Downsizing First Fidelity cuts top managers' pay

March 15, 1995|By Timothy J. Mullaney | Timothy J. Mullaney,Sun Staff Writer

First Fidelity Bancorp. said it cut the 1994 pay of its chief executive by 34 percent, as the new parent company of the old Bank of Baltimore decided its top managers should share the pain of a corporate downsizing that is expected to claim 1,000 jobs, including 500 in Maryland.

First Fidelity Chairman Anthony P. Terracciano earned $750,000 in salary, the same annual rate he was paid at the end of 1993. But the 56-year-old banker did not get any money under the company's long-term incentive program, which paid him $572,771 in 1993. Mr. Terracciano also took a $75,000 cut in his annual bonus, which fell to $400,000 last year.

"It was my recommendation," Mr. Terracciano said yesterday. He said the company posted record earnings last year, but is preparing for major layoffs because rising interest rates have squeezed the spread between the interest rate the bank pays for funds and the rate it commands when it lends the money to businesses and consumers. That means the company needs to cut costs more than it had expected to keep profits on track.

"Compensation was reduced for Tony and the other key managers as an example," First Fidelity spokesman Paul Levine said.

The company said in January that it will cut nearly 8 percent of its work force, including about 50 percent of the staff it inherited from the Bank of Baltimore and its holding company, Baltimore Bancorp. Most of the cuts are expected to be made during the second and third quarters.

None of the company's six highest-paid executives received payments from the long-term incentive plan, which is designed to reward performance over a multiyear period.

The decision cost Senior Executive Vice President Leslie E. Goodman $121,109, who got the least money of the six from the plan in 1993. Vice Chairman Wolfgang Schoellkopf did not duplicate the $189,563 he had received from the plan in 1993, but still earned more than $688,000 in salary, bonus and other compensation.

The top executives also got one-fourth or less of the stock options they were granted in 1993. Mr. Terracciano was granted the right to buy 40,000 shares, down from 160,000 in 1993.

The company made its disclosures in the proxy statement for its April 18 annual meeting in Philadelphia, filed with the U.S. Securities and Exchange Commission. First Fidelity completed its acquisition of the Bank of Baltimore in November.

First Fidelity is one of a handful of large banks that have cut executive pay this year, analysts said. They pointed to Bankers Trust New York Corp., where Chairman Charles S. Sanford's bonus was cut by more than $7 million after the company ran into debacles in bond and currency trading and derivatives, and Mellon Bank Corp. of Pittsburgh, where Chief Executive Frank Cahouet saw his bonus cut 27 percent after the company reported a $130 million charge for losses by a securities subsidiary.

The other major banks serving metropolitan Baltimore have not yet reported their 1994 executive pay.

"I always believed [Mr. Terracciano] was quite reasonably paid," said Nancy A. Bush, a regional bank stock analyst for Brown Brothers Harriman Co. in New York, who said First Fidelity's small erosion in profitability late in 1994 didn't warrant an involuntary cut. "First Fidelity didn't have what I would characterize as a wonderful year, but it didn't have a terrible year."

Keefe, Bruyette & Woods Inc. analyst Mary Quinn said First Fidelity's 1994 performance was better than average for banks its size.

"Generally where you see sharp changes in performance, it's right and proper that compensation should be tied to performance," Ms. Quinn said. "But when you're talking about [small decreases in profitability late in 1994] it doesn't dictate a 34 percent cut."

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