwood Financial upon the acquisition of Upstate New York Bancorp, where she held a position as a Director. This suggests she sees great benefits in the deal and believes it will be a success.
Norwood Financial posted strong Q1 numbers, bolstered by its acquisition of Upstate New York Bancorp. Its earnings for the quarter of $5.542 million were a record for the business, up 80% from the prior year. Earnings per share on a fully diluted basis were $0.67 versus $0.49 in Q1 2020. Importantly annualized return on average assets jumped to 1.18% in the quarter against 1.01% a year before. Annualized return on average equity moved up strongly during the period to 11.39% from 8.79% in Q1 2020.
“Our first quarter results reflect the revenue generated and the costs associated with our acquisition of Upstate, as well as the continued impact of economic stimulus on our balance sheet. We remain committed to providing the financial resources that will help our customers emerge from the restrictions related to the COVID-19 pandemic,” said Lewis Critelli, the President and CEO.
On the back of these Q1 numbers we see the recent insider buying at Norwood Financial as bullish. It suggests that the insider is very confident that the recent acquisition is bedding in well and will lead to a higher share price in the future.