Baltimore Bancorp merging with N.J. bank for $346M

March 21, 1994|By David Conn | David Conn,Sun Staff Writer

Baltimore Bancorp, one of Maryland's few remaining locally based banking companies, announced today that it has agreed to be acquired by First Fidelity Bancorporation of Lawrenceville, N.J., for $346 million in cash, or $20.75 a share.

The news caps weeks of takeover speculation about the fate of Baltimore Bancorp, parent of the Bank of Baltimore. The 42-branch company, which has $2.2 billion in assets, has gone through a three-year struggle to survive a bitter management fight and large real estate-related losses, before returning to profitability in 1992 and 1993.

The deal, if approved by regulators and Baltimore Bancorp's shareholders, would represent the first move into Maryland by First Fidelity, one of the nation's 25 largest banking companies. The company, whose major subsidiary is the First Fidelity Bank, has $33.8 billion in assets and more than 650 branches in New Jersey, Pennsylvania, New York and Connecticut.

"This is an exciting opportunity for First Fidelity," Tony Terracciano, First Fidelity's chairman and chief executive officer, said in a statement. "It positions us in a new market which is experiencing economic growth and which is contiguous to our Philadelphia-area and Southern New Jersey operations."

As a member of the Southeast regional banking pact, Maryland only allows acquisitions by banking companies in a 16-state region stretching from Florida to Delaware.

However, First Fidelity plans to circumvent the banking pact by converting Baltimore Bancorp to a thrift charter from a bank charter immediately before the acquisition. The charter will be switched back right after the acquisition is completed.

First Fidelity told analysts today it expected to cut Baltimore Bancorp's expenses by about $40 million in the first year. Most of those cuts would come through consolidating administrative and other non-branch functions.

"The sale price represents a significant return to our shareholders over the average market price of our stock over the last few years," said Baltimore Bancorp Chairman Edwin F. Hale Sr. The stock had been as low as $6.875 in early 1993 before climbing into the upper teens in the past two months.

In mid-morning trading today, Baltimore Bancorp's stock rose $1.50 a share, to $19.50. First Fidelity's shares were down 50 cents, to $45.

Analysts said the price of $20.75 a share was generous, given Baltimore Bancorp's large portfolio of defaulted real estate loans and its below average profitability.

The price, at more than twice the company's 1993 year-end book value of $9.73 a share, "means some people want the franchise, because the earnings don't justify it," said Arnold G. Danielson, a Rockville banking consultant.

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