Anthony Terracciano has this sly grin on his face. He's been asked a pretty simple question -- why did he, the chief executive of First Fidelity Bancorp. of Newark, N.J., agree Monday to buy Baltimore Bancorp for $346 million? And he's getting ready to give a really simple answer.
"It was for sale," he said.
From someone else's mouth, those words would be dissembling, but the 55-year old banker from Bayonne, N.J., is straighter than that. Anyone who paid attention to him has known for a while that he wanted to get into Baltimore, and that the parent company of the Bank of Baltimore was the only bank in town on the market. He's just stating facts. So what if people thought the buyer would be Mellon Bank Corp. or First Union Corp.?
"Some people were shocked -- shocked!" he said. "I don't know why they should be."
First Fidelity is the new bank in town, and it is very much the creature of Mr. Terracciano, who was brought in in 1990 to fix the now-$34 billion bank when it was reeling from half-thought-out mergers and lending woes.
He fired 1,400 people two months after arriving, replaced virtually everyone at the top (only four of 15 current executive officers arrived before 1990). He dealt with the bad loans, raised capital even though he had to go to Spain to find a partner, engineered 18 mergers and saved the company while pushing from its New Jersey-Pennsylvania base into New York, Connecticut and now Maryland.
The result is a super-regional bank, the bank Maryland National Bank yearned to become when First Fidelity's one-time peer flung itself into the real estate loans that wrecked it. First Fidelity's stock has tripled since 1990, handily outperforming regional banks as a group, earnings have gone from a $6 million 1990 loss to $399 million last year, and the growth is still coming.
"This seems to be a period where you have to have a strategic framework, but you have to behave somewhat opportunistically," Terracciano said. "We would like to stretch from Boston to Baltimore. I'm sticking with that geographical framework."
First Fidelity is a bank investors love. But it is not a bank competitors seem to fear.
"Banks in New Jersey and Pennsylvania love to compete against First Fidelity," said Arnold Danielson, a Rockville banking consultant. "When you get a big bank that's cost-conscious, [you become] impersonal. But when you're a big bank, you don't have a lot of choice."
"All we really have is another name; we don't have another competitor," said Kenneth Trout, president of Signet Bank/Maryland. "I think there are plenty of strong competitors in the market, and I don't see anything First Fidelity is going to bring."
At first meeting, the First Fidelity chief executive is part the imposing Mr. Terracciano, the banker with the $1.075 million in 1992 salary and bonus in charge of $34 billion in assets.
But he also is part -- seemingly a larger part -- the engaging Tony from Bayonne, with the New York accent and the pack of Merit cigarettes on the desk, humble enough to insist any banker who is arrogant after the last few years needs a "lobotomy."
He also is part witty Jesuit-educated holder of a master's in philosophy, as fluent in moral reasoning as market share, who drops jokes about "poor, misunderstood Descartes" into the context of a conversation.
He spent 23 years at Chase Manhattan Corp., then went to Mellon Bank Corp. in Pittsburgh in 1987. Mellon was in terrible shape, clobbered by loans in Texas real estate and energy that went bad by 1987, years before real estate lending woes hit the East Coast.
As chief operating officer, he helped Mellon Chief Executive Frank V. Cahouet execute an innovative "good bank/bad bank" strategy to spin off the bad loans into a separate company and protect the "good bank" from failure.
First Fidelity became the next big eastern bank to get in trouble after a 1988 lending debacle and the first signs of real estate problems. Those problems also kept the old management from effectively knitting together the New Jersey and Pennsylvania banks that had merged to form First Fidelity in 1988. The bank turned to Mr. Terracciano.
"The cultures were different, and my job was to turn around the institution. To do that I had to have one culture," Mr. Terracciano said. "One contribution I made right away was that I gave all the banks in the First Fidelity system something in common, which was that they all hated me."
After his cost-cutting wave and acquisition spree, the bank is healthy. But its profits and asset quality are still below those of top performing banks. Dean Witter Reynolds Inc. analyst Anthony Davis ranks First Fidelity's overall fundamentals 22nd of 30 regional banking companies that Dean Witter follows. Lingering loan problems and acquisitions of weak banks earn First Fidelity a 29th place for asset quality. The bank is 10th on that list in profits, and will do better when loan problems are completely fixed, Mr. Davis said.