2008 Message To Shareholders

Still Going Strong

In 2008, the banking and financial services industries faced their greatest challenges in many decades. Yet, your bank—by adhering to the principals that have kept it strong for more than 60 years—remains financially secure. In response to the economic downturn, Standard Bank reduced operating costs and postponed expenditures to offset an anticipated drop in revenues. We continued to focus on our customers old and new, maintaining relationships and offering services to meet their lifetime needs.

As the stock market plummeted, individuals and businesses demonstrated their desire for a safe, secure place for their money by entrusting their funds to Standard Bank. Total deposits at year end were $1.91 billion, up 6 percent versus $1.80 billion at the end of 2007. Gross loans rose 9.7 percent in 2008 to $1.89 billion from $1.73 billion in 2007. Toward the end of 2008, mortgage and business lending rose as interest rates dropped.  The bank increased its credit loss reserve to $28.70 million as of the end of 2008 from $22.23 million at the end of 2007 in order to cover additional losses that may occur. This reserve equaled 1.5 percent of gross loans, up from 1.3 percent for 2007. Net loan charge-offs rose to $4.78 million versus $1.75 million in 2007 because of the deteriorating economy.

Standard Bancshares ended the year with Consolidated Tier 1 capital of $163.35 million, an increase of 2.9 percent from $158.78 million in 2007. The company’s ratio of Tier 1 capital to average assets was 7.3 percent, down from 7.4 percent in 2007. This ratio is well above the minimum established by the federal government for a bank to be considered well-capitalized.  Standard Bancshares continues to return value to shareholders in an annual dividend. The board of directors elected to increase the dividend for 2008 by 3.3 percent to $0.156 per share. 2008 is the 21st consecutive year in which the dividend has risen. 

Going forward, we anticipate that 2009 will be another difficult year for our industry. Increases to the credit loss reserve are expected to limit earnings, and loan defaults will exert pressure on banks and other lenders. However, lower rates could present lending opportunities and may have a positive impact on home sales. We will continue to manage the business conservatively, providing our customers with a secure place to bank.

As we work our way through this difficult period, your executive team remains grateful for the trust that our customers and shareholders have placed in Standard Bank. We thank our directors and staff for their commitment to the bank’s ongoing success and our communities for their support. And, finally, we pledge to remain your safe, secure, community bank long into the future.

(please click here for the full version of the 2008 Message to Shareholders)

Sincerely,

Timothy J. Gallagher
Chairman

Lawrence P. Kelley
President, Chief Executive Officer and Vice Chaiman