SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934 (Amendment No. ___)
Filed by
the Registrant x
Filed by
a Party other than the Registrant ¨
Check the
appropriate box:
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Preliminary
Proxy Statement
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¨
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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Definitive
Proxy Statement
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¨
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Definitive
Additional Materials
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¨
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Soliciting
Material pursuant to §240.14a-12
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SANDY
SPRING BANCORP, INC.
(Name of
Registrant as Specified in Its Charter)
(Name of
Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment
of Filing Fee (Check the appropriate box):
x
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fee required.
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¨
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computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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N/A
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Aggregate
number of securities to which transaction applies:
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N/A
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Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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maximum aggregate value of transaction:
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______________________________________________________
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![](logo.jpg)
17801
Georgia Avenue, Olney, Maryland 20832
NOTICE
OF 2009 ANNUAL MEETING OF SHAREHOLDERS
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Date:
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Wednesday,
April 22, 2009
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Time:
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3:00
p.m., EDT
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Place:
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Ten
Oaks Ballroom
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5000
Signal Bell Lane
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Clarksville,
MD 21029
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The 2009 annual meeting of shareholders
of Sandy Spring Bancorp, Inc. (Bancorp) will be held as indicated above for the
purposes of considering:
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(1)
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The
election of four (4) director nominees to serve as Class I directors with
terms expiring at the 2012 annual meeting, in each case until their
successors are duly elected and qualified;
and
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(2)
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A
non-binding resolution to approve the compensation of the named executive
officers; and
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(3)
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The
ratification of the appointment of Grant Thornton LLP as the independent
registered public accounting firm for the year
2009.
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(4)
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Such
other business as may properly come before the annual meeting or any
adjournment thereof.
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Enclosed with this notice is a proxy
card, the 2009 proxy statement and 2008 Annual Report on Form
10-K. Only holders of record of Bancorp's common stock as of the
close of business on February 25, 2009 will be entitled to notice of, and to
vote at, the annual meeting, or any adjournment thereof. Please
complete the proxy card and mail it in the enclosed
envelope. You may also choose to vote your shares using the
Internet, as explained on the proxy card. If you attend the meeting,
you may withdraw your proxy and vote in person.
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By
order of the board of directors,
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Ronald
E. Kuykendall
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General
Counsel & Secretary
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Olney,
Maryland
March 16,
2009
Important
Notice Regarding the Availability of Proxy Materials for the
2009
Annual Meeting of Shareholders to be held on April 22, 2009
This
proxy statement and Bancorp’s 2008 Annual Report on Form 10-K are
available electronically at
www.sandyspringbank.com/proxy
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YOUR
VOTE IS VERY IMPORTANT. PLEASE VOTE YOUR SHARES BY COMPLETING AND RETURNING THE
ENCLOSED PROXY CARD OR VOTING YOUR SHARES ELECTRONICALLY, WHETHER OR NOT YOU
PLAN TO BE PRESENT IN PERSON AT THE ANNUAL MEETING.
Table of
Contents
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3
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Who
Can Vote
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3
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Executing
Your Right to Vote
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3
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Costs
of Proxy Solicitation
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3
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Internet
Voting
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3
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Changing
Your Vote
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3
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Delivery
of Proxy Materials
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4
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PROPOSAL
I: Election of Directors
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6
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Corporate
Governance and Other Matters
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6
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Corporate
Governance Policy and Code of Business Conduct
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6
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Director
Independence
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6
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Board
Committees
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6
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Director
Attendance at Meetings
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8
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Director
Compensation
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8
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Stock
Ownership of Directors and Executive Officers
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10
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Owners
of More Than 5% of Bancorp's Common Stock
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11
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Transactions
and Relationships with Management
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11
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Shareholder
Proposals and Communications
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11
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Section
16(a) Beneficial Ownership Reporting Compliance
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12
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Compensation
Discussion and Analysis
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13
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Overall
Compensation Philosophy and Guiding Principles
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13
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Compensation
Decision Process
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13
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Role
of Human Resources and Compensation Committee, Management and the
Compensation
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14
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Consultants
in the Executive Compensation Process
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Compensation
Structure and Elements
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15
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Factors
for Determining Compensation
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18
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Employment
and Other Significant Agreements with Named Executive
Officers
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19
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Impact
of Accounting and Tax on the Form of Compensation
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20
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Impact
of Restrictions on Executive Compensation for TARP
Participants
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21
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Stock
Ownership Guidelines
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21
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Human
Resources and Compensation Committee Report
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21
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Executive
Compensation Tables
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22
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PROPOSAL
II: A Non-Binding Resolution to Approve the Compensation of the
Named
Executive
Officers
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28
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PROPOSAL
III: The Ratification of the Appointment of Grant Thornton LLP
as the
Independent
Registered Public Accounting Firm for the Year 2009
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29
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Audit
and Non-Audit Fees
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29
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29
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Report
of the Audit Committee
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30
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SANDY
SPRING BANCORP, INC.
PROXY
STATEMENT
General
Information
This
proxy statement is furnished in connection with the solicitation of proxies by
the board of directors of Sandy Spring Bancorp, Inc. (Bancorp) to be used at the
2009 annual meeting of shareholders on Wednesday, April 22, 2009, at 3:00 p.m.
EDT at Ten Oaks Ballroom, 5000 Signal Bell Lane, Clarksville,
Maryland. The notice of annual meeting, the proxy card, and this
proxy statement are being first mailed on or about March 16, 2009, to
shareholders of record as of the close of business on February 25, 2009 (the
Record Date).
Who
Can Vote
You can
vote if you owned shares of Bancorp common stock, par value $1.00 per share, as
of the close of business on the Record Date. Each share of common
stock is entitled to one vote. The number of common shares
outstanding on the Record Date was approximately 16,445,178. When you give
Bancorp your proxy, you authorize Bancorp to vote your shares per your
instructions whether or not you attend the annual meeting. The presence, in
person or by proxy, of at least a majority of the total number of outstanding
shares of common stock is necessary to constitute a quorum at the annual
meeting.
Executing
Your Right to Vote
By
completing and returning the enclosed proxy card in time to be voted at the
annual meeting, the shares represented by it will be voted in accordance with
the instructions marked on the card. Executed but unmarked proxies will be voted
on all business matters as recommended by the board of
directors. Proxies marked as abstentions and proxies for shares held
in the name of a bank, broker, or other nominee marked as not voted will be
counted only for purposes of determining a quorum at the annual
meeting.
The board
of directors does not know of any other matters that are to come before the
annual meeting except for incidental, procedural matters. If any other matters
are properly brought before the annual meeting, the persons named in the
accompanying proxy card will vote the shares represented by each proxy on such
matters as determined by a majority of the board of directors.
Costs
of Proxy Solicitation
The cost
of soliciting proxies will be borne by Bancorp. In addition to the solicitation
of proxies by mail, Bancorp also may solicit proxies through its directors,
officers, and employees. Bancorp also will request persons, firms, and
corporations holding shares in their names or in the name of nominees that are
beneficially owned by others to send proxy materials to and obtain proxies from
those beneficial owners and will reimburse the holders for their reasonable
expenses in doing so.
Internet
Voting
Bancorp
is pleased to offer its shareholders the convenience of voting online via the
Internet. Please check your proxy card for
instructions. Please be aware that if you vote your shares over the
Internet, you may incur costs or charges from your Internet access provider for
which you are responsible.
Changing
Your Vote
Your
presence at the annual meeting will not automatically revoke your proxy.
However, you may revoke a proxy at any time prior to its exercise by 1) filing a
written notice of revocation with Ronald E. Kuykendall, General Counsel and
Secretary; or 2) delivering to Bancorp a duly executed proxy bearing a later
date; or 3) attending the annual meeting and casting a ballot in
person.
Delivery
and Accessibility Proxy Materials
Bancorp
plans to take advantage of the householding rules of the Securities and Exchange
Commission (SEC) that permit the delivery of one set of the proxy materials to
shareholders who have the same address to achieve the benefit of reduced
printing and mailing costs. Shareholders residing at a shared address
will continue to receive separate proxy cards. If you wish to receive
a separate set of materials, please write or call as specified below, and we
will promptly mail them to you at no charge. If a bank, broker or
other nominee holds your shares, please contact your bank, broker or nominee
directly.
The
2008 Annual Report on Form 10-K for the year ended December 31, 2008, as filed
with the SEC, but excluding exhibits, is provided with this proxy statement and
both documents are available on the Internet at
www.sandyspringbank.com/proxy. Shareholders may obtain a copy of the
exhibits to the Annual Report on Form 10-K by writing Ronald E. Kuykendall,
General Counsel and Secretary, at Sandy Spring Bancorp, Inc., 17801 Georgia
Avenue, Olney, Maryland 20832. Shareholders also may access a copy of the Form
10-K including exhibits on the SEC Web site at www.sec.gov.
PROPOSAL I: Election
of Directors
In
accordance with Bancorp's articles of incorporation and bylaws, the board of
directors has set the total number of directors at thirteen. The
articles of incorporation divide the directors into three classes, as nearly
equal in number as possible. In general, the term of office of only one class of
directors expires in each year, and their successors are elected for terms of
three years or until their successors are elected and qualified.
At the
annual meeting a total of four director-nominees are before you for election,
all of whom are incumbent Bancorp directors. With respect to the
election of directors, a plurality of all the votes cast at the annual meeting
will be sufficient to elect a nominee as a director.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES NAMED BELOW AS A
DIRECTOR OF BANCORP.
Information
as to Nominees and Incumbent Directors
The
following information sets forth the names of the four nominees for
election. Each has given his or her consent to be nominated and has
agreed to serve if elected. If any person nominated by the board of directors is
unable to accept election, the proxies will be voted for the election of such
other person or persons as the present board of directors may
designate.
Also
provided is information on the remaining incumbent directors. Unless described
otherwise, each director has held his or her current occupation for at least
five years, and the ages listed are as of the Record Date. Bancorp's
Corporate Governance Policy and Bylaws require a director to retire immediately
following the annual meeting following the date on which he or she attains 70
years of age. Therefore, Directors Charles F. Mess, Sr. and
Marshall H. Groom will be retiring from service at the close of the annual
meeting.
All
directors of Bancorp and its principal subsidiary Sandy Spring Bank (the Bank)
are composed of the same persons. Throughout this proxy statement,
the singular use of "board of directors" or "board" shall be intended to refer
to both boards unless otherwise indicated.
Incumbent
Class I Directors – Nominees for Terms to Expire at the 2012 Annual
Meeting:
Name and Position(s) Held
with Bancorp
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Age
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Principal Occupation and Employer
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Member
of Board
Since
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Current
Term
Expires
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Susan
D. Goff
Director
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63
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Retired.
Former executive of Mid-Atlantic Medical Services, Inc., a health
maintenance organization.
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1994
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2009
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Robert
L. Orndorff
Director
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52
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President
of RLO Contractors, Inc., an excavating contractor in Dayton,
Maryland.
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1991
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2009
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David
E. Rippeon
Director
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60
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President
and CEO of Gaithersburg Equipment Co., Frederick Equipment Co., and Howard
County Equipment, tractor and equipment dealerships.
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1997
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2009
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Daniel
J. Schrider
Director
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44
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President
and CEO of Sandy Spring Bancorp, Inc. and Sandy Spring
Bank
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2009
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2009
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Incumbent
Class II Directors - Continuing
Mark
E. Friis
Director
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53
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President
and CEO and owner of Rodgers Consulting, Inc., a land planning and
engineering firm in Germantown, Maryland.
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2005
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2011
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Hunter
R. Hollar
Chairman
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60
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Retired. Former
President and Chief Executive Officer of Sandy Spring Bancorp, Inc. and
Sandy Spring Bank
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1990
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2011
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Pamela
A. Little
Director
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55
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CFO
of ATS a provider of IT services to the federal government in McLean,
Virginia (2007); former CFO of Athena Innovative Solutions, Inc.
(2005-2007); former CFO of ZKD, Inc. (2004-2005). All of these firms are
government contractors.
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2005
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2011
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Craig
A. Ruppert
Director
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55
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President
and owner of The Ruppert Companies, comprised of nursery and landscaping,
business and investment management, and commercial real estate development
and management businesses.
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2002
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2011
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Incumbent
Class III Directors - Continuing
Solomon
Graham
Director
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66
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President
and CEO of Quality Biological, Inc., a biotechnology firm providing
reagents for medical research.
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1994
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2010
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Gilbert
L. Hardesty
Director
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68
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Retired.
Former President of Crestar Bank-Annapolis and former President of
Annapolis Federal Savings Bank.
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1997
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2010
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Lewis
R. Schumann
Director
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65
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Attorney. Partner
in Miller, Miller and Canby, Chtd in Rockville, Maryland
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1994
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2010
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Corporate Governance and
Other Matters
Corporate
Governance Policy and Code of Business Conduct
Bancorp's
business affairs and strategic direction are overseen by its board of
directors. The board remains committed to setting a tone of the
highest ethical standards and performance for Bancorp's management, officers,
and company as a whole. The board believes that strong corporate
governance practices are a critical element of doing business
today. To that end, the Corporate Governance Policy is reviewed
periodically to ensure it reflects the best interests of Bancorp and its
shareholders.
In
addition, Bancorp's board of directors has adopted a Code of Business Conduct
applicable to all directors, officers, and employees of Bancorp and its
subsidiaries. It sets forth the legal and ethical standards that govern the
conduct of business performed by Bancorp and its subsidiaries. The Code of
Business Conduct includes a Code of Ethics established pursuant to Section 406
of the Sarbanes-Oxley Act of 2002, related SEC regulations, and the listing
standards of the Nasdaq Stock Market, Inc.
More
information about corporate governance, including the Corporate Governance
Policy and the Code of Ethics, and board committee charters may be found on
Bancorp's investor relations Web site maintained at www.sandyspringbank.com.
Director
Independence
The board
of directors has affirmatively determined that all directors other than Mr.
Hollar and Mr. Schrider are independent under Nasdaq's listing standards. Those
independent directors are: Mark E. Friis, Susan D. Goff, Solomon Graham,
Marshall H. Groom, Gilbert L. Hardesty, Pamela A. Little, Charles F. Mess, Sr.,
Robert L. Orndorff, David E. Rippeon, Craig A. Ruppert, and Lewis R.
Schumann.
The board
of directors complies with or exceeds the independence requirements for the
board and board committees established by the Nasdaq stock market, federal
securities and banking laws and the additional standards included in Bancorp's
Corporate Governance Policy.
In
accordance with the Corporate Governance Policy, no more than two inside
directors may be on the board at any one time. All other directors must be
independent. An inside director is defined as a director that is employed or was
employed within the last three years as either an officer of Bancorp or the Bank
and serves as a member of the board of directors. In making its determination of
independence, the board of directors did not consider any transactions,
relationship, or arrangements that are not included in the section of this proxy
statement entitled "Transactions and Relationships with
Management."
Board
Committees
Bancorp's
board of directors has the following standing committees: Audit, Executive and
Corporate Governance, Human Resources and Compensation, and
Nominating. Each committee has a written charter which may be found
on Bancorp's investor relations Web site at
www.sandyspringbank.com. The functions, composition, and number of
meetings for these committees in 2008 were as follows:
Audit Committee - The Audit
Committee is appointed by the board to assist in monitoring the integrity of the
financial statements and of financial reporting, including the proper operation
of internal and disclosure controls and procedures in accordance with the
Sarbanes-Oxley Act of 2002, compliance with legal and regulatory requirements
and the independence and performance of internal and external auditors. The
Audit Committee reviews the Forms 10-K and 10-Q prior to filing. All
members of the committee are independent as defined in applicable law,
regulations of the SEC, Nasdaq's listing standards, and the Federal Deposit
Insurance Act and related regulations (the FDIA). Members of the committee also
meet all other applicable requirements of the SEC, FDIA, and Nasdaq's listing
standards for financial, accounting or related expertise. The board of directors
has determined that Pamela A. Little qualifies as an audit committee financial
expert under the Nasdaq listing standards and applicable securities regulations.
During 2008, the Audit Committee held six meetings.
Executive and Corporate Governance
Committee - This committee conducts board business between
regular monthly meetings and provides oversight and guidance to the board of
directors to ensure that the structure, policies, and processes of the board and
its committees facilitate the effective exercise of the board's role in the
governance of Bancorp. The committee reviews and evaluates the policies and
practices with respect to the size, composition, independence and functioning of
the board and its committees as stated in the Corporate Governance Policy.
During 2008, the Executive and Corporate Governance Committee held thirteen
meetings.
Human Resources and Compensation
Committee – Members of this committee are independent directors within
the meaning of the Nasdaq listing standards. The Human Resources and
Compensation Committee recommends salaries and other compensation for executive
officers, considers other compensation and benefit plans and makes
recommendations to the board regarding grants and awards under the 2005 Omnibus
Stock Plan. During 2008, the Human Resources and Compensation Committee held six
meetings.
Nominating Committee - Members
of this committee are independent directors within the meaning of the Nasdaq
listing standards. The Nominating Committee makes recommendations to the board
of directors with respect to nominees for election as directors. In exercising
its responsibilities, the Nominating Committee considers general, minimum
criteria and particular goals and needs of Bancorp for additional competencies
or characteristics. Each director of Bancorp is expected to exhibit
the highest standards in exercising his or her duty of loyalty, care and
commitment to all shareholders and to protect the values and legacy of the
organization. Additionally, directors must manage themselves well in
their personal deportment and display the ability to challenge the thinking of
others and to influence them with constructive approaches. Directors
must be able to read and act upon complex financial statements and
analyses. Finally, directors need to be able to apply informed
judgment and long-term, conceptual and systemic thinking to all
decisions. The board gathers input from all directors prior to the
recruitment of a new director in order to form a collective picture of the
competencies needed. The board also values diversity and seeks to
include women and members of minority groups as well as to maintain a range of
thinking and personality styles. The Nominating Committee encourages
suggestions for qualified candidates to the board from the Chief Executive
Officer, the Chairman of the Board, other directors, and from shareholders, and
is responsible for the evaluation of such suggestions. Shareholders may submit
suggestions for qualified director candidates by writing to Ronald E.
Kuykendall, General Counsel and Secretary, at Sandy Spring Bancorp, Inc., 17801
Georgia Avenue, Olney, Maryland 20832. Submissions should include
information regarding a candidate's background, qualifications, experience and
willingness to serve as a director. In addition, the Nominating
Committee may consider candidates submitted by a third party search firm hired
for the purpose of identifying director candidates. The
Nominating Committee uses the same process for evaluating all nominees,
including those recommended by shareholders, using the board membership criteria
described above. Please see "Shareholder Proposals and
Communications." During 2008, the Nominating Committee held seven
meetings.
2008
Board Committees
Name
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Executive
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Audit
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Human
Resources
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Nominating
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Mark
E. Friis
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X
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X
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Susan
D. Goff
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X
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Chairman
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Solomon
Graham
|
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|
|
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X
|
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Chairman
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Marshall
H. Groom
|
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X
|
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|
|
|
|
X
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Gilbert
L. Hardesty
|
|
X
|
|
|
|
|
|
X
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Hunter
R. Hollar
|
|
X
|
|
|
|
|
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Pamela
A. Little
|
|
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Chairman
|
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Charles
F. Mess, Sr.
|
|
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X
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X
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Robert
L. Orndorff
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Chairman
|
|
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|
X
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David
E. Rippeon
|
|
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X
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X
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Craig
A. Ruppert
|
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X
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X
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X
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Lewis
R. Schumann
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X
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Director
Attendance at Meetings
During
2008, the board of directors held twelve regular joint meetings with attendance
averaging 98%. All incumbent directors attended well over 75%
of the aggregate of (a) the total number of meetings of the board of directors
and (b) the total number of meetings held by all committees on which they
served.
Director
Compensation
Meeting Fees – Non-employee
directors of Sandy Spring Bank received an annual retainer of $11,200. The
chairman of the Audit Committee received an additional retainer of $6,000 and
all other committee chairmen received an additional retainer of
$4,000. Non-employee directors received $880 for attendance at each
meeting of the board of directors and also $800 for attendance at each committee
meeting. Bancorp directors do not receive any additional compensation
(beyond compensation received for service as Bank directors); however,
non-employee directors would receive a fee of $880 for attendance at a meeting
of Bancorp's board of directors not held in conjunction with a meeting of the
Bank's board of directors.
Directors
of the Bank are eligible to defer all or a portion of their fees under the
Director Fee Deferral Plan. The amounts deferred accrued interest at
the Wall Street prime rate in 2008. Beginning in 2009, deferred compensation
will accrue interest at a rate that is not considered “above market” or
preferential. Except in the case of death or financial emergency,
deferred fees and accrued interest are payable only following termination of a
director's service on the board. In the event a director dies during
active service, the Bank may pay benefits that exceed deferred fees and accrued
interest to the extent the Bank owns an insurance policy in effect on the
director’s life at the time of death that pays a greater amount than the total
of deferred fees and accrued interest.
Non-Cash Compensation - Bancorp directors are
also eligible to receive non-incentive stock options, stock appreciation rights,
and restricted stock under Bancorp's 2005 Omnibus Stock Plan. These options have
a maximum term of seven years and an exercise price that may not be less than
100% of the closing price of the common stock on the date of grant. Director
options are included in the computation of share dilution. In 2008,
non-employee directors were granted options for a total of 13,860 shares at a
grant price of $27.96 with a three year vesting schedule and 3,080 shares of
restricted stock with a five year vesting schedule. Under the
Director Stock Purchase Plan, directors may elect to apply from 50% to 100% of
their annual retainers to purchase newly issued Bancorp common stock at market
value.
2008
Non-Employee Director Compensation
Name
|
|
Fees Earned
or Paid in
Cash
(1)
|
|
|
Stock
Awards
(2)
|
|
|
Option
Awards
(3)
|
|
|
Nonqualified Deferred
Compensation
Earnings
(4)
|
|
|
Total
|
|
John
Chirtea(5)
|
|
$ |
6,640 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
6,640 |
|
Mark
E. Friis
|
|
|
34,760 |
|
|
|
3,186 |
|
|
|
4,617 |
|
|
|
218 |
|
|
|
42,781 |
|
Susan
D. Goff
|
|
|
38,480 |
|
|
|
3,186 |
|
|
|
4,617 |
|
|
|
5,853 |
|
|
|
52,136 |
|
Solomon
Graham
|
|
|
32,160 |
|
|
|
3,186 |
|
|
|
4,617 |
|
|
|
4,588 |
|
|
|
44,551 |
|
Marshall
H. Groom
|
|
|
39,360 |
|
|
|
1,174 |
|
|
|
1,364 |
|
|
|
- |
|
|
|
41,898 |
|
Gilbert
L. Hardesty
|
|
|
37,760 |
|
|
|
3,186 |
|
|
|
4,617 |
|
|
|
- |
|
|
|
45,563 |
|
Pamela
A. Little
|
|
|
32,560 |
|
|
|
3,186 |
|
|
|
4,617 |
|
|
|
921 |
|
|
|
41,284 |
|
Charles
F. Mess, Sr.
|
|
|
30,560 |
|
|
|
3,186 |
|
|
|
4,617 |
|
|
|
781 |
|
|
|
39,144 |
|
Robert
L. Orndorff
|
|
|
38,480 |
|
|
|
3,186 |
|
|
|
4,617 |
|
|
|
8,112 |
|
|
|
54,395 |
|
David
E. Rippeon
|
|
|
29,680 |
|
|
|
3,186 |
|
|
|
4,617 |
|
|
|
- |
|
|
|
37,483 |
|
Craig
A. Ruppert
|
|
|
37,760 |
|
|
|
3,186 |
|
|
|
4,617 |
|
|
|
- |
|
|
|
45,563 |
|
Lewis
R. Schumann
|
|
|
29,760 |
|
|
|
3,186 |
|
|
|
4,617 |
|
|
|
7,315 |
|
|
|
44,878 |
|
W.
Drew Stabler(5)
|
|
|
9,840 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
9,840 |
|
(1)
|
All
or a portion of the reported cash compensation may be deferred under the
Director Fee Deferral Plan. Please see the description of “Director
Compensation” on page 8.
|
(2)
|
On
March 26, 2008 the directors noted above were granted 280 shares of
restricted stock. The value reported represents the
compensation expense recognized for financial statement reporting purposes
in accordance with FAS 123(R) for outstanding restricted stock awards for
each director. At December 31, 2008, each non-employee director
had 441 unvested shares of restricted stock with the exception of Mr.
Groom who had 280 shares.
|
(3)
|
On
March 26, 2008 each non-employee director received stock options for 1,260
shares. The value reported represents the compensation expense recognized
for financial statement reporting purposes in accordance with FAS 123(R)
for outstanding stock option awards for each director. As of
the Record Date directors held total outstanding options for the following
number of shares: Friis-3,299; Goff-7,721; Graham-6,959;
Groom-6,420; Hardesty-12,527; Little-3,299; Mess-9,072; Orndorff-11,680;
Rippeon-8,761; Ruppert-7,215;
Schumann-11,314.
|
(4)
|
Amount
reported is the “above-market” interest paid on deferred compensation
pursuant to the Director Fee Deferral Plan as described under “Director
Compensation” on page 8.
|
(5)
|
Messrs.
Stabler and Chirtea retired from the board on April 23,
2008. The reported compensation reflects amounts earned or
accrued from January 1, 2008 through April 23,
2008.
|
Stock Ownership of Directors
and Executive Officers
The
following table sets forth information as of February 13, 2009, with respect to
the shares of common stock beneficially owned by each director continuing in
office and nominee for director of Bancorp, by all directors and executive
officers of Bancorp as a group, and by the following executive officers of
Bancorp and Bank: Hunter R. Hollar, Daniel J. Schrider, Philip J. Mantua, Frank
Small, R. Louis Caceres and Sara E. Watkins (Named Executive Officers for 2008).
Directors qualifying shares are included in shares owned.
Name
|
|
Number of Shares
Owned
(excluding options
and restricted
stock)
(1) (2)
|
|
|
Shares of
Restricted Stock
|
|
|
Number of Shares
That May Be
Acquired Within
60 Days by
Exercising
Options
(3)
|
|
|
Total
|
|
|
Percentage of
Common Stock
Outstanding
(*Less than
1%)
|
|
Mark
E. Friis
|
|
|
12,658 |
|
|
|
441 |
|
|
|
2,042 |
|
|
|
15,141 |
|
|
|
* |
|
Susan
D. Goff
|
|
|
5,007 |
|
|
|
441 |
|
|
|
6,464 |
|
|
|
11,912 |
|
|
|
* |
|
Solomon
Graham
|
|
|
12,048 |
|
|
|
441 |
|
|
|
5,702 |
|
|
|
18,191 |
|
|
|
* |
|
Marshall
H. Groom
|
|
|
3,321 |
|
|
|
280 |
|
|
|
5,580 |
|
|
|
9,181 |
|
|
|
* |
|
Gilbert
L. Hardesty
|
|
|
7,301 |
|
|
|
441 |
|
|
|
11,270 |
|
|
|
19,012 |
|
|
|
* |
|
Hunter
R. Hollar(4)
|
|
|
28,525 |
|
|
|
2,000 |
|
|
|
119,168 |
|
|
|
149,693 |
|
|
|
* |
|
Pamela
A. Little
|
|
|
4,800 |
|
|
|
441 |
|
|
|
2,042 |
|
|
|
7,283 |
|
|
|
* |
|
Charles
F. Mess, Sr.
|
|
|
16,042 |
|
|
|
441 |
|
|
|
7,815 |
|
|
|
24,298 |
|
|
|
* |
|
Robert
L. Orndorff
|
|
|
153,726 |
|
|
|
441 |
|
|
|
10,423 |
|
|
|
164,590 |
|
|
|
1.0 |
% |
David
E. Rippeon
|
|
|
18,503 |
|
|
|
441 |
|
|
|
7,504 |
|
|
|
26,448 |
|
|
|
* |
|
Craig
A. Ruppert
|
|
|
44,325 |
|
|
|
441 |
|
|
|
5,958 |
|
|
|
50,724 |
|
|
|
* |
|
Lewis
R. Schumann(5)
|
|
|
91,781 |
|
|
|
441 |
|
|
|
10,057 |
|
|
|
102,279 |
|
|
|
* |
|
Daniel
J. Schrider(6)
|
|
|
3,783 |
|
|
|
3,100 |
|
|
|
34,688 |
|
|
|
41,571 |
|
|
|
* |
|
Philip
J. Mantua(7)
|
|
|
5,442 |
|
|
|
1,850 |
|
|
|
25,121 |
|
|
|
32,413 |
|
|
|
* |
|
Frank
H. Small(8)
|
|
|
16,461 |
|
|
|
2,150 |
|
|
|
73,535 |
|
|
|
92,146 |
|
|
|
* |
|
R.
Louis Caceres(9)
|
|
|
3,070 |
|
|
|
1,600 |
|
|
|
32,227 |
|
|
|
36,897 |
|
|
|
* |
|
Sara
E. Watkins(10)
|
|
|
12,636 |
|
|
|
0 |
|
|
|
33,295 |
|
|
|
45,931 |
|
|
|
* |
|
All
directors and all executive officers as a group (21
persons)
|
|
|
444,169 |
|
|
|
17,903 |
|
|
|
433,601 |
|
|
|
895,673 |
|
|
|
5.45 |
% |
(1)
|
Under
the rules of the SEC, an individual is considered to "beneficially own"
any share of common stock which he or she, directly or indirectly, through
any contract, arrangement, understanding, relationship, or otherwise, has
or shares: (a) voting power, which includes the power to vote, or to
direct the voting of, such security; and/or (b) investment power, which
includes the power to dispose, or to direct the disposition, of such
security.
|
(2)
|
Only
whole shares appear in the table. Fractional shares that may arise from
participation in the dividend reinvestment plan are not
shown.
|
(3)
|
Includes
stock options exercisable on the Record Date and within 60 days
thereafter.
|
(4)
|
Mr.
Hollar's shares include 947 shares held through employee benefit
plans. 4,500 stock options granted to Mr. Hollar expired on
December 16, 2008. In connection with Mr. Hollar’s retirement
from employment on December 31, 2008, 1,500 shares of restricted stock and
3,833 unvested stock options were forfeited and remaining vested options
will expire on March 31, 2009.
|
(5)
|
Mr.
Schumann's shares include 77,484 shares held by a trust for which Mr.
Schumann is trustee, but in which he has no pecuniary
interest.
|
(6)
|
Mr.
Schrider's shares include 2,841 shares held through employee benefit
plans.
|
(7)
|
Mr.
Mantua's shares include 5,042 shares held through employee benefit
plans.
|
(8)
|
Mr.
Small's shares include 6,111 shares held through employee benefit plans.
2250 stock options granted to Mr. Small in 1998 expired on December 16,
2008.
|
(9)
|
Mr.
Caceres' shares include 2,298 shares held through employee benefit
plans.
|
(10)
|
Ms.
Watkins' shares include 4,481 shares held through employee benefit
plans. Ms. Watkins no longer worked for the Bank as of December
19, 2008, and as such 1,150 shares of restricted stock and 5,000 unvested
stock options were forfeited. Remaining vested stock options
will expire on March 19,
2009.
|
Owners of More Than 5% of
Bancorp’s Common Stock
Beneficial
owners of more than 5% of the common stock are required to file certain
ownership reports under the federal securities laws. The following
table shows the common stock beneficially owned by the person or entity who has
filed a report reporting beneficial ownership that exceeds 5% of Bancorp’s
outstanding common stock at December 31, 2008.
Name
|
|
Amount and Nature of
Beneficial Ownership
(1)
|
|
|
Percentage of Shares
Outstanding
(2)
|
|
Barclays
Global Investors, NA
400
Howard Street,
San
Franscisco, CA 94105
|
|
|
871,007 |
|
|
|
5.3 |
% |
(1)
|
Beneficial
ownership is defined by rules of the SEC, and includes shares that the
person or entity has, or shares, voting or investment power
over.
|
(2)
|
Calculated
by Bancorp based upon shares reported as beneficially owned by the listed
person or entity and shares of Bancorp common stock outstanding as of the
Record Date.
|
Transactions and
Relationships with Management
Bancorp
and the Bank have had in the past, and expect to have in the future, banking
transactions with directors and executive officers in the ordinary course of
business on substantially the same terms, including interest rates and
collateral on loans, as those prevailing at the same time for comparable
transactions with other persons. In the opinion of management, these
transactions do not and will not involve more than the normal risk of
collectability or present other unfavorable features.
Bancorp's
written Code of Ethics requires that all related party transactions involving
executive officers or directors, as defined in Item 404 of SEC Regulation S-K,
must be reviewed and approved by the Audit Committee, another independent
committee of directors, or the independent directors on the board. As required
by federal regulations, extensions of credit by the Bank to directors and
executive officers are subject to the procedural and financial requirements of
Regulation O of the Board of Governors of the Federal Reserve System, which
generally require advance approval of such transactions by uninterested
directors. Other related party transactions as defined in Item 404 (generally,
any financial transactions, arrangements, or relationships, regardless of dollar
amount, other than extensions of credit and bank deposits) are reviewed by the
independent directors with the affected director not present or
voting.
Director
Lewis R. Schumann is a partner in the Rockville, Maryland law firm of Miller,
Miller and Canby, Chtd. which Bancorp and the Bank have retained during 2008 and
expect to retain during the current year as legal counsel. The law firm provides
legal services on matters of real estate, and trust and estate
administration.
Shareholder Proposals and
Communications
From time
to time, individual shareholders may wish to submit proposals that they believe
should be voted upon by the shareholders. The SEC has adopted regulations that
govern the inclusion of such proposals in Bancorp's annual proxy materials.
Shareholder proposals intended to be presented at the 2010 annual meeting of
shareholders may be eligible for inclusion in Bancorp's proxy materials for that
annual meeting if received by Bancorp at its executive offices not later than
November 18, 2009 unless the date of the 2010 annual meeting is more than 30
days from April 22, 2010, in which case the deadline is a reasonable time before
Bancorp begins to print and mail proxy materials. Any such proposals
shall be subject to the requirements of the proxy rules adopted under the
Securities Exchange Act of 1934.
In
addition, Bancorp's bylaws require that to be properly brought before an annual
meeting, shareholder proposals for new business must be delivered to or mailed
and received by Bancorp not less than thirty nor more than ninety days prior to
the date of the meeting; provided, however, that if less than forty-five days
notice of the date of the meeting is given to shareholders, such notice by a
shareholder must be received not later than the fifteenth day following the date
on which notice of the date of the meeting was mailed to shareholders or two
days before the date of the meeting, whichever is earlier. Each such notice
given by a shareholder must set forth certain information specified in the
bylaws concerning the shareholder and the business proposed to be brought before
the meeting.
Shareholders
also may nominate candidates for election as a director, provided that such
nominations are made in writing and received by Bancorp at its executive offices
not later than December 16, 2009. The nomination should be sent to the attention
of Ronald E. Kuykendall, General Counsel and Secretary, at Sandy Spring Bancorp,
Inc., 17801 Georgia Avenue, Olney, Maryland 20832, and must include, concerning
the director nominee, the following information: full name, age, date of birth,
educational background and business experience, including positions held for at
least the preceding five years, home and office addresses and telephone numbers,
and a signed representation to timely provide all information requested by
Bancorp for preparation of its disclosures regarding the solicitation of proxies
for election of directors. The name of each such candidate for director must be
placed in nomination at the annual meeting by a shareholder present in person.
The nominee must also be present in person at the annual meeting. A vote for a
person who has not been duly nominated pursuant to these requirements will be
deemed to be void.
Bancorp's
shareholders may communicate with the board of directors or any individual
director by addressing correspondence to the board or such director in care of
the Secretary at Bancorp's main office by mail, courier, or facsimile or by
e-mail through the Company's "contact us" feature of the investor relations area
of its Web site at www.sandyspringbank.com.
The board
of directors believes it is important for all directors to attend the annual
meeting of shareholders in order to show their support for Bancorp and to
provide an opportunity for shareholders to express any concerns to them. Bancorp
has adopted a policy that all directors should attend each annual meeting of
shareholders unless they are unable to attend by reason of personal or family
illness or pressing matters. All directors were present at the 2008
annual meeting.
Section 16(a) Beneficial
Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934 requires Bancorp's executive
officers and directors, and any persons who own more than ten percent of a
registered class of Bancorp's equity securities, to file reports of ownership
and changes in ownership on Forms 3, 4, and 5 with the SEC. Executive officers,
directors and greater than ten percent shareholders are required by applicable
regulations to furnish Bancorp with copies of all Forms 3, 4, and 5 they
file.
Based
solely on the review of the copies of such forms it has received, all of
Bancorp's executive officers and directors have complied with filing
requirements applicable to them with respect to transactions during 2008, with
the single exception of one late filing of a Form 4 for Charles F. Mess,
Sr.
Compensation Discussion and
Analysis
The
following discussion and analysis describes Bancorp's philosophy, processes,
elements of and factors for determining compensation for the named executive
officers for 2008 who were: the Principal Executive Officer, Hunter R. Hollar;
the Principal Financial Officer, Philip J. Mantua; and the three most highly
compensated other executive officers for Bancorp and the Bank: Daniel J.
Schrider, Frank H. Small, and R. Louis Caceres. As of December 19,
2008 Executive Vice President Sara E. Watkins no longer worked for the
Bank. Ms. Watkins received compensation under the terms of her
employment agreement and as such met the definition of named executive officer
for 2008 only.
There
were no material changes to the compensation philosophy in 2008, and this
discussion is intended to assist in understanding and evaluating the information
set forth in the detailed compensation disclosures beginning on page
22.
Early in
2008, Hunter R. Hollar announced his intention to retire as president and chief
executive officer as of December 31, 2008. The board undertook a
comprehensive search process, and as a result, on March 26, 2008, Mr. Schrider
was promoted to president with the understanding that he would become chief
executive officer upon Mr. Hollar’s retirement. This leadership succession
prompted a significant review of Mr. Schrider’s total compensation.
Overall
Compensation Philosophy & Guiding Principles
Bancorp’s
executive compensation philosophy is intended to attract, motivate, and retain
top executive talent, to link executive rewards with shareholder interests, to
achieve strategic business objectives, and to reward a balanced approach to
short-term and long-term performance. The philosophy incorporates elements that
are nonperformance-based (e.g., salary, benefits and perquisites) and
performance-based (e.g., annual incentives in the form of cash and retirement
contributions, and equity-based awards) to provide a “total rewards”
approach.
Under
this philosophy, executives are paid market competitive salaries based on
experience, expertise and individual performance. Incentive
compensation in the form of an annual cash bonus, an annual contribution to a
deferred compensation retirement plan, and annual equity awards are targeted to
be market competitive and depend upon company performance. These compensation
programs are externally benchmarked against the total compensation paid by
comparably sized banks.
By
following a portfolio approach to compensation and benefits, the executive is
provided a measure of security as to the minimum levels of compensation he or
she is eligible to receive, and also motivated to focus on the business measures
that will produce a high level of performance for Bancorp. In
addition, the committee believes this approach reduces the risk of recruitment
of top executive talent by competitors.
Compensation
Decision Process
The Human
Resources and Compensation Committee is comprised entirely of independent
directors and is appointed annually by the board of directors to assist the
board in managing compensation and benefit plans for the chief executive officer
and other named executive officers. The committee operates under a written
charter reviewed and approved by the board. The process by which the
committee makes specific decisions relating to executive compensation includes
the following factors:
|
·
|
The
compensation philosophy;
|
|
·
|
Bancorp's
performance relative to peers and industry
standards;
|
|
·
|
Success
in attaining annual and long-term goals and
objectives;
|
|
·
|
Alignment
of executive interests with shareholder interests through equity-based
awards vesting over a period of
years;
|
|
·
|
Management
of compensation expense, and emphasis on performance-based
compensation;
|
|
·
|
Individual
performance, experience, and
contributions;
|
|
·
|
Total
compensation and the mix of compensation elements for named executive
officers;
|
|
·
|
The
competitiveness of executive compensation relative to Bancorp's peers and
conditions in our labor markets;
|
|
·
|
The
relative appropriateness of named executive officer's compensation as
compared to the compensation of other peer group executive officers;
and
|
|
·
|
Retention
considerations.
|
Role
of the Human Resources and Compensation Committee, Management, and the
Compensation Consultants in the Executive Compensation Process
Role
of the Human Resources and Compensation Committee
The basic
responsibilities of the committee are to review, recommend or approve
compensation policies applicable to named executive officers, including
participation and performance measures; to consider the relationship of
corporate performance to total compensation; to recommend salary and bonus
levels and equity-based awards for executive officers for consideration by the
board of directors; and to review the adequacy and effectiveness of various
compensation and benefit plans and executive succession planning of Bancorp. The
committee meets throughout the year (six times in 2008) and also takes action by
written consent. The chairman of the committee reports committee actions or
recommendations to the board of directors following each committee
meeting.
The
committee reviews all compensation components for the named executive officers.
Compensation includes base salary, short-term incentives usually in the form of
cash bonuses, long-term incentives including equity-based awards, benefit plans,
and perquisites. The committee determines the appropriate mix of compensation
components for each named executive officer.
The
committee reviews the chief executive officer's performance and makes
recommendations regarding his compensation with the advice of independent
consultants (see "Role of the Compensation Consultant"). Decisions regarding
compensation for the named executive officers are made by the committee with
consideration given to recommendations from the chief executive officer and
independent consultants. Decisions by the committee with respect to the
compensation are approved by the full board of directors.
The
committee has the authority to obtain advice and assistance from internal or
external legal, human resources, accounting or other experts, advisors, or
consultants as it deems desirable or appropriate. In 2008, the committee
retained the services of a law firm to advise the committee in its work. The
committee has sole authority to retain and terminate any compensation
consultants and to approve the fee and the terms of engagement. Details on the
committee's functions are described in its charter, which has been approved by
the board of directors and is available on Bancorp’s Investor Relations Web Site
maintained at www.sandyspringbank.com.
Role
of the Compensation Consultant
The
committee is advised by independent compensation consultants and
advisors. In general, the consultants provide compensation
benchmarking and analytical data and render advice to the committee regarding
all aspects of the committee's compensation decisions, including the chief
executive officer's performance review process. The committee has direct access
to the consultants and control over their engagement. The committee was advised
by two consulting firms during 2008. The firm of Furr Resources, Inc. was
engaged to assist with the annual performance evaluation process for the chief
executive officer. The firm of Pearl Meyer & Partners (PM&P) was engaged
to conduct a review and competitive assessment of total compensation and
benefits for the named executive officers, and to provide a comprehensive
assessment of the competitiveness and effectiveness of the total executive
compensation programs. PM&P assisted in the identification of relevant peer
groups and provided other market data used by Bancorp for benchmarking and has
provided advice regarding levels and components of compensation for each named
executive officer.
Role
of Management
Below is
a summary of the role of Bancorp's management in assessing or recommending
executive compensation:
|
·
|
The
chief executive officer is responsible for the development of Bancorp's
strategic plan and annual business plan, which are reviewed and approved
by the board of directors.
|
|
·
|
The
chief executive officer conducts a self-assessment, which is reviewed
annually by the board of directors.
|
|
·
|
The
chief executive officer presents executive performance ratings to the
committee and makes recommendations relating to executive compensation,
taking into consideration the advice from the external compensation
consultant.
|
|
·
|
The
chief executive officer in collaboration with the external consultant
develops proposals relating to potential changes in executive compensation
programs for review by the
committee.
|
|
·
|
The
compensation consultant and executive management works with the committee
to identify an appropriate peer group for the purpose of market
comparisons.
|
|
·
|
The
chief executive officer and senior vice president of human resources
provide the committee with company data necessary to evaluate and
implement compensation proposals and
programs.
|
|
·
|
The
senior vice president of human resources works with other external
consultants to provide actuarial data and other similar information
related to the committee's
responsibilities.
|
The
committee regularly requests the chief executive officer, the chief financial
officer and the senior vice president of human resources to be present at
committee meetings where compensation and Bancorp or individual performance is
discussed and evaluated. Executive management is not present during
final deliberations and only committee members vote on decisions regarding
executive compensation.
Each
director completes a performance evaluation form, separately and anonymously,
for the chief executive officer and submits it to Furr Resources, Inc. for
compilation. The Executive and Corporate Governance Committee and the
Human Resources and Compensation Committee review the results, and then the
Executive and Corporate Governance Committee meets with the chief executive
officer to discuss his performance. Based on the results of the
evaluations and other criteria as noted herein, including the compensation
consultant, the Human Resources and Compensation Committee recommends a chief
executive officer compensation package to the board of directors for
approval. The Human Resources and Compensation Committee receives
input from the compensation consultant regarding competitive market data for the
other named executive officers and from the chief executive officer regarding
the performance evaluations of other named executive
officers. Based on these inputs, the committee recommends
compensation packages for the other named executive officers and these
recommendations are reviewed and approved by the board of
directors.
Compensation
Structure and Elements
Bancorp's
compensation structure for named executive officers consists of five main
elements: base salary, the Sandy Spring Leadership Incentive Plan, the Executive
Incentive Retirement Plan, equity-based awards, and executive benefits and
perquisites. Following is a summary of the role of each component, a description
of how decisions regarding the components are made and the specific decisions
made in 2008 as they relate to the named executive officers.
Base
Salary
Base
salary is paid bi-weekly and reviewed annually as a critical element of
executive compensation. In determining base salaries, the committee
considers the executive's qualifications and experience, scope of
responsibilities, the goals and objectives established for the executive, the
executive's past performance, as well as competitive salary practices at
financial institutions in the peer group benchmarking (see "Pay Levels and
Benchmarking").
In 2008,
executive salaries were reviewed and adjustments were made ranging from 0% to
4.30% for all named executive officers other than Mr. Schrider. Mr.
Schrider’s promotion to president, as part of the leadership succession plan,
resulted in a 39.5% increase to his base salary. The following table
shows the annual base salary amounts and increase percentages for the named
executive officers. These adjustments were consistent with the
company’s goal of paying market competitive base salaries at the 50th
percentile based on the peer group of comparably sized banks.
Name
|
|
Title
|
|
2007
Base
Salary
|
|
|
Adjustment
(1)
|
|
|
Adjusted
Base
Salary
|
|
|
Increase
Amount
|
|
|
2008
Base
Salary
|
|
|
Increase
%
|
|
H. Hollar
|
|
Chief Executive Officer
|
|
$ |
462,800 |
|
|
$ |
6,500 |
|
|
$ |
469,300 |
|
|
$ |
18,700 |
|
|
$ |
488,000 |
|
|
|
3.98 |
% |
P. Mantua
|
|
Chief Financial Officer
|
|
|
223,600 |
|
|
$ |
6,500 |
|
|
|
230,100 |
|
|
|
9,900 |
|
|
|
240,000 |
|
|
|
4.30 |
% |
D. Schrider
|
|
Chief Revenue Officer
|
|
|
244,400 |
|
|
$ |
6,500 |
|
|
|
250,900 |
|
|
|
99,100 |
|
|
|
350,000 |
|
|
|
39.50 |
% |
F. Small
|
|
Chief Operating Officer
|
|
|
306,000 |
|
|
$ |
6,500 |
|
|
|
312,500 |
|
|
|
0 |
|
|
|
312,500 |
|
|
|
0.00 |
% |
R. Caceres
|
|
Executive Vice President
|
|
|
244,400 |
|
|
$ |
6,500 |
|
|
|
250,900 |
|
|
|
9,100 |
|
|
|
260,000 |
|
|
|
3.63 |
% |
S. Watkins
|
|
Executive Vice President
|
|
|
200,500 |
|
|
$ |
6,500 |
|
|
|
207,000 |
|
|
|
6,000 |
|
|
|
213,000 |
|
|
|
2.90 |
% |
(1)
|
$6,500
was added to each executive officer's base salary on January 1, 2008 to
offset the discontinuance of the Executive Health Reimbursement Plan
benefit.
|
Sandy
Spring Leadership Incentive Plan
In 2008,
each of the named executive officers participated in the Sandy Spring Leadership
Incentive Plan (SSLIP), a short-term incentive plan. This plan was
designed to pay a cash award as a percentage of annual earnings based on company
performance compared to pre-established performance indicators and defined award
levels. The overall program objectives included:
|
·
|
Align
pay with performance.
|
|
·
|
Position
total cash compensation to be competitive with market when performance
meets expectations.
|
|
·
|
Motivate
and reward employees for achieving/exceeding performance
goals.
|
|
·
|
Enable
the Bank to attract and retain the talent needed to drive
success.
|
|
·
|
Provide
clear focus on key strategic business
objectives.
|
Performance
measures reflect critical goals that are defined each year as part of the
business planning process, and participants are paid based on company
performance. This approach supports the desire to foster a
collaborative team-oriented culture. In future years, or as
appropriate, the committee may add individual performance goals to SSLIP for
certain roles. The 2008 approved performance measures and weights
are: Earnings Per Share Growth 40%, Return on Average Equity 20%, Efficiency
Ratio 30%, and Average Asset Growth 10%. Specific targets and ranges
of threshold to stretch performance were established for each performance
measure with consideration given to internal goals developed in the business
plan as well as industry trends (i.e. relative performance).
In order to
receive a bonus, performance in any of the measures listed above must exceed the
established threshold for that measure, and only those measures that exceed the
threshold will contribute to the bonus calculation. If none of the
four measures achieves the threshold no bonus would be earned.
Bancorp’s
performance in 2008 achieved the threshold for two of the four measures yielding
a bonus for SSLIP participants. However, due to overall results
falling below plan, the committee recommended, and the chief executive officer
agreed, that no bonuses for executive officers should be paid. This
recommendation was approved by the board.
Executive
Incentive Retirement Plan
In 2008,
the board of directors implemented an Executive Incentive Retirement Plan to
replace individual Supplemental Executive Retirement Agreements with the named
executive officers. This plan is a defined contribution plan that provides for
contributions to be made to the participants' plan accounts based on the
attainment of criteria established by the board of directors on an annual
basis. The beginning balance for each participant’s plan account was
the accrued balance as of December 31, 2007 under the former Supplemental
Executive Retirement Agreements. The board of directors adopted this plan to
better align the interests of executive management with the performance of
Bancorp and the interests of shareholders.
The
executive’s vested account balance will be distributed to the executive
following termination of employment either in a lump sum or in installments, at
the election of the executive. No payments will be made to an
executive who is terminated for just cause. Deferral bonus awards
under the plan vest over a period of 15 years and automatically vest upon the
executive’s death or disability or upon a change in control.
For 2008,
deferral bonuses under the plan were determined based on company performance as
defined by return on average equity compared to peer bank performance (see page
“Pay Levels and Benchmarking” on page 6 for a discussion of the peer bank
group). The board of directors established a minimum contribution of 2% of
salary and a cap of 9%. Bancorp’s 2008 performance yielded a
contribution of 4%.
Equity-Based
Awards
Bancorp’s
compensation philosophy identifies equity-based compensation as among the most
effective means of creating a long-term link between the interests of Bancorp's
shareholders and the performance of the organization and executive management.
The committee has increasingly weighted the compensation of named executive
officers toward equity-based awards. Vesting schedules for equity-based awards
support a goal of retention of key leaders.
Executives
are eligible to receive annual equity awards in the form of stock options,
restricted stock, and stock appreciation rights under Bancorp's 2005 Omnibus
Stock Plan. The value of equity awards granted is based on competitive market
practice, company performance, and individual performance. The committee
recommends, in its discretion, the form, number, and terms of equity-based
awards, and the Stock Option Committee, made up of all non-employee directors,
approves the awards. Grants made in 2008 are detailed in the
Grants of Plan Based Awards table on page 25.
Benefits
and Perquisites
The
purpose of executive benefits and perquisites is to provide economic value to
attract, retain, and motivate key executives. Bancorp's policy on executive
benefits has been to provide benefits consistent with market practice. The
committee believes that perquisites should be limited in scope and value and
periodically reviews perquisites to ensure alignment with our desired
philosophy.
Currently,
the named executive officers are eligible to participate in benefit plans
available to all employees including the Sandy Spring Bancorp, Inc. Cash and
Deferred Profit Plan (401(k) Plan) and the Employee Stock Purchase Plan (ESPP).
Other benefits and perquisites may be provided at the discretion of the
committee. In 2008, perquisites for the named executive officers included
payment of a supplemental long-term disability, and a long-term care insurance
policy. In addition, Mr. Hollar received a company-paid automobile
and was reimbursed for his health club dues. Mr. Schrider received a
monthly car allowance upon his promotion to president.
Factors
for Determining Compensation
Bancorp
Goal Setting for Compensation Purposes
On an
annual basis, the board of directors approves the annual profit plan including a
detailed business plan and financial plan. These goals are designed
to support the multi-year strategic plan by setting annual targets for
achievement. The committee uses this information to set goals for the chief
executive officer against which to measure individual performance. In addition,
Bancorp’s goals along with competitive information assist in determining the
incentive award targets for the named executive officers.
The chief
executive officer and chief financial officer report on the performance of
Bancorp to the board of directors at each regularly scheduled
meeting. The committee received quarterly reports on Bank performance
relative to plan and anticipated incentive payouts. At the end of the
year, the chief executive officer reviews the actual performance compared to the
profit plan and specific incentive targets. This information is used in
assessing individual performance of executive officers.
Pay
Levels and Benchmarking
Pay
levels for executives are determined using a number of factors, including the
individual's role and job responsibilities; the individual's experience and
expertise; the pay levels of internal peers; pay levels in the competitive
market for similar positions; performance and contribution of the individual;
and performance of Bancorp as a whole. Each of these factors are
analyzed as part of the compensation review process, with an emphasis placed on
market and competitive information.
The
committee assesses competitive market compensation using a number of data
sources in order to gauge industry practices of other banking organizations
including information publicly disclosed by a selected peer group of publicly
traded banking organizations. Upon considering the benefits of
a unified peer group reporting for both financial performance benchmarking and
executive compensation, the chief executive officer recommended that a single
peer bank group be created for both purposes.
The peer
group for 2008 was compiled by the independent compensation consultant and
approved by the committee. It includes banking organizations of similar asset
size in the region (two factors that influence executive compensation in
financial institutions). The peer group is reviewed and updated annually for
appropriateness and compatibility. The committee believes a group of
approximately 20 comparative banks within the contiguous states of Delaware,
Pennsylvania, Virginia, West Virginia, Ohio, New Jersey and North Carolina as
well as Maryland provides a market perspective for executive
compensation.
The
specific elements of compensation reviewed as part of this comparable company
analysis include base salaries, annual performance bonuses, and long-term
incentives relative to the peer group. Matches to proxy compensation
data are made based on the role of the executive, rather than rank to ensure a
better comparison. The following group of 21 peer banking institutions was used
by Bancorp for 2008. As of December 31, 2007, these banks were
between $2 and $7 billion in total assets, with an average asset size of
approximately $3.6 billon, consistent with Bancorp's asset size.
Park National Corporation, OH
|
Provident Bankshares Corp, MD
|
F.N.B. Corporation, PA
|
National Penn Bancshares, Inc., PA
|
First Commonwealth Financial, PA
|
First Charter Corporation, NC (1)
|
Wesbanco, Inc., WV
|
Harleysville National Corp., PA
|
S&T Bancorp, Inc., PA
|
First Financial Bancorp, OH
|
Sun Bancorp, Inc., NJ
|
Carter Bank & Trust, VA
|
Lakeland Bancorp, Inc., NJ
|
TowneBank, VA
|
City Holding Company, WV
|
Virginia Commerce Bancorp, Inc, VA
|
First Bancorp, NC
|
Union Bankshares Corp., VA
|
First Community Bancshares, Inc., VA
|
NewBridge Bancorp, NC
|
Pennsylvania Commerce Bancorp, PA
|
(1) First
Charter Corporation was acquired on June 6, 2008.
The
committee generally intends that the base salary for each executive will be
competitive, and that above-target performance by Bancorp will be rewarded by
above-market incentive awards for the individual. The board is willing to make
awards commensurate with the achievement of high performance goals and
objectives. These performance goals are created as part of a robust
strategic planning and business review process. Once the business and
financial plans are approved by the board of directors, the performance goals
for the short-term incentive plans are derived directly from the stated target
financial results.
Committee
Discretion and Final Compensation Decisions
The
committee retains the discretion to decrease all forms of incentive payouts
based on significant individual or Bancorp performance shortfalls. Likewise, the
committee retains the discretion to increase awards or consider special awards
for significant performance, or due to subjective factors described above. The
committee believes that the compensation package for each of the named executive
officers is reasonable and appropriately within the range of the peer data given
Bancorp and individual performance.
Employment
and Other Significant Agreements with Named Executive Officers
Employment
Agreements
Each of
the named executive officers, other than Mr. Hollar, has an employment agreement
with Bancorp and the Bank. These employment agreements have an initial term of
three years for Mr. Schrider and two years for the other named executive
officers. Mr. Hollar’s employment agreement terminated at the time of
his retirement on December 31, 2008. Mr. Schrider’s agreement
provides that it may be extended for an additional year at each anniversary so
that the remaining term again becomes three years. The employment
agreements with the other named executive officers are automatically renewed for
an additional one year upon each anniversary unless written notice not to renew
has been given by the executive or Bancorp. The employment agreements address
matters such as the executive’s salary and participation in incentive
compensation and benefit plans.
In 2008,
as part of the continuing evaluation of its executive compensation practices,
the board of directors determined to reduce the number of executive officers
with whom Bancorp has employment contracts. On October 15, 2008, Bancorp gave
notice to all of the executive officers with employment contracts, other than
Mr. Schrider and Mr. Mantua, that their employment contracts would not
automatically renew at the end of their respective terms.
The
committee anticipates that as the employment agreements with the named executive
officers expire, Bancorp will enter into a change-in-control severance agreement
with each of the officers. The change-in-control agreements, which
will provide a severance benefit similar to what is currently provided under the
executive’s employment agreement, are intended to encourage the executive to
continue to perform his or her duties in the event of a pending or potential
change in control.
Upon
termination of Mr. Schrider without just cause by Bancorp, or with good reason
by Mr. Schrider, Mr. Schrider is entitled to receive his salary for the
remaining term of the agreement. Upon termination of the other named
executive officers without just cause by Bancorp, or with good reason by the
executive, the executive is entitled to salary and bonuses for the remaining
term of the agreement, payable in a lump sum based upon prior year's
compensation levels.
Each
executive is prohibited from conflicts of interest, and is required to maintain
the confidentiality of nonpublic information regarding Bancorp and its clients.
Each executive is also bound by a covenant not to compete and not to interfere
with other employees following termination of employment. The
post-termination restrictions do not apply if the there is a change in control
and, in the case of the executive officers other than Mr. Schrider, if the
executive's employment is terminated without just cause by Bancorp or with good
reason by the executive.
In the
event of a voluntary resignation, the executive officer will receive only the
compensation, vested rights, and employee benefits up to the date of
termination. In the event of retirement, the executive officer would receive no
additional compensation under the agreement.
The
agreements provide for additional benefits in the event of a change in control
of Bancorp or the Bank and either a termination of the officer's employment
without just cause or a resignation by the officer with good reason, as defined
in the agreements. In those circumstances, Mr. Schrider would be entitled to a
lump-sum payment equal to three times his average taxable income for the five
calendar years preceding the year in which the change in control
occurs. The other executive officers would be entitled to a lump sum
cash payment equal to 2.99 times the sum of the executive's annual salary at the
highest rate in effect during the preceding twelve months and other compensation
for the preceding calendar year. Each executive also would be entitled to
continued participation for a three-year period in Bancorp-sponsored health and
welfare plans. The agreements require Bancorp and the Bank to hold the executive
harmless from the federal excise tax assessable if payments and benefits exceed
the amount allowable as a deduction under Section 280G of the Internal Revenue
Code.
The
agreements also provide that Bancorp will not make any golden parachute payment
to the executive in any period during which the executive is a senior executive
officer and the U.S. Department of the Treasury holds an equity or debt position
acquired from Bancorp in the Troubled Assets Relief Program Capital Purchase
Program. A golden parachute payment is defined under applicable
Treasury rules as payments made on account of severance from employment to the
extent that the aggregate present value of such payments exceeds three times the
executive’s average taxable income over the five calendar years prior to the
year in which the termination from employment occurs. If any payment
due to the executive would exceed the golden parachute limitations, the payment
would be reduced by the amount that is necessary so that the payment does not
exceed the golden parachute limitation.
Change-in-Control
Benefit Triggers
The right
to change-in-control benefits under the employment agreements and
change-in-control agreements is dependent up on a "double trigger," that is,
there must be both a change in control and a termination of employment without
just cause or with good reason. However, the employment agreements allow each
executive officer to terminate "with good reason" for any reason within the
sixty-day period that begins six months after the closing date of a definite
agreement that results in the change in control. The committee believes these
trigger provisions are reasonable and in the best interests of shareholders and
should help (a) to retain executives useful for the transition of a change in
control for at least six months after the closing; (b) to reduce potential
disincentives for executives in the period in which a change in control is being
evaluated and negotiated; and (c) to avoid the potential double payment of
executives who continue their employment after a change in control that could
result from a single change-in-control trigger.
Impact
of Accounting and Tax on the Form of Compensation
The
committee and Bancorp consider the accounting and tax (individual and corporate)
consequences of the compensation plans prior to making any changes to the
plans.
The
committee has considered the impact of the Statement of Financial Accounting
Standard No. 123 (R), "Share-Based Payment," which Bancorp adopted on January 1,
2006, on Bancorp's use of equity-based awards. This consideration factored
heavily in our decision to use a mix of restricted stock and stock options
beginning in 2006.
The
committee also considers the limits on deductibility of compensation imposed by
Section 162(m) of the Internal Revenue Code (the Code) with respect to annual
compensation exceeding $1 million, or $500,000 with respect to senior executive
officers during the period that the U.S. Treasury Department holds an equity or
debt position in Bancorp pursuant to the TARP-Capital Purchase Program, and
Section 280(g) of the Code with respect to change-in-control payments exceeding
specified limits.
Impact
of Restrictions on Executive Compensation for TARP Participants
The
recently enacted American Recovery and Reinvestment Act of 2009 requires the
Department of the Treasury to establish additional standards for executive
compensation for participants in the TARP Capital Purchase Program, such as
Bancorp. These standards must include a prohibition on making any
severance payment to a named executive officer or any of the next five most
highly compensated employees and a prohibition on paying or accruing any bonus,
retention award or incentive compensation to, in the case of Bancorp, at least
the five most highly compensated employees, other than certain restricted stock
awards. These new compensation standards may require Bancorp to make
significant adjustments to the manner in which it compensates the named
executive officers during the period in which the preferred stock issued to the
Treasury Department remains outstanding. Because the specific
requirements of these executive compensation standards will depend on the
regulations to be issued by the Treasury Department, the committee has not made
any determination about which elements of compensation for named executive
officers will be changed for 2009 or how they will be changed.
Stock
Ownership Guidelines
Bancorp
does not currently have a formal stock ownership requirement for executives, but
all of the current executive officers own Bancorp common stock. We encourage
stock ownership by executives on a voluntary basis. Bancorp retains the
discretion to implement a minimum ownership requirement of mandatory holding
period for shares received under our equity compensation plan.
Human Resources and
Compensation Committee Report
We have
reviewed and discussed the foregoing Compensation Discussion and Analysis with
management. Based on this review and discussion, we have recommended to the
board of directors that the Compensation Discussion and Analysis be included in
this proxy statement and in Bancorp's Annual Report on Form 10-K for the year
ended December 31, 2008.
The Human
Resources and Compensation Committee certifies that it has reviewed with senior
risk officers the incentive compensation arrangements with senior executive
officers (as defined in subsection 111(b)(3) of the Emergency Economic
Stabilization Act of 2008 and 31 C.F.R. § 30.2) and has made reasonable efforts
to ensure that such arrangements do not encourage senior executive officers to
take unnecessary and excessive risks that threaten the value of
Bancorp.
February
19, 2009
Susan D.
Goff, Chairman
Solomon
Graham
Charles
F. Mess, Sr.
Robert L.
Orndorff
David E.
Rippeon
Executive
Compensation
Summary
of Compensation Table
The
following table summarizes compensation earned by or awarded to Bancorp's named
Executive Officers for 2008.
Name and Principal
Position
|
|
Year
|
|
|
Salary
|
|
|
Stock
Awards
(1)
|
|
|
Option
Awards
(2)
|
|
|
Non-Equity
Incentive
Plan
Compensation
(3)
|
|
|
Change in
Pension
Value &
Nonqualified
Deferred
Compensation
Earnings
(4)
|
|
|
All Other
Compensation
(5)
|
|
|
Total
|
|
Hunter R. Hollar
Chief
Executive Officer
|
|
|
2008
2007
2006
|
|
|
$ |
483,685
458,008
437,677
|
|
|
$ |
27,088
18,700
-
|
|
|
$ |
29,900
84,425
54,525
|
|
|
$
$
|
165,658
-
200,302
|
|
|
$ |
94,434
270,078
403,036
|
|
|
$ |
59,221
28,334
26,894
|
|
|
$ |
859,985
859,545
1,067,909
|
|
Philip
J. Mantua
Executive
Vice President & Chief Financial Officer
|
|
|
2008
2007
2006
|
|
|
$ |
237,335
221,285
206,446
|
|
|
$ |
12,723
7,480
-
|
|
|
$ |
21,930
32,810
17,693
|
|
|
|
28,846
-
52,739
|
|
|
$ |
20,410
107,030
79,196
|
|
|
$ |
11,364
8,910
8,793
|
|
|
$ |
332,608
377,515 347,174
|
|
Daniel J. Schrider
President
& Chief Revenue Officer
|
|
|
2008
2007
2006
|
|
|
$ |
269,324
241,869
229,892
|
|
|
$ |
17,965
7,480
-
|
|
|
$ |
26,967
32,810
17,693
|
|
|
|
25,992
-
77,639
|
|
|
$ |
31,856
27,731
51,382
|
|
|
$ |
24,814
12,565
9,478
|
|
|
$ |
396,917
322,455
368,391
|
|
Frank
H. Small
Executive
Vice President & Chief Operating Officer
|
|
|
2008
2007
2006
|
|
|
$ |
312,500
304,385
298,892
|
|
|
$ |
16,463
11,220
-
|
|
|
$ |
27,977
54,018
32,854
|
|
|
|
119,482
-
112,033
|
|
|
$ |
78,925
163,972
413,724
|
|
|
$ |
20,555
16,018
17,991
|
|
|
$ |
575,902
549,613
842,640
|
|
R. Louis Caceres
Executive
Vice President
|
|
|
2008
2007
2006
|
|
|
$ |
257,900
241,869
229,892
|
|
|
$ |
11,674
7,480
-
|
|
|
$ |
21,042
32,810
17,693
|
|
|
|
25,070
-
77,639
|
|
|
$ |
25,143
82,705
59,827
|
|
|
$ |
15,831
11,899
10,516
|
|
|
$ |
356,660
376,763
377,874
|
|
Sara
E. Watkins
Executive
Vice President
|
|
2008
|
|
|
$ |
209,635
|
|
|
$ |
11,045
|
|
|
$ |
13,810
|
|
|
|
4,767
|
|
|
$ |
75,844
|
|
|
$ |
279,540
|
|
|
$ |
594,640
|
|
(1)
|
Represents
the compensation expense recognized for financial statement reporting
purposes in accordance with FAS 123(R) for outstanding restricted stock
awards.
|
(2)
|
Represents
the compensation expense recognized for financial statement reporting
purposes in accordance with FAS 123(R) for outstanding stock option
awards. See the discussion of the assumptions used for these values in
Note 13 to the Consolidated Financial Statements contained in Bancorp's
2008 Annual Report on Form
10-K.
|
(3)
|
Represents
incentive payments earned in 2008 as well as interest paid in 2008 under
the Executive Incentive Retirement Plan (EIRP) as described on page 17 and
quantified in the Nonqualified Deferred Compensation table on page
27. There were no bonuses paid to the named executive officers
for 2008 under the Sandy Spring Leadership Incentive Plan
(SSLIP).
|
(4)
|
This
represents the change in value with respect to Bancorp's Pension
Plan. See the table of Pension Benefits on page
26. The actuarial method for calculating the change in the
pension value changed as of January 1, 2008 and resulted in a greater
increase than in past years. For Mr. Hollar and Ms. Watkins
this amount also includes the total earnings on the nonqualified deferred
compensation plan as further described on page
27.
|
(5)
|
This
column consists of the value of perquisites and personal benefits for the
named executive officers including educational benefits, supplemental long
term care and disability insurance, 401(k) matching funds, and life
insurance benefits. In addition to automobile usage, Mr. Hollar
also received his bank-owned car as a retirement gift valued at
$27,225. Mr. Schrider received a car allowance beginning in
March 2008. Ms. Watkins received $263,250 in compensation under
the terms of her employment agreement upon separation from the
Bank.
|
Outstanding
Equity Awards at Fiscal Year End
This
table shows outstanding equity awards to the named executive officers at
December 31, 2008.
Option Awards
|
|
Stock Awards
|
|
Name
|
|
Grant Date
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
(1)
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
|
|
Market Value
of Shares or
Units of Stock
That Have Not
Vested
($)(2)
|
|
|
|
12/15/1999
|
|
10,520
|
|
-
|
|
$
|
17.21
|
|
3/31/2009
|
|
-
|
|
-
|
|
Hunter
R. Hollar
|
|
12/13/2000
|
|
7,481
|
|
-
|
|
14.54
|
|
3/31/2009
|
|
-
|
|
-
|
|
|
|
12/21/2001
|
|
18,400
|
|
-
|
|
32.25
|
|
3/31/2009
|
|
-
|
|
-
|
|
|
|
12/11/2002
|
|
17,000
|
|
-
|
|
31.25
|
|
3/31/2009
|
|
-
|
|
-
|
|
|
|
12/17/2003
|
|
16,950
|
|
-
|
|
38.91
|
|
3/31/2009
|
|
-
|
|
-
|
|
|
|
12/15/2004
|
|
18,650
|
|
-
|
|
38.00
|
|
3/31/2009
|
|
-
|
|
-
|
|
|
|
12/14/2005
|
|
22,500
|
|
-
|
|
38.13
|
|
3/31/2009
|
|
-
|
|
-
|
|
|
|
12/13/2006
|
|
7,667
|
|
(3) -
|
|
37.40
|
|
3/31/2009
|
|
(3) -
|
|
-
|
|
|
|
3/26/2008
|
|
|
|
|
|
|
|
|
|
(4)
2,000
|
|
$43,660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/1999
|
|
175
|
|
-
|
|
$
|
17.21
|
|
12/15/2009
|
|
-
|
|
-
|
|
Philip
J. Mantua
|
|
12/13/2000
|
|
1,800
|
|
-
|
|
14.54
|
|
12/13/2010
|
|
-
|
|
-
|
|
|
|
12/21/2001
|
|
1,500
|
|
-
|
|
32.25
|
|
12/21/2011
|
|
-
|
|
-
|
|
|
|
12/11/2002
|
|
1,750
|
|
-
|
|
31.25
|
|
12/11/2012
|
|
-
|
|
-
|
|
|
|
12/17/2003
|
|
2,200
|
|
-
|
|
38.91
|
|
12/17/2013
|
|
-
|
|
-
|
|
|
|
12/15/2004
|
|
6,050
|
|
-
|
|
38.00
|
|
12/15/2014
|
|
-
|
|
-
|
|
|
|
12/14/2005
|
|
6,395
|
|
-
|
|
38.13
|
|
12/14/2012
|
|
-
|
|
-
|
|
|
|
12/13/2006
|
|
3,334
|
|
(5)
1,666
|
|
37.40
|
|
12/13/2013
|
|
(6)
600
|
|
13,098
|
|
|
|
3/26/2008
|
|
-
|
|
(7)
5,750
|
|
27.96
|
|
03/26/2015
|
|
(8)
1,250
|
|
27,288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/1999
|
|
800
|
|
-
|
|
$
|
17.21
|
|
12/15/2009
|
|
-
|
|
-
|
|
Daniel
J. Schrider
|
|
12/13/2000
|
|
2,499
|
|
-
|
|
14.54
|
|
12/13/2010
|
|
-
|
|
-
|
|
|
|
12/21/2001
|
|
2,000
|
|
-
|
|
32.25
|
|
12/21/2011
|
|
-
|
|
-
|
|
|
|
12/11/2002
|
|
4,700
|
|
-
|
|
31.25
|
|
12/11/2012
|
|
-
|
|
-
|
|
|
|
12/17/2003
|
|
5,000
|
|
-
|
|
38.91
|
|
12/17/2013
|
|
-
|
|
-
|
|
|
|
12/15/2004
|
|
6,625
|
|
-
|
|
38.00
|
|
12/15/2014
|
|
-
|
|
-
|
|
|
|
12/14/2005
|
|
6,395
|
|
-
|
|
38.13
|
|
12/14/2012
|
|
-
|
|
-
|
|
|
|
12/13/2006
|
|
3,334
|
|
(5)
1,666
|
|
37.40
|
|
12/13/2013
|
|
(6)
600
|
|
13,098
|
|
|
|
3/26/2008
|
|
-
|
|
(7)
10,000
|
|
27.96
|
|
03/26/2015
|
|
(8)
2,500
|
|
54,575
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/1999
|
|
6,750
|
|
-
|
|
$
|
17.21
|
|
12/15/2009
|
|
-
|
|
-
|
|
Frank
H. Small
|
|
12/13/2000
|
|
12,001
|
|
-
|
|
14.54
|
|
12/13/2010
|
|
-
|
|
-
|
|
|
|
12/21/2001
|
|
6,400
|
|
-
|
|
32.25
|
|
12/21/2011
|
|
-
|
|
-
|
|
|
|
12/11/2002
|
|
8,350
|
|
-
|
|
31.25
|
|
12/11/2012
|
|
-
|
|
-
|
|
|
|
12/17/2003
|
|
10,325
|
|
-
|
|
38.91
|
|
12/17/2013
|
|
-
|
|
-
|
|
|
|
12/15/2004
|
|
11,250
|
|
-
|
|
38.00
|
|
12/15/2014
|
|
-
|
|
-
|
|
|
|
12/14/2005
|
|
11,875
|
|
-
|
|
38.13
|
|
12/14/2012
|
|
-
|
|
-
|
|
|
|
12/13/2006
|
|
4,667
|
|
(5)
2,333
|
|
37.40
|
|
12/13/2013
|
|
(6)
900
|
|
19,647
|
|
|
|
3/26/2008
|
|
-
|
|
(7)
5,750
|
|
27.96
|
|
03/26/2015
|
|
(8)
1,250
|
|
27,288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/1999
|
|
2,081
|
|
-
|
|
$
|
17.21
|
|
12/15/2009
|
|
-
|
|
-
|
|
R.
Louis Caceres
|
|
12/21/2001
|
|
3,000
|
|
-
|
|
32.25
|
|
12/21/2011
|
|
-
|
|
-
|
|
|
|
12/11/2002
|
|
4,700
|
|
-
|
|
31.25
|
|
12/11/2012
|
|
-
|
|
-
|
|
|
|
12/17/2003
|
|
5,000
|
|
-
|
|
38.91
|
|
12/17/2013
|
|
-
|
|
-
|
|
|
|
12/15/2004
|
|
6,050
|
|
-
|
|
38.00
|
|
12/15/2014
|
|
-
|
|
-
|
|
|
|
12/14/2005
|
|
6,395
|
|
-
|
|
38.13
|
|
12/14/2012
|
|
-
|
|
-
|
|
|
|
12/13/2006
|
|
3,334
|
|
(5)
1,666
|
|
37.40
|
|
12/13/2013
|
|
(6)
600
|
|
13,098
|
|
|
|
3/26/2008
|
|
-
|
|
(7)
5,000
|
|
27.96
|
|
03/26/2015
|
|
(8)
1,000
|
|
21,830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sara
E. Watkins
|
|
12/15/1999
|
|
2,400
|
|
-
|
|
$
|
17.21
|
|
3/19/2009
|
|
|
|
|
|
|
|
12/13/2000
|
|
3,750
|
|
-
|
|
14.54
|
|
3/19/2009
|
|
|
|
|
|
|
|
12/21/2001
|
|
3,000
|
|
-
|
|
32.25
|
|
3/19/2009
|
|
|
|
|
|
|
|
12/11/2002
|
|
4,700
|
|
-
|
|
31.25
|
|
3/19/2009
|
|
|
|
|
|
|
|
12/17/2003
|
|
5,000
|
|
-
|
|
38.91
|
|
3/19/2009
|
|
|
|
|
|
|
|
12/15/2004
|
|
6,050
|
|
-
|
|
38.00
|
|
3/19/2009
|
|
|
|
|
|
|
|
12/14/2005
|
|
6,395
|
|
-
|
|
38.13
|
|
3/19/2009
|
|
|
|
|
|
|
|
12/13/2006
|
|
2,000
|
|
-
|
|
37.40
|
|
3/19/2009
|
|
-
|
|
-
|
|
|
|
3/26/2008
|
|
-
|
|
(9)
-
|
|
27.96
|
|
-
|
|
(9)
-
|
|
-
|
|
(1)
|
All
outstanding equity awards were issued under Bancorp’s 1999 Stock Option
Plan or Bancorp’s 2005 Omnibus Stock
Plan.
|
(2)
|
Aggregate
market values are based upon the closing price of $21.83 on December 31,
2008.
|
(3)
|
Mr.
Hollar forfeited 3,833 unvested options and 1,500 unvested shares of
restricted stock upon his retirement on December 31,
2008.
|
(4)
|
Shares
granted on March 26, 2008 for Mr. Hollar will vest over three years in
equal amounts on the anniversary of the
grant.
|
(5)
|
Remaining
unexercisable options granted on December 13, 2006 will vest on December
13, 2009.
|
(6)
|
Remaining
shares granted on December 13, 2006 will vest in equal amounts on each
anniversary up to and including December 13,
2011.
|
(7)
|
Options
granted on March 26, 2008 will vest over three years in equal amounts on
the anniversary of the grant.
|
(8)
|
Shares
granted on March 26, 2008 will vest over five years in equal amounts on
the anniversary of the grant.
|
(9)
|
Ms.
Watkins forfeited a total of 5,000 unvested stock options, and 1,150
shares of restricted stock as of December 19,
2008.
|
Grants
of Plan-Based Awards
The
following table sets forth for the named executive officers information on the
estimated potential awards that were possible for 2008 upon satisfaction of the
conditions set forth in the non-equity incentive plans described under “Sandy
Spring Leadership Incentive Plan” (SSLIP) on page 16 and “Executive Incentive
Retirement Plan” (EIRP) on page 17 as well as restricted stock awards (RSA) and
grants of stock options (OPT) made in 2008 under the 2005 Omnibus Stock
Plan.
Name
|
|
|
Grant Date
|
|
|
Estimated possible payouts under
non-equity incentive plan awards
|
|
|
All other
stock
awards:
Number
of shares
of stock
(#)
|
|
|
All other
option
awards:
Number of
securities
underlying
options
(#)
|
|
|
Exercise
or Base
Price of
Option
Awards
($/share)
|
|
|
Grant
Date Fair
Value of
Stock and
Option
Awards
($)(2)
|
|
|
|
|
|
|
|
Threshold(1)
|
|
|
Target
|
|
|
Maximum
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hunter R. Hollar
|
SSLIP
|
|
n/a
|
|
|
$ |
109,800 |
|
|
$ |
219,600 |
|
|
$ |
329,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EIRP
|
|
n/a
|
|
|
|
9,760 |
|
|
|
24,400 |
|
|
|
43,920 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSA
|
|
3/26/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000 |
|
|
|
|
|
|
|
|
$ |
55,920 |
|
Philip J. Mantua
|
SSLIP
|
|
n/a
|
|
|
|
36,000 |
|
|
|
72,000 |
|
|
|
108,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EIRP
|
|
n/a
|
|
|
|
4,800 |
|
|
|
12,000 |
|
|
|
21,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSA
|
|
3/26/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,250 |
|
|
|
|
|
|
|
|
$ |
34,950 |
|
|
OPT
|
|
3/26/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,750 |
|
|
$ |
27.96 |
|
|
|
27,255 |
|
Daniel J. Schrider
|
SSLIP
|
|
n/a
|
|
|
|
61,250 |
|
|
|
122,500 |
|
|
|
183,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EIRP
|
|
n/a
|
|
|
|
7,000 |
|
|
|
17,500 |
|
|
|
31,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSA
|
|
3/26/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500 |
|
|
|
|
|
|
|
|
|
|
$ |
69,900 |
|
|
OPT
|
|
3/26/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000 |
|
|
$ |
27.96 |
|
|
|
47,400 |
|
Frank H. Small
|
SSLIP
|
|
n/a
|
|
|
|
46,875 |
|
|
|
93,750 |
|
|
|
140,625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EIRP
|
|
n/a
|
|
|
|
6,250 |
|
|
|
15,625 |
|
|
|
28,125 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSA
|
|
3/26/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,250 |
|
|
|
|
|
|
|
|
|
|
$ |
34,950 |
|
|
OPT
|
|
3/26/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,750 |
|
|
$ |
27.96 |
|
|
|
27,255 |
|
R. Louis Caceres
|
SSLIP
|
|
n/a
|
|
|
|
32,500 |
|
|
|
65,000 |
|
|
|
97,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EIRP
|
|
n/a
|
|
|
|
5,200 |
|
|
|
13,000 |
|
|
|
23,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSA
|
|
3/26/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000 |
|
|
|
|
|
|
|
|
|
|
$ |
27,960 |
|
|
OPT
|
|
3/26/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000 |
|
|
$ |
27.96 |
|
|
|
23,700 |
|
Sara E. Watkins(3)
|
SSLIP
|
|
n/a
|
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EIRP
|
|
n/a
|
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSA
|
|
3/26/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
850 |
|
|
|
|
|
|
|
|
|
|
$ |
23,766 |
|
|
OPT
|
|
3/26/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000 |
|
|
$ |
27.96 |
|
|
|
18,960 |
|
(1)
|
The
amount listed for the threshold for the SSLIP assumes that all performance
measures achieve the threshold level established under the plan. A lesser
bonus would be earned if only some of the performance measures achieved
the threshold level, and no bonus would be earned if none of the
performance measures achieved threshold.
|
(2)
|
The grant date fair value of each
equity award is computed in accordance with FAS 123R using a binomial
valuation model.
|
(3)
|
Ms.
Watkins was not eligible to receive a benefit under SSLIP or EIRP as she
was not employed on December, 31,
2008.
|
Option
Exercises and Stock Vested
The
following table shows exercises of stock options by the named executive officers
during 2008 and the value realized by them upon exercise.
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Number of Shares
Acquired on Exercise
(#)
|
|
|
Value Realized Upon
Exercise(1)
($)
|
|
|
Number of Shares
Acquired on Vesting
(#)
|
|
|
Value Realized Upon
Vesting(2)
($)
|
|
Hunter R. Hollar
|
|
|
- |
|
|
$ |
- |
|
|
|
500 |
|
|
$ |
9,750 |
|
Philip J. Mantua
|
|
|
- |
|
|
|
- |
|
|
|
200 |
|
|
|
3,900 |
|
Daniel J. Schrider
|
|
|
- |
|
|
|
- |
|
|
|
200 |
|
|
|
3,900 |
|
Frank H. Small
|
|
|
- |
|
|
|
- |
|
|
|
300 |
|
|
|
5,850 |
|
R. Louis Caceres
|
|
|
- |
|
|
|
- |
|
|
|
200 |
|
|
|
3,900 |
|
Sara E. Watkins
|
|
|
1,500 |
|
|
$ |
14,040 |
|
|
|
100 |
|
|
|
1,950 |
|
(1)
|
The
value realized upon exercise is determined by multiplying the number of
shares acquired by the difference between market value per share of
Bancorp common stock on the date of exercise and the exercise price per
share.
|
(2)
|
The
value realized upon vesting is equal to the closing market price of
Bancorp common stock on the date of vesting multiplied by the number of
shares acquired.
|
Pension
Benefits
The
following table shows the present value of the accumulated benefit under the
Sandy Spring Bancorp, Inc. Retirement Income Plan (Pension Plan) for each named
executive officer.
Name
|
|
Plan Name
|
|
Years of Credited Service
|
|
|
Present Value of
Accumulated Benefit
(1)
|
|
Hunter R. Hollar
|
|
Pension Plan
|
|
|
17 |
|
|
$ |
327,073 |
|
Philip J. Mantua
|
|
Pension Plan
|
|
|
9 |
|
|
|
62,990 |
|
Daniel J. Schrider
|
|
Pension Plan
|
|
|
19 |
|
|
|
87,279 |
|
Frank H. Small
|
|
Pension Plan
|
|
|
17 |
|
|
|
363,181 |
|
R. Louis Caceres
|
|
Pension Plan
|
|
|
9 |
|
|
|
72,783 |
|
Sara E. Watkins
|
|
Pension Plan
|
|
|
34 |
|
|
|
309,236 |
|
(1)
|
This
plan and related valuation methods and assumptions are included in Note 14
to the Consolidated Financial Statements in the 2008 Annual Report on Form
10-K.
|
Sandy
Spring Bancorp's Retirement Income Plan, a defined benefit, tax-qualified
pension plan (Pension Plan), was generally available to employees through
December 31, 2007. Benefits under the Pension Plan are provided on a 10-year
certain and life basis and are not subject to deduction for Social Security or
other offset amounts. Earnings covered by the Pension Plan are total wages,
including elective pre-tax contributions under Section 401(k) of the Internal
Revenue Code, bonuses, and other cash compensation, which for the named
executive officers correspond, in general, to the total of the amounts in the
"Salary" and "Non-Equity Incentive Plan Compensation" columns in the Summary
Compensation Table, up to a total of $225,000.
The
Pension Plan benefit equals the sum of three parts: (a) the benefit accrued as
of December 31, 2000, based on the formula of 1.5% of highest five-year average
salary as of that date times years of service as of that date, plus (b) 1.75% of
each year's earnings after December 31, 2000 (1.75% of career average earnings)
through December 31, 2005, and (c) 1.0% of each year's earnings thereafter. In
addition, if the participant's age plus years of service as of January 1, 2001
equaled at least 60, and the participant had at least 15 years of service at
that date, he or she will receive an additional benefit of 1% of year 2000
earnings for each of the first 10 years of service completed after December 31,
2000. The Pension Plan permits early retirement at age 55 after at least 10
years of service completed after December 31, 2000. The Pension Plan
was frozen as of December 31, 2007.
Nonqualified
Deferred Compensation
The
following table summarizes the contributions and earnings for the named
executive officers under the Nonqualified Deferred Compensation Plan (NQDCP) and
the Executive Incentive Retirement Plan (EIRP).
Name
|
|
Plan Name
|
|
Executive
Contributions
in Last Fiscal
Year
(1)
|
|
|
Registrant
Contributions
in Last Fiscal
Year
(2)
|
|
|
Aggregate
Earnings in
Last Fiscal
Year
(3)(4)
|
|
|
Aggregate
Withdrawals/
Distributions
(4)
|
|
|
Aggregate
Balance at
Last Fiscal
Year End
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hunter
R. Hollar
|
|
NQDC
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
17,041 |
|
|
$ |
- |
|
|
$ |
244,376 |
|
|
|
EIRP
|
|
|
|
|
|
|
19,520 |
|
|
|
146,138 |
|
|
|
- |
|
|
|
1,749,862 |
|
Philip
J. Mantua
|
|
NQDC
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
EIRP
|
|
|
|
|
|
|
9,600 |
|
|
|
19,246 |
|
|
|
|
|
|
|
237,486 |
|
Daniel
J. Schrider
|
|
NQDX
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
EIRP
|
|
|
|
|
|
|
14,000 |
|
|
|
11,992 |
|
|
|
|
|
|
|
155,994 |
|
Frank
H. Small
|
|
NQDC
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
EIRP
|
|
|
|
|
|
|
12,500 |
|
|
|
106,982 |
|
|
|
|
|
|
|
1,279,216 |
|
R.
Louis Caceres
|
|
NQDC
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
EIRP
|
|
|
|
|
|
|
10,400 |
|
|
|
14,670 |
|
|
|
|
|
|
|
184,102 |
|
Sara
E. Watkins
|
|
NQDC
|
|
|
41,927 |
|
|
|
|
|
|
|
26,609 |
|
|
|
- |
|
|
|
404,501 |
|
|
|
EIRP
|
|
|
|
|
|
|
- |
|
|
|
4,767 |
|
|
|
56,447 |
|
|
|
- |
|
(1)
|
Mr.
Hollar and Ms. Watkins participated in the Sandy Spring Bank Nonqualified
Deferred Compensation Plan under which he last deferred earnings in 2002
and she in 2008. The amount shown is the total of Ms. Watkins’
contributions for 2008.
|
(2)
|
The
criteria for determining contributions for EIRP participants are discussed
on page 17. The benefit earned for 2008 was calculated after
2008 peer bank information was received and credited to each participant’s
account as of December 31, 2008.
|
(3)
|
Annual
earnings for the NQDC accrued at the Wall Street prime rate in effect on
December 31st of the prior year, or 7.25% for 2008. The amount considered
to be “above market” interest in 2008 was $4,844 for Mr. Hollar and $7,585
for Ms. Watkins. Aggregate earnings have been included in
compensation in the summary compensation tables in this report and in
previous years.
|
(4)
|
Annual
earnings for the EIRP accrued at the Wall Street prime rate in effect on
December 31st
of the prior year plus 2 percentage points, or 9.25% for
2008. The amount considered to be “above market” interest in
2008 for the named executive officers was as follows: Hollar
$61,948; Mantua $8,158; Schrider $5,083; Small $45,349; Caceres $6,218;
Watkins $2,021.
|
(5)
|
The
former Supplemental Executive Retirement Agreements were replaced with the
EIRP as described on page 17. The beginning balance for each
participant’s EIRP account was the accrued balance as of December 31, 2007
under the former Supplemental Executive Retirement
Agreements.
|
Potential
Payments upon Termination
The
following table summarizes the payments to which the named executive officers
were entitled upon a termination of employment in different, specified
circumstances under their employment agreements, the Executive Incentive
Retirement Plan (EIRP), the 2005 Omnibus Stock Plan, and prior stock plans under
which stock options remain outstanding. Benefits payable under the Pension Plan
or 401(k) Plan are not included. Ms. Watkins’ last day of
employment was December 19, 2008 and therefore, she was only eligible for
additional compensation in the event of a change in control. Mr.
Hollar’s employment agreement ended on December 31, 2008 and therefore he was
not entitled to receive any additional compensation. Calculations
below assume termination on December 31, 2008.
POTENTIAL
PAYMENTS UPON
TERMINATION
|
|
Hunter
R.
Hollar
|
|
|
Philip
J.
Mantua
|
|
|
Daniel
J.
Schrider
|
|
|
Frank
H.
Small
|
|
|
R.
Louis
Caceres
|
|
|
Sara
E.
Watkins
|
|
Termination
without a Change in Control:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement:
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employment
agreements
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
EIRP
(2)
|
|
|
1,749,862 |
|
|
|
112,149 |
|
|
|
155,994 |
|
|
|
1,279,216 |
|
|
|
82,846 |
|
|
|
- |
|
Equity
awards
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Total
|
|
$ |
1,749,862 |
|
|
$ |
112,149 |
|
|
$ |
155,994 |
|
|
$ |
1,279,216 |
|
|
$ |
82,846 |
|
|
$ |
- |
|
Death:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employment
agreements
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
EIRP
(2)
|
|
|
1,749,862 |
|
|
|
237,486 |
|
|
|
155,994 |
|
|
|
1,279,216 |
|
|
|
184,102 |
|
|
|
|
|
Equity
awards (3)
|
|
|
43,660 |
|
|
|
40,386 |
|
|
|
67,673 |
|
|
|
46,935 |
|
|
|
34,928 |
|
|
|
|
|
Total
|
|
$ |
1,793,522 |
|
|
$ |
277,872 |
|
|
$ |
223,667 |
|
|
$ |
1,326,151 |
|
|
$ |
117,774 |
|
|
$ |
- |
|
Disability:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employment
agreements (4)
|
|
$ |
- |
|
|
$ |
205,479 |
|
|
$ |
249,839 |
|
|
$ |
372,510 |
|
|
$ |
235,509 |
|
|
$ |
- |
|
EIRP
(2)
|
|
|
1,749,862 |
|
|
|
237,486 |
|
|
|
155,994 |
|
|
|
1,279,216 |
|
|
|
184,102 |
|
|
|
|
|
Equity
awards (3)
|
|
|
43,660 |
|
|
|
40,836 |
|
|
|
67,673 |
|
|
|
46,935 |
|
|
|
34,928 |
|
|
|
|
|
Total
|
|
$ |
1,793,522 |
|
|
$ |
483,350 |
|
|
$ |
473,506 |
|
|
$ |
1,271,275 |
|
|
$ |
353,283 |
|
|
$ |
- |
|
Voluntary
termination by executive officer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employment
agreements
|
|
$ |
- |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
EIRP
(2)
|
|
|
1,749,862 |
|
|
|
112,149 |
|
|
|
155,994 |
|
|
|
1,279,216 |
|
|
|
82,846 |
|
|
|
|
|
Equity
awards
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Total
|
|
$ |
1,749,862 |
|
|
$ |
112,149 |
|
|
|
155,994 |
|
|
$ |
1,279,216 |
|
|
$ |
82,846 |
|
|
$ |
- |
|
Termination
by Bancorp with just cause
|
|
None
|
|
|
None
|
|
|
None
|
|
|
None
|
|
|
None
|
|
|
|
|
|
Termination
by Bancorp without just cause or by executive with Good
Reason:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employment
agreements (5)
|
|
$ |
- |
|
|
$ |
310,628 |
|
|
$ |
641,459 |
|
|
$ |
411,561 |
|
|
$ |
545,850 |
|
|
$ |
- |
|
EIRP
(2)
|
|
|
1,749,862 |
|
|
|
112,149 |
|
|
|
155,994 |
|
|
|
1,279,216 |
|
|
|
82,846 |
|
|
|
|
|
Equity
awards
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Total
|
|
$ |
1,749,862 |
|
|
$ |
422,777 |
|
|
$ |
797,453 |
|
|
$ |
1,690,777 |
|
|
$ |
628,696 |
|
|
$ |
- |
|
Termination
in connection with a Change in Control:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employment
agreements-compensation and benefits (6)
|
|
$ |
2,796,263 |
|
|
$ |
1,084,383 |
|
|
$ |
1,548,040 |
|
|
$ |
1,957,941 |
|
|
$ |
1,204,861 |
|
|
$ |
885,328 |
|
Employment
agreements-tax gross up (7)
|
|
|
916,460 |
|
|
|
472,229 |
|
|
|
604,605 |
|
|
|
681,930 |
|
|
|
517,597 |
|
|
|
395,109 |
|
EIRP
(2)
|
|
|
1,749,862 |
|
|
|
237,486 |
|
|
|
155,994 |
|
|
|
1,279,216 |
|
|
|
184,102 |
|
|
|
- |
|
Equity
awards (3)
|
|
|
43,660 |
|
|
|
40,386 |
|
|
|
67,673 |
|
|
|
46,935 |
|
|
|
34,928 |
|
|
|
- |
|
Total
|
|
$ |
5,506,245 |
|
|
$ |
1,834,484 |
|
|
$ |
2,376,312 |
|
|
$ |
3,966,021 |
|
|
$ |
1,941,489 |
|
|
$ |
1,280,437 |
|
(1)
|
Does
not include benefits payable under Bancorp's pension
plan.
|
(2)
|
In
all cases of termination, except for “just cause,” the executive is
entitled to the vested accrued balance in the EIRP
account. Unvested deferred bonus awards will automatically vest
upon the executive’s death or disability or upon the occurrence of a
change in control. The benefit is payable to the executive or his or her
designated beneficiary, as applicable, either in a lump sum or in fixed
annual installments over a minimum of 2 years and up to 15
years. The amount shown is the vested accrued balance as of
December 31, 2008. See "Executive Incentive Retirement Plan" on
page 17.
|
(3)
|
Includes
(a) the market value of restricted stock for which vesting is accelerated
and (b) the market value of shares issuable upon the exercise of options
for which vesting is accelerated less the option exercise
price.
|
(4)
|
The
employment agreements provide for continuation of salary, net of payments
under Bancorp's disability policies, plus benefits for the remaining term
of the agreements. Amounts shown are not
discounted.
|
(5)
|
The
executive is entitled to salary and bonus for the remaining term of the
agreement in the event of termination by Bancorp without just cause or by
the executive with Good
Reason.
|
(6)
|
Consist
of 2.99 times salary and other compensation in a lump sum and the value of
three calendar years of health and welfare benefits to which the
executives are entitled in the event of termination by Bancorp without
just cause or by the executive with Good Reason within the period
beginning six months before and ending two years after a change in
control. An executive also is entitled to these benefits in the event he
terminates his employment for any reason within the sixty-day period that
begins six months after the closing of an agreement that triggered the
change in control. See "Change-in-Control Benefit" on page
20. The amounts shown in the table do not reflect any
limitations imposed on participants in the TARP-CPP, which would have the
effect of reducing, and possibly eliminating, any severance
payments.
|
(7)
|
The
executive is entitled to a payment to offset the federal excise tax on
excess payments. This tax is payable if the value of change-in-control
related payments exceeds three times the executive's five-year average
compensation. The amount subject to the tax is the excess of the value of
the change-in-control payments that exceed the average compensation. For
purposes of this table, it is assumed that the full amount of the benefit
payable under the employment agreements is paid. However,
restrictions on severance payments by participants in the TARP-CPP would
make the tax gross-up payments
unnecessary.
|
PROPOSAL II: A
Non-Binding Resolution to Approve the Compensation
of
the Named Executive Officers
The
American Recovery and Reinvestment Act of 2009 requires Bancorp, during the
period in which any obligation arising from Bancorp’s participation in the TARP
Capital Purchase Program remains outstanding, to submit to the shareholders a
non-binding vote on the compensation of Bancorp’s named executive officers, as
described in the Compensation Discussion and Analysis, the tabular disclosure
regarding named executive officer compensation, and the accompanying narrative
disclosure in this proxy statement.
This
proposal, commonly known as a “say-on-pay” proposal, gives Bancorp’s
shareholders the opportunity to endorse or not endorse Bancorp’s executive pay
program and policies through the following resolution:
“Resolved,
that the shareholders approve the compensation of the named executive officers,
as disclosed in the Compensation Discussion and Analysis, the compensation
tables, and related material in this proxy statement.”
This vote
shall not be binding on the board of directors and will not be construed as
overruling a decision by the board nor create or imply any additional fiduciary
duty by the board. However, the Human Resources and
Compensation Committee will take into account the outcome of the vote when
considering future executive compensation arrangements.
In voting
to approve the above resolution, shareholders may vote for the resolution,
against the resolution or abstain from voting. This matter will be
decided by the affirmative vote of a majority of the votes cast at the annual
meeting. On this matter, abstentions will have no effect on the
voting.
The board
of directors believes that the compensation practices of Bancorp are designed to
accomplish the objectives stated in the compensation philosophy, and they are
appropriately aligned to the long-term success of Bancorp and the interests of
shareholders.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVAL OF THE
COMPENSATION OF THE NAMED EXECUTIVE OFFICERS.
PROPOSAL III: The
Ratification of the Appointment of Grant Thornton LLP as the Independent
Registered Public Accounting Firm for the Year 2009
The Audit
Committee has appointed the firm of Grant Thornton LLP as Bancorp’s independent
registered public accounting firm for 2009. In accordance with
established policy, the board is submitting this proposal to the vote of the
shareholders for ratification. In the event the appointment is not
ratified by a majority of the shareholders it is anticipated that no change in
auditors will be made for the current year because of the difficulty and expense
of making a change so long after the beginning of the year, but the vote will be
considered in connection with the auditor appointment for 2010.
On March
18, 2008, Bancorp dismissed McGladrey & Pullen, LLP (McGladrey), which had
previously served as independent auditor for Bancorp. The reports of McGladrey
on the consolidated financial statements of Bancorp as of and for the fiscal
years ended December 31, 2007 and December 31, 2006 contained no adverse opinion
or disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope, or accounting principles. In connection with its audit for the
fiscal years ended December 31, 2007 and 2006, there were no disagreements with
McGladrey on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements, if
not resolved to the satisfaction of McGladrey, would have caused McGladrey to
make reference to such disagreements in its report on the consolidated financial
statements for such years.
In voting
to ratify the appointment of Grant Thornton LLP as Bancorp’s independent
registered public accounting firm for 2009, shareholders may vote for the
proposal, against the proposal or abstain from voting. This matter
will be decided by the affirmative vote of a majority of the votes cast at the
annual meeting. On this matter, abstentions will have no effect on
the voting.
Representatives
of Grant Thornton LLP will be present at the annual meeting, will be given the
opportunity to make a statement, and be available to respond to appropriate
questions.
THE
BOARD RECOMMENDS A VOTE "FOR" THE RATIFICATION OF GRANT THORNTON LLP AS
BANCORP'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2009.
Audit and Non-Audit
Fees
The
following table presents fees for professional audit services rendered for the
audit of the annual financial statements of Sandy Spring Bancorp, Inc. and
subsidiaries by Grant Thornton LLP for the year ended December 31, 2008 and by
McGladrey & Pullen, LLP for the year ended December 31, 2007 together with
fees billed for other services rendered by McGladrey & Pullen, LLP and RSM
McGladrey, Inc. (an affiliate of McGladrey & Pullen, LLP).
|
|
2008
|
|
|
2007
|
|
Audit
Fees(1)
|
|
$ |
361,905 |
|
|
$ |
392,134 |
|
Audit-Related
Fees(2)
|
|
|
- |
|
|
|
56,550 |
|
Tax
Services(3)
|
|
|
- |
|
|
|
26,082 |
|
(1)
|
Audit
fees consist of fees for professional services rendered for the audit of
Bancorp's consolidated financial statements and review of financial
statements included in Bancorp's quarterly reports on Form 10-Q and
services normally provided by the independent registered public accounting
firm in connection with statutory and regulatory filings or
engagements.
|
(2)
|
Audit-related
fees were for services related to employee benefit plan audits, due
diligence related to mergers and acquisitions, and consultation concerning
financial accounting and reporting
standards.
|
(3)
|
Tax
services fees were for due diligence related to
mergers.
|
Audit Committee's
Preapproval Policies and Procedures for Services
The Audit
Committee is required to pre-approve all auditing services and permitted
non-audit services provided by Bancorp's independent registered public
accounting firm. There is an exception for preapproval of non-audit
services if the aggregate amount of all such non-audit services provided to
Bancorp constitutes not more than 5% of the total amount of revenues paid by it
to its independent registered public accounting firms during the fiscal year in
which the non-audit services are provided; such services were not recognized by
Bancorp at the time of the engagement to be non-audit services; and the
non-audit services are promptly brought to the attention of the committee and
approved prior to the completion of the audit by the committee or by one or more
members of the committee to whom authority to grant such approval has been
delegated by the committee. All audit services and permitted non-audit services
to be performed by Bancorp's independent registered public accounting firm have
been preapproved by the Audit Committee as required by SEC regulations and the
Audit Committee's charter without exception.
Report of the Audit
Committee
Bancorp's
Audit Committee is appointed by the board of directors to assist the board in
monitoring the integrity of the financial statements, compliance with legal and
regulatory requirements, and the independence and performance of internal and
external auditors. The committee (1) has reviewed and discussed the audited
financial statements included in Bancorp's 2008 Annual Report on Form 10-K with
management; (2) has discussed with the Bancorp's independent registered public
accounting firm the matters required to be discussed by Statement of Auditing
Standards 61 (Communication with Audit Committees); and (3) has received the
written disclosures and the letter from the Bancorp's independent registered
public accounting firm required by applicable requirement of the Public Company
Accounting Oversight Board and discussed independence with Bancorp's independent
registered public accounting firm. Based upon this review, discussion,
disclosures, and materials described in (1) through (3), the committee
recommended to the board of directors that the audited financial statements be
included in the 2008 Annual Report on Form 10-K. The committee also has
considered whether the amount and nature of non-audit services rendered by the
Bancorp's independent registered public accounting firm are consistent with its
independence.
March 3,
2009
Pamela A.
Little, Chairman
Mark E.
Friis
Charles
F. Mess, Sr.
Craig A.
Ruppert
David E.
Rippeon
By order
of the board of directors,
Ronald E.
Kuykendall
General
Counsel & Secretary
Olney,
Maryland
March 16,
2009
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