Two local banks found themselves in stable positions during the first quarter of 2007 in a time when the industry is facing challenges.
Olney-based Sandy Spring Bancorp and Arlington-based Virginia Commerce Bancorp Inc. each reported their financial results for the quarter ending March 31 on Tuesday. Sandy Spring Bancorp saw its profits decline slightly last quarter because of merger-related expenses, while Virginia Commerce Bancorp’s profits increased by 13 percent.
Sandy Spring Bancorp earned $7.5 million in the first quarter of 2007, compared with $8.3 million during the same period last year. A merger with Potomac Bank of Virginia, which closed in February, cost the company $400,000, according to its earning statements. The merger marked the company’s first entry into the Northern Virginia market.
Virginia Commerce Bancorp’s net income increased by 13.3 percent, to $6.5 million, during the quarter. The bank’s total assets surpassed $2 billion for the first time in the company’s history. Profits for Virginia Commerce were boosted by growth in loans, deposits and prime mortgages, according to the company’s earning statement.
Virginia Commerce’s results were “particularly satisfying in the face of continued margin pressure and intense local competition,” CEO Peter Converse said in a Tuesday press release.
The banking industry as a whole is facing two major challenges in 2007, according to Keith Leggett, senior economist for the D.C.-based American Bankers Association. Community banks in particular are dealing with margin pressure that comes when loan rates do not increase at the same pace as deposits. Additionally, the industry is coming to a point in the credit cycle in which more defaults and delinquencies are occurring, particularly in the subprime mortgage market.
“Still, while these are negative developments, overall the industry is in excellent shape,” Leggett said.
