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Community banks shine during trying times

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Sandy Spring Bancorp, the parent company of Sandy Spring Bank, reported record net income of $56.7 million for the fourth quarter of 2020.

The financial performance of the 152-year-old institution is particularly striking because it was achieved during the COVID-19 pandemic, an economy flirting with a full-blown recession and relatively high unemployment.

Known for nimbly serving their local market in a way that large institutions cannot, other community banks also have reported solid results despite the pandemic.

Sense of Community

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As for Sandy Spring’s record net income, Dan Schrider, president and CEO, thinks that 2020 was “an incredible year in many ways. That [figure] was achieved with the tremendous effort put forth by our 1,150-member team.”

But there were outside factors, too, like “the hot housing market, record low interest rates on a 30-year mortgage loans of about three percent, record home loans of more than $2 billion,” said Schrider, “and home construction, which has helped keep trades busy.”

Sandy Spring, which has nine branches in Howard and Anne Arundel counties and a financial center in Annapolis and an operations center in Columbia, bought Revere Bank and Rembert Pendleton Jackson, a financial planning and investment advisory firm located in Falls Church, Va.

The Revere Bank acquisition and participation in the Paycheck Protection Program (PPP) boosted Sandy Spring’s total assets from $8.5 billion up to $12.8 billion.

Schrider said Sandy Spring Bank was “among the leaders in our area in PPP loans and put out more than $1.2 billion in that market last year. We helped every client that applied, across all industries, and continue to participate” in the current wave of PPP loans.

The success came down to immersion in the community.

“It’s very important to work and raise families where our clients do,” he said. “No loan approvals come from Charlotte and no advice comes from distant call centers.” As a now $12.8 billion company, Sandy Spring’s size gives it the ability to invest in things like new technology, Schrider added.

Local Scene

In 2020, Fulton Bank “had a really good year,” said Joe Durham, senior vice president and regional commercial executive in Maryland for the Lancaster, Pa.-based institution, which reported net income of $49 million for the fourth quarter of 2020.

“General production was very solid, in addition to what was gained from the PPP loans. That means new accounts, new business, consistent loans requests throughout,” said Durham. “We got off to a very good first quarter, then PPP took us sideways [in the second quarter]. But we finished strong.”

The two keys were Fulton’s client base and the solid market.

“Commercial customers have shown their entrepreneurial spirits,” he said. “We also received business via referrals from key centers of influence, such as accountants, insurance agents, lawyers and commercial/residential real estate agents.”

While Fulton still operates six branches in Howard and Anne Arundel counties, earlier this year the former Columbia Bank closed centers in Ellicott City and in Odenton.

This year, Durham expressed the bank’s “big interest in growing the Maryland market. Its business pipeline was strong entering 2021.”

Building Up

Another area bank that has closed local branches but still reported growth is Baltimore-based Howard Bank. After the Downtown Columbia branch closes in March, it will have two branches in Howard, both in Ellicott City, and two in Anne Arundel.

While Howard reported markedly less net income, at $4.5 million for the fourth quarter of 2020, than larger banks like Sandy Spring and Fulton, 2020 performance was considered solid by Chairman and CEO Mary Ann Scully.

“We had a good fourth quarter and year in a very tough market,” she said. “We’ve worked to grow our capital base during this down economy and our earnings up and earnings per share are up. We did it the old-fashioned way.”

Net revenue was up, as were net return-on-assets, Scully said. “If you can say that you’re growing your tangible book value by nine percent from the prior quarter and growing our operating earnings 33 percent from previous quarter and are still able to expand our allowance given an unpredictable economy going forward, that’s good.”

Howard also saw loan growth origination of $100 million in the quarter, which equated to $10 million in net growth.

“I think, overall, the industry is challenged with zero growth in interest rates, an uncertain economy with suffering market segments, an uncertain regulation environment in D.C., plus the slow rollout for the vaccine,” she said. “But we think there are always ways to stand out from the crowd and we think we’re doing that.”

Despite Howard County losing another Howard branch, she noted that while the bank has gone from 28 to 13 branches since its merger with First Mariner in 2017 “and we’ve still experienced growth in the overall market.”

Today, Howard is building a business development lending team in Montgomery County and will add several more in metro Baltimore.

“With industry consolidation,” said Scully, “more professionals see an opportunity to grow with us.”

‘Same Dynamics’

Anirban Basu, chairman and CEO of Sage Policy Group, said community banks around the nation have fared well.

“According to the Federal Deposit Insurance Corp., net income rose by 10 percent during a recent quarter,” said Basu. “They have been collecting fees for PPP loans and given low interest rates, they have been refinancing mortgages for individual customers and generating mortgages for others.”

Basu added, “Those same low rates have expanded demand for loans within certain other economic segments, including for home improvement. Put it all together and community banks, including those operating in Central Maryland, have been able to handle the economics of the pandemic better than many others.”

He also noted their advantages over large banks, which “are more likely to be exposed to large-scale retail bankruptcies, as well as the commercial real estate issues facing many large, often expensive American cities.”

Such dynamics are what made 2020 unique, said Schrider.

“At Sandy Spring, we’ve [operated] under the radar due to the pandemic,” he said, “but I think we’ll emerge with good public relations and relationships that will lead to more horsepower to do more for more people.”

By Mark R. Smith | Senior Writer | The Business Monthly | March 2021 Issue

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