Banking & Finance

Sandy Spring Bank

While 2008 is a year most of us would like to forget, we can learn from it! At Sandy Spring Bank Investment Management and Fiduciary Services (IMFS) we learn fromour own experiences as well as others' observations. We use that knowledge to protect our clients' wealth through turbulent economic times.

This economic meltdown can be traced to the housing market of recent years, where prices and demand for homeownership increased rapidly. Many residential mortgage lenders developed ever riskier programs for home buyers, including low and no down payment scenarios, loosened credit standards, and interest-only, adjustable rate, balloon and sub-prime loans. To get in on this housing boom Wall Street and investors around the world purchased these loans in the form of bonds and structured investment vehicles.

As interest rates climbed, mortgage payments rocketed out of reach for many homeowners. Decreasing home values precluded their ability to refinance. Companies suffered losses as the value of their mortgage-backed investments declined, making them less credit-worthy and banks hesitant to lend. The consequence is the current credit crunch.

Equities have reflected the imploding economy, losing value in record percentages. The effect on individuals' portfolios has been dramatic. While no one has escaped the downturn completely, there are strategies that can help protect your wealth.

"You never know who is swimming naked until the tide goes out"

Warren Buffett

observed that a rising tide protects most investors no matter how ill conceived their investment policy, but a reverse in economic trends has the opposite effect. "Naked swimmers" have been surfacing over the past year: Fannie Mae and Freddie Mac, Lehman Brothers, Bernard Madoff, GM and Chrysler, and The Reserve Fund among them.

At Sandy Spring Bank IMFS Division we've avoided the herd mentality, thinking for ourselves to protect our clients' wealth. Earlier than many, we moved to preserve capital in our clients' holdings.

"A sound banker, alas, is not one who foresees danger and avoids it, but one who, when he is ruined, is ruined in a conventional way along with his fellows, so that no one can really blame him."

Hyman Minsky

Minsky is the most interesting disciple of John Maynard Keynes, the father of macroeconomics. Minsky eschewed the notion of "efficient markets." At Sandy Spring, we disbelieve in them ourselves. We're not interested in going down with the rest of the investment world. If we fail, it's not because we followed the "common wisdom," which often isn't. We've avoided hedge funds, financially engineered securities and other esoteric vehicles that have been so popular and contributed in no small say to the world's economic problems. "Never let the fear of striking out get in your way."

Babe Ruth

Now is the time to look for opportunities to protect and enhance value, knowing that this environment is the most difficult of our lifetimes. While there may be strike outs, you can play "smart ball," looking for ways to "score" that may not be as dramatic as Babe's storied hits but will protect or enhance value nonetheless. We expect to see opportunities in the future; indeed there are some very attractive equity valuations now. "It does not do to leave a live dragon out of your calculations, if you live near him."

J.R.R. Tolkien

Awareness of the dragon prompted us to begin raising cash in the third quarter of 2007. We were well ahead of most of our peers in preparation for the economic firestorm. The dot-com bubble, the housing bubble and perhaps now the bond bubble are part of normally recurring economic phenomena. It is possible to manage through them. Since 1868, Sandy Spring Bank has weathered many ups and downs in the economy - always emerging strong and stable. Our track record speaks of our commitment to serving our clients and communities and to putting clients' needs first. We've grown with our communities and evolved with the people and businesses in this market, building the expertise and sophistication needed for today's Suburban Maryland and Northern Virginia client. With recent local bank mergers and acquisitions, Sandy Spring Bank becomes the oldest and largest bank headquartered in Maryland. We've been steady and even conservative in our lending policies, while at the same time innovative and progressive with our money management. We'd be happy to meet with you to discuss your wealth management strategy and how our services can benefit you as they have our many satisfied wealth management clients. At Sandy Spring Bank, we know our business; we care about our community; and we're here to help you through this economy and beyond.