sandy spring bank 08/09/04 performance evaluation/media/richmondfedorg/cra_pes/2004… · sandy...

PUBLIC DISCLOSURE

August 9, 2004

COMMUNITY REINVESTMENT ACT PERFORMANCE EVALUATION

Sandy Spring Bank

506922

1708 Georgia Avenue

Olney, Maryland 20832

Federal Reserve Bank of Richmond

Post Office Box 85029

Richmond, Virginia 27622

NOTE: This document is an evaluation of this institution’s record

of meeting the credit needs of its entire community, including low- and moderate-income neighborhoods, consistent with safe and sound operation of the institution. This evaluation is not, nor should it be construed as, an assessment of the financial condition of this institution. The rating assigned to this institution does not represent an analysis, conclusion or opinion of the Federal financial supervisory agency concerning the safety and soundness of this financial institution.

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Bank Name: Sandy Spring Bank CRA Public Evaluation City, ST: Olney, Maryland August 9, 2004

TABLE OF CONTENTS Institution Rating

Institution’s CRA Rating............................................. 1 Table of Performance Test Ratings.................................... 1 Summary of Major Factors Supporting Rating........................... 1

Institution Description of Institution........................................... 2 Scope of Examination................................................. 2 Conclusions With Respect to Performance Tests........................ 3

Metropolitan Area (Full review) Montgomery/Howard/Prince George’s/Frederick Counties Assessment Area Description of Operations......................................... 6 Conclusions with Respect to Performance Tests..................... 9 Anne Arundel County Assessment Area Description of Operations......................................... 15 Conclusions with Respect to Performance Tests..................... 17 Appendices

CRA Appendix A: Scope of Examination................................ 23 CRA Appendix B: Glossary............................................ 24

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INSTITUTION RATING INSTITUTION'S CRA RATING: Sandy Spring Bank is rated "SATISFACTORY." The following table indicates the performance level of Sandy Spring Bank, with respect to the lending, investment, and service tests.

Sandy Spring Bank PERFORMANCE

LEVELS

PERFORMANCE TESTS Lending

Test* Investment

Test Service Test

Outstanding

High Satisfactory

X X X

Low Satisfactory

Needs to Improve

Substantial Noncompliance

* The lending test is weighted more heavily than the investment and service

tests in determining the overall rating. Major factors supporting the institution’s rating include: • Overall, lending activity is consistent with the bank’s capacity and market presence. • A high percentage of the institution’s small business and Home Mortgage

Disclosure Act (HMDA) loans were originated within the bank’s assessment areas. • While the geographic and borrower distribution of loans is varied, overall the

performance is considered good. • The level of qualified community development investments is considered good

relative to available opportunities and bank capacity. • Delivery systems and branch locations are readily accessible to all segments of

the assessment areas. Branch closings have not adversely affected low- and moderate-income neighborhoods.

• Within the Montgomery/Howard/Prince George’s/Frederick Counties assessment area,

the bank provides an adequate level of community development services.

• The bank has not received any complaints regarding its CRA performance since the previous evaluation.

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Bank Name: Sandy Spring Bank CRA Public Evaluation City, ST: Olney, Maryland August 9, 2004 DESCRIPTION OF INSTITUTION Headquartered in Olney, Maryland, Sandy Spring Bank is a wholly-owned subsidiary of Sandy Spring Bancorp, Inc., a single-bank holding company. The institution has two nonbank subsidiaries; Equipment Leasing Company, which leases personal and real property and Sandy Spring Insurance Company. Sandy Spring Mortgage Corporation (SSMC) operates as a division of the bank and originates one- to four-family residential mortgages for sale to investors in the secondary market. Thirty branches and 12 loan production offices are located throughout Maryland. Since the previous compliance examination, two branches were closed and two were opened. As of June 30, 2004, the bank had assets of approximately $2.4 billion of which 52.3% were loans and 36.6% were securities. The loan portfolio was comprised of 43.3% residential real estate secured, 39.5% other real estate (including farmland and nonresidential property), 7.6% commercial, 8.4% consumer and 1.2% other. Deposits as of June 30, 2004, were approximately $1.7 billion. From September 30, 2002, to June 30, 2004, total assets, loans, and deposits increased by 7.3%%, 18.1%, and 14.8%, respectively. At the previous CRA evaluation, Sandy Spring Bank’s performance was rated Satisfactory. The following table details the composition of each of the bank’s assessment areas (as of 2003) and includes the number and percentage of branches, volume of lending, and volume of deposits by assessment area.

Branches Volume of

Loans Assessment Area

Name

Census Tracts

Included #

%

#

$

Volume of

Deposits

Montgomery/Howard/Prince George’s/Frederick Counties (Washington D.C. MSA)

258 26 86.7% 84.4% 84.5% 93.4%

Anne Arundel County (Baltimore MSA)

41 4 13.3% 15.6% 15.5% 6.6%

Loan volume data includes all HMDA and small business loans originated or purchased from January 1, 2002, through December 31, 2003, while deposit data is current through June 30, 2003. Detailed descriptions of each assessment area are included in following sections within this report. SCOPE OF EXAMINATION: The review of the bank’s lending activity includes loans reported under HMDA and CRA data regarding small business loans originated or purchased from January 1, 2002, to December 31, 2003. Sandy Spring Bank did not originate any farm loans during the review period. Community development loans, qualified investments and services were considered from August 2002 through August 2004.

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Bank Name: Sandy Spring Bank CRA Public Evaluation City, ST: Olney, Maryland August 9, 2004 The two assessment areas were evaluated using the interagency examination procedures developed by the Federal Financial Institution’s Examination Council. The institution’s ratings are based on performance in both assessment areas. Greater weight was placed on the institution’s performance in the Montgomery/Howard/Prince George’s/Frederick Counties (M/H/PG/F) assessment area because of its relative size based on deposits and loan activity, as well as the population within this market. CONCLUSIONS WITH RESPECT TO PERFORMANCE TESTS: LENDING TEST An analysis of lending for the review period is discussed in greater detail later in the report. The lending test is rated high satisfactory overall based on lending activity, distribution of lending, and community development lending. Area demographics, Dun & Bradstreet (D&B) economic data, and market aggregate information are used as proxies for demand when evaluating the bank’s performance. Aggregated data includes Sandy Spring Bank and all reporting institutions that originated and/or purchased loans of the type considered within Sandy Spring Bank’s assessment areas. Demographic data are from the 1990 and 2000 census; D&B business data is from calendar year 2003; market HMDA and small business aggregate data are from calendar years 2002 and 2003. Lending Activity The institution primarily serves its market through direct lending and offers a variety of credit products. The loan-to-deposit ratio is one measure of a bank’s lending relative to its capacity. During an eight-quarter period ending June 30, 2004, the quarterly average loan-to-deposit ratio for all banks headquartered in metropolitan areas of Maryland and of similar asset size to Sandy Spring Bank ranged from 78.3% to 83.1%. The bank’s average loan-to-deposit ratio for an eight-quarter period ending June 30, 2004 is 71.7%. No barriers to the bank’s ability to lend were noted. Various loan products are available through the institution including consumer, residential mortgage, home equity, and commercial loans. Mortgage loans offered by the bank include conventional home purchase, refinance, and adjustable rate mortgages. Several loan programs are available that offer more flexible underwriting criteria or loan terms. During 2002 and 2003, the institution originated 73 Government-sponsored or affordable housing loans totaling $10.8 million. Small Business Administration (SBA) loans are offered and are included in the small business totals listed below. From January 2002 through December 2003, Sandy Spring Bank originated 19 SBA loans totaling approximately $3.2 million. Lending activity is considered good relative to the bank’s capacity to lend and generally strong economic conditions within its assessment areas.

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Bank Name: Sandy Spring Bank CRA Public Evaluation City, ST: Olney, Maryland August 9, 2004 Assessment Area Concentration The institution’s lending volume for HMDA and small business purposes from January 1, 2002, to December 31, 2003, is represented in the following table.

Lending Inside and Outside the Assessment Areas Inside Outside

# % $(‘000s) % # % $(‘000s) %

HMDA home purchase

821 58.5% $177,102 58.8% 582 41.5% $123,979 41.2%

HMDA refinancing 2,665 72.6% $621,195 73.9% 1,005 27.4% $219,506 26.1%

HMDA home improvement

3 50% $267 41.3% 3 50% $380 58.7%

HMDA multifamily

1 25% $610 60.8% 3 75% $394 39.2%

Total HMDA-related

3,490 68.7% $799,174 69.9% 1,593 31.3% $344,259 30.1%

Total small business

1,583 84.5% $306,355 83.1% 291 15.5% $62,115 16.9%

TOTAL LOANS 5,073 72.9% $1,105,52 73.1% 1,884 27.1% $406,374 26.9% As depicted above, the majority of mortgage (68.7%) and small business loans (84.5%) were originated within the assessment areas. Overall, the bank originated a high percentage of loans within all of its assessment areas. Borrower and Geographic Distribution Further analysis of small business and HMDA loans by assessment area is discussed in greater detail later in the report. The analysis reveals good distributions of loans to individuals of varying incomes and excellent distributions to businesses of different sizes given the bank’s market presence in each of its assessment areas. Overall, loan penetration among geographies of different income levels is good. In all cases, the bank’s performance was compared to demographic proxies for demand, as well as available aggregate loan data. INVESTMENT TEST The institution’s level of responding to community development needs through its investment activities is rated high satisfactory. Qualified community development investments include: • Housing bonds totaling $1.9 million issued by the Federal Home Loan Mortgage

Corporation and Fannie Mae are maintained by the bank. The underlying mortgages are originated to low- and moderate-income residents of Maryland.

• Three certificates of deposit (CDs) totaling $300,000 were purchased from

community development financial institutions located in Washington, D.C. • In 2003, Sandy Spring Bank entered into a commitment for $500,000 to support the

Dingman Center for Entrepreneurship New Markets Growth Fund, which will provide equity capital to small businesses throughout the state of Maryland. At least 80% of the investments from the fund must be in census tracts with at least 20% of the population below the poverty level. To date, $50,000 of this commitment has been funded.

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Bank Name: Sandy Spring Bank CRA Public Evaluation City, ST: Olney, Maryland August 9, 2004 Other investments consist primarily of contributions to a variety of causes that assist low- and moderate-income residents and small businesses within the state of Maryland. Since August 2002, these contributions totaled $51,184. SERVICE TEST The bank’s overall performance under the service test is rated high satisfactory. Delivery systems, branch locations, and hours of operation are considered accessible and convenient to all portions of the assessment areas. Of the 30 branch offices, three (10%) are located within moderate-income areas. As noted earlier, two branches were closed and two were opened since the prior evaluation. Sandy Spring Bank provides an adequate level of community development services. The majority of bank support is for organizations located in the M/H/PG/F assessment area. Discussion of specific activities is included for each assessment area, as applicable. As required by the Federal Deposit Insurance Corporation Improvement Act of 1991, Sandy Spring Bank has adopted a branch closing policy. COMPLIANCE WITH ANTIDISCRIMINATION LAWS No credit practices inconsistent with the substantive provisions of the fair housing and fair lending laws and regulations were identified. Adequate policies, procedures, and training programs have been developed to support nondiscrimination in lending activities.

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METROPOLITAN AREAS (For metropolitan areas with some or all assessment areas

reviewed using the examination procedures) DESCRIPTION OF INSTITUTION'S OPERATIONS IN THE MONTGOMERY/HOWARD/PRINCE GEORGE’S/FREDERICK COUNTIES ASSESSMENT AREA: 1990 Census This assessment area consists of Montgomery and Howard Counties, the 17 most northwestern census tracts in Prince George’s County, and 22 southern census tracts in Frederick County, Maryland. Located in the Baltimore/Washington, D.C. Consolidated Metropolitan Statistical Area (CMSA) and containing 26 branches, the market is comprised of four low-income, 26 moderate-income, 98 middle-income, and 99 upper-income census tracts. Two geographies have no income classification and contain no population. According to the 1990 census data, this assessment area has a population of 1,123,915. The median housing values for the assessment area, Baltimore MSA, Washington D.C. MSA, and state are $179,789, $100,034, $160,046, and $115,502, respectively. The respective owner-occupancy rates are 64.5%, 59.7%, 57.3%, and 60.1%. Within the assessment area, 2.7% of families are considered to be living below the poverty level. This level is considerably lower than the levels in the Baltimore MSA (7.4%), the Washington D.C. MSA (4.4%), and the State of Maryland (6%). The 2002 median family incomes for the Baltimore and Washington MSAs are $66,400 and $91,500, respectively. The following table provides demographics for the M/H/PG/F assessment area.

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2000 Census Based on 2000 Census data, the M/H/PG/F assessment area includes 258 census tracts of which two are low-income, 36 are moderate-income, 116 are middle-income, and 104 are upper-income. This market has a population of 1,344,342. The median housing values for the assessment area, Baltimore MSA, Washington D.C. MSA, and state are $194,772, $132,400, $172,900, and $143,300, respectively. The respective owner-occupancy rates are 67%, 62.2%, 60.9%, and 62.5%. Within the assessment area, 3.4% of families are considered to be living below the poverty level. This level is considerably lower than the levels in the Baltimore MSA (7.2%), the Washington D.C. MSA (5.2%), and the State of Maryland (6.1%). The 2003 median family incomes for the Baltimore and Washington MSAs are $67,300 and $84,800, respectively. The following table provides demographics for the M/H/PG/F assessment area.

# % # % # % # %4 1.7 1,898 0.6 371 19.5 35,199 11.826 11.4 31,404 10.5 2,210 7.0 46,733 15.698 42.8 124,390 41.6 3,492 2.8 71,227 23.899 43.2 141,301 47.3 2,079 1.5 145,834 48.82 0.9 0 0.0 0 0.0 0 0.0

229 100.0 298,993 100.0 8,152 2.7 298,993 100.0

# % % # % # %3,856 762 0.3 19.8 2,763 71.7 331 8.657,436 17,037 6.0 29.7 36,577 63.7 3,822 6.7191,326 119,413 42.2 62.4 63,042 33.0 8,871 4.6186,420 145,972 51.5 78.3 32,535 17.5 7,913 4.2

0 0 0.0 0.0 0 0.0 0 0.0439,038 283,184 100.0 64.5 134,917 30.7 20,937 4.8

# % # % # % # %1,161 2.9 854 2.6 273 4.4 34 3.94,763 11.9 3,914 11.9 757 12.2 92 10.716,620 41.5 13,406 40.7 2,866 46.2 348 40.417,478 43.7 14,781 44.9 2,309 37.2 388 45.0

0 0.0 0 0.0 0 0.0 0 0.040,022 100.0 32,955 100.0 6,205 100.0 862 100.0

82.3 15.5 2.2

Montgomery/ Howard/ Prince George Counties - 2002ASSESSMENT AREA DEMOGRAPHICS

Income

Categories

Tract Distribution Families by Tract

Income

Families < Poverty as a % of Families by

Tract

Families by

Family Income

Low Moderate Middle Upper NA Total

Housing Units by Tract

Housing Types by Tract

Owner Occupied Rental Vacant


Total Businesses

by Tract Businesses by Tract and Revenue Size

Less than or =

$1 Million Over $1 Million Revenue not

Reported

Low Moderate Middle Upper

NA Tracts are tracts without household or family income.

NA Total

Percentage of Total Businesses:

Sources: 1990 Census Data, 2003 Dun & Bradstreet business demographic data.

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As of July 2004, the unemployment rates for Montgomery, Howard, Prince George’s and Frederick Counties are 2.3%, 2.7%, 4.5%, and 2.7%, respectively. The rate for the State of Maryland is 4.1%. Area jobs derive from the service, manufacturing, and retail industries. Additionally, many residents commute to the Washington, D.C. and Baltimore areas for employment opportunities. As mentioned previously, the bank operates 26 full-service branches within this market area. As of June 2003, Sandy Spring Bank ranked seventh in deposit market share having 4.7% of the assessment area’s available FDIC insured deposits (credit union deposits are not included). According to 2003 aggregate data, the institution ranked 16th in reported small business lending with a 1.3% market share and ranked 30th in reported residential mortgage loans with a .7% market share. Both market share rankings consider originated and purchased loans.

# % # % # % # %2 0.8 765 0.2 162 21.2 49,636 14.236 14.0 40,634 11.6 3,183 7.8 55,010 15.7116 45.0 161,919 46.2 6,081 3.8 74,819 21.4104 40.3 146,799 41.9 2,596 1.8 170,652 48.70 0.0 0 0.0 0 0.0 0 0.0

258 100.0 350,117 100.0 12,022 3.4 350,117 100.0

# % % # % # %1,793 517 0.1 28.8 1,106 61.7 170 9.572,079 22,160 6.4 30.7 47,134 65.4 2,785 3.9248,899 164,479 47.6 66.1 75,594 30.4 8,826 3.5192,940 158,408 45.8 82.1 29,813 15.5 4,719 2.4

0 0 0.0 0.0 0 0.0 0 0.0515,711 345,564 100.0 67.0 153,647 29.8 16,500 3.2

# % # % # % # %93 0.2 76 0.2 13 0.2 4 0.4

5,230 12.4 4,294 12.4 820 12.8 116 10.719,449 46.2 15,728 45.4 3,226 50.5 495 45.517,364 41.2 14,566 42.0 2,324 36.4 474 43.5

0 0.0 0 0.0 0 0.0 0 0.042,136 100.0 34,664 100.0 6,383 100.0 1,089 100.0

82.3 15.1 2.6

Montgomery/ Howard/ Prince George Counties - 2003ASSESSMENT AREA DEMOGRAPHICS

Income

Categories

Tract Distribution Families by Tract Income


Tract

Families by

Family Income






Total Businesses


Less than or =


Reported



NA Total



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Bank Name: Sandy Spring Bank CRA Public Evaluation City, ST: Olney, Maryland August 9, 2004 CONCLUSIONS WITH RESPECT TO PERFORMANCE TESTS IN MONTGOMERY/HOWARD/PRINCE GEORGE’S/ FREDERICK COUNTIES ASSESSMENT AREA LENDING TEST Lending Activity: Bank lending activity within this market (84.4%) is generally consistent with the percentage of branch offices (86.7%) and the proportion of deposits (93.4%) within the assessment area. Relative to the number of offices and the volume of deposits in this assessment area, the level of lending is considered good. Geographic Distribution: The following tables present data about the bank’s lending. Discussion of the bank’s performance follows each table.

Distribution of HMDA Loans by Income Level of Geography 2002 Activity

Low- Income

Moderate-Income

Middle-Income

Upper-Income Total

Total Number of HMDA Loans 3 44 520 761 1,328 Percentage of Total Loans .2% 3.3% 39.2% 57.3% 100% Total Amount of loans (000's) $579 $6,879 $92,669 $188,108 $288,235 Percentage of Total Amount .2% 2.4% 32.2% 65.2% 100%

Within the assessment area, 6.3% of all owner-occupied housing units are located in low- (.3%) and moderate-income (6%) census tracts. According to 2002 aggregate data, .2% and 4.6% of all reported transactions were to borrowers residing in low- and moderate-income areas, respectively. When compared to market aggregate information and the percentage of owner-occupied units, the bank’s 2002 HMDA lending (.2% in low- and 3.3% in moderate-income geographies) is considered good. 2003 Activity

Low- Income

Moderate-Income

Middle-Income

Upper-Income Total

Total Number of HMDA Loans 1 63 742 961 1,767 Percentage of Total Loans .1% 3.6% 42% 54.3% 100% Total Amount of loans (000's) $138 $8,816 $136,456

$257,861 $403,271

Percentage of Total Amount <.1% 2.2% 33.8% 64% 100%

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Bank Name: Sandy Spring Bank CRA Public Evaluation City, ST: Olney, Maryland August 9, 2004 Within the assessment area, 6.5% of all owner-occupied housing units are located in low- (.1%) and moderate-income (6.4%) census tracts. According to 2003 aggregate data, .1% and 6% of all reported transactions were to borrowers residing in low- and moderate-income areas, respectively. When compared to market aggregate information and the percentage of owner-occupied units, the bank’s 2003 HMDA lending (.1% in low- and 3.6% in moderate-income geographies) is considered good. Based on analysis of lending for both years, the bank’s distribution of HMDA lending is considered good.

Distribution of Small Business Loans by Income Level of Geography

2002 Activity

Low- Income

Moderate-Income

Middle-Income

Upper-Income Total

Total Number of HMDA Loans 6 72 274 268 620 Percentage of Total Loans 1% 11.6% 44.2% 43.2% 100% Total Amount of loans (000's) $1,414 $7,779 $56,970 $52,605 $118,768 Percentage of Total Amount 1.2% 6.5% 48% 44.3% 100%

Recent D&B data indicates that 2.9% and 11.9% of area businesses are located in low- and moderate-income census tracts, respectively. Calendar year 2002 aggregate data indicates that of all reported loans, 12.7% were to businesses in low- (2.3%) and moderate-income geographies (10.4%). Sandy Spring Bank’s level of small business lending (1% in low-income and 11.6% in moderate-income areas) is consistent with both the aggregate and demographic proxies and is considered good. 2003 Activity

Low- Income

Moderate-Income

Middle-Income

Upper-Income Total

Total Number of HMDA Loans 0 38 229 300 567 Percentage of Total Loans 0% 6.7% 40.4% 52.9% 100% Total Amount of loans (000's) $0 $7,774 $48,353 $68,115 $124,242 Percentage of Total Amount 0% 6.3% 38.9% 54.8% 100%

Recent D&B data indicates that 12.6% of area businesses are located in low- (.2%) and moderate-income census tracts (12.4%). Calendar year 2003 aggregate data indicates that of all reported loans, 10.9% were to businesses in low- (.2%) and moderate-income geographies (10.7%). The bank’s level of small business lending (0% in low-income and 6.7% in moderate-income areas) is somewhat lower than both the aggregate and demographic proxies and is considered adequate. Based on analysis of lending for both years, the bank’s distribution of small business lending is considered good.

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Bank Name: Sandy Spring Bank CRA Public Evaluation City, ST: Olney, Maryland August 9, 2004 The overall geographic loan distribution within this assessment area is considered good given the institution’s size, branch locations and effective demand for credit. Distribution by Borrower Income and Revenue Size of the Business: The tables that follow present data about bank lending to borrowers of different income levels and to businesses of different sizes. Discussion of the bank’s performance follows each table.

Distribution of HMDA Loans by Income Level of Borrower

2002 Activity The bank reported a total of 1,328 HMDA loans within the assessment area. Twenty-two of the transactions did not contain income data and, therefore, are not included in the analysis.

Low-Income

Moderate-Income

Middle-Income

Upper-Income Total

Total Number of Loans

96 288 353 569 1,306

Percentage of Total Loans

7.4% 22.1% 27% 43.5% 100%

Total Amount of Loans (000's)

$10,947 $43,255 $66,346 $163,098 $283,646

Percentage of Total Amount

3.9% 15.2% 23.4% 57.5% 100%

In cases where income was known, the percentage of HMDA loans to low-income borrowers (7.4%) is somewhat lower than the level of low-income families (11.8%) but approximates 2002 aggregate lending to such borrowers (8.6%). The percentage of loans originated to moderate-income borrowers (22.1%) exceeds both demographic (15.6%) and aggregate (21.2%) percentages. Overall, the bank’s level of HMDA lending to low- and moderate-income residents is considered good when considering market demand as measured by area demographics and aggregate data. 2003 Activity The bank reported a total of 1,767 HMDA loans within the assessment area. Fifty-eight of the transactions did not contain income data and, therefore, are not included in the analysis.

Low-Income

Moderate-Income

Middle-Income

Upper-Income Total


125 356 414 814 1,709


7.3% 20.8% 24.2% 47.7% 100%


$14,943 $54,661 $79,758 $239,296 $388,658


3.8% 14.1% 20.5% 61.6% 100%

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Bank Name: Sandy Spring Bank CRA Public Evaluation City, ST: Olney, Maryland August 9, 2004 In cases where income was known, the percentage of HMDA loans to low-income borrowers (7.3%) is somewhat lower than the level of low-income families (14.2%) but approximates 2003 aggregate lending to such borrowers (7%). The percentage of loans originated to moderate-income borrowers (20.8%) exceeds both demographic (15.7%) and aggregate (19.2%) percentages. Overall, the bank’s level of HMDA lending to low- and moderate-income residents is considered good when considering market demand as measured by area demographics and aggregate data. Based on an analysis of lending for both years, the bank’s distribution of lending to borrowers of different incomes is considered good.

Distribution of Lending by Loan Amount and Size of Business

2002 Activity

$0 - $100,000

>$100,000 to $250,000

>$250,000 Total

Revenues < $1 Million

293 47.3% 115 18.5% 131 21.1% 539 86.9%

Revenues > $1 Million

11 1.8% 14 2.3% 17 2.7% 42 6.8%

Revenues Not Reported

21 3.4% 8 1.3% 10 1.6% 39 6.3%

Total 325 52.5% 137 22.1% 158 25.4% 620 100% According to aggregate small business data, of all loans (originated and purchased) in 2002, 26.5% were to businesses with annual revenues of $1 million or less. D&B data indicates that 82.3% of all local businesses have revenues that do not exceed $1 million per year. During the evaluation period, 86.9% of Sandy Spring Bank’s small business loans were to businesses with annual revenues of $1 million or less and 52.5% of all loans were in amounts of $100,000 or less. This level of lending is considered excellent. 2003 Activity

$0 - $100,000

>$100,000 to $250,000

>$250,000 Total


124 21.9% 71 12.5% 75 13.2% 270 47.6%


118 20.8% 72 12.7% 71 12.5% 261 46%


19 3.4% 4 .7% 13 2.3% 36 6.4%

Total 261 46.1% 147 25.9% 159 28% 567 100% According to aggregate small business data, of all loans (originated and purchased) in 2003, 33.4% were to businesses with annual revenues of $1 million or less. D&B data indicates that 82.3% of all local businesses have revenues that do not exceed $1 million per year. During the evaluation period, 47.6% of Sandy Spring Bank’s small business loans were to businesses with annual revenues of $1 million or less and 46% of all loans were in amounts of $100,000 or less. This level of lending is considered adequate.

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Bank Name: Sandy Spring Bank CRA Public Evaluation City, ST: Olney, Maryland August 9, 2004 Based on an analysis of lending for both years, the bank’s distribution of lending to businesses of different sizes is considered good. Overall, the distribution of loans to borrowers of different income levels and to businesses of different sizes is considered good using aggregate data and area demographics as proxies for demand. Community Development Lending: To the extent the bank originated any community development loans, such financing has been reported as small business loans or HMDA loans. The overall level of lending within this assessment area is considered good. This conclusion is based on the evaluation of geographic distribution and borrower distribution, while taking into account the bank’s market strategy, area demographic data, and aggregate CRA and HMDA data. INVESTMENT TEST As previously noted, the bank has qualified community development investments totaling $2.7 million. The majority of these investments are pools of mortgage-backed securities issued by the Federal Home Loan Mortgage Corporation and Fannie Mae. The underlying mortgages are originated to low- and moderate-income residents of Maryland. In 2003, Sandy Spring Bank entered into a commitment for $500,000 to support the Dingman Center for Entrepreneurship New Markets Growth Fund, which will provide equity capital to small businesses throughout the state of Maryland. At least 80% of the investments from the fund must be in census tracts with at least 20% of the population below the poverty level. To date, $50,000 of this commitment has been funded. Additionally, CDs totaling $300,000 are held in community development financial institutions. Within this market, charitable donations totaling $41,184 have also been made that are considered qualified community development investments. Another $6,750 in grants was made to organizations which benefit the entire state of Maryland. The bank’s performance under the investment test is considered good. SERVICE TEST Within the M/H/PG/F assessment area, Sandy Spring Bank’s performance under the service test is considered good. Systems for delivering retail-banking services are accessible to essentially all portions of the assessment area, including low- and moderate-income areas. Retail Services: Delivery systems are accessible to all portions of the assessment area. ATMs are available and, through a network, provide customers with 24-hour nationwide access. The bank has 41 ATMs located in this market with 17 of those being stand-alone ATMs. Bank-by-mail and bank-by-computer services are also offered by the institution. In addition, the institution provides customers with 24-hour telephone access to their accounts through an automated system.

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Bank Name: Sandy Spring Bank CRA Public Evaluation City, ST: Olney, Maryland August 9, 2004 The institution has 26 offices within this assessment area, of which three are located in moderate-income tracts (11.5%), 13 are in middle-income areas (50%), and ten are within upper-income census tracts (38.5%). Although not located in the market’s two low-income geographies, the branches are accessible and in close proximity to these areas. The distribution of branches is considered good due to the fact that .3% and 13% of the assessment area’s population reside in low- and moderate-income areas, respectively (using 2003 demographic data). Branch locations and business hours are considered convenient and meet the needs of the assessment area. Since the previous evaluation, two offices located in middle-income tracts have been closed. Branch closings have not adversely affected the accessibility of the bank’s delivery systems. Community Development Services: A bank representative provides financial expertise for the Montgomery County Small Business Loan Fund. The level of community development services is considered adequate.

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Bank Name: Sandy Spring Bank CRA Public Evaluation City, ST: Olney, Maryland August 9, 2004 DESCRIPTION OF INSTITUTION'S OPERATIONS IN THE ANN ARUNDEL ASSESSMENT AREA: 1990 Census The second assessment area consists of a portion of Anne Arundel County, Maryland. Located within the Baltimore MSA and containing four branches, the market consists of 41 census tracts of which two are considered moderate-income, 13 are middle-income, and 26 are upper-income. There are no low-income geographies within this assessment area. According to the 1990 census data, the area has a population of 225,113. Median housing values for the assessment area, MSA, and state are $149,017, $100,034, and $115,502, respectively. The respective owner-occupancy rates are 69.5%, 59.7%, and 60.1%. Within the assessment area, 2.8% of families are living below the poverty level, which is lower than the Baltimore MSA poverty rate of 7.4% and the state rate of 6%. As mentioned previously, the 2002 median family income for the Baltimore MSA is $66,400. The following table provides demographics for the Anne Arundel County assessment area.

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# % # % # % # %0 0.0 0 0.0 0 0.0 5,493 9.22 4.9 1,159 1.9 212 18.3 7,409 12.413 31.7 18,519 30.9 767 4.1 12,909 21.526 63.4 40,290 67.2 690 1.7 34,157 57.00 0.0 0 0.0 0 0.0 0 0.0

41 100.0 59,968 100.0 1,669 2.8 59,968 100.0

# % % # % # %0 0 0.0 0.0 0 0.0 0 0.0

1,459 653 1.1 44.8 743 50.9 63 4.330,664 15,051 25.6 49.1 13,617 44.4 1,996 6.552,611 43,191 73.3 82.1 6,862 13.0 2,558 4.9

0 0 0.0 0.0 0 0.0 0 0.084,734 58,895 100.0 69.5 21,222 25.0 4,617 5.4

# % # % # % # %0 0.0 0 0.0 0 0.0 0 0.0

174 2.3 148 2.3 24 2.6 2 1.12,556 33.4 2,139 32.7 344 37.2 73 38.44,934 64.4 4,263 65.1 556 60.2 115 60.5

0 0.0 0 0.0 0 0.0 0 0.07,664 100.0 6,550 100.0 924 100.0 190 100.0

85.5 12.1 2.5

Anne Arundel - 2002ASSESSMENT AREA DEMOGRAPHICS

Income Categories


Income


Tract

Families by Family Income

LowModerateMiddleUpperNATotal




LowModerateMiddleUpperNATotal

Total Businesses by Tract

Businesses by Tract and Revenue Size

Less than or = $1 Million

Over $1 MillionRevenue not Reported

LowModerateMiddleUpper


NATotal



2000 Census Based on 2000 census data, the Anne Arundel County assessment area has a population of 254,754 and consists of 45 census tracts of which one is considered moderate-income, 13 are middle-income, and 31 are upper-income. There are no low-income geographies within this assessment area. Median housing values for the assessment area, MSA, and state are $184,034, $132,400, and $143,300, respectively. The respective owner-occupancy rates are 73%, 62.2%, and 62.5%. Within the assessment area, 3.2% of families are living below the poverty level, which is lower than the Baltimore MSA poverty rate of 7.2% and the state rate of 6.1%. As mentioned previously, the 2003 median family income for the Baltimore MSA is $67,300. The following table provides demographics for the Anne Arundel County assessment area.

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As of July 2004, the unemployment rate for Anne Arundel County is 3.7% and is consistent with the state average of 4.1%. The county is primarily a retirement and vacation community. Area jobs derive from local government, fishing, tourism and service industries. Additionally, many residents commute to the Washington, D.C. and Baltimore areas for employment opportunities.

As mentioned previously, the bank operates four full-service branches within this market area. As of June 2003, Sandy Spring Bank ranked 16th in deposit market share having 1.8% of the assessment area’s available FDIC insured deposits (credit union deposits are not included). According to 2003 aggregate data, the institution ranked tenth in reported small business lending with a 2.2% market share and ranked 44th in reported residential mortgage loans with a .4% market share. Both market share rankings consider originated and purchased loans. CONCLUSIONS WITH RESPECT TO PERFORMANCE TESTS IN ANNE ARUNDEL COUNTY ASSESSMENT AREA LENDING TEST Lending Activity: Bank lending activity within this market (15.6%) is generally consistent with the percentage of branch offices (13.3%), but somewhat higher than the proportion of deposits (6.6%) within the assessment area. Relative to the number of offices and the volume of deposits in this assessment area, the level of lending is considered good.

# % # % # % # %0 0.0 0 0.0 0 0.0 7,366 10.81 2.2 1,877 2.7 100 5.3 8,865 13.013 28.9 17,957 26.3 1,097 6.1 14,067 20.631 68.9 48,454 71.0 986 2.0 37,990 55.60 0.0 0 0.0 0 0.0 0 0.0

45 100.0 68,288 100.0 2,183 3.2 68,288 100.0

# % % # % # %0 0 0.0 0.0 0 0.0 0 0.0

3,873 767 1.1 19.8 2,930 75.7 176 4.528,656 17,584 24.3 61.4 9,593 33.5 1,479 5.266,768 54,126 74.7 81.1 10,115 15.1 2,527 3.8

0 0 0.0 0.0 0 0.0 0 0.099,297 72,477 100.0 73.0 22,638 22.8 4,182 4.2

# % # % # % # %0 0.0 0 0.0 0 0.0 0 0.037 0.5 28 0.4 6 0.6 3 1.4

2,298 28.4 1,976 28.6 268 27.9 54 24.45,749 71.1 4,900 71.0 685 71.4 164 74.2

0 0.0 0 0.0 0 0.0 0 0.08,084 100.0 6,904 100.0 959 100.0 221 100.0

85.4 11.9 2.7

Anne Arundel - 2003ASSESSMENT AREA DEMOGRAPHICS

Income

Categories


Income


Tract

Families by

Family Income






Total Businesses


Less than or =


Reported



NA Total



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Bank Name: Sandy Spring Bank CRA Public Evaluation City, ST: Olney, Maryland August 9, 2004 Geographic Distribution: The following tables present data about the bank’s lending. Discussion of the bank’s performance follows each table. As previously noted, there are no low-income geographies for both 2002 and 2003 demographics.

Distribution of HMDA Loans by Income Level of Geography

2002 Activity

Moderate-Income

Middle-Income

Upper-Income Total

Total Number of HMDA Loans 7 42 143 192 Percentage of Total Loans 3.6% 21.9% 74.5% 100% Total Amount of loans (000's) $2,195 $11,153 $36,991 $50,339 Percentage of Total Amount 4.4% 22.2% 73.4% 100%

Within the assessment area, 1.1% of all owner-occupied housing units are located in moderate-income census tracts. According to 2002 aggregate data, 1.3% of all reported transactions were to borrowers residing in moderate-income areas. When compared to market aggregate information and the percentage of owner-occupied units, the bank’s 2002 HMDA lending (3.6% in moderate-income geographies) is considered good. 2003 Activity

Moderate-Income

Middle-Income

Upper-Income Total

Total Number of HMDA Loans 0 48 155 203 Percentage of Total Loans 0% 23.6% 76.4% 100% Total Amount of loans (000's) $0 $13,200 $44,129 $57,329 Percentage of Total Amount 0% 23% 77% 100%

Within the assessment area, 1.1% of all owner-occupied housing units are located in moderate-income census tracts. According to 2003 aggregate data, .9% of all reported transactions were to borrowers residing in moderate-income areas. When compared to market aggregate information and the percentage of owner-occupied units, the bank’s lack of HMDA lending in moderate-income geographies is considered adequate. Based on analysis of lending for both years, the bank’s distribution of HMDA lending is considered good.

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Distribution of Small Business Loans by Income Level of Geography

2002 Activity

Moderate-Income

Middle-Income

Upper-Income Total

Total Number of HMDA Loans 5 74 114 193 Percentage of Total Loans 2.6% 38.3% 59.1% 100% Total Amount of loans (000's) $600 $12,427 $20,394 $33,421 Percentage of Total Amount 1.8% 37.2% 61% 100%

Recent D&B data indicates that 2.3% of area businesses are located in moderate-income census tracts. Calendar year 2002 aggregate data indicates that of all reported loans, 1.6% were to businesses in moderate-income geographies. The bank’s level of small business lending (2.6% in moderate-income areas) is somewhat higher than both aggregate and demographic proxies and is considered good. 2003 Activity

Moderate-Income

Middle-Income

Upper-Income Total

Total Number of HMDA Loans 0 93 110 203 Percentage of Total Loans 0% 45.8% 54.2% 100% Total Amount of loans (000's) $0 $12,583 $17,341 $29,924 Percentage of Total Amount 0% 42% 58% 100%

Recent D&B data indicates that .5% of area businesses are located in moderate-income census tracts. Calendar year 2003 aggregate data indicates that of all reported loans, 1.1% were to businesses in moderate-income geographies. The institution’s lack of small business lending in moderate-income areas is considered adequate given the limited lending opportunities available as demonstrated by both aggregate and D&B data. Based on analysis of lending for both years, the bank’s distribution of small business lending is considered good. The overall geographic loan distribution within this assessment area is considered good given the institution’s size, branch locations and effective demand for credit. Distribution by Borrower Income and Revenue Size of the Business: The tables that follow present data about bank lending to borrowers of different income levels and to businesses of different sizes. Discussion of the bank’s performance follows each table.

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Distribution of HMDA Loans by Income Level of Borrower

2002 Activity The bank reported a total of 192 HMDA loans within the assessment area. Four of the transactions did not contain income data and, therefore, are not included in the analysis.

Low-Income

Moderate-Income

Middle-Income

Upper-Income Total


9 16 22 141 188


4.8% 8.5% 11.7% 75% 100%


$900 $2,042 $3,668 $42,363 $48,973


1.8% 4.2% 7.5% 86.5% 100%

In cases where income was known, the percentage of HMDA loans to low-income borrowers (4.8%) is somewhat lower than the level of low-income families (9.2%) but is higher than 2002 aggregate lending to such borrowers (3.5%). The percentage of loans originated to moderate-income borrowers (8.5%) is lower than both demographic (12.4%) and aggregate (14.3%) percentages. Overall, the bank’s level of HMDA lending to low- and moderate-income residents is considered adequate when considering market demand as measured by area demographics and aggregate data. 2003 Activity The bank reported a total of 203 HMDA loans within the assessment area. Five of the transactions did not contain income data and, therefore, are not included in the analysis.

Low-Income

Moderate-Income

Middle-Income

Upper-Income Total


5 17 41 135 198


2.5% 8.6% 20.7% 68.2% 100%


$427 $2,310 $6,694 $47,104 $56,535


.8% 4.1% 11.8% 83.3% 100%

In cases where income was known, the percentage of HMDA loans to low-income borrowers (2.5%) is lower than the level of low-income families (10.8%) but is consistent with 2003 aggregate lending to such borrowers (3.7%). The percentage of loans originated to moderate-income borrowers (8.6%) is lower than both demographic (13%) and aggregate (14.1%) percentages. Overall, the bank’s level of HMDA lending to low- and moderate-income residents is adequate when considering market demand as measured by area demographics and aggregate data. Based on an analysis of lending for both years, the bank’s distribution of lending to borrowers of different incomes is considered adequate.

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Distribution of Lending by Loan Amount and Size of Business

2002 Activity

$0 - $100,000

>$100,000 to $250,000

>$250,000 Total


103 53.4% 27 14% 35 18.1% 165 85.5%


4 2.1% 2 1% 6 3.1% 12 6.2%


9 4.6% 4 2.1% 3 1.6% 16 8.3%

Total 116 60.1% 33 17.1% 44 22.8% 193 100%

According to aggregate small business data, of all loans (originated and purchased) in 2002, 33.8% were to businesses with annual revenues of $1 million or less. D&B data indicates that 85.5% of all local businesses have revenues that do not exceed $1 million per year. During the evaluation period, 85.5% of Sandy Spring Bank’s small business loans were to businesses with annual revenues of $1 million or less and 60.1% of all loans were in amounts of $100,000 or less. This level of lending is considered excellent.

2003 Activity

$0 - $100,000

>$100,000 to $250,000

>$250,000 Total


90 44.3% 24 11.8% 19 9.4% 133 65.5%


29 14.3% 23 11.3% 16 7.9% 68 33.5%


1 .5% 1 .5% 0 0% 2 1%

Total 120 59.1% 48 23.6% 35 17.3% 203 100%

According to aggregate small business data, of all loans (originated and purchased) in 2003, 37.6% were to businesses with annual revenues of $1 million or less. D&B data indicates that 85.4% of all local businesses have revenues that do not exceed $1 million per year. During the evaluation period, 65.5% of Sandy Spring Bank’s small business loans were to businesses with annual revenues of $1 million or less and 59.1% of all loans were in amounts of $100,000 or less. This level of lending is considered excellent.

Based on an analysis of lending for both years, the bank’s distribution of lending to businesses of different sizes is considered excellent.

Overall, the distribution of loans to borrowers of different income levels and to businesses of different sizes is considered good using aggregate data and area demographics as proxies for demand.

Community Development Lending:

To the extent the bank originated any community development loans, such financing has been reported as small business loans or HMDA loans.

The overall level of lending within this assessment area is considered good. This conclusion is based on the evaluation of geographic distribution and borrower distribution, while taking into account the bank’s market strategy, area demographic data, and aggregate CRA and HMDA data.

22

Bank Name: Sandy Spring Bank CRA Public Evaluation City, ST: Olney, Maryland August 9, 2004 INVESTMENT TEST As previously noted, the bank has qualified community development investments totaling $2.7 million. The majority of these investments are pools of mortgage-backed securities issued by the Federal Home Loan Mortgage Corporation and Fannie Mae. The underlying mortgages are originated to low- and moderate-income residents of Maryland. In 2003, Sandy Spring Bank entered a commitment for $500,000 to support the Dingman Center for Entrepreneurship New Markets Growth Fund, which will provide equity capital to small businesses throughout the state of Maryland. At least 80% of the investments from the fund must be in census tracts with at least 20% of the population below the poverty level. To date, $50,000 of this commitment has been funded. Additionally, CDs totaling $300,000 are held in community development financial institutions. Within this market, charitable donations totaling $3,350 have also been made that are considered qualified community development investments. Another $6,750 in grants was made to organizations which benefit the entire state of Maryland. The bank’s performance under the investment test is considered good. SERVICE TEST Within the Anne Arundel assessment area, Sandy Spring Bank’s performance under the service test is considered good. Systems for delivering retail-banking services are accessible to essentially all portions of the assessment area, including low- and moderate-income areas. Retail Services: Delivery systems are accessible to all portions of the assessment area. ATMs are available and, through a network, provide customers with 24-hour nationwide access. The bank has four ATMs at its branch offices within this market. Bank-by-mail and bank-by-computer services are also offered by the institution. In addition, the institution provides customers with 24-hour telephone access to their accounts through an automated system. The institution has four offices within this assessment area, of which two are located in middle-income areas (50%) and two are located in upper-income census tracts (50%). The distribution of branches is considered good due to the fact that 28.3% and 68.6% of the assessment area’s population reside in middle- and upper-income areas, respectively (using 2003 demographic data). Within the Anne Arundel market, there are no low-income geographies and the one moderate-income geography contains only 3.1% of the population. Branch locations and business hours are considered convenient and meet the needs of the assessment area. There have been no branch closings since the previous evaluation.

23


CRA APPENDIX A

A full discussion of the scope of the examination is contained in the narrative section of this evaluation.

LIST OF ASSESSMENT AREAS AND TYPE OF EXAMINATION

ASSESSMENT AREA

TYPE OF EXAMINATION

BRANCHES VISITED

M/H/PG/F Anne Arundel

Full procedures Full procedures

12276 Clarksville Pike Clarksville, MD 21209 17801 Georgia Avenue Olney, MD 208352 1013 Bay Ridge Avenue Annapolis, MD 21403

* "Branches visited" indicates where technical compliance with the CRA (signs, public file, etc.) was confirmed. The evaluation of the institution’s CRA performance takes into consideration activity from all branch locations, as described in the Scope of Examination.

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CRA APPENDIX B

GLOSSARY Aggregate lending: The number of loans originated and purchased by all reporting lenders in specified income categories as a percentage of the aggregate number of loans originated and purchased by all reporting lenders in the metropolitan area/assessment area. Block numbering area ("BNA"): A statistical subdivision of a county for grouping and numbering blocks in non-metropolitan counties where local census statistical area committees have not established census tracts. A BNA does not cross county lines. Census tract: A small subdivision of metropolitan and other densely populated counties. Census tract boundaries do not cross county lines; however, they may cross the boundaries of metropolitan statistical areas. Census tracts usually have between 2,500 and 8,000 persons, and their physical size varies widely depending upon population density. Census tracts are designed to be homogeneous with respect to population characteristics, economic status, and living conditions to allow for statistical comparisons. Community development: Affordable housing (including multifamily rental housing) for low- or moderate-income individuals; community services targeted to low- or moderate-income individuals; activities that promote economic development by financing businesses or farms that meet the size eligibility standards of the Small Business Administration’s Development Company or Small Business Investment Company programs (13 CFR 121.301) or have gross annual revenues of $1 million or less; or, activities that revitalize or stabilize low- or moderate-income geographies. Consumer loan(s): A loan(s) to one or more individuals for household, family, or other personal expenditures. A consumer loan does not include a home mortgage, small business, or small farm loan. This definition includes the following categories: motor vehicle loans, credit card loans, home equity loans, other secured consumer loans, and other unsecured consumer loans. Family: Includes a householder and one or more other persons living in the same household who are related to the householder by birth, marriage, or adoption. The number of family households always equals the number of families; however, a family household may also include nonrelatives living with the family. Families are classified by type as either a married-couple family or other family, which is further classified into "male householder" (a family with a male householder and no wife present) or "female householder" (a family with a female householder and no husband present). Full review: Performance under the lending, investment and service tests is analyzed considering performance context, quantitative factors (for example, geographic distribution, borrower distribution, and total number and dollar amount of investments), and qualitative factors (for example, innovativeness, complexity and responsiveness). Geography: A census tract or a block numbering area delineated by the U.S. Bureau of the Census in the most recent decennial census.

25

Bank Name: Sandy Spring Bank CRA Public Evaluation City, ST: Olney, Maryland August 9, 2004 Home Mortgage Disclosure Act ("HMDA"): The statute that requires certain mortgage lenders that do business or have banking offices in a metropolitan statistical area to file annual summary reports of their mortgage lending activity. The reports include data such as race, gender and income of applications, amount of loan requested, and disposition of the application (for example, approved, denied, and withdrawn). Home mortgage loans: Includes home purchase and home improvement loans as defined in the HMDA regulation. This definition also includes multifamily (five or more families) dwelling loans, loans for the purchase of manufactured homes and refinancings of home improvement and home purchase loans. Household: Includes all persons occupying a housing unit. Persons not living in households are classified as living in group quarters. In 100 percent tabulations, the count of households always equals the count of occupied housing units. Limited review: Performance under the lending, investment and service tests is analyzed using only quantitative factors (for example, geographic distribution, borrower distribution, total number and dollar amount of investments, and branch distribution). Low-income: Individual income that is less than 50 percent of the area median income, or a median family income that is less than 50 percent, in the case of a geography. Market share: The number of loans originated and purchased by the institution as a percentage of the aggregate number of loans originated and purchased by all reporting lenders in the metropolitan area/assessment area. Metropolitan area ("MA"): Any primary metropolitan statistical area ("PMSA"), metropolitan statistical area ("MSA"), or consolidated metropolitan statistical area ("CMSA"), as defined by the Office of Management and Budget, with a population of 250 thousand or more, and any other area designated as such by the appropriate federal financial supervisory agency. Middle-income: Individual income that is at least 80 percent and less than 120 percent of the area median income, or a median family income that is at least 80 percent and less than 120 percent, in the case of a geography. Moderate-income: Individual income that is at least 50 percent and less than 80 percent of the area median income, or a median family income that is at least 50 percent and less than 80 percent, in the case of a geography. Multifamily: Refers to a residential structure that contains five or more units. Other products: Includes any unreported optional category of loans for which the institution collects and maintains data for consideration during a CRA examination. Examples of such activity include consumer loans and other loan data an institution may provide concerning its lending performance. Owner-occupied units: Includes units occupied by the owner or co-owner, even if the unit has not been fully paid for or is mortgaged.

Qualified investment: A qualified investment is defined as any lawful investment, deposit, membership share or grant that has as its primary purpose community development.

26

Bank Name: Sandy Spring Bank CRA Public Evaluation City, ST: Olney, Maryland August 9, 2004 Rated area: A rated area is a state or multistate metropolitan area. For an institution with domestic branches in only one state, the institution’s CRA rating would be the state rating. If an institution maintains domestic branches in more than one state, the institution will receive a rating for each state in which those branches are located. If an institution maintains domestic branches in two or more states within a multistate metropolitan area, the institution will receive a rating for the multistate metropolitan area. Small loan(s) to business(es): A loan included in "loans to small businesses" as defined in the Consolidated Report of Condition and Income ("Call Report") and the Thrift Financial Reporting ("TFR") instructions. These loans have original amounts of $1 million or less and typically are either secured by nonfarm or nonresidential real estate or are classified as commercial and industrial loans. However, thrift institutions may also exercise the option to report loans secured by nonfarm residential real estate as "small business loans" if the loans are reported on the TFR as non-mortgage, commercial loans. Small loan(s) to farm(s): A loan included in "loans to small farms" as defined in the instructions for preparation of the Call Report. These loans have original amounts of $500 thousand or less and are either secured by farmland, or are classified as loans to finance agricultural production and other loans to farmers. Upper-income: Individual income that is more than 120 percent of the area median income, or a median family income that is more than 120 percent, in the case of geography.

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