N.J. bank bids to buy Bank of Baltimore

March 22, 1994|By David Conn | David Conn,Sun Staff Writer

Baltimore Bancorp, parent of the Bank of Baltimore and one of the last big locally based banking companies, yesterday ended a wild three-year ride for its employees and shareholders by announcing it has agreed to be sold to the First Fidelity Bancorp. of Lawrenceville, N.J., for $346 million in cash.

If approved by regulators and Baltimore Bancorp's shareholders, the deal, valued at $20.75 a share, would be First Fidelity's initial move into Maryland. The company, which has 650 branches in New Jersey, Pennsylvania, New York and Connecticut, is the nation's 24th-largest banking company, with $33.8 billion in assets.

For Maryland, it would mean the end of independence for the state's fifth-largest banking company, the parent of the 176-year-old Bank of Baltimore. About one-quarter of Baltimore Bancorp's 1,125 jobs would be eliminated, First Fidelity said, mostly through attrition.

First Fidelity technically is not allowed to operate in Maryland because it is based in a state that is outside the 16-state Southeast interstate banking region created under state law. As means of skirting that regional compact, First Fidelity has decided to change Baltimore Bancorp from a commercial bank back into a thrift, its status before the Bank of Baltimore went public in 1984.

That change, which already has received a favorable opinion from Maryland's attorney general, would occur just before the merger and isn't expected to affect the company's operations, First Fidelity said. It would be a temporary measure, lasting either until Congress enacts a national interstate banking law, as expected, or the Southeast compact is dissolved.

The deal is expected to close in November or December. First Fidelity said that it has no plans to change the name of the Bank of Baltimore within the next few years.

Baltimore Bancorp's sale would leave only a handful of locally based banking companies that have more than $1 billion in assets.

The shares of two of those companies -- Provident Bankshares Corp., at $1.8 billion in assets, and Loyola Capital Corp., with $2.4 billion in assets -- rose sharply yesterday as the market saw the price Baltimore Bancorp commanded. Loyola gained $1.50 a share, to close at $17.75, while Provident rose $1.125, closing at $19.875.

The largest Baltimore-based banking company, Mercantile Bankshares Corp., is not considered a takeover possibility. Its management has shown no inclination to entertain merger offers.

A fourth local banking company, First Maryland Bancorp, is managed from Baltimore but is owned by Allied Irish Banks PLC of Dublin, Ireland.

Baltimore Bancorp, which has $2.2 billion in assets and 42 branches statewide, nearly succumbed to a federal takeover when millions of dollars of its commercial real estate loans were defaulted on in 1991, its chairman said yesterday. Those problems didn't come to light until shortly after a bitter summer-long shareholder battle in 1991 ended with the ouster of the bank's former leadership.

Hale may gain $1.5 million

The leader of the group that took over, shipping and trucking magnate Edwin F. Hale Sr., publicly thanked yesterday some of the institutional shareholders who voted for his management team.

That team, aided by an improving regional economy and falling interest rates, managed to save the company and bring it back to profitability. Last week Baltimore Bancorp announced that its regulators were expected to rescind the operating restrictions that had hung over the institution since 1992.

"It's with a little bit of mixed emotions and trepidation that I announce the sale of the bank," Mr. Hale told reporters and analysts at an afternoon news conference. He said he'll stay on the job until the merger is completed, then return to his other companies full time.

For his troubles, and because of his willingness to buy the company's stock over the years, Mr. Hale stands to gain about $1.5 million from the sale of his shares in Baltimore Bancorp.

Mr. Hale's reward is likely to grow considerably -- his total compensation and that for other Baltimore Bancorp officers won't be disclosed until the merger agreement is made public today.

First Fidelity officials estimated that the merger would lead to a reduction of about 300 Baltimore Bancorp jobs during a one-year consolidation process. The Baltimore company normally loses about 220 employees a year to attrition, and some local jobs will be replaced because First Fidelity plans to move one of its central operating functions to this area, said Wolfgang Schoellkopf, vice chairman and chief financial officer.

"The most obvious [possibility] is the mortgage company," he said, which is roughly the same size as Baltimore Bancorp's mortgage operation.

The company expects to cut Baltimore Bancorp's annual operating expenses by about one-third in the year after the acquisition, or roughly $32 million, Mr. Schoellkopf said.

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