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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Year Ended December 31, 1997
Commission File Number 0-19065
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SANDY SPRING BANCORP, INC.
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(Exact name of registrant as specified in its charter)
Maryland 52-1532952
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) or No.)
17801 Georgia Avenue, Olney, Maryland 20832
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (301) 774-6400.
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of
the Act:
Common Stock, par value $1.00 per share
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The registrant's Common Stock is traded on the NASDAQ National Market under the
symbol SASR. The aggregate market value of the 9,305,962 shares of Common Stock
of the registrant issued and outstanding held by nonaffiliates on March 9, 1998,
was approximately $318.7 million based on the closing sales price of $34.25 per
share of the registrant's Common Stock on March 9, 1998. For purposes of this
calculation, the term "affiliate" refers to all directors and executive officers
of the registrant.
As of the close of business on March 9, 1998, 9,659,938 shares of the
registrant's Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Parts I and II: Portions of the Annual Report to Shareholders for the year
ended December 31, 1997 (the "Annual Report").
Part III: Portions of the definitive proxy statement for the Annual
Meeting of Shareholders to be held on April 15, 1998 (the
"Proxy Statement").
FORWARD-LOOKING STATEMENTS
Part I and Part II of this Annual Report on Form 10-K contain
forward-looking statements, including statements of goals, intentions, and
expectations, regarding or based upon general economic conditions, interest
rates, developments in national and local markets, and other matters, and which,
by their nature, are subject to significant uncertainties. Because of these
uncertainties and the assumptions on which statements in this report are based,
the actual future results may differ materially from those indicated in this
report.
PART I
ITEM 1. BUSINESS
GENERAL
Sandy Spring Bancorp, Inc. ("Bancorp") is the one-bank holding company
for Sandy Spring National Bank of Maryland (the "Bank"). Bancorp is registered
as a bank holding company pursuant to the Bank Holding Company Act of 1956, as
amended (the "Holding Company Act"). As such, Bancorp is subject to supervision
and regulation by the Board of Governors of the Federal Reserve System (the
"Federal Reserve"). Bancorp began operating in 1988. The Bank traces its origin
to 1868, and is the oldest banking business based in Montgomery County,
Maryland. The Bank is independent, community oriented, and conducts a
full-service commercial banking business through 21 community offices located in
Montgomery, Howard, Prince George's and Anne Arundel counties in Maryland. The
Bank is a national bank subject to supervision and regulation by the Office of
the Comptroller of the Currency (the "OCC"). The Bank's savings and deposit
accounts are insured by the Bank Insurance Fund ("BIF") administered by the
Federal Deposit Insurance Corporation (the "FDIC") to the maximum permitted by
law.
The Bank experiences substantial competition both in attracting and
retaining deposits and in making loans. Direct competition for deposits comes
from other commercial banks, savings associations, and credit unions located in
the Bank's primary market area of Montgomery, Howard, Prince George's and Anne
Arundel Counties in Maryland. Additional significant competition for deposits
comes from mutual funds and corporate and government debt securities. As an
alternative to traditional deposit accounts, annuities are offered through Sandy
Spring Insurance Corporation, a wholly owned subsidiary of the Bank. Residential
construction and mortgage loan products are offered by Sandy Spring Mortgage
Corporation, another wholly owned subsidiary of the Bank. The primary factors in
competing for loans are interest rates and loan origination fees and the range
of services offered by lenders. Competitors for loan originations include other
commercial banks, mortgage bankers, mortgage brokers, savings associations, and
insurance companies. Management believes the Bank is able to compete effectively
in its primary market area.
Bancorp's and the Bank's principal executive office is at 17801 Georgia
Avenue, Olney, Maryland 20832, and its telephone number is (301) 774-6400.
REGULATION, SUPERVISION, AND GOVERNMENTAL POLICY
Following is a brief summary of certain statutes and regulations that
significantly affect Bancorp and the Bank. This summary does not purport to be
complete and is qualified in its entirety by reference to these statutes and
regulations. A number of other statutes and regulations affect Bancorp and the
Bank but are not summarized below.
Bank Holding Company Regulation. Bancorp is registered as a bank
holding company under the Holding Company Act and, as such, is subject to
supervision and regulation by the Federal Reserve. As a bank holding company,
Bancorp is required to furnish to the Federal Reserve annual and quarterly
reports of its operations and additional information and reports. Bancorp is
also subject to regular examination by the Federal Reserve.
1
Under the Holding Company Act, a bank holding company must obtain the
prior approval of the Federal Reserve before (i) acquiring direct or indirect
ownership or control of any class of voting securities of any bank or bank
holding company if, after the acquisition, the bank holding company would
directly or indirectly own or control more than 5% of the class; (2) acquiring
all or substantially all of the assets of another bank or bank holding company;
or (3) merging or consolidating with another bank holding company.
Under the Holding Company Act, any company must obtain approval of the
Federal Reserve prior to acquiring control of Bancorp or the Bank. For purposes
of the Holding Company Act, "control" is defined as ownership of more than 25%
of any class of voting securities of Bancorp or the Bank, the ability to control
the election of a majority of the directors, or the exercise of a controlling
influence over management or policies of Bancorp or the Bank.
The Change in Bank Control Act and the related regulations of the
Federal Reserve require any person or persons acting in concert (except for
companies required to make application under the Holding Company Act), to file a
written notice with the Federal Reserve before the person or persons acquire
control of Bancorp or the Bank. The Change in Bank Control Act defines "control"
as the direct or indirect power to vote 25% or more of any class of voting
securities or to direct the management or policies of a bank holding company or
an insured bank.
The Holding Company Act also prohibits, with certain exceptions, a bank
holding company from acquiring direct or indirect ownership or control of more
than 5% of the voting shares of a company that is not a bank or a bank holding
company, or from engaging directly or indirectly in activities other than those
of banking, managing or controlling banks, or providing services for its
subsidiaries. The principal exceptions to these prohibitions involve certain
non-bank activities which, by statute or by Federal Reserve regulation or order,
have been identified as activities closely related to the business of banking or
managing or controlling banks. The activities of Bancorp are subject to these
legal and regulatory limitations under the Holding Company Act and Federal
Reserve regulations. The Federal Reserve also has the power to order a holding
company or its subsidiaries to terminate any activity, or to terminate its
ownership or control of any subsidiary, when it has reasonable cause to believe
that the continuation of such activity or such ownership or control constitutes
a serious risk to the financial safety, soundness, or stability of any bank
subsidiary of that holding company.
The Federal Reserve has adopted guidelines regarding the capital
adequacy of bank holding companies, which require bank holding companies to
maintain specified minimum ratios of capital to total assets and capital to
risk-weighted assets. See "Regulatory Capital Requirements."
The Federal Reserve has the power to prohibit dividends by bank holding
companies if their actions constitute unsafe or unsound practices. The Federal
Reserve has issued a policy statement on the payment of cash dividends by bank
holding companies, which expresses the Federal Reserve's view that a bank
holding company should pay cash dividends only to the extent that the company's
net income for the past year is sufficient to cover both the cash dividends and
a rate of earnings retention that is consistent with the company's capital
needs, asset quality, and overall financial condition.
Bank Regulation. As a national bank, the Bank is subject to the primary
supervision of the OCC under the National Bank Act. The prior approval of the
OCC is required for a national bank to establish or relocate an additional
branch office or to engage in any merger, consolidation, or significant purchase
or sale of assets.
The OCC regularly examines the operations and condition of the Bank,
including but not limited to its capital adequacy, reserves, loans, investments,
and management practices. These examinations are for the protection of the
Bank's depositors and the BIF. In addition, the Bank is required to furnish
quarterly and annual reports to the OCC. The OCC's enforcement authority
includes the power to remove officers and directors and the authority to issue
cease-and-desist orders to prevent a bank from engaging in unsafe or unsound
practices or violating laws or regulations governing its business.
2
The OCC has adopted regulations regarding the capital adequacy of
national banks, which require national banks to maintain specified minimum
ratios of capital to total assets and capital to risk-weighted assets. See
"Regulatory Capital Requirements."
No national bank may pay dividends from its paid-in capital. All
dividends must be paid out of current or retained net profits, after deducting
reserves for losses and bad debts. The National Bank Act further restricts the
payment of dividends out of net profits by prohibiting a national bank from
declaring a dividend on its shares of common stock until the surplus fund equals
the amount of capital stock or, if the surplus fund does not equal the amount of
capital stock, until one-tenth of a bank's net profits for the preceding half
year in the case of quarterly or semi-annual dividends, or the preceding two
half-year periods in the case of annual dividends, are transferred to the
surplus fund.
The approval of the OCC is required prior to the payment of a dividend
if the total of all dividends declared by a national bank in any calendar year
would exceed the total of its net profits for that year combined with its
retained net profits for the two preceding years, less any required transfers to
surplus or a fund for the retirement of any preferred stock. In addition, the
Bank is prohibited by federal statute from paying dividends or making any other
capital distribution that would cause the Bank to fail to meet its regulatory
capital requirements. Further, the OCC also has authority to prohibit the
payment of dividends by a national bank when it determines that their payment
would be an unsafe and unsound banking practice.
The Bank is a member of the Federal Reserve System and its deposits are
insured by the FDIC to the legal maximum of $100,000 for each insured depositor.
Some of the aspects of the lending and deposit business of the Bank that are
subject to regulation by the Federal Reserve and the FDIC include reserve
requirements and disclosure requirements in connection with personal and
mortgage loans and deposit accounts. In addition, the Bank is subject to
numerous federal and state laws and regulations that include specific
restrictions and procedural requirements with respect to the establishment of
branches, investments, interest rates on loans, credit practices, the disclosure
of credit terms, and discrimination in credit transactions.
The Bank is subject to restrictions imposed by federal law on
extensions of credit to, and certain other transactions with, Bancorp and other
affiliates, and on investments in their stock or other securities. These
restrictions prevent Bancorp and the Bank's other affiliates from borrowing from
the Bank unless the loans are secured by specified collateral, and require those
transactions to have terms comparable to terms of arms-length transactions with
third persons. In addition, secured loans and other transactions and investments
by the Bank are generally limited in amount as to Bancorp and as to any other
affiliate to 10% of the Bank's capital and surplus and as to Bancorp and all
other affiliates together to an aggregate of 20% of the Bank's capital and
surplus. Certain exemptions to these limitations apply to extensions of credit
by, and other transactions between, the Bank to its subsidiaries. These
regulations and restrictions may limit Bancorp's ability to obtain funds from
the Bank for its cash needs, including funds for acquisitions and for payment of
dividends, interest, and operating expenses.
Under OCC regulations, national banks must adopt and maintain written
policies that establish appropriate limits and standards for extensions of
credit secured by liens or interests in real estate or are made for the purpose
of financing permanent improvements to real estate. These policies must
establish loan portfolio diversification standards; prudent underwriting
standards, including loan-to-value limits, that are clear and measurable; loan
administration procedures; and documentation, approval, and reporting
requirements. A bank's real estate lending policy must reflect consideration of
the Interagency Guidelines for Real Estate Lending Policies (the "Interagency
Guidelines") adopted by the federal bank regulators. The Interagency Guidelines,
among other things, call for internal loan-to-value limits for real estate loans
that are not in excess of the limits specified in the Guidelines. The
Interagency Guidelines state, however, that it may be appropriate in individual
cases to originate or purchase loans with loan-to-value ratios in excess of the
supervisory loan-to-value limits.
The FDIC has established a risk-based deposit insurance premium
assessment system for insured depository institutions. Under the system, the
assessment rate for an insured depository institution depends on the assessment
3
risk classification assigned to the institution by the FDIC, based upon the
institution's capital level and supervisory evaluations. Institutions are
assigned to one of three capital groups -- well-capitalized, adequately
capitalized, or undercapitalized -- based on the data reported to regulators.
Well-capitalized institutions are institutions satisfying the following capital
ratio standards: (i) total risk-based capital ratio of 10.0% or greater; (ii)
Tier 1 risk-based capital ratio of 6.0% or greater; and (iii) Tier 1 leverage
ratio of 5.0% or greater. Adequately capitalized institutions are institutions
that do not meet the standards for well-capitalized institutions but that
satisfy the following capital ratio standards: (i) total risk-based capital
ratio of 8.0% or greater; (ii) Tier 1 risk-based capital ratio of 4.0% or
greater; and (iii) Tier 1 leverage ratio of 4.0% or greater. Institutions that
do not qualify as either well-capitalized or adequately capitalized are deemed
to be undercapitalized. Within each capital group, institutions are assigned to
one of three subgroups on the basis of supervisory evaluations by the
institution's primary supervisory authority and such other information as the
FDIC determines to be relevant to the institution's financial condition and the
risk it poses to the deposit insurance fund. Subgroup A consists of financially
sound institutions with only a few minor weaknesses. Subgroup B consists of
institutions with demonstrated weaknesses that, if not corrected, could result
in significant deterioration of the institution and increased risk of loss to
the deposit insurance fund. Subgroup C consists of institutions that pose a
substantial probability of loss to the deposit insurance fund unless effective
corrective action is taken. The Bank has been informed that it is in the lowest
assessment category for BIF and SAIF for the first assessment period of 1998.
New Laws. The operations of Bancorp and the Bank are affected by new
federal and state laws. The federal Economic Growth and Regulatory Paperwork
Reduction Act of 1996 (the "1996 Act"), included provisions that affect banks,
bank holding companies, and savings associations. The 1996 Act had, and is
expected to have in the future, its most significant effect upon bank and
savings associations that hold deposits assessed at Savings Deposit Insurance
Fund ("SAIF") rates. The Bank does not have "SAIF" assessed deposits, and the
direct impact on the Bank of the 1996 Act was not material in 1996 or 1997.
Among other things, the 1996 Act recapitalized the SAIF through a special
assessment on savings association deposits and bank deposits that had been
acquired from savings associations. The 1996 Act may increase competition from
savings associations by equalizing, over time, the amount of federal insurance
premiums paid on savings association and bank deposits. The 1996 Act also
provided that institutions with deposits insured by the BIF, as well as those
with SAIF insured deposits, are responsible for payment of certain bonds issued
in connection with the resolution of failed savings associations. The result of
these provisions will be somewhat higher federal deposit insurance premiums for
the Bank. These higher insurance premiums have not had and are not expected to
have a material adverse effect on the Bank or Bancorp.
The 1996 Act also simplified the regulatory approval process for new
activities of banks and bank holding companies, and reduced a number of other
regulatory burdens. None of these changes has had or is expected to have a
significant effect on the Bancorp or the Bank.
Bank Secrecy Act Compliance. In the fourth quarter of 1996, the Bank
learned that it had not fully complied with certain requirements of the federal
Bank Secrecy Act and related regulations, including obligations to monitor and
file reports of certain types of currency transactions. Financial institutions
that fail to comply with the requirements of the Bank Secrecy Act may be subject
to penalties, including civil money penalties. It is not now known whether such
penalties or any other action will be sought against the Bank in connection with
its noncompliance, or, if they are, the amount or nature of such penalties.
Management believes that the Bank is now in compliance with its current
reporting obligations under the Bank Secrecy Act, and is in discussion with
appropriate federal regulatory authorities regarding the steps it has taken and
plans to take to remedy its past noncompliance. See "Note 23 - Contingencies" of
the Notes to the Consolidated Financial Statements on page 39 of the Annual
Report.
4
Regulatory Capital Requirements. The Federal Reserve and the OCC have
established guidelines for maintenance of appropriate levels of capital by bank
holding companies and national banks, respectively. The regulations impose two
sets of capital adequacy requirements: minimum leverage rules, which require
bank holding companies and banks to maintain a specified minimum ratio of
capital to total assets, and risk-based capital rules, which require the
maintenance of specified minimum ratios of capital to "risk-weighted" assets.
The regulations of the Federal Reserve and the OCC require bank holding
companies and national banks, respectively, to maintain a minimum leverage ratio
of "Tier 1 capital" (as defined in the risk-based capital guidelines discussed
in the following paragraphs) to total assets of 3.0%. The capital regulations
state, however, that only the strongest bank holding companies and banks, with
composite examination ratings of 1 under the rating system used by the federal
bank regulators, would be permitted to operate at or near this minimum level of
capital. All other bank holding companies and banks are expected to maintain a
leverage ratio of at least 1% to 2% above the minimum ratio, depending on the
assessment of an individual organization's capital adequacy by its primary
regulator. A bank or bank holding company experiencing or anticipating
significant growth is expected to maintain capital well above the minimum
levels. In addition, the Federal Reserve has indicated that it also may consider
the level of an organization's ratio of tangible Tier 1 capital (after deducting
all intangibles) to total assets in making an overall assessment of capital.
The risk-based capital rules of the Federal Reserve and the OCC require
bank holding companies and national banks to maintain minimum regulatory capital
levels based upon a weighting of their assets and off-balance sheet obligations
according to risk. The risk-based capital rules have two basic components: a
core capital (Tier 1) requirement and a supplementary capital (Tier 2)
requirement. Core capital consists primarily of common stockholders' equity,
certain perpetual preferred stock (noncumulative perpetual preferred stock with
respect to banks), and minority interests in the equity accounts of consolidated
subsidiaries; less all intangible assets, except for certain mortgage servicing
rights and purchased credit card relationships. Supplementary capital elements
include, subject to certain limitations, the allowance for losses on loans and
leases; perpetual preferred stock that does not qualify as Tier 1 capital;
long-term preferred stock with an original maturity of at least 20 years from
issuance; hybrid capital instruments, including perpetual debt and mandatory
convertible securities; and subordinated debt and intermediate-term preferred
stock.
The risk-based capital regulations assign balance sheet assets and
credit equivalent amounts of off-balance sheet obligations to one of four broad
risk categories based principally on the degree of credit risk associated with
the obligor. The assets and off-balance sheet items in the four risk categories
are weighted at 0%, 20%, 50% and 100%. These computations result in the total
risk-weighted assets.
The risk-based capital regulations require all banks and bank holding
companies to maintain a minimum ratio of total capital to total risk-weighted
assets of 8%, with at least 4% as core capital. For the purpose of calculating
these ratios: (i) supplementary capital is limited to no more than 100% of core
capital; and (ii) the aggregate amount of certain types of supplementary capital
is limited. In addition, the risk-based capital regulations limit the allowance
for loan losses that may be included in capital to 1.25% of total risk-weighted
assets.
In July 1996, the federal bank regulatory agencies, including the OCC,
issued a joint policy statement regarding the evaluation of commercial banks'
capital adequacy for interest rate risk. Under the policy, the OCC's assessment
of a bank's capital adequacy includes an assessment of the bank's exposure to
adverse changes in interest rates. The OCC has determined to rely on its
examination process for such evaluations rather than on standardized measurement
systems or formulas. The OCC may require banks that are found to have a high
level of interest rate risk exposure or weak interest rate risk management
systems to take corrective actions. Management believes its interest rate risk
management systems and its capital relative to its interest rate risk are
adequate.
Federal banking regulations also require banks with significant trading
assets or liabilities to maintain supplemental risk-based capital based upon
their levels of market risk. The Bank did not have significant levels of
5
trading assets or liabilities during 1997, and was not required to maintain such
supplemental capital.
The OCC has established regulations that classify national banks by
capital levels and provide for the OCC to take various "prompt corrective
actions" to resolve the problems of any bank that fails to satisfy the capital
standards. Under these regulations, a well-capitalized bank is one that is not
subject to any regulatory order or directive to meet any specific capital level
and that has a total risk-based capital ratio of 10% or more, a Tier 1
risk-based capital ratio of 6% or more, and a leverage ratio of 5% or more. An
adequately capitalized bank is one that does not qualify as well-capitalized but
meets or exceeds the following capital requirements: a total risk-based capital
ratio of 8%, a Tier 1 risk-based capital ratio of 4%, and a leverage ratio of
either (i) 4% or (ii) 3% if the bank has the highest composite examination
rating. A bank that does not meet these standards is categorized as
undercapitalized, significantly undercapitalized, or critically
undercapitalized, depending on its capital levels. A national bank that falls
within any of the three undercapitalized categories established by the prompt
corrective action regulation is subject to severe regulatory sanctions. As of
December 31, 1997, the Bank was well-capitalized as defined in the OCC's
regulations.
For information regarding Bancorp's and the Bank's compliance with
their respective regulatory capital requirements, see "Management's Discussion
and Analysis -- Capital Management--Regulatory Capital Requirements" on page 18
of the Annual Report and "Note 21 - Regulatory Matters" of the Notes to the
Consolidated Financial Statements on page 38 of the Annual Report.
SUPERVISION AND REGULATION OF MORTGAGE BANKING OPERATIONS
Bancorp's mortgage banking business is subject to the rules and
regulations of the U.S. Department of Housing and Urban Development ("HUD"), the
Federal Housing Administration ("FHA"), the Veterans' Administration ("VA"),
FMHA and FNMA with respect to originating, processing, selling and servicing
mortgage loans. Those rules and regulations, among other things, prohibit
discrimination and establish underwriting guidelines which include provisions
for inspections and appraisals, require credit reports on prospective borrowers,
and fix maximum loan amounts. Lenders such as Bancorp are required annually to
submit to FNMA, FHA and VA audited financial statements, and each regulatory
entity has its own financial requirements. Bancorp's affairs are also subject to
examination by the Federal Reserve, FNMA, FHA and VA at all times to assure
compliance with the applicable regulations, policies and procedures. Mortgage
origination activities are subject to, among others, the Equal Credit
Opportunity Act, Federal Truth-in-Lending Act, Fair Housing Act, Fair Credit
Reporting Act, the National Flood Insurance Act and the Real Estate Settlement
Procedures Act and related regulations that prohibit discrimination and require
the disclosure of certain basic information to mortgagors concerning credit
terms and settlement costs. Bancorp's mortgage banking operations also are
affected by various state and local laws and regulations and the requirements of
various private mortgage investors.
COMPETITION
The Bank's principal competitors for deposits are other financial
institutions, including other banks, credit unions, and savings institutions.
Competition among these institutions is based primarily on interest rates and
other terms offered, service charges imposed on deposit accounts, the quality of
services rendered, and the convenience of banking facilities. Additional
competition for depositors' funds comes from U.S. Government securities, private
issuers of debt obligations and suppliers of other investment alternatives for
depositors, such as securities firms. Competition from credit unions has
intensified in recent years as historical federal limits on membership have been
relaxed. Because federal law subsidizes credit unions by giving them a general
exemption from federal income taxes, credit unions have a significant cost
advantage over banks and savings associations, which are fully subject to
federal income taxes. Credit unions may use this advantage to offer rates that
are highly competitive with those offered by banks and thrifts.
The banking business in Maryland generally, and the Bank's primary
service areas specifically, are highly competitive with respect to both loans
and deposits. As noted above, the Bank competes with many larger banking
6
organizations that have offices over a wide geographic area. These larger
institutions have certain inherent advantages, such as the ability to finance
wide-ranging advertising campaigns and promotions and to allocate their
investment assets to regions offering the highest yield and demand. They also
offer services, such as international banking, that are not offered directly by
the Bank (but are available indirectly through correspondent institutions), and,
by virtue of their larger total capitalization, such banks have substantially
higher legal lending limits, which are based on bank capital, than does the
Bank. The Bank can arrange loans in excess of its lending limit, or in excess of
the level of risk it desires to take, by arranging participations with other
banks. Other entities, both governmental and in private industry, raise capital
through the issuance and sale of debt and equity securities and indirectly
compete with the Bank in the acquisition of deposits.
In addition to competing with other commercial banks, credit unions and
savings associations, commercial banks such as the Bank compete with nonbank
institutions for funds. For instance, yields on corporate and government debt
and equity securities affect the ability of commercial banks to attract and hold
deposits. Commercial banks also compete for available funds with mutual funds.
These mutual funds have provided substantial competition to banks for deposits,
and it is anticipated they will continue to do so in the future.
The Holding Company Act permits the Federal Reserve to approve an
application of an adequately capitalized and adequately managed bank holding
company to acquire control of, or acquire all or substantially all of the assets
of, a bank located in a state other than that holding company's home state. The
Federal Reserve may not approve the acquisition of a bank that has not been in
existence for the minimum time period (not exceeding five years) specified by
the statutory law of the host state. The Holding Company Act also prohibits the
Federal Reserve from approving an application if the applicant (and its
depository institution affiliates) controls or would control more than 10% of
the insured deposits in the United States or 30% or more of the deposits in the
target bank's home state or in any state in which the target bank maintains a
branch. The Holding Company Act does not affect the authority of states to limit
the percentage of total insured deposits in the state which may be held or
controlled by a bank or bank holding company to the extent such limitation does
not discriminate against out-of-state banks or bank holding companies. The
effect of these provisions of the Holding Company Act may be to increase
competition within the State of Maryland among banking and savings associations
located in Maryland and from banking companies located anywhere in the country.
Federal banking laws also authorized the federal banking agencies,
effective June 1, 1997, to approve interstate merger transactions without regard
to whether such transactions are prohibited by the law of any state, unless the
home state of one of the banks adopts a law after the date of enactment of such
Act and prior to June 1, 1997 that applies equally to all out-of-state banks and
expressly prohibits merger transactions involving out-of-state banks. In 1995,
however, the State of Maryland acted to authorize interstate mergers by enacting
legislation that allows out-of-state financial institutions to merge with
Maryland banks and to establish branches in Maryland, subject to certain
limitations. Maryland previously had enacted reciprocal interstate banking
statutes that authorized interstate bank and savings association acquisitions.
The effect of the federal and Maryland law may be to increase competition within
the State of Maryland among banking and thrift institutions located in Maryland
and from the major regional and national bank holding companies that acquire
institutions in Maryland, many of which are larger than the Bank. The 1996 Act,
described above, also may increase competition by reducing the deposit insurance
cost advantage on BIF insured deposits, such as those of the Bank, over SAIF
insured deposits, and by making acquisitions of savings associations more
attractive by resolving uncertainties over the costs of SAIF recapitalization.
EMPLOYEES
As of February 23, 1998, Bancorp and the Bank employed 445 persons,
including executive officers, loan and other banking and trust officers, branch
personnel, and others. None of Bancorp's or the Bank's employees is represented
by a union or covered under a collective bargaining agreement. Management of
Bancorp and the Bank consider their employee relations to be excellent.
7
EXECUTIVE OFFICERS
The following table sets forth information regarding the executive
officers of Bancorp and the Bank who are not directors.
Name Age (1) Principal Position(s)
- ---- ------- --------------------
James R. Farmer 46 Senior Vice President of the Bank
James H. Langmead 48 Vice President and Treasurer of Bancorp and
Executive Vice President and Chief Financial
Officer of the Bank
Lawrence T. Lewis 49 Executive Vice President of the Bank
Stanley L. Merson 41 President, Sandy Spring Mortgage Corporation and
Senior Vice President of the Bank
Frank H. Small 51 Executive Vice President of the Bank
Sara E. Watkins 41 Senior Vice President of the Bank
- ------------------
(1) At March 25, 1998
The principal occupation(s) and business experience of each executive
officer who is not a director for the last five years are set forth below.
JAMES R. FARMER became a Senior Vice President of the Bank in 1994.
Prior to that, Mr. Farmer was Vice President of the Bank. Mr. Farmer has been
employed by the Bank since 1979.
JAMES H. LANGMEAD, CPA, became Vice President and Treasurer of Bancorp,
Senior Vice President and Chief Financial Officer of the Bank in 1995, and
Executive Vice President in 1997. Prior to that, Mr. Langmead was a Senior Vice
President of the Bank (from January 1994), and Vice President and Controller of
the Bank. Prior to joining the Bank in 1992, Mr. Langmead was Executive Vice
President of the Bank of Baltimore.
LAWRENCE T. LEWIS began his employment with the Bank in 1996 as Senior
Vice President, and became Executive Vice President in 1997. From January 1984
to December 1995, Mr. Lewis was a managing director of Clark Melvin Securities
Corporation.
STANLEY L. MERSON has been a Senior Vice President of the Bank since
1991 and was Vice President of the Commercial Loan Department prior to becoming
Senior Vice President. He became President of Sandy Spring Mortgage Corporation
upon its formation in 1997. Mr. Merson has been employed by the Bank since 1982.
FRANK H. SMALL became a Senior Vice President of the Bank in 1994, and
Executive Vice President in 1997. Prior to that, Mr. Small was Vice President of
the Bank. Before joining the Bank in 1990, Mr. Small was Vice President in
charge of branch operations at Equitable Bank, N.A.
SARA E. WATKINS became a Senior Vice President of the Bank in 1997.
Prior to that, Ms. Watkins was Vice President and Branch Administrator of the
Bank (from June 1994) and Vice President and Region Manager of the Bank (from
April 1992).
8
TABULAR FINANCIAL INFORMATION
Loan Maturity Table. The following table sets forth information as of
December 31, 1997, regarding the loan maturities and interest rate sensitivity
for real estate-construction, commercial, and tax exempt loans (dollars in
thousands).
Years
--------------------------------------------------------------
1 or Less Over 1-5 Over 5 Total
--------- -------- ------ -----
Real Estate Construction..................... $39,182 $ 3,232 $15,273 $ 57,687
Commercial................................... 46,309 24,538 1,664 72,511
Tax Exempt................................... 1 6 6 13
--------- --------- --------- ---------
Total............................... $85,492 $27,776 $16,943 $130,211
======= ======= ======= ========
Rate Terms:
Fixed...................................... $16,337 $23,550 $ 3,293 $ 43,180
Variable or adjustable..................... 69,155 4,226 13,650 87,031
------- ------- ------- --------
Total.................................... $85,492 $27,776 $16,943 $130,211
======= ======= ======= ========
9
Credit Loss Allowance Table. The following table presents the
allocation of the allowance for credit losses for the past five years, along
with the percentage of total loans in each category (dollars in thousands).
-------------------------------------------------------------------
1997 1996 1995
------------------ ------------------ ------------------
Loan Loan Loan
Amount Mix Amount Mix Amount Mix
--------- -------- ---------- ------- --------- --------
Amount applicable to:
Real estate--mortgage $1,213 71% $ 425 72% $ 512 74%
Real estate--construction 224 10 745 9 10 8
Consumer 215 6 193 6 181 6
Commercial 774 13 1,015 13 907 12
Tax exempt 0 0 0 0 0 0
Unallocated 4,590 4,013 4,987
------ ------ ------
Total allowance for
for credit losses $7,016 $6,391 $6,597
====== ====== ======
------------------------------------------------------
1994 1993
------------------ ------------------
Loan Loan
Amount Mix Amount Mix
---------- ------- ---------- -------
Amount applicable to:
Real estate--mortgage $1,581 76% $2,046 77%
Real estate--construction 41 7 34 6
Consumer 136 6 324 5
Commercial 832 11 1,998 12
Tax exempt 0 0 0 0
Unallocated 4,073 2,279
------ ------
Total allowance for
for credit losses $6,663 $6,681
====== ======
The Company's policies and practices regarding the allowance for credit
losses, including factors regularly analyzed by management in evaluating the
sufficiency of the allowance, are disclosed in the discussion of Credit Risk
Management on pages 18 and 19 and in Notes 1 and 6 of the Notes to the
Consolidated Financial Statements beginning on page 26 of the Annual Report.
(See also the discussion of loan portfolio composition and trends on pages 15
and 16 of the Annual Report.) The amount of unallocated allowance for credit
losses increased to 65.4% of the total allowance at December 31, 1997, from
62.8% a year earlier. The percentage was 75.6% at December 31, 1995. The size of
the unallocated reserve at December 31, 1997 reflects management's assessment of
actual loss residing in the loan portfolio which has not been specifically
attributed to any category of loans.
10
The tabular financial information set forth on pages 10 through 21 of
the Annual Report is incorporated herein by reference.
ITEM 2. DESCRIPTION OF PROPERTY
Page 7 of the Annual Report (listing executive and community offices)
is hereby incorporated by reference.
ITEM 3. LEGAL PROCEEDINGS
Note 18 on page 35 of the Annual Report ("Litigation") is hereby
incorporated by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth
quarter of 1997, through solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
The sections titled "Recent Stock Prices and Dividends" and "Quarterly
Stock Information" on page 9 of the Annual Report is hereby incorporated by
reference.
For information regarding regulatory restrictions on the Bank's and,
therefore, Bancorp's payment of dividends, see Note 11 -- "Stockholders' Equity"
on page 32 of the Annual Report, which is hereby incorporated by reference.
DESCRIPTION OF CAPITAL STOCK
The following discussion is not intended to be complete and is
qualified in its entirety by reference to Bancorp's Articles of Incorporation
and Bylaws and to the Maryland General Corporation Law.
CAPITAL STOCK
Authorized Capital. Bancorp's Articles of Incorporation authorize
15,000,000 shares of capital stock, par value $1.00 per share. All authorized
shares are initially classified as Common Stock. Of the 15,000,000 authorized
shares of capital stock, all unissued shares can be designated by the Board of
Directors as either Common Stock or Preferred Stock. The Articles of
Incorporation permit the Board of Directors to issue shares of serial preferred
stock (the "Preferred Stock") from time to time and in one or more series, to
specify the number of shares of such series and to determine the applicable
designations, preferences, conversion or other rights, voting powers,
restrictions, limitations as to distributions and dividends, redemption
privileges, and qualifications within the limits established by law from time to
time.
The flexibility to issue shares of any class or series could act as a
deterrent to takeover attempts, even if such attempts would be beneficial to
shareholders, by adversely affecting the ability of any given person or group to
remove incumbent officers and directors, to change Bancorp's corporate
structure, or otherwise to control Bancorp. The Board of Directors believes that
this authority is desirable and beneficial to Bancorp
11
and its shareholders.
Redemption and Retirement. Under Maryland law, a corporation is
permitted to acquire shares of its own stock, unless the corporation would not
be able to pay its debt as it becomes due in the usual course of business or the
corporation's total assets would be less than the sum of the corporation's total
liabilities plus, unless the charter permits otherwise, the amount that would be
needed, if the corporation were to be dissolved at the time of such acquisition,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights on dissolution are superior to those whose shares are
acquired.
Dividends. Maryland law permits the payment of dividends unless the
corporation would not be able to pay its debt as it becomes due in the usual
course of business or the corporation's total assets would be less than the sum
of the corporation's total liabilities plus, unless the charter permits
otherwise, the amount that would be needed, if the corporation were to be
dissolved at the time of such dividends, to satisfy the preferential rights upon
dissolution of shareholders whose preferential rights on dissolution are
superior to those receiving the dividends.
SHAREHOLDERS
Shareholders' Inspection Rights. Maryland law provides that the
shareholders' list may be inspected by one or more persons who together have
been shareholders of record for at least six months and who together hold at
least 5% of the outstanding stock of any class.
Special Meetings of Shareholders. A special meeting of the shareholders
of Bancorp may be called by the President, the Chairman of the Board, a majority
of the Board of Directors, or the Secretary upon the written request of
shareholders entitled to cast at least 25% of the votes at such meeting.
Shareholder Action Without a Meeting. The Bylaws provide that
shareholders may take action without a meeting if a unanimous written consent to
the action is signed by each shareholder entitled to vote on the matter, and a
written waiver of any rights to dissent is signed by each shareholder entitled
to notice but not entitled to vote. As a practical matter, it is not possible
for Shareholders of a public company to act without a meeting.
Nomination Procedures. The Bylaws provide that the Board of Directors
shall act as a nominating committee for selecting the management nominees for
election as directors. Except in the case of a nominee substituted as a result
of the death or other incapacity of a management nominee, the nominating
committee shall deliver written nominations to the Secretary at least 20 days
prior to the date of the annual meeting. The Bylaws require that shareholder
nominations for directors be made pursuant to timely notice in writing to the
Secretary of Bancorp. To be timely, notice must be delivered to the Secretary
not later than 90 days prior to the month and day one year subsequent to the
date that proxy materials regarding the last election of directors were mailed
to shareholders. A shareholder's notice of nomination must also set forth
certain information specified in the Bylaws concerning each person the
shareholder proposes to nominate for election. In accordance with the Bylaws,
shareholder nominations may be made by any shareholder eligible to vote at an
annual meeting.
New Business at Annual Meeting. The Bylaws provide 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 30 nor more than 90
days prior to the date of the meeting; provided, however, that if less than 45
days notice of the date of the meeting is given to shareholders, such notice by
a shareholder must be received not later than the 15th day following the day 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
12
business proposed to be brought before the meeting.
Quorum Requirements. Under the Bylaws, except as provided in the
Articles of Incorporation, a majority of the outstanding shares entitled to vote
shall constitute a quorum for the transaction of business at a meeting of
shareholders. The Bylaws also provide that a meeting may be adjourned despite
the absence of a quorum by a majority of the shares represented. Pursuant to the
Articles of Incorporation, any meeting of shareholders, whether annual or
special, called to consider a vote in favor of a reverse stock split or merger
or consolidation of Bancorp with, or a sale, exchange or lease of substantially
all of the assets of Bancorp to, any person or entity, which is not recommended
by the Board of Directors of Bancorp by the required vote, shall require
attendance in person or by proxy by the holders of 80% of the outstanding shares
of voting stock of Bancorp in order for a quorum for the conduct of business to
exist. Furthermore, such a meeting may not be adjourned with notice if a quorum
is not present.
Preemptive Rights. The Articles of Incorporation provide that
shareholders do not have any preemptive right to subscribe for any newly-issued
stock or other securities of Bancorp.
Election of Directors. Under Maryland law, shareholders are permitted
to cumulate their votes for election of directors only when so provided by the
charter of the corporation. The Articles of Incorporation specifically provide
that there shall be no cumulative voting by shareholders of any class or series
in the election of directors of Bancorp.
Under Maryland law, unless the charter or bylaws of a corporation
provide otherwise, a plurality of all the votes cast at a meeting at which a
quorum is present is sufficient to elect a director.
Approval of Certain Transactions. The affirmative vote of the holders
of not less than 80% of the outstanding shares of voting stock is required to
authorize a merger or consolidation of Bancorp with, or a sale, exchange or
lease of all or substantially all of the assets of Bancorp to, any person or
entity unless approval of any such transaction is recommended by at least a
majority of the entire Board of Directors. For purposes of this provision,
"substantially all of the assets" is defined to mean assets having a fair market
value or book value, whichever is greater, of 25% or more of the total assets of
Bancorp. See "Anti-Takeover Provisions -- Special Voting Requirements for
Certain Business Combinations" and " -- Supermajority Votes," below.
Approval of Business Combinations with Controlling Parties. Approval by
vote of more than a simple majority of shares is required when a "Business
Combination" (defined generally to include a merger or consolidation of Bancorp,
a disposition of substantially all of the assets of Bancorp and a reverse stock
split) is with a Controlling Party. See "Anti-Takeover Provisions -- Special
Voting Requirements for Certain Business Combinations" and " -- Supermajority
Votes," below.
ANTI-TAKEOVER PROVISIONS
Restrictions on Acquisition and Voting of Securities. Under Maryland
law, the voting rights of "control shares" acquired in a "control share
acquisition" are eliminated unless such acquisition is exempt or is approved by
at least two-thirds of all of the votes (other than votes held by the person
making the "control share acquisition," an officer of the corporation and an
employee who is also a director of the corporation) entitled to be cast at a
meeting called in accordance with specified procedures. A "control share
acquisition" is the direct or indirect acquisition by any person of ownership or
control of "control shares," which are shares of stock that would, if aggregated
with all other voting stock owned by such person, entitle such person to
exercise at least 20% of the voting power of the corporation. Unless the charter
or bylaws provide otherwise, the corporation has the option to redeem any or all
"control shares" (except "control shares" for which voting rights have
previously been approved by the shareholders) at their fair value during a
certain time period.
Special Voting Requirements for Certain Business Combinations. Bancorp
is governed by special
13
voting procedures that apply to certain business combinations between a
corporation and interested shareholders. The purpose of such provisions is to
protect Bancorp and its shareholders against hostile takeovers by requiring that
certain criteria are satisfied.
The Articles of Incorporation define a "Controlling Party" as the
holder of 20% or more of the outstanding shares of Common Stock of Bancorp or an
affiliate of such person. These special voting provisions are not applicable to
any Business Combination, (and such Business Combination shall require only such
affirmative vote as is required by any other provision of the Articles of
Incorporation, any provision of law, or any agreement with any regulatory agency
or national securities exchange), if (1) the Business Combination shall have
been approved by a majority of the "Continuing Directors" (defined generally in
the Articles of Incorporation as any member of the Board of Directors who is not
a Controlling Party or an affiliate thereof and was a member of the Board of
Directors prior to the time that the Controlling Party became a Controlling
Party) and (2) certain "fair price" and procedural requirements are met.
Maryland law provides that, unless exempted, a corporation may not
engage in any "business combination" (as defined therein) with any "interested
stockholder" (i.e., a person who owns beneficially, directly or indirectly, 10%
or more of the outstanding voting stock of a Maryland corporation) or any
affiliate or associate of an interested stockholder for a period of five years
following the most recent date on which the interested stockholder became an
interested stockholder. Maryland law further provides that, unless exempted, in
addition to any vote otherwise required by law or the charter of the
corporation, a business combination that is not so prohibited must be
recommended by the board of directors and approved by (1) at least 80% of the
outstanding shares of voting stock of the corporation and (2) at least
two-thirds of the outstanding shares of voting stock (other than voting stock
held by an interested stockholder or an affiliate or associate thereof), unless
certain value and other standards are met or an exemption is available. The
higher voting requirements do not apply at any time to a business combination
with an interested stockholder or its affiliates if approved by the board of
directors of the corporation prior to the time the interested stockholder first
became an interested stockholder. Additionally, if the business combination
involves the receipt of consideration by the stockholders in exchange for the
corporation's stock, the higher voting requirements do not apply if certain
"fair price" conditions are met.
Consideration of Certain Nonmonetary Factors in the Event of an Offer
by Another Party. The Articles of Incorporation direct the Board of Directors,
in evaluating a business combination or a tender or exchange offer, to consider
all factors it deems relevant. The Board of Directors shall evaluate whether the
proposal is in the best interests of Bancorp by considering the best interests
of the shareholders and other factors the directors determine to be relevant,
including the social, legal and economic effects on employees, customers,
depositors and communities served by Bancorp. The Board of Directors shall
evaluate the consideration being offered to the shareholders in relation to the
then current market value of Bancorp, the then current market value of Bancorp's
stock in a freely negotiated transaction, and the Board of Directors' estimate
of the future value of stock of Bancorp as an independent entity.
Supermajority Votes. The Articles of Incorporation provide that
specified provisions of the Articles of Incorporation and Bylaws may not be
repealed or amended except upon the affirmative vote of the holders of not less
than 80% of the outstanding shares of stock entitled to vote generally in the
election of directors (considered for that purpose as a single class). These
requirements exceed the required votes of the outstanding stock that would
otherwise be required by Maryland law for the repeal or amendment of a charter
provision. Some of the provisions to which this supermajority vote applies
include the following: (1) the authorization of issuance of stock, (2) the
number of directors and the classification of the Board of Directors, (3)
shareholder approval of certain transactions, (4) business combinations with
Controlling Parties, (5) evaluation of business combinations by the Board of
Directors, and (6) amendment of the Articles of Incorporation. The Bylaws may be
amended by a majority vote of the Board of Directors or by a vote of not less
than 80% of the outstanding shares of capital stock entitled to vote generally
in the election of directors (considered for this purpose as one
14
class).
ITEM 6. SELECTED FINANCIAL DATA
The table titled "Historical Trends in Financial Data 1993 - 1997" on
page 11 of the Annual Report is hereby incorporated by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Pages 10 through 21 of the Annual Report are hereby incorporated by
reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The section titled "Market Risk Management" on pages 19 and 20 of the
Annual Report is hereby incorporated by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Pages 22 through 40 of the Annual Report are hereby incorporated by
reference. The remaining information appearing in the Annual Report to
Shareholders is not deemed to be filed as part of this Report, except as
expressly provided herein.
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding directors and nominees for directors of Bancorp
and compliance with Section 16(a) of the Securities Exchange Act of 1934 is
included under the captions titled "Election of Directors -- Information as to
Nominees and Continuing Directors" on pages 3 through 5 of the Proxy Statement,
and "Compliance with Section 16(a) of the Securities Exchange Act of 1934" on
pages 15 and 16 of the Proxy Statement, and is hereby incorporated by reference.
Information concerning the executive officers of Bancorp is included
under the caption titled "Item 1. Business -- Executive Officers" of this report
and is hereby incorporated by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding the compensation of Bancorp's directors and
executive officers is included under the captions "Corporate Governance and
Other Matters," "Executive Compensation," "Report of the Human Resources
Committee," and "Stock Performance Graph" on pages 5 through 14 of the Proxy
Statement, and is hereby incorporated by reference.
15
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding beneficial ownership of Bancorp's common stock by
certain beneficial owners and directors and executive officers of Bancorp is
included under the caption "Stock Ownership of Management" on pages 2 and 3 of
the Proxy Statement and is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions
with management is included under the caption "Transactions and Relationships
with Management" on page 15 of the Proxy Statement and is hereby incorporated by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following consolidated financial statements of Bancorp included in
the Annual Report to Shareholders for the year ended December 31, 1997,
are incorporated herein by reference in Item 8 of this Report. The
remaining information appearing in the Annual Report to Shareholders is
not deemed to be filed as part of this Report, except as expressly
provided herein.
The following financial statements are filed as a part of this report:
Consolidated Balance Sheets at December 31, 1996 and 1997
Consolidated Statements of Income for the years ended December
31, 1995, 1996 and 1997
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1996 and 1997
Consolidated Statements of Changes in Stockholders' Equity for
the years ended December 31, 1995, 1996 and 1997
Notes to the Consolidated Financial Statements
Report of Independent Auditors
All financial statement schedules have been omitted as the required
information is either inapplicable or included in the consolidated
financial statements or related notes.
16
The following exhibits are filed as a part of this report:
Exhibit No. Description Incorporated by Reference to:
- --------------------------------------------------------------------------------------------------------------------
3(a) Articles of Incorporation of Sandy Spring Exhibit 3.1 to Form 10-Q for the Quarter
Bancorp, Inc., as Amended ended June 30, 1996, SEC File No. 0-19065.
3(b) Bylaws of Sandy Spring Bancorp, Inc. Exhibit 3.2 to Form 8-K dated May 13, 1992,
SEC File No. 0-19065.
10(a)* Amended and Restated Sandy Spring Bancorp, Inc., Exhibit 10(a) to Form 10-Q for the Quarter
Cash and Deferred Profit Sharing Plan and Trust ended September 30, 1997, SEC File No.
0-19065.
10(b)* Sandy Spring Bancorp, Inc. 1982 Incentive Stock Exhibit 10(c) to Form 10-Q for the quarter
Option Plan ended June 30, 1990, SEC File No. 0-19065.
10(c)* Sandy Spring Bancorp, Inc. 1992 Stock Option Plan Exhibit 10(i) to Form 10-K for the year ended
December 31, 1991, SEC File No. 0-19065.
10(d)* Sandy Spring Bancorp, Inc. Amended and Restated Exhibit 4 to Registration Statement on Form
Stock Option Plan for Employees of Annapolis S-8, Registration Statement No. 333-11-049.
Bancshares, Inc.
10(e)* Sandy Spring National Bank of Maryland Executive Exhibit 10(g) to Form 10-K for the year ended
Health Insurance Plan December 31, 1991, SEC File No. 0-19065.
10(f)* Sandy Spring National Bank of Maryland Executive Exhibit 10(k) to Form 10-K for the year ended
Health Expense Reimbursement Plan December 31, 1991, SEC File No. 0-19065.
10(g)* Form of Director Fee Deferral Agreement, August Exhibit 10(b) to Form 10-Q for the Quarter
26, 1997 ended September 30, 1997, SEC File No.
0-19065.
10(h)* Supplemental Executive Retirement Agreement by Exhibit 10(c) to Form 10-Q for the Quarter
and Between Sandy Spring National Bank of ended September 30, 1997, SEC File No.
Maryland and Hunter R. Hollar 0-19065.
10(i)* Form of Supplemental Executive Retirement Exhibit 10(d) to Form 10-Q for the Quarter
Agreement by and between Sandy Spring National ended September 30, 1997, SEC File No.
Bank of Maryland and each of James H. Langmead, 0-19065.
Lawrence T. Lewis, Stanley L. Merson, and Frank
H. Small
10(j)* Employment Agreement by and among Sandy Spring Exhibit 10(e) to Form 10-Q for the Quarter
Bancorp, Inc., Sandy Spring National Bank of ended September 30, 1997, SEC File No.
Maryland, and Hunter H. Hollar 0-19065.
10(k)* Employment Agreement by and among Sandy Spring Exhibit 10(f) to Form 10-Q for the Quarter
Bancorp, Inc., Sandy Spring National Bank of ended September 30, 1997, SEC File No.
Maryland, and James H. Langmead 0-19065.
17
Exhibit No. Description Incorporated by Reference to:
- --------------------------------------------------------------------------------------------------------------------
10(l)* Employment Agreement by and among Sandy Spring Exhibit 10(g) to Form 10-Q for the Quarter
Bancorp, Inc., Sandy Spring National Bank of ended September 30, 1997, SEC File No.
Maryland, and Lawrence T. Lewis 0-19065.
10(m)* Employment Agreement by and among Sandy Spring Exhibit 10(h) to Form 10-Q for the Quarter
Bancorp, Inc., Sandy Spring National Bank of ended September 30, 1997, SEC File No.
Maryland, and Stanley L. Merson 0-19065.
10(n)* Employment Agreement by and among Sandy Spring Exhibit 10(i) to Form 10-Q for the Quarter
Bancorp, Inc., Sandy Spring National Bank of ended September 30, 1997, SEC File No.
Maryland, and Frank H. Small 0-19065.
13 1997 Annual Report to Shareholders
21 Subsidiaries
23 Consent of Independent Auditors
24 Power of Attorney
27 Financial Data Schedule
* Management Contract or Compensatory Plan or Arrangement filed pursuant to
Item 14(c) of this Report.
(b) No Current Reports on Form 8-K were filed during the three month period
ended December 31, 1997.
(c) Exhibits to this Form 10-K are attached or incorporated by reference as
stated above.
(d) None.
18
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SANDY SPRING BANCORP, INC.
(Registrant)
By: /s/ Hunter R. Hollar
--------------------
Hunter R. Hollar
President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated as of March 25, 1998.
Principal Executive Officer and Director: Principal Financial and Accounting
Officer:
/s/ Hunter R. Hollar /s/ James H. Langmead
- -------------------- ---------------------
Hunter R. Hollar James H. Langmead
President and Chief Executive Officer Vice President and Treasurer
A majority of the directors of Bancorp executed a power of attorney
appointing Marjorie S. Holsinger as their attorney-in-fact, empowering her to
sign this report on their behalf. This power of attorney has been filed with the
Securities and Exchange Commission under Part IV, Exhibit 24 of this Form 10-K
for the year ended December 31, 1997. This report has been signed below by such
attorney-in-fact as of March 25, 1998.
By: /s/ Marjorie S. Holsinger
-----------------------------
Marjorie S. Holsinger
Attorney-in-Fact for Majority of the
Directors of Bancorp
19
INDEX TO EXHIBITS
The following exhibits are filed as a part of this report:
Exhibit No. Description Incorporated by Reference to:
- --------------------------------------------------------------------------------------------------------------------
3(a) Articles of Incorporation of Sandy Spring Exhibit 3.1 to Form 10-Q for the Quarter
Bancorp, Inc., as Amended ended June 30, 1996, SEC File No. 0-19065.
3(b) Bylaws of Sandy Spring Bancorp, Inc. Exhibit 3.2 to Form 8-K dated May 13, 1992,
SEC File No. 0-19065.
10(a)* Amended and Restated Sandy Spring Bancorp, Inc., Exhibit 10(a) to Form 10-Q for the Quarter
Cash and Deferred Profit Sharing Plan and Trust ended September 30, 1997, SEC File No.
0-19065.
10(b)* Sandy Spring Bancorp, Inc. 1982 Incentive Stock Exhibit 10(c) to Form 10-Q for the quarter
Option Plan ended June 30, 1990, SEC File No. 0-19065.
10(c)* Sandy Spring Bancorp, Inc. 1992 Stock Option Plan Exhibit 10(i) to Form 10-K for the year ended
December 31, 1991, SEC File No. 0-19065.
10(d)* Sandy Spring Bancorp, Inc. Amended and Restated Exhibit 4 to Registration Statement on Form
Stock Option Plan for Employees of Annapolis S-8, Registration Statement No. 333-11-049.
Bancshares, Inc.
10(e)* Sandy Spring National Bank of Maryland Executive Exhibit 10(g) to Form 10-K for the year ended
Health Insurance Plan December 31, 1991, SEC File No. 0-19065.
10(f)* Sandy Spring National Bank of Maryland Executive Exhibit 10(k)
to Form 10-K for the year ended Health Expense Reimbursement
Plan December 31, 1991, SEC File No. 0-19065.
10(g)* Form of Director Fee Deferral Agreement, August Exhibit 10(b) to Form 10-Q for the Quarter
26, 1997 ended September 30, 1997, SEC File No.
0-19065.
10(h)* Supplemental Executive Retirement Agreement by Exhibit 10(c) to Form 10-Q for the Quarter
and Between Sandy Spring National Bank of ended September 30, 1997, SEC File No.
Maryland and Hunter R. Hollar 0-19065.
10(i)* Form of Supplemental Executive Retirement Exhibit 10(d) to Form 10-Q for the Quarter
between Sandy Spring National Bank of Maryland Agreement by andended September 30, 1997,
and each of James H. Langmead, Lawrence T. Lewis, SEC File No. 0-19065.
Stanley L. Merson, and Frank H. Small
20
Exhibit No. Description Incorporated by Reference to:
- --------------------------------------------------------------------------------------------------------------------
10(j)* Employment Agreement by and among Sandy Spring Exhibit 10(e) to Form 10-Q for the Quarter
Bancorp, Inc., Sandy Spring National Bank of ended September 30, 1997, SEC File No.
Maryland, and Hunter H. Hollar 0-19065.
10(k)* Employment Agreement by and among Sandy Spring Exhibit 10(f) to Form 10-Q for the Quarter
Bancorp, Inc., Sandy Spring National Bank of ended September 30, 1997, SEC File No.
Maryland, and James H. Langmead 0-19065.
10(l)* Employment Agreement by and among Sandy Spring Exhibit 10(g) to Form 10-Q for the Quarter
Bancorp, Inc., Sandy Spring National Bank of ended September 30, 1997, SEC File No.
Maryland, and Lawrence T. Lewis 0-19065.
10(m)* Employment Agreement by and among Sandy Spring Exhibit 10(h) to Form 10-Q for the Quarter
Bancorp, Inc., Sandy Spring National Bank of ended September 30, 1997, SEC File No.
Maryland, and Stanley L. Merson 0-19065.
10(n)* Employment Agreement by and among Sandy Spring Exhibit 10(i) to Form 10-Q for the Quarter
Bancorp, Inc., Sandy Spring National Bank of ended September 30, 1997, SEC File No.
Maryland, and Frank H. Small 0-19065.
13 1997 Annual Report to Shareholders
21 Subsidiaries
23 Consent of Independent Auditors
24 Power of Attorney
27 Financial Data Schedule
* Management Contract or Compensatory Plan or Arrangement filed pursuant to Item
14(c) of this Report.