While the largest U.S. banks have suspended share repurchases in preparation for a likely recession, several community banks saw opportunity to launch new buyback programs during March's sell-off.
In total, 29 banks announced new share repurchase plans between March 1 and April 7, according to S&P Global Market Intelligence data; one of those banks suspended its plan shortly after the announcement. That includes eight banks that unveiled plans after March 15, when the eight U.S.-based global systemically important banks said they would temporarily pause share repurchases until the second half of the year due to the COVID-19 pandemic.
Shareholder distributions have become a topic of heated debate as the economy appears headed for a recession, with widespread stay-at-home orders shuttering local businesses and sending nearly 17 million Americans to file for unemployment over the last three weeks. While banks have built robust capital buffers in recent years, several prominent voices have called for a suspension of share buybacks and dividends.
Sheila Bair, former chair of the Federal Deposit Insurance Corp., penned a March 22 op-ed in the Financial Times arguing that banks should suspend buybacks, dividends and discretionary bonuses. On April 6, former Federal Reserve Chair Janet Yellen said she supports a suspension of banks' stock buyback plans as well as their dividend payments. And on April 9, Democratic senators sent a letter to current Fed Chair Jerome Powell requesting the regulator prohibit share buybacks and dividends for banks with more than $50 billion in assets.
Asheville, N.C.-based HomeTrust Bancshares Inc. reported the most recent buyback program in the analysis with an April 2 announcement that its board authorized the repurchase of up to 5% of outstanding shares. The bank had just completed a repurchase program, which also targeted 5% of outstanding shares, that began in October 2019. As was the case for the vast majority of the 29 companies with new buyback plans, HomeTrust is a small community bank with about $3.5 billion of assets.
Charleston, S.C.-based Bank of South Carolina Corp. announced a pair of shareholder distribution actions on March 26 with a new share repurchase program and a quarterly dividend of 16 cents per share, payable on April 30. The dividend was flat from previous quarters. In a news release about the actions, management acknowledged the bank was distributing funds to shareholders at a deeply uncertain time.
"In these times of adversity, your bank continues to operate with strong capital, steady earnings, and a visible community presence," said Fleetwood Hassell, president and CEO, in the news release. "As a bank, we are here as a source of strength and comfort to see our customers and shareholders through these challenges."
The $445 million community bank appears to have plenty of capital on hand to fund the distributions, reporting a regulatory leverage ratio of 11.3% at 2019 year-end. Further, the bank's board members have been betting on the company with their own money. The same day as the buyback announcement, directors and management filed six insider trading forms. All six transactions were insiders acquiring the bank's stock, mostly in open-market purchases. Director Charles Lane led the way with open-market purchases of 4,000 shares for more than $52,000.
