LAWRENCEVILLE, N.J. -- First Fidelity Bancorp. received authorization from its board to repurchase up to 2% of its common shares in any year.
The modest buyback would amount to 1.6 million shares in any calendar year. At its current price of $41.625, that would mean $67 million in capital spent to repurchase shares.
"At the right share price, it is an alternative way to use your capital to directly benefit shareholders," said a spokesman for the New Jersey company.
John Heffern, an analyst with Alex. Brown & Sons in Baltimore, said the modest buyback can be interpreted as a signal about the management's comfort with the bank's prospects. In addition, it could "sop up some supply if there is selling pressure on the stock," he said.
First Fidelity's shares have been under pressure this year. The stock is down 5.1%, while Alex. Brown's regional index is up 5.8%. Since June 30, First Fidelity has plunged 15%, versus a 4% decline for other regionals, said Mr. Heffern.
If exercised, the buyback may do little to keep down the bank's growing capital. Using the Sept. 30 balance sheet, Mr. Heffern estimates that the full repurchase would have reduce the bank's equity-to-assets ratio to 7.16%, from 7.35%.
First Fidelity joins a growing list of banks that have announced buyback plans of common stock or preferred stock. Mellon Bank Corp. and First Bank System have announced similar, limited buybacks. Sun-Trust Banks has been more aggressive, announcing plans to repurchase up to 10% of its stock.
Firstar Corp. said Thursday that it will redeem all of its 500,000 Series B cumulative preferred shares on December 29 at $103 a share.
"You are seeing a tremendous buildup of capital at banks," said Dillon, Read analyst Felice Gelman. "It is only logical that in an environmental where balance sheets aren't likely to grow very much, companies should be looking at buybacks."
