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):  January 28, 2010

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 January 28, 2010, Sandy Spring Bancorp, Inc. issued a news release announcing its results of operations and financial condition for the quarter and year ended December 31, 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 January 28, 2010

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: January 28, 2010	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 FOURTH QUARTER AND

FULL YEAR RESULTS

OLNEY, MARYLAND, January 28, 2010 — Sandy Spring Bancorp, Inc., (Nasdaq-SASR) the parent company of Sandy Spring Bank, today announced a net loss available to common stockholders for the fourth quarter of 2009 of $4.4 million (($0.27) per diluted share) compared to a net loss available to common stockholders of $3.8 million (($0.23) per diluted share) for the fourth quarter of 2008 and a net loss available to common stockholders of $14.8 million (($0.90) per diluted share) for the third quarter of 2009. The fourth quarter of 2009 included a provision for loan and lease losses of $21.1 million.

Net loss available to common stockholders for the full year ending December 31, 2009 totaled $19.7 million (($1.20) per diluted share) compared to net income available to common stockholders of $15.4 million ($0.94 per diluted share) for the prior year. The results for the current year included a provision for loan and lease losses totaling $76.8 million for the year and FDIC insurance expense totaling $6.1 million, which included a special assessment charge of $1.7 million. The results for 2008 included a provision for loan and lease losses of $33.2 million for the year, a goodwill impairment charge of $4.2 million relating to the Bank’s equipment leasing subsidiary and a pre-tax pension credit of $1.5 million.

“Looking back on 2009 and forward into 2010, we feel that this company has the underlying fundamentals and strength to weather the current economic cycle that is having a profound impact on the national community banking industry and especially the competitive landscape here in the Washington-Baltimore corridor,” said Daniel J. Schrider, president and chief executive officer.

“We remain the largest independent locally-managed community banking company across our attractive footprint, and we expect to build on our strong franchise as we begin emerging from the effects of the current credit cycle during 2010. Resolution of problem assets requires expertise and patience, perhaps more than the market recognizes. However, we have both expertise and patience, and we expect results over the forthcoming quarters will demonstrate our confidence and cautious optimism.”

“Our results this quarter were obviously driven by the provision for loan losses. Notably, the loan-loss provision declined compared to the prior quarter, largely due to a reduced level of net charge-offs and a decrease in nonperforming loans. Most of the above-mentioned activity was related to our residential real estate development portfolio where the majority of problem loans are concentrated. These positive trends reflect our ongoing aggressive efforts in managing the resolution of problem credits.”

“Total loan balances declined for the year compared to 2008 due to a combination of soft demand from our customers, loan charge-offs and by applying more conservative underwriting standards. Residential mortgage lending continues to be a bright spot as we closed over $390 million in residential mortgage loans for the year, compared to $257 million in 2008.”

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

“We have conservatively invested the proceeds of our recent deposit growth primarily into U. S. government agency instruments with short durations in order to provide good flexibility and the necessary liquidity in the event that high-quality loan demand increases in the coming months. We have experienced no realized losses in the investment portfolio during the recent economic downturn. The net interest margin has continued to improve as we have strategically managed interest rates in our loan, investment and deposit portfolios to both grow the margin and minimize interest rate risk. We believe this approach is prudent as we expect rates to trend upwards over the coming year,” said Schrider.

Fourth Quarter and Full Year Highlights:

· The provision for loan and lease losses totaled $21.1 million for the quarter compared to $17.8 million for the fourth quarter of 2008 and $34.5 million for the third quarter of 2009. For the year, the provision for loan and lease losses totaled $76.8 million compared to $33.2 million in 2008.

· The net interest margin was 3.40% for the fourth quarter compared to 3.73% for the fourth quarter of 2008 and 3.27% for the third quarter of 2009. For the year, the net interest margin declined to 3.29% compared to 3.92% for 2008.

· Noninterest expenses decreased 7% for the quarter compared to the fourth quarter of 2008 and decreased 5% versus the third quarter of 2009. For the full year of 2009, noninterest expenses increased 1% compared to 2008.

· Customer funding sources, comprised of deposits and other short-term borrowings from core customers, increased 14% compared to the balance at December 31, 2008, and remained level compared to the balance at September 30, 2009. This increase over the prior year was 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 December 31, 2009 balances to December 31, 2008, total assets increased 10% to $3.6 billion. This growth was due mainly to a 14% increase in deposits that was deployed into investment securities, which increased 108%. Total loans and leases decreased 8% 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 third quarter of 2009.

Customer funding sources, which include deposits and other short-term borrowings from core customers increased 14% to $2.8 billion at December 31, 2009 compared to the prior year and remained even with the third quarter of 2009. The increase over the prior year was due primarily to growth resulting from the Company’s Premier Money Market account as well as growth in noninterest-bearing deposits.

Stockholders’ equity totaled $373.6 million at December 31, 2009, and represented 10.3% of total assets, compared to 12.0% at December 31, 2008.  At December 31, 2009 the Company had a total risk-based capital ratio of 13.28%, a tier 1 risk-based capital ratio of 12.02% and a tier 1 leverage ratio of 9.09% 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 $21.1 million for the fourth quarter of 2009 compared to $17.8 million for the fourth quarter of 2008 and $34.5 million for the third quarter of 2009. The increase over the prior year quarter was primarily due to internal risk rating downgrades, charge-offs and additional specific reserves primarily related to loans in the residential real estate development portfolio. The decrease compared to the third quarter of 2009 was largely due to declines in net charge-offs and nonperforming loans.

Loan charge-offs, net of recoveries totaled $19.5 million for the fourth quarter of 2009 compared to net charge-offs of $5.5 million for the fourth quarter of 2008 and net charge-offs of $29.8 million for the third quarter of 2009. The allowance for loan and lease losses represented 2.81% of outstanding loans and leases and 48% of nonperforming loans at December 31, 2009 compared to 2.70% of outstanding loans and leases and 44% of nonperforming loans at September 30, 2009 and 2.03% of outstanding loans and leases and 73% of nonperforming loans at December 31, 2008. Nonperforming loans includes loans 90 days or more past-due which are still accruing interest.

Nonperforming assets totaled $141.2 million at December 31, 2009 compared to $72.2 million at December 31, 2008 and $150.2 million at September 30, 2009. The increase over the prior year was due primarily to problem credits identified in the residential real estate development portfolio. The decrease compared to the third quarter of 2009 was due primarily to charge-offs that exceeded new problem credits identified during the period.

Income Statement Review

Comparing the fourth quarter of 2009 and 2008, net interest income increased by $1.2 million, or 4%. This increase was due to the decline in rates paid on deposits and borrowings together with a higher level of interest earning assets.

Noninterest income increased 5% to $11.6 million in the fourth quarter of 2009 as compared to $11.0 million in the fourth quarter of 2008. This increase was due primarily to other noninterest income which increased $0.9 million or 61% compared to the fourth quarter of 2008 due largely to gains on commercial loan interest rate swaps. In addition, trust and investment fees increased $0.2 million or 7% due to growth in assets under management.  Service charges on deposit accounts decreased $0.4 million or 12% driven by lower overdraft fees. Fees on sales of investment products decreased $0.2 million or 18% compared to the fourth quarter of 2008 due primarily to a decline in annuity sales. In addition, insurance agency commissions decreased $0.1 million or 7% due to the overall effect of the current economy while gains on sales of mortgage loans decreased $0.1 million or 16% due largely to a decline in accrued gains on mortgage commitments in the fourth quarter of 2009 compared to the fourth quarter of 2008.

Noninterest expenses were $25.4 million in the fourth quarter of 2009 compared to $27.2 million in the fourth quarter of 2008, a decrease of $1.8 million or 7%. This decrease was due largely to a goodwill impairment charge of $1.9 million in the fourth quarter of 2008 and a decline of $0.6 million or 55% in intangibles amortization compared to the prior year period. Salaries and benefits expenses remained relatively flat for the quarter. Occupancy and equipment expenses decreased $0.2 million or 5% compared to the fourth quarter of 2008. FDIC insurance expense increased $0.7 million or 145% due to higher deposit balances and increased assessment rates. Other noninterest expenses increased $0.4 million or 10% due primarily to higher accrued losses associated with commercial loan swaps.

Comparing the year ended December 31, 2009 and 2008, net interest income decreased by $4.8 million, or 4% as the lack of loan demand caused the Company to invest the funds generated by the growth in deposits into lower yielding investment securities. Net interest income for the year was also adversely affected by the growth in average nonperforming loans mentioned above. These factors resulted in a net interest margin decrease to 3.29% in 2009 from 3.92% in 2008.

Noninterest income decreased 2% to $45.2 million for the year ended December 31, 2009 as compared to $46.2 million in 2008.  Service charges on deposit accounts decreased $1.3 million or 11% due primarily to lower overdraft fees while insurance agency commissions decreased $0.7 million or 11%. Fees on sales of investment products decreased $0.7 million or 19% due primarily to lower average assets under management. These decreases were somewhat offset by an increase in gains on sales of mortgage loans of $1.0 million or 42% due largely to higher mortgage refinancing volumes reflecting an extended period of historically very low interest rates. Other noninterest income also increased $1.0 million or 16% compared to 2008 due primarily to higher accrued gains on commercial loan interest rate swaps.

Noninterest expenses were $103.0 million in 2009 compared to $102.1 million in 2008, an increase of $0.9 million or 1%. This increase was due primarily to an increase of $4.3 million in FDIC insurance expense which includes a one time special assessment in the second quarter of 2009 by the FDIC of $1.7 million. Excluding the FDIC special assessment, a $4.2 million goodwill impairment charge in 2008 and a $1.5 million pre-tax pension credit in 2008, noninterest expenses increased $2.0 million or 2% over 2008. Salaries and benefits expenses increased $1.4 million or 3%, while expenses for outside data services decreased $0.7 million or 15%. Other noninterest expenses increased $1.3 million or 8% compared to 2008 due to increases in legal fees resulting from loan workouts and accrued losses on commercial loan swaps.

Conference Call

The Company’s management will host a conference call to discuss its fourth quarter and full year results today at 2:00 P.M. (ET).  A live Web cast of the conference call is available through the Investor Relations’ section of the Sandy Spring Web site at www.sandyspringbank.com.  Participants may call 888-220-8450. 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) February 28, 2010.  A telephone voice replay will also be available during that same time period at 888-203-1112.  Please use pass code #9999948 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 43 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									Year Ended
	December 31,						%			December 31,						%
(Dollars in thousands, except per share data)	2009			2008			Change			2009			2008			Change
Results of Operations:
Net interest income	$	27,833		$	26,674			4	%	$	103,708		$	108,459			(4	)%
Provision for loan and lease losses		21,084			17,791			19			76,762			33,192			131
Noninterest income		11,575			10,973			5			45,241			46,243			(2	)
Noninterest expenses		25,364			27,233			(7	)		103,039			102,089			1
Income (loss) before income taxes		(7,040	)		(7,377	)		(5	)		(30,852	)		19,421			-
Net income (loss)		(3,218	)		(3,436	)		(6	)		(14,855	)		15,779			(194	)
Net income (loss) available to common stockholders	$	(4,421	)	$	(3,770	)		17		$	(19,665	)	$	15,445			-
Return on average assets (1)		(0.48	)%		(0.42	)%					(0.55	)%		0.49	%
Return on average common equity (1)		(4.66	)%		(4.70	)%					(6.42	)%		4.84	%
Net interest margin		3.40	%		3.73	%					3.29	%		3.92	%
Efficiency ratio - GAAP *		64.36	%		72.34	%					69.18	%		65.99	%
Efficiency ratio - Non-GAAP *		61.29	%		62.41	%					64.81	%		59.88	%
Per share data:
Basic net income (loss)	$	(0.20	)	$	(0.21	)		(5	) %	$	(0.90	)	$	0.96			(194	)%
Basic net income (loss) per common share		(0.27	)		(0.23	)		17			(1.20	)		0.94			-
Diluted net income (loss)		(0.20	)		(0.21	)		(5	)		(0.90	)		0.96			(194	)
Diluted net income (loss) per common share		(0.27	)		(0.23	)		17			(1.20	)		0.94			-
Dividends declared per common share		0.01			0.24			(96	)		0.37			0.96			(61	)
Book value per common share		17.80			19.05			(7	)		17.80			19.05			(7	)
Average fully diluted shares		16,477,925			16,434,214						16,448,580			16,429,471
Financial Condition at period-end:
Assets	$	3,630,478		$	3,313,638			10	%	$	3,630,478		$	3,313,638			10	%
Total loans and leases		2,298,010			2,490,646			(8	)		2,298,010			2,490,646			(8	)
Investment securities		1,023,799			492,491			108			1,023,799			492,491			108
Deposits		2,696,842			2,365,257			14			2,696,842			2,365,257			14
Stockholders' equity		373,586			391,862			(5	)		373,586			391,862			(5	)
Capital ratios:
Tier 1 leverage		9.09	%		11.00	%					9.09	%		11.00	%
Tier 1 capital to risk-weighted assets		12.01	%		12.56	%					12.01	%		12.56	%
Total regulatory capital to risk-weighted assets		13.27	%		13.82	%					13.27	%		13.82	%
Tangible common equity to tangible assets**		5.95	%		7.18	%					5.95	%		7.18	%
Average equity to average assets		10.36	%		10.59	%					10.94	%		10.31	%
Credit quality ratios:
Allowance for loan and lease losses to loans and leases		2.81	%		2.03	%					2.81	%		2.03	%
Nonperforming loans to total loans		5.82	%		2.79	%					5.82	%		2.79	%
Nonperforming assets to total assets		3.89	%		2.18	%					3.89	%		2.18	%
Annualized net charge-offs to average loans and leases		3.34	%		0.88	%					2.61	%		0.32	%

(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						Year Ended
	December 31,						December 31,
(Dollars in thousands)	2009			2008			2009			2008
GAAP efficiency ratio:
Noninterest expenses	$	25,364		$	27,233		$	103,039		$	102,089
Net interest income plus noninterest income		39,408			37,647			148,949			154,702
Efficiency ratio–GAAP		64.36	%		72.34	%		69.18	%		65.99	%
Non-GAAP efficiency ratio:
Noninterest expenses	$	25,364		$	27,233		$	103,039		$	102,089
Less non-GAAP adjustment:
Amortization of intangible assets		496			1,103			3,646			4,447
Goodwill impairment loss		-			1,909			-			4,159
Plus non-GAAP adjustment:
Pension prior service credit		-			-			-			1,473
Noninterest expenses as adjusted	$	24,868		$	24,221		$	99,393		$	94,956
Net interest income plus noninterest income	$	39,408		$	37,647		$	148,949		$	154,702
Plus non-GAAP adjustment:
Tax-equivalent income		1,376			1,164			4,839			4,545
Less non-GAAP adjustments:
Securities gains (losses)		211			1			418			663
Net interest income plus noninterest income - as adjusted	$	40,573		$	38,810		$	153,370		$	158,584
Efficiency ratio–Non-GAAP		61.29	%		62.41	%		64.81	%		59.88	%
Tangible common equity ratio:
Total stockholders' equity	$	373,586		$	391,862		$	373,586		$	391,862
Accumulated other comprehensive loss		2,652			7,572			2,652			7,572
Goodwill		(76,816	)		(76,248	)		(76,816	)		(76,248	)
Other intangible assets, net		(8,537	)		(12,183	)		(8,537	)		(12,183	)
Preferred stock		(80,095	)		(79,440	)		(80,095	)		(79,440	)
Tangible common equity	$	210,790		$	231,563		$	210,790		$	231,563
Total assets	$	3,630,478		$	3,313,638		$	3,630,478		$	3,313,638
Goodwill		(76,816	)		(76,248	)		(76,816	)		(76,248	)
Other intangible assets, net		(8,537	)		(12,183	)		(8,537	)		(12,183	)
Tangible assets	$	3,545,125		$	3,225,207		$	3,545,125		$	3,225,207
Tangible common equity ratio		5.95	%		7.18	%		5.95	%		7.18	%

Sandy Spring Bancorp, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

	December 31,
(Dollars in thousands)	2009			2008
	(Unaudited)
Assets
Cash and due from banks	$	49,430		$	44,738
Federal funds sold		1,863			1,110
Interest-bearing deposits with banks		8,503			59,381
Cash and cash equivalents		59,796			105,229
Residential mortgage loans held for sale (at fair value)		12,498			11,391
Investments available-for-sale (at fair value)		858,433			291,727
Investments held-to-maturity — fair value of $137,787 (2009) and $175,908 (2008)		132,593			171,618
Other equity securities		32,773			29,146
Total loans and leases		2,298,010			2,490,646
Less: allowance for loan and lease losses		(64,559	)		(50,526	)
Net loans and leases		2,233,451			2,440,120
Premises and equipment, net		49,606			51,410
Other real estate owned		7,464			2,860
Accrued interest receivable		13,653			11,810
Goodwill		76,816			76,248
Other intangible assets, net		8,537			12,183
Other assets		144,858			109,896
Total assets	$	3,630,478		$	3,313,638
Liabilities
Noninterest-bearing deposits	$	540,578		$	461,517
Interest-bearing deposits		2,156,264			1,903,740
Total deposits		2,696,842			2,365,257
Short-term borrowings		499,888			421,074
Long-term borrowings		758			66,584
Subordinated debentures		35,000			35,000
Accrued interest payable and other liabilities		24,404			33,861
Total liabilities		3,256,892			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 $2,999 (2009) and $3,654 (2008)		80,095			79,440
Common stock — par value $1.00; shares authorized 49,916,906 for 2009 and 2008; shares issued and outstanding 16,487,852 (2009) and 16,398,523 (2008)		16,488			16,399
Warrants		3,699			3,699
Additional paid in capital		87,334			85,486
Retained earnings		188,622			214,410
Accumulated other comprehensive loss		(2,652	)		(7,572	)
Total stockholders' equity		373,586			391,862
Total liabilities and stockholders' equity	$	3,630,478		$	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						Year Ended
	December 31,						December 31,
(Dollars in thousands, except per share data)	2009			2008			2009			2008
Interest Income:
Interest and fees on loans and leases	$	30,320		$	36,337		$	126,899		$	148,765
Interest on loans held for sale		113			118			767			436
Interest on deposits with banks		37			3			149			82
Interest and dividends on securities:
Taxable		6,272			2,428			19,945			10,177
Exempt from federal income taxes		1,907			2,088			7,467			8,800
Interest on federal funds sold		-			56			3			585
Total interest income		38,649			41,030			155,230			168,845
Interest Expense:
Interest on deposits		6,803			9,886			34,921			42,816
Interest on short-term borrowings		3,763			3,326			14,520			13,212
Interest on long-term borrowings		250			1,144			2,081			4,358
Total interest expense		10,816			14,356			51,522			60,386
Net interest income		27,833			26,674			103,708			108,459
Provision for loan and lease losses		21,084			17,791			76,762			33,192
Net interest income after provision for loan and lease losses		6,749			8,883			26,946			75,267
Noninterest Income:
Securities gains		211			1			418			663
Service charges on deposit accounts		2,896			3,297			11,433			12,778
Gains on sales of mortgage loans		434			516			3,253			2,288
Fees on sales of investment products		761			928			2,823			3,475
Trust and investment management fees		2,358			2,201			9,421			9,483
Insurance agency commissions		1,098			1,183			5,236			5,908
Income from bank owned life insurance		730			719			2,906			2,902
Visa check fees		776			691			2,920			2,875
Other income		2,311			1,437			6,831			5,871
Total noninterest income		11,575			10,973			45,241			46,243
Noninterest Expenses:
Salaries and employee benefits		13,141			13,441			54,460			53,015
Occupancy expense of premises		2,702			2,612			10,710			10,762
Equipment expenses		1,359			1,642			5,691			6,156
Marketing		777			652			2,166			2,163
Outside data services		967			1,054			3,721			4,373
FDIC insurance		1,124			458			6,092			1,751
Amortization of intangible assets		496			1,103			3,646			4,447
Goodwill impairment loss		-			1,909			-			4,159
Other expenses		4,798			4,362			16,553			15,263
Total noninterest expenses		25,364			27,233			103,039			102,089
Income (loss) before income taxes		(7,040	)		(7,377	)		(30,852	)		19,421
Income tax expense (benefit)		(3,822	)		(3,941	)		(15,997	)		3,642
Net income (loss)	$	(3,218	)	$	(3,436	)	$	(14,855	)	$	15,779
Preferred stock dividends and discount accretion		1,203			334			4,810			334
Net income (loss) available to common stockholders	$	(4,421	)	$	(3,770	)	$	(19,665	)	$	15,445
Per Share Amounts:
Basic net income (loss) per share	$	(0.20	)	$	(0.21	)	$	(0.90	)	$	0.96
Basic net income (loss) per common share		(0.27	)		(0.23	)		(1.20	)		0.94
Diluted net income (loss) per share		(0.20	)		(0.21	)		(0.90	)		0.96
Diluted net income (loss) per common share		(0.27	)		(0.23	)		(1.20	)		0.94
Dividends declared per share		0.01			0.24			0.37			0.96

Sandy Spring Bancorp, Inc. and Subsidiaries

HISTORICAL TRENDS - QUARTERLY FINANCIAL DATA (Unaudited)

	2009												2008
(Dollars in thousands, except per share data)		Q4			Q3			Q2			Q1			Q4			Q3			Q2			Q1
Profitability for the quarter:
Tax-equivalent interest income	$	40,025		$	40,516		$	39,791		$	39,737		$	42,194		$	43,228		$	42,906		$	45,062
Interest expense		10,816			12,783			14,220			13,703			14,356			13,961			14,726			17,343
Tax-equivalent net interest income		29,209			27,733			25,571			26,034			27,838			29,267			28,180			27,719
Tax-equivalent adjustment		1,376			1,331			1,123			1,009			1,164			1,180			1,061			1,140
Provision for loan and lease losses		21,084			34,450			10,615			10,613			17,791			6,545			6,189			2,667
Noninterest income		11,575			10,662			11,030			11,974			10,973			10,879			11,695			12,696
Noninterest expenses		25,364			26,567			26,858			24,250			27,233			25,267			24,886			24,703
Income (loss) before income taxes		(7,040	)		(23,953	)		(1,995	)		2,136			(7,377	)		7,154			7,739			11,905
Income tax expense (benefit)		(3,822	)		(10,379	)		(1,715	)		(81	)		(3,941	)		1,795			2,088			3,700
Net Income (loss)		(3,218	)		(13,574	)		(280	)		2,217			(3,436	)		5,359			5,651			8,205
Net Income (loss) available to common stockholders	$	(4,421	)	$	(14,779	)	$	(1,482	)	$	1,017		$	(3,770	)	$	5,359		$	5,651		$	8,205
Financial ratios:
Return on average assets		(0.48	)%		(1.62	)%		(0.17	)%		0.12	%		(0.42	)%		0.67	%		0.73	%		1.07	%
Return on average common equity		(4.66	)%		(19.01	)%		(1.90	)%		1.32	%		(4.70	)%		6.64	%		7.09	%		10.45	%
Net interest margin		3.40	%		3.27	%		3.11	%		3.39	%		3.73	%		4.02	%		3.96	%		3.99	%
Efficiency ratio - GAAP *		64.36	%		71.68	%		75.70	%		65.54	%		72.34	%		64.84	%		64.11	%		62.90	%
Efficiency ratio - Non-GAAP *		61.29	%		66.49	%		70.58	%		61.29	%		62.41	%		58.27	%		59.73	%		59.18	%
Per share data:
Basic net income (loss) per share	$	(0.20	)	$	(0.83	)	$	(0.02	)	$	0.14		$	(0.21	)	$	0.33		$	0.35		$	0.50
Basic net income (loss) per common share		(0.27	)		(0.90	)		(0.09	)		0.06			(0.23	)		0.33			0.35			0.50
Diluted net income (loss) per share		(0.20	)		(0.83	)		(0.02	)		0.13			(0.21	)		0.33			0.34			0.50
Diluted net income (loss) per common share		(0.27	)		(0.90	)		(0.09	)		0.06			(0.23	)		0.33			0.34			0.50
Dividends declared per common share		0.01			0.12			0.12			0.12			0.24			0.24			0.24			0.24
Book value per common share		17.80			18.25			18.92			19.06			19.05			19.51			19.56			19.50
Average fully diluted shares		16,477,925			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	$	211		$	15		$	30		$	162		$	1		$	9		$	79		$	574
Service charges on deposit accounts		2,896			2,823			2,851			2,863			3,297			3,249			3,202			3,030
Gains on sales of mortgage loans		434			1,011			786			1,022			516			397			653			722
Fees on sales of investment products		761			740			622			700			928			820			905			822
Trust and investment management fees		2,358			2,406			2,370			2,287			2,201			2,380			2,505			2,397
Insurance agency commissions		1,098			1,048			1,040			2,050			1,183			1,282			1,357			2,086
Income from bank owned life insurance		730			740			725			711			719			742			727			714
Visa check fees		776			758			748			638			691			727			761			696
Other income		2,311			1,121			1,858			1,541			1,437			1,273			1,506			1,655
Total noninterest income	$	11,575		$	10,662		$	11,030		$	11,974		$	10,973		$	10,879		$	11,695		$	12,696
Noninterest expense:
Salaries and employee benefits	$	13,141		$	14,411		$	13,704		$	13,204		$	13,441		$	11,949		$	13,862		$	13,763
Occupancy expense of premises		2,702			2,685			2,548			2,775			2,612			2,732			2,619			2,799
Equipment expenses		1,359			1,444			1,374			1,514			1,642			1,515			1,560			1,439
Marketing		777			484			485			420			652			526			488			497
Outside data services		967			987			961			806			1,054			1,116			1,081			1,122
FDIC insurance		1,124			1,219			2,790			959			458			480			421			392
Amortization of intangible assets		496			1,048			1,047			1,055			1,103			1,103			1,117			1,124
Goodwill impairment loss		-			-			-			-			1,909			2,250			-			-
Other expenses		4,798			4,289			3,949			3,517			4,362			3,596			3,738			3,567
Total noninterest expense	$	25,364		$	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)		Q4			Q3			Q2			Q1			Q4			Q3			Q2			Q1
Balance sheets at quarter end:
Residential mortgage loans	$	457,414		$	455,312		$	450,500		$	461,359		$	457,571		$	452,815		$	461,000		$	459,768
Residential construction loans		92,283			115,258			138,923			163,861			189,249			221,630			199,602			183,690
Commercial mortgage loans		894,951			873,438			862,315			859,882			847,452			804,728			752,905			732,692
Commercial construction loans		131,789			174,052			199,278			222,805			223,169			247,930			273,059			256,714
Commercial loans and leases		321,924			314,599			333,025			342,870			366,978			358,097			356,256			354,509
Consumer loans		399,649			401,623			405,348			411,068			406,227			397,218			386,126			376,650
Total loans and leases		2,298,010			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		(64,559	)		(62,937	)		(58,317	)		(59,798	)		(50,526	)		(38,266	)		(33,435	)		(27,887	)
Net loans and leases		2,233,451			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			76,816			76,248			75,701			78,376			78,111
Other intangible assets, net		8,537			9,033			10,080			11,128			12,183			13,286			14,390			15,507
Total assets		3,630,478			3,632,391			3,617,497			3,519,432			3,313,638			3,195,117			3,164,123			3,160,896
Total deposits		2,696,842			2,683,487			2,650,845			2,553,912			2,365,257			2,248,812			2,294,791			2,340,568
Customer repurchase agreements		74,062			84,138			98,827			91,928			75,106			77,630			93,919			101,666
Total stockholders' equity		373,586			380,571			391,262			392,522			391,862			319,700			320,218			318,967
Quarterly average balance sheets:
Residential mortgage loans	$	464,737		$	460,772		$	477,955		$	481,721		$	457,956		$	463,778		$	470,144		$	463,597
Residential construction loans		106,115			123,892			150,914			176,811			208,616			210,363			193,822			174,626
Commercial mortgage loans		877,419			871,831			862,658			854,402			833,752			779,652			733,905			690,289
Commercial construction loans		165,784			191,021			216,897			224,229			236,176			253,806			261,360			266,098
Commercial loans and leases		312,547			327,569			341,039			359,820			361,731			356,327			359,287			351,862
Consumer loans		401,164			401,930			408,200			408,843			400,937			391,640			380,911			378,261
Total loans and leases		2,327,766			2,377,015			2,457,663			2,505,826			2,499,168			2,455,566			2,399,429			2,324,733
Securities		1,026,179			956,350			772,878			536,981			431,858			423,082			431,182			427,819
Total earning assets		3,409,867			3,370,823			3,298,923			3,117,590			2,972,173			2,898,968			2,862,012			2,795,453
Total assets		3,672,382			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		2,709,152			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		549,347			532,462			527,713			476,361			458,538			453,281			441,330			412,369
Total deposits		2,718,882			2,661,108			2,581,837			2,431,471			2,305,880			2,264,990			2,306,867			2,260,837
Customer repurchase agreements		92,471			95,310			93,980			69,212			84,012			81,158			92,968			94,841
Total stockholders' equity		380,534			391,571			393,201			391,673			342,639			321,028			320,409			315,755
Capital and credit quality measures:
Average equity to average assets		10.36	%		10.79	%		11.08	%		11.60	%		10.59	%		10.14	%		10.22	%		10.28	%
Allowance for loan and lease losses to loans and leases		2.81	%		2.70	%		2.44	%		2.43	%		2.03	%		1.54	%		1.38	%		1.18	%
Nonperforming loans to total loans		5.82	%		6.14	%		5.84	%		4.90	%		2.79	%		2.69	%		2.62	%		1.96	%
Nonperforming assets to total assets		3.89	%		4.14	%		4.05	%		3.57	%		2.18	%		2.14	%		2.05	%		1.48	%
Annualized net charge-offs (recoveries) to average loans and leases		3.34	%		5.00	%		1.97	%		0.22	%		0.88	%		0.28	%		0.11	%		-0.02	%
Net charge-offs (recoveries)	$	19,462		$	29,831		$	12,095		$	1,341		$	5,531		$	1,714		$	641		$	(129	)
Nonperforming assets:
Non-accrual loans and leases	$	111,180		$	127,473		$	123,117		$	110,761		$	67,950		$	64,246		$	60,373		$	37,353
Loans and leases 90 days past due		19,001			15,491			16,004			9,545			1,038			2,074			2,538			8,244
Restructured loans and leases		3,549			395			395			395			395			395			655			655
Other real estate owned, net		7,464			6,873			6,829			5,094			2,860			1,698			1,352			661
Total nonperforming assets	$	141,194		$	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 December 31,
	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	$	464,737		$	6,540		5.63	%	$	457,956		$	6,976		6.09	%
Residential construction loans		106,115			1,332		4.98			208,616			2,857		5.45
Commercial mortgage loans		877,419			13,501		6.10			833,752			13,494		6.44
Commercial construction loans		165,784			957		2.29			236,176			2,718		4.58
Commercial loans and leases		312,547			4,124		5.24			361,731			5,638		6.21
Consumer loans		401,164			3,979		3.95			400,937			4,771		4.73
Total loans and leases		2,327,766			30,433		5.20			2,499,168			36,454		5.81
Taxable securities		854,637			6,272		3.04			254,056			2,428		3.94
Tax-advantaged securities		171,542			3,283		6.85			177,802			3,252		6.98
Interest-bearing deposits with banks		54,359			37		0.27			515			3		2.71
Federal funds sold		1,563			-		0.13			40,632			56		0.54
TOTAL EARNING ASSETS		3,409,867			40,025		4.66			2,972,173			42,193		5.65
Less:  allowance for loan and lease losses		(65,093	)							(41,204	)
Cash and due from banks		44,646								50,963
Premises and equipment, net		49,894								52,092
Other assets		233,068								201,408
Total assets	$	3,672,382							$	3,235,432
Liabilities and Stockholders' Equity
Interest-bearing demand deposits	$	262,327			94		0.14	%	$	236,609			143		0.24	%
Regular savings deposits		153,692			34		0.09			144,275			90		0.25
Money market savings deposits		935,980			2,035		0.86			636,628			2,487		1.55
Time deposits		817,536			4,640		2.25			829,830			7,166		3.44
Total interest-bearing deposits		2,169,535			6,803		1.24			1,847,342			9,886		2.13
Short-term borrowings		502,371			3,763		2.97			447,162			3,326		2.95
Long-term borrowings		37,246			250		2.66			111,386			1,144		4.09
TOTAL INTEREST-BEARING LIABILITIES		2,709,152			10,816		1.59			2,405,890			14,356		2.38
Noninterest-bearing demand deposits		549,347								458,538
Other liabilities		33,349								28,365
Stockholders' equity		380,534								342,639
Total liabilities and stockholders' equity	$	3,672,382							$	3,235,432
Net interest income and spread				$	29,209		3.07	%				$	27,837		3.27	%
Less: tax equivalent adjustment					1,376								1,164
Net interest income				$	27,833							$	26,673
Interest income/earning assets							4.66	%							5.65	%
Interest expense/earning assets							1.26								1.92
Net interest margin							3.40	%							3.73	%

* 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 $5.5 million in 2009 and $4.6 million in2008

Sandy Spring Bancorp, Inc. and Subsidiaries

CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES (Unaudited)

	Year Ended December 31,
	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	$	471,221		$	27,560		5.85	%	$	463,853		$	28,547		6.15	%
Residential construction loans		139,197			7,165		5.15			196,926			11,585		5.88
Commercial mortgage loans		866,655			53,280		6.15			759,658			50,699		6.67
Commercial construction loans		199,299			5,669		2.84			254,309			13,859		5.45
Commercial loans and leases		335,093			17,991		5.37			357,311			24,007		6.72
Consumer loans		405,005			16,001		3.96			387,983			20,503		5.28
Total loans and leases		2,416,470			127,666		5.28			2,420,040			149,200		6.17
Taxable securities		662,853			20,784		3.14			242,422			10,684		4.41
Tax-advantaged securities		161,949			11,467		7.08			186,057			12,838		6.90
Interest-bearing deposits with banks		56,980			149		0.26			3,213			82		2.55
Federal funds sold		2,045			3		0.19			30,711			585		1.90
TOTAL EARNING ASSETS		3,300,297			160,069		4.85			2,882,443			173,389		6.02
Less:  allowance for loan and lease losses		(59,961	)							(32,629	)
Cash and due from banks		45,038								49,981
Premises and equipment, net		50,649								53,207
Other assets		221,211								199,584
Total assets	$	3,557,234							$	3,152,586
Liabilities and Stockholders' Equity
Interest-bearing demand deposits	$	254,047			420		0.17	%	$	242,848			671		0.28	%
Regular savings deposits		152,383			210		0.14			153,123			455		0.30
Money market savings deposits		841,336			10,725		1.27			669,239			12,247		1.83
Time deposits		829,817			23,566		2.84			777,979			29,443		3.78
Total interest-bearing deposits		2,077,583			34,921		1.68			1,843,189			42,816		2.32
Short-term borrowings		486,364			14,520		2.99			409,933			13,212		3.22
Long-term borrowings		48,908			2,081		4.26			103,304			4,358		4.22
TOTAL INTEREST-BEARING LIABILITIES		2,612,855			51,522		1.97			2,356,426			60,386		2.56
Noninterest-bearing demand deposits		521,701								441,459
Other liabilities		33,457								29,706
Stockholders' equity		389,221								324,995
Total liabilities and stockholders' equity	$	3,557,234							$	3,152,586
Net interest income and spread				$	108,547		2.88	%				$	113,003		3.46	%
Less: tax equivalent adjustment					4,839								4,545
Net interest income				$	103,708							$	108,458
Interest income/earning assets							4.85	%							6.02	%
Interest expense/earning assets							1.56								2.10
Net interest margin							3.29	%							3.92	%

* 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 $4.8 million in 2009 and $4.5 million in2008