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 27, 2011

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 27, 2011, Sandy Spring Bancorp, Inc. issued a news release announcing its results of operations and financial condition for the quarter and year ended December 31, 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 January 27, 2011

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 27, 2011	By:	/s/ Daniel J. Schrider
		Daniel J. Schrider
		President and Chief Executive Officer

EX-99.1

 

NEWS RELEASE

FOR IMMEDIATE RELEASE

SANDY SPRING BANCORP REPORTS FOURTH QUARTER PROFIT AND FULL REDEMPTION OF TARP

OLNEY, MARYLAND, January 27, 2011 — Sandy Spring Bancorp, Inc., (Nasdaq-SASR) the parent company of Sandy Spring Bank, today announced net income available to common stockholders for the fourth quarter of 2010 of $6.6 million ($0.27 per diluted share) compared to a net loss available to common stockholders of $4.4 million (($0.27) per diluted share) for the fourth quarter of 2009 and net income available to common stockholders of $6.4 million ($0.27 per diluted share) for the third quarter of 2010. The fourth quarter of 2010 included a provision for loan and lease losses of $2.3 million compared to $21.1 million for the fourth quarter of 2009 and $2.5 million for the third quarter of 2010.

Net income available to common stockholders for the year ended December 31, 2010 totaled $17.4 million ($0.78 per diluted share) compared to a net loss available to common stockholders of $19.7 million (($1.20) per diluted share) for the prior year. The results included a provision for loan and lease losses totaling $25.9 million for the year ended December 31, 2010 compared to a provision for loan and lease losses of $76.8 million for the year ended December 31, 2009.

“We are very pleased to report that we have redeemed the remainder of the preferred stock issued under TARP,” said Daniel J. Schrider, President and Chief Executive Officer.  “We believe this validates our turnaround in performance, which is  largely driven by the substantial improvement in credit quality. The provision for loan losses has continued to decline for the last several quarters due primarily to the efforts of our credit team to reduce the level of non-performing loans. However, we recognize the need to focus on the continuing resolution of problem credits. Our consistent expense control and improved net interest margin continue to be major drivers of our improved performance and return to profitability. We believe that our consistent emphasis on the fundamental elements of community banking will serve us well as the business climate slowly improves,” said Schrider.

“Looking forward to the future, we will be dealing with the uncertain effects of the recently passed health care law, financial reform and tax legislation, together with the added threat of volatile international markets and an extended economic recovery period. This has created an extremely challenging environment for both consumers and small businesses locally that has limited business expansion and the creation of new jobs. We do, however, remain optimistic that our strategies to originate quality loans across our markets will produce positive growth in the coming year,” said Schrider.

Fourth Quarter and Full Year Highlights:

· In the fourth quarter, the Company redeemed the remainder of the original $83.0 million in preferred stock issued to the U.S. Treasury under the TARP Capital Purchase Program. The Company is currently negotiating with the Treasury to repurchase the related warrant.

· The provision for loan and lease losses totaled $2.3 million for the quarter compared to $21.1 million for the fourth quarter of 2009. For the year, the provision for loan and lease losses totaled $25.9 million compared to $76.8 million in 2009.

· Non-performing assets declined to $89.3 million compared to $141.2 million at December 31, 2009. This decrease also resulted in a coverage ratio of the allowance for loan and lease losses compared to non-performing loans of 78% at December 31, 2010 compared to a ratio of 48% at December 31, 2009.

· Loan charge-offs, net of recoveries, totaled $7.5 million for the fourth quarter of 2010 compared to $19.5 million for the fourth quarter of 2009. For the year, net charge-offs totaled $28.3 million compared to $62.7 million in 2009.

· The net interest margin was 3.61% for the fourth quarter of 2010 compared to 3.40% for the fourth quarter of 2009 and 3.64% for the third quarter of 2010. For the year, the net interest margin increased to 3.60% compared to 3.29% for 2009.

· Non-interest expenses increased 5% for the fourth quarter of 2010 compared to the fourth quarter of 2009. For the full year of 2010, noninterest expenses remained level compared to 2009.

Review of Balance Sheet and Credit Quality

Comparing December 31, 2010 balances to December 31, 2009, total assets decreased 3% to $3.5 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 all major categories of the loan portfolio due to a lack of loan demand resulting from the current state of the economy and due to charge-offs and pay-downs on non-performing loans. Total loans decreased 1% compared to the third quarter of 2010.

Customer funding sources, which include deposits and other short-term borrowings from core customers, decreased 5% compared to the prior year and 2% compared to the third quarter of 2010. The decrease compared to the prior year was due primarily to a decline of 20% in certificates of deposit. This planned decrease was due mainly to a reduction in rates as the Company managed its net interest margin. In addition, money market accounts declined 8% due mainly to clients’ redeployment of funds in the face of low rates and rising equity markets. These trends were somewhat offset by an increase of 8% in the combined balances of noninterest-bearing deposits, traditional savings and interest-bearing checking accounts as clients continued to emphasize safety and liquidity.

Stockholders’ equity totaled $407.6 million at December 31, 2010, and represented 11.6% of total assets, compared to 10.3% at December 31, 2009.  At December 31, 2010 the Company had a total risk-based capital ratio of 15.37%, a tier 1 risk-based capital ratio of 14.11% and a tier 1 leverage ratio of 10.30%.

The provision for loan and lease losses totaled $2.3 million for the fourth quarter of 2010 compared to $21.1 million for the fourth quarter of 2009 and $2.5 million for the third quarter of 2010. The decrease compared to both the prior year quarter and the third quarter of 2010 was due to a lower level of non-performing loans. The decrease in the provision was the direct result of early identification of problem credits,  provision of related loan loss reserves and the aggressive work out or charge-off of these problem credits.

Loan charge-offs, net of recoveries, totaled $7.5 million for the fourth quarter of 2010 compared to net charge-offs of $19.5 million for the fourth quarter of 2009 and net charge-offs of $6.5 million for the third quarter of 2010. The allowance for loan and lease losses represented 2.88% of outstanding loans and leases and 78% of non-performing loans at December 31, 2010 compared to 2.81% of outstanding loans and leases and 48% of non-performing loans at December 31, 2009 and 3.08% of outstanding loans and leases and 72% of non-performing loans at September 30, 2010. Non-performing loans includes accruing loans 90 days or more past due.

Non-performing assets totaled $89.3 million at December 31, 2010 compared to $141.2 million at December 31, 2009 and $103.6 million at September 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 as a result of charge-offs and pay-downs on existing problem credits and a significant reduction in the migration of new credits to non-performing status.

Income Statement Review

Comparing the fourth quarter of 2010 and 2009, net interest income increased by $1.1 million, or 4%. This increase was due primarily to the decline in rates paid on deposits. This resulted in a higher net interest margin for the fourth quarter of 2010 of 3.61% compared to 3.40% for fourth quarter of 2009.

Non-interest income increased $0.5 million or 4% to $12.0 million for the fourth quarter of 2010 compared to $11.5 million for the fourth quarter of 2009. Gains on sales of investment securities increased $0.3 million. Gains on sales of mortgage loans increased $0.3 million or 63% due largely to higher refinancing volumes. Fees on sales of investment products increased $0.2 million or 28% due to higher assets under management and higher sales of financial products, while trust and investment management fees increased $0.4 million or 19% due primarily to an increase in assets under management. Insurance agency commissions increased $0.2 million or 21% due to higher commissions on physician’s liability insurance. Visa check fees increased $0.1 million or 14% due to increased volume of electronic transactions.  These gains were somewhat offset by a decrease of $0.6 million or 19% in service charges on deposits due to lower overdraft fees. Other noninterest income also decreased $0.4 million or 17% due mainly to lower mark to market adjustments on commercial loan swaps.

Non-interest expenses were $26.5 million in the fourth quarter of 2010 compared to $25.3 million in the fourth quarter of 2009, an increase of $1.2 million or 5%. Salaries and benefits expense increased $0.9 million or 7% due primarily to higher salary expenses.  Other noninterest expenses increased $0.4 million or 9% due largely to losses on sales of other real estate owned and loan work out expenses.

Comparing the year ended December 31, 2010 and 2009, net interest income increased by $11.9 million, or 11%. 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 2010 increased to 3.60% compared to a net interest margin of 3.29% for the prior year.

Non-interest income increased $0.7 million or 2% to $46.0 million for the year ended December 31, 2010 as compared to $45.3 million in 2009. This increase was due primarily to fees on sales of investment products, which increased $0.6 million or 22% resulting from growth in sales of financial products. In addition, trust and investment management fees increased $0.9 million or 9% due to growth in assets under management, while Visa check fees increased $0.4 million or 14% due to an increased volume of electronic transactions. Other noninterest income also increased $0.2 million or 3% due primarily to higher mark to market adjustments on commercial loan swaps.   These increases were somewhat offset by a decline of $1.1 million or 10% in service charges on deposits due to lower commercial account analysis fees and return check charges.

Non-interest expenses remained level at $103.1 million for the year ended December 31, 2010 compared to 2009. Salary and benefits expenses increased $1.0 million or 2% due to increased salary expenses. Marketing expenses increased $0.2 million or 9% while outside data services increased $0.3 million or 7%. Other noninterest expenses increased $2.0 million or 12% due primarily to losses on sales of other real estate owned, loan workout fees and accrued expenses on loans sold with recourse. These increases were largely offset by a decrease of $1.6 million or 26% in FDIC insurance expense due mainly 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 46% due to intangibles from branch acquisitions that had fully amortized during the third quarter of 2009.

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 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) February 27, 2011.  A telephone voice replay will also be available during that same time period at 800-642-1687.  Please use pass code #3614119 to access.

About Sandy Spring Bancorp/Sandy Spring Bank

With $3.5 billion in assets, Sandy Spring Bancorp is the holding company for Sandy Spring Bank and its principal subsidiaries, Sandy Spring Insurance Corporation 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									Twelve Months Ended
	December 31,						%			December 31,						%
(Dollars in thousands, except per share data)	2010			2009			Change			2010			2009			Change
Results of Operations:
Net interest income	$	28,953		$	27,833			4	%	$	115,607		$	103,708			11	%
Provision for loan and lease losses		2,323			21,084			(89	)		25,908			76,762			(66	)
Non-interest income		12,046			11,534			4			45,993			45,287			2
Non-interest expenses		26,525			25,323			5			103,123			103,085			-
Income (loss) before income taxes		12,151			(7,040	)		-			32,569			(30,852	)		-
Net income (loss)		8,276			(3,218	)		-			23,520			(14,855	)		-
Net income (loss) available to common stockholders	$	6,604		$	(4,421	)		-		$	17,371		$	(19,665	)		(188	)
Return on average assets (1)		0.73	%		(0.48	)%					0.48	%		(0.55	)%
Return on average common equity (1)		6.34	%		(4.66	)%					4.56	%		(6.35	)%
Net interest margin		3.61	%		3.40	%					3.60	%		3.29	%
Efficiency ratio - GAAP (3)		64.70	%		64.33	%					63.81	%		69.19	%
Efficiency ratio - Non-GAAP (3)		62.15	%		61.25	%					60.89	%		64.82	%
Per share data:
Basic net income (loss)	$	0.34		$	(0.20	)		-	%	$	1.05		$	(0.90	)		-	%
Basic net income (loss) per common share		0.27			(0.27	)		(200	)		0.78			(1.20	)		(165	)
Diluted net income (loss)		0.34			(0.20	)		-			1.05			(0.90	)		-
Diluted net income (loss) per common share		0.27			(0.27	)		(200	)		0.78			(1.20	)		(165	)
Dividends declared per common share		0.01			0.01			-			0.04			0.37			(89	)
Book value per common share		16.95			17.80			(5	)		16.95			17.80			(5	)
Average fully diluted shares		24,087,482			16,477,925			46			22,380,135			16,448,580			36
Financial Condition at period-end:
Assets	$	3,519,388		$	3,630,478			(3	)%	$	3,519,388		$	3,630,478			(3	)%
Total loans and leases		2,156,232			2,298,010			(6	)		2,156,232			2,298,010			(6	)
Investment securities		1,042,943			1,023,799			2			1,042,943			1,023,799			2
Deposits		2,549,872			2,696,842			(5	)		2,549,872			2,696,842			(5	)
Stockholders' equity		407,569			373,586			9			407,569			373,586			9
Capital ratios:
Tier 1 leverage		10.30	%		9.09	%					10.30	%		9.09	%
Tier 1 capital to risk-weighted assets		14.11	%		12.01	%					14.11	%		12.01	%
Total regulatory capital to risk-weighted assets		15.37	%		13.27	%					15.37	%		13.27	%
Tangible common equity to tangible assets (4)		9.51	%		5.95	%					9.51	%		5.95	%
Average equity to average assets		12.41	%		10.36	%					12.21	%		10.94	%
Credit quality ratios:
Allowance for loan and lease losses to total loans and leases		2.88	%		2.81	%					2.88	%		2.81	%
Nonperforming loans to total loans and leases		3.69	%		5.82	%					3.69	%		5.82	%
Nonperforming assets to total assets		2.54	%		3.89	%					2.54	%		3.89	%
Annualized net charge-offs to average
loans and leases (2)		1.37	%		3.34	%					1.27	%		2.61	%

(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						Twelve Months Ended
	December 31,						December 31,
(Dollars in thousands)	2010			2009			2010			2009
GAAP efficiency ratio:
Non-interest expenses	$	26,525		$	25,323		$	103,123		$	103,085
Net interest income plus non-interest income	$	40,999		$	39,367		$	161,600		$	148,995
Efficiency ratio–GAAP		64.70	%		64.33	%		63.81	%		69.19	%
Non-GAAP efficiency ratio:
Non-interest expenses	$	26,525		$	25,323		$	103,123		$	103,085
Less non-GAAP adjustment:
Amortization of intangible assets		472			496			1,959			3,646
Non-interest expenses as adjusted	$	26,053		$	24,827		$	101,164		$	99,439
Net interest income plus non-interest income	$	40,999		$	39,367		$	161,600		$	148,995
Plus non-GAAP adjustment:
Tax-equivalent income		1,352			1,376			4,836			4,839
Less non-GAAP adjustments:
Securities gains		473			211			796			418
OTTI recognized in earnings		(43	)		-			(512	)		-
Net interest income plus non-interest income - as adjusted	$	41,921		$	40,532		$	166,152		$	153,416
Efficiency ratio–Non-GAAP		62.15	%		61.25	%		60.89	%		64.82	%
Tangible common equity ratio:
Total stockholders' equity	$	407,569		$	373,586		$	407,569		$	373,586
Accumulated other comprehensive income (loss)		2,620			2,652			2,620			2,652
Goodwill		(76,816	)		(76,816	)		(76,816	)		(76,816	)
Other intangible assets, net		(6,579	)		(8,537	)		(6,579	)		(8,537	)
Preferred stock		-			(80,095	)		-			(80,095	)
Tangible common equity	$	326,794		$	210,790		$	326,794		$	210,790
Total assets	$	3,519,388		$	3,630,478		$	3,519,388		$	3,630,478
Goodwill		(76,816	)		(76,816	)		(76,816	)		(76,816	)
Other intangible assets, net		(6,579	)		(8,537	)		(6,579	)		(8,537	)
Tangible assets	$	3,435,993		$	3,545,125		$	3,435,993		$	3,545,125
Tangible common equity ratio		9.51	%		5.95	%		9.51	%		5.95	%

Sandy Spring Bancorp, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CONDITION (Unaudited)

	December 31,
(Dollars in thousands)	2010			2009
Assets
Cash and due from banks	$	44,696		$	49,430
Federal funds sold		1,813			1,863
Interest-bearing deposits with banks		16,608			8,503
Cash and cash equivalents		63,117			59,796
Residential mortgage loans held for sale (at fair value)		22,717			12,498
Investments available-for-sale (at fair value)		907,283			858,433
Investments held-to-maturity — fair value of $104,124 and $137,787 at December 31, 2010 and 2009, respectively		101,590			132,593
Other equity securities		34,070			32,773
Total loans and leases		2,156,232			2,298,010
Less: allowance for loan and lease losses		(62,135	)		(64,559	)
Net loans and leases		2,094,097			2,233,451
Premises and equipment, net		49,004			49,606
Other real estate owned		9,493			7,464
Accrued interest receivable		12,570			13,653
Goodwill		76,816			76,816
Other intangible assets, net		6,579			8,537
Other assets		142,052			144,858
Total assets	$	3,519,388		$	3,630,478
Liabilities
Noninterest-bearing deposits	$	566,812		$	540,578
Interest-bearing deposits		1,983,060			2,156,264
Total deposits		2,549,872			2,696,842
Securites sold under retail repurchase agreements and federal funds purchased		96,243			89,062
Advances from FHLB		405,758			411,584
Subordinated debentures		35,000			35,000
Accrued interest payable and other liabilities		24,946			24,404
Total liabilities		3,111,819			3,256,892
Stockholders' Equity
Preferred stock—par value $1.00 (liquidation preference of $1,000 per share) shares authorized 83,094, shares issued and outstanding at December 31, 2009; 83,094, net of discount of $2,999 at December 31, 2009		-			80,095
Common stock — par value $1.00; shares authorized 49,916,906; shares issued and outstanding 24,046,627 and 16,487,852 at December 31, 2010 and 2009, respectively		24,047			16,488
Warrants		3,699			3,699
Additional paid in capital		177,344			87,334
Retained earnings		205,099			188,622
Accumulated other comprehensive loss		(2,620	)		(2,652	)
Total stockholders' equity		407,569			373,586
Total liabilities and stockholders' equity	$	3,519,388		$	3,630,478

Sandy Spring Bancorp, Inc. and Subsidiaries

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

	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
(Dollars in thousands, except per share data)	2010			2009			2010			2009
Interest Income:
Interest and fees on loans and leases	$	28,047		$	30,320		$	115,789		$	126,899
Interest on loans held for sale		213			113			534			767
Interest on deposits with banks		19			37			177			149
Interest and dividends on securities:
Taxable		5,984			6,272			24,624			19,945
Exempt from federal income taxes		1,850			1,907			7,222			7,467
Interest on federal funds sold		1			-			3			3
Total interest income		36,114			38,649			148,349			155,230
Interest Expense:
Interest on deposits		3,193			6,803			16,934			34,921
Interest on retail repurchase agreements and federal funds purchased		71			83			269			308
Interest on advances from FHLB		3,650			3,703			14,599			14,708
Interest on subordinated debt		247			227			940			1,585
Total interest expense		7,161			10,816			32,742			51,522
Net interest income		28,953			27,833			115,607			103,708
Provision for loan and lease losses		2,323			21,084			25,908			76,762
Net interest income after provision for loan and lease losses		26,630			6,749			89,699			26,946
Non-interest Income:
Investment securities gains		473			211			796			418
Total other-than-temporary impairment ("OTTI") losses		(337	)		-			(1,505	)		-
Portion of OTTI losses recognized in other comprehensive income, before taxes		294			-			993			-
Net OTTI recognized in earnings		(43	)		-			(512	)		-
Service charges on deposit accounts		2,342			2,896			10,326			11,433
Gains on sales of mortgage loans		707			434			3,251			3,253
Fees on sales of investment products		974			761			3,438			2,823
Trust and investment management fees		2,799			2,358			10,287			9,421
Insurance agency commissions		1,334			1,098			5,229			5,236
Income from bank owned life insurance		695			730			2,800			2,906
Visa check fees		887			776			3,325			2,920
Other income		1,878			2,270			7,053			6,877
Total non-interest income		12,046			11,534			45,993			45,287
Non-interest Expenses:
Salaries and employee benefits		14,077			13,141			55,470			54,460
Occupancy expense of premises		2,852			2,702			11,477			10,710
Equipment expenses		1,153			1,359			4,808			5,691
Marketing		681			777			2,359			2,166
Outside data services		985			967			3,992			3,721
FDIC insurance		1,114			1,124			4,497			6,092
Amortization of intangible assets		472			496			1,959			3,646
Other expenses		5,191			4,757			18,561			16,599
Total non-interest expenses		26,525			25,323			103,123			103,085
Income (loss) before income taxes		12,151			(7,040	)		32,569			(30,852	)
Income tax expense (benefit)		3,875			(3,822	)		9,049			(15,997	)
Net income (loss)	$	8,276		$	(3,218	)	$	23,520		$	(14,855	)
Preferred stock dividends and discount accretion		1,672			1,203			6,149			4,810
Net income (loss) available to common stockholders	$	6,604		$	(4,421	)	$	17,371		$	(19,665	)
Net Income Per Share Amounts:
Basic net income (loss) per share	$	0.34		$	(0.20	)	$	1.05		$	(0.90	)
Basic net income (loss) per common share		0.27			(0.27	)		0.78			(1.20	)
Diluted net income (loss) per share	$	0.34		$	(0.20	)	$	1.05		$	(0.90	)
Diluted net income (loss) per common share		0.27			(0.27	)		0.78			(1.20	)
Dividends declared per common share	$	0.01		$	0.01		$	0.04		$	0.37

Sandy Spring Bancorp, Inc. and Subsidiaries

HISTORICAL TRENDS - QUARTERLY FINANCIAL DATA (Unaudited)

	2010												2009
(Dollars in thousands, except per share data)	Q4			Q3			Q2			Q1			Q4			Q3			Q2			Q1
Profitability for the quarter:
Tax-equivalent interest income	$	37,466		$	38,688		$	38,663		$	38,368		$	40,025		$	40,516		$	39,791		$	39,737
Interest expense		7,161			7,868			8,512			9,201			10,816			12,783			14,220			13,703
Tax-equivalent net interest income		30,305			30,820			30,151			29,167			29,209			27,733			25,571			26,034
Tax-equivalent adjustment		1,352			1,321			1,155			1,008			1,376			1,331			1,123			1,009
Provision for loan and lease losses		2,323			2,453			6,107			15,025			21,084			34,450			10,615			10,613
Non-interest income		12,046			10,738			11,869			11,340			11,534			10,770			11,009			11,974
Non-interest expenses		26,525			25,339			25,953			25,306			25,323			26,675			26,837			24,250
Income (loss) before income taxes		12,151			12,445			8,805			(832	)		(7,040	)		(23,953	)		(1,995	)		2,136
Income tax expense (benefit)		3,875			3,961			2,546			(1,333	)		(3,822	)		(10,379	)		(1,715	)		(81	)
Net Income (loss)		8,276			8,484			6,259			501			(3,218	)		(13,574	)		(280	)		2,217
Net Income (loss) available to common stockholders	$	6,604		$	6,410		$	5,056		$	(699	)	$	(4,421	)	$	(14,779	)	$	(1,482	)	$	1,017
Financial ratios:
Return on average assets		0.73	%		0.70	%		0.56	%		(0.08	)%		(0.48	)%		(1.62	)%		(0.17	)%		0.12	%
Return on average common equity		6.34	%		6.26	%		5.13	%		(0.92	)%		(4.66	)%		(19.01	)%		(1.90	)%		1.32	%
Net interest margin		3.61	%		3.64	%		3.58	%		3.56	%		3.40	%		3.27	%		3.11	%		3.39	%
Efficiency ratio - GAAP (1)		64.70	%		62.98	%		63.51	%		64.07	%		64.36	%		71.68	%		75.70	%		65.54	%
Efficiency ratio - Non-GAAP (1)		62.15	%		59.27	%		60.59	%		61.56	%		61.29	%		66.49	%		70.58	%		61.29	%
Per share data:
Basic net income (loss) per share	$	0.34		$	0.35		$	0.26		$	0.03		$	(0.20	)	$	(0.83	)	$	(0.02	)	$	0.14
Basic net income (loss) per common share		0.27			0.27			0.21			(0.04	)		(0.27	)		(0.90	)		(0.09	)		0.06
Diluted net income (loss) per share		0.34			0.35			0.26			0.03			(0.20	)		(0.83	)		(0.02	)		0.13
Diluted net income (loss) per common share		0.27			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			0.01			0.12			0.12			0.12
Book value per common share		16.95			17.14			16.80			16.33			17.80			18.25			18.92			19.06
Average fully diluted shares		24,087,482			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	$	473		$	25		$	95		$	203		$	211		$	15		$	30		$	162
Net OTTI recognized in earnings		(43	)		(380	)		(89	)		-			-			-			-			-
Service charges on deposit accounts		2,342			2,567			2,791			2,626			2,896			2,823			2,851			2,863
Gains on sales of mortgage loans		707			915			1,020			609			434			1,011			786			1,022
Fees on sales of investment products		974			782			941			741			761			740			622			700
Trust and investment management fees		2,799			2,505			2,534			2,449			2,358			2,406			2,370			2,287
Insurance agency commissions		1,334			978			928			1,989			1,098			1,048			1,040			2,050
Income from bank owned life insurance		695			709			703			693			730			740			725			711
Visa check fees		887			843			855			740			776			758			748			638
Other income		1,878			1,794			2,091			1,290			2,270			1,229			1,837			1,541
Total non-interest income	$	12,046		$	10,738		$	11,869		$	11,340		$	11,534		$	10,770		$	11,009		$	11,974
Non-interest expense:
Salaries and employee benefits	$	14,077		$	13,841		$	14,181		$	13,371		$	13,141		$	14,411		$	13,704		$	13,204
Occupancy expense of premises		2,852			2,826			2,709			3,090			2,702			2,685			2,548			2,775
Equipment expenses		1,153			1,137			1,304			1,214			1,359			1,444			1,374			1,514
Marketing		681			589			573			516			777			484			485			420
Outside data services		985			966			918			1,123			967			987			961			806
FDIC insurance		1,114			1,056			1,186			1,141			1,124			1,219			2,790			959
Amortization of intangible assets		472			495			496			496			496			1,048			1,047			1,055
Other expenses		5,191			4,429			4,586			4,355			4,757			4,397			3,928			3,517
Total non-interest expense	$	26,525		$	25,339		$	25,953		$	25,306		$	25,323		$	26,675		$	26,837		$	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)	Q4			Q3			Q2			Q1			Q4			Q3			Q2			Q1
Balance sheets at quarter end:
Residential mortgage loans	$	436,534		$	442,723		$	458,502		$	460,129		$	457,414		$	455,312		$	450,500		$	461,359
Residential construction loans		91,273			92,485			86,393			83,902			92,283			115,258			138,923			163,861
Commercial mortgage loans		889,415			903,195			900,312			882,040			894,951			873,438			862,315			859,882
Commercial construction loans		92,714			96,823			95,357			130,064			131,789			174,052			199,278			222,805
Commercial business loans and leases		265,806			258,566			284,708			302,995			321,924			314,599			333,025			342,870
Consumer loans		380,490			391,415			393,560			397,527			399,649			401,623			405,348			411,068
Total loans and leases		2,156,232			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		(62,135	)		(67,282	)		(71,377	)		(69,575	)		(64,559	)		(62,937	)		(58,317	)		(59,798	)
Net loans and leases		2,094,097			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			76,816
Other intangible assets, net		6,579			7,050			7,546			8,042			8,537			9,033			10,080			11,128
Total assets		3,519,388			3,606,617			3,701,150			3,673,246			3,630,478			3,632,391			3,617,497			3,519,432
Total deposits		2,549,872			2,585,496			2,659,956			2,653,448			2,696,842			2,683,487			2,650,845			2,553,912
Customer repurchase agreements		86,243			97,884			86,062			78,416			74,062			84,138			98,827			91,928
Total stockholders' equity		407,569			451,717			483,681			471,857			373,586			380,571			391,262			392,522
Quarterly average balance sheets:
Residential mortgage loans	$	461,700		$	466,437		$	467,970		$	462,803		$	464,737		$	460,772		$	477,955		$	481,721
Residential construction loans		92,033			87,522			85,617			89,732			106,115			123,892			150,914			176,811
Commercial mortgage loans		895,262			906,010			887,259			891,722			877,419			871,831			862,658			854,402
Commercial construction loans		96,498			96,502			115,965			131,265			165,784			191,021			216,897			224,229
Commercial business loans and leases		256,645			272,353			294,168			317,492			312,547			327,569			341,039			359,820
Consumer loans		387,375			393,491			395,833			398,233			401,164			401,930			408,200			408,843
Total loans and leases		2,189,513			2,222,315			2,246,812			2,291,247			2,327,766			2,377,015			2,457,663			2,505,826
Securities		1,112,128			1,058,175			1,013,756			970,681			1,026,179			956,350			772,878			536,981
Total earning assets		3,332,705			3,360,758			3,379,388			3,318,070			3,409,867			3,370,823			3,298,923			3,117,590
Total assets		3,594,812			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		2,534,716			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		587,570			568,835			547,245			524,313			549,347			532,462			527,713			476,361
Total deposits		2,584,025			2,607,190			2,612,633			2,640,853			2,718,882			2,661,108			2,581,837			2,431,471
Customer repurchase agreements		92,049			87,927			85,178			81,622			92,471			95,310			93,980			69,212
Total stockholders' equity		446,256			455,101			475,521			387,099			380,534			391,571			393,201			391,673
Capital and credit quality measures:
Average equity to average assets		12.41	%		12.57	%		13.05	%		10.78	%		10.36	%		10.79	%		11.08	%		11.60	%
Allowance for loan and lease losses to loans and leases		2.88	%		3.08	%		3.22	%		3.08	%		2.81	%		2.70	%		2.44	%		2.43	%
Non-performing loans to total loans		3.69	%		4.27	%		4.93	%		6.05	%		5.82	%		6.14	%		5.84	%		4.90	%
Non-performing assets to total assets		2.54	%		2.87	%		3.19	%		3.90	%		3.89	%		4.14	%		4.05	%		3.57	%
Annualized net charge-offs to average loans and leases (1)		1.37	%		1.18	%		0.77	%		1.78	%		3.34	%		5.00	%		1.97	%		0.22	%
Allowance for loan and lease losses to non-performing loans		78.03	%		72.08	%		65.30	%		50.98	%		48.28	%		43.90	%		41.80	%		49.54	%
Net charge-offs	$	7,470		$	6,548		$	4,305		$	10,009		$	19,462		$	29,831		$	12,095		$	1,341
Non-performing assets:
Non-accrual loans and leases	$	63,327		$	73,876		$	83,887		$	110,719		$	111,180		$	127,473		$	123,117		$	110,761
Loans and leases 90 days past due		14,154			18,268			24,226			25,085			19,001			15,491			16,004			9,545
Restructured loans and leases		2,148			1,199			1,199			682			3,549			395			395			395
Total non-performing loans		79,629			93,343			109,312			136,486			133,730			143,359			139,516			120,701
Other real estate owned, net		9,493			10,011			8,730			6,796			7,464			6,873			6,829			5,094
Other assets owned		200			200			-			-			-			-			-			-
Total non-performing assets	$	89,322		$	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)

	Three Months Ended December 31,
	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 (2)	$	461,700		$	5,849		5.09	%	$	464,737		$	6,540		5.63	%
Residential construction loans		92,033			993		4.28			106,115			1,332		4.98
Commercial mortgage loans		895,262			13,418		5.95			877,419			13,501		6.10
Commercial construction loans		96,498			919		3.78			165,784			957		2.29
Commercial business loans and leases		256,645			3,355		5.19			312,547			4,124		5.24
Consumer loans		387,375			3,726		3.84			401,164			3,979		3.95
Total loans and leases (3)		2,189,513			28,260		5.13			2,327,766			30,433		5.20
Taxable securities		934,784			6,403		2.68			854,637			6,633		3.04
Tax-exempt securities (4)		177,344			2,783		6.28			171,542			2,922		6.85
Interest-bearing deposits with banks		29,410			19		0.26			54,359			37		0.27
Federal funds sold		1,654			1		0.18			1,563			-		0.13
Total interest-earning assets		3,332,705			37,466		4.46			3,409,867			40,025		4.66
Less:  allowance for loan and lease losses		(67,164	)							(65,093	)
Cash and due from banks		45,042								44,646
Premises and equipment, net		48,326								49,894
Other assets		235,903								233,068
Total assets	$	3,594,812							$	3,672,382
Liabilities and Stockholders' Equity
Interest-bearing demand deposits	$	302,401			68		0.09	%	$	262,327			94		0.14	%
Regular savings deposits		169,021			36		0.08			153,692			34		0.09
Money market savings deposits		882,323			1,009		0.45			935,980			2,035		0.86
Time deposits		642,710			2,080		1.28			817,536			4,640		2.25
Total interest-bearing deposits		1,996,455			3,193		0.63			2,169,535			6,803		1.24
Other borrowings		96,016			71		0.30			92,906			83		0.35
Advances from FHLB		407,245			3,650		3.56			411,711			3,703		3.57
Subordinated debentures		35,000			247		2.82			35,000			227		2.59
Total interest-bearing liabilities		2,534,716			7,161		1.12			2,709,152			10,816		1.59
Noninterest-bearing demand deposits		587,570								549,347
Other liabilities		26,270								33,349
Stockholders' equity		446,256								380,534
Total liabilities and stockholders' equity	$	3,594,812							$	3,672,382
Net interest income and spread				$	30,305		3.34	%				$	29,209		3.07	%
Less: tax-equivalent adjustment					1,352								1,376
Net interest income				$	28,953							$	27,833
Interest income/earning assets							4.46	%							4.66	%
Interest expense/earning assets							0.85								1.26
Net interest margin							3.61	%							3.40	%

(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 in the above table to compute yields aggregated to $1.4 million and $1.4 million in 2010 and 2009, respectively.

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

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

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

Sandy Spring Bancorp, Inc. and Subsidiaries

CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES (Unaudited)

	Twelve Months Ended December 31,
	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 (2)	$	464,462		$	24,838		5.35	%	$	471,221		$	27,560		5.85	%
Residential construction loans		88,729			4,037		4.55			139,197			7,165		5.15
Commercial mortgage loans		895,103			53,877		6.02			866,655			53,280		6.15
Commercial construction loans		109,925			3,576		3.25			199,299			5,669		2.84
Commercial business loans and leases		284,963			14,789		5.19			335,093			17,991		5.37
Consumer loans		393,703			15,206		3.88			405,005			16,001		3.96
Total loans and leases (3)		2,236,885			116,323		5.20			2,416,470			127,666		5.28
Taxable securities		875,292			25,630		2.93			662,853			20,784		3.14
Tax-exempt securities (4)		163,834			11,052		6.75			161,949			11,467		7.08
Interest-bearing deposits with banks		69,755			177		0.25			56,980			149		0.26
Federal funds sold		1,773			3		0.17			2,045			3		0.19
Total interest-earning assets		3,347,539			153,185		4.58			3,300,297			160,069		4.85
Less:  allowance for loan and lease losses		(69,393	)							(59,961	)
Cash and due from banks		44,736								45,038
Premises and equipment, net		48,738								50,649
Other assets		241,368								221,211
Total assets	$	3,612,988							$	3,557,234
Liabilities and Stockholders' Equity
Interest-bearing demand deposits	$	292,106			324		0.11	%	$	254,047			420		0.17	%
Regular savings deposits		165,032			164		0.10			152,383			210		0.14
Money market savings deposits		890,187			5,015		0.56			841,336			10,725		1.27
Time deposits		706,487			11,431		1.62			829,817			23,566		2.84
Total interest-bearing deposits		2,053,812			16,934		0.82			2,077,583			34,921		1.68
Other borrowings		89,932			269		0.30			88,198			308		0.35
Advances from FHLB		409,697			14,599		3.56			412,074			14,708		3.57
Subordinated debentures		35,000			940		2.69			35,000			1,585		4.53
Total interest-bearing liabilities		2,588,441			32,742		1.27			2,612,855			51,522		1.97
Noninterest-bearing demand deposits		557,197								521,701
Other liabilities		26,155								33,457
Stockholders' equity		441,195								389,221
Total liabilities and stockholders' equity	$	3,612,988							$	3,557,234
Net interest income and spread				$	120,443		3.31	%				$	108,547		2.88	%
Less: tax-equivalent adjustment					4,836								4,839
Net interest income				$	115,607							$	103,708
Interest income/earning assets							4.58	%							4.85	%
Interest expense/earning assets							0.98								1.56
Net interest margin							3.60	%							3.29	%

(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 in the above table to compute yields aggregated to $4.8 million and $4.8 million in 2010 and 2009, respectively.

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

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

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