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 21, 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 October 21, 2010, Sandy Spring Bancorp, Inc. issued a news release announcing its results of operations and financial condition for the quarter ended September 30, 2010.  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 21, 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:  October 21, 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 CONTINUING IMPROVEMENT

WITH THIRD QUARTER RESULTS

OLNEY, MARYLAND, October 21, 2010 — Sandy Spring Bancorp, Inc., (Nasdaq-SASR) the parent company of Sandy Spring Bank, today announced net income available to common stockholders for the third quarter of 2010 of $6.4 million ($0.27 per diluted share) compared to a net loss available to common stockholders of $14.8 million (($0.90) per diluted share) for the third quarter of 2009 and net income available to common stockholders of $5.1 million ($0.21 per diluted share) for the second quarter of 2010. The third quarter of 2010 included a provision for loan and lease losses of $2.5 million compared to $34.5 million for the third quarter of 2009 and $6.1 million for the second quarter of 2010.

Net income available to common stockholders for the nine-month period ending September 30, 2010 totaled $10.8 million ($0.49 per diluted share) compared to a net loss available to common stockholders of $15.2 million (($0.93) per diluted share) for the prior year period. The results included a provision for loan and lease losses totaling $23.6 million for the first nine months of 2010. The results for the first nine months of 2009 included a provision for loan and lease losses of $55.7 million and an FDIC special assessment charge of $1.7 million.

“Our positive third quarter results provide us with further reason for optimism even as the economy struggles to recover from the recent recession. The experience gained during this very challenging economic period has enabled us to emerge as a stronger institution as we remain focused on the business of community banking,” said Daniel J. Schrider, President and Chief Executive Officer.

“We took aggressive action early in the credit cycle to identify and resolve problem credits and this is evidenced by the continued downward trend in our non-performing commercial real estate mortgage and construction loans, in addition to commercial business loans.  The provision for loan losses declined for the fourth consecutive quarter, due in large part to a continued decrease in non-performing loans. We recognize that more work remains to be done in this area, given the tenuous state of the economic recovery, and our credit team is continuing to work diligently to deal with our remaining problem credits.

“The low level of consumer and small business confidence has served to limit business expansion and new home construction as the national economy remains in neutral, with the added threat of deflation and volatile international markets. Our primary challenge is to make quality loans, and we are developing loan origination strategies that will serve our business and retail clients.

 

“On a further positive note, our consistent expense control and stable net interest margin continue to drive our favorable performance. We believe that emphasis on the fundamental elements of community banking will serve us well as the business climate improves,” said Schrider.

Third Quarter Highlights:

· The Company repaid $41.5 million of the $83.0 million in preferred stock issued to the U.S. Treasury under the TARP Capital Purchase Program.

· The provision for loan and lease losses totaled $2.5 million for the quarter compared to $34.5 million for the third quarter of 2009 and $6.1 million for the second quarter of 2010.

· Non-performing assets declined to $103.6 million compared to $150.2 million at September 30, 2009 and $118.0 million at June 30, 2010. This decrease also resulted in a coverage ratio of the allowance for loan and lease losses compared to non-performing loans of 72% compared to a ratio of 44% at September 30, 2009 and 65% at June 30, 2010.

· Loan charge-offs, net of recoveries, totaled $6.5 million for the third quarter of 2010 compared to $29.8 million for the third quarter of 2009 and $4.3 million for the second quarter of 2010.

· The net interest margin was 3.64% for the third quarter of 2010 compared to 3.27% for the third quarter of 2009 and 3.58% for the second quarter of 2010.

· Non-interest expenses decreased 5% for the third quarter of 2010 compared to the third quarter of 2009 and decreased 2% compared to the second quarter of 2010.

Review of Balance Sheet and Credit Quality

Comparing September 30, 2010 balances to September 30, 2009, total assets decreased 1% to $3.6 billion. Total loans and leases decreased 6% to $2.2 billion compared to the prior year. This decrease in loans was attributable to declines in most major categories of the loan portfolio due to a lack of loan demand in weak economic conditions. Total loans decreased 2% compared to the second quarter of 2010.

Customer funding sources, which include deposits and other short-term borrowings from core customers, decreased 3% compared to the prior year and 2% compared to the second quarter of 2010. The decrease compared to the prior year was due primarily to a decline of 18% in certificates of deposit. This planned decrease was due mainly to a reduction in rates as the Company managed its net interest margin. The decline in certificate of deposit balances was substantially offset by an increase of 6% in the combined balances of noninterest-bearing deposits, traditional savings and interest-bearing checking accounts as clients sought to retain liquidity in a volatile economic environment.

Stockholders’ equity totaled $451.7 million at September 30, 2010, and represented 12.5% of total assets, compared to 10.5% at September 30, 2009.  At September 30, 2010 the Company had a total risk-based capital ratio of 16.56%, a tier 1 risk-based capital ratio of 15.29% and a tier 1 leverage ratio of 11.15%.

The provision for loan and lease losses totaled $2.5 million for the third quarter of 2010 compared to $34.5 million for the third quarter of 2009 and $6.1 million for the second quarter of 2010. The decrease compared to both the prior year quarter and the second quarter of 2010 was primarily due to a lower level of non-performing loans.  The credit risk management process has resulted in the identification of the most significant problem credits. The decrease in the provision was the direct result of these identification efforts, the early provision of loan loss reserves and the aggressive work out or charge-off of these problem credits.

Loan charge-offs, net of recoveries, totaled $6.5 million for the third quarter of 2010 compared to net charge-offs of $29.8 million for the third quarter of 2009 and net charge-offs of $4.3 million for the second quarter of 2010. The allowance for loan and lease losses represented 3.08% of outstanding loans and leases and 72% of non-performing loans at September 30, 2010 compared to 2.70% of outstanding loans and leases and 44% of non-performing loans at September 30, 2009 and 3.22% of outstanding loans and leases and 65% of non-performing loans at June 30, 2010. Non-performing loans includes loans 90 days or more past due.

Non-performing assets totaled $103.6 million at September 30, 2010 compared to $150.2 million at September 30, 2009 and $118.0 million at June 30, 2010. The decrease compared to the prior year was due primarily to a decrease in non-accrual loans, particularly in the commercial real estate mortgage and construction portfolios  and the commercial business loan portfolios as a result of charge-offs and pay-downs.

Income Statement Review

Comparing the third quarters of 2010 and 2009, net interest income increased by $3.1 million, or 12%. This increase was due primarily to the decline in rates paid on deposits. This resulted in a higher net interest margin for the third quarter of 2010 of 3.64% compared to 3.27% for third quarter of 2009.

Non-interest income remained virtually level at $10.7 million for the third quarter of 2010 compared to the third quarter of 2009. Other noninterest income increased $0.7 million due largely to higher accrued gains on mortgage commitments. Trust and investment management fees increased $0.1 million or 4% while Visa check fees increased $0.1 million or 11%. These gains were largely offset by decreases of $0.3 million or 9% in service charges on deposits and gains on sales of mortgage loans which decreased $0.2 million or 10% due to lower mortgage loan origination volumes.

Non-interest expenses were $25.3 million in the third quarter of 2010 compared to $26.6 million in the third quarter of 2009, a decrease of $1.3 million or 5%. Salaries and benefits expense decreased $0.6 million or 4% due primarily to lower health plan expenses.  FDIC insurance expense decreased $0.2 million or 13% due mainly to the decline in deposit balances while amortization of intangibles decreased $0.6 million or 53% due to intangibles from branch acquisitions that had fully amortized during the third quarter of 2009.

Comparing the first nine months of 2010 and 2009, net interest income increased by $10.8 million, or 14%. This increase was due primarily to the decline in rates paid on deposits which more than offset the decrease in the yield on interest earning assets. The net interest margin for the first nine months of 2010 increased to 3.59% compared to a net interest margin of 3.25% for the prior year period.

Non-interest income increased 1% to $33.9 million for the first nine months of 2010 as compared to $33.7 million in 2009. This increase was due primarily to fees on sales of investments which increased $0.4 million or 19% resulting from growth in sales of financial products. In addition, trust and investment fees increased $0.4 million or 6% due to growth in assets under management while Visa check fees increased $0.3 million or 14% due to an increased volume of electronic transactions. Other noninterest income also increased $0.7 million or 14% due to higher mark to market adjustments associated with commercial loan swaps.  These increases were somewhat offset by a decline of $0.6 million or 6% in service charges on deposits due to lower commercial account analysis fees and return check charges.

Non-interest expenses were $76.6 million for the first nine months of 2010 compared to $77.7 million for the first nine months of 2009. This decrease was due primarily to a decrease of $1.6 million or 32% in FDIC insurance expense due largely to a $1.7 million one time special assessment by the FDIC in the second quarter of 2009 and a decrease in intangibles amortization of $1.7 million or 53% due to intangibles from branch acquisitions that had fully amortized during the third quarter of 2009.  These decreases were partially offset by an increase of $1.6 million or 14% in other noninterest expenses due primarily to higher mark-to-market adjustments associated with commercial loan swaps.

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 877-380-5664. 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 22, 2010.  A telephone voice replay will also be available during that same time period at 800-642-1687.  Please use pass code #15724091 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, 2009, 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
	September30,						%			September 30,						%
(Dollars in thousands, except per share data)	2010			2009			Change			2010			2009			Change
Results of Operations:
Net interest income	$	29,499		$	26,402			12	%	$	86,654		$	75,875			14	%
Provision for loan and lease losses		2,453			34,450			(93	)		23,585			55,678			(58	)
Non-interest income		10,738			10,662			1			33,947			33,666			1
Non-interest expenses		25,339			26,567			(5	)		76,598			77,675			(1	)
Income (loss) before income taxes		12,445			(23,953	)		-			20,418			(23,812	)		-
Net income (loss)		8,484			(13,574	)		-			15,244			(11,637	)		-
Net income (loss) available to common stockholders	$	6,410		$	(14,779	)		-		$	10,767		$	(15,244	)		-
Return on average assets (1)		0.70	%		(1.62	)%					0.40	%		(0.58	)%
Return on average common equity (1)		6.26	%		(19.01	)%					3.89	%		(6.52	)%
Net interest margin		3.64	%		3.27	%					3.59	%		3.25	%
Efficiency ratio - GAAP (3)		62.98	%		71.68	%					63.51	%		70.91	%
Efficiency ratio - Non-GAAP (3)		59.27	%		66.49	%					60.46	%		66.07	%
Per share data:
Basic net income (loss)	$	0.35		$	(0.83	)		-	%	$	0.70		$	(0.71	)		-	%
Basic net income (loss) per common share		0.27			(0.90	)		-			0.49			(0.93	)		-
Diluted net income (loss)		0.35			(0.83	)		-			0.70			(0.71	)		-
Diluted net income (loss) per common share		0.27			(0.90	)		-			0.49			(0.93	)		-
Dividends declared per common share		0.01			0.12			(92	)		0.03			0.36			(92	)
Book value per common share		17.14			18.25			(6	)		17.14			18.25			(6	)
Average fully diluted shares		24,102,497			16,466,631			46			21,812,412			16,438,691			33
Financial Condition at period-end:
Assets	$	3,606,617		$	3,632,391			(1	)%	$	3,606,617		$	3,632,391			(1	)%
Total loans and leases		2,185,207			2,334,282			(6	)		2,185,207			2,334,282			(6	)
Investment securities		1,099,518			980,446			12			1,099,518			980,446			12
Deposits		2,585,496			2,683,487			(4	)		2,585,496			2,683,487			(4	)
Stockholders' equity		451,717			380,571			19			451,717			380,571			19
Capital ratios:
Tier 1 leverage		11.15	%		9.31	%					11.15	%		9.31	%
Tier 1 capital to risk-weighted assets		15.29	%		11.96	%					15.29	%		11.96	%
Total regulatory capital to risk-weighted assets		16.56	%		13.23	%					16.56	%		13.23	%
Tangible common equity to tangible assets (4)		9.06	%		6.07	%					9.06	%		6.07	%
Average equity to average assets		12.57	%		10.79	%					12.14	%		11.15	%
Credit quality ratios:
Allowance for loan and lease losses to total loans and leases		3.08	%		2.70	%					3.08	%		2.70	%
Nonperforming loans to total loans and leases		4.27	%		6.14	%					4.27	%		6.14	%
Nonperforming assets to total assets		2.87	%		4.14	%					2.87	%		4.14	%
Annualized net charge-offs to average loans and leases(2)		1.18	%		5.00	%					1.24	%		2.38	%

(1) Calculation utilizes net income available to common stockholders.

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

(3) The GAAP efficiency ratio is non-interest expenses divided by net interest income plus non-interest income from the Consolidated Statements of Income.

The traditional, non-GAAP efficiency ratio excludes intangible asset amortization from non-interest expense; securities gains (losses) from non-interest income; OTTI; and adds the tax-equivalent adjustment to net interest income.  See the Reconciliation Table included with these Financial Highlights.

(4) 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)	2010			2009			2010			2009
GAAP efficiency ratio:
Non-interest expenses	$	25,339		$	26,567		$	76,598		$	77,675
Net interest income plus non-interest income	$	40,237		$	37,064		$	120,601		$	109,541
Efficiency ratio–GAAP		62.98	%		71.68	%		63.51	%		70.91	%
Non-GAAP efficiency ratio:
Non-interest expenses	$	25,339		$	26,567		$	76,598		$	77,675
Less non-GAAP adjustment:
Amortization of intangible assets		495			1,048			1,487			3,150
Non-interest expenses as adjusted	$	24,844		$	25,519		$	75,111		$	74,525
Net interest income plus non-interest income	$	40,237		$	37,064		$	120,601		$	109,541
Plus non-GAAP adjustment:
Tax-equivalent income		1,321			1,331			3,484			3,463
Less non-GAAP adjustments:
Securities gains		25			15			323			207
OTTI recognized in earnings		(380	)		-			(469	)		-
Net interest income plus non-interest income - as adjusted	$	41,913		$	38,380		$	124,231		$	112,797
Efficiency ratio–Non-GAAP		59.27	%		66.49	%		60.46	%		66.07	%
Tangible common equity ratio:
Total stockholders' equity	$	451,717		$	380,571		$	451,717		$	380,571
Accumulated other comprehensive income (loss)		(8,384	)		310			(8,384	)		310
Goodwill		(76,816	)		(76,816	)		(76,816	)		(76,816	)
Other intangible assets, net		(7,050	)		(9,033	)		(7,050	)		(9,033	)
Preferred stock		(40,308	)		(79,930	)		(40,308	)		(79,930	)
Tangible common equity	$	319,159		$	215,102		$	319,159		$	215,102
Total assets	$	3,606,617		$	3,632,391		$	3,606,617		$	3,632,391
Goodwill		(76,816	)		(76,816	)		(76,816	)		(76,816	)
Other intangible assets, net		(7,050	)		(9,033	)		(7,050	)		(9,033	)
Tangible assets	$	3,522,751		$	3,546,542		$	3,522,751		$	3,546,542
Tangible common equity ratio		9.06	%		6.07	%		9.06	%		6.07	%

Sandy Spring Bancorp, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CONDITION (Unaudited)

	September 30,			December 31,			September 30,
(Dollars in thousands)	2010			2009			2009
Assets
Cash and due from banks	$	40,511		$	49,430		$	42,079
Federal funds sold		1,522			1,863			1,271
Interest-bearing deposits with banks		37,692			8,503			45,660
Cash and cash equivalents		79,725			59,796			89,010
Residential mortgage loans held for sale (at fair value)		19,234			12,498			10,926
Investments available-for-sale (at fair value)		960,313			858,433			807,145
Investments held-to-maturity — fair value of $111,298, $137,787 and $146,800 at September 30, 2010, December 31, 2009 and September 30, 2009, respectively		106,553			132,593			140,528
Other equity securities		32,652			32,773			32,773
Total loans and leases		2,185,207			2,298,010			2,334,282
Less: allowance for loan and lease losses		(67,282	)		(64,559	)		(62,937	)
Net loans and leases		2,117,925			2,233,451			2,271,345
Premises and equipment, net		48,175			49,606			49,827
Other real estate owned		10,011			7,464			6,873
Accrued interest receivable		13,083			13,653			13,325
Goodwill		76,816			76,816			76,816
Other intangible assets, net		7,050			8,537			9,033
Other assets		135,080			144,858			124,790
Total assets	$	3,606,617		$	3,630,478		$	3,632,391
Liabilities
Noninterest-bearing deposits	$	580,309		$	540,578		$	573,601
Interest-bearing deposits		2,005,187			2,156,264			2,109,886
Total deposits		2,585,496			2,696,842			2,683,487
Securites sold under retail repurchase agreements and federal funds purchased		97,884			89,062			84,138
Advances from FHLB		409,263			411,584			411,827
Subordinated debentures		35,000			35,000			35,000
Accrued interest payable and other liabilities		27,257			24,404			37,368
Total liabilities		3,154,900			3,256,892			3,251,820
Stockholders' Equity
Preferred stock—par value $1.00 (liquidation preference of $1,000 per share) shares authorized 83,094, shares issued and outstanding 41,547, 83,094 and 83,094, net of discount of $1,239, $2,999, $3,164 at September 30, 2010, December 31, 2009 and September 30, 2009, respectively		40,308			80,095			79,930
Common stock — par value $1.00; shares authorized 49,916,906; shares issued and outstanding 24,006,748, 16,487,852 and 16,470,078 at September 30, 2010, December 31, 2009 and September 30, 2009, respectively		24,007			16,488			16,470
Warrants		3,699			3,699			3,699
Additional paid in capital		176,582			87,334			87,572
Retained earnings		198,737			188,622			193,210
Accumulated other comprehensive income (loss)		8,384			(2,652	)		(310	)
Total stockholders' equity		451,717			373,586			380,571
Total liabilities and stockholders' equity	$	3,606,617		$	3,630,478		$	3,632,391

Sandy Spring Bancorp, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF INCOME/(LOSS) (Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(Dollars in thousands, except per share data)	2010			2009			2010			2009
Interest Income:
Interest and fees on loans and leases	$	29,084		$	31,280		$	87,742		$	96,579
Interest on loans held for sale		148			121			321			654
Interest on deposits with banks		61			23			158			112
Interest and dividends on securities:
Taxable		6,336			5,947			18,640			13,673
Exempt from federal income taxes		1,737			1,814			5,372			5,560
Interest on federal funds sold		1			-			2			3
Total interest income		37,367			39,185			112,235			116,581
Interest Expense:
Interest on deposits		3,883			8,743			13,741			28,118
Interest on retail repurchase agreements and federal funds purchased		61			87			198			225
Interest on advances from FHLB		3,676			3,706			10,949			11,005
Interest on subordinated debt		248			247			693			1,358
Total interest expense		7,868			12,783			25,581			40,706
Net interest income		29,499			26,402			86,654			75,875
Provision for loan and lease losses		2,453			34,450			23,585			55,678
Net interest income after provision for loan and lease losses		27,046			(8,048	)		63,069			20,197
Non-interest Income:
Investment securities gains		25			15			323			207
Total other-than-temporary impairment ("OTTI") losses		(334	)		-			(1,168	)		-
Portion of OTTI losses recognized in other comprehensive income, before taxes		(46	)		-			699			-
Net OTTI recognized in earnings		(380	)		-			(469	)		-
Service charges on deposit accounts		2,567			2,823			7,984			8,537
Gains on sales of mortgage loans		915			1,011			2,544			2,819
Fees on sales of investment products		782			740			2,464			2,062
Trust and investment management fees		2,505			2,406			7,488			7,063
Insurance agency commissions		978			1,048			3,895			4,138
Income from bank owned life insurance		709			740			2,105			2,176
Visa check fees		843			758			2,438			2,144
Other income		1,794			1,121			5,175			4,520
Total non-interest income		10,738			10,662			33,947			33,666
Non-interest Expenses:
Salaries and employee benefits		13,841			14,411			41,393			41,319
Occupancy expense of premises		2,826			2,685			8,625			8,008
Equipment expenses		1,137			1,444			3,655			4,332
Marketing		589			484			1,678			1,389
Outside data services		966			987			3,007			2,754
FDIC insurance		1,056			1,219			3,383			4,968
Amortization of intangible assets		495			1,048			1,487			3,150
Other expenses		4,429			4,289			13,370			11,755
Total non-interest expenses		25,339			26,567			76,598			77,675
Income (loss) before income taxes		12,445			(23,953	)		20,418			(23,812	)
Income tax expense (benefit)		3,961			(10,379	)		5,174			(12,175	)
Net income (loss)	$	8,484		$	(13,574	)	$	15,244		$	(11,637	)
Preferred stock dividends and discount accretion		2,074			1,205			4,477			3,607
Net income (loss) available to common stockholders	$	6,410		$	(14,779	)	$	10,767		$	(15,244	)
Net Income Per Share Amounts:
Basic net income (loss) per share	$	0.35		$	(0.83	)	$	0.70		$	(0.71	)
Basic net income (loss) per common share		0.27			(0.90	)		0.49			(0.93	)
Diluted net income (loss) per share	$	0.35		$	(0.83	)	$	0.70		$	(0.71	)
Diluted net income (loss) per common share		0.27			(0.90	)		0.49			(0.93	)
Dividends declared per common share	$	0.01		$	0.12		$	0.03		$	0.36

Sandy Spring Bancorp, Inc. and Subsidiaries

HISTORICAL TRENDS - QUARTERLY FINANCIAL DATA (Unaudited)

	2010									2009
(Dollars in thousands, except per share data)	Q3			Q2			Q1			Q4			Q3			Q2			Q1
Profitability for the quarter:
Tax-equivalent interest income	$	38,688		$	38,663		$	38,368		$	40,025		$	40,516		$	39,791		$	39,737
Interest expense		7,868			8,512			9,201			10,816			12,783			14,220			13,703
Tax-equivalent net interest income		30,820			30,151			29,167			29,209			27,733			25,571			26,034
Tax-equivalent adjustment		1,321			1,155			1,008			1,376			1,331			1,123			1,009
Provision for loan and lease losses		2,453			6,107			15,025			21,084			34,450			10,615			10,613
Non-interest income		10,738			11,869			11,340			11,575			10,662			11,030			11,974
Non-interest expenses		25,339			25,953			25,306			25,364			26,567			26,858			24,250
Income (loss) before income taxes		12,445			8,805			(832	)		(7,040	)		(23,953	)		(1,995	)		2,136
Income tax expense (benefit)		3,961			2,546			(1,333	)		(3,822	)		(10,379	)		(1,715	)		(81	)
Net Income (loss)		8,484			6,259			501			(3,218	)		(13,574	)		(280	)		2,217
Net Income (loss) available to common stockholders	$	6,410		$	5,056		$	(699	)	$	(4,421	)	$	(14,779	)	$	(1,482	)	$	1,017
Financial ratios:
Return on average assets		0.70	%		0.56	%		(0.08	)%		(0.48	)%		(1.62	)%		(0.17	)%		0.12	%
Return on average common equity		6.26	%		5.13	%		(0.92	)%		(4.66	)%		(19.01	)%		(1.90	)%		1.32	%
Net interest margin		3.64	%		3.58	%		3.56	%		3.40	%		3.27	%		3.11	%		3.39	%
Efficiency ratio - GAAP (1)		62.98	%		63.51	%		64.07	%		64.36	%		71.68	%		75.70	%		65.54	%
Efficiency ratio - Non-GAAP (1)		59.27	%		60.59	%		61.56	%		61.29	%		66.49	%		70.58	%		61.29	%
Per share data:
Basic net income (loss) per share	$	0.35		$	0.26		$	0.03		$	(0.20	)	$	(0.83	)	$	(0.02	)	$	0.14
Basic net income (loss) per common share		0.27			0.21			(0.04	)		(0.27	)		(0.90	)		(0.09	)		0.06
Diluted net income (loss) per share	$	0.35			0.26			0.03			(0.20	)		(0.83	)		(0.02	)		0.13
Diluted net income (loss) per common share		0.27			0.21			(0.04	)		(0.27	)		(0.90	)		(0.09	)		0.06
Dividends declared per common share	$	0.01			0.01			0.01			0.01			0.12			0.12			0.12
Book value per common share	$	17.14			16.80			16.33			17.80			18.25			18.92			19.06
Average fully diluted shares		24,102,497			24,033,158			17,243,415			16,477,925			16,496,480			16,444,252			16,433,788
Non-interest income:
Securities gains	$	25		$	95		$	203		$	211		$	15		$	30		$	162
Net OTTI recognized in earnings		(380	)		(89	)		-			-			-			-			-
Service charges on deposit accounts		2,567			2,791			2,626			2,896			2,823			2,851			2,863
Gains on sales of mortgage loans		915			1,020			609			434			1,011			786			1,022
Fees on sales of investment products		782			941			741			761			740			622			700
Trust and investment management fees		2,505			2,534			2,449			2,358			2,406			2,370			2,287
Insurance agency commissions		978			928			1,989			1,098			1,048			1,040			2,050
Income from bank owned life insurance		709			703			693			730			740			725			711
Visa check fees		843			855			740			776			758			748			638
Other income		1,794			2,091			1,290			2,311			1,121			1,858			1,541
Total non-interest income	$	10,738		$	11,869		$	11,340		$	11,575		$	10,662		$	11,030		$	11,974
Non-interest expense:
Salaries and employee benefits	$	13,841		$	14,181		$	13,371		$	13,141		$	14,411		$	13,704		$	13,204
Occupancy expense of premises		2,826			2,709			3,090			2,702			2,685			2,548			2,775
Equipment expenses		1,137			1,304			1,214			1,359			1,444			1,374			1,514
Marketing		589			573			516			777			484			485			420
Outside data services		966			918			1,123			967			987			961			806
FDIC insurance		1,056			1,186			1,141			1,124			1,219			2,790			959
Amortization of intangible assets		495			496			496			496			1,048			1,047			1,055
Other expenses		4,429			4,586			4,355			4,798			4,289			3,949			3,517
Total non-interest expense	$	25,339		$	25,953		$	25,306		$	25,364		$	26,567		$	26,858		$	24,250

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

Sandy Spring Bancorp, Inc. and Subsidiaries

HISTORICAL TRENDS - QUARTERLY FINANCIAL DATA (Unaudited)

	2010									2009
(Dollars in thousands)	Q3			Q2			Q1			Q4			Q3			Q2			Q1
Balance sheets at quarter end:
Residential mortgage loans	$	442,723		$	458,502		$	460,129		$	457,414		$	455,312		$	450,500		$	461,359
Residential construction loans		92,485			86,393			83,902			92,283			115,258			138,923			163,861
Commercial mortgage loans		903,195			900,312			882,040			894,951			873,438			862,315			859,882
Commercial construction loans		96,823			95,357			130,064			131,789			174,052			199,278			222,805
Commercial loans and leases		258,566			284,708			302,995			321,924			314,599			333,025			342,870
Consumer loans		391,415			393,560			397,527			399,649			401,623			405,348			411,068
Total loans and leases		2,185,207			2,218,832			2,256,657			2,298,010			2,334,282			2,389,389			2,461,845
Less: allowance for loan and lease losses		(67,282	)		(71,377	)		(69,575	)		(64,559	)		(62,937	)		(58,317	)		(59,798	)
Net loans and leases		2,117,925			2,147,455			2,187,082			2,233,451			2,271,345			2,331,072			2,402,047
Goodwill		76,816			76,816			76,816			76,816			76,816			76,816			76,816
Other intangible assets, net		7,050			7,546			8,042			8,537			9,033			10,080			11,128
Total assets		3,606,617			3,701,150			3,673,246			3,630,478			3,632,391			3,617,497			3,519,432
Total deposits		2,585,496			2,659,956			2,653,448			2,696,842			2,683,487			2,650,845			2,553,912
Customer repurchase agreements		97,884			86,062			78,416			74,062			84,138			98,827			91,928
Total stockholders' equity		451,717			483,681			471,857			373,586			380,571			391,262			392,522
Quarterly average balance sheets:
Residential mortgage loans	$	466,437		$	467,970		$	462,803		$	464,737		$	460,772		$	477,955		$	481,721
Residential construction loans		87,522			85,617			89,732			106,115			123,892			150,914			176,811
Commercial mortgage loans		906,010			887,259			891,722			877,419			871,831			862,658			854,402
Commercial construction loans		96,502			115,965			131,265			165,784			191,021			216,897			224,229
Commercial loans and leases		272,353			294,168			317,492			312,547			327,569			341,039			359,820
Consumer loans		393,491			395,833			398,233			401,164			401,930			408,200			408,843
Total loans and leases		2,222,315			2,246,812			2,291,247			2,327,766			2,377,015			2,457,663			2,505,826
Securities		1,058,175			1,013,756			970,681			1,026,179			956,350			772,878			536,981
Total earning assets		3,360,758			3,379,388			3,318,070			3,409,867			3,370,823			3,298,923			3,117,590
Total assets		3,620,881			3,645,090			3,591,786			3,672,382			3,627,617			3,549,185			3,375,715
Total interest-bearing liabilities		2,571,000			2,596,353			2,653,187			2,709,152			2,671,944			2,595,303			2,471,762
Noninterest-bearing demand deposits		568,835			547,245			524,313			549,347			532,462			527,713			476,361
Total deposits		2,607,190			2,612,633			2,640,853			2,718,882			2,661,108			2,581,837			2,431,471
Customer repurchase agreements		87,927			85,178			81,622			92,471			95,310			93,980			69,212
Total stockholders' equity		455,101			475,521			387,099			380,534			391,571			393,201			391,673
Capital and credit quality measures:
Average equity to average assets		12.57	%		13.05	%		10.78	%		10.36	%		10.79	%		11.08	%		11.60	%
Allowance for loan and lease losses to loans and leases		3.08	%		3.22	%		3.08	%		2.81	%		2.70	%		2.44	%		2.43	%
Non-performing loans to total loans		4.27	%		4.93	%		6.05	%		5.82	%		6.14	%		5.84	%		4.90	%
Non-performing assets to total assets		2.87	%		3.19	%		3.90	%		3.89	%		4.14	%		4.05	%		3.57	%
Annualized net charge-offs to average loans and leases (1)		1.18	%		0.77	%		1.78	%		3.34	%		5.00	%		1.97	%		0.22	%
Net charge-offs	$	6,548		$	4,305		$	10,009		$	19,462		$	29,831		$	12,095		$	1,341
Non-performing assets:
Non-accrual loans and leases	$	73,876		$	83,887		$	110,719		$	111,180		$	127,473		$	123,117		$	110,761
Loans and leases 90 days past due		18,268			24,226			25,085			19,001			15,491			16,004			9,545
Restructured loans and leases		1,199			1,199			682			3,549			395			395			395
Other real estate owned, net		10,011			8,730			6,796			7,464			6,873			6,829			5,094
Other assets owned		200			-			-			-			-			-			-
Total non-performing assets	$	103,554		$	118,042		$	143,282		$	141,194		$	150,232		$	146,345		$	125,795

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

Sandy Spring Bancorp, Inc. and Subsidiaries

CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES (Unaudited)

	ThreeMonthsEndedSeptember30,
	2010								2009
						Annualized								Annualized
	Average			(1)		Average			Average			(1)		Average
(Dollars in thousands and tax-equivalent)	Balances			Interest		Yield/Rate			Balances			Interest		Yield/Rate
Assets
Residential mortgage loans (3)	$	466,437		$	6,081		5.23	%	$	460,772		$	6,795		5.90	%
Residential construction loans		87,522			964		4.37			123,892			1,583		5.07
Commercial mortgage loans		906,010			13,766		6.03			871,831			13,290		6.05
Commercial construction loans		96,502			880		3.62			191,021			1,330		2.76
Commercial loans and leases		272,353			3,737		5.45			327,569			4,428		5.37
Consumer loans		393,491			3,804		3.86			401,930			3,975		3.94
Total loans and leases (2)		2,222,315			29,232		5.23			2,377,015			31,401		5.25
Taxable securities		906,231			6,463		2.91			798,735			5,947		3.11
Tax-exempt securities (4)		151,944			2,931		7.03			157,615			3,145		7.07
Interest-bearing deposits with banks		78,355			61		0.31			35,880			23		0.25
Federal funds sold		1,913			1		0.18			1,578			-		0.17
Total interest-earning assets		3,360,758			38,688		4.57			3,370,823			40,516		4.77
Less: allowance for loan and lease losses		(71,059	)							(60,342	)
Cash and due from banks		44,806								44,500
Premises and equipment, net		48,518								50,404
Other assets		237,858								222,232
Total assets	$	3,620,881							$	3,627,617
Liabilities and Stockholders' Equity
Interest-bearing demand deposits	$	299,110			82		0.11	%	$	256,432			99		0.15	%
Regular savings deposits		166,989			41		0.10			153,903			56		0.14
Money market savings deposits		886,296			1,125		0.50			899,017			2,868		1.27
Time deposits		685,960			2,635		1.52			819,294			5,720		2.77
Total interest-bearing deposits		2,038,355			3,883		0.76			2,128,646			8,743		1.63
Other borrowings		88,308			61		0.27			96,342			87		0.36
Advances from FHLB		409,337			3,676		3.56			411,956			3,706		3.57
Subordinated debentures		35,000			248		2.84			35,000			247		2.82
Total interest-bearing liabilities		2,571,000			7,868		1.21			2,671,944			12,783		1.90
Noninterest-bearing demand deposits		568,835								532,462
Other liabilities		25,945								31,640
Stockholders' equity		455,101								391,571
Total liabilities and stockholders' equity	$	3,620,881							$	3,627,617
Net interest income and spread				$	30,820		3.36	%				$	27,733		2.87	%
Less: tax-equivalent adjustment					1,321								1,331
Net interest income				$	29,499							$	26,402
Interest income/earning assets							4.57	%							4.77	%
Interest expense/earning assets							0.93								1.50
Net interest margin							3.64	%							3.27	%

(1) Tax-equivalent income has been adjusted using the combined marginal federal and state rate of 39.88% for 2010 and 2009. The annualized taxable-equivalent adjustments utilized inthe above table to compute yields aggregated to $1.3 million and $1.3 million in 2010 and 2009, respectively.

(2) Non-accrual loans are included in the average balances.

(3) Includes residential mortgage loans held for sale. Home equity loans and lines are classified as consumer loans.

(4) Includes only investments that are exempt from federal taxes.

Sandy Spring Bancorp, Inc. and Subsidiaries

CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES (Unaudited)

	NineMonthsEndedSeptember30,
	2010								2009
						Annualized								Annualized
	Average			(1)		Average			Average			(1)		Average
(Dollars in thousands and tax-equivalent)	Balances			Interest		Yield/Rate			Balances			Interest		Yield/Rate
Assets
Residential mortgage loans (3)	$	465,393		$	18,989		5.44	%	$	473,406		$	21,020		5.92	%
Residential construction loans		87,616			3,044		4.65			150,345			5,833		5.19
Commercial mortgage loans		895,049			40,459		6.04			863,028			39,780		6.16
Commercial construction loans		114,450			2,657		3.10			210,594			4,712		2.99
Commercial loans and leases		294,506			11,434		5.19			342,691			13,866		5.41
Consumer loans		395,835			11,480		3.90			406,299			12,022		3.97
Total loans and leases (2)		2,252,849			88,063		5.22			2,446,363			97,233		5.31
Taxable securities		855,243			19,227		3.02			598,223			13,673		3.18
Tax-exempt securities (4)		159,281			8,269		6.92			158,716			9,023		7.17
Interest-bearing deposits with banks		83,351			158		0.25			57,864			112		0.26
Federal funds sold		1,814			2		0.17			2,207			3		0.21
Total interest-earning assets		3,352,538			115,719		4.61			3,263,373			120,044		4.92
Less: allowance for loan and lease losses		(70,145	)							(58,231	)
Cash and due from banks		44,633								45,170
Premises and equipment, net		48,876								50,904
Other assets		243,100								217,214
Total assets	$	3,619,002							$	3,518,430
Liabilities and Stockholders' Equity
Interest-bearing demand deposits	$	288,637			256		0.12	%	$	251,257			326		0.17	%
Regular savings deposits		163,687			128		0.10			151,942			177		0.16
Money market savings deposits		892,838			4,006		0.60			809,442			8,690		1.44
Time deposits		727,980			9,351		1.72			833,955			18,925		3.03
Total interest-bearing deposits		2,073,142			13,741		0.89			2,046,596			28,118		1.84
Other borrowings		87,881			198		0.30			86,612			225		0.35
Advances from FHLB		410,523			10,949		3.57			412,195			11,005		3.57
Subordinated debentures		35,000			693		2.64			35,000			1,358		5.17
Total interest-bearing liabilities		2,606,546			25,581		1.31			2,580,403			40,706		2.11
Noninterest-bearing demand deposits		546,961								512,384
Other liabilities		26,006								33,494
Stockholders' equity		439,489								392,149
Total liabilities and stockholders' equity	$	3,619,002							$	3,518,430
Net interest income and spread				$	90,138		3.30	%				$	79,338		2.81	%
Less: tax-equivalent adjustment					3,484								3,463
Net interest income				$	86,654							$	75,875
Interest income/earning assets							4.61	%							4.92	%
Interest expense/earning assets							1.02								1.67
Net interest margin							3.59	%							3.25	%

(1) Tax-equivalent income has been adjusted using the combined marginal federal and state rate of 39.88% for 2010 and 2009. The annualized taxable-equivalent adjustments utilized inthe above table to compute yields aggregated to $3.5 million and $3.5 million in 2010 and 2009, respectively.

(2) Non-accrual loans are included in the average balances.

(3) Includes residential mortgage loans held for sale. Home equity loans and lines are classified as consumer loans.

(4) Includes only investments that are exempt from federal taxes.