Bank stocks continue to tumble

Bank stocks continue to tumble down the well. Among those getting soaked are executives at two banks with a major presence in Minnesota. They lately have been buying stock in their own companies.

Do they know something we don't?

Not in the short run, at least. Bank stocks continue to gasp for air. The stocks of 23 Midwest regional banks covered by Stifel Nicolaus have fallen 37 percent in the last year.

But, if the history of insider trading is any guide, executives who seem all wet at first often end up pulling up buckets of money in the long run.

"It doesn't surprise me that people [inside of the companies] get in too early," said Michael Painchaud, director of research at Market Profile Theorems, a Seattle company that analyzes insider trading and other market transactions.

Insiders, he said, buy and hold for many quarters or many years, seeking a return on stocks that show value.

"You want to see the value players stepping up to be buyers," Painchaud said. "And we want the Street to be the darkest, moonless night. That produces the conditions under which we tend to see turnaround."

Insider optimism may signal better times ahead for the battered banking industry, a second quarter in which loan writeoffs and earnings hits are expected to be commonplace.

Former TCF Financial Chief Executive and Chairman William Cooper bought about $2 million worth of TCF shares last month, at prices ranging from $15.80 to $16.15.

His reward: The stock has dropped, on paper paring more than $450,000 from his investment.

Officers at a rival bank shared a similar fate.

Wells Fargo Chairman Richard Kovacevich a couple of weeks ago bought nearly 40,400 shares of his bank's stock for $1.05 million, then at $26.05 a share. It closed Friday at $24.59, whiting out $59,984 in value.

Wells Fargo President John Stumpf handed over nearly $45,000 to his broker to buy his bank's stock last month. He paid about $29 for each of his shares.

Keith Tufte, president of Longview Wealth Management in Eden Prairie, noted that neither Kovacevich nor Stumpf have bought shares in a number of years. He said they appear to have "drawn a line in the sand."

"They're saying that these stocks are ridiculously cheap," Tufte said. "They're making a bet, going forward, that this is a good price for Wells Fargo."

Showing confidence in the face of gloom has gained favor among insider investors lately, despite the discouragement sapping Wall Street.

A Star Tribune survey of regional banks across the nation shows that bank executives have lost millions -- at least, on paper -- after buying stock in their companies in the last year or two.

From Comerica in Texas and National City in Indiana to Huntington Bancshares in Ohio to Wachovia in North Carolina, bank executives have been buying their shares only to see their investments plunge in value.

On Wednesday, Ohio-based Fifth Third Bancorp saw its shares drop 27 percent in one day.

Earlier this year, three top executives at Fifth Third Bancorp paid $24 to $25 a share for their bank's stock. It closed at $9.26 after the bank announced a dividend cut and the need to raise $2 billion in new capital.

Major players in Minnesota banking hope to avoid that performance.

Ben Crabtree, who covers TCF for Stifel Nicolaus, thinks Cooper was smart to buy TCF shares.

"I don't think Bill would claim to be a market timer," said Crabtree, who this month upgraded TCF from a "hold" to a "buy." "But I think we can assume he knows what's inside the company."

Crabtree added, "I take considerable comfort that he put in $2 million of his own money in at about $16."

At Wells Fargo, Kovacevich had been a heavy seller of his company's stock three or four years ago. But that changed in early June, when he made his first buy of Wells stock in a decade.

Painchaud has studied Kovacevich's record in buying and selling stock, and said he usually profits from his trades in the long run.

Painchaud said investors would be wise to pay attention to Kovacevich's trades.

"What he did last month is a very, very strong buy signal," Painchaud said.

Mike Meyers • 612-673-1746