Sandy Spring to buy bank in N. Va.

Montgomery firm to expand to Fairfax

October 12, 2006|By Hanah Cho | Hanah Cho,Sun reporter

Sandy Spring Bancorp of Olney said yesterday that it was entering the Virginia banking market with the acquisition of Potomac Bank in a deal worth $64.7 million.

Sandy Spring's acquisition comes on the heels of a proposed acquisition of Mercantile Bankshares Corp. of Baltimore by a Pittsburgh bank as institutions seek to grow in an increasingly competitive market.

After Mercantile's deal with PNC Financial is completed, Sandy Spring would become the second-largest, publicly traded independent bank based in Maryland.

Sandy Spring, based in the Montgomery County community of Olney, said it wants to broaden and grow its predominantly Maryland-based business. With $2.6 billion in assets, Sandy Spring has 32 branches in Anne Arundel, Carroll, Frederick, Howard, Montgomery and Prince George's counties.

Earlier this year, Sandy Spring acquired Neff & Associates, an independent insurance agency in Ocean City. And last year, Sandy Spring completed its acquisition of West Financial Services, an asset management and financial planning company in McLean, Va.

"I would say that we certainly are more focused on growth opportunities now than in the recent past," said Hunter R. Hollar, Sandy Spring's president and chief executive officer. "The expansion in Northern Virginia is natural for us. Those counties are very similar to the counties we serve in Maryland."

Under the deal, Sandy Spring will acquire all shares of Potomac Bank, of Fairfax, Va., with 50 percent stock and 50 percent cash. Potomac shareholders would receive 0.6143 shares of Sandy Spring stock or $21.75 in cash for each Potomac share, or a combination of each.

The cash price for a Potomac share represents a 19 percent premium over Tuesday's closing price of $18.25 on the OTC Bulletin Board. Potomac stock rose 17.5 percent, or $3.20, to close at $21.45 yesterday.

Shares of Sandy Spring dropped 1.02 percent, or 37 cents, to close yesterday at $35.92 on Nasdaq.

Potomac Bank, with four branches in Northern Virginia, would bring $247 million in assets, $193 million in gross loans and $192 million in deposits to Sandy Spring.

Sandy Spring said the transaction could result in a 25 percent reduction in operating expenses by eliminating overlapping positions in administration and operations. That could mean some job losses, though the company hopes to retain many of Potomac Bank's 50 employees, Hollar said.

The transaction, which requires the approval of Potomac Bank shareholders and banking regulators, is expected to close in the first quarter of 2007. Once the deal is approved, Potomac Bank would continue to operate under its name.

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