First Fidelity Bank, N.A., New Jersey History

Company History:

First Fidelity Bank is regarded as one of the most stable and reliable financial institutions in the United States. With a distinguished history dating back to 1812, encompassing numerous banking panics, a civil war, two world wars, and the Great Depression, First Fidelity has developed into one of the preeminent banks on the eastern coast of America.

In 1811 the charter for the Bank of the United States expired, and one year later the New Jersey state legislature enacted the Bank Act of 1812, authorizing charters for six state banks located in Newark, Camden, Elizabeth, Morris, New Brunswick, and Trenton. With William S. Pennington as its first president and 13 state appointed directors, many of them heroes of the Revolutionary War, the State Bank of Newark opened for business on June 1, 1812. The first day's total receipts amounted to $18,081.62.

Only 18 days later, the United States declared war on Great Britain. The economy boomed during the war, and many government contractors traveled to Newark to procure much-needed war materials. The sudden increase in business led the bank to move two blocks south from its original location to a larger location on the corner of Broad and Mechanic streets. As a result of its prosperity, the bank's directors approved a four percent dividend on April 1, 1813, and made plans for an additional four-and-a-half percent to be distributed by the end of the year. From that time forward, the bank always paid a yearly dividend.

While the bank continued to prosper through 1814, due to the growing demand for factories to expand and provide more war supplies, the war went poorly for the United States. When the treaty of Ghent was signed in 1814 and hostilities between America and Britain ended, the economy suddenly fell into a bitter depression with many factory closings, high unemployment in the cities, and numerous bank failures.

However, the State Bank of Newark was largely unaffected by the depression after the war, and began to quicken its pace of development as the city of Newark once again prospered. During this time, Newark became well known as one of the state's great produce markets. Southern businessmen began to travel to the city to consult with northern industrialists. By 1832, the Morris Canal was shipping large amounts of coal, iron, and even more produce, and industrial development was spurred on by the growth of railroads connecting Newark to Jersey City, Trenton, and Philadelphia.

Yet, by 1836, the financial situation across the country was once again discouraging. For years many banks in the new western territories issued notes or currency at will, incurred huge debts, and speculated in land sales. When President Andrew Jackson issued a declaration that all payments for public land sales be in specie, or hard money, the value of paper money fell precipitously and a financial panic followed. The State Bank of Newark, feeling the effects of the panic, suspended specie payments one year later.

William S. Pennington, the bank's first president, had resigned shortly after his appointment to run a successful campaign for governor of New Jersey. His successor, Elias Van Arsdale, Sr., served with distinction until he died in 1846. Caleb Carter, a director of the bank and owner of a carriage business, agreed to serve for a brief time until Elias Van Arsdale, Jr., assumed the presidency of the bank. The son of Van Arsdale Sr. helped steer the State Bank of Newark through several profitable and calm years until his death in 1854. The next president of the bank was not as lucky.

Samuel Meeker became president of the State Bank of Newark soon after Van Arsdale Jr. had died. Then, for the third time in its history, the bank felt the effects of a financial panic. Banking institutions throughout the country were suspending specie payments due to rash speculation and defaulted loans. The State Bank joined all other New Jersey banks in suspending its specie payments on October 14, 1857. Before the year was over, many manufacturers and shop owners in Newark declared bankruptcy, and soup kitchens soon sprung up throughout the city.

As the economy gradually improved, the bank resumed its specie payments in December, but soon a more threatening situation arose--civil war. With more than two-thirds of their sales made to southern businesses, merchants in Newark were distressed over the deteriorating relations with the South. Supporters of Abraham Lincoln were not surprised, therefore, when the city voted against him. But after the bombing of Fort Sumter in 1860, and once Newark merchants began to receive orders for war materials from Washington, sentiment for supporting the Union cause ran high.

One week after the Civil War started, the State Bank of Newark provided $50,000 to Governor Charles Olden to help the Union effort. The bank also increased its federal bond holdings from $102,000 to $607,000, and in 1864 it loaned the city of Newark $25,000 to pay volunteers who substituted for war draftees. The bank prospered during the war, and by 1864 net gains after dividends totaled $25,000.

The State Bank of Newark was directly affected by the National Bank Act, signed in 1863 by President Lincoln. Enacted in order to bring some cohesion to the nation's banking system, the legislation authorized the government to supervise banks and provided for a currency circulation guaranteed by the federal government. Under this law the State Bank of Newark was granted a national charter, and on August 1, 1865, began the day's business as The National State Bank of Newark. Along with a new name, the bank had a new president. Charles S. Macknett replaced Samuel Meeker, who had died in Pisa, Italy, while on a tour of Europe.

After the Civil War, assets at National State increased gradually each year until 1872 when the banking industry suffered from the new trend of mortgage financing. With its conservative management, however, the bank was able to avoid the problems that led to the collapse of many noted New York and New Jersey banking firms. By 1884, bank records reported 12 full-time employees whose annual wages ranged from $4,000 to $264.

From 1864 to 1893, National State had three presidents: Charles S. Macknett, Theodore Macknett, and John J. Jube. When James F. Bless was appointed president in 1893, the country was again in the midst of a depression. However, National State was largely unaffected and, under Bless's leadership, could report that assets rose from approximately $2 million in the 1880s to nearly $3.4 million by 1900.

The extremely conservative management style of the bank had helped it weather five depressions--including the financial panic of 1907--and the directors pointed with pride to their bond holdings in such stable companies as the Essex Passenger Railway Company and the East Tennessee, Virginia, and Georgia Railroad. However, this type of financial management did not generate much new business. In 1910, National State Bank reported assets of close to the amount reported ten years earlier. Still more distressing for National State, Newark banking rival Union National Bank reported assets surpassing $16.9 million.

After 18 years as president, Bless was replaced by William I. Cooper in 1911. An ex-clerk who had worked his way up in the institution, Cooper was determined to expand the bank's business while maintaining its reputation for stability. Helped by the boom in the production of war products brought on by World War I, the bank's assets rose from $3.9 million in 1911 to over $7 million by 1920.

National State grew slowly but steadily through the 1920s; in accordance with its conservative management policy, it refused to involve itself in market speculation. Thus when the New York Stock Exchange collapsed in October 1929, National State did not suffer any ill effects. In fact, Cooper proudly reported in the annual report of 1930 that assets had risen to $10.7 million.

The banking industry had changed dramatically over the years and the era of the "family bank" had vanished. No longer serving the needs of a limited number of local or regional customers, banks had developed into highly structured and sophisticated institutions. Accordingly, after Cooper died in 1931, the directors sought to replace him with someone who could help realize these developments at National State. W. Paul Stillman was a natural choice. Stillman started his career in New York as a runner with the Hanover National Bank. After serving in the Navy during World War I, he worked as a national bank examiner in Newark and was subsequently a manager of the Newark Clearing House. Vice-president of Fidelity Union Bank before he became president of National State, Stillman was just 34 years old.

Under Stillman's leadership the bank's resources rose to over $24 million by 1937. Yet Stillman was not satisfied with merely retaining old accounts, and he aggressively sought new ones. This strategy began to pay off, and by 1940 the bank showed resources of almost $38 million. When World War II arrived, National State grew by providing long-term credit and loans to expanding industry and business.

The end of the war brought a change in the lifestyles of many Americans. Convinced by powerful advertising that the luxuries of life were necessities, people were willing to pay on credit for these items. Government-insured mortgages provided veterans with the opportunity to build new homes, and the age of the automobile brought a sharp increase in requests for auto loans.

Even though National State's assets had grown to more than $80 million by 1948, the bank remained on the periphery of American banking and life, refusing to grant mortgages or provide personal loans. As the demand for credit continued to increase, Stillman decided to enter the mainstream in one dramatic move. In 1949 National State merged with Merchants and Newark Trust Company, producing combined assets of over $115 million. Just as important, the merger brought National State its first branch office as well as its first mortgage, personal, and installment loans.

On June 1, 1950, National State merged with Orange First National Bank in order to provide it with a presence in the growing suburban areas surrounding Newark. On December 1, 1950, a merger with United States Trust Company was also completed and added seven more branches. In less than 18 months, National State grew from one of the smallest banks to one of the largest in the state. Its assets were over $168 million.

Throughout the 1950s, National State pursued a strategy of expansion through mergers. In 1955, Lincoln National Bank consolidated with National State; in 1956 and 1957, the Irvington Trust Company, First National Bank of Milburn, and Citizens National Bank and Trust Company of Caldwell were also acquired. The most significant merger took place in 1958 when the venerable Federal Trust Company came into the fold. By the end of the decade, National State's combined assets amounted to more than $418 million, and it ranked as the second largest bank in New Jersey.

William H. Keith replaced Stillman as president in 1961, while the latter remained as chair and chief executive of the bank. One year later, on its 150th anniversary, National State had almost 1,000 employees working at its headquarters and 21 branch offices, and over half a billion dollars in assets. To reflect its new prominence, the board of directors changed the bank's name to First National State Bank of New Jersey.

When Keith died in 1966, Robert R. Ferguson, Jr. was elected president of First National. Ferguson had a distinguished career at Federal Trust before its acquisition, and he immediately implemented an aggressive strategy of growth and expansion. Under Stillman's and his direction in 1969 the bank formed a parent company, First National State Bancorporation, in order to begin a program of statewide growth, and also laid the foundation for First National's involvement in interstate banking.

Stillman served as chairman of the Bancorporation and Ferguson as its president and chief executive, having assumed this position in 1973. Continuing its strategy of creating a large, statewide retail branch system, by the end of the decade the Bancorporation had expanded into every sector of the state. This system gave First National a substantial commercial banking-retail business.

During the early part of the 1980s, the merger of First National Bank of South Jersey and First National Bank of New Jersey increased assets to $6.4 billion. In 1984, the largest merger in the banking industry to date brought together Fidelity Union Bancorporation with First National to create First National State Bancorporation with assets of $10 billion. Renamed First Fidelity Bancorporation in 1985, it acquired Morris County Savings Bank of Morristown one year later, and in 1988 Fidelcor, Inc., based in Philadelphia, was merged. The merger of First Fidelity and Fidelcor created a super-regional interstate banking corporation with customers throughout the Philadelphia area and the state of New Jersey. Through these major mergers and corporate reorganization, First Fidelity became one of the 25 largest banking companies in the United States, with over $28 billion in assets.

Following the change of name and merger with Fidelcor, First Fidelity Bank, N.A., New Jersey, became the lead bank in the corporation's new lineup of commercial banking affiliates in New Jersey and Pennsylvania. This bank, with over $8 billion in assets of its own, was the largest commercial bank in New Jersey.

Having guided the bank through some of the most dramatic changes in its history, Ferguson retired and was replaced by Hal Pote. Under Pote's direction the bank agreed to some unwise commercial loans, and losses in revenue began to mount. Soon the board of directors was informed that the bank's capital ratio had declined severely, and this led directly to the resignation of Pote. Ferguson was asked to return and serve on an interim basis until a suitable replacement could be found.

In February 1990, the board of directors hired Anthony Terracciano as chairman, president, and chief executive. Terracciano had worked at Chase Manhattan Bank for 23 years, where he rose to the position of vice-chairman. In 1987, as president and chief operating officer of Mellon Bank, he helped Frank Cahouet solve the problems that were plaguing the Pittsburgh bank. When Terracciano arrived at Fidelity he immediately began to slash operating costs. In two years he reduced the workforce by some 20 percent, eliminating 6,000 jobs, introduced a new and more efficient standardized process for the bank's loan underwriting program, and contracted General Motors's Electronic Data Systems to handle the bank's computer operations. Within three years, Terracciano reduced operating expenses from 70 to 57 percent of revenue.

Seeking to expand the bank's assets, Terracciano also began to purchase failed financial institutions from the FDIC and RTC. He acquired a number of thrift and commercial banking institutions with nearly $10 billion in deposits at bargain prices, including the former City Federal Savings Bank, First National Bank of Toms River, and the Howard Savings Bank of Livingston, New Jersey. Terracciano's skillful implementation of his strategy to decrease Fidelity's cost structure while increasing its asset base made Fidelity both the dominant and the most profitable bank in New Jersey, as well as expanding its market share in southeastern Connecticut, eastern Pennsylvania, and Westchester County, New York.

Further Reading:

• Forty-Nine Feet on Broad: The Story of the First 150 Years of the National States Bank of Newark, New Jersey, New Jersey: The National State Bank of Newark, 1962.
• "A Brief History of First Fidelity," First Fidelity Journal, Vol.6, No. 2, December 1992.
• Schifrin, Matthew, "The Early Bird," December 7, 1992, Forbes, pp. 168-69.

Source: International Directory of Company Histories, Vol. 9. St. James Press, 1994.

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