We'd be surprised if Preferred Bank (NASDAQ:PFBC) shareholders haven't noticed that the Executive VP & Deputy COO, Johnny Hsu, recently sold US$133k worth of stock at US$73.05 per share. That sale was 19% of their holding, so it does make us raise an eyebrow.

Preferred Bank Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider sale was by the Chairman, Li Yu, for US$280k worth of shares, at about US$55.98 per share. That means that even when the share price was below the current price of US$74.42, an insider wanted to cash in some shares. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. This single sale was just 0.7% of Li Yu's stake.

In the last twelve months insiders purchased 1.05k shares for US$63k. But they sold 7.12k shares for US$433k. All up, insiders sold more shares in Preferred Bank than they bought, over the last year. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

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Does Preferred Bank Boast High Insider Ownership?

I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. We usually like to see fairly high levels of insider ownership. It appears that Preferred Bank insiders own 8.2% of the company, worth about US$84m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

So What Do The Preferred Bank Insider Transactions Indicate?

An insider hasn't bought Preferred Bank stock in the last three months, but there was some selling. Zooming out, the longer term picture doesn't give us much comfort. But since Preferred Bank is profitable and growing, we're not too worried by this. Insider ownership isn't particularly high, so this analysis makes us cautious about the company. So we'd only buy after careful consideration. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. Our analysis shows 3 warning signs for Preferred Bank (1 is potentially serious!) and we strongly recommend you look at these before investing.

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For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions of direct interests only, but not derivative transactions or indirect interests.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.