Thank you, and good afternoon everyone, and welcome to Sandy Spring Bancorp’s earnings call to discuss our performance for the first quarter of 2012.

This is Dan Schrider speaking and I’m here with Phil Mantua, our Chief Financial Officer as well as Ron Kuykendall, our General Counsel. And as usual today’s call is open to all investors, all analysts and the news media and there will be a live webcast of today’s call and a replay of the call available at our website beginning later today.

After some brief review of highlights we will take your questions. And before we get started, Ron will give our customary safe harbor statement.

Thank you, good afternoon everyone. Sandy Spring Bancorp will make forward-looking statements in this webcast that are subject to risks and uncertainties.

These forward-looking statements include statements of goals, intentions, earnings and other expectations, estimates of risk and future cost and benefits, assessments of probable loan and lease losses, assessments of market risk and statements of the ability to achieve financial and other goals.

These forward-looking statements are subject to significant uncertainties because they are based upon, or affected by management’s estimates and projections of future interest rates, market behavior or other economic conditions, future laws and regulations and a variety of other matters which by their very nature are subject to significant uncertainties.

Because of these uncertainties, Sandy Spring Bancorp’s actual future results may differ materially from those indicated. In addition, the company’s past results of operations do not necessarily indicate its future results.

Thank you, Ron. Today we’re going to keep our prepared remarks rather brief as it was a solid straightforward quarter, with no unexpected developments.

As reported in our press release issued this morning, net income for the first quarter of 2012 was $8.5 million, that’s $0.35 per diluted share. And this compares favorably to net income of $7.3 million or $0.30 per diluted share, coincidentally that we reported both for the first quarter and fourth quarter of 2011.

So we’re off to a solid start for the forthcoming year.

We think it’s a good indicator that total loans increased for the third straight quarter and are also - incurs that this growth was nicely distributed across our commercial and small business portfolios, investor real estate, residential mortgages and the residential construction portfolio. Competition is still as intense as ever but the economy across our footprint appears to be trending a bit better which is creating a wider range of opportunities for our lenders to evaluate higher quality transactions and to maintain a nice pipeline of new business opportunities.

New commercial loan originations totaled a healthy $98 million for the first quarter of 2012. As an encouraging counterpoint to the loan growth story, non-performing loans declined to $72.2 million at March 31, 2012 compared to $88.3 million at March 31, 2011 and $79.1 million at December 31, 2011.

The coverage ratio of the allowance for loan and lease losses to non-performing loans remained at 62% at March 31 compared to December 31. We’re comfort with the level of coverage as we continue to work the NPAs of our balance sheet.

The net interest margin, it declined to 3.56% for the first quarter of 2012 compared to 3.65% for the first quarter of 2011, but the margin was up a bit when compared to 3.51% that we posted in the fourth quarter of 2011. On the deposit front, customer funding sources which includes deposits and other short-term borrowings from our clients, increased 3% compared to March 31, 2011.

This was attributable to a 12% increase in non-interest bearing and interest bearing checking accounts which more than offset the 9% planned reduction in our time deposit portfolio.

We continue to execute on a strategy to improve our deposit mix and in turn push the margin higher. On a related note, we see the growth trend in checking accounts as a very important element of our overall deposit strategy as it consistently creates new opportunities to grow multiple product banking relationships with our clients.

Our frontline bankers have always been quite good at cross-selling other services off the basic checking account platform that initiates a core relationship and a long-lasting relationship with us.

Evidence of our continuing success at building multiple product relationships is an inherent in the revenue growth from our various wealth management services. This growth is coming from fees from trust and investment management, as well as the sale of investment products which increased overall 11% for the first quarter of 2012 compared to the first quarter of 2011.

In fairness, while the addition of new clients was the primary driver of the increase, improved market conditions during the first quarter obviously had a positive impact on the value of assets under management upon which most of our fees are based.

On the non-financial highlight side, a couple of examples which include excellent progress on integrating the acquisition of CommerceFirst Bank into our organization. The acquisition teams on both sides of the transaction have been working diligently.

We’ve received all the necessary regulatory approvals and we do expect to complete the seamless transition in the second quarter with the target date of June 1.

And one development that we’re very proud of occurred within the past few weeks as we are once again ranked among the top 100 Most Trustworthy Companies on a list compiled by Forbes by GovernanceMetrics International. GMI is a New York based independent global leader in corporate governance.

We were about one of 15 repeaters among the 100 on the list this year. GMI uses a complex quantitative and qualitative analysis that goes way beyond just comparing the roll data of the company’s income statement and balance sheet, in order to assess the true quality of corporate accounting and management practices.

GMI examined over 8,000 companies traded on the U.S. exchanges in order to boil it down to the top 100.

The user model that identifies practices that historically have had a high correlation with increasing shareholder risk, then they assigned each company in accounting and governance risk score. So we are especially gratified to have done so well considering the underlying purpose of the most trusted companies list commissioned by Forbes.

Our financial reporting, our governance and our credit groups have really distinguished themselves with this recognition.

And that wraps up my comments as we’ve covered most of the other key financial highlights and stats in our press release today, and we will now move to your questions. So Mike, we can have the first question please and we would appreciate it if you would state your name and company affiliation as you come on so we know with whom we are speaking.

I was just wondering if you could just talk about the margin for a bit, a great job this quarter in terms of getting that to raise up but I was thinking about looking at the securities yield. It looks like the securities yield actually went up, the overall securities yield went up this quarter, and I was wondering did you guys - what did you guys add because the securities portfolio as a whole shrunk, so I was just wondering how that came about?

Mike, this is Phil. Couple of things in that regard.

First of all thank you. We’re quite pleased to have the margin hold up and do what it did here in the first quarter.

And I think your point as it relates to the most contributing factor there being what’s going on in the investment portfolio. I think there is couple of things, I think in the middle of the quarter we had some opportunity to take into yield some premiums related to some repayments or whatever in the mortgage-backed portion of the portfolio but then I think also towards the end of the quarter and especially in March, given what happened to the long end of the curve there for temporary period of time, we found that that there were some buying opportunities and values in the municipal portion of portfolio.

So I think we were able to effectively replace some higher yielding type things that were either being called or maturing off with some respectable yields without having to really extend our duration of the overall portfolio which is still pretty much around 3.3 years. So I think we just - I think we took advantage of some opportunity there that allowed us to crop that yield up even though the overall portfolio declined in size.

Great, and then just moving forward as we kind of think about that, obviously the 10 years kind of retraced its path and so forth.

Right.

Would we expect to see little bit of pressure on that current overall yield in the next several quarters if we got a [indiscernible] environment?

Yes, I would think so, I mean I think that we continue to believe that the overall rate environment is going to stay at the current levels and absent of some bumps up and down in a trading range for example that you might find let’s say on the 10-year that generally speaking that would be the impact, yes.

And then just on the funding mix side, it looks like you guys have done a pretty good job of reducing your reliance on CDs or actually I would say lack thereof but that CD portfolio continues to come down.

Correct.

As we move along, but the yields on the core deposits, we’re getting kind of bear a minimum I think your core deposit yields inclusive of money market savings and interest bearing demand at this point is around 80 basis points. So it doesn’t seem like there is a lot of room left to maneuver in that end?

Yes, I would agree with you and I think that we’ve taken that into consideration as we look to the rest of the year and as we’ve discussed before where we think the margin is probably going to drift downwards as we get closer to the end of the year as opposed to where we are now. And then in conjunction with that, which we don’t really have a reference to yet is the impact of the influx of funds on both sides of the balance sheet from the acquisition that will close next quarter.

I think that what we’ve tried to do in just recent times here is position our rates across the deposit side so that we can have a smooth transition with the core element of the rate deposit in a rate position for CommerceFirst and then factor that through. So I mean I think that’s kind of where we stand.

Okay. And then just on the loan growth side, last quarter when we had this call, you guys seemed a little bit more upbeat about the growth prospects.

What would you kind of expect in terms of exclusive of the acquisition for annual growth rate for 2012?

We had a pretty robust fourth quarter as you remember Mike, and I think our outlook is not to dissimilar right now and that’s on an average growth base is in the mid single-digit.

Okay.

We’re still cautiously optimistic about loan growth just because of the competitive environment is as it is and we’re staying pretty disciplined, I should say very disciplined to both the pricing as well as the credit structure side. So we think that’s our outlook right now in terms of loan growth.

It could be a little bit lumpy from quarter-to-quarter as we work out some NPAs but overall that’s what we look to see.

Phil, a question for you jumping back in on the bond book here. Could you remind me if I am correct here in this number, I think you had about $380 million that you expected to be called this year and then you’re running it off $30 million of cash flow a month off the bond book?

Yes, in terms of the cash flow, that $30 million - actually it’s about $8 million to $10 million a month in cash flow of the mortgaged-backed or the asset-backed portion of the portfolio. And at the moment, our projection for overall maturity let’s say are called out of the portfolio for the rest of this year is about $260 million with another $160 million or more to come off approximately in 2013.

So over the course of remainder of this year and through the end of next year, it’s about 43% of the total portfolio that could come to maturity or be called away.

43% of the book and that includes the stuff that could be called away in 2013?

That’s correct.

Okay.

Right. That’s an all inclusive number, both of those numbers are all inclusive of anything that’s either maturing called or the cash flow runoff we talked about a little bit earlier.

Okay. And outside of what we saw jump around in the fourth or I guess in late March where you made some investments, would it be reasonable to say that a lot of that cash flow would probably be going into new money somewhere around 2%, 2.25%, 2.50%?

Yes, that’s probably a good - that’s probably a good place to put it in terms of a range. Yes, that makes sense because I think that what we did do in - we were able to do in March on a kind of blended basis which had some municipal purchases and also had some agency type paper in it was probably a blended average of around 2.65%.

So figuring that the opportunities that we took advantage of on a muni side wouldn't be as great that probably brings that down into the range you just quoted, yes.

Okay. And then in terms of the MBS book this quarter, you’re saying prepayments accelerated?

I think at one point during the quarter if I am not mistaken I think they did accelerate for a short period of time but then worked their way back based on the rally there in March.

Which is why we saw the gap back up in yields from the pressure you saw in the fourth quarter?

That’s correct.

Okay. And then on the loan side, we’ve been hearing a lot of commentary on the competitive environment getting very, very strong including your comments, Dan.

Could you talk about - I mean do you still feel confident in that sort of loan growth outlook given that sort of competitive environment and will that mean that you’ll have to incrementally I guess sacrifice some pricing to get that growth?

No, I think our outlook is based upon staying close to what we want to put on the book both from a quality and a pricing standpoint. The prepays both from - that we experienced in probably the last 8 quarters have slowed, so that’s coming back to us while production is picking up.

So we think that growth expectation at least right now is not far out of line from what we should expect. Again we’re staying pretty disciplined on what we want to put in the book.

But we’re still winning our fair share of opportunities when the prospect value is dealing with the local community bank that’s strong and stable. But there is I mean the competitive environment certainly is heated up quite a bit and we’re seeing some stretching around the edges.

Could I ask the question if you can sort of ballpark this, is this a function of the market getting better or is this a function of recent hires moving book to business or what’s driving the growth right now?

Yes, I think it’s probably it’s not necessarily a function of hiring and pulling books away. In our case it’s probably a couple of things that play into it, Carter.

One is the progress that our teams have made in dealing with the asset quality issues that we faced back in ‘08, ‘09 and into ‘10. And so that has fundamentally allowed our frontline to get back up and be more aggressive.

And then beginning about a year ago, little bit more than a year ago we really rallied our teams both in the commercial and the wealth and the mortgage and the retail together to get back out on the street. And so we’ve had higher number of opportunities driven by much greater calling activity which we really were prohibited from doing during a time when we were really internally focused on working through credits.

So I think it’s the combination.

Okay. And then final question and I’ll hop out of the queue here.

Has it been more so regional competitor, or excuse me large cap competitors or more so a community bank competitors that have been aggressive in pricing?

Community bank competitors.

Okay.

And I would say as competitive on structure as on price.

I know you’ve covered this in the past but could you just remind me, would you guys be interested in doing FDIC-assisted deals or even buying anything maybe not FDIC-assisted that’s something that’s clearly a sub optimal performer on the credit standpoint?

Yes. Matt, this is Dan.

A couple of things, one is we made a decision a while back that that probably was not an area where whether it was FDIC-assisted or it just had non-FDIC hair on it that we would necessarily go after that, and predominantly because we don’t see a lot of that in our market. The FDIC-assisted transaction thus far have typically been out of geography where we are and those that tend to be more troubled institution maybe not rising to the level of FDIC aren’t a good strategic fits for us.

And so it’s not likely we will play in that game.

And do you have any sense of I mean obviously they are sold not necessarily bought but you assuming the current acquisition gets integrated well. How long do you think it would take before you are willing to do another transaction?

I think the - our experience really going back to our ‘07 experience with the two acquisitions which occurred within one calendar year and how smooth this one is working we would - if the right opportunity came along, we would not be hesitant to move along right away. That’s not to say that there is one but we would be prepared to move.

Two questions, the first one is on the credit, things did get a little better this quarter and credit costs appeared to have to do more of the resolution in existing problem credits and a limited migration to new credits. How should we look at credit costs going forward for the rest of the year here?

That’s a good, we got to think Dave that what we saw in the net charge-off number is just that it’s continuing to work through credit that are on the books that have had specific reserves in just a process of working through them and taking the write-downs when appropriate as opposed to kind of kicking the can down the road. So what we’re seeing in terms of provision expenses driven more by a function of loan growth and activity on that side than it is a deterioration in the existing book.

And so if you kind of look at our outlook for loan growth should give you some indication that we’re not - we’re looking at pretty modest provisioning levels throughout the year relative to our ability to produce new credits for the book.

Right. Where did your problem loan balances end the quarter as compared to the end of the year?

In terms of our NPA balances?

No, like substandard and doubtful classified.

Yes. Give me one second here.

Yes, our classifieds have moved down significantly by about $10 million from end of the year to the end of the first quarter. And our total criticized assets which include our special mentioned credits are about level.

Okay.

Migration is - continues to be at a trickle pace.

Okay. And lastly in the non-interest expense lines specifically compensation expense, how should we look at compensation expense relative to loan growth you’re talking about for rest of the year?

I would - in terms of the connection between those 2 in particular and those are not completely readily identifiable but just using that as a proxy for overall levels, I would think that you could see it pretty much on a comparable basis in terms of the levels of incentive comp et cetera that we’ve incurred here in the first quarter being similar throughout the rest of the year given a similar type of loan growth, and as Dan kind of estimated a little bit earlier in reference to one of the other questions.

Okay, so the $15.7 million is a good run rate throughout the year to stay contained at that level?

Well in terms of the overall salary and benefit level which has the number of other things in there that move around a little bit based on timing or whatever. That number is probably a little bit higher here in the first quarter.

We had some additional payouts on incentives that were accrued for last year that then had higher levels of social security tax and payroll related type taxes, 401(k) match type expenses that occurred in the first quarter that are likely to smooth back out a little bit as you move ahead here.

So there might have been in that regard a couple, $300,000 worth of that that probably won’t reoccur in that particular line item of the non-interest expense and the overall area of non-interest expense.

Thank you, and thanks to all of you for participating with us today and for your questions. I hope it was valuable.

We’d love to hear your feedback on how we’ve done and effectiveness of our call. You can email your comments to [email protected] that will help us improve our process and make it more valuable for you in the future.

So thanks again for participating and have a great afternoon.