Sandy Spring Bank is eyeing fee-based acquisitions. Here’s what the CEO is looking for.
Washington Business Journal
Olney-based Sandy Spring Bancorp Inc. (NASDAQ: SASR), which owns Sandy Spring Bank, is coming off a quarter of record earnings and is on the hunt for companies that could fuel its plans for doubledigit earnings growth.
The company reported net income of $13.5 million for the third quarter of 2016, up from $11 million during the same time last year, the highest quarter so far. And the current period of bank consolidation in Greater Washington and years of low interest rates are pushing many companies to decide what their futures are, and that is where Sandy Spring can step in.
“We would view ourselves as an acquirer,” said Sandy Spring CEO Dan Schrider in an interview with the Washington Business Journal. “It’s about finding an organization, whether it’s a bank or a wealth management firm or an insurance agency, that views the client relationship the same way we do and has a comparable culture.”
Schrider outlined an acquisition strategy that would boost earnings growth and the overall franchise value of the company. He also said a compatible culture is an important factor in deciding whether to buy a company.
“Banks take longer to build those relationships. Some of the fee-based opportunities are a little easier to make happen,” Schrider said.
He pointed to the company’s August acquisition of the Westminster, Maryland based insurance company The Advantage Group. The terms of the deal were not disclosed, but the company will eventually be rebranded as Sandy Spring Insurance.
“That’s an example of the type of company that is not a bank that we would be acquiring. Those that are complimentary to the core banking franchise,” Schrider said.
Sandy Spring Bank is the No. 14 bank in the D.C. metro area ranked by deposits, according to the FDIC. The bank had $2.7 billion in deposits in the metro area with an additional $783.8 million outside. The bank also reports about $4.8 billion in assets.
While he did not rule out purchasing a bank, the focus on a wider range of businesses stands in contrast to other regional players. United Bank, which recently agreed to purchase Tysons-based Cardinal Bank for $922 million, has focused on buying up smaller banks to fuel its rapid growth in the region.
Meanwhile, Schrider believes this record net income represents “a new level of performance” for the company and something the company believes can be sustained over the long term. He said the bank is pushing for double-digit earnings growth and that will push the bank to grow further.
The bank brought in about $42.8 million in interest income with the lion’s share coming from its loan portfolio. The company also brought in $12.5 million from its portfolio of other services. Its mortgage banking services brought in $1.1 million, more than double the $566,000 from the third quarter of 2015.
So is Sandy Spring Bank open to being acquired? Schrider said the bank will remain independent as long as it continues to remain relevant in the community and produce good returns for its shareholders.
“Our long term strategy is to remain Sandy Spring and to be independent. But we are very aware of the fact that you earn the right to continue to be independent,” Schrider said.
He stressed the bank will continue to grow organically and look for new opportunities in nearby markets. Earlier this year, Sandy Spring Bank opened a new branch in the District, and Schrider said that was an example of how the bank might continue to push into new areas.
Does the purchase of Cardinal Bank open up new opportunities for Sandy Spring to push further west in Northern Virginia?
“We do believe that and we will consider those opportunities as they arise,” Schrider said, although he stressed that expansion might not come in the form of a new bank branch.
Sandy Spring Bancorp. CEO Dan Schrider sees the bank as an acquirer during a time of consolidation.
This article appeared in the online edition of the Washington Business Journal on November 2, 2016. It has been reprinted by the Washington Business Journal and further reproduction by any other party is strictly prohibited. Copyright ©2016 Washington Business Journal, 1555 Wilson Boulevard, Suite 400, Arlington VA 22209