Insider Trading Report: Bank of South Carolina Corp

Last week, insiders at Bank of South Carolina Corp (NASDAQ:BKSC) purchased shares of the company’s stock at prices between $11.40 and $11.50.  On May 10th and 11th, four of the bank’s executives purchased 3,692 shares of BKSC for a combined value of $42,200.  While this total does not represent a major percentage of the Bank of South Carolina’s market cap – it currently rests around $51.0 million – this activity is significant.  It has been widely documented that investors who follow the purchasing activity of insiders in small-cap companies can beat the market by around 7 percent over a 6 to 12 month time period.  Additionally, SEC filings show that this buying activity marks the continuation of a larger trend, as these BKSC execs have made nearly 100 bullish transactions over the past year, while not selling a single share.  Below are the profiles of the most active insiders.

G. Sheryl Sharry: The CFO and Treasurer of BKSC, Sharry has purchased 28,046 shares at a total value just over $300,000 in the past year.  She has initiated long positions in 8 of the past 12 months, buying as low as $9.39 a share last August, and as high as $11.5 a share last week.  Sharry’s most active months were January ’12 and June ’11, where she accumulated almost half of her total holdings in BKSC.  In June of last year, it seemed that Sharry had little reason to buy in, as shares had been down 10 percent since the start of 2011, and had remained flat during the preceding month.  She has been rewarded thus far, as the stock has made most of its headway since the start of 2012.  It should be noted that after Sharry – and these other three insiders – purchased shares of BKSC this January, its stock price has rocketed 11 percent to its current price of just over $11 a share.  Like her other peers in this list, Sharry has been with BKSC since its inception in 1986.

Jr. C. Hugh Lane, The President and CEO, Lane has been the most active insider of the bunch over the past year, purchasing over 50,000 shares of BKSC worth nearly $600,000 total.  He has purchased shares in 9 of the past 12 months, amassing 15,000 shares alone last August.  Interestingly, his purchase price last fall was only a few cents off BKSC’s post-recession low, so it’s possible that Lane noticed signs of undervaluation.  Consequently, he has seen the largest return of his peers, as he generated almost a 20 percent return on his August purchases, for a total value of nearly $30,000.  Lane has served as the only President and CEO of BKSC in the bank’s 25-year history, though he has recently announced he will step down after 2013 to become the company’s Board Chairman.  He will be replaced by S. Fleetwood Hassell.

R. David Schools: An independent director of Bank of South Carolina, Schools has purchased the same amount of shares as CFO Sharry, and buying patterns were the same as mentioned above.  He generated a return worth nearly $45,000 last year, and currently makes only around $5,000 a year in fees as a director of BKSC.  School’s day-job is to serve as the President and CEO of Piggly Wiggly, a privately owned grocery store chain in South Carolina and Georgia.

S. Fleetwood Hassell: The bank’s acting Executive Vice President, Fleetwood Hassell – no relation to Fleetwood Mac – will take over CEO duties in a couple of years from C. Hugh Lane.  Over the past year, Hassell has purchased 28,246 shares of BKSC.  While Hassell has purchased a total amount similar to Schools and Sharry, the majority of his purchases came in 2011, specifically in the May, August, and November.  As is the case with his peers mentioned above, his purchases last fall generated the most return, as BKSC was trading under $10 a share at this time.  It will be interesting to see how Hassell’s buying is affected by his recent announcement to become CEO – and if last week’s purchases are any indication, his bullish behavior will continue.

In addition to this positive insider sentiment, the small-cap bank also impressed the Street with its recent first quarter earnings release.  Specifically, BKSC reported higher-than-expected EPS of $0.20, which was also up from the $0.14 figure reported in Q1 of 2011.  Additionally, it seems that the bank’s earnings are currently trading at a multiple of 16.0X, which is below the industry average of 17.6X, and its own 10-year historical P/E of 17.4X.  Other small southeastern regional banks actually trade at much higher P/E ratios. Colony Bankcorp (CBAN) has P/E of 64. First South Bancorp (FSBK) trades at a 27 P/E multiple and NewBridge Bancorp’s (NBBC) P/E ratio is north of 32. These three peers don’t pay any dividends either, vs. Bank of South Carolina Corp’s nice dividend yield of 3.8 percent. BKCS has also tripled its financing cash flow over the past year.  Investors may be wise to follow these four insiders into Bank of South Carolina.