8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  October 22, 2009

SANDY SPRING BANCORP, INC.

(Exact name of registrant as specified in its charter)

Maryland	000-19065	52-1532952
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

17801 Georgia Avenue, Olney, Maryland  20832

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code:  (301) 774-6400

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02   Results of Operations and Financial Condition

On October 22, 2009, Sandy Spring Bancorp, Inc. issued a news release announcing its results of operations and financial condition for the quarter ended September 30, 2009.  A copy of the news release is included as Exhibit 99.1 to this report.

Item 9.01   Financial Statements and Exhibits

Exhibits

Number	Description
99.1	Press Release dated October 22, 2009

2

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	SANDY SPRING BANCORP, INC.
	(Registrant)
Date: October 22, 2009	By:	/s/ Daniel J. Schrider
		Daniel J. Schrider
		President and Chief Executive Officer

3

EX-99.1

    NEWS RELEASE

FOR IMMEDIATE RELEASE

SANDY SPRING BANCORP REPORTS THIRD QUARTER RESULTS

OLNEY, MARYLAND, October 22, 2009 — Sandy Spring Bancorp, Inc., (Nasdaq-SASR) the parent company of Sandy Spring Bank, today announced a net loss available to common shareholders for the third quarter of 2009 of $14.8 million (($.90) per diluted share) compared to net income of $5.4 million ($.33 per diluted share) for the third quarter of 2008 and a net loss available to common shareholders of $1.5 million (($.09) per diluted share) for the second quarter of 2009. The loss in the third quarter of 2009 was primarily a result of a $34.5 million provision for loan and lease losses.

Net loss available to common shareholders for the nine-month period ending September 30, 2009 totaled $15.2 million (($.93) per diluted share) compared to net income of $19.2 million ($1.17 per diluted share) for the prior year period. The results for the year-to-date include a provision for loan and lease losses totaling $55.7 million for the first nine months of 2009 and an FDIC special assessment charge of $1.7 million which was recognized in the second quarter of 2009.

“Our results for the quarter declined largely due to a higher provision for loan losses. The main drivers of the higher reserve were: increased non-performing loans as a result of risk-rating downgrades to a combination of previously identified problem credits plus a few newly identified credits; reserve adjustments based on historical experience; and a higher level of overall charge-offs, primarily related to our residential real estate development portfolio.  This is logical as we move from the earlier phase where we were focused on identifying problem credits to aggressively managing these credits toward their ultimate resolution,” said Daniel J. Schrider, president and chief executive officer.

“Total loan balances continued to decline for the first nine months of 2009 compared to 2008 due to soft demand and more conservative underwriting standards. Residential mortgage lending continues to be a bright spot as we closed over $320 million in residential mortgage loans during the first nine months of the year compared to $197 million in the first nine months of last year.”

“We have retained a large majority of the deposit growth we experienced earlier in the year. This resulted from our ‘high-touch’ strategy to capitalize on market disruption opportunities resulting from several recent local mergers. Our efforts have produced new multi-product customer relationships that we plan to rely upon for the long term to fund future loan growth as the economy recovers.”

“Additionally, our investment portfolio has grown to nearly $1 billion as we have prudently invested the proceeds of our proactively acquired deposit growth primarily into U. S. government agency instruments. Through conservative and careful asset management, we have experienced no realized losses in the portfolio during the recent economic downturn,” said Schrider.

Third Quarter Highlights:

· The provision for loan and lease losses totaled $34.5 million for the quarter compared to $6.5 million for the third quarter of 2008 and $10.6 million for the second quarter of 2009.  The provision was due to continued internal risk rating downgrades, charge-offs and additional specific reserves primarily related to loans in the residential real estate development portfolio.

· The net interest margin was 3.27% for the third quarter compared to 4.02% for the third quarter of 2008 and 3.11% for the second quarter of 2009.

· Noninterest expenses increased 5% for the quarter compared to the third quarter of 2008 and decreased 1% versus the second quarter of 2009. Excluding the FDIC special assessment charge of $1.7 million in the second quarter, noninterest expenses increased 5% compared to the second quarter of 2009.

· Customer funding sources, comprised of deposits and other short-term borrowings from core customers, increased 19% compared to the balance at September 30, 2008, and also increased 1% over the balance at June 30, 2009. These increases were due primarily to growth in the Company’s Premier money market savings product and growth in noninterest-bearing deposits.

Review of Balance Sheet and Credit Quality

Comparing September 30, 2009 balances to September 30, 2008, total assets increased 13% to $3.6 billion. Asset growth was reflected primarily in increases of 135% in investments and 18% in cash and cash equivalents.  This growth was due mainly to a 19% increase in deposits. Total loans and leases decreased 6% to $2.3 billion compared to the prior year. This decrease in loans was due mainly to a net 15% decrease in residential mortgage and residential construction loans.  Total loans decreased 2% compared to the second quarter of 2009.

Customer funding sources, which include deposits plus other short-term borrowings from core customers, increased 19% to $2.8 billion at September 30, 2009 compared to the prior year.  Such customer funding sources also increased 1% compared to the second quarter of 2009. These increases were due primarily to growth resulting from the Company’s Premier money market account as well as growth in noninterest-bearing deposits.

Stockholders’ equity totaled $380.6 million at September 30, 2009, and represented 10.5% of total assets, compared to 10.0% at September 30, 2008.   At September 30, 2009 the Company had a total risk-based capital ratio of 13.23%, a tier 1 risk-based capital ratio of 11.96% and a tier 1 leverage ratio of 9.31% which were all above amounts needed in order to be categorized as “well capitalized” for regulatory purposes.

The provision for loan and lease losses totaled $34.5 million for the third quarter of 2009 compared to $6.5 million for the third quarter of 2008 and $10.6 million for the second quarter of 2009. As discussed above, these increases were primarily due to internal risk rating downgrades, charge-offs and additional specific reserves primarily related to loans in the residential real estate development portfolio.

Loan charge-offs, net of recoveries totaled $29.8 million for the third quarter of 2009 compared to net charge-offs of $1.7 million for the third quarter of 2008 and net charge-offs of $12.1 million for the second quarter of 2009. The allowance for loan and lease losses represented 2.70% of outstanding loans and leases and 44% of non-performing loans at September 30, 2009 compared to 2.44% of outstanding loans and leases and 42% of non-performing loans at June 30, 2009 and 1.54% of outstanding loans and leases and 57% of non-performing loans at September 30, 2008.

Non-performing assets totaled $150.2 million at September 30, 2009 compared to $68.4 million at September 30, 2008 and $146.3 million at June 30, 2009. The increase over the prior year was due primarily to $80.9 million in problem residential real estate development loans which was somewhat offset by charge-offs on existing credits. The increase over the second quarter of 2009 was due primarily to the net effect of adding existing problem credits to nonperforming status.

Income Statement Review

Comparing the third quarter of 2009 and 2008, net interest income decreased by $1.7 million, or 6%, due primarily to the decline in loan demand caused by the current state of the economy. This required the Company to invest the funds generated from deposit growth in investment securities with lower comparative yields thus exerting downward pressure on the net interest margin. Net interest income for the quarter was also negatively affected by the growth in nonperforming loans discussed above. These factors produced a net interest margin decrease to 3.27% in 2009 from 4.02% in 2008.

Noninterest income decreased 2% to $10.7 million in the third quarter of 2009 as compared to $10.9 million in the third quarter of 2008. Service charges on deposit accounts decreased $0.4 million or 13% due primarily to lower overdraft fees. Fees on sales of investment products decreased $0.1 million or 10% compared to the third quarter of 2008 due primarily to a decline in assets under management. In addition, insurance agency commissions decreased $0.2 million or 18% due to the overall effect of the current economy. Other noninterest income also decreased $0.2 million or 12% compared to the third quarter of 2008 due largely to losses on sales of other real estate owned. These decreases were somewhat offset by an increase in gains on sales of mortgage loans of $0.6 million or 155% due largely to higher mortgage refinancing volumes reflecting market conditions.

Noninterest expenses were $26.6 million in the third quarter of 2009 compared to $25.3 million in the third quarter of 2008, an increase of $1.3 million or 5%. This increase was due in large part to an increase of $0.7 million in FDIC insurance expense resulting primarily from higher assessment rates and increased deposit balances. Salaries and benefits expenses increased $2.5 million or 21% due largely to a pre-tax pension credit recognized in the third quarter of 2008. Excluding this credit, salaries and benefits expenses increased $1.0 million or 7%. Occupancy and equipment expenses decreased $0.1 million or 3% compared to the third quarter of 2008. Other noninterest expenses increased $0.7 million or 19% due primarily to higher legal fees necessary to manage nonperforming loan credits and to losses on valuation of loan swaps.

Comparing the first nine months of 2009 and 2008, net interest income decreased by $5.9 million, or 7% due primarily to the downward pressure on the net interest margin resulting from the lack of loan demand which caused the Company to invest the funds generated by the growth in deposits into investment securities which carry a lower yield as mentioned above. Net interest income for the year-to-date was also negatively affected by the growth in nonperforming loans mentioned above. These factors produced a net interest margin decrease to 3.25% in 2009 from 3.99% in 2008.

Noninterest income decreased 5% to $33.7 million for the first nine months of 2009 as compared to $35.3 million in 2008.  Service charges on deposit accounts decreased $0.9 million or 10% due primarily to lower overdraft fees while insurance agency commissions decreased $0.6 million or 12%. Fees on sales of investment products decreased $0.5 million or 19% and trust and investment management fees declined $0.2 million or 3%, both of which were due primarily to a decline in assets under management. These decreases were somewhat offset by an increase in gains on sales of mortgage loans of $1.0 million or 59% due largely to higher mortgage refinancing volumes reflecting market conditions. Other noninterest income also increased $0.1 million or 2% compared to 2008.

Noninterest expenses were $77.7 million for the first nine months of 2009 compared to $74.9 million in 2008, an increase of $2.8 million or 4%. This increase was due primarily to an increase of $3.7 million in FDIC insurance expense which includes a one time special assessment in the second quarter by the FDIC of $1.7 million. Excluding the 2009 FDIC special assessment, a $2.3 million goodwill impairment charge and a $1.5 million pre-tax pension credit in 2008, noninterest expenses increased $1.9 million or 3% over 2008.Salaries and benefits expenses increased $1.7 million or 4%, while marketing expenses decreased $0.1 million or 8% and expenses for outside data services decreased $0.6 million or 17% compared to the first nine months of 2008.

Conference Call

The Company’s management will host a conference call to discuss its third quarter 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 800-765-0709. 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 12:00 midnight (ET) November 21, 2009.  A telephone voice replay will also be available during that same time period at 888-203-1112.  Please use pass code #7548411 to access.

About Sandy Spring Bancorp/Sandy Spring Bank

With $3.6 billion in assets, Sandy Spring Bancorp is the holding company for Sandy Spring Bank and its principal subsidiaries, Sandy Spring Insurance Corporation, The Equipment Leasing Company 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 42 community offices in Anne Arundel, Carroll, Frederick, Howard, Montgomery, and Prince George’s counties in Maryland, and Fairfax and Loudoun counties in Virginia. Through its subsidiaries, Sandy Spring Bank also offers a comprehensive menu of leasing, 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, 2008, 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									Nine Months Ended
	September 30,						%			September 30,						%
(Dollars in thousands, 0;except per share data)	2009			2008			Change			2009			2008			Change
Profitability for the period:
Net interest income	$	26,402		$	28,087			(6	)%	$	75,875		$	81,785			(7	)%
Provision for loan and lease losses		34,450			6,545			-			55,678			15,401			-
Noninterest income		10,662			10,879			(2	)		33,666			35,270			(5	)
Noninterest expenses		26,567			25,267			5			77,675			74,856			4
Income (loss) before income taxes		(23,953	)		7,154			-			(23,812	)		26,798			(189	)
Net income (loss)		(13,574	)		5,359			-			(11,637	)		19,215			(161	)
Net income (loss) available to common stockholders	$	(14,779	)	$	5,359			-		$	(15,244	)	$	19,215			(179	)
Return on average assets (1)		(1.62	)%		0.67	%					(0.58	)%		0.82	%
Return on average common equity (1)		(19.01	)%		6.64	%					(6.59	)%		8.04	%
Net interest margin		3.27	%		4.02	%					3.25	%		3.99	%
Efficiency ratio - GAAP *		71.68	%		64.84	%					70.91	%		63.95	%
Efficiency ratio - Non-GAAP *		66.49	%		58.27	%					66.07	%		59.06	%
Per share data:
Basic net income (loss)	$	(0.83	)	$	0.33			-	%	$	(0.71	)	$	1.18			(160	)%
Basic net income (loss) per common share		(0.90	)		0.33			-			(0.93	)		1.18			(179	)
Diluted net income (loss)		(0.83	)		0.33			-			(0.71	)		1.17			(161	)
Diluted net income (loss) per common share		(0.90	)		0.33			-			(0.93	)		1.17			(179	)
Dividends declared per common share		0.12			0.24			(50	)		0.36			0.72			(50	)
Book value per common share		18.25			19.51			(6	)		18.25			19.51			(6	)
Average fully diluted shares		16,496,480			16,418,588						16,438,691			16,419,180
At period-end:
Assets	$	3,632,391		$	3,195,117			14	%	$	3,632,391		$	3,195,117			14	%
Total loans and leases		2,334,282			2,482,418			(6	)		2,334,282			2,482,418			(6	)
Investment securities		980,446			417,935			135			980,446			417,935			135
Deposits		2,683,487			2,248,812			19			2,683,487			2,248,812			19
Stockholders' equity		380,571			319,700			19			380,571			319,700			19
Capital ratios:
Tier 1 leverage		9.31	%		8.76	%					9.31	%		8.76	%
Tier 1 capital to risk-weighted assets		11.96	%		9.73	%					11.96	%		9.73	%
Total regulatory capital to risk-weighted assets		13.23	%		10.98	%					13.23	%		10.98	%
Tangible common equity to tangible assets**		6.07	%		7.55	%					6.07	%		7.55	%
Average equity to average assets		10.79	%		10.14	%					11.15	%		10.21	%
Credit quality ratios:
Allowance for loan and lease losses to loans and leases		2.70	%		1.54	%					2.70	%		1.54	%
Nonperforming loans to total loans		6.14	%		2.69	%					6.14	%		2.69	%
Nonperforming assets to total assets		4.14	%		2.14	%					4.14	%		2.14	%
Annualized net charge-offs to average
loans and leases		5.00	%		0.28	%					2.38	%		0.12	%

(1) Calculation utilizes net income available to common stockholders

* The GAAP efficiency ratio is noninterest expenses divided by net interest income plus noninterest income from the Consolidated Statements of Income. The traditional, non-GAAP efficiency ratio excludes intangible asset amortization, the goodwill impairment loss and the pension prior servcie credit from noninterest expenses; excludes securities gains from noninterest income; and adds the tax-equivalent adjustment to net interest income.  See the Reconciliation Table included with these Financial Highlights.

** 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, other comprehensive losses and preferred stock.  See the Reconciliation Table included with these Financial Highlights.

Sandy Spring Bancorp, Inc. and Subsidiaries

RECONCILIATION TABLE

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(Dollars in thousands)	2009			2008			2009			2008
GAAP efficiency ratio:
Noninterest expenses	$	26,567		$	25,267		$	77,675		$	74,856
Net interest income plus noninterest income		37,064			38,966			109,541			117,055
Efficiency ratio–GAAP		71.68	%		64.84	%		70.91	%		63.95	%
Non-GAAP efficiency ratio:
Noninterest expenses	$	26,567		$	25,267		$	77,675		$	74,856
Less non-GAAP adjustment:
Amortization of intangible assets		1,048			1,103			3,150			3,344
Goodwill impairment loss		-			2,250			-			2,250
Plus non-GAAP adjustment:
Pension prior service credit		-			1,473			-			1,473
Noninterest expenses as adjusted	$	25,519		$	23,387		$	74,525		$	70,735
Net interest income plus noninterest income	$	37,064		$	38,966		$	109,541		$	117,055
Plus non-GAAP adjustment:
Tax-equivalent income		1,331			1,180			3,463			3,381
Less non-GAAP adjustments:
Securities gains (losses)		15			9			207			662
Net interest income plus noninterest income - as adjusted	$	38,380		$	40,137		$	112,797		$	119,774
Efficiency ratio–Non-GAAP		66.49	%		58.27	%		66.07	%		59.06	%
Tangible common equity ratio:
Total stockholders' equity	$	380,571		$	319,700		$	380,571		$	319,700
Accumulated other comprehensive loss		310			3,875			310			3,875
Goodwill		(76,816	)		(75,701	)		(76,816	)		(75,701	)
Other intangible assets, net		(9,033	)		(13,286	)		(9,033	)		(13,286	)
Preferred stock		(79,930	)		-			(79,930	)		-
Tangible common equity	$	215,102		$	234,588		$	215,102		$	234,588
Total assets	$	3,632,391		$	3,195,117		$	3,632,391		$	3,195,117
Goodwill		(76,816	)		(75,701	)		(76,816	)		(75,701	)
Other intangible assets, net		(9,033	)		(13,286	)		(9,033	)		(13,286	)
Tangible assets	$	3,546,542		$	3,106,130		$	3,546,542		$	3,106,130
Tangible common equity ratio		6.07	%		7.55	%		6.07	%		7.55	%

Sandy Spring Bancorp, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

	(Unaudited)
	September 30,						December 31,
(Dollars in thousands)	2009			2008			2008
Assets
Cash and due from banks	$	42,079		$	55,321		$	44,738
Federal funds sold		1,271			19,712			1,110
Interest-bearing deposits with banks		45,660			483			59,381
Cash and cash equivalents		89,010			75,516			105,229
Residential mortgage loans held for sale (at fair value)		10,926			4,541			11,391
Investments available-for-sale (at fair value)		807,145			206,898			291,727
Investments held-to-maturity — fair value of $146,800, $181,734 and $175,908, respectively		140,528			178,690			171,618
Other equity securities		32,773			32,347			29,146
Total loans and leases		2,334,282			2,482,418			2,490,646
Less: allowance for loan and lease losses		(62,937	)		(38,266	)		(50,526	)
Net loans and leases		2,271,345			2,444,152			2,440,120
Premises and equipment, net		49,827			52,441			51,410
Other real estate owned		6,873			1,698			2,860
Accrued interest receivable		13,325			12,491			11,810
Goodwill		76,816			75,701			76,248
Other intangible assets, net		9,033			13,286			12,183
Other assets		124,790			97,356			109,896
Total assets	$	3,632,391		$	3,195,117		$	3,313,638
Liabilities
Noninterest-bearing deposits	$	573,601		$	468,101		$	461,517
Interest-bearing deposits		2,109,886			1,780,711			1,903,740
Total deposits		2,683,487			2,248,812			2,365,257
Short-term borrowings		491,702			484,595			421,074
Long-term borrowings		4,263			76,828			66,584
Subordinated debentures		35,000			35,000			35,000
Accrued interest payable and other liabilities		37,368			30,182			33,861
Total liabilities		3,251,820			2,875,417			2,921,776
Stockholders' Equity
Preferred stock—par value $1.00 (liquidation preference of $1,000 per share) shares authorized 83,094; issued and outstanding 83,094 (net of discount of $3,164, $0 and $3,654, respectively)		79,930			-			79,440
Common stock — par value $1.00; shares authorized 49,916,906, 50,000,000 and 49,916,906; shares issued and outstanding 16,470,078, 16,383,671 and 16,398,523, respectively		16,470			16,384			16,399
Warrants		3,699			-			3,699
Additional paid in capital		87,572			85,065			85,486
Retained earnings		193,210			222,126			214,410
Accumulated other comprehensive loss		(310	)		(3,875	)		(7,572	)
Total stockholders' equity		380,571			319,700			391,862
Total liabilities and stockholders' equity	$	3,632,391		$	3,195,117		$	3,313,638

Certain reclassifications of information previously reported have been made to conform with current presentation.

Sandy Spring Bancorp, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
(Dollars in thousands, except per share data)	2009			2008		2009			2008
Interest Income:
Interest and fees on loans and leases	$	31,280		$	37,263	$	96,579		$	112,428
Interest on loans held for sale		121			100		654			318
Interest on deposits with banks		23			6		112			79
Interest and dividends on securities:
Taxable		5,947			3,171		13,673			7,749
Exempt from federal income taxes		1,814			1,409		5,560			6,712
Interest on federal funds sold		-			99		3			529
Total interest income		39,185			42,048		116,581			127,815
Interest Expense:
Interest on deposits		8,743			9,325		28,118			32,930
Interest on short-term borrowings		3,697			3,544		10,757			9,886
Interest on long-term borrowings		343			1,092		1,831			3,214
Total interest expense		12,783			13,961		40,706			46,030
Net interest income		26,402			28,087		75,875			81,785
Provision for loan and lease losses		34,450			6,545		55,678			15,401
Net interest income after provision for loan and lease losses		(8,048	)		21,542		20,197			66,384
Noninterest Income:
Securities gains		15			9		207			662
Service charges on deposit accounts		2,823			3,249		8,537			9,481
Gains on sales of mortgage loans		1,011			397		2,819			1,772
Fees on sales of investment products		740			820		2,062			2,547
Trust and investment management fees		2,406			2,380		7,063			7,282
Insurance agency commissions		1,048			1,282		4,138			4,725
Income from bank owned life insurance		740			742		2,176			2,183
Visa check fees		758			727		2,144			2,184
Other income		1,121			1,273		4,520			4,434
Total noninterest income		10,662			10,879		33,666			35,270
Noninterest Expenses:
Salaries and employee benefits		14,411			11,949		41,319			39,574
Occupancy expense of premises		2,685			2,732		8,008			8,150
Equipment expenses		1,444			1,515		4,332			4,514
Marketing		484			526		1,389			1,511
Outside data services		987			1,116		2,754			3,319
FDIC insurance		1,219			480		4,968			1,293
Amortization of intangible assets		1,048			1,103		3,150			3,344
Goodwill impairment loss		-			2,250		-			2,250
Other expenses		4,289			3,596		11,755			10,901
Total noninterest expenses		26,567			25,267		77,675			74,856
Income (loss) before income taxes		(23,953	)		7,154		(23,812	)		26,798
Income tax expense (benefit)		(10,379	)		1,795		(12,175	)		7,583
Net income (loss)	$	(13,574	)	$	5,359	$	(11,637	)	$	19,215
Preferred stock dividends and discount accretion		1,205			-		3,607			-
Net income (loss) available to common stockholders	$	(14,779	)	$	5,359	$	(15,244	)	$	19,215
Per Share Amounts:
Basic net income (loss) per share	$	(0.83	)	$	0.33	$	(0.71	)	$	1.18
Basic net income (loss) per common share		(0.90	)		0.33		(0.93	)		1.18
Diluted net income (loss) per share		(0.83	)		0.33		(0.71	)		1.17
Diluted net income (loss) per common share		(0.90	)		0.33		(0.93	)		1.17
Dividends declared per share		0.12			0.24		0.36			0.72

Sandy Spring Bancorp, Inc. and Subsidiaries

HISTORICAL TRENDS - QUARTERLY FINANCIAL DATA (Unaudited)

	2009									2008
(Dollars in thousands, except per share data)	Q3			Q2			Q1			Q4			Q3			Q2			Q1
Profitability for the quarter:
Tax-equivalent interest income	$	40,516		$	39,791		$	39,737		$	42,194		$	43,228		$	42,906		$	45,062
Interest expense		12,783			14,220			13,703			14,356			13,961			14,726			17,343
Tax-equivalent net interest income		27,733			25,571			26,034			27,838			29,267			28,180			27,719
Tax-equivalent adjustment		1,331			1,123			1,009			1,164			1,180			1,061			1,140
Provision for loan and lease losses		34,450			10,615			10,613			17,791			6,545			6,189			2,667
Noninterest income		10,662			11,030			11,974			10,973			10,879			11,695			12,696
Noninterest expenses		26,567			26,858			24,250			27,233			25,267			24,886			24,703
Income (loss) before income taxes		(23,953	)		(1,995	)		2,136			(7,377	)		7,154			7,739			11,905
Income tax expense (benefit)		(10,379	)		(1,715	)		(81	)		(3,941	)		1,795			2,088			3,700
Net Income (loss)		(13,574	)		(280	)		2,217			(3,436	)		5,359			5,651			8,205
Net Income (loss) available to common stockholders	$	(14,779	)	$	(1,482	)	$	1,017		$	(3,770	)	$	5,359		$	5,651		$	8,205
Financial ratios:
Return on average assets		-1.62	%		-0.17	%		0.12	%		-0.42	%		0.67	%		0.73	%		1.07	%
Return on average common equity		-19.01	%		-1.90	%		1.32	%		-4.70	%		6.64	%		7.09	%		10.45	%
Net interest margin		3.27	%		3.11	%		3.39	%		3.73	%		4.02	%		3.96	%		3.99	%
Efficiency ratio - GAAP *		71.68	%		75.70	%		65.54	%		72.34	%		64.84	%		64.11	%		62.90	%
Efficiency ratio - Non-GAAP *		66.49	%		70.58	%		61.29	%		62.41	%		58.27	%		59.73	%		59.18	%
Per share data:
Basic net income (loss) per share	$	(0.83	)	$	(0.02	)	$	0.14		$	(0.21	)	$	0.33		$	0.35		$	0.50
Basic net income (loss) per common share		(0.90	)		(0.09	)		0.06			(0.23	)		0.33			0.35			0.50
Diluted net income (loss) per share		(0.83	)		(0.02	)		0.13			(0.21	)		0.33			0.34			0.50
Diluted net income (loss) per common share		(0.90	)		(0.09	)		0.06			(0.23	)		0.33			0.34			0.50
Dividends declared per common share		0.12			0.12			0.12			0.24			0.24			0.24			0.24
Book value per common share		18.25			18.92			19.06			19.05			19.51			19.56			19.50
Average fully diluted shares		16,496,480			16,444,252			16,433,788			16,434,214			16,418,588			16,427,213			16,407,778
Noninterest income:
Securities gains	$	15		$	30		$	162		$	1		$	9		$	79		$	574
Service charges on deposit accounts		2,823			2,851			2,863			3,297			3,249			3,202			3,030
Gains on sales of mortgage loans		1,011			786			1,022			516			397			653			722
Fees on sales of investment products		740			622			700			928			820			905			822
Trust and investment management fees		2,406			2,370			2,287			2,201			2,380			2,505			2,397
Insurance agency commissions		1,048			1,040			2,050			1,183			1,282			1,357			2,086
Income from bank owned life insurance		740			725			711			719			742			727			714
Visa check fees		758			748			638			691			727			761			696
Other income		1,121			1,858			1,541			1,437			1,273			1,506			1,655
Total noninterest income	$	10,662		$	11,030		$	11,974		$	10,973		$	10,879		$	11,695		$	12,696
Noninterest expense:
Salaries and employee benefits	$	14,411		$	13,704		$	13,204		$	13,441		$	11,949		$	13,862		$	13,763
Occupancy expense of premises		2,685			2,548			2,775			2,612			2,732			2,619			2,799
Equipment expenses		1,444			1,374			1,514			1,642			1,515			1,560			1,439
Marketing		484			485			420			652			526			488			497
Outside data services		987			961			806			1,054			1,116			1,081			1,122
FDIC insurance		1,219			2,790			959			458			480			421			392
Amortization of intangible assets		1,048			1,047			1,055			1,103			1,103			1,117			1,124
Goodwill impairment loss		-			-			-			1,909			2,250			-			-
Other expenses		4,289			3,949			3,517			4,362			3,596			3,738			3,567
Total noninterest expense	$	26,567		$	26,858		$	24,250		$	27,233		$	25,267		$	24,886		$	24,703

* The GAAP efficiency ratio is noninterest expenses divided by net interest income plus noninterest income from the Consolidated Statements of Income. The traditional, non-GAAP efficiency ratio excludes intangible asset amortization, the goodwill impairment loss and the pension prior servcie credit from noninterest expenses; excludes securities gains from noninterest 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)

	2009									2008
(Dollars in thousands)	Q3			Q2			Q1			Q4			Q3			Q2			Q1
Balance sheets at quarter end:
Residential mortgage loans	$	455,312		$	450,500		$	461,359		$	457,571		$	452,815		$	461,000		$	459,768
Residential construction loans		115,258			138,923			163,861			189,249			221,630			199,602			183,690
Commercial mortgage loans		873,438			862,315			859,882			847,452			804,728			752,905			732,692
Commercial construction loans		174,052			199,278			222,805			223,169			247,930			273,059			256,714
Commercial loans and leases		314,599			333,025			342,870			366,978			358,097			356,256			354,509
Consumer loans		401,623			405,348			411,068			406,227			397,218			386,126			376,650
Total loans and leases		2,334,282			2,389,389			2,461,845			2,490,646			2,482,418			2,428,948			2,364,023
Less: allowance for loan and lease losses		(62,937	)		(58,317	)		(59,798	)		(50,526	)		(38,266	)		(33,435	)		(27,887	)
Net loans and leases		2,271,345			2,331,072			2,402,047			2,440,120			2,444,152			2,395,513			2,336,136
Goodwill		76,816			76,816			76,816			76,248			75,701			78,376			78,111
Other intangible assets, net		9,033			10,080			11,128			12,183			13,286			14,390			15,507
Total assets		3,632,391			3,617,497			3,519,432			3,313,638			3,195,117			3,164,123			3,160,896
Total deposits		2,683,487			2,650,845			2,553,912			2,365,257			2,248,812			2,294,791			2,340,568
Customer repurchase agreements		84,138			98,827			91,928			75,106			77,630			93,919			101,666
Total stockholders' equity		380,571			391,262			392,522			391,862			319,700			320,218			318,967
Quarterly average balance sheets:
Residential mortgage loans	$	460,772		$	477,955		$	481,721		$	457,956		$	463,778		$	470,144		$	463,597
Residential construction loans		123,892			150,914			176,811			208,616			210,363			193,822			174,626
Commercial mortgage loans		871,831			862,658			854,402			833,752			779,652			733,905			690,289
Commercial construction loans		191,021			216,897			224,229			236,176			253,806			261,360			266,098
Commercial loans and leases		327,569			341,039			359,820			361,731			356,327			359,287			351,862
Consumer loans		401,930			408,200			408,843			400,937			391,640			380,911			378,261
Total loans and leases		2,377,015			2,457,663			2,505,826			2,499,168			2,455,566			2,399,429			2,324,733
Securities		956,350			772,878			536,981			431,858			423,082			431,182			427,819
Total earning assets		3,370,823			3,298,923			3,117,590			2,972,173			2,898,968			2,862,012			2,795,453
Total assets		3,627,617			3,549,185			3,375,715			3,235,432			3,167,145			3,134,440			3,072,428
Total interest-bearing liabilities		2,671,944			2,595,303			2,471,762			2,405,890			2,363,299			2,344,266			2,311,629
Noninterest-bearing demand deposits		532,462			527,713			476,361			458,538			453,281			441,330			412,369
Total deposits		2,661,108			2,581,837			2,431,471			2,305,880			2,264,990			2,306,867			2,260,837
Customer repurchase agreements		95,310			93,980			69,212			84,012			81,158			92,968			94,841
Total stockholders' equity		391,571			393,201			391,673			342,639			321,028			320,409			315,755
Capital and credit quality measures:
Average equity to average assets		10.79	%		11.08	%		11.60	%		10.59	%		10.14	%		10.22	%		10.28	%
Loan and lease loss allowance to loans and leases		2.70	%		2.44	%		2.43	%		2.03	%		1.54	%		1.38	%		1.18	%
Nonperforming loans to total loans		6.14	%		5.84	%		4.90	%		2.79	%		2.69	%		2.62	%		1.96	%
Nonperforming assets to total assets		4.14	%		4.05	%		3.57	%		2.18	%		2.14	%		2.05	%		1.48	%
Annualized net charge-offs (recoveries) to
average loans and leases		5.00	%		1.97	%		0.22	%		0.88	%		0.28	%		0.11	%		-0.02	%
Net charge-offs (recoveries)	$	29,831		$	12,095		$	1,341		$	5,531		$	1,714		$	641		$	(129	)
Nonperforming assets:
Non-accrual loans and leases	$	127,473		$	123,117		$	110,761		$	67,950		$	64,246		$	60,373		$	37,353
Loans and leases 90 days past due		15,491			16,004			9,545			1,038			2,074			2,538			8,244
Restructured loans and leases		395			395			395			395			395			655			655
Other real estate owned, net		6,873			6,829			5,094			2,860			1,698			1,352			661
Total nonperforming assets	$	150,232		$	146,345		$	125,795		$	72,243		$	68,413		$	64,918		$	46,913

Sandy Spring Bancorp, Inc. and Subsidiaries

CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES (Unaudited)

	Three Months Ended September 30,
	2009								2008
						Annualized								Annualized
	Average					Average			Average					Average
(Dollars in thousands and tax-equivalent)	Balances			Interest		Yield/Rate			Balances			Interest		Yield/Rate
Assets
Residential mortgage loans	$	460,772		$	6,795		5.90	%	$	463,778		$	7,150		6.17	%
Residential construction loans		123,892			1,583		5.07			210,363			3,132		5.92
Commercial mortgage loans		871,831			13,290		6.05			779,652			12,936		6.60
Commercial construction loans		191,021			1,330		2.76			253,806			3,260		5.11
Commercial loans and leases		327,569			4,428		5.37			356,327			5,822		6.51
Consumer loans		401,930			3,975		3.94			391,640			5,063		5.14
Total loans and leases		2,377,015			31,401		5.25			2,455,566			37,363		6.16
Securities		956,350			9,092		3.76			423,082			5,760		5.38
Interest-bearing deposits with banks		35,880			23		0.25			1,311			6		1.91
Federal funds sold		1,578			-		0.17			19,009			99		2.07
TOTAL EARNING ASSETS		3,370,823			40,516		4.77			2,898,968			43,228		5.93
Less:  allowance for loan and lease losses		(60,342	)							(34,897	)
Cash and due from banks		44,500								49,860
Premises and equipment, net		50,404								52,912
Other assets		222,232								200,302
Total assets	$	3,627,617							$	3,167,145
Liabilities and Stockholders' Equity
Interest-bearing demand deposits	$	256,432			99		0.15	%	$	242,488			177		0.29	%
Regular savings deposits		153,903			56		0.14			155,039			118		0.30
Money market savings deposits		899,017			2,868		1.27			647,258			2,410		1.48
Time deposits		819,294			5,720		2.77			766,924			6,620		3.43
Total interest-bearing deposits		2,128,646			8,743		1.63			1,811,709			9,325		2.05
Borrowings		543,298			4,040		2.95			551,590			4,636		3.35
TOTAL INTEREST-BEARING LIABILITIES		2,671,944			12,783		1.90			2,363,299			13,961		2.35
Noninterest-bearing demand deposits		532,462								453,281
Other liabilities		31,640								29,537
Stockholders' equity		391,571								321,028
Total liabilities and stockholders' equity	$	3,627,617							$	3,167,145
Net interest income and spread				$	27,733		2.87	%				$	29,267		3.58	%
Less: tax equivalent adjustment					1,331								1,180
Net interest income				$	26,402							$	28,087
Interest income/earning assets							4.77	%							5.93	%
Interest expense/earning assets							1.50								1.91
Net interest margin							3.27	%							4.02	%

*  Interest income includes the effects of annualized taxable-equivalent adjustments (reduced by the nondeductible portion of interest expense) using the appropriate marginal federal income tax rate of 35.00% and, where applicable, the marginal state income tax rate of 8.25% or a combined marginal federal and state rate of 39.88% for 2009 and  2008, to increase tax-exempt interest income to a taxable-equivalent basis. The annualized taxable-equivalent adjustments utilized in the above table to compute yields aggregated to $5.4 million in 2009 and $4.5 million in 2008

Sandy Spring Bancorp, Inc. and Subsidiaries

CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES (Unaudited)

	Nine Months Ended September 30,
	2009								2008
						Annualized								Annualized
	Average					Average			Average					Average
(Dollars in thousands and tax-equivalent)	Balances			Interest		Yield/Rate			Balances			Interest		Yield/Rate
Assets
Residential mortgage loans	$	473,406		$	21,020		5.92	%	$	465,832		$	21,571		6.17	%
Residential construction loans		150,345			5,833		5.19			193,001			8,728		6.04
Commercial mortgage loans		863,028			39,780		6.16			734,780			37,205		6.76
Commercial construction loans		210,594			4,712		2.99			260,397			11,141		5.72
Commercial loans and leases		342,691			13,866		5.41			355,827			18,369		6.89
Consumer loans		406,299			12,022		3.97			383,633			15,732		5.48
Total loans and leases		2,446,363			97,233		5.31			2,393,470			112,746		6.29
Securities		756,939			22,696		4.02			427,345			17,842		5.59
Interest-bearing deposits with banks		57,864			112		0.26			4,119			79		2.56
Federal funds sold		2,207			3		0.21			27,381			529		2.58
TOTAL EARNING ASSETS		3,263,373			120,044		4.92			2,852,315			131,196		6.14
Less:  allowance for loan and lease losses		(58,231	)							(29,750	)
Cash and due from banks		45,170								49,651
Premises and equipment, net		50,904								53,582
Other assets		217,214								198,930
Total assets	$	3,518,430							$	3,124,728
Liabilities and Stockholders' Equity
Interest-bearing demand deposits	$	251,257			326		0.17	%	$	244,943			528		0.29	%
Regular savings deposits		151,942			177		0.16			156,093			365		0.31
Money market savings deposits		809,442			8,690		1.44			680,189			9,760		1.92
Time deposits		833,955			18,925		3.03			760,569			22,277		3.91
Total interest-bearing deposits		2,046,596			28,118		1.84			1,841,794			32,930		2.39
Borrowings		533,807			12,588		3.15			498,023			13,100		3.51
TOTAL INTEREST-BEARING LIABILITIES		2,580,403			40,706		2.11			2,339,817			46,030		2.63
Noninterest-bearing demand deposits		512,384								435,725
Other liabilities		33,494								30,115
Stockholders' equity		392,149								319,071
Total liabilities and stockholders' equity	$	3,518,430							$	3,124,728
Net interest income and spread				$	79,338		2.81	%				$	85,166		3.51	%
Less: tax equivalent adjustment					3,463								3,381
Net interest income				$	75,875							$	81,785
Interest income/earning assets							4.92	%							6.14	%
Interest expense/earning assets							1.67								2.15
Net interest margin							3.25	%							3.99	%

*  Interest income includes the effects of annualized taxable-equivalent adjustments (reduced by the nondeductible portion of interest expense) using the appropriate marginal federal income tax rate of 35.00% and, where applicable, the marginal state income tax rate of 8.25% or a combined marginal federal and state rate of 39.88% for 2009 and  2008, to increase tax-exempt interest income to a taxable-equivalent basis. The annualized taxable-equivalent adjustments utilized in the above table to compute yields aggregated to $4.6 million in 2009 and $4.5 million in 2008