SANDY SPRING BANK
Company Research Paper
Babita Shrestha
3/27/2014
ENGL317
INTRODUCTION
Sandy Spring Bank (SSB) is a publicly traded company which has grown soundly since
its inception. Sandy Spring Bank operates on a full line of financial services through a network
of 46 community offices. Headquartered in Olney, Maryland, it operates in the highly desirable
market of greater Washington D.C. including offices in Montgomery, Howard, Frederick, Anne
Arundel and Prince George’s counties in Maryland, Fairfax, Loudoun and Arlington counties in
Northern Virginia.
This community bank provides a wide range of product and services. Its products
include different kinds of checking and saving accounts as well as loans. Services includes
branch banking, online banking, mobile banking, overdraft services, wealth management,
investing opportunities and others,csuch as ID protection and telephone banking.
COMPANY HISTORY
About 145 years ago, in March of 1868, Governor Swann approved charter for a group of
26 Quaker farmers to a Savings Institute in the State of Maryland, who got together to help out
the nation by solving the financial problem raised by The Civil War. The working solution the
Quaker farmers came up with was to open a new bank that “would serve the interests of all the
people in their community, staffed and managed by those who lived and worked in their
community” ("About Us"). Caleb Stabler was the first president of the Institute until and served
for 14 years until 1882. Daniel Schrider is the current president and CEO of the company. On
April 13, 1868, the Savings Institution of Sandy Spring opened for business with 44 accounts
and $383 in total deposits. Within 10 years, the deposits reached $100,000 ("About Us"). By
1900, the Saving Institution’s success and the growing needs of the local population led to the
1
creation of the First National Bank of Sandy Spring. In 1956, the Bank opened its first
community office in Olney, Maryland and later in 1986, this building was named headquarters.
On June 30 1972, the bank had $28 million in combined assets. The bank updated its name to
Sandy Spring National Bank in the early 1980’s. In 2001, the company updated its name to
Sandy Spring Bank ("About Us").
ACQUISITIONS
Two subsidiary companies: Equipment Leasing Co. and Chesapeake Insurance Group (now
Sandy Spring Insurance Group) were acquired to broaden product offerings. In October 2005,
West Financial Services was acquired and in February 2007, the Potomac Bank of Virginia was
acquired. This acquisition introduced the Bank to Fairfax and Louden Counties ("About Us").
On May 21, 2007, the bank acquired CN Bancorp, Inc. of Glen Burnie. Most recent acquisition
was of Commerce 1st bank on June 1, 2012. Today, the bank’s branch network includes 49
community offices in eight counties and has $4.1 billion in assets ("About Us").
VISION, MISSION AND VALUES
The bank aims to continue to be successful by adding the value to the communities in its
footprint. It values building long lasting relationship with clients and employees through
integrity and teamwork. It is a community bank that strongly believes in giving back to the
community. Since the inception, the bank has stayed true to its values. That is why they are still
in strong position ("About Us").
2
VOLUNTEERISM AND RECOGNITION
Since its inception, the bank has really lived its slogan “For here, from here.” They are
really committed to serve the community not only through their banking products and services,
but through volunteerism. Last year alone, they volunteered more than 30,000 hours although the
bank only has about 700 staff members ("About Us"). The bank was recognized by Forbes
magazine as one of the top “Most Trustworthy” corporations in America for integrity in financial
reporting in 2010 through 2013. The Society of Human Resources has named it as one of the top
50 places to work in the United States. SSB won the Montgomery County C of C Corporate
Social Responsibility Award in 2012. The bank was the winner of Maryland Work-Life Alliance
Seal of Approval from 2002 to 2010. The bank was number 22 Best Medium Company to Work
for in America in 2004 and was named a Baltimore Sun Top Workplace in 2011 and 2012. In
2005, it was named among the top ten family-friendly businesses in Frederick County ("About
Us").
FINANCIAL PERFORMANCE
The bank is involved in the business of banking, investments, wealth management and
financial planning, insurance and leasing. Its clients are retail consumers, small/medium
business, non-profit organizations, public funds (local government). Seventy percent of the
sources of income are from interest and 30 % are from noninterest. It earns income from earning
assets through loans, leases and line of credit as well as investments such as equities, municipals,
US agencies and mortgage backed investments. The bank has interest expenses such as paying
interest on interest bearing deposit accounts as well as short and long term borrowings. Noninterest income includes fees and service charges, fee based businesses and gain on sale of loans.
3
Noninterest expenses include compensation and benefits, facilities, marketing, systems and
technology, supplies, vendor services and many more ("About Us"). According to the peer
analysis, SSB’s financial performance is better than the peer median ("Peer Analysis").
4
TOTAL RETURN COMPARISON
The following graph shows cumulative total return on common stock of the company over the
last five years compared with cumulative total return of a broad stock market index and narrower
index Mid-Atlantic Bank holding company peers with assets of $2 billion to $7 billion ("2012
Annual Report").
Figure 1: Total Return Performance
[Source: Annual Report SSB]
5
ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATION
OVERVIEW
Net income for Sandy Spring Bancorp, Inc and subsidiaries for the year ending December 31,
2012 totaled 36.6 million ($1.48 per diluted share), compared to net income of 34.1 million
($1.41 per diluted share) for the prior year ("2012 Annual Report"). These results reflect the
following events.
Net interest income increased 7% in 2012 from 2011 ("2012 Annual Report"). This increase was
primarily due to growth in average interest-earning assets mostly resulting from higher-earning
commercial loans added in the acquisition of CommerceFirst Bancorp, Inc. (“CommerceFirst”)
and loan growth. Combined with an improved deposit mix, these factors more than offset lower
overall earning asset yields.
The provision for loan and lease losses totaled $3.6 million for 2012 compared to $1.4 million
for 2011 ("2012 Annual Report"). The increase in the provision for 2012 compared to the prior
year was due primarily to a decline in historical losses in 2011 which caused a credit balance in
the provision for the third quarter of 2011, thus reducing the full year provision.
Non-interest income increased $3.5 million or 8% for 2012 compared to 2011 due largely to
growth in income from mortgage banking activities due to a higher volume of refinancing
activity ("2012 Annual Report").
Total loans at December 31, 2012 increased 13% compared to the balance at December 31, 2011
("2012 Annual Report"). This improvement was driven primarily by the growth in loans
mentioned above.
6
FINANCIAL CONDITION
The company’s total assets were $4.0 billion on December 31, 2012, increasing $244 million or
3.7 billion the year before. Interest earning assets increased $217 million to $3.7 billion on
December 31, 2012 compared to 2011 and it was due to Commerce First acquisition in the
second quarter of 2012 which added $172 million.
LOANS AND LEASES
“Total loans and leases, excluding loans held for sale, increased $291 million or 13% at
December 31, 2012 compared to December 31, 2011. Excluding the loans acquired in the second
quarter through the Commerce First transaction, total loans and leases increased $136 million or
6%. The residential real estate portfolio, which is comprised of residential construction and
permanent residential mortgage loans, reflected a 15% increase at December 31, 2012 compared
to December 31, 2011. Permanent residential mortgages, most of which are one to four families,
increased 17% due to higher loan origination volumes of adjustable rate mortgage loans. The
Company generally retains such adjustable rate mortgages in its portfolio and sells the fixed rate
mortgages that it originates in the secondary mortgage market. Residential construction loans
increased 11% at December 31, 2012 compared to the balance at December 31, 2011 due to
increased construction activity as a result of mild weather conditions and low interest rates”
("2012 Annual Report" Pg.36).
“The commercial loan portfolio increased by $212 million to $1.5 billion at December 31, 2012
compared to the prior year end largely due to the Commerce First acquisition. The increase in
commercial loans was due to a 33% increase in commercial business loans, a 23% increase in
commercial investor real estate loans and a 9% increase in commercial owner occupied real
estate loans at December 31, 2012 compared to December 31, 2011. Commercial ADC loans
decreased 6% at December 31, 2012 compared to December 31, 2011 as the Company reduced
7
its exposure to this segment of the portfolio. Excluding the effect of the CommerceFirst
acquisition, the commercial loan portfolio increased 4% or $57 million due primarily to increases
of 12% in commercial investor real estate loans and 8% in commercial business loans” ("2012
Annual Report" Pg.36).
“The consumer loan portfolio remained virtually level at $357 million at December 31, 2012
compared to December 31, 2011. Equity lines of credit increased 3% in 2012. This increase was
offset by declines in installment loans and conventional second mortgage loans due to weak
consumer demand as a result of the state of the regional and national economy. It is doing better
than the median peers but not better than the high performing peers. Analysts have predicted that
this year the earning per share will increase”("2012 Annual Report" Pg.36).
CONCLUSION
Through all these years, Sandy Spring Bank has remained strong and is “the largest
independent financial institutions based in Maryland” ("About Us").Its performance supports the
bank’s vision of remaining successful. Over the past two years, the bank has been working
throughout the family of companies to define and elevate client experience. Along this journey,
they identified key principles which they wanted to bring to each client interaction and involved
every member of the company in improving the client experience. Being a local, community
bank focused on a remarkable client experience separates them from the competition and
positions SSB for growth in the years ahead. The fact that it has lived for nearly a century and
half, proves that management style in the bank has been really good from the very beginning.
The Financial data shows that this bank is still in sound financial position.
8
WORK CITED
"2012 Annual Report." Annual Reports. Sandy Spring Bancorp, n.d. Web. 2 Apr 2014.
<http://www2.snl.com/Cache/16478631.PDF?Y=&o=PDF&D=&fid=16478631&T=&osi
d=9&iid=100651>.
2012 Annual Reports. 2013. Chart. Annual Reports, Washington, D.C.. Web. 2 Apr 2014.
<http://www2.snl.com/Cache/16478631.PDF?Y=&o=PDF&D=&fid=16478631&T=&osi
d=9&iid=100651>.
"About Us." Sandy Spring Bank. Sandy Spring Bank. Web. 2 Apr 2014.
<https://www.sandyspringbank.com/aboutus.asp&xgt;>.
"Peer Analysis." Sandy Spring Bancorp. SNL Financial LC, n.d. Web. 2 Apr 2014.
<http://www2.snl.com/irweblinkx/peer.aspx?iid=100651>.
9
APPENDIX
INTERVIEW
I conducted a phone interview with one of the staff members of Sandy Spring Bank:
Miss. Edwina Lewis. She is a member of the commercial loan department.
I had several specific questions in mind when I approached this interview. First, I wanted
to know some of the organization’s background information, goals and mission. She took the
time to answer my questions in detail. During my interview with her, I came to know how the
bank is focusing on improving client experience to beat the competitors. She also informed me
about many risk factors involved in being a banker, such as, loans not being paid off and risks of
mobile banking. There are many areas associated with an organizational operation. To get to
know about the Company’s information from one of its family members was a really good
experience.
Overall, the interview was very successful, and I got to compile more information about
the bank because of it. She also provided me with a copy of the bank’s organizational chart.
ORGANIZATIONAL CHART
To understand the organization, it is very important to know how its operation is handled within
different departments. I would like to present the current organizational flow of SSB using the
following organizational chart.
10
Board Of Director
Chief Executive
Officer
Audit Committee
Wealth Management,
Insurance, and Mortgage
Commercial & Retail
Banking
Chief Credit Officer
Sandy Spring
Mortgage
Market President
Annapolis Region
Senior Credit Officer
Security
& Contingency
Planning
Human Resources
Learning & Prof.
Development
Senior Corporate
Counsel
Sandy Spring Trust
Commercial Team
Leader
Senior Credit Officer
Facilities
Human
Resources
Regulatory
Management
Investment
Services
Commercial Team
Leader
Technology
Management
Treasury & ALCO
Senior Credit Officer
Credit Policy Officer
Information
Security
Fin'l Inst. Banking
Deposit Operations
Finance
Alternative Delivery
Financial
Reporting
Project
Management
Decision Support
& Planning
Chief Information
Officer
Chief Financial Officer
Chief Legal Officer
Internal Audit
West Financial
Services
Sandy Spring
Insurance
Commercial Team
Leader
Treasury
Management
Division
Commercial Deposit
Division
Loan Administration
Commercial
Workout Manager
Marketing & Retail
Banking
Figure 2: Organizational Chart of SSB
11