First Fidelity Bancorp. continued its drive into the Maryland market yesterday, announcing that it agreed to take over 24 branches of Household Bank FSB, increasing its share of deposits in the state by more than 50 percent.
The move came as part of a concerted effort by the Illinois-based parent of Household to pull its savings bank business out of markets where it has a minor share.
First Fidelity, based in New Jersey, said it would pay $76.1 million for the Household branches and the right to take over $1.1 billion in customer deposits. Only a small number of Household loans will transfer to First Fidelity, most of them secured by borrowers' deposits, First Fidelity spokesman Paul Levine said.
"It gives us much better market penetration," Mr. Levine said. "It gives us the second-highest market share in Baltimore County, third highest in the city. It makes the franchise more valuable."
Howard Adamski, a spokesman for Household International Inc., the bank's Chicago-based parent company, said the rest of Household Bank's loans would continue to be serviced by Household from offices outside the Baltimore area. The company's Household Finance Corp. unit, which also has offices in Maryland, will not be affected by the sale.
First Fidelity's Mr. Levine said Household Bank has about 220 employees in the state, nearly all of them working in its 24 branches. Because turnover tends to be high among branch bank employees, he said, the company expected to be able to offer any worker whose branch closes after the sale a job at another location.
"We expect to be able to absorb just about everyone," Mr. Levine said. The sale is expected to close by June, and the name of the branches will change to First Fidelity by fall, he said.
First Fidelity, a $35 billion bank holding company, began building its Maryland franchise last year, when it acquired Baltimore Bancorp, the parent company of the Bank of Baltimore. It also purchased the deposits from four branches of John Hanson Savings & Loan Association from federal thrift regulators who liquidated the failed Beltsville-based thrift. First Fidelity had 45 Maryland branches and about $1.9 billion in Maryland deposits before purchasing the 24 locations from Household.
"It's a great idea for them," said Anthony Davis, an analyst who follows First Fidelity for Dean Witter Reynolds Inc. in New York. "They need a bigger deposit share [in Maryland] and this really helps them."
Mr. Davis said First Fidelity would probably make more Maryland acquisitions, most likely in the Washington suburbs, to achieve economies of scale that would let it offer more competitive pricing to local customers.
First Fidelity Chairman Anthony Terracciano said last year that his company was likely to continue its Maryland acquisitions as its desire to survive industry consolidation has led the bank to pursue a strategy of expanding from Boston to Baltimore.
Indeed, Mr. Terracciano has said the company believed it might attract unwanted takeover attention from larger banks if it failed to build efficiency and profits. First Fidelity, the 25th biggest bank in the United States, earned $451.1 million last year, up 13 percent from 1993.
First Fidelity closed down 50 cents a share yesterday, to $48.625.
Vernon Plack, an analyst at Scott & Stringfellow Inc. in Richmond, Va., said Household's consolidation into a larger competitor might help tiny community banks.
The acquisition removes a "borderline" competitor, Mr. Plack said. "The community banks would like nothing better than for First Fidelity to come in and buy all of the [mid-sized] banks. If you take one more competitor out of the way, for little guys it's a pretty positive move."
Household's retreat from Maryland came the same day that the company announced it was selling its branches and deposits from its banking affiliates in Virginia and Southern California.
The company opened its first Maryland branches in 1984, when it purchased Fidelity Federal Savings & Loan Association. But Household's Mr. Adamski said the company decided it did not have sufficient market share to be competitive, and was retreating to its core banking markets in the Midwest.
Household International appointed a new chief executive, who took over in September, and he has impressed analysts by vowing to eliminate underperforming businesses with the banking subsidiary as a target.
Household's restructuring had already resulted in cutting 1,000 of the company's 14,000 jobs by late November, according to a report by a Morgan Stanley & Co. analyst David B. Hilder.
Household International does not disclose banking profits by state. But overall, Household Bank earned $113 million during the first nine months of the year, Mr. Adamski said. Household International earned $257 million.