News release

FOR IMMEDIATE RELEASE

SANDY SPRING BANCORP REPORTS NET INCOME OF $9.9 MILLION FOR

FOURTH QUARTER OF 2012 AND $36.6 MILLION FOR FULL YEAR

OLNEY, MARYLAND, January 24, 2013 — Sandy Spring Bancorp, Inc., (Nasdaq-SASR) the parent company of Sandy Spring Bank, today announced net income for the fourth quarter of 2012 of $9.9 million ($.40 per diluted share) compared to net income of $7.3 million ($0.30 per diluted share) for the fourth quarter of 2011 and net income of $11.0 million ($0.44 per diluted share) for the third quarter of 2012.

Net income for the year ended December 31, 2012 totaled $36.6 million ($1.48 per diluted share), compared to net income of $34.1 million ($1.41 per diluted share) for the prior year, an increase of 7%.

“The solid results for the fourth quarter and the full year were a result of the combination of increased loan growth and continued improvement to our funding mix, “said Daniel J. Schrider, President and Chief Executive Officer. “Looking back on 2012, we benefited from two full quarters of the accretive effect on the net interest margin from the CommerceFirst acquisition combined with a stellar year in income from our mortgage banking activities.”

“We are committed to providing outstanding value to our clients via quality financial products delivered through a consistently high level of service that they have come to expect,” said Schrider. “Together with our strong capital and liquidity positions and improved credit quality, we believe we are well positioned for continued growth during the coming year.”

Fourth Quarter Highlights:

· Pre-tax pre-provision income, a non-GAAP measure, was $15.7 million for the fourth quarter of 2012, a 26% increase over the fourth quarter of 2011 and a 7% decrease compared to the third quarter of 2012.

· The net interest margin was 3.53% for the fourth quarter of 2012, compared to 3.51% for the fourth quarter of 2011 and 3.67% for the third quarter of 2012. The decrease compared to the prior quarter was due primarily to the accrual status of specific commercial loans together with declining yields in the residential construction and mortgage portfolios.

· Non-interest income increased 8% for the quarter compared to the prior year quarter and remained virtually level compared to the third quarter of 2012. The increase over the prior year quarter was due primarily to higher income from mortgage banking activities.

· Non-performing loans totaled $57.9 million at December 31, 2012 compared to $79.1 million at December 31, 2011 and $58.9 million at September 30, 2012. The coverage ratio of the allowance for loan and lease losses to non-performing loans increased to 74% at December 31, 2012 compared to a ratio of 62% at December 31, 2011 and 72% at September 30, 2012.

· Total loans, excluding those acquired in the CommerceFirst acquisition, reflected a 6% increase over the prior year quarter due primarily to growth in commercial business, investor real estate and residential mortgage loans.

Review of Balance Sheet and Credit Quality

Total assets increased 7% to $4.0 billion at December 31, 2012 as compared to December 31, 2011. During the same period, total loans and leases increased 13% to $2.5 billion compared to the prior year end. This increase consisted of $155.0 million in loans from the acquisition of CommerceFirst and $136.4 million of internally-generated loan growth, primarily in the commercial loan and residential mortgage portfolios.

Customer funding sources, which include deposits and other short-term borrowings from customers, increased 9% compared to December 31, 2011. This increase was due primarily to a 25% increase in noninterest-bearing and interest-bearing checking accounts. The Company considers the growth in checking accounts to be an especially valuable metric as such accounts typically are the primary drivers of growth in multiple product banking relationships with clients. Excluding the deposits acquired in the CommerceFirst acquisition, total customer funding sources increased 5% while certificates of deposit declined 17% at December 31, 2012 compared to balances at December 31, 2011, as the Company managed its deposit mix to maintain the net interest margin.

Tangible common equity totaled $384.2 million at December 31, 2012 compared to $351.3 million at December 31, 2011 resulting in an increase in the ratio of tangible common equity to tangible assets from 9.68% at December 31, 2011 to 9.94% at December 31, 2012. This increase was due primarily to net income earned during 2012. At December 31, 2012, the Company had a total risk-based capital ratio of 15.40%, a tier 1 risk-based capital ratio of 14.15% and a tier 1 leverage ratio of 10.98%.

Non-performing loans totaled $57.9 million at December 31, 2012 compared to $79.1 million at December 31, 2011 and $58.9 million at September 30, 2012. Overall credit quality continued to improve as a result of resolution of existing problem credits and limited migration of new credits to non-performing status.

The provision for loan and lease losses was $1.2 million for the fourth quarter of 2012 compared to $2.3 million for the fourth quarter of 2011 and $0.2 million for the third quarter of 2012. The decrease in the provision for the fourth quarter of 2012 compared to the fourth quarter of 2011 was due primarily to a decline in both historical losses and the impact of non-performing loans at December 31, 2012. The increase in the provision for the fourth quarter of 2012 compared to the third quarter of 2012 was largely due to an increase in the overall size of the loan portfolio together with an increase in specific reserves on selected loans.

Loan charge-offs, net of recoveries, totaled $0.8 million for the fourth quarter of 2012 compared to net charge-offs of $2.6 million for the fourth quarter of 2011 and net charge-offs of $2.9 million for the third quarter of 2012. The allowance for loan and lease losses represented 1.70% of outstanding loans and leases and 74% of non-performing loans at December 31, 2012 compared to 2.21% of outstanding loans and leases and 62% of non-performing loans at December 31, 2011 and 1.73% of outstanding loans and leases and 72% of non-performing loans at September 30, 2012. Non-performing loans includes accruing loans 90 days or more past due and restructured loans.

Income Statement Review

Net interest income for the fourth quarter of 2012 increased by $2.5 million or 9% compared to the fourth quarter of 2011 due to an increase in average interest-earning assets from the CommerceFirst transaction and organic growth. Combined with a lower cost deposit mix, these factors resulted in an increase in the net interest margin to 3.53% for the fourth quarter of 2012 compared to 3.51% for the fourth quarter of 2011.

Non-interest income increased $0.8 million or 8% to $12.2 million for the fourth quarter of 2012 compared to $11.4 million for the fourth quarter of 2011. This increase was driven by growth in income from mortgage banking activities of $0.9 million due to higher loan origination volumes and higher average gains on sales, both due to historically low interest rates during the quarter.

Non-interest expenses remained virtually level at $27.2 million for the fourth quarter of 2012 compared to $27.3 million in the fourth quarter of 2011. This was driven by decreases in benefits expenses, commissions on sales of investment products and incentive compensation which largely offset a 5% increase in salaries. The non-GAAP efficiency ratio improved to 60.5% for the fourth quarter of 2012 compared to 65.1% for the fourth quarter of 2011.

Net interest income for the year ended December 31, 2012 increased by $8.3 million or 7% compared to the year ended December 31, 2011 due to an increase in average earning assets resulting from organic loan growth, loans acquired in the CommerceFirst acquisition and an increased level of noninterest-bearing deposits, which more than offset lower earning asset yields. These factors, together with a decline in the cost of funds, resulted in an increase in the net interest margin to 3.60% for 2012 compared to 3.57% for 2011.

Non-interest income increased $3.5 million or 8% to $47.0 million for 2012 as compared to $43.5 million for 2011. This increase was due primarily to an increase of $2.8 million or 87% in income from mortgage banking activities due to higher volumes and increased average gains from refinancing activity. Revenue from wealth management services increased $0.3 million or 2% due primarily to higher assets under management while Visa check fees increased $0.3 million or 7% due to an increased volume of electronic transactions.

Non-interest expenses were $109.9 million for 2012 compared to $105.1 million for 2011, an increase of $4.8 million or 5%. Excluding one-time merger expenses of $2.5 million in 2012, non-interest expenses increased 2% over the prior year. This increase was driven by a 4% increase in salaries and benefits expense, excluding merger expenses, due to merit salary increases, a larger staff and higher cost of health benefits. These expenses were partially offset by a 19% decrease in FDIC insurance premiums due to a change in calculation of such premiums effective in the third quarter of 2011. The non-GAAP efficiency ratio was 60.9% for 2012 compared to 63.8% for 2011.

Conference Call

The Company’s management will host a conference call to discuss its fourth quarter and full year results today at 2:00 P.M. (ET). A live Web cast of the conference call is available through the Investor Relations’ section of the Sandy Spring Web site at www.sandyspringbank.com. Participants may call 1-888-317-6016. A password is not necessary. Visitors to the Web site are advised to log on 10 minutes ahead of the scheduled start of the call. An internet-based replay will be available at the Web site until 9:00 am (ET) February 25, 2013. A replay of the teleconference will be available through the same time period by calling 1-877-344-7529 under conference call number 10023201.

About Sandy Spring Bancorp/Sandy Spring Bank

With $4.0 billion in assets, Sandy Spring Bancorp is the holding company for Sandy Spring Bank and its principal subsidiaries, Sandy Spring Insurance Corporation and West Financial Services, Inc. Sandy Spring Bancorp is the largest publicly traded banking company headquartered and operating in Maryland. Sandy Spring is a community banking organization that focuses its lending and other services on businesses and consumers in the local market area. Independent and community-oriented, Sandy Spring Bank was founded in 1868 and offers a broad range of commercial banking, retail banking and trust services through 49 community offices in Anne Arundel, Carroll, Frederick, Howard, Montgomery, and Prince George’s counties in Maryland, and Arlington, Fairfax and Loudoun counties in Virginia. Through its subsidiaries, Sandy Spring Bank also offers a comprehensive menu of insurance and investment management services. Visit www.sandyspringbank.com to locate an ATM near you or for more information about Sandy Spring Bank.

For additional information or questions, please contact:

Daniel J. Schrider, President & Chief Executive Officer, or

Philip J. Mantua, E.V.P. & Chief Financial Officer

Sandy Spring Bancorp

17801 Georgia Avenue

Olney, Maryland 20832

1-800-399-5919

Email: DSchrider@sandyspringbank.com

PMantua@sandyspringbank.com

Web site: www.sandyspringbank.com

Forward-Looking Statements

Sandy Spring Bancorp makes forward-looking statements in this news release and in the conference call regarding this news release. These forward-looking statements may include: statements of goals, intentions, earnings expectations, and other expectations; estimates of risks and of future costs and benefits; assessments of probable loan and lease losses; assessments of market risk; and statements of the ability to achieve financial and other goals.

Forward-looking statements are typically identified by words such as “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project” and other similar words and expressions. Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made. Sandy Spring Bancorp does not assume any duty and does not undertake to update its forward-looking statements. Because forward-looking statements are subject to assumptions and uncertainties, actual results or future events could differ, possibly materially, from those that Sandy Spring Bancorp anticipated in its forward-looking statements and future results could differ materially from historical performance.

Sandy Spring Bancorp’s forward-looking statements are subject to the following principal risks and uncertainties: general economic conditions and trends, either nationally or locally; conditions in the securities markets; changes in interest rates; changes in deposit flows, and in the demand for deposit, loan, and investment products and other financial services; changes in real estate values; changes in the quality or composition of the Company’s loan or investment portfolios; changes in competitive pressures among financial institutions or from non-financial institutions; the Company’s ability to retain key members of management; changes in legislation, regulations, and policies; and a variety of other matters which, by their nature, are subject to significant uncertainties. Sandy Spring Bancorp provides greater detail regarding some of these factors in its Form 10-K for the year ended December 31, 2011, including in the Risk Factors section of that report, and in its other SEC reports. Sandy Spring Bancorp’s forward-looking statements may also be subject to other risks and uncertainties, including those that it may discuss elsewhere in this news release or in its filings with the SEC, accessible on the SEC’s Web site at www.sec.gov.

Sandy Spring Bancorp, Inc. and Subsidiaries
FINANCIAL HIGHLIGHTS - UNAUDITED
	Three Months Ended									Twelve Months Ended
	December 31,						%			December 31,						%
(Dollars in thousands, except per share data)	2012			2011			Change			2012			2011			Change
Results of Operations:
Net interest income	$	30,920		$	28,452			9	%	$	121,219		$	112,946			7	%
Provision for loan and lease losses		1,168			2,282			(49	)		3,649			1,428			156
Non-interest income		12,247			11,370			8			46,956			43,500			8
Non-interest expenses		27,219			27,323			-			109,927			105,071			5
Income before income taxes		14,780			10,217			45			54,599			49,947			9
Net income		9,881			7,258			36			36,554			34,102			7
Pre-tax pre-provision pre-merger expense income	$	15,740		$	12,499			26		$	60,748		$	51,375			18
Return on average assets		1.01	%		0.79	%					0.97	%		0.95	%
Return on average common equity		8.14	%		6.54	%					7.85	%		8.07	%
Net interest margin		3.53	%		3.51	%					3.60	%		3.57	%
Efficiency ratio - GAAP (1)		63.06	%		68.61	%					65.36	%		67.16	%
Efficiency ratio - Non-GAAP (1)		60.54	%		65.10	%					60.94	%		63.75	%
Per share data:
Basic net income	$	0.40		$	0.30			33	%	$	1.49		$	1.42			5	%
Diluted net income	$	0.40			0.30			33			1.48			1.41			5
Average fully diluted shares		24,971,249			24,141,084			3			24,657,149			24,149,205			2
Dividends declared per share	$	0.14			0.10			40		$	0.48			0.34			41
Book value per share		19.41			18.52			5			19.41			18.52			5
Tangible book value per share		15.43			14.58			6			15.43			14.58			6
Outstanding shares		24,905,392			24,091,042			3			24,905,392			24,091,042			3
Financial Condition at period-end:
Investment securities	$	1,075,032		$	1,164,699			(8	)%	$	1,075,032		$	1,164,699			(8	)%
Loans and leases		2,531,128			2,239,692			13			2,531,128			2,239,692			13
Interest-earning assets		3,669,175			3,452,214			6			3,669,175			3,452,214			6
Assets		3,955,206			3,711,370			7			3,955,206			3,711,370			7
Deposits		2,913,034			2,656,520			10			2,913,034			2,656,520			10
Interest-bearing liabilities		2,592,606			2,590,165			-			2,592,606			2,590,165			-
Stockholders' equity		483,512			446,109			8			483,512			446,109			8
Capital ratios:
Tier 1 leverage		10.98	%		10.84	%					10.98	%		10.84	%
Tier 1 capital to risk-weighted assets		14.15	%		14.57	%					14.15	%		14.57	%
Total regulatory capital to risk-weighted assets		15.40	%		15.83	%					15.40	%		15.83	%
Tangible common equity to tangible assets (2)		9.94	%		9.68	%					9.94	%		9.68	%
Average equity to average assets		12.35	%		12.07	%					12.32	%		11.80	%
Credit quality ratios:
Allowance for loan and lease losses to loans and leases		1.70	%		2.21	%					1.70	%		2.21	%
Non-performing loans to total loans		2.29	%		3.53	%					2.29	%		3.53	%
Non-performing assets to total assets		1.61	%		2.25	%					1.61	%		2.25	%
Allowance for loan and lease losses to non-performing loans		74.18	%		62.46	%					74.18	%		62.46	%
Annualized net charge-offs to average loans and leases (3)		0.13	%		0.47	%					0.42	%		0.66	%

(1) The GAAP efficiency ratio is non-interest expenses divided by net interest income plus non-interest income from the Consolidated Statements of Income. The traditional, non-GAAP efficiency ratio excludes intangible asset amortization and merger expenses from non-interest expense; securities gains (losses) from non-interest income; OTTI; and the tax-equivalent adjustment to net interest income. See the Reconciliation Table included with these Financial Highlights.

(2) The tangible common equity to tangible assets ratio is a non-GAAP ratio that divides assets excluding intangible assets into stockholders' equity after deducting intangible assets and other comprehensive gains (losses). See the Reconciliation Table included with these Financial Highlights.

(3) Calculation utilizes average loans and leases, excluding residential mortgage loans held-for-sale.

Sandy Spring Bancorp, Inc. and Subsidiaries
RECONCILIATION TABLE - UNAUDITED
	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
(Dollars in thousands)	2012			2011			2012			2011
Pre-tax pre-provision pre-merger expense income:
Net income	$	9,881		$	7,258		$	36,554		$	34,102
Plus non-GAAP adjustment:
Merger expenses		(208	)		-			2,500			-
Income taxes		4,899			2,959			18,045			15,845
Provision for loan and lease losses		1,168			2,282			3,649			1,428
Pre-tax pre-provision pre-merger expense income	$	15,740		$	12,499		$	60,748		$	51,375
GAAP efficiency ratio:
Non-interest expenses	$	27,219		$	27,323		$	109,927		$	105,071
Net interest income plus non-interest income	$	43,167		$	39,822		$	168,175		$	156,446
GAAP Efficiency ratio		63.06	%		68.61	%		65.36	%		67.16	%
Non-GAAP efficiency ratio:
Non-interest expenses	$	27,219		$	27,323		$	109,927		$	105,071
Less non-GAAP adjustment:
Amortization of intangible assets		478			461			1,881			1,845
Merger expenses		(208	)		-			2,500			-
Non-interest expenses - as adjusted	$	26,949		$	26,862		$	105,546		$	103,226
Net interest income plus non-interest income	$	43,167		$	39,822		$	168,175		$	156,446
Plus non-GAAP adjustment:
Tax-equivalent income		1,334			1,448			5,374			5,602
Less non-GAAP adjustments:
Securities gains		-			9			459			292
OTTI recognized in earnings		(14	)		-			(109	)		(160	)
Net interest income plus non-interest income - as adjusted	$	44,515		$	41,261		$	173,199		$	161,916
Non-GAAP Efficiency ratio		60.54	%		65.10	%		60.94	%		63.75	%
Tangible common equity ratio:
Total stockholders' equity	$	483,512		$	446,109		$	483,512		$	446,109
Accumulated other comprehensive income		(11,312	)		(13,248	)		(11,312	)		(13,248	)
Goodwill		(84,808	)		(76,816	)		(84,808	)		(76,816	)
Other intangible assets, net		(3,163	)		(4,734	)		(3,163	)		(4,734	)
Tangible common equity	$	384,229		$	351,311		$	384,229		$	351,311
Total assets	$	3,955,206		$	3,711,370		$	3,955,206		$	3,711,370
Goodwill		(84,808	)		(76,816	)		(84,808	)		(76,816	)
Other intangible assets, net		(3,163	)		(4,734	)		(3,163	)		(4,734	)
Tangible assets	$	3,867,235		$	3,629,820		$	3,867,235		$	3,629,820
Tangible common equity ratio		9.94	%		9.68	%		9.94	%		9.68	%
Outstanding common shares		24,905,392			24,091,042			24,905,392			24,091,042
Tangible book value per common share	$	15.43		$	14.58		$	15.43		$	14.58

Sandy Spring Bancorp, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION - UNAUDITED
	December 31,
(Dollars in thousands)	2012			2011
Assets
Cash and due from banks	$	59,540		$	49,832
Federal funds sold		466			1,006
Interest-bearing deposits with banks		26,400			21,476
Cash and cash equivalents		86,406			72,314
Residential mortgage loans held for sale (at fair value)		36,149			25,341
Investments available-for-sale (at fair value)		825,582			951,301
Investments held-to-maturity -- fair value of $222,024 and $184,167 at December 31, 2012 and 2011, respectively		215,814			178,465
Other equity securities		33,636			34,933
Total loans and leases		2,531,128			2,239,692
Less: allowance for loan and lease losses		(42,957	)		(49,426	)
Net loans and leases		2,488,171			2,190,266
Premises and equipment, net		48,326			48,483
Other real estate owned		5,926			4,431
Accrued interest receivable		12,392			12,898
Goodwill		84,808			76,816
Other intangible assets, net		3,163			4,734
Other assets		114,833			111,388
Total assets	$	3,955,206		$	3,711,370
Liabilities
Noninterest-bearing deposits	$	847,415		$	650,377
Interest-bearing deposits		2,065,619			2,006,143
Total deposits		2,913,034			2,656,520
Securities sold under retail repurchase agreements and federal funds purchased		86,929			143,613
Advances from FHLB		405,058			405,408
Subordinated debentures		35,000			35,000
Accrued interest payable and other liabilities		31,673			24,720
Total liabilities		3,471,694			3,265,261
Stockholders' Equity
Common stock -- par value $1.00; shares authorized 50,000,000; shares issued and outstanding 24,905,392 and 24,091,042 at December 31, 2012 and 2011, respectively		24,905			24,091
Additional paid in capital		191,689			177,828
Retained earnings		255,606			230,942
Accumulated other comprehensive income		11,312			13,248
Total stockholders' equity		483,512			446,109
Total liabilities and stockholders' equity	$	3,955,206		$	3,711,370

Sandy Spring Bancorp, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED

	Three Months Ended					Twelve Months Ended
	December 31,					December 31,
(Dollars in thousands, except per share data)	2012			2011		2012			2011
Interest Income:
Interest and fees on loans and leases	$	29,410		$	26,758	$	115,574		$	107,355
Interest on loans held for sale		254			189		841			577
Interest on deposits with banks		28			15		111			77
Interest and dividends on investment securities:
Taxable		4,142			5,314		17,951			22,096
Exempt from federal income taxes		2,368			2,431		9,392			9,363
Interest on federal funds sold		-			1		1			2
Total interest income		36,202			34,708		143,870			139,470
Interest Expense:
Interest on deposits		1,650			2,329		7,357			11,002
Interest on retail repurchase agreements and federal funds purchased		46			57		204			212
Interest on advances from FHLB		3,359			3,628		14,131			14,397
Interest on subordinated debt		227			242		959			913
Total interest expense		5,282			6,256		22,651			26,524
Net interest income		30,920			28,452		121,219			112,946
Provision for loan and lease losses		1,168			2,282		3,649			1,428
Net interest income after provision for loan and lease losses		29,752			26,170		117,570			111,518
Non-interest Income:
Investment securities gains		-			9		459			292
Total other-than-temporary impairment ("OTTI") losses		(14	)		-		(109	)		(178	)
Portion of OTTI losses recognized in other comprehensive income, before taxes		-			-		-			18
Net OTTI recognized in earnings		(14	)		-		(109	)		(160	)
Service charges on deposit accounts		2,197			2,394		8,910			9,527
Mortgage banking activities		1,738			824		6,032			3,228
Wealth management income		4,000			4,041		15,949			15,646
Insurance agency commissions		1,334			1,473		4,490			4,650
Income from bank owned life insurance		662			674		2,616			2,636
Visa check fees		1,043			927		3,887			3,637
Other income		1,287			1,028		4,722			4,044
Total non-interest income		12,247			11,370		46,956			43,500
Non-interest Expenses:
Salaries and employee benefits		15,405			15,433		62,509			59,625
Occupancy expense of premises		3,115			2,802		12,010			11,519
Equipment expenses		1,189			1,292		4,871			4,705
Marketing		827			727		2,651			2,389
Outside data services		836			1,092		5,019			4,159
FDIC insurance		601			698		2,573			3,187
Amortization of intangible assets		478			461		1,881			1,845
Other expenses		4,768			4,818		18,413			17,642
Total non-interest expenses		27,219			27,323		109,927			105,071
Income before income taxes		14,780			10,217		54,599			49,947
Income tax expense		4,899			2,959		18,045			15,845
Net income	$	9,881		$	7,258	$	36,554		$	34,102
Net Income Per Share Amounts:
Basic net income per share	$	0.40		$	0.30	$	1.49		$	1.42
Diluted net income per share	$	0.40		$	0.30	$	1.48		$	1.41
Dividends declared per share	$	0.14		$	0.10	$	0.48		$	0.34

Sandy Spring Bancorp, Inc. and Subsidiaries
HISTORICAL TRENDS - QUARTERLY FINANCIAL DATA - UNAUDITED
	2012												2011
(Dollars in thousands, except per share data)	Q4			Q3			Q2			Q1			Q4			Q3			Q2			Q1
Profitability for the quarter:
Tax-equivalent interest income	$	37,536		$	38,819		$	36,898		$	35,991		$	36,156		$	36,424		$	36,435		$	36,057
Interest expense		5,282			5,710			5,749			5,910			6,256			6,674			6,854			6,740
Tax-equivalent net interest income		32,254			33,109			31,149			30,081			29,900			29,750			29,581			29,317
Tax-equivalent adjustment		1,334			1,324			1,340			1,376			1,448			1,420			1,427			1,307
Provision for loan and lease losses		1,168			232			1,585			664			2,282			(3,520	)		1,151			1,515
Non-interest income		12,247			12,242			11,493			10,974			11,370			11,336			10,802			9,992
Non-interest expenses		27,219			27,167			28,858			26,683			27,323			25,848			25,838			26,062
Income before income taxes		14,780			16,628			10,859			12,332			10,217			17,338			11,967			10,425
Income tax expense		4,899			5,638			3,652			3,856			2,959			6,081			3,671			3,134
Net income	$	9,881		$	10,990		$	7,207		$	8,476		$	7,258		$	11,257		$	8,296		$	7,291
Financial performance:
Pre-tax pre-provision pre-merger expense income	$	15,740		$	16,996		$	14,642		$	13,370		$	12,499		$	13,818		$	13,118		$	11,940
Return on average assets		1.01	%		1.13	%		0.78	%		0.94	%		0.79	%		1.24	%		0.93	%		0.84	%
Return on average common equity		8.14	%		9.22	%		6.34	%		7.60	%		6.54	%		10.42	%		8.03	%		7.26	%
Net interest margin		3.53	%		3.67	%		3.62	%		3.56	%		3.51	%		3.53	%		3.58	%		3.65	%
Efficiency ratio - GAAP (1)		63.06	%		61.70	%		69.87	%		67.25	%		68.61	%		65.16	%		66.33	%		68.58	%
Efficiency ratio - Non-GAAP (1)		60.54	%		58.91	%		61.54	%		63.88	%		65.10	%		62.02	%		62.82	%		65.09	%
Per share data:
Basic net income per share	$	0.40		$	0.44		$	0.30		$	0.35		$	0.30		$	0.47		$	0.34		$	0.30
Diluted net income per share		0.40		$	0.44		$	0.30		$	0.35		$	0.30		$	0.47		$	0.34		$	0.30
Average fully diluted shares		24,971,249			24,949,205			24,423,236			24,180,501			24,141,084			24,142,137			24,130,357			24,115,906
Dividends declared per common share	$	0.14		$	0.12		$	0.12		$	0.10		$	0.10		$	0.08		$	0.08		$	0.08
Non-interest income:
Securities gains	$	-		$	296		$	90		$	73		$	9		$	231		$	32		$	20
Net OTTI recognized in earnings		(14	)		(23	)		(8	)		(64	)		-			(76	)		(43	)		(41	)
Service charges on deposit accounts		2,197			2,230			2,283			2,200			2,394			2,444			2,437			2,252
Mortgage banking activities		1,738			1,981			1,288			1,025			824			1,141			808			455
Wealth management income		4,000			3,858			4,034			4,057			4,041			3,937			4,023			3,645
Insurance agency commissions		1,334			1,020			934			1,202			1,473			1,044			953			1,180
Income from bank owned life insurance		662			660			660			634			674			662			654			646
Visa check fees		1,043			984			962			898			927			927			949			834
Other income		1,287			1,236			1,250			949			1,028			1,026			989			1,001
Total non-interest income	$	12,247		$	12,242		$	11,493		$	10,974		$	11,370		$	11,336		$	10,802		$	9,992
Non-interest expense:
Salaries and employee benefits	$	15,405		$	15,476		$	15,927		$	15,701		$	15,433		$	14,892		$	14,676		$	14,624
Occupancy expense of premises		3,115			3,106			2,943			2,846			2,802			2,784			2,790			3,143
Equipment expenses		1,189			1,237			1,255			1,190			1,292			1,143			1,128			1,142
Marketing		827			764			565			495			727			468			709			485
Outside data services		836			1,076			1,828			1,279			1,092			1,073			999			995
FDIC insurance		601			667			653			652			698			709			736			1,044
Amortization of intangible assets		478			476			466			461			461			461			462			461
Professional fees		1,584			1,282			2,156			1,287			1,414			1,314			1,088			1,126
Other real estate owned expenses		316			174			351			64			604			383			726			699
Other expenses		2,868			2,909			2,714			2,708			2,800			2,621			2,524			2,343
Total non-interest expense	$	27,219		$	27,167		$	28,858		$	26,683		$	27,323		$	25,848		$	25,838		$	26,062

(1) The GAAP efficiency ratio is non-interest expenses divided by net interest income plus non-interest income from the Condensed Consolidated Statements of Income. The traditional, non-GAAP efficiency ratio excludes intangible asset amortization and merger expenses from non-interest expense; excludes securities gains; OTTI losses from non-interest income; and adds the tax-equivalent adjustment to net interest income. See the Reconciliation Table included with these Financial Highlights.

Sandy Spring Bancorp, Inc. and Subsidiaries
HISTORICAL TRENDS - QUARTERLY FINANCIAL DATA - UNAUDITED
	2012												2011
(Dollars in thousands)	Q4			Q3			Q2			Q1			Q4			Q3			Q2			Q1
Balance sheets at quarter end:
Residential mortgage loans	$	523,364		$	499,806		$	472,426		$	465,204		$	448,662		$	440,606		$	445,605		$	444,519
Residential construction loans		120,314			128,606			130,791			122,841			108,699			90,727			81,425			84,939
Commercial ADC loans		151,933			133,007			151,620			149,814			160,946			141,576			149,215			151,135
Commercial investor real estate loans		456,888			447,536			443,237			392,626			371,948			357,358			353,749			355,967
Commercial owner occupied real estate loans		571,510			579,711			579,812			525,022			522,076			519,837			511,271			509,215
Commercial business loans		346,708			322,087			334,040			253,827			260,327			226,528			225,624			231,448
Leasing		3,421			4,233			5,618			5,843			6,954			8,484			10,200			12,477
Consumer loans		356,990			353,999			357,534			356,215			360,080			360,287			360,831			360,349
Total loans and leases		2,531,128			2,468,985			2,475,078			2,271,392			2,239,692			2,145,403			2,137,920			2,150,049
Allowance for loan and lease losses		(42,957	)		(42,618	)		(45,265	)		(45,061	)		(49,426	)		(49,720	)		(55,246	)		(58,918	)
Investment securities		1,075,032			1,074,918			1,006,743			1,067,462			1,164,699			1,174,180			1,128,589			1,087,620
Interest-earning assets		3,669,175			3,614,310			3,584,480			3,416,136			3,452,214			3,370,360			3,322,317			3,283,819
Total assets		3,955,206			3,887,427			3,855,177			3,668,273			3,711,370			3,626,043			3,612,016			3,549,533
Noninterest-bearing demand deposits		847,415			818,674			763,566			685,770			650,377			643,169			648,605			619,905
Total deposits		2,913,034			2,880,262			2,852,055			2,681,075			2,656,520			2,640,324			2,657,861			2,599,634
Customer repurchase agreements		51,929			58,306			64,779			73,130			63,613			79,529			65,214			75,516
Total interest-bearing liabilities		2,592,606			2,560,040			2,593,501			2,508,756			2,590,164			2,517,180			2,515,053			2,495,916
Total stockholders' equity		483,512			481,810			471,464			451,917			446,109			440,791			423,684			409,076
Quarterly average balance sheets:
Residential mortgage loans	$	542,095		$	510,475		$	488,644		$	474,149		$	463,754		$	453,645		$	455,803		$	458,329
Residential construction loans		125,640			133,236			125,582			116,630			99,983			89,128			84,144			85,891
Commercial ADC loans		137,679			142,870			151,374			159,769			153,598			145,835			149,773			149,071
Commercial investor real estate loans		453,074			445,012			410,258			377,072			353,975			350,925			352,668			340,008
Commercial owner occupied real estate loans		577,693			580,994			539,590			518,763			521,212			515,185			509,273			500,875
Commercial business loans		322,501			332,364			284,271			258,099			231,773			225,041			225,646			236,949
Leasing		3,773			4,858			5,528			6,325			7,671			9,269			11,154			14,009
Consumer loans		356,452			357,135			359,008			358,783			361,888			360,875			362,098			367,261
Total loans and leases		2,518,907			2,506,945			2,364,255			2,269,590			2,193,854			2,149,903			2,150,559			2,152,393
Investment securities		1,072,278			1,038,586			1,052,502			1,086,295			1,173,418			1,168,712			1,121,325			1,054,740
Interest-earning assets		3,639,605			3,599,715			3,453,590			3,389,843			3,392,773			3,355,937			3,305,059			3,237,556
Total assets		3,908,479			3,863,951			3,708,622			3,637,674			3,647,291			3,610,219			3,566,278			3,500,807
Noninterest-bearing demand deposits		824,188			774,215			699,638			641,477			655,381			631,192			607,092			582,441
Total deposits		2,891,120			2,857,523			2,714,980			2,642,634			2,658,676			2,640,729			2,607,854			2,548,117
Customer repurchase agreements		60,941			62,693			66,674			65,195			74,267			72,646			70,313			79,067
Total interest-bearing liabilities		2,571,937			2,587,815			2,526,541			2,523,394			2,525,128			2,524,728			2,519,114			2,485,451
Total stockholders' equity		482,621			474,231			457,338			448,406			440,154			428,511			414,624			407,007
Financial Measures
Average equity to average assets		12.35	%		12.27	%		12.33	%		12.33	%		12.07	%		11.87	%		11.63	%		11.63	%
Investment securities to earning assets		29.30	%		29.74	%		28.09	%		31.25	%		33.74	%		34.84	%		33.97	%		33.12	%
Loans to earnings assets		68.98	%		68.31	%		69.05	%		66.49	%		64.88	%		63.66	%		64.35	%		65.47	%
Loans to assets		63.99	%		63.51	%		64.20	%		61.92	%		60.35	%		59.17	%		59.19	%		60.57	%
Loans to deposits		86.89	%		85.72	%		86.78	%		84.72	%		84.31	%		81.26	%		80.44	%		82.71	%
Capital measures:
Tier 1 leverage		10.98	%		10.99	%		11.21	%		11.05	%		10.84	%		10.79	%		10.64	%		10.63	%
Tier 1 capital to risk-weighted assets		14.15	%		14.31	%		14.12	%		14.89	%		14.57	%		14.96	%		14.75	%		14.21	%
Total regulatory capital to risk-weighted assets		15.40	%		15.56	%		15.36	%		16.14	%		15.83	%		16.21	%		16.01	%		15.48	%
Book value per share	$	19.41		$	19.35		$	18.94		$	18.72		$	18.52		$	18.31		$	17.58		$	16.99
Tangible book value per common share		0.00			0.00			0.00			0.00			14.58			14.35			13.93			13.64
Outstanding shares		24,905,392			24,896,136			24,886,724			24,143,985			24,091,042			24,079,204			24,095,123			24,084,423

Sandy Spring Bancorp, Inc. and Subsidiaries                                      

LOAN PORTFOLIO QUALITY DETAIL - UNAUDITED

	2012												2011
(Dollars in thousands)	December 31,			September 30,			June 30,			March 31,			December 31,			September 30,			June 30,			March 31,
Non-Performing Assets:
Loans and leases 90 days past due:
Commercial business	$	24		$	44		$	70		$	40		$	-		$	-		$	-		$	-
Commercial real estate:
Commercial AD&C		-			-			342			-			-			-			-			-
Commercial investor real estate		-			-			-			-			-			-			-			-
Commercial owner occupied real estate		209			-			-			-			-			-			-			-
Leasing		-			127			96			-			2			63			20			24
Consumer		14			18			5			89			165			373			337			169
Residential real estate:
Residential mortgage		-			116			91			167			167			2,291			3,820			4,616
Residential construction		-			-			-			-			243			-			-			2,367
Total loans and leases 90 days past due		247			305			604			296			577			2,727			4,177			7,176
Non-accrual loans and leases:
Commercial business		4,611			4,919			4,583			6,542			7,226			8,038			8,288			9,649
Commercial real estate:
Commercial AD&C		6,332			8,957			13,055			14,303			18,702			24,481			26,133			28,310
Commercial investor real estate		11,843			12,345			13,327			13,893			16,963			16,118			2,975			2,519
Commercial owner occupied real estate		13,681			13,742			15,146			16,295			14,709			11,847			13,019			12,304
Leasing		865			834			872			858			853			956			1,017			1,529
Consumer		2,410			1,607			1,651			1,700			1,786			1,478			590			720
Residential real estate:
Residential mortgage		4,681			3,644			2,600			4,818			5,722			6,081			6,295			6,652
Residential construction		3,125			3,236			4,333			4,929			5,719			5,034			5,701			5,222
Total non-accrual loans and lease		47,548			49,284			55,567			63,338			71,680			74,033			64,018			66,905
Total restructured loans - accruing		10,110			9,277			8,285			8,547			6,881			6,088			8,299			14,266
Total non-performing loans and leases		57,905			58,866			64,456			72,181			79,138			82,848			76,494			88,347
Other assets and real estate owned (OREO)		5,926			9,291			9,553			4,834			4,431			7,938			6,951			7,960
Total non-performing assets	$	63,831		$	68,157		$	74,009		$	77,015		$	83,569		$	90,786		$	83,445		$	96,307
		For the quarter ended,
		December 31,			September 30,			June 30,			March 31,			December 31,			September 30,			June 30,			March 31,
(Dollars in thousands)		2012			2012			2012			2012			2011			2011			2011			2011
Analysis of Non-accrual Loan and Lease Activity:
Balance at beginning of period	$	49,284		$	55,567		$	63,338		$	71,680		$	74,033		$	64,018		$	66,905		$	63,327
Non-accrual balances transferred to OREO		(400	)		(232	)		(2,131	)		-			(511	)		(142	)		(791	)		(535	)
Non-accrual balances charged-off		(979	)		(3,697	)		(1,663	)		(4,965	)		(2,758	)		(1,375	)		(2,112	)		(2,701	)
Net payments or draws		(3,852	)		(6,342	)		(4,149	)		(5,061	)		(6,724	)		(4,839	)		(8,016	)		(2,531	)
Loans placed on non-accrual		5,023			3,988			1,261			1,809			8,640			17,226			8,032			9,526
Non-accrual loans brought current		(1,528	)		-			(1,089	)		(125	)		(1,000	)		(855	)		-			(181	)
Balance at end of period	$	47,548		$	49,284		$	55,567		$	63,338		$	71,680		$	74,033		$	64,018		$	66,905
Analysis of Allowance for Loan Losses:
Balance at beginning of period	$	42,618		$	45,265		$	45,061		$	49,426		$	49,720		$	55,246		$	58,918		$	62,135
Provision for loan and lease losses		1,168			232			1,585			664			2,282			(3,520	)		1,151			1,515
Less loans charged-off, net of recoveries:
Commercial business		(76	)		(225	)		(185	)		(39	)		(65	)		397			769			790
Commercial real estate:
Commercial AD&C		(248	)		1,983			(59	)		1,076			275			151			253			(137	)
Commercial investor real estate		110			123			140			3,219			335			30			504			(4	)
Commercial owner occupied real estate		-			653			484			-			329			45			113			-
Leasing		-			(17	)		(3	)		5			181			85			455			333
Consumer		384			111			228			348			352			375			713			1,091
Residential real estate:
Residential mortgage		508			253			713			420			792			751			1,319			2,095
Residential construction		151			(2	)		63			-			377			172			697			564
Net charge-offs		829			2,879			1,381			5,029			2,576			2,006			4,823			4,732
Balance at end of period	$	42,957		$	42,618		$	45,265		$	45,061		$	49,426		$	49,720		$	55,246		$	58,918
Asset Quality Ratios:
Non-performing loans to total loans		2.29	%		2.38	%		2.60	%		3.18	%		3.53	%		3.86	%		3.58	%		4.11	%
Non-performing assets to total assets		1.61	%		1.75	%		1.92	%		2.10	%		2.25	%		2.50	%		2.31	%		2.71	%
Allowance for loan losses to loans		1.70	%		1.73	%		1.83	%		1.98	%		2.21	%		2.32	%		2.58	%		2.74	%
Allowance for loan losses to non-performing loans		74.18	%		72.40	%		70.23	%		62.43	%		62.46	%		60.01	%		72.22	%		66.69	%
Net charge-offs in quarter to average loans		0.13	%		0.46	%		0.23	%		0.89	%		0.47	%		0.37	%		0.90	%		0.89	%

Sandy Spring Bancorp, Inc. and Subsidiaries                        

CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES - UNAUDITED              

	Three Months Ended December 31,
	2012								2011
						Annualized								Annualized
	Average			(1)		Average			Average			(1)		Average
(Dollars in thousands and tax-equivalent)	Balances			Interest		Yield/Rate			Balances			Interest		Yield/Rate
Assets
Residential mortgage loans (2)	$	542,095		$	5,278		3.93	%	$	463,754		$	5,224		4.53	%
Residential construction loans		125,640			1,076		3.41			99,983			962		3.82
Commercial ADC loans		137,679			1,866		5.39			153,598			2,006		5.18
Commercial investor real estate loans		453,074			6,242		5.48			353,975			4,977		5.53
Commercial owner occupied real estate loans		577,693			7,514		5.26			521,212			7,511		5.75
Commercial business loans		322,501			4,523		5.43			231,773			2,851		4.88
Leasing		3,773			54		5.62			7,671			131		6.83
Consumer loans		356,452			3,111		3.50			361,888			3,285		3.62
Total loans and leases (3)		2,518,907			29,664		4.71			2,193,854			26,947		4.89
Taxable securities		768,412			4,493		2.34			902,211			5,661		2.51
Tax-exempt securities (4)		303,866			3,351		4.41			271,207			3,532		5.21
Interest-bearing deposits with banks		47,954			28		0.22			24,374			15		0.25
Federal funds sold		466			-		0.22			1,127			1		0.12
Total interest-earning assets		3,639,605			37,536		4.11			3,392,773			36,156		4.24
Less: allowance for loan and lease losses		(42,741	)							(51,126	)
Cash and due from banks		48,803								46,121
Premises and equipment, net		48,626								48,800
Other assets		214,186								210,723
Total assets	$	3,908,479							$	3,647,291
Liabilities and Stockholders' Equity
Interest-bearing demand deposits	$	400,175			88		0.09	%	$	352,244			86		0.10	%
Regular savings deposits		220,814			44		0.08			188,877			41		0.09
Money market savings deposits		900,991			472		0.21			871,923			682		0.31
Time deposits		544,952			1,046		0.76			590,250			1,520		1.02
Total interest-bearing deposits		2,066,932			1,650		0.32			2,003,294			2,329		0.46
Other borrowings		64,908			46		0.28			81,387			57		0.27
Advances from FHLB		405,097			3,359		3.30			405,447			3,628		3.55
Subordinated debentures		35,000			227		2.59			35,000			242		2.77
Total interest-bearing liabilities		2,571,937			5,282		0.82			2,525,128			6,256		0.98
Noninterest-bearing demand deposits		824,188								655,381
Other liabilities		29,733								26,628
Stockholders' equity		482,621								440,154
Total liabilities and stockholders' equity	$	3,908,479							$	3,647,291
Net interest income and spread				$	32,254		3.29	%				$	29,900		3.26	%
Less: tax-equivalent adjustment					1,334								1,448
Net interest income				$	30,920							$	28,452
Interest income/earning assets							4.11	%							4.24	%
Interest expense/earning assets							0.58								0.73
Net interest margin							3.53	%							3.51	%

(1)	Tax-equivalent income has been adjusted using the combined marginal federal and state rate of 39.88% for 2012 and 2011. The annualized taxable-equivalent adjustments utilized in the above table to compute yields aggregated to $1.3 million and $1.4 million in 2012 and 2011, respectively.
(2)	Includes residential mortgage loans held for sale. Home equity loans and lines are classified as consumer loans.
(3)	Non-accrual loans are included in the average balances.
(4)	Includes only investments that are exempt from federal taxes.

Sandy Spring Bancorp, Inc. and Subsidiaries                        

CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES - UNAUDITED              

	Twelve Months Ended December 31,
	2012								2011
						Annualized								Annualized
	Average			(1)		Average			Average			(1)		Average
(Dollars in thousands and tax-equivalent)	Balances			Interest		Yield/Rate			Balances			Interest		Yield/Rate
Assets
Residential mortgage loans (2)	$	503,963		$	21,281		4.22	%	$	457,886		$	21,971		4.80	%
Residential construction loans		125,295			4,581		3.66			89,823			3,410		3.80
Commercial ADC loans		147,881			7,721		5.22			149,571			6,819		4.56
Commercial investor real estate loans		421,505			23,167		5.50			349,447			20,213		5.78
Commercial owner occupied real estate loans		554,397			30,236		5.45			511,692			30,197		5.90
Commercial business loans		299,462			16,511		5.51			229,825			11,344		4.94
Leasing		5,117			326		6.36			10,505			707		6.73
Consumer loans		357,839			12,592		3.52			363,010			13,271		3.68
Total loans and leases (3)		2,415,459			116,415		4.82			2,161,759			107,932		5.00
Taxable securities		774,030			19,254		2.49			885,023			23,471		2.65
Tax-exempt securities (4)		288,347			13,463		4.67			244,958			13,590		5.55
Interest-bearing deposits with banks		42,668			111		0.26			30,270			77		0.25
Federal funds sold		724			1		0.18			1,337			2		0.14
Total interest-earning assets		3,521,228			149,244		4.24			3,323,347			145,072		4.37
Less: allowance for loan and lease losses		(46,260	)							(56,770	)
Cash and due from banks		46,588								45,721
Premises and equipment, net		48,875								49,047
Other assets		209,653								220,221
Total assets	$	3,780,084							$	3,581,566
Liabilities and Stockholders' Equity
Interest-bearing demand deposits	$	385,004			344		0.09	%	$	340,110			364		0.11	%
Regular savings deposits		212,659			199		0.09			184,050			183		0.10
Money market savings deposits		877,546			1,943		0.22			859,608			3,547		0.41
Time deposits		566,658			4,871		0.86			611,192			6,908		1.13
Total interest-bearing deposits		2,041,867			7,357		0.36			1,994,960			11,002		0.55
Other borrowings		70,477			204		0.29			78,207			212		0.27
Advances from FHLB		405,227			14,131		3.49			405,577			14,397		3.55
Subordinated debentures		35,000			959		2.74			35,000			913		2.61
Total interest-bearing liabilities		2,552,571			22,651		0.89			2,513,744			26,524		1.06
Noninterest-bearing demand deposits		735,231								619,260
Other liabilities		26,563								25,881
Stockholders' equity		465,719								422,681
Total liabilities and stockholders' equity	$	3,780,084							$	3,581,566
Net interest income and spread				$	126,593		3.35	%				$	118,548		3.31	%
Less: tax-equivalent adjustment					5,374								5,602
Net interest income				$	121,219							$	112,946
Interest income/earning assets							4.24	%							4.37	%
Interest expense/earning assets							0.64								0.80
Net interest margin							3.60	%							3.57	%

(1)	Tax-equivalent income has been adjusted using the combined marginal federal and state rate of 39.88% for 2012 and 2011. The annualized taxable-equivalent adjustments utilized in the above table to compute yields aggregated to $5.4 million and $5.6 million in 2012 and 2011, respectively.
(2)	Includes residential mortgage loans held for sale. Home equity loans and lines are classified as consumer loans.
(3)	Non-accrual loans are included in the average balances.
(4)	Includes only investments that are exempt from federal taxes.