Sending a signal that the 1995 rally in bank stocks may be peaking, industry insiders sold large chunks of their shares last month.
What began as a trickle of bank insider sales in March turned into a gusher in April as the banking sector's stock rally continued. As of Friday, the American Banker index of 225 bank stocks was up 19.4% from yearend.
Leading the April selling were officers of CoreStates Financial Corp., Philadelphia; National Commerce Bancorp., Memphis; Chase Manhattan Corp., New York; Wells Fargo & Co., San Francisco; and First Interstate Bancorp, Los Angeles.
"There is selling where the fundamentals are fully priced," said Robert Gabele, president of CDA/Investnet, which tracks insider trading and provided the bank data. "And there are questions about the strength of banks' earnings and revenues."
To be sure, there is still a lot of stock accumulation among insiders at regional banks seen as takeover targets. "But there are cracks in the armor," he said, as insider selling is fast overtaking insider buying.
Perhaps nowhere is this trend more pronounced than at CoreStates, where insiders have been disposing of their holdings since early January. Between Jan. 23 and April 25, five insiders sold 186,945 shares.
Chief financial officer David C. Carney, who began accumulating his bank's shares in 1991, made his first sale this year. In April, he exercised an option on 36,946 shares and sold them. He now holds 5,000 shares.
Vice president John Harding cleared out nearly his entire option position this year, with sales of 89,750 shares. In April, divisional officer Robert B. Palmer exercised an option on 55,760 shares and sold them.
CoreStates stock rallied from $25 in early January to a current $33 on the strength of its restructuring program. "Insiders are acting like those prices are too good to pass up," Mr. Gabele said.
At National Commerce Bancorp., a $3 billion-asset bank, insiders unloaded 42,500 shares between Feb. 25 and May 2.
Chairman Thomas Garrott and officer Douglas Ferris bought company stock in 1990 at the nadir of the industry's woes and doubled their money in 18 months, Mr. Gabele said. For the better part of the last two years, the stock has traded at between $20 and $25 a share.
"With market savvy of this nature, it makes us wonder why they're getting out now with no price appreciation to motivate the action," Mr. Gabele said. Calls to Mr. Garrott were unreturned by press time.
Selling at many of the money-centers increased somewhat as insiders capitalized on stock surges sparked in part by falling interest rates.
Citicorp insiders exercised options on 29,910 shares in late April, selling them all. Vice president Dionisio R. Martin exercised an option on 22,000 shares and sold them, closing out his holdings.
At Chase Manhattan, some insiders capitalized on the trading surge following investor Michael Price's April disclosure that he had purchased 6.1% of the company. The executive has held out the sale or breakup of Chase as possible strategies to boost shareholder returns.
Insiders sold 25,100 shares in the weeks following Mr. Price's disclosure, which sent the stock price from $37 to a current $47. Vice president Lester J. Stephens sold 10,000 of his shares, or 39% of his holdings.
At Wells Fargo, insiders sold 28,643 shares in the last two weeks of April. Director Charles M. Johnson sold 15,000 shares, or two-thirds of his holdings.
At First Interstate, insiders sold 68,080 shares. Vice president Thomas P. Marrie exercised an option on 39,625 shares in April and sold them. He no longer owns stock in the company.
At First American Corp., Nashville, insiders unloaded 42,625 shares in April. Chairman James F. Smith exercised an option on 32,723 shares between April 18 and April 27, and sold them.
Keycorp director Henry S. Hemingway sold 43,581 shares, or 29% of his holdings, for $1.2 million.
Officers of smaller banks were also heavily involved in insider selling. At Liberty Bancorp, Oklahoma City, director Robert Elliott Torray sold 489,205 shares, or 46% of his holdings.
At Long Island Bancorp, Melville, N.Y., insiders sold 31,542 shares on April 27. The day before, Nasdaq released its monthly short interest tables, showing the $4.5 billion-asset thrift had the fourth- largest short interest volume increase of any bank or thrift traded over the counter.
An increase in short increase generally indicates traders expect the value of a company's stock to decline.
Insiders at Bancfirst Ohio Corp., Zanesville, Ohio, unloaded 46,934 shares.
Thrift insiders were also busy selling shares. Thrift stocks have risen even more than bank stocks in past months as interest rates have declined.
At Coast Savings Financial Inc., Los Angeles, insiders sold 47,214 shares. President Robert L. Hunt sold 4,000 shares, or 8% of his holdings.
At H.F. Ahmanson & Co., Irwindale, Calif., director David S. Hannah sold all his 2,850 shares on April 25.
At Dime Bancorp, New York, officer Douglas E. Barzelay sold 12,100 shares, or 52% of his holdings.
Some bank insiders remain bullish. At Fifth Third Bancorp, Cincinnati, insiders purchased 178,500 shares, but much of that was attributed to a beneficial owner, Cincinnati Financial Corp. Director John Schiff spent $241,250 for 5,000 shares and now owns 66,915 shares.
At Midlantic Corp., Edison, N.J., director Roy T. Peraino exercised an option on 37,113 shares, and now holds 92,337 shares.