As Gerard Cuddy prepares to become the president and chief executive officer of Beneficial Mutual Bancorp in Philadelphia, one analyst likened him to a coach taking over a team in midseason.
"He knows how to play the game," said Richard D. Weiss of Janney Montgomery Scott LLC in Philadelphia. "But he has to learn the players and make a lot of decisions."
The $2.4 billion-asset thrift company lured Mr. Cuddy, 47, away from Commerce Bancorp Inc. of Cherry Hill, N.J., where he was the senior commercial loan officer for Pennsylvania and head of the private banking group for the state. He will succeed George Nise, who plans to retire in January.
Though no analysts follow the privately held Beneficial, several said Mr. Cuddy is in for a major-league challenge. Beneficial's to-do list includes plans, announced Oct. 13, to go public and use the proceeds to finance its $183 million deal to acquire FMS Financial Corp. in Burlington, N.J.
"He's new to the company. He's never been a CEO. He's switching from a commercial bank focus to a thrift. He's getting up to speed on how a mutual holding company operates. He's trying to understand the mechanics of an offering and integrate an acquisition on top of that," Mr. Weiss said. "It's a lot to do, and there's not much time to learn."
But Mr. Nise and others familiar with Mr. Cuddy expressed confidence in him. Mr. Nise said the search committee liked the executive's skill and enthusiasm and figured his commercial lending background would help Beneficial diversify its loan portfolio.
Mr. Cuddy, who has 25 years of banking experience, almost entirely in the Philadelphia area, noted that Beneficial is about to become the largest community banking company based in the city. The FMS acquisition would increase Beneficial's assets by half, to $3.6 billion, and more than double its branch count, to 81.
"For a Philadelphia person, which I am, this is beyond an honor," said Mr. Cuddy, who will join Beneficial as its president-elect Nov. 13.
He said that even though it was too early to talk about what might lie ahead for the 153-year-old company, it has no plans to sell itself. "I wouldn't be stunned if 153 years from now, they're still independent."
Mr. Cuddy started his career in 1981 at Continental Bank Corp., a Philadelphia company that later became part of PNC Financial Services Group Inc. Before joining Commerce 18 months ago, he had held senior management positions at Bank of America Corp. and FleetBoston Financial Corp., which B of A bought in 2004.
Jim Lynch, a vice chairman at Sovereign Bancorp Inc. in Philadelphia, hired Mr. Cuddy at two of his former companies, Continental and Fleet.
"I was always impressed with him," Mr. Lynch said. "I think he's got his work cut out for him now, getting into a community bank and being responsible for all facets of it. But I think he's got the skill set to do that."
According to Mr. Nise - who has worked there for 36 years, including the last six as its president and CEO - Beneficial began looking for a new leader after he told the board last year that he would like to retire in 2007, preferably in January, when he will turn 65.
So the timing of the executive change is unrelated to the planned minority stock sale and acquisition, which are to be completed by mid-2007, he said.
Though Beneficial is already a mutual holding company, it has never sold any stock.
Mr. Nise said this is one of only a few instances in which a mutual holding company bundled an IPO with an acquisition. After the transaction is complete, the IPO investors and FMS shareholders would own 45% of Beneficial.
FMS is the parent of Farmers and Mechanics Bank, which has $1.2 billion in assets and 42 branches, all in New Jersey. Most of the branches are in Burlington County, though there are a handful in Camden and Mercer counties.
Beneficial agreed to pay $28 a share in cash and stock - about 2.47 times FMS' tangible book value.
FMS stock spiked after the deal was announced. The shares, bought up by those eager to get in on the IPO, continue to trade above the deal price; they closed at $30.52 Friday.
Cassandra Toroian, the president and chief investment officer at Blue Rockefeller LLC in Paoli, Pa., an FMS shareholder, said she expects Mr. Cuddy to do well, since he impressed Beneficial's conservative board.
"I don't know Gerard Cuddy, but I've heard very good things about him," Ms. Toroian said.
"There aren't a lot of ex-CEOs that are available in this marketplace. Those that are high-quality have already gone out and started other banks," she said. "Going with a strong leader that has a high-quality reputation was a very good move for Beneficial."
Ms. Toroian said her firm intends to hold on to the Beneficial stock it would receive once the deal to buy FMS closes.
"I'm very happy about this combination," she said. "When I look five years out, I think it's a phenomenal franchise."
Andrew W. Stapp, an analyst at Cohen & Co. in Philadelphia, said the fact that both companies have a lot of room for improvement could prove to be a negative or a positive for Mr. Cuddy.
"At both Beneficial and Farmers, the profitability metrics are not as strong as they could be," Mr. Stapp said. "He's got that to focus his attention on as well. So he's got a lot of work to do."
Investors like to see a return on assets of about 1%, and Beneficial and Farmers have fallen short of that by more than half so far this year, Mr. Stapp said.
However, the low returns give the companies much greater potential upside, he said. "It's good from the perspective that you're starting at a low profitability base, so if you can turn this around, you can generate some nice earnings growth."
Jared Shaw, an analyst at Keefe, Bruyette & Woods Inc. in Hartford, Conn., said that even though he is unfamiliar with Mr. Cuddy, a Commerce executive could be just what Beneficial needs.
"The culture at Commerce is one focusing on growth. That company is all about going after consumers and growing deposits," Mr. Shaw said. "So I think that brings more of a profitability-focused mentality to the CEO role than you typically have at a mutual."
