UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities
Filed by the Registrant ☒
Filed by a Party other than the Registrant ☐
Check the appropriate box:
Preliminary Proxy Statement |
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
Definitive Proxy Statement |
Definitive Additional Materials |
Soliciting Material pursuant to §240.14a-12 |
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):
No fee required. |
Fee paid previously with preliminary materials. |
| ☐ | Fee computed on table |
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
| DATE | Wednesday, May 18, 2022 | |
| TIME | 10:00 a.m., Eastern Time | |
| PLACE | The meeting will be held live via the internet in virtual format only at https://meetnow.global/MMYUPAD | |
| RECORD DATE | You are eligible to vote if you were a shareholder of record at the close of business on March 9, 2022 |
MEETING AGENDA
Elect three Class III directors to serve until the 2025 annual meeting
Approve amendments to the Articles of Incorporation to declassify the Board of Directors
Vote, on an advisory basis, to approve the compensation for the named executive officers
Ratify the appointment of Ernst & Young LLP as the company’s independent registered public accounting firm for 2022
Transact such other business as may properly come before the meeting
THERE WILL BE NO PHYSICAL LOCATION FOR THE ANNUAL MEETING
In support of the health and safety of our shareholders and employees, we will hold our annual meeting this year solely by means of remote communication via webcast at https://meetnow.global/MMYUPAD. You will be able to attend and participate in the virtual annual meeting online, vote your shares electronically, and submit questions prior to and during the meeting. If you plan to attend the annual meeting virtually, please review the information on attendance procedures on page 59 of this proxy statement.
YOUR VOTE IS VERY IMPORTANT
Please submit your proxy as soon as possible by internet, telephone, or mail. Submitting your proxy by one of these methods will ensure your representation at the annual meeting regardless of whether you attend the meeting. Instructions for voting by internet or telephone can be found on your proxy card or voting instruction form.
By order of the Board of Directors,
Aaron M. Kaslow
General Counsel & Secretary
April [ ], 2022
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE 2022 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 18, 2022
This proxy statement and the 2021 Annual Report on Form 10-K are available at www.envisionreports.com/sasr.
| | Notice and Proxy Statement | 2022 |
| | Notice and Proxy Statement | 2022 |
PROXY SUMMARY |
This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider in deciding how to vote your shares. Please read the entire proxy statement before voting. For information about our company’s performance, please review our 2021 Annual Report on Form 10-K.
You have received these proxy materials because our Board of Directors is soliciting your proxy to vote your shares during the 2022 annual meeting of shareholders. Notice of our annual meeting and this proxy statement were first sent or made available to shareholders on April [ ], 2022.
2022 ANNUAL MEETING OF SHAREHOLDERS
For additional information about our annual meeting, see “Information about the Meeting” on page 59.
| | MEETING DATE: | May 18, 2022 | |
| | MEETING TIME: | 10:00 a.m. (Eastern) | |
| | RECORD DATE: | March 9, 2022 | |
| | VIRTUAL MEETING LOCATION: | https://meetnow.global/MMYUPAD |
There will be no physical location for the annual meeting. Shareholders may attend, vote and ask questions at the meeting only by logging in at https://meetnow.global/MMYUPAD. Registered shareholders will be required to enter a control number, which can be found on your Notice of Internet Availability, proxy card, electronic notification or voting instructions included with your proxy materials. If you hold your shares through an intermediary, such as a bank or broker, see page 59 for information regarding how to vote your shares during the meeting. If you do not have a control number, you may still attend the meeting as a guest, but you will not be able to vote your shares during the meeting.
VOTING MATTERS AND BOARD RECOMMENDATIONS
Proposal | ||||
| Board Recommendation | ||||
1) Election of | ||||
| Page 4 | ||||
2) Approval of amendments to the Articles of Incorporation to declassify the Board of Directors | ✓ “FOR” | Page 53 | ||
3) Advisory vote to approve the compensation | ||||
| Page 55 | ||||
4) The ratification of the appointment of | ✓ “FOR” | Page 56 | ||
HOW TO VOTE YOUR SHARES
Your vote is important. You may vote if you were a shareholder on March 9, 2022. Whether or not you plan to attend the virtual annual meeting, please cast your vote as promptly as possible using one of these methods:
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| Online before the | By Phone | By Mail | Online during the meeting | |||
www.envisionreports.com/sasr (record holders) www.proxyvote.com (beneficial owners) | Call the phone number on your proxy card (record holders) or voting instruction form (beneficial owners) | Complete, sign, date and mail your proxy card (record holders) or your voting instruction form (beneficial owners) | Attend our annual meeting virtually by logging into the virtual annual meeting website and vote by following the instructions provided on the website | |||
| | Notice and Proxy Statement | 2022 | 1 |
PROXY SUMMARY |
BOARD OF DIRECTORS
Name | Occupation | Age | Independent | Director Since | Committee Memberships | |||||
Mona Abutaleb | CEO of Medical Technology Solutions, LLC | 59 | ✓ | 2015 |
Compensation Risk
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Ralph F. Boyd | President and CEO of SOME, Inc. | 65 | ✓ | 2012 |
Compensation (Chair) E&G Nominating
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Mark E. Friis | Chair (former CEO) of Rogers Consulting, Inc. | 66 | ✓ | 2005 |
E&G Risk (Chair) Nominating
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Brian J. Lemek | Owner of Lemek, LLC, a franchisee for Panera Bread bakery-cafes. | 58 | ✓ | 2020 |
Audit Compensation
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Pamela A. Little | CFO of Nathan, Inc. | 68 | ✓ | 2005 |
Audit (Chair) E&G Nominating
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Walter C. Martz II
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Managing Member of Walter C. Martz LLC law firm.
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70
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✓
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2020
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Audit
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Mark C. Michael
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Fellow at the Harvard Advanced Leadership Initiative
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59
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✓
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2018
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Compensation
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Mark C. Micklem | Retired. Former Managing Director and Head of Financial Services Investment Banking at Robert W. Baird & Co. | 63 | ✓ | 2019 |
Audit Risk
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Christina B. O’Meara
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President and founder of O’Meara Properties
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68
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✓
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2020
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Compensation
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Robert L. Orndorff, Chair | President and founder of RLO Contractors, Inc. | 65 | ✓ | 1991 |
Audit Compensation E&G (Chair) Risk Nominating
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Craig A. Ruppert | President and CEO of The Ruppert Companies | 68 | ✓ | 2002 |
E&G Nominating (Chair)
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Daniel J. Schrider, Vice Chair | President and CEO Sandy Spring Bancorp, Inc. and Sandy Spring Bank | 57 |
| 2009 |
E&G Risk
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Ages as of 03/09/2022 E&G = Executive and Governance
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| | Notice and Proxy Statement | 2022 |
PROXY SUMMARY |
BOARD COMPOSITION
GOVERNANCE HIGHLIGHTS
Independent chair | ✓ | Continuing director education program | ✓ | |||
Mandatory director retirement age of 72 | ✓ | Stock ownership guidelines for directors and executive officers | ✓ | |||
Independent directors meet regularly in executive session | ✓ | Anti-hedging policy | ✓ | |||
Audit, Compensation and Nominating Committees consist solely of independent directors | ✓ | Clawback policy | ✓ | |||
Audit Committee meets with auditor in executive session | ✓ | Code of Ethics and Business conduct available on website | ✓ | |||
Oversight of enterprise risk through Board Risk Committee | ✓ | Corporate governance policies available on website | ✓ | |||
Plurality plus resignation in uncontested director elections | ✓ | One share, one vote structure | ✓ | |||
Annual board evaluations | ✓ | No shareholder rights plan | ✓ | |||
| | Notice and Proxy Statement | 2022 | 3 |
PROPOSAL 1: ELECTION OF DIRECTORS |
PROPOSAL 1: ELECTION OF DIRECTORS
Our Board of Directors currently has 12 members. Under our Articles of Incorporation and Bylaws, the Board is authorized to fix the number of directors, up to a maximum of 15. The Board currently is divided into three classes, with only one class of directors being elected each year and each class serving a three-year term. The Board has approved amendments to our Articles of Incorporation to declassify the Board so that directors are elected annually by shareholders. If these amendments are approved by shareholders (see Proposal 2 on page 53), nominees will be elected for a one-year term beginning in 2023. The Board has nominated three Class III directors for election for a three-year term expiring in 2025. They are Mona Abutaleb, Mark C. Micklem, and Christina B. O’Meara. All Class III director-nominees are currently directors who have been elected previously by the shareholders. Each nominee has consented to be nominated and has agreed to serve, if elected. If any person nominated by the Board is unable to stand for election for any reason, the shares represented at our annual meeting may be voted for the election of another candidate as the present Board may designate, or our Board may choose to reduce its size. | In Memoriam
GARY G. NAKAMOTO 1964 - 2021 Gary G. Nakamoto served as an independent director of our company since 2011. Mr. Nakamoto was the principal of The Nakamoto Group, LLC, a consulting firm based in Great Falls, Virginia. We remember Gary for his warmth and humor and his unwavering support for our company. |
Our Board values diversity (inclusive of gender, race and ethnicity) and seeks to include directors with a broad range of backgrounds, professional experience, perspectives and skills. In compliance with Nasdaq Listing Rules, the following chart shows the diversity of the Board:
| Board Diversity Matrix as of March 9, 2022 | ||||||||
Total Number of Directors | 12 | |||||||
| Female | Male | Non-Binary | Did not Disclose | |||||
Part I: Gender Identity |
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Directors | 3 | 9 | 0 | 0 | ||||
Part II: Demographic Background |
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African American or Black |
| 1 |
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Alaskan Native or Native American |
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Asian |
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Hispanic or Latinx |
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Native Hawaiian or Pacific Islander |
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White | 11 |
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Two or More Races or Ethnicities |
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LGBTQ+ | 0 | |||||||
Did Not Disclose Demographic Background | 0 | |||||||
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| | Notice and Proxy Statement | 2022 |
PROPOSAL 1: ELECTION OF DIRECTORS |
Our directors bring a balance of skills, qualifications and experience to their oversight of our company, as shown in the matrix below. The matrix identifies certain skills, qualifications and experience that the Board believes are relevant to our business. A director may possess other skills, qualifications and experience not indicated in the matrix that may be relevant and valuable to their service on our Board.
| Abutaleb | Boyd | Friis | Lemek | Little | Martz | Michael | Micklem | O’Meara | Orndorff | Ruppert | Schrider | |||||||||||||||||||||||||||||||||||||||
SKILL/EXPERIENCE | ||||||||||||||||||||||||||||||||||||||||||||||||||
Executive Leadership Experience in an executive leadership position provides the perspective required to understand and | ||||||||||||||||||||||||||||||||||||||||||||||||||
| ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||||||||||||||||||||||||||||||||||
Consumer Business and Financial Services Experience with consumer products and services or the financial services industry provides insight that assists the Board in overseeing the operation of | ¡ | ¡ | ¡ | ¡ | ¡ | ¡ | ¡ | ● | ¡ | ¡ | ¡ | ● | ||||||||||||||||||||||||||||||||||||||
Financial Reporting and Accounting Knowledge of or experience in accounting, financial reporting or auditing processes and standards assists the | ● | ¡ | ¡ | ¡ | ● | ¡ | ● | ● | ¡ | ● | ● | |||||||||||||||||||||||||||||||||||||||
Legal and Understanding legal risks and obligations and experience with regulated businesses, regulatory requirements and relationships with regulators is important because we operate in a regulated industry. | ¡ | ● | ¡ | ¡ | ● | ¡ | ¡ | ¡ | ● | |||||||||||||||||||||||||||||||||||||||||
Risk Management Risk is inherent in the operation of our business. Having directors with experience and | ● | ¡ | ¡ | ● | ● | ¡ | ● | ¡ | ¡ | ● | ● | |||||||||||||||||||||||||||||||||||||||
Technology/Information Security/Cybersecurity Experience with and understanding of technology, information systems and/or cybersecurity is important in overseeing our ongoing investment in and development of critical technology, as well as the security of our operations, assets and systems. | ● | ¡ | ● | ● | ● | ¡ | ¡ | ¡ | ● | |||||||||||||||||||||||||||||||||||||||||
Human Capital Management Directors with an understanding of human capital management and compensation help the Board to effectively oversee our efforts to recruit, retain and develop key talent and provide valuable insight in determining compensation of the | ● | ¡ | ● | ● | ● | ● | ● | ¡ | ¡ | ¡ | ● | |||||||||||||||||||||||||||||||||||||||
Commercial Real Estate/Market Knowledge Directors with experience in commercial real estate in our service area provide insight into our strategic planning, risk management, our market area and the | ● | ● | ● | ● | ¡ | ¡ | ¡ | ¡ | ● | ¡ | ● | ● | ||||||||||||||||||||||||||||||||||||||
Public Company Governance Knowledge of public company governance practices and | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||||||||||||||||||||||||||||||
| ● | Technical or Managerial Expertise – derived from direct and hands-on experience or director managerial experience with the subject matter during his/her career. | |
| ¡ | Working Knowledge – derived through Board or relevant committee membership at Sandy Spring or another company, executive leadership of a company in the relevant industry, consulting, investment banking, or private equity investing. | |
| | Notice and Proxy Statement | 2022 | 5 |
PROPOSAL 1: ELECTION OF DIRECTORS |
The Nominating Committee is furnished in connection withresponsible for identifying, evaluating, and recommending to the solicitationBoard a slate of proxies by the board of directors of Sandy Spring Bancorp, Inc. (Bancorp) to be usednominees for election at the 2010each annual meeting of shareholdersshareholders. All director nominees are expected to exhibit high standards of integrity and independence of thought and judgment, participate in a constructive and collegial manner, and be willing to devote sufficient time to carrying out the duties and responsibilities of a director.
The Nominating Committee assesses the skill areas currently represented on Wednesday, May 5, 2010, at 3:00 p.m. EDT at Ten Oaks Ballroom, 5000 Signal Bell Lane, Clarksville, Maryland 21029.the Board, as well as those skill areas represented by directors expected to retire from the Board in the near future, against the skills matrix described above. The notice of annual meeting, the proxy card, and this proxy statement are being first mailed on or about March 24, 2010, to shareholders of record ascommittee also considers recommendations from members of the close of business on March 10, 2010 (the Record Date).
The number of common shares outstanding onNominating Committee also considers whether the Record Date was 16,606,427. When you give Bancorp your proxy, you authorize Bancorp to vote your shares per your instructions whether or not you attendcandidate would enhance the annual meeting. The presence, in person or by proxy, of at least a majoritydiversity of the total numberBoard in terms of outstanding shares of common stock is necessarygender, ethnicity, race, experience and skills.
The Nominating Committee may retain an independent search firm to constitute a quorum atassist with identifying director candidates, and individual Board members are encouraged to submit potential nominees to the annual meeting.
VOTING STANDARD FOR UNCONTESTED ELECTIONS
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.
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| | Notice and Proxy Statement | 2022 |
PROPOSAL 1: ELECTION OF DIRECTORS |
NOMINEES FOR ELECTION AND CONTINUING DIRECTORS
| THE BOARD OF DIRECTORS RECOMMENDS A VOTE |
CLASS III DIRECTOR-NOMINEES – FOR TERMS EXPIRING AT THE 2025 ANNUAL MEETING
MONA ABUTALEB | About Ms. Abutaleb has been the Chief Executive Officer of Medical Technology Solutions, LLC, a provider of technology solutions for the healthcare industry, since December 2019. From 2013 to 2018, Ms. Abutaleb was the Chief Executive Officer of mindSHIFT Technologies, Inc., an IT outsourcing/managed services and cloud services provider, which was acquired by Ricoh Company, Ltd. in 2014. From 2006 to 2013, Ms. Abutaleb served as President and Chief Operating Officer of mindSHIFT. Ms. Abutaleb also served as Senior Vice President, Ricoh USA from 2015 to 2017 and Executive Vice President of Ricoh Global Services from 2017 to 2018. Ms. Abutaleb is also on the board of directors of Pentair plc (NYSE: PNR). | |
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MARK C. MICKLEM | About Mr. Micklem retired from Robert W. Baird & Co. Incorporated, in 2018 where he was a Managing Director and Head of Financial Services Investment Banking for 12 years. While at Baird, Mr. | |
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| | Notice and Proxy Statement | 2022 | 7 |
PROPOSAL 1: ELECTION OF DIRECTORS |
CHRISTINA B. O’MEARA | About Ms. O’Meara is president and founder of O’Meara Properties, a real estate brokerage, development, and management firm. She has extensive experience with commercial property and is a licensed real estate broker. Ms. O’Meara is an owner of Reliable Contracting Company and an officer of related companies. She is a former Legislation Committee chair for the Anne Arundel County Association of Realtors and a past land use chair for the Anne Arundel Trade Council. Ms. O’Meara is active in the global community to support education and basic needs for children. She currently serves as a director of Kaleidoscope Child Foundation. | |
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INCUMBENT CLASS I DIRECTORS – TERMS EXPIRING AT THE 2024 ANNUAL MEETING
RALPH F. BOYD | About Mr. Boyd is the | |
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| | Notice and Proxy Statement | 2022 |
PROPOSAL 1: ELECTION OF DIRECTORS |
WALTER C. MARTZ II | About Mr. Martz has practiced law for over 42 years and is currently the Managing Member of Walter C. Martz LLC, in Frederick, Md., a | |
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MARK C. MICHAEL | About In 2021, Mr. Michael became a Fellow at the Harvard Advanced Leadership Initiative located in Cambridge, Massachusetts. He is the co-founder of Occasions Caterers Inc., located in Washington, D.C. where he was CEO from 1986 to 2020 and remains a senior advisor. He also founded Protocol Staffing Services LLC, as well as | |
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| Notice and Proxy Statement | 2022 | 9 |
PROPOSAL 1: ELECTION OF DIRECTORS |
ROBERT L. ORNDORFF | ||
About Mr. Orndorff is the founder and President of RLO Contractors, Inc., a leading residential and commercial excavating and grading company | |
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DANIEL J. SCHRIDER | About Mr. Schrider has been | |
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| | Notice and Proxy Statement | 2022 |
PROPOSAL 1: ELECTION OF DIRECTORS |
INCUMBENT CLASS II DIRECTORS – TERMS EXPIRING AT THE 2023 ANNUAL MEETING
MARK E. FRIIS | About Mr. Friis is currently the chair of Rodgers Consulting, Inc., having previously served as the firm’s President and CEO from 2001-2016. Headquartered in | |
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BRIAN J. LEMEK | About Mr. Lemek is the founder and owner of Lemek, LLC, the franchisee for Panera Bread bakery-cafes in the state of Maryland. Lemek, LLC currently owns and operates over 50 locations. In 2010, Mr. Lemek founded Lemek Slower Lower LLC, which owns six Panera Bread Cafes in Southern New Jersey and Delaware. Mr. Lemek currently serves on the board of trustees of his alma mater, Saint Ambrose University in Davenport, Iowa, where he chairs the | |
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| | Notice and Proxy Statement | 2022 | 11 |
PROPOSAL 1: ELECTION OF DIRECTORS |
PAMELA A. LITTLE | About Ms. Little is | |
directors. Ms. Little has over | ||
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CRAIG A. RUPPERT | About Mr. Ruppert is the | |
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| | Notice and |
CORPORATE GOVERNANCE |
We 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 elementthat promote the long-term interests of doing business today. To that end,our shareholders and strengthen the accountability of our Board and management.
Our governance framework is set forth in our Corporate Governance Policy, committee charters and other key governance documents, which we review and modify on a regular basis to reflect best practices, recent developments, and legal and regulatory requirements. Our Corporate Governance Policy, committee charters and other key governance documents are available on our website atwww.sandyspringbank.com by selecting “Investor Relations” at the top of the page, then “Governance Documents” under “Governance Information.”
Nasdaq Listing Rules require that a majority of our directors and each member of our Audit Committee, Compensation Committee and Nominating Committee be independent. In addition, our Corporate Governance Policy requires that not more than two of our directors be non-independent. A director may be determined to be independent only if the Board has determined that he or she has no relationship with the company that, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
The Nominating Committee advises and makes recommendations to the full Board regarding director independence. After considering the committee’s recommendation, the Board affirmatively determined that all current members of the Board, other than Mr. Schrider, are independent directors and independent for purposes of the committees on which they serve in accordance with applicable Nasdaq and Securities and Exchange Commission (SEC) independence rules and requirements. The Board determined that Mr. Schrider is reviewed periodicallynot independent because he is the President and Chief Executive Officer of the company.
To determine the independence of the directors, the Board considered certain transactions, relationships, or arrangements between those directors, their immediate family members, or their affiliated entities, on the one hand, and the company, on the other hand. Certain directors, their respective immediate family members, and/or affiliated entities have deposit or credit relationships with, or received investment or wealth management services from, Sandy Spring Bank or one of its subsidiaries in the ordinary course of business. The Board determined that all of these transactions, relationships, or arrangements were made in the ordinary course of business, were made on terms comparable to those that could be obtained in arms’ length dealings with an unrelated third party, were not criticized or classified, non-accrual, past due, restructured or a potential problem, complied with applicable banking laws, and did not otherwise impair any director’s independence.
Our Board is led by the Chair. Under our Bylaws, the Chair is elected annually by the Board from among the directors and presides over each Board meeting and performs such other duties as may be incident to the office of the Chair. The Chair also chairs the Executive and Governance Committee (see Executive and Governance Committee description below), which is empowered to act on behalf of the Board between regular Board meetings.
Under our Corporate Governance Policy, we separate the roles of Chair and Chief Executive Officer. Separation of the Chair and Chief Executive Officer roles facilitates effective oversight and evaluation of the Chief Executive Officer’s performance and supports the Board’s independent oversight of the company’s performance.
| | Notice and Proxy Statement | 2022 | 13 |
CORPORATE GOVERNANCE |
The Board has five standing committees: Audit, Compensation, Executive and Governance, Nominating, and Risk. Each committee operates under a written charter, which may be found on our investor relations website at www.sandyspringbank.com.
| AUDIT COMMITTEE | The primary responsibility of the Audit Committee is to assist the Board in fulfilling its oversight responsibility for: • the integrity of the company’s accounting and financial statements and reporting processes; • the qualifications, independence, and performance of the independent auditors; and • the qualifications and performance of the company’s internal audit function. The Audit Committee is also responsible for: • the appointment, compensation, retention and oversight of the company’s independent auditors; • pre-approval of all audit and permissible non-audit services to be performed by the company’s independent auditors; • reviewing all major financial reports in advance of filing or distribution, including the company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and quarterly earnings press releases; and • reviewing the effectiveness of the company’s system of internal controls. All members are financially literate as required by the Nasdaq listing rules. All members are independent and meet additional Nasdaq and SEC independence standards for audit committee members. The Board has determined that Pamela A. Little and Mark C. Micklem are each an audit committee financial expert as defined by the SEC. | |
Committee Chair: Pamela A. Little | ||
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Other Committee Members | ||
Brian J. Lemek Walter C. Martz, II Mark C. Micklem Robert L. Orndorff | ||
Meetings in 2021: 8 |
| COMPENSATION COMMITTEE | The responsibilities of the Compensation Committee include: • developing our executive compensation philosophy and reviewing and approving compensation and benefit programs applicable to the company’s executive officers, including base salary, incentive compensation, equity awards, and retirement benefits. • reviewing and recommending to the Board the compensation of the company’s non-employee directors; • assessing whether the company’s compensation programs generally are designed in a manner that does not encourage or reward unnecessary or excessive risk-taking; • administering the company’s equity compensation plans; • oversight of the company’s human capital management strategy including initiatives on diversity, equity and inclusion, employee well-being and engagement; and • retaining and overseeing an independent compensation consultant to support the committee, approving related fees and engagement terms, and determining that the consultant’s work raises no conflicts of interest. All members are independent and meet additional Nasdaq and SEC independence standards for compensation committee members. | |
Committee Chair: Ralph F. Boyd | ||
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Other Committee Members | ||
Mona Abutaleb Brian J. Lemek Mark C. Michael Christina B. O’Meara Robert L. Orndorff | ||
Meetings in 2021: 6 |
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| | Notice and Proxy Statement | 2022 |
CORPORATE GOVERNANCE |
| EXECUTIVE AND GOVERNANCE COMMITTEE | The Executive and Governance Committee is authorized to exercise the authority of the Board between regular meetings, except to the extent limited by law or the company’s charter documents. The Executive and Governance Committee also oversees the company’s governance structure and practices. The responsibilities of the Executive and Governance Committee include: • reviewing the company’s Corporate Governance Policy at least annually and making recommendations for updates; • reviewing the qualifications and independence of the directors as well as the composition of the Board and each committee’s membership; • oversight of the annual evaluation of the CEO and executive succession planning; • managing the Board’s process of annual evaluation; • oversight of ethics and business conduct; and • oversight of the company’s policies and practices on significant issues of corporate social responsibility including environmental, social, and corporate governance (ESG) and sustainability. All members are independent, except for Mr. Schrider. | |
Committee Chair: Robert L. Orndorff | ||
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Other Committee Members | ||
Ralph F. Boyd Mark E. Friis Pamela A. Little Craig A. Ruppert Daniel J. Schrider | ||
Meetings in 2021: 4 |
| NOMINATING COMMITTEE | The responsibilities of the Nominating Committee include: • reviewing the composition of the Board at least annually to ensure the Board reflects the desired skills, experience, diversity, and other qualifications as well as affirming whether each director qualifies as “independent” as defined by Nasdaq Listing Rules; • recommending the appropriate size of the Board; • overseeing the Company’s policies and processes for identifying and reviewing director candidates; • engaging an outside search firm, as needed, to source qualified candidates; • identifying, screening and reviewing individuals qualified to serve as directors, consistent with the criteria developed and approved by the Board; and • recommending to the Board for approval the candidates for nomination for election or re-election by the shareholders. All members are independent. | |
Committee Chair: Craig A. Ruppert | ||
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Other Committee Members | ||
Ralph F. Boyd Mark E. Friis Pamela A. Little Robert L. Orndorff | ||
Meetings in 2021: 2 |
| | Notice and Proxy Statement | 2022 | 15 |
CORPORATE GOVERNANCE |
| RISK COMMITTEE | The Risk Committee assists the Board in its oversight of the company’s enterprise risk management. The responsibilities of the Risk Committee include: • monitoring the direction and trend of major risks relative to the our business operations and strategies; • reviewing and recommending to the Board updates to our enterprise risk management structure and risk appetite statement at least annually; • reviewing and approving significant risk management policies and controls that reflect our risk management philosophy, principles, and limits consistent with the risk appetite statement; and • receiving comprehensive reports on enterprise level risk exposures and measurements, including relevant forecast information, and risk management programs including cybersecurity, business continuity, vendor management, and regulatory compliance. All members are independent, except for Mr. Schrider. | |
Committee Chair: Mark E. Friis | ||
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Other Committee Members | ||
Mona Abutaleb Mark C. Micklem Robert L. Orndorff Daniel J. Schrider | ||
Meetings in 2021: 6 |
We believe that a strong risk management culture is vital to the success of our business. To mitigate the risks inherent in our business, we foster a culture that makes managing risk everyone’s responsibility at all levels of the company.
We have implemented a formal risk management framework that establishes the program by which we identify, assess, measure, monitor, report and control risks across the company. The risk management framework is designed to link risk appetite, and related risk monitoring and reporting, with our business strategy and capital plans. The risk management framework describes our risk management approach, including the adoption of the three lines of defense risk model, and outlines our risk management governance structure, including the roles of the Board, management, lines of business and internal audit. The Risk Committee reviews the risk management framework at least annually, or more often as needed to address changes in the company’s risk profile or risk management best practices.
We have also adopted a risk appetite statement that identifies the level of risk we are willing to accept in pursuit of our strategic objectives. The company’s risk appetite is articulated through qualitative statements and quantitative metrics that cover the broad array of risks relevant to the company, including credit, market, liquidity, capital, operational, strategic and reputational risks. The Board reviews and approves our risk appetite statement annually. On a quarterly basis, we evaluate the risks facing the company and our risk appetite metrics against the risk appetite statement to ensure it reflectsthat the best interestsoperations of Bancorpthe company align with the company’s risk appetite.
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| | Notice and Proxy Statement | 2022 |
CORPORATE GOVERNANCE |
The Board is responsible for overseeing the company’s risk management processes by informing itself about our material risks and evaluating whether management has reasonable risk management and control processes in place to address those risks. The Board oversees risk management through the actions of the full Board, including approval and oversight of the company’s risk appetite statement, strategic plan, capital plan and financial plan, and the activities of its shareholders.committees, principally the Risk Committee, Audit Committee and Compensation Committee.
| Board of Directors | ||||
Risk Committee | The Risk Committee has primary responsibility for overseeing our risk management framework. The committee reviews and approves the company’s risk appetite statement, key risk management policies and the charter of the Executive Risk Committee, monitors compliance with the risk management framework and risk limits, and oversees the work of the company’s risk management function. The committee oversees credit risk, including lending and credit policies and asset quality, financial risk, including interest rate risk, liquidity risk, capital risk and market risk, and operational risk, including compliance risk, business continuity planning, information and cyber security risk, and third-party risk. The committee receives a quarterly enterprise risk report as well as regular updates on key and emerging risks. The Risk Committee reports regularly to the Board regarding material matters discussed at meetings of the Risk Committee, as well as the current status of risk and action items. | |||
Audit Committee | The Audit Committee plays a significant role in the Board’s exercise of its risk oversight responsibilities. This committee has primary oversight of risks arising from the company’s financial reporting, internal control processes and public disclosure. The Audit Committee reviews management’s assessment of the company’s internal control over financial reporting, meets regularly with the company’s independent auditors to discuss the results of their quarterly reviews and annual audit, and receives internal audit reports that enable it to monitor operational risk throughout the company. To ensure candid reporting, the Audit Committee meets in separate executive sessions with the company’s independent auditors and Chief Internal Auditor. The committee coordinates any substantive or systemic findings with the Risk Committee through a liaison member who serves on both committees. The Audit Committee regularly reports to the full Board on its risk management activities. | |||
Compensation Committee | The Compensation Committee has primary oversight of risks arising from the company’s incentive compensation plans and programs. On an annual basis, the committee receives a risk assessment that enables the committee to determine whether our incentive compensation plans and programs create risks that are likely to have a material adverse effect or would encourage excessive risk-taking. | |||
Board Oversight of Cybersecurity Risk
Our Board recognizes the company’s responsibility to protect the data provided by its clients and employees, understands how cyber risks could disrupt the company’s operations, and is cognizant of the increasing risks and threats associated with the use of digital technology. Through the efforts of the Risk Committee, the Board oversees the company’s continuing efforts to strengthen its information security infrastructure and staffing and enhance its technology controls and cybersecurity defenses.
As part of its oversight of operational risk, the Risk Committee is responsible for the oversight of information security and cybersecurity risk management. Our Chief Information Security Officer regularly reports to the Risk Committee on security events, testing, training, audits, new system assessments and vendor performance. These reports address topics such as the threat environment and vulnerability assessments, results of penetration testing, results of key cyber risk indicators and performance metrics, and the company’s efforts to detect, prevent and respond to internal and external critical threats. The Risk Committee receives periodic updates on information security risk, the maturity of the company’s information security program, and updates on related investments and results. On an annual basis, the Risk Committee reviews and approves our information security program and information security policy.
| | Notice and Proxy Statement | 2022 | 17 |
CORPORATE GOVERNANCE |
ENVIRONMENTAL, SOCIAL AND GOVERNANCE MATTERS
Strengthening our communities through our products and services, investing in our communities and serving our neighbors and friends has always been at the heart of our mission as a community financial institution. As investors and the business community coalesce around the importance of environmental, social and governance issues (ESG), we are developing an approach to corporate and environmental sustainability that aligns with the nature of our business and the evolution of ESG principles in the financial services industry. In addition, Bancorp's board2021, we published our inaugural Corporate Responsibility Report, which summarizes our efforts and performance on ESG matters that we and our stakeholders view as among the most important to our business.
The Board has responsibility for overseeing policies, programs and strategies related to ESG matters and receives updates, at least annually, from management on ESG matters, including investor sentiment, our Corporate Responsibility Report, and ESG initiatives. Board committees also play an important role in oversight of ESG matters. The Executive and Governance Committee oversees the company’s policies and practices on significant issues of corporate social responsibility and sustainability. The Compensation Committee assists the Board in the oversight of the company’s human capital management strategy, including strategies and initiatives on diversity, equity, and inclusion, employee well-being and engagement.
ENVIRONMENT | We recognize that we all have a role to play in environmental sustainability and combatting climate change. We foster sustainability by: • embracing digital tools to reduce paper usage and reliance on paper intensive processes • reducing waste and energy and resource usage in our facilities • financing clean energy and energy efficiency projects | |
SOCIAL | We believe that all members of our communities should have the opportunity to enjoy prosperous and fulfilling lives and that our success should enrich all stakeholders. We help lift up our clients and our communities by: • making financial products and services accessible and affordable • supporting area non-profit organizations that promote affordable housing, financial literacy, education, and health and wellness • volunteering with organizations across our footprint | |
PEOPLE | Attracting, retaining and developing a diverse, highly skilled workforce where employees feel included, respected and valued is key to our ability to deliver a remarkable client experience. We create a great place to work by: • building a diverse and inclusive workplace where all backgrounds, experience, interests and skills are respected, appreciated and encouraged • providing employees with opportunities to advance and grow their careers with our company through systematic talent management, career development and succession planning • delivering competitive compensation and benefits that exceed expectations | |
GOVERNANCE | We believe in strong governance and a culture of ethics and integrity in all that we do. We live these principles by: • adopting a Corporate Governance Policy that promotes sound and effective governance • adhering to a Code of Ethics and Business Conduct that sets expectations aligned with our core values • creating a culture of risk management in which managing risk is everyone’s responsibility at all levels of the company | |
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| | Notice and Proxy Statement | 2022 |
CORPORATE GOVERNANCE |
2021 ESG HIGHLIGHTS
| $494K donated to 110 local nonprofits | Financing clean energy through Montgomery County Green Bank and DC Green Bank | |||
over 6,000 employee volunteer hours | Lent $307M to first-time home buyers | |||
59% women in workforce | Launched formalized mentor program for diverse leaders | Paid over $475K in COVID-19 leave benefits | ||
38% people of color in workforce |
| $1.6B Paycheck Protection Program Loans | ||
| $15 minimum wage | |||
115 tons paper recycledFor more detailed information, please see our Corporate Responsibility Report, which is available on our website at www.sandyspringbank.com. Information on our website is not incorporated by reference into this proxy statement. Additional disclosures about human capital management can be found in our 2021 Annual Report on Form 10-K filed with the SEC.
The Board has established an annual self-assessment process that evaluates a different aspect of the Board’s effectiveness each year. On a rotating basis, the directors evaluate the Board as a whole, the Board committees, and individual director performance. The self-assessment process, which is managed by the Executive and Governance Committee, involves completion of annual surveys, review and discussion of the results of the surveys by both the committee and the full Board, as well as with individual directors in the case of peer evaluations, and communication of feedback to management to improve policies, processes and procedures to support Board and committee effectiveness. In 2021, the Board completed an evaluation of the Board as a whole.
We believe that continuing director education is essential to the ability of directors to fulfill their roles. We provide both internal and external educational opportunities and association memberships for our directors. We encourage directors to participate in external continuing director education programs, and we reimburse directors for their expenses associated with such activities. Continuing director education also is provided during Board meetings and as stand-alone information sessions outside of meetings. Our Board hears from management as well as from subject matter experts on corporate governance and other matters relevant to Board service, including matters related to the financial services industry.
BOARD AND COMMITTEE MEETING ATTENDANCE
During 2021, the Board held nine regular meetings and one special meeting. Directors are expected to attend at least 80% of Board meetings and meetings of the committees upon which they serve. In 2021, directors attended 99% of total Board and committee meetings, and each of the directors attended at least 75% of the total meetings of the Board and the committees on which he or she served in 2021.
| | Notice and Proxy Statement | 2022 | 19 |
CORPORATE GOVERNANCE |
Directors are expected to attend the company’s annual meeting of shareholders. All of our directors serving at the time of the 2021 annual meeting attended the 2021 virtual annual meeting via teleconference.
CODE OF ETHICS AND BUSINESS CONDUCT
Our Board has adopted a Code of Ethics and Business Conduct (the Code) 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.company. The Code of Ethics and 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, may be found on Bancorp'sour investor relations Web site maintainedwebsite at www.sandyspringbank.com. If we make any substantive amendments to the Code or grant any waiver from a provision of the Code that is required to be disclosed under the applicable rules of the SEC, we will disclose the nature of such amendments or waiver on our website or in a current report on Form www.sandyspringbank.com8-K..
STOCK OWNERSHIP REQUIREMENTS FOR DIRECTORS
Our Corporate Governance Policy no more than two insiderequires that directors own the lesser of 5,000 shares of company stock or company stock with a market value of $175,000 by January 1 following the director’s fifth anniversary of service. Unvested shares of restricted stock and restricted stock units count towards the satisfaction of the ownership requirement. Directors are expected to retain the shares of company stock they receive pursuant to their service as a Board member for so long as they serve as a director. All of the directors exceed the minimum ownership requirements of the policy.
PROHIBITION ON HEDGING AND PLEDGING
Under our Insider Trading Policy, our directors, officers and employees may be on the boardnot at any one time. Alltime buy or sell options on company securities or other derivative securities that reference company securities and may not enter into hedging or similar transactions that are designed to offset any decrease in the market value of company securities. In addition, our directors must be independent. An insideand executive officers are prohibited from trading company securities on margin, borrowing against any account in which company securities are held, or pledging company securities as collateral for any loan. Our policy also prohibits directors and executive officers from engaging in short sales of company stock.
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| | Notice and Proxy Statement | 2022 |
DIRECTOR COMPENSATION |
Our director compensation program is defineddesigned to attract and retain highly qualified directors and align their interests with those of our shareholders. We compensate our non-employee directors with a combination of cash and equity awards. Directors who are employees of our company do not receive additional compensation for their service as aBoard members.
The Compensation Committee periodically reviews the director that is employed or was employed withincompensation program and recommends changes for approval by the last three yearsBoard. The Compensation Committee did not recommend any changes to our director compensation program for 2021.
CASH COMPENSATION
Non-employee directors received cash compensation in 2021 as either an officer of Bancorp or the Bankfollows:
Annual cash retainer per director | $ | 30,000 |
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Additional cash annual retainer for Board and committee chairs |
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Chair of Board | $ | 40,000 |
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Audit Committee | $ | 15,000 |
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All other committees | $ | 10,000 |
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Board meeting attendance fee (per meeting) | $ | 1,200 |
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Attending an in-person Board meeting by phone | $ | 500 |
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Committee meeting attendance fee (per meeting) | $ | 1,000 |
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Directors are not paid for limited-purpose teleconference meetings, and serves as a membermembers of the board of directors. In making its determination of independence, the board of directors did not consider any transactions, relationship, or arrangements thatNominating Committee are not included in the section of this proxy statement entitled "Transactions and Relationships with Management."
EQUITYCOMPENSATION
On April 28, 2021, each director received a grant of restricted stock units valued at approximately $35,000. The restricted stock units will vest over three years in equal increments, and vesting accelerates upon the permanent departure from the Board other than removal 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.
DEFERRED FEE ARRANGEMENTS
Directors of the Bank are eligible to defer all or a portion of their fees under the Director Deferred Fee Deferral Plan. In 2009, theThe amounts deferred accruedaccrue interest at 120% of the long-term Applicable Federal Rate, which 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'sdirector’s service, onat which time the board. In the eventdirector’s deferral account balance will be paid in a director dies during active service, the Bank may pay benefits that exceed deferred fees and accrued interestlump sum. Mr. Orndorff is a party to a Directors’ Fee Deferral Agreement, under which deferrals ceased in 2004, pursuant to which his beneficiary would receive a death benefit equal to the extent the Bank owns an insurance policy in effect on
| | Notice and Proxy Statement | 2022 | 21 |
| Name | Fees Earned or Paid in Cash (1) | Stock Awards (2) | Option Awards (3) | All Other Compensation (4) | Total | |||||||||||||||
David H. Fogg(5) | $ | 19,213 | $ | - | - | $ | - | $ | 19,213 | |||||||||||
| Mark E. Friis | $ | 35,460 | $ | 19,997 | - | $ | 565 | $ | 56,022 | |||||||||||
| Susan D. Goff | $ | 34,180 | $ | 19,997 | - | $ | 565 | $ | 54,742 | |||||||||||
| Solomon Graham | $ | 38,260 | $ | 19,997 | - | $ | 565 | $ | 58,822 | |||||||||||
Marshall H. Groom(6) | $ | 7,240 | $ | - | - | $ | 60 | $ | 7,300 | |||||||||||
| Gilbert L. Hardesty | $ | 41,460 | $ | 19,997 | - | $ | 565 | $ | 62,022 | |||||||||||
| Hunter R. Hollar | $ | 61,960 | $ | 19,997 | - | $ | 990 | $ | 82,946 | |||||||||||
| Pamela A. Little | $ | 33,480 | $ | 19,997 | - | $ | 565 | $ | 54,042 | |||||||||||
Charles F. Mess, Sr.(6) | $ | 5,040 | $ | - | - | $ | 99 | $ | 5,139 | |||||||||||
| Robert L. Orndorff | $ | 36,580 | $ | 19,997 | - | $ | 565 | $ | 57,142 | |||||||||||
| David E. Rippeon | $ | 29,460 | $ | 19,997 | - | $ | 565 | $ | 50,022 | |||||||||||
| Craig A. Ruppert | $ | 39,060 | $ | 19,997 | - | $ | 565 | $ | 59,622 | |||||||||||
| Lewis R. Schumann | $ | 34,260 | $ | 19,997 | - | $ | 565 | $ | 54,822 | |||||||||||
DIRECTOR COMPENSATION |
2021 NON-EMPLOYEE DIRECTOR COMPENSATION
The following table shows the compensation received during 2021 by our non-employee directors.
Name | Fees Earned or ($) | Stock Awards(2) ($) | All Other ($) | Total ($) | ||||||||||||||||
Mona Abutaleb | 51,800 | 35,043 | 2,616 | 89,459 |
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Ralph F. Boyd | 58,800 | 35,043 | 2,616 | 96,459 |
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Mark E. Friis | 61,800 | 35,043 | 5,016 | 101,859 |
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Brian J. Lemek | 47,800 | 35,043 | 2,223 | 85,066 |
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Pamela A. Little | 63,800 | 35,043 | 2,616 | 101,459 |
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James J. Maiwurm(4) | 5,400 |
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| 708 | 6,108 |
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Walter C. Martz, II | 44,100 | 35,043 | 3,423 | 82,566 |
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Mark C. Michael | 44,800 | 35,043 | 2,616 | 82,459 |
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Mark C. Micklem | 50,800 | 35,043 | 2,813 | 88,656 |
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Gary G. Nakamoto(5) | 38,800 | 35,043 | 1,485 | 75,328 |
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Christina B. O’Meara | 44,800 | 35,043 | 2,223 | 82,066 |
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Robert L. Orndorff | 108,800 | 35,043 | 2,616 | 146,459 |
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Craig A. Ruppert | 54,800 | 35,043 | 2,616 | 92,459 |
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| (1) | All or a portion of the reported cash compensation may be deferred under the Director Fee Deferral Plan. |
| (2) | On |
| (3) |
Amounts in this column represent dividends paid on |
| (4) | Mr. |
| (5) | Mr. Nakamoto died on |
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| | Notice and Proxy Statement | 2022 |
TRANSACTIONS WITH RELATED PERSONS |
TRANSACTIONS WITH RELATED PERSONS
The Board has adopted a written policy and procedures for the review, approval or ratification of transactions that could potentially be required to be reported under the SEC rules for disclosure of transactions in which related persons have a direct or indirect material interest. Related persons include directors and executive officers of the company and members of their immediate families. To help identify related person transactions and relationships, each director and executive officer completes a questionnaire that requires the disclosure of any transaction or relationship that the person, or any member of his or her immediate family, has or is proposed to have with the company. The policy applies to any transaction in which our company is a participant, any related party has a direct or indirect material interest, and the amount involved exceeds $120,000, but excludes any transaction that does not require disclosure under Item 404(a) of SEC Regulation S-K, including banking, insurance, trust and wealth management services provided to related parties on substantially the same terms for comparable services provided to unrelated third parties. In addition, loans to related parties are excluded from the policy, but only if the loan (i) is made in the ordinary course of business, (ii) is on market terms or terms that are no more favorable than those offered to unrelated third parties, (iii) when made does not involve more than the normal risk of collectability or present other unfavorable features, (iv) would not be disclosed as nonaccrual, past due, restructured or a potential problem loan, and (v) complies with applicable law.
The Audit Committee, with assistance from our General Counsel, is responsible for reviewing and, where appropriate, approving or ratifying any related person transaction involving our company or its subsidiaries and related parties.
As required by federal regulations, extensions of credit by Sandy Spring 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 disinterested directors. Extensions of credit to our directors or officers are subject to approval by the disinterested members of the Board per the terms of Regulation O and our policy.
| | Notice and Proxy Statement | 2022 | 23 |
STOCK OWNERSHIP INFORMATION |
5% OWNERS OF COMPANY STOCK
The following table provides information about those holders known to us to be the beneficial owners of Directors and Executive Officers5% or more of our outstanding shares of common stock as of December 31, 2021.
Name and Address | Number of Shares | Percentage of Common Stock Outstanding | ||||||||||
BlackRock, Inc. 55 East 52nd Street, New York, NY 10055 | 4,352,382(1) | 9.6% | ||||||||||
T. Rowe Price Associates, Inc. 100 E. Pratt Street, Baltimore, MD 21202 | 2,910,314(2) | 6.4% | ||||||||||
The Vanguard Group 100 Vanguard Blvd., Malvern, PA 19355 | 2,480,515(3) | 5.5% | ||||||||||
Dimensional Fund Advisors LP 6300 Bee Cave Road, Austin, TX 78746 | 2,425,462(4) | 5.3% | ||||||||||
| (1) | According to the Schedule 13G/A filed by Blackrock, Inc., with the SEC on February 1, 2022, BlackRock, Inc., had sole voting power with respect to 4,037,072 shares and sole dispositive power with respect to 4,352,382 shares. |
| (2) | According to the Schedule 13G/A filed by T. Rowe Price Associates, Inc., with the SEC on February 14, 2022, T. Rowe Price Associates, Inc. had sole voting power with respect to 760,162 shares, and sole dispositive power with respect to 2,910,314. |
| (3) | According to the Schedule 13G/A filed by The Vanguard Group, with the SEC on February 10, 2022, The Vanguard Group had shared power to vote 42,321 shares, sole dispositive power with respect to 2,398,093, and shared dispositive power with regard to 82,422 shares. |
| (4) | According to the Schedule 13G/A filed by Dimensional Fund Advisors LP on February 8, 2022, Dimensional Fund Advisors had sole voting power with respect to 2,372,470 shares and sole dispositive power with respect to 2,425,462 shares. Dimensional Fund Advisors LP, an investment adviser registered under Section 203 of the Investment Advisors Act of 1940, furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, and serves as investment manager or sub-adviser to certain other commingled funds, group trusts and separate accounts (such investment companies, trusts and accounts, collectively referred to as the “Funds”). In certain cases, subsidiaries of Dimensional Fund Advisors LP may act as an adviser or sub-adviser to certain Funds. In its role as investment advisor, sub-adviser and/or manager, Dimensional Fund Advisors LP or its subsidiaries may possess voting and/or investment power over the securities that are owned by the Funds, and may be deemed to be the beneficial owner of the shares held by the Funds. However, all securities reported are owned by the Funds. Dimensional Fund Advisors LP disclaims beneficial ownership of such securities. |
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| | Notice and Proxy Statement | 2022 |
STOCK OWNERSHIP INFORMATION |
BENEFICIAL OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information as of February 10, 2010,16, 2022, with respect to the shares of common stock beneficially owned by each director continuing in office and nominee for director of Bancorp,director-nominee, by the 2021 named executive officers, and by all directors and executive officers as a group. No individual holds more than 1% of Bancorpthe total outstanding shares of common stock. All directors and executive officers as a group and by the following executive officersbeneficially own 3.2% of Bancorp and Bank: Daniel J. Schrider, Philip J. Mantua, Frank Small, R. Louis Caceres, William W. Hill, IV (Named Executive Officers for 2009). 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 | 21,592 | 1,996 | 2,879 | 26,467 | * | |||||||||||||||
| Susan D. Goff | 15,147 | 1,996 | 7,301 | 24,444 | * | |||||||||||||||
| Solomon Graham | 14,260 | 1,996 | 6,539 | 22,795 | * | |||||||||||||||
| Gilbert L. Hardesty | 8,348 | 1,996 | 12,107 | 22,451 | * | |||||||||||||||
| Pamela A. Little | 5,176 | 1,996 | 2,879 | 10,051 | * | |||||||||||||||
| Robert L. Orndorff | 153,873 | 1,996 | 11,260 | 167,129 | 1.0 | % | ||||||||||||||
| David E. Rippeon | 13,225 | 1,996 | 8,341 | 23,562 | * | |||||||||||||||
| Craig A. Ruppert | 52,571 | 1,996 | 6,795 | 61,362 | * | |||||||||||||||
| Lewis R. Schumann | 14,407 | 1,996 | 10,894 | 27,297 | * | |||||||||||||||
Dennis A. Starpliper(4) | - | - | - | - | * | |||||||||||||||
Daniel J. Schrider(5) | 5,415 | 14,765 | 38,886 | 59,066 | * | |||||||||||||||
Philip J. Mantua(6) | 8,111 | 7,995 | 28,529 | 44,635 | * | |||||||||||||||
Frank H. Small(7) | 7,694 | 7,116 | 71,035 | 85,845 | * | |||||||||||||||
R. Louis Caceres(8) | 3,230 | 8,344 | 33,479 | 45,053 | * | |||||||||||||||
William W. Hill, IV(9) | 1,699 | - | 9,867 | 11,566 | * | |||||||||||||||
| All directors and all executive officers as a group (17 persons) | 331,606 | 72,810 | 287,438 | 691,854 | 4.16 | % | ||||||||||||||
Name | Shares Owned(1)(2) | Restricted Stock Awards(3) | Right to Acquire(4) | Total Beneficial Ownership | Additional Stock Units(5) | Total | ||||||||||||||||||||||||||
Mona Abutaleb | 4,538 | 334 | 442 | 5,314 |
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| 1,212 | 6,526 | ||||||||||||||||||||
Ralph F. Boyd | 7,500 | 334 | 442 | 8,276 |
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| 1,212 | 9,488 | ||||||||||||||||||||
Mark E. Friis(6) | 44,477 | 334 | 442 | 45,253 |
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| 1,212 | 46,465 | ||||||||||||||||||||
Brian J. Lemek | 252,072 | — | 515 | 252,587 |
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| 1,285 | 253,872 | ||||||||||||||||||||
Pamela A. Little | 26,578 | 334 | 442 | 27,354 |
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| 1,212 | 28,566 | ||||||||||||||||||||
Walter C. Martz II(7) | 30,427 | — | 515 | 30,942 |
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| 1,285 | 32,227 | ||||||||||||||||||||
Mark C. Michael | 23,670 | 334 | 442 | 24,446 |
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| 1,212 | 25,658 | ||||||||||||||||||||
Mark C. Micklem | 12,963 | — | 942 | 13,905 |
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| 1,212 | 15,117 | ||||||||||||||||||||
Christina B. O’Meara(8) | 44,954 | 334 | 515 | 45,469 |
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| 1,285 | 46,754 | ||||||||||||||||||||
Robert L. Orndorff(9) | 168,011 | 334 | 442 | 168,787 |
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| 1,212 | 169,999 | ||||||||||||||||||||
Craig A. Ruppert | 106,618 | 334 | 442 | 107,394 |
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| 1,212 | 108,606 | ||||||||||||||||||||
Daniel J. Schrider (10) | 99,496 | 24,410 | — | 123,906 |
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| 21,914 | 145,820 | ||||||||||||||||||||
Philip J. Mantua(11) | 55,330 | 9,389 | — | 64,719 |
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| 8,396 | 73,115 | ||||||||||||||||||||
Joseph J. O’Brien, Jr.(12) | 51,748 | 12,021 | — | 63,769 |
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| 11,075 | 74,844 | ||||||||||||||||||||
Kenneth C. Cook (13) | 216,514 | 6,264 | 109,027 | 331,805 |
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| 7,829 | 339,634 | ||||||||||||||||||||
R. Louis Caceres | 36,556 | 8,673 | — | 45,229 |
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| 7,554 | 52,783 | ||||||||||||||||||||
All directors and all executive officers as a group (21 persons) | 1,237,642 | 91,369 | 115,419 | 1,444,430 |
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| 91,184 | 1,535,614 | ||||||||||||||||||||
| (1) | Under the rules of the SEC, an individual is considered to |
| (2) | Only whole shares appear in the table. Fractional shares that may arise from |
| (3) | Includes restricted stock awards as to which the holder has voting power. |
| (4) | Includes shares that the named individual or group has the right to acquire through the exercise of vested stock options |
| (5) | Includes restricted stock units and performance-based restricted stock units, reported at target levels, as to which no voting or investment power exists. |
| (6) | Includes 30,782 shares owned by Mr. |
| (7) | Includes 2,183 shares |
| (8) | Includes 7,343 shares owned by Ms. O’Meara’s spouse |
| (9) | Includes 156,348 shares owned by trusts for which Mr. Orndorff and his spouse, as co-trustees, share investment and voting power. |
| (10) | Includes 6,671 shares held through employee benefit |
Includes 11,330 shares held through employee benefit plans. |
Includes 5,491 shares held through employee benefit plans. |
Includes 2,256 shares held through employee benefit plans. |
| | Notice and | 25 |
Name | Amount and Nature of Beneficial Ownership(1) | Percentage of Shares Outstanding(2) | ||||||
Blackrock, Inc. 40 East 52nd Street, New York, NY 10022 | 977,669 | 5.88 | % | |||||
Dimensional Fund Advisors, LP Austin, Texas | 975,377 | 5.87 | % | |||||
STOCK OWNERSHIP INFORMATION |
DELINQUENT SECTION 16(A) REPORTS
Section 16(a) of the Securities Exchange Act of 1934 requires Bancorp'sour directors, executive officers, and directors, and any persons who own more than ten percent10% of a registered class of Bancorp's equity securities,our common stock to file reports of ownership and changes in ownership on Forms 3, 4, and 5of our common stock with the SEC. Executive officers, directorsSpecific dates for such filings have been established by the SEC, and greater than ten percent shareholderswe are required by applicable regulations to furnish Bancorp with copies of all Forms 3, 4, and 5 they file. report in this proxy statement any failure to file reports in a timely manner in 2021.
Based solely on the review of the copies of such forms it haswe have received and written representations from each person, all of Bancorp'sthe executive officers and directors have complied with filing requirements applicable to them with respect to transactions during 2009.
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| | Notice and Proxy Statement | 2022 |
COMPENSATION DISCUSSION AND ANALYSIS |
COMPENSATION DISCUSSION AND ANALYSIS
This section describes our executive compensation philosophy, the material components of our compensation program, and the factors used for determining compensation earned by the following persons who were our named executive officers, or “NEOs,” in 2021: Daniel J. Schrider President and Chief Executive Officer Philip J. Mantua Executive Vice President and Chief Financial Officer Joseph J. O’Brien, Jr. Executive Vice President and Chief Banking Officer Kenneth C. Cook Executive Vice President and President of Commercial Banking R. Louis Caceres Executive Vice President and Chief Wealth Officer Each of our NEOs is a member of our Executive Leadership Team, which includes other key members of our senior management. This discussion should be read in conjunction with the compensation tables and accompanying narrative starting on page 42. | ||||||||||
| | | 1. EXECUTIVE SUMMARY | 28 | ||||||||
28 | ||||||||||
| Executive Compensation Philosophy | 28 | |||||||||
| 2021 Compensation Highlights | 29 | |||||||||
| Target Compensation Mix | 29 | |||||||||
| “Say on Pay” Results | 29 | |||||||||
| Compensation and Governance Practices | 30 | |||||||||
| | | 31 | |||||||||
| Executive Compensation Program Elements | 31 | |||||||||
| | | 31 | |||||||||
| Executive Compensation Process | 31 | |||||||||
| Peer Group | 32 | |||||||||
| | | 33 | |||||||||
| Base Salary | 33 | |||||||||
| 2021 Target Award Opportunities | 33 | |||||||||
| Annual Incentive Compensation | 33 | |||||||||
| Long-term Incentive Compensation | 37 | |||||||||
| Executive Incentive Retirement Plan | 38 | |||||||||
| | | 39 | |||||||||
| Other Compensation Elements | 39 | |||||||||
| Employment and Change in Control Agreements | 40 | |||||||||
| Executive Compensation Policies | 40 | |||||||||
| Compensation Risk Assessment | 40 | |||||||||
| Tax Considerations | 40 | |||||||||
| | Notice and Proxy Statement | 2022 | 27 |
COMPENSATION DISCUSSION AND ANALYSIS |
2021 was a year of strong financial performance in a challenging operating environment. We began the year by supporting our clients with an additional $469 million of Paycheck Protection Program (PPP) loans, bringing our total PPP loan originations to over $1.6 billion. As the year progressed and Analysis
Core Earnings* $212M Core earnings, which exclude provision expense and non-recurring and non-cash items, increased 12% over 2020. | Loans $10.0B Excluding PPP loans, loans grew 5% in 2021 as loan demand surged in the second half of the year. | Deposits $10.6B Deposits grew 6% in 2021, | ||||||
Non-GAAP Efficiency* 46.17% Our non-GAAP efficiency ratio improved from 46.53% in 2020 and was in the top quartile of our peers. | Core ROATCE* 18.93% Our core return on average tangible | Core ROAA* 1.65% Our core return on average | ||||||
Tangible Book Value* $24.90/share Tangible book value per share grew 10% in 2021. | Core EPS* $4.52/share Core earnings per share | Dividends $1.28/share We increased our dividend | ||||||
Non-GAAP financial measure. See our 2021 Annual Report on Form 10-K for additional information and a |
EXECUTIVE COMPENSATION PHILOSOPHY
Our Compensation Committee is committed to full compliance with all lawsrewarding executive management for the company’s performance achieved through planning and regulations including those connected to being a TARP-CPP participant.
Aligned – Executive Officer upon the retirement of Hunter R. Hollar. Mr. Schrider’s compensation was increased commensuratemust be aligned with the positioncompany’s strategic objectives, which state that the company will earn independence by creating franchise and shareholder value. In order to align compensation to this strategy, a significant portion of chief executive officer.
Compensation must also be aligned with each of the named executive officers (excluding Mr. Hill) to amend any existing compensation plancompetitive markets in order to maintain compliance under TARP-CPP. With regardattract and retain the talent, skills, and experience needed in executive management. The committee works with an independent compensation consultant to these officers,receive periodic analyses that benchmark compensation with market trends and practices.
Finally, compensation must align the agreements directly affected terms containedinterests of executives with those of shareholders to ensure that management will be rewarded for increasing shareholder value. To accomplish this, a significant portion of total compensation is in the employment agreementsform of Messrs. Schrider, Mantua,equity.
Balanced – Executive compensation must balance a number of factors. Compensation should have a proper mix of fixed and Caceres,variable elements, compensation arrangements should use multiple performance measures for balanced achievement, awards should balance short and long-term results with short and long-term career objectives, including retirement, and compensation must always balance risk with reward so as not to encourage excessive risk-taking.
Rewarding – Executive compensation must provide the change-in-control agreement with Mr. Small, and the restricted stock award agreements for each.
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| | Notice and Proxy Statement | 2022 |
COMPENSATION DISCUSSION AND ANALYSIS |
Annual Incentive Payout – Annual incentive opportunities are provided to our executive talent,officers under our Executive Team Incentive Plan (ETIP).
$266.1 million pre-provision net revenue |
| 145% of Target Payout | 2021 ETIP 130.61% of Target Payout | |||||
46.17% non-GAAP efficiency ratio |
| 148% of Target Payout | ||||||
Achievement of strategic initiatives |
| 95% of Target Payout | ||||||
Qualitative factors |
| 110% of Target Payout | ||||||
2019 - 2021 Performance Share Payout – Performance shares have a three-year performance period with cliff vesting at the end of the performance period.
64% 3-year total shareholder return |
| 150% of Target Payout | 2019 Performance Shares 150.00% of Target Payout | |||||
$11.54 3-year adjusted EPS |
| 150% of Target Payout | ||||||
We tie pay to link executive rewardsperformance by structuring a significant portion of our executives’ pay as at-risk compensation (63% for CEO; 56% for other NEOs), and we align the interests of our executives with shareholder interests, to achieve strategic business objectives, and to rewardthose of our shareholders by delivering a balanced approach to short-term and long-term performance. The philosophy incorporates elements that are nonperformance-based (e.g., salary, benefits and limited perquisites) and performance-based (e.g., annual incentivesmeaningful portion of our executives’ pay in the form of cash and retirement contributions, and equity-based awards)equity compensation (32% for CEO; 27% for other NEOs).
At each annual cash bonus,meeting of shareholders, we ask our shareholders to vote on a non-binding resolution to approve the compensation for our named executive officers, commonly referred to as a “say on pay” vote. At our 2021 annual meeting, over 97% of the shares voted were voted “for” the proposal. The committee considered this result and, in light of the strong support for our executive compensation program, did not make any significant changes to our executive compensation program.
| | Notice and Proxy Statement | 2022 | 29 |
COMPENSATION DISCUSSION AND ANALYSIS |
COMPENSATION AND GOVERNANCE PRACTICES
Our executive compensation programs have strong governance components that support the pay-for-performance philosophy of our Compensation Committee and align the executive compensation program with the long-term interests of our shareholders.
| I AT SANDY SPRING WE | I WE DO NOT | |||||||
✓ | Use an independent compensation consultant that is retained by and reports to the Compensation Committee | O | Provide tax gross-ups to executive officers | |||||
✓ | Tie a significant portion of executive compensation to performance | O | Provide “single-trigger” vesting of equity awards upon a change in control | |||||
✓ | Require a minimum performance threshold be attained before any incentive compensation is paid | O | Provide “single trigger” severance upon a change in control | |||||
✓ | Impose maximum caps on incentive compensation | O | Provide excessive perquisites | |||||
✓ | Tie incentive compensation to a clawback policy | O | Permit hedging or pledging of Sandy Spring stock | |||||
✓ | Require significant stock ownership by our named executive officers, including 4x base salary for our CEO and 2x base salary for our other executive officers | O | Encourage excessive risk-taking through our compensation programs | |||||
✓ | Conduct an annual risk assessment of our compensation programs | O | Provide supplemental executive retirement plans | |||||
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| | Notice and Proxy Statement | 2022 |
COMPENSATION DISCUSSION AND ANALYSIS |
EXECUTIVE COMPENSATION PROGRAM ELEMENTS
The compensation elements for 2021 included base salary, annual incentive, long-term incentive (equity) and a contribution to a deferred compensation retirement plan as shown in the following table and annual equity awards is intended to be market competitive and commensurate with company performance.described further herein. These compensation programs are externally benchmarkedelements did not change in 2021.
| Description/Objectives | Performance Rewarded | Form and Timing of Payment | ||||
Base Salary | Fixed base of cash compensation reflective of each executive’s role, performance, skills and contributions | Recognizes each executive’s individual performance and contribution in his/her role | Paid in cash bi-weekly | |||
Annual Incentive (ETIP) | Variable payment based on achievement of performance metrics aligned with company strategy | Measured over a one-year period: • Pre-provision net revenue • Non-GAAP efficiency ratio • Strategic initiatives • Qualitative factors | Paid in cash after the end of the fiscal year | |||
Long-term Incentive PRSUs (50%) RSAs (50%) | Performance-based restricted stock units intended to incentivize performance against metrics aligned with strategic long-term goals | Measured over a three-year period: • Relative return on average tangible common equity • Relative total shareholder return | Paid in shares after the end of three-year performance period | |||
| Time-based restricted stock intended to align executives’ interests with shareholder interests and promote retention | Value realized depends on stock price performance | Paid in shares pro-rata over three-year vesting period | ||||
Executive Incentive Retirement Plan (EIRP) | Variable contribution to deferred compensation plan based on annual performance rewards superior performance relative to peers | Relative return on average assets | Contribution allocated after the end of the fiscal year | |||
3. EXECUTIVE COMPENSATION GOVERNANCE AND PRACTICES
EXECUTIVE COMPENSATION PROCESS
Role of the total compensation paid by comparably sized banks.
The chairmanchair of the committee reports committee actions or recommendations to the board of directorsBoard following each committee meeting.
The committee retains the discretion to decrease ETIP payouts based on significant individual or company performance shortfalls, as well as risk, compliance and regulatory matters.
Role of Compensation Consultant– The committee engages an independent executive officer on January 1, 2009compensation consultant to provide commentary, analysis and so did not receive a formal performance evaluation duringexpertise relating to executive compensation. Since 2017, the coursecommittee has engaged Meridian Compensation Partners, LLC (“Meridian”) as its independent executive compensation consultant.
Representatives of the year. However, the process previously adopted by Bancorp has not changed. The CEO evaluation process is coordinated by an outside consultant,Meridian attend and involves receiving feedback from each director separatelyparticipate in committee meetings and anonymously for compilation. The Compensation Committee is expected to use the results of future evaluations inexecutive sessions at which executive compensation decisions.
| | Notice and Proxy Statement | 2022 | 31 |
COMPENSATION DISCUSSION AND ANALYSIS |
The committee has sole authority and discretion to retain and terminate any compensation consultantsMeridian and to approve the feefees, scope and theother terms of engagement. Details on the committee's functions are described in its charter, which has been approvedMeridian’s engagement, with full funding provided by the boardcompany.
The committee annually reviews the independence of directorsMeridian in light of SEC rules and Nasdaq Listing Rules regarding compensation consultant independence and has affirmatively concluded that Meridian is available on Bancorp’s Investor Relations Web Site maintained at www.sandyspringbank.com.
Role of Compensation Consultants -
The Compensation Committee uses a peer group to perform assessments of executive officer'scompensation as well as to measure performance review process.under annual and long-term incentive plans. The committee has direct access toreviews compensation data from our peers along with pay survey data in establishing base salaries, target pay opportunities and the consultantsamount and control over their engagement. mix of annual and long-term incentive awards for our executive officers.
The committee approves a group of publicly traded banks and bank holding companies each year to serve as the peer group. For 2021, the committee, with input and advice from Meridian, selected publicly traded companies with assets between approximately $6.5 to $30 billion (approximately one-half to two times the company’s assets) from the Mid-Atlantic region plus Connecticut, Massachusetts, North Carolina, Ohio, Virginia and West Virginia. The median asset size of the peer group was advised by a consulting firm during 2009$13.3 billion, placing the company at the 51st percentile, based on assets as of June 30, 2020. Compared to our prior peer group, Investors Bancorp, Inc. and ConnectOne Bancorp, Inc. were added and Flushing Financial Corporation was removed to better align the company’s asset size with the peer group median. The 2021 peer group was comprised of the following 20 companies:
Atlantic Union Bankshares Corp. (AUB) | Independent Bank Corp. (INDB) | |
Berkshire Hills Bancorp, Inc. (BHLB) | Investors Bancorp, Inc. (ISBC) | |
Brookline Bancorp, Inc. (BRKL) | NBT Bancorp, Inc. (NBTB) | |
Community Bank System, Inc. (CBU) | OceanFirst Financial Corp. (OCFC) | |
ConnectOne Bancorp, Inc. (CNOB) | Park National Corporation (PRK) | |
Customers Bancorp, Inc. (CUBI) | S&T Bancorp, Inc. (STBA) | |
Eagle Bancorp, Inc. (EGBN) | TowneBank (TOWN) | |
First Commonwealth Financial Corp. (FCF) | United Bankshares, Inc. (UBSI) | |
First Financial Bancorp (FFBC) | Wesbanco, Inc. (WSBC) | |
Fulton Financial Corporation (FULT) | WSFS Financial Corporation (WSFS) | |
The committee determined that was engaged to conduct a review and competitive assessment of total compensation and benefitsthis peer group would be used for the named executive officers, and to provide a comprehensive assessment of the competitiveness and effectiveness of the total executive compensation programs. The consultant assistedrelative performance comparisons 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.
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| | Notice and Proxy Statement | 2022 |
COMPENSATION DISCUSSION AND ANALYSIS |
In determining base salaries, the committee considers the executive'sexecutive’s qualifications and experience, scope of responsibilities, the goals and objectives established for the executive, and the executive'sexecutive’s past performance, as well as competitive salary practices at financial institutions in the peer group benchmarking (see "Pay Levels and Benchmarking").
Name | 2020 Base | Amount of Increase | 2021 Base | Percent Increase | ||||||||||||||||
Daniel J. Schrider | $825,000 | $25,000 | $850,000 | 3.0% |
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Philip J. Mantua | $425,000 | $15,000 | $440,000 | 3.5% |
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Joseph J. O’Brien, Jr. | $500,000 | $17,500 | $517,500 | 3.5% |
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Kenneth C. Cook | $425,000 | $25,000 | $450,000 | 5.9% |
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R. Louis Caceres | $420,000 | $20,000 | $440,000 | 4.8% |
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2021 TARGET AWARD OPPORTUNITIES
Our executive officers have a target award opportunity for annual and long-term goals, which represents the amount of award received if the company achieves the performance goals set by the committee. The table below summarizes the award opportunities for the NEOs at the target level of performance.
2021 Target Award (as a % of base salary) | ||||||||||||
Name | Annual Incentive | Long-Term Incentive | ||||||||||
Daniel J. Schrider | 75% | 90% |
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Philip J. Mantua | 50% | 65% |
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Joseph J. O’Brien, Jr. | 65% | 75% |
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Kenneth C. Cook | 65% | 60% |
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R. Louis Caceres | 50% | 60% |
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For 2021, target payout opportunities for annual cash awardincentives and long-term incentive awards as a percentage of annual earningsbase salary remained unchanged from the prior year for all of the NEOs, except for Mr. Cook, whose opportunity was increased.
For 2021, the target long-term incentive award opportunity for each NEO was allocated equally among PRSUs and RSAs.
Annual incentive opportunities are provided to our executive officers under our Executive Team Incentive Plan (ETIP). The ETIP is a short-term, cash compensation plan designed to recognize and reward participants for their success in achieving specific company goals. For 2021, the committee selected two financial metrics and two sets of qualitative metrics under the ETIP. A relative weight was assigned to each metric to prioritize importance and relative contribution. Performance metrics were selected to incentivize and reward profitability, progress towards key strategic initiatives and operational excellence.
| | Notice and Proxy Statement | 2022 | 33 |
COMPENSATION DISCUSSION AND ANALYSIS |
The performance measures and respective weights for 2021 were as follows:
Corporate Goal | Weight | |||||||
Pre-provision net revenue | 40% | |||||||
Non-GAAP efficiency ratio | 25% | |||||||
Strategic initiatives | 20% | |||||||
Qualitative factors | 15% | |||||||
| 100% | ||||||||
Each financial metric was assigned a “threshold” or minimum performance level, a “target” level of performance, and a maximum level at which the award opportunity was capped. Achievement of the threshold performance level earns 50% of the target opportunity, achievement of the target performance level earns the target award, and achievement at or above the maximum performance level earns 150% of the target opportunity. Actual results for any metric that falls between performance levels are interpolated to calculate a proportionate award.
Awards under the ETIP are calculated as follows:
| Base Salary | X | Target ETIP Opportunity Percentage | X | Payment Level Achieved | = | Award |
Financial Metrics– The financial metrics for the 2021 ETIP were pre-provision net revenue (PPNR) and non-GAAP efficiency ratio.
PPNR is calculated as net interest income plus non-interest income minus non-interest expense. This metric excludes the effects of the provision for credit losses, which can vary significantly from period to period based on companychanges to economic forecasts, and income taxes. The committee chose PPNR because it reflects the operating performance compared to pre-established performance indicators and defined award levels. Performance measures reflect critical goals that are defined each year as part of the company’s core business planning process,operations.
The non-GAAP efficiency ratio is calculated as adjusted non-interest expense divided by the sum of adjusted net interest income and participants are paid basedadjusted non-interest income. See Annex A – Non-GAAP Financial Measures for more information on company performance. This approach supportscalculation of this metric. The committee chose this metric because it is a measure of operating expense control and efficiency of operations and is highly useful in comparing period-to-period operating performance of the desirecompany’s core business operations.
The targets for both PPNR and the non-GAAP efficiency ratio were determined by reference to foster a collaborative team-oriented culture. our 2021 financial plan and evaluation of our 2020 performance relative to our peer group.
The 2009 approved performance measures which are weighted basedand actual performance levels for 2021 were as follows ($000):
Corporate Goal | Threshold (50% of Target | Target Level (100% of | Maximum (150% of | Actual 2021 | Payment Level | |||||||||||||||||||
Pre-provision net revenue | $173,536 | $216,920 | $271,150 | 266,103(1) | 145.35% |
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Non-GAAP efficiency ratio | 54% | 50% | 46% | 46.17(2) | 147.88% |
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| (1) | See Annex A – Non-GAAP Financial Measures for reconciliation to net income. |
| (2) | See Annex A – Non-GAAP Financial Measures for reconciliation to the GAAP efficiency ratio. |
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| | Notice and Proxy Statement | 2022 |
COMPENSATION DISCUSSION AND ANALYSIS |
Strategic Initiatives – Priority strategic initiatives were identified by the committee at the same time as financial goals were established. Completion of these initiatives, or the specific phases expected to be completed in 2021, were considered to be critical for our long-term success.
Initiative | Description | Achievements | Performance Level | |||
Digital Optimization and Alignment | Our multi-year project to enhance our information technology and data infrastructure will provide a seamless, unified digital banking platform that is expected to reduce friction for clients and employees, enable digital sales, allow us to offer first-class technologies, improve efficiency, and give us the flexibility to meet the changing needs of our clients. Transitioning our data management to a cloud platform will enable us to modernize our digital and analytics capabilities and transition to a more data-driven culture. | • Introduced on-line chat for web and on-line banking • Updated mobile and on-line banking • Substantial progress towards integration with core processor • Established foundation for internal development operations • Initiated implementation of marketing technology solutions • Established cloud platform and stood up data mastering capability with enterprise level customer profile • Commenced ingestion of data to create master customer record. | Target | |||
nCino Installation | Utilizing nCino’s commercial banking system is expected to shorten our loan origination cycle, improve the loan officer and client experience, and streamline underwriting and portfolio management. | • Went live in July 2021. • Created training materials and trained all users. • Integrated supporting applications. • Transitioned substantially all commercial loan origination to the nCino platform. | Target | |||
ALM Model Replacement | Replacement of our asset/liability modeling tool enables us to conduct more sophisticated financial forecasting and stress testing. | • Completed model build • Incorporated data inputs • Initiated model validation | Below Target | |||
Loan Pricing Model Implementation | Replacement of our loan pricing model gives us more sophisticated pricing capability and facilitates the transition away from LIBOR. | • Completed transition to new model in third quarter of 2021 | Target | |||
Based on business plan goals, were: Earnings Per Share Growth, Noninterest Income to Total Revenue, Efficiency Ratio, and Average Deposit Growth. Specific target performance goals as well as minimum and maximums were established for each performance measure. In addition to these measures,its assessment, the 2009 SSLIP had a net income “trigger” which prohibited a payout unless earnings met a specific level. For 2009, earnings were insufficient to meetcommittee determined that the trigger and therestrategic initiatives component was no payment from the 2009 SSLIPearned at 95%. The committee did not assign particular weights to any participant, including Mr. Hill.
Qualitative Factors – Key qualitative factors that influence or reflect the company’s performance were identified by the committee at the same time as financial goals were established. The committee did not establish quantitative thresholds for any of the qualitative factors that were financial metrics due to uncertainty about the impact of the Executive Incentive Retirement Plan -COVID-19 pandemic and extent of the economic recovery. Instead, the committee determined to evaluate the specific qualitative factors in light of our 2021 financial plan and peer and industry performance.
Factor | Description | Achievement | Performance Level | |||
Paycheck Protection Program forgiveness | Completion of the forgiveness process is essential to helping our clients recover from the effects of the COVID-19 pandemic and enabling the company to transition its resources back to execution of its core strategies. | • We made over 8,500 forgivable loans for $1.6 billion under the Small Business Administration’s Paycheck Protection Program, including over 3,100 loans for $469 million in 2021. • Assisted clients in obtaining forgiveness for over 8,100 loans totaling $1.5 billion. | Target | |||
Client survey results | We conduct quarterly client surveys to determine our SEE (Success, Effort, Emotion) Score, which indicates the level of client loyalty and engagement. | Achieved average score of 78 for 2021, which is well above industry average. | Above Target | |||
| | Notice and Proxy Statement | 2022 | 35 |
COMPENSATION DISCUSSION AND ANALYSIS |
Factor | Description | Achievement | Performance Level | |||
Net charge-offs to average loans | The ratio of net charge-offs to average loans is a key indicator of credit quality and loan portfolio performance. | Net charge-offs of 0.11% of average loans matched peer average and reflected continued strong asset quality. | Target | |||
Loan growth (excluding PPP) | Interest income is our primary source of revenue, with interest and fees on loans accounting for over 90% of that revenue source. | Year over year loan growth of 5.0% exceeded peer average and plan, aided by significant commercial loan growth. | Above Target | |||
Deposit growth | Customer deposits provide a stable, low-cost source of funds. | Year over year deposit growth of 5.9% slightly lagged peer average, but exceeded plan, as we strengthened core deposits and reduced brokered and other high cost deposits. | Target | |||
Based on its assessment, the committee determined that the qualitative factors component was earned at 110%. The Executive Incentive Retirement Plan (EIRP) replaced Supplemental Executive Retirement Agreements withcommittee did not assign particular weights to any single factor.
2021 Payouts – Combining the named executive officers in 2008. Participationresults for PPNR, non-GAAP efficiency ratio and the qualitative performance components produced payment at 130.61% of target.
Corporate Goal | Weight | Performance Achieved | Weighted Level | |||||||||||||||||
Pre-provision net revenue | 40% | X | 145.35% | = | 58.14% | |||||||||||||||
Non-GAAP efficiency ratio | 25% | X | 147.88% | = | 36.97% | |||||||||||||||
Strategic initiatives | 20% | X | 95.00% | = | 19.00% | |||||||||||||||
Qualitative factors | 15% | X | 110.00% | = | 16.50% | |||||||||||||||
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The amounts paid under the ETIP for 2021 performance are shown below and in the EIRP for 2009 was prohibited by the TARP-CPP restrictions for Messrs. Schrider, Mantua, Small, and Caceres. Only Mr. Hill was eligible to participate in 2009. The EIRP is a defined contribution plan that provides for contributions to be made to the participants' plan accounts basedSummary Compensation Table on the attainment of criteria established by the board of directors on an annual basis. In 2009, management recommended, and the Compensation Committee approved, that no benefit be paid based on Bancorp’s performance and general market conditions.
Name | 2021 ETIP Paid at 130.61% of Target ($) | |||||||
Daniel J. Schrider | 832,639 | |||||||
Philip J. Mantua | 287,342 | |||||||
Joseph J. O’Brien, Jr. | 439,339 | |||||||
Kenneth C. Cook | 382,034 | |||||||
R. Louis Caceres | 287,342 | |||||||
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| | Notice and Proxy Statement | 2022 |
COMPENSATION DISCUSSION AND ANALYSIS |
LONG-TERM INCENTIVE COMPENSATION
The company’s compensation philosophy identifies equity-based compensation as among the mostan effective means of creating a long-term link betweenaligning the interests of Bancorp'sour shareholders, and the performance of the organizationcompany, and the retention of executive management. The committee has increasingly weightedutilized performance-based and time-based stock awards to accomplish these objectives. For 2021, the compensation of namedtarget long-term incentive award opportunity for each NEO was allocated equally among PRSUs and RSAs, as follows:
Name | Performance Restricted Stock Units (#) | Restricted Stock Awards (#) | ||||||||||
Daniel J. Schrider | 9,129 | 9,129 |
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Philip J. Mantua | 3,397 | 3,397 |
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Joseph J. O’Brien, Jr. | 4,611 | 4,611 |
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Kenneth C. Cook | 3,135 | 3,135 |
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R. Louis Caceres | 3,099 | 3,099 |
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2021 Performance Restricted Stock Units – PRSUs are designed to align pay and long-term performance. We grant PRSUs to executive officers toward equity-based awards. Vesting schedulesto incentivize production of superior long-term shareholder returns through achievement of long-term financial performance. PRSUs have a three-year performance period with cliff vesting at the end of the performance period.
For 2021, the committee selected return on tangible common equity (ROTCE) as the performance metric, with payouts based on our average annual ROTCE performance over the three-year measurement period relative to our peer group. ROTCE is defined as net income attributable to common shareholders, adjusted to exclude extraordinary items, divided by average tangible common equity. The committee selected ROTCE because it is a comprehensive performance metric that is useful for equity-based awards support a goalcomparing the profitability of retentionthe company with that of key leaders.
At the end of the three-year performance period, our executive officers can earn between 0% to receive annual equity awards150% of the target number of PRSUs granted based on the percentile rank of the our average ROTCE for the three-year performance period relative to the average ROTCE of the companies in the formour peer group.
Relative ROTCE Performance | Percentage of PRSUs Vesting | |||||||
75th percentile or above | 150% | |||||||
50th percentile (Target) | 100% | |||||||
25th percentile | 50% | |||||||
Below 25th percentile | 0% | |||||||
Actual performance between the 25th percentile and the 75th percentile will be interpolated to calculate a proportionate award.
Payouts calculated based on relative ROTCE performance are subject to a potential TSR modifier (increase or decrease) based on our TSR percentile performance relative to our peer group for the three-year performance period. Payments under the 2021 PRSUs will be adjusted as follows:
Relative TSR Performance | Increase or Decrease in Payout(1) | |||||||
Top quartile (above 75th percentile) | +15% | |||||||
Second quartile | None | |||||||
Third quartile | None | |||||||
Bottom quartile (25th percentile or below) | -15% | |||||||
| (1) | Subject to overall payout cap of 150% of target. There will be no upward adjustment if the company’s TSR for the three-year performance period is negative. |
PRSUs will be credited with dividends paid on the company’s common stock during the time period when the PRSUs are outstanding, which will be reinvested in additional units, adjusted for performance and paid out in shares if and when the underlying PRSU is earned and paid.
| | Notice and Proxy Statement | 2022 | 37 |
COMPENSATION DISCUSSION AND ANALYSIS |
Restricted Stock Awards – The company grants RSAs to align the interests of executive officers with those of our shareholders by creating an incentive to create and preserve long-term shareholder value. Through RSAs, executive officers share the risks and rewards of stock options, restricted stock, and stock appreciation rights. However,ownership. Through multi-year vesting, RSAs also serve as a retention vehicle. RSAs vest in equal installments over three years, provided that the limitations under TARP-CPP allow Bancorprecipient continues to grant only awardsbe employed by the company on each vesting date. Dividends are paid on RSAs during the vesting period.
Results of long-term restricted stock to2019 - 2021 Performance-based Awards – The three-year performance period for the named executive officers. Under the TARP-CPP restrictions, Bancorp may award long-term restricted stock to employees whose compensation is limited so long as the value2019 performance shares concluded on December 31, 2021. Payout of the award does not exceed 33%was based 50% on our TSR relative to an industry peer group and 50% on our cumulative adjusted earnings per share.
Payout percentages at various levels of performance for the 2019 performance shares and actual results are illustrated in the table below.
Corporate Goal | Threshold (50% of Target | Target Level (100% of | Maximum (150% of | Actual 2021 | Payment Level | |||||||||||||||||||
Relative TSR percentile | 40th | 50th | 75th | 82.76th | 150.00% |
|
|
| ||||||||||||||||
3-Year Adjusted Cumulative EPS | $9.16 | $9.89 | $10.66 | $11.54(1) | 150.00% |
|
|
| ||||||||||||||||
| (1) | See Annex A – Non-GAAP Financial Measures for reconciliation to GAAP EPS. |
Payout of the recipient’s annual compensation. 2019 performance shares was calculated as follows:
TSR | + | EPS | = | Final Payout | ||||
| 150.00% x 50% = 75.00% | 150.00% x 50% = 75.00% | 150.00% | ||||||
The Compensation Committee recommended, andfollowing table lists the Stock Option Committee approved, restricted stock awardsnumber of 2019 performance shares to eachwhich our NEOs became vested at the end of the named2019 – 2021 performance cycle.
Name | 2019 Performance Shares Earned at 150.00% of Target (#) | |||||||
Daniel J. Schrider | 12,001 | |||||||
Philip J. Mantua | 4,610 | |||||||
Joseph J. O’Brien, Jr. | 5,527 | |||||||
Kenneth C. Cook | — | |||||||
R. Louis Caceres | 4,491 | |||||||
EXECUTIVE INCENTIVE RETIREMENT PLAN
All executive officers calculatedparticipate in a nonqualified, deferred compensation plan known as the Executive Incentive Retirement Plan (EIRP). The EIRP was created to provide a percentageperformance-based supplemental retirement benefit. Executive officers receive a minimum cash contribution of 3% of base salary with the opportunity for increased contributions based on identified performance criteria.
For 2021, the committee selected core return on average assets (Core ROAA) as follows:
| Executive | % of Base Salary | Economic Value | ||||||
| Daniel J. Schrider | 33 | % | $ | 148,500 | ||||
| Philip J. Mantua | 33 | % | $ | 79,200 | ||||
| Frank Small | 25 | % | $ | 66,250 | ||||
| R. Louis Caceres | 33 | % | $ | 85,800 | ||||
| William Hill | 33 | % | $ | 77,550 | ||||
Core ROAA as % of Peer Median | Performance Level | CEO | Other Participating Officers | |||||||
Award as a % of Base Salary | Award as a % of Base Salary | |||||||||
70% or below | Threshold | 3.000% |
| 3.0% |
| |||||
100% | Target | 9.375% |
| 7.5% |
| |||||
150% or above | Maximum | 20.000% |
| 15.0% |
| |||||
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| | Notice and Proxy Statement | 2022 |
COMPENSATION DISCUSSION AND ANALYSIS |
In 2021, Core ROAA for the company for purposes of the EIRP was 1.93%. See Annex A – Non-GAAP Financial Measures for reconciliation to GAAP ROAA. Compared to the peer group median of 1.44%, the company achieved 134.30% of the peer group’s result, yielding a contribution of 16.66% of base salary for Mr. Schrider and 12.65% for the other executive officers. The company’s 2021 contributions are shown in the Nonqualified Deferred Compensation table on page 47 along with a description of the terms and conditions for balances paid under the EIRP. The 2021 contributions are also included in the Summary Compensation Table on page 42, and potential awards may be foundare further described in the Grants of Plan BasedPlan-Based Awards table on page 25.
5. OTHER COMPENSATION PROGRAMS AND POLICIES
401(k) Plan – Executive officers are eligible to participate in benefit plans available to all employees, including the Sandy Spring Bank 401(k) Plan. The 401(k) plan provides a 100% match on the first 4% of salary deferred and a 50% match on the next 2% of salary deferred, up to the maximum allowed by IRS regulations.
Pension Plan – The Sandy Spring Bancorp, Inc. CashRetirement Income Plan (Pension Plan) was generally available to employees through December 31, 2007, at which time the Pension Plan was frozen. Of the named executive officers, Mr. Schrider, Mr. Mantua, and Deferred Profit Plan (401(k) Plan) and the Employee Stock Purchase Plan (ESPP). Other benefits and perquisitesMr. Caceres are participants. The accumulated benefit for each may be provided atfound in the discretionPension Benefits table on page 46.
Life Insurance Benefits –The company maintains split dollar life insurance agreements with Mr. Schrider, Mr. Mantua, Mr. O’Brien and Mr. Caceres. Pursuant to the agreements, the executive officer’s designated beneficiary will be entitled to share in the death proceeds payable under one or more life insurance policies owned by the company in the event of the committee. executive’s death while the agreement remains in effect. The amount payable to the executive officer’s beneficiaries is the lesser of two and one-half times the executive’s base salary or the net death proceeds of the policies, which is defined as the total death proceeds minus the greater of the cash surrender value of the policies or the aggregate premiums paid by the company. The split dollar life insurance agreements will terminate if the executive officer has a separation from service, other than as a result of the executive officer’s disability or following a change in control, prior to the executive officer’s normal retirement date or early retirement date. An executive officer’s normal retirement date is the date on which the executive officer has attained age 65 and an executive officer’s early retirement date is the date on which the executive officer has both attained age 60 and completed ten years of service. The Summary Compensation Table on page 42 includes the taxable income associated with this benefit in the column labeled All Other Compensation.
Deferred Compensation – Executive officers are eligible to participate in the company’s nonqualified deferred compensation plan. The deferred compensation plan provides the opportunity to defer up to 25% of base salary and up to 100% of cash bonuses for payment following the six-month anniversary of any separation from service. Interest accrues on the account balance at a rate equal to 120% of the long-term Applicable Federal Rate, adjusted monthly. Contributions during 2021 and year-end account balances can be found in the Nonqualified Deferred Compensation table.
In 2009,the fourth quarter of 2021, the committee adopted a new Non-Qualified Deferred Compensation Plan (NQDC Plan) to provide deferred compensation benefits for a select group of management and highly compensated employees, including the named executive officers. The NQDC Plan provides participants with the option to defer receipt of a portion of their base salary and annual cash incentives. Participant contributions will be fully vested at all times. At its sole discretion, the company may credit participant accounts with company contributions. The company determines who will receive discretionary contributions, as well as the amounts and timing of any such contributions. Distributions of participant accounts will be made following a participant’s separation of service, death, disability, unforeseeable emergency, or as of a future payment date specified by the participant. Participants’ accounts will increase or decrease based on the hypothetical investment of the account balances in one or more investment funds and will be credited and debited in accordance with the actual financial performance of such funds. Participants elect the investment funds in which their accounts are hypothetically invested.
Business-Related Benefits and Perquisites– The committee believes that perquisites should be limited in scope and have a business-related purpose. The committee periodically reviews perquisites to ensure alignment with the desired philosophy. The committee approves specific perquisites or benefits for individuals based on the needs of the position.
In 2021, perquisites for eachall of the named executive officers included paymenteligibility for a company-paid, supplemental long-term disability insurance policy and a long-term care insurance policy, and a comprehensive executive health screening the values for which, if applicable, are represented under “All Other Compensation” in the Summary of Compensation table on page 23.42. In addition, Mr. Schrider receivedreceives the use of a company-paid automobile.
| | Notice and Proxy Statement | 2022 | 39 |
COMPENSATION DISCUSSION AND ANALYSIS |
EMPLOYMENT AND CHANGE IN CONTROL AGREEMENTS
The company has entered into employment agreements with Mr. Schrider, Mr. Mantua, Mr. O’Brien and Mr. Cook and a change in control agreement with Mr. Caceres that would provide them with severance benefits if their employment is terminated under certain circumstances. The committee believes that providing for severance and change in control benefits are an annual basis, the boardimportant element of directors approves the annual profit plan, including a detailed business plan and financial plan. These plans are designed toour executive compensation program, support the multi-year strategic plan by setting annual targetscreation of long-term shareholder value, and are necessary to attract and retain top executive talent in a competitive market. The agreements are intended to ensure that management can fairly consider potential change in control transactions that could result in loss of their jobs. The agreements do not provide for achievement. Onceany tax indemnification or “gross-up” payments for any golden parachute excise tax payments, and all change in control benefits are subject to a “double-trigger” (i.e., a change in control plus a qualifying termination of employment).
The severance benefits payable to each named executive officer under the businessemployment and financial planschange in control agreements are approved bydescribed on page 48 under the board“Executive Compensation Tables – Potential Payments upon Termination or Change in Control” section of directors,this proxy statement.
EXECUTIVE COMPENSATION POLICIES
Stock Ownership Requirements for Executives –The Board believes that the performance goals for the short-term incentive plans are derived directly from the stated target financial results. During 2009 Mr. Schrider and Mr. Mantua reported on the performance of Bancorp to the board of directors at each regularly scheduled meeting.
Clawback Policy – Under our Clawback Policy, in the employment agreements for Messrs. Schrider, Mantua and Caceres, howeverevent the employment agreements also provide that Bancorp or the Bank will assume the obligation of any excise taxes for which the executive is liable. Under the Change-in-Control severance agreements, the payment to the executive is reduced so as not to incur additional taxes.
No Hedging and its clients. EachNo Pledging – Under our Insider Trading Policy, the company’s directors and executive is also bound by a covenant notofficers are prohibited from shorting company securities, entering into hedging or similar transactions that are designed to compete and not to interfere with other employees following termination of employment. The post-termination restrictions do not apply if there is a change-in-control and,offset any decrease in the casemarket value of company securities, borrowing against any account in which company securities are held, and pledging company securities as collateral for any loan.
We regularly undertake a systematic risk analysis of each of the executivecompany’s incentive compensation plans that is led by our risk management department and involves participants from our human resources and legal departments. We review the plan design and governance of each plan (including plan participants, performance measures, how performance is determined, and how well the plan is aligned with company goals and objectives) to determine whether the plan creates any undesired or unintentional risk of a material nature, taking into account the mitigation factors that exist for each plan. During 2021, the committee reviewed and discussed risk assessments and reports prepared by our risk officers other than Mr. Schrider, if the executive's employment is terminated without Just Cause by Bancorpand determined that our incentive compensation plans are not reasonably likely to encourage unnecessary or with Good Reason by the executive.
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.
attract, retain and reward top executive talent.
40 |
| | Notice and Proxy Statement | 2022 |
COMPENSATION COMMITTEE REPORT |
2009 Sandy Spring Leadership Incentive Plan - COMPENSATION COMMITTEE REPORTThe 2009 Sandy Spring Leadership Incentive Plan (2009 SSLIP) was comprised of four weighted performance measures as described on page 16. The senior risk officers determined that under the prevailing economic conditions the only measure considered viable in yielding a reward was the Average Deposit Growth measure. While it is possible for pressure to be applied to raise deposit rates for the sole purpose of achieving growth in average deposits, the resulting increased cost of funds could theoretically create pressure to make higher yielding loans, i.e. riskier, to compensate. However, the senior risk officers concluded that current policies together with regular asset-liability reports to the board sufficiently mitigated against this possibility. In addition, the 2009 SSLIP contained a net income “trigger” which prohibited a bonus payment unless a specified net income level was achieved, another mitigating factor to support overall balance in the plan. In 2009, the net income trigger was not achieved and therefore there were no bonuses paid under the 2009 SSLIP. Further, the majority of executive officers were prohibited from receiving any bonus due to the compensation restrictions plans on TARP-CPP participants, thus nullifying the risk factors contained in the plan for those individuals.
The Compensation Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis with management. Based on this review and discussion, we have recommendedthe committee recommends to the board of directorsBoard 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, 2009.statement.
March 16, 2022
Ralph F. Boyd, Chair
Brian J. Lemek
Mark C. Michael
Christina B. O’Meara
Robert L. Orndorff
Mona Abutaleb Stephenson
| | Notice and Proxy Statement | 2022 | 41 |
EXECUTIVE COMPENSATION |
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock ($) | Non-Equity ($) | Change in ($) | All Other ($) | Total ($) | ||||||||||||||||||||||||||||||||
Daniel J. Schrider President and Chief Executive Officer | 2021 | 842,308 | — | 742,553 | 995,269 | — | 65,701 | 2,645,831 | ||||||||||||||||||||||||||||||||
| 2020 | 804,808 | 731,156 | 684,082 | 13,877 | 79,897 | 63,179 | 2,376,999 | |||||||||||||||||||||||||||||||||
| 2019 | 743,269 | — | 479,634 | 564,648 | 80,740 | 61,170 | 1,929,461 | |||||||||||||||||||||||||||||||||
Philip J. Mantua EVP, Chief Financial Officer | 2021 | 435,385 | — | 276,312 | 357,766 | — | 39,564 | 1,109,027 | ||||||||||||||||||||||||||||||||
| 2020 | 419,885 | 257,125 | 267,479 | 10,343 | 33,311 | 33,976 | 1,022,120 | |||||||||||||||||||||||||||||||||
| 2019 | 401,692 | — | 184,273 | 243,799 | 35,771 | 32,460 | 897,995 | |||||||||||||||||||||||||||||||||
Joseph J. O’Brien, Jr. EVP, Chief Banking Officer | 2021 | 512,115 | — | 375,059 | 514,192 | — | 59,947 | 1,461,728 | ||||||||||||||||||||||||||||||||
| 2020 | 487,885 | 377,500 | 345,867 | 6,192 | — | 55,220 | 1,272,864 | |||||||||||||||||||||||||||||||||
| 2019 | 446,923 | — | 220,903 | 284,977 | — | 51,752 | 1,004,555 | |||||||||||||||||||||||||||||||||
Kenneth C. Cook EVP, President of Commercial Banking | 2021 | 442,308 | — | 255,001 | 439,913 | — | 37,580 | 1,174,801 | ||||||||||||||||||||||||||||||||
R. Louis Caceres EVP, Chief Wealth Officer | 2021 | 433,846 | — | 252,073 | 355,975 | — | 53,219 | 1,095,113 | ||||||||||||||||||||||||||||||||
| 2020 | 412,462 | 254,100 | 238,372 | 9,010 | 51,215 | 53,710 | 1,018,869 | |||||||||||||||||||||||||||||||||
| 2019 | 388,769 | — | 179,582 | 233,667 | 53,342 | 52,383 | 907,743 | |||||||||||||||||||||||||||||||||
| (1) | Stock Awards. The amounts reported are the aggregate grant date fair value of stock awards granted in the year shown computed in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718. The values in this column reflect the full grant date fair value of all equity awards granted during the year, although RSAs are subject to vesting periods based on continued employment and the number of PRSUs that vest depends on whether the company achieves specified performance measures. For more information about these awards and the calculation of their fair value, see Note 13 – Share Based Compensation in the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021. 2021 stock awards are described under “Compensation Discussion and Analysis – 2021 Compensation,” and details regarding these awards can be found in the Grants of Plan-Based Awards table. Details regarding outstanding stock awards can be found in the Outstanding Equity Awards at Fiscal Year-End table. |
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 | ||||||||||||||||||||||
| Daniel J. Schrider | 2009 | $ | 450,000 | $ | 148,504 | - | $ | 7,286 | $ | 6,210 | $ | 25,184 | $ | 637,184 | ||||||||||||||||
| President & Chief | 2008 | $ | 269,324 | $ | 69,900 | $ | 47,400 | $ | 25,992 | $ | 31,856 | $ | 24,814 | $ | 469,286 | |||||||||||||||
| Revenue Officer | 2007 | $ | 241,869 | - | - | - | $ | 27,731 | $ | 12,565 | $ | 282,165 | ||||||||||||||||||
| Philip J. Mantua | ||||||||||||||||||||||||||||||
| Executive Vice | 2009 | $ | 240,000 | $ | 79,206 | - | $ | 11,092 | $ | 4,514 | $ | 12,208 | $ | 347,020 | ||||||||||||||||
| President & Chief | 2008 | $ | 237,335 | $ | 34,950 | $ | 27,255 | $ | 28,846 | $ | 20,410 | $ | 11,364 | $ | 360,160 | |||||||||||||||
| Financial Officer | 2007 | $ | 221,285 | - | - | - | $ | 107,030 | $ | 8,910 | $ | 337,225 | ||||||||||||||||||
| Frank H. Small | ||||||||||||||||||||||||||||||
| Executive Vice | 2009 | $ | 265,000 | $ | 66,247 | - | $ | 59,743 | $ | 28,134 | $ | 23,910 | $ | 443,034 | ||||||||||||||||
| President & Chief | 2008 | $ | 312,500 | $ | 34,950 | $ | 27,255 | $ | 119,482 | $ | 78,925 | $ | 20,555 | $ | 593,667 | |||||||||||||||
| Operating Officer | 2007 | $ | 304,385 | - | - | - | $ | 163,972 | $ | 16,018 | $ | 484,375 | ||||||||||||||||||
| R. Louis Caceres | 2009 | $ | 260,000 | $ | 85,799 | - | $ | 8,598 | $ | 5,195 | $ | 19,234 | $ | 378,826 | ||||||||||||||||
| Executive Vice | 2008 | $ | 257,900 | $ | 27,960 | $ | 23,700 | $ | 25,070 | $ | 25,143 | $ | 15,831 | $ | 375,604 | |||||||||||||||
| President | 2007 | $ | 241,869 | - | - | - | $ | 82,705 | $ | 11,899 | $ | 336,473 | ||||||||||||||||||
| William W. Hill, IV | 2009 | $ | 235,000 | $ | 77,549 | - | - | $ | 4,473 | $ | 19,746 | $ | 336,768 | |||||||||||||||||
| Executive Vice President | ||||||||||||||||||||||||||||||
For 2021, the grant date fair value of PRSUs included in this column is based on payout at target, which we have determined to be the probable level of achievement of the performance measures related to those awards. Assuming the highest level of performance is achieved, which would result in the vesting of 150% of the PRSUs granted, the aggregate grant date fair value of the PRSUs would be: $556,935 for Mr. Schrider; $207,254 for Mr. Mantua; $281,314 for Mr. O’Brien; $191,271 for Mr. Cook; and $189,074 for Mr. Caceres. |
| (2) | Non-Equity Incentive Plan Compensation. For 2021, the amounts reported are the total of the following: (a) cash awards under the ETIP, (b) company contribution credited to the officer’s account under the EIRP and (c) earnings on outstanding EIRP balances, as indicated in the table below. |
Name | ETIP ($) | Contributions ($) | Earnings ($) | Total ($) | ||||||||||||
Daniel J. Schrider | 832,639 | 141,642 | 20,988 | 995,269 | ||||||||||||
Philip J. Mantua | 287,342 | 55,638 | 14,786 | 357,766 | ||||||||||||
Joseph J. O’Brien, Jr. | 439,339 | 65,438 | 9,415 | 514,192 | ||||||||||||
Kenneth C. Cook | 382,034 | 56,903 | 976 | 439,913 | ||||||||||||
R. Louis Caceres | 287,342 | 55,638 | 12,995 | 355,975 | ||||||||||||
| (3) | Change in Pension Value and Nonqualified Deferred Compensation Earnings. In 2021, there was a decrease in pension values for Mr. Schrider, Mr. Mantua and Mr. Caceres of $13,452, $2,911 and $6,848, respectively, because of changes in actuarial assumptions in 2021 as compared to 2020. For years in which changes in actuarial assumptions result in a decrease in pension value, rather than report a negative number, a change of $0 is reported. Neither an increase nor decrease in the pension value resulting from changes in actuarial assumptions results in any increase or decrease in benefits payable to participants under the pension plan. |
42 |
| | Notice and Proxy Statement | 2022 |
EXECUTIVE COMPENSATION |
| (4) | All Other Compensation. Detail for the amounts of All Other Compensation is as follows: |
Name | Dividends on Restricted Stock | 401(k) Matching Contribution | Perquisites* | Total All Other Compensation | ||||||||||||
Daniel J. Schrider | 31,857 | 14,500 | 19,344 | 65,701 | ||||||||||||
Philip J. Mantua | 12,356 | 14,500 | 12,708 | 39,564 | ||||||||||||
Joseph J. O’Brien, Jr. | 15,612 | 14,500 | 29,835 | 59,947 | ||||||||||||
Kenneth C. Cook | 7,516 | 14,500 | 15,564 | 37,580 | ||||||||||||
R. Louis Caceres | 11,463 | 14,500 | 27,256 | 53,219 | ||||||||||||
| * | Perquisites include car allowance or personal use of company vehicle, long-term care and supplemental disability insurance premiums paid on behalf of the executive, executive health screening, and the taxable income associated with the executive officer’s split dollar life insurance benefit. |
| | Notice and Proxy Statement | 2022 | 43 |
EXECUTIVE COMPENSATION |
The following table sets forth information on plan-based awards made to the named executive officers in 2021.
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (1) | Estimated Future Payouts Under Equity Incentive Plan Awards (2)(3) | All Other (#) | Grant Date ($) | |||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||
Daniel J. Schrider | RSA | 3/10/2021 | 9,129 | 371,276 | ||||||||||||||||||||||||||||||||||||||
| PRSU | 3/10/2021 | 4,565 | 9,129 | 13,694 | 371,276 | |||||||||||||||||||||||||||||||||||||
| ETIP | 318,750 | 637,500 | 956,250 | |||||||||||||||||||||||||||||||||||||||
| EIRP | 25,500 | 79,688 | 170,000 | |||||||||||||||||||||||||||||||||||||||
Philip J. Mantua | RSA | 3/10/2021 | 3,397 | 138,156 | ||||||||||||||||||||||||||||||||||||||
| PRSU | 3/10/2021 | 1,699 | 3,397 | 5,096 | 138,156 | |||||||||||||||||||||||||||||||||||||
| ETIP | 110,000 | 220,000 | 330,000 | |||||||||||||||||||||||||||||||||||||||
| EIRP | 13,200 | 33,000 | 66,000 | |||||||||||||||||||||||||||||||||||||||
Joseph J. O’Brien, Jr. | RSA | 3/10/2021 | 4,611 | 186,529 | ||||||||||||||||||||||||||||||||||||||
| RSU | 3/10/2021 | 2,306 | 4,611 | 6,917 | 186,529 | |||||||||||||||||||||||||||||||||||||
| ETIP | 168,188 | 336,375 | 504,563 | |||||||||||||||||||||||||||||||||||||||
| EIRP | 15,525 | 38,813 | 77,625 | |||||||||||||||||||||||||||||||||||||||
Kenneth C. Cook | RSA | 3/10/2021 | 3,135 | 127,500 | ||||||||||||||||||||||||||||||||||||||
| PRSU | 3/10/2021 | 1,568 | 3,135 | 4,703 | 127,500 | |||||||||||||||||||||||||||||||||||||
| ETIP | 146,250 | 292,500 | 438,750 | |||||||||||||||||||||||||||||||||||||||
| EIRP | 13,500 | 33,750 | 67,500 | |||||||||||||||||||||||||||||||||||||||
R. Louis Caceres | RSA | 3/10/2021 | 3,099 | 126,036 | ||||||||||||||||||||||||||||||||||||||
| PRSU | 3/10/2021 | 1,550 | 3,099 | 4,649 | 126,036 | |||||||||||||||||||||||||||||||||||||
| ETIP | 110,000 | 220,000 | 330,000 | |||||||||||||||||||||||||||||||||||||||
| EIRP | 13,200 | 33,000 | 66,000 | |||||||||||||||||||||||||||||||||||||||
| (1) | The amounts in these columns represent the threshold, target and maximum amounts of potential cash incentive payments that may be earned under the indicated plans as established by the Compensation Committee. These plans and awards are described under “Compensation Discussion and Analysis – 2021 Compensation.” The actual amounts earned by each executive are disclosed in |
| (2) | The amounts in these columns represent the threshold, target and |
| (3) | PRSUs will be credited with dividends paid on the company’s common stock during the time period when the PRSUs are outstanding, which will be reinvested in additional units, adjusted for performance and paid out in shares if and when the underlying PRSU is earned and paid. |
| (4) | The amounts reported are the aggregate grant date fair value of RSA and PRSU awards computed in accordance with FASB |
44 |
| | Notice and |
EXECUTIVE COMPENSATION |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table shows outstandinginformation regarding all unvested equity awards toheld by the named executive officers at December 31, 2009.
| 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) | ||||||||||||||||
| 12/13/2000 | 2,499 | - | 14.54 | 12/13/2010 | - | ||||||||||||||||||
| Daniel J. Schrider | 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 | 5,000 | 37.40 | 12/13/2013 | (3)400 | 3,556 | ||||||||||||||||||
| 3/26/2008 | 3,334 | (4) 6,666 | 27.96 | 03/26/2015 | (5) 2,000 | 17,780 | |||||||||||||||||
| 3/25/3009 | - | - | - | - | (6)12,365 | 109,925 | |||||||||||||||||
| 12/13/2000 | 1,800 | - | 14.54 | 12/13/2010 | - | ||||||||||||||||||
| Philip J. Mantua | 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 | 5,000 | - | 37.40 | 12/13/2013 | (3) 400 | 3,556 | |||||||||||||||||
| 3/26/2008 | 1,917 | (4) 3,833 | 27.96 | 03/26/2015 | (5) 1,000 | 8,890 | |||||||||||||||||
| 3/25/2009 | - | - | - | - | (6) 6,595 | 58,630 | |||||||||||||||||
| 12/13/2000 | 12,001 | - | 14.54 | 12/13/2010 | - | ||||||||||||||||||
| Frank H. Small | 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 | 7,000 | - | 37.40 | 12/13/2013 | (3) 600 | 5,334 | |||||||||||||||||
| 3/26/2008 | 1,917 | (4) 3,833 | 27.96 | 03/26/2015 | (5) 1,000 | 8,890 | |||||||||||||||||
| 3/25/2009 | - | - | - | - | (6) 5,516 | 49,037 | |||||||||||||||||
| 12/21/2001 | 3,000 | - | 32.25 | 12/21/2011 | - | ||||||||||||||||||
| R. Louis Caceres | 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 | 5,000 | 37.40 | 12/13/2013 | (3) 400 | 3,556 | ||||||||||||||||||
| 3/26/2008 | 1,667 | (4) 3,333 | 27.96 | 03/26/2015 | (5) 800 | 7,112 | |||||||||||||||||
| 3/25/2009 | - | - | - | - | (6) 7,144 | 63,510 | |||||||||||||||||
| 12/17/2003 | 2,200 | 38.91 | (7)3/31/2010 | ||||||||||||||||||||
| William W. Hill | 12/15/2004 | 2,875 | 38.00 | 3/31/2010 | |||||||||||||||||||
| 12/14/2005 | 2,530 | 38.13 | 3/31/2010 | ||||||||||||||||||||
| 12/13/2006 | 1,662 | 37.40 | 3/31/2010 | (8) - | - | ||||||||||||||||||
| 3/26/2008 | (8)600 | - | 27.96 | 3/31/2010 | (8) - | - | |||||||||||||||||
| 3/25/2009 | - | - | - | - | (8) - | - | |||||||||||||||||
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised Options Exercisable (#) | Option ($) | Option Expiration Date | Number of (#) | Market value of shares or units of stock that have not vested ($)(1) | Equity (#) | Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested ($)(1) | ||||||||||||||||||||||||||||
Daniel J. Schrider | 3/15/2017 | 1,211(2) | 58,225 | |||||||||||||||||||||||||||||||||
| 4/25/2018 | 3,129(3) | 150,442 | ||||||||||||||||||||||||||||||||||
| 3/06/2019 | 2,418(4) | 116,257 | 12,001(5) | 577,008 | ||||||||||||||||||||||||||||||||
| 3/11/2020 | 8,523(6) | 409,786 | 20,445(7) | 982,996 | ||||||||||||||||||||||||||||||||
| 3/10/2021 | 9,129(8) | 438,922 | 13,982(9) | 672,255 | ||||||||||||||||||||||||||||||||
Philip J. Mantua | 3/15/2017 | 567(2) | 27,261 | |||||||||||||||||||||||||||||||||
| 4/25/2018 | 1,163(3) | 55,917 | ||||||||||||||||||||||||||||||||||
| 3/06/2019 | 929(4) | 44,666 | 4,610(5) | 221,649 | ||||||||||||||||||||||||||||||||
| 3/11/2020 | 3,333(6) | 160,251 | 7,994(7) | 384,352 | ||||||||||||||||||||||||||||||||
| 3/10/2021 | 3,397(8) | 163,328 | 5,203(9) | 250,160 | ||||||||||||||||||||||||||||||||
Joseph J. O’Brien, Jr. | 3/15/2017 | 597(2) | 28,704 | |||||||||||||||||||||||||||||||||
| 4/25/2018 | 1,390(3) | 66,831 | ||||||||||||||||||||||||||||||||||
| 3/06/2019 | 1,114(4) | 53,561 | 5,527(5) | 265,738 | ||||||||||||||||||||||||||||||||
| 3/11/2020 | 4,309(6) | 207,177 | 10,337(7) | 497,003 | ||||||||||||||||||||||||||||||||
| 3/10/2021 | 4,611(8) | 221,697 | 7,062(9) | 339,541 | ||||||||||||||||||||||||||||||||
Kenneth C. Cook | 10/15/2013 | 47,867 | $10.96 | 10/15/2023 | ||||||||||||||||||||||||||||||||
| 2/18/2014 | 7,838 | $10.96 | 2/18/2024 | |||||||||||||||||||||||||||||||||
| 5/19/2015 | 35,784 | $14.77 | 5/19/2025 | |||||||||||||||||||||||||||||||||
| 6/16/2015 | 7,466 | $14.77 | 6/16/2025 | |||||||||||||||||||||||||||||||||
| 2/16/2016 | 10,072 | $16.20 | 2/16/2026 | |||||||||||||||||||||||||||||||||
| 4/01/2020 | 3,129(6) | 150,442 | 7,508(7) | 360,985 | ||||||||||||||||||||||||||||||||
| 3/10/2021 | 3,135(8) | 150,731 | 4,802(9) | 230,880 | ||||||||||||||||||||||||||||||||
R. Louis Caceres | 3/15/2017 | 559(2) | 26,877 | |||||||||||||||||||||||||||||||||
| 4/25/2018 | 1,140(3) | 54,811 | ||||||||||||||||||||||||||||||||||
| 3/06/2019 | 905(4) | 43,512 | 4,491(5) | 215,927 | ||||||||||||||||||||||||||||||||
| 3/11/2020 | 2,970(6) | 142,798 | 7,124(7) | 342,522 | ||||||||||||||||||||||||||||||||
| 3/10/2021 | 3,099(8) | 149,000 | 4,747(9) | 228,236 | ||||||||||||||||||||||||||||||||
| (1) |
Aggregate market values |
Estimated Possible Payouts under non-equity incentive plan awards | All other stock awards: Number of | All other option awards: Number of securities | Exercise or Base Price of | Grant Date Fair Value of Stock and | |||||||||||||||||||||||
| Name | Grant Date | Threshold (1) | Target | Maximum | shares of stock (#) | underlying options (#) | Option Awards ($/share) | Option Awards ($)(2) | |||||||||||||||||||
| Daniel J. Schrider | RSA | 3/25/2009 | 12,365 | $ 148,504 | |||||||||||||||||||||||
| Philip J. Mantua | RSA | 3/25/2009 | 6,595 | $ | 79,206 | ||||||||||||||||||||||
| Frank Small | RSA | 3/25/2009 | 5,516 | $ | 66,247 | ||||||||||||||||||||||
| R. Louis Caceres | RSA | 3/25/2009 | 7,144 | $ | 85,799 | ||||||||||||||||||||||
| William | SSLIP | $ | 29,375 | $ | 58,750 | $ | 88,125 | ||||||||||||||||||||
| W. Hill,IV | RSA | 3/25/2009 | 6,457 | $ | 77,549 | ||||||||||||||||||||||
| Option Awards | Stock Awards | |||||||||||||||
| Name | Number of Shares Acquired on Exercise (#) | Value Realized Upon Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized Upon Vesting(1) ($) | ||||||||||||
| Daniel J. Schrider | - | - | 378 | $ | 4,277 | |||||||||||
| Philip J. Mantua | - | - | 628 | $ | 7,422 | |||||||||||
| Frank H. Small | - | - | 444 | $ | 4,861 | |||||||||||
| R. Louis Caceres | - | - | 328 | $ | 3,648 | |||||||||||
| William W. Hill, IV | 105 | $ | 1,171 | |||||||||||||
| (2) | 2017 RSAs. The |
| (3) | 2018 RSAs.One-half of the |
| | Notice and Proxy Statement | 2022 | 45 |
EXECUTIVE COMPENSATION |
| (4) | 2019 RSAs. The outstanding award is scheduled to vest on April 1, 2022. |
| (5) | 2019 Performance Shares. On February 15, 2022, the Compensation Committee certified the achievement of the applicable performance measures for the performance share cycle ending on December 31, 2021 at 150% of the target level, at which time the shares were vested and paid. See page 38 for a description of the results of this award. |
| (6) | 2020 RSAs.One-half of the outstanding award is scheduled to vest on April 1, 2022, and one-half of the outstanding award is scheduled to vest on April 1, 2023. |
| (7) | 2020 PRSUs. Vesting is subject to achievement of specific performance measures. The number of PRSUs shown in the table assumes the maximum level of performance is achieved and includes accumulated reinvested dividend equivalent shares as of December 31, 2021. The actual number of PRSUs will be determined as of December 31, 2022 based on the 2020 – 2022 performance period. |
| (8) | 2021 RSAs.One-third of the outstanding award is scheduled to vest on April 1, 2022, one-third of the outstanding award is scheduled to vest on April 1, 2023, and one-third of the outstanding award is scheduled to vest on April 1, 2024. |
| (9) | 2021 PRSUs. Vesting is subject to achievement of specific performance measures. The number of PRSUs shown in the table assumes the maximum level of performance is achieved and includes accumulated reinvested dividend equivalent shares as of December 31, 2021. The actual number of PRSUs will be determined as of December 31, 2023 based on the 2021 – 2023 performance period. |
OPTION EXERCISES AND STOCK VESTED
The following table provides information for each of our named executive officers regarding the exercise of stock options and the vesting of stock awards during 2021. The value realized upon the exercise of stock options is equal to the difference between the market price of company stock on the date of exercise and the exercise price of the options. The value realized upon the vesting of stock awards is based on the market price of company stock on the vesting date.
| Option Awards | Stock Awards | |||||||||||||||||||
Name | Number (#) | Value on Exercise ($) | Number of Acquired (#) | Value Upon Vesting ($) | ||||||||||||||||
Daniel J. Schrider | 15,873 | 659,327 | ||||||||||||||||||
Philip J. Mantua | 6,428 | 266,829 | ||||||||||||||||||
Joseph J. O’Brien, Jr. | 7,464 | 310,803 | ||||||||||||||||||
Kenneth C. Cook | 22,656 | 843,757 | 1,565 | 67,968 | ||||||||||||||||
R. Louis Caceres | 5,988 | 249,119 | ||||||||||||||||||
| (1) | Includes the gross number of RSAs and performance shares covering the 2018 – 2020 performance period that vested or were settled and paid in 2021, and includes any amounts that were withheld for applicable taxes. On February 15, 2022, the Compensation Committee certified the achievement of the applicable performance measures for the performance share cycle ending on December 31, 2021, at which time those shares were vested and paid. |
The following table shows the estimated present value of the accumulated benefit under the Sandy Spring Bancorp, Inc. Retirement Income Plan (Pension Plan) for eachthose named executive officer.
| Name | Plan Name | Years of Credited Service | Present Value of Accumulated Benefit (1) | |||||||
| Daniel J. Schrider | Pension Plan | 19 | $ | 93,489 | ||||||
| Philip J. Mantua | Pension Plan | 9 | $ | 67,504 | ||||||
| Frank H. Small | Pension Plan | 17 | $ | 391,315 | ||||||
| R. Louis Caceres | Pension Plan | 9 | $ | 77,978 | ||||||
| William W. Hill, IV | Pension Plan | 4 | (2) | $ | 66,008 | |||||
Name | Plan Name | Number of Years (#) | Present Value of ($) | |||||||||
Daniel J. Schrider | Pension Plan | 19 | 488,333 | |||||||||
Philip J. Mantua | Pension Plan | 9 | 272,053 | |||||||||
R. Louis Caceres | Pension Plan | 9 | 357,934 | |||||||||
| (1) | For additional information on the Pension Plan and |
Benefits under the Pension Plan are provided on a 10-year certain and life basis, with survivor benefits for the employee’s spouse, and are not subject to deduction for Social Security or other offset amounts. Earnings covered byWhen the Pension Plan arewas active, earnings covered were total wages, including elective pre-tax contributions under Sectionthe 401(k) of the Internal Revenue Code,Plan, bonuses, and other cash compensation which for the named executive officers correspond, in general,up to the total ofallowable limit under the amounts in the "Salary" and "Non-Equity Incentive Plan Compensation" columns in the Summary Compensation Table, up to a total of $225,000.Internal Revenue Code. The
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| | Notice and Proxy Statement | 2022 |
EXECUTIVE COMPENSATION |
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'syear’s earnings after December 31, 2000 (1.75% of career average earnings) through December 31, 2005, and (c) 1.0% of each year'syear’s earnings thereafter. thereafter, through December 31, 2007.
The Pension Plan permits early retirement at age 55 after at least 10 years of service completed after December 31, 2000.
NONQUALIFIED DEFERRED COMPENSATION
The following table summarizes theprovides information regarding executive and company contributions, 2021 earnings and earningsyear-end account balances for the named executive officers under the Executive Incentive Retirement Plan (EIRP). None of the named executive officers participate in the Deferred Compensation Plan.
| Name | Plan Name | Executive Contributions in Last Fiscal Year (1) | Registrant Contributions in Last Fiscal Year (2) | Aggregate Earnings in Last Fiscal Year (3) | Aggregate Withdrawals/ Distributions | Aggregate Balance at Last Fiscal Year End (4) | ||||||||||||||||
| Daniel J. Schrider | EIRP | n/a | - | $ | 7,286 | - | $ | 163,280 | ||||||||||||||
| Philip J. Mantua | EIRP | n/a | - | $ | 11,092 | - | $ | 248,578 | ||||||||||||||
| Frank Small | EIRP | n/a | - | $ | 59,743 | - | $ | 1,338,959 | ||||||||||||||
| R. Louis Caceres | EIRP | n/a | - | $ | 8,598 | - | $ | 192,700 | ||||||||||||||
| William W. Hill | EIRP | n/a | - | - | - | - | ||||||||||||||||
Name | Plan Name | Executive ($) | Registrant ($) | Aggregate in 2021(3) ($) | Aggregate ($) | Aggregate ($) | ||||||||||||||||
Daniel J. Schrider | EIRP | n/a | 141,642 | 20,988 | - | 1,122,541 | ||||||||||||||||
Philip J. Mantua | EIRP | n/a | 55,638 | 14,786 | - | 746,687 | ||||||||||||||||
Joseph J. O’Brien, Jr. | EIRP | n/a | 65,438 | 9,415 | - | 505,480 | ||||||||||||||||
| Deferred Compensation Plan | - | - | 414 | - | 19,345 | |||||||||||||||||
Kenneth C. Cook | EIRP | n/a | 56,903 | 976 | - | 102,504 | ||||||||||||||||
R. Louis Caceres | EIRP | n/a | 55,638 | 12,995 | - | 662,967 | ||||||||||||||||
| (1) | Participant contributions are not permitted under the EIRP. |
| (2) | Represents amounts earned in 2021 and credited to the executive officer’s account in 2022, after the Compensation Committee certified the achievement of the applicable performance measure. Contributions under the EIRP are described under “Compensation Discussion and Analysis – 2021 Compensation” on page 38. These amounts are included in |
| (3) | The EIRP and the |
| (4) | As of December 31, 2021, $6,718 of Mr. O’Brien’s EIRP balance was unvested. The |
| (5) | Upon inception of the EIRP in 2008, Mr. Schrider, Mr. Mantua, Mr. O’Brien and Mr. Caceres were credited with an account balance equal to the accrued benefit under individual Supplemental Executive Retirement Agreements, which were |
| (6) | The aggregate balance with respect to the Deferred Compensation Plan includes the following amounts that were previously reported in the Summary Compensation Tables for prior fiscal years: Mr. O’Brien’s elective deferrals of $12,172 and earnings on deferred compensation of $4,236. |
The following table summarizesdescribes the estimated payments tomaterial features of our nonqualified deferred compensation plans in which the named executive officers were entitled upon a terminationparticipate.
Executive Incentive Retirement Plan –Each of employmentour named executive officers participates in different, specified circumstances under their employment agreements, the Executive Incentive Retirement Plan (EIRP), a deferred compensation plan that provides for supplemental executive retirement benefits.
Under the 2005 Omnibus StockEIRP, a guaranteed minimum deferral bonus equal to 3% of a participant’s base salary is credited annually to the participant’s deferred benefit account. Each year, the Compensation Committee determines the performance measures by which a deferral bonus above the minimum may be earned. Performance measures and awards for 2021 are described under “Compensation Discussion and Analysis – 2021 Compensation” on page 38. Employer contributions under the EIRP and earnings on EIRP balances vest immediately. Interest accrues on account balances at a rate equal to 120% of the long-term Applicable Federal Rate, adjusted monthly.
Participants may generally elect to receive distribution of their vested account balance in a lump sum or in annual installments payable over up to 15 years commencing following separation from service or at a later date not beyond the first business day of the January occurring after the year in which the Participant attains age 70. A participant whose employment is terminated for just cause will forfeit his or her account balance.
Deferred Compensation Plan –Each of our named executive officers is eligible to participate in the Sandy Spring Bank Deferred Compensation Plan (Deferred Compensation Plan), which is a nonqualified retirement savings plan. Participants may defer up to 25% of base salary and/or commissions earned during the year and prior stock plansup to 100% of bonus compensation. Interest accrues on the account balance at a rate equal to 120% of the long-term Applicable Federal Rate, adjusted monthly. Participants will receive their account balance following the six- month anniversary of any separation from service. Participants are not subject to U.S. federal income tax on amounts that they defer or any investment earnings until those amounts are distributed to them.
| | Notice and Proxy Statement | 2022 | 47 |
EXECUTIVE COMPENSATION |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Under agreements that we have with our named executive officers, our named executive officers are entitled to compensation in the event that their employment terminates under certain circumstances. The amount of the compensation depends on, among other things, the circumstances under which stock options remain outstanding. Benefitsthe executive officer terminates employment. In addition, our equity incentive awards contain standard provisions that cause awards to vest or be forfeited upon termination of employment, depending on the reason for termination.
The agreements that each named executive officer has with the company and the treatment of equity awards upon termination are described below, along with a table on page 51 that quantifies the amount that would become payable to each named executive officer as a result of his termination of employment.
EMPLOYMENT AND CHANGE IN CONTROL AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
Daniel J. Schrider – The company entered into an employment agreement with Mr. Schrider as of January 1, 2009 to provide for his employment as President and CEO. The initial term of the agreement was for three years and provides that the Board may take action to extend the term for an additional year at each anniversary so that the remaining term again becomes three years. Mr. Schrider’s agreement does not automatically renew. The Executive and Governance Committee reviews CEO performance annually and recommends whether or not to extend the CEO’s employment agreement. Mr. Schrider’s employment agreement currently has a term expiring on June 30, 2024. The agreement addresses such matters as Mr. Schrider’s base salary, participation in incentive compensation, participation in benefit plans, vacation, insurance and other fringe benefits.
There is no specific compensation provision under Mr. Schrider’s agreement for termination due to retirement, death, or voluntary resignation. Should Mr. Schrider become disabled, the Board must provide written notice 30 days in advance of termination. Mr. Schrider will receive his full base salary, benefits, and any perquisites other than bonus during the time of incapacity leading up to the date of termination less any benefits paid under existing disability plans. For termination by Mr. Schrider with good reason or involuntary termination without just cause, Mr. Schrider will receive his base salary and medical benefits for the remainder of the term of the agreement.
If Mr. Schrider’s employment is terminated without just cause or he terminates his employment with good reason, as defined in the agreement (referred to herein as a “qualifying termination”), in each case following a change in control of the company, he will receive a lump-sum payment equal to three times his average annual compensation for the past five years preceding the change in control and medical benefits for the remaining term of the agreement.
Mr. Schrider’s agreement does not entitle him to receive any tax indemnification payments (a “gross-up”) if payments under his employment agreement or any other payments trigger liability under Sections 280G and 4999 of the Internal Revenue Code for an excise tax on “excess parachute payments.” If any payments to Mr. Schrider trigger such excise tax, he will be entitled to receive the greater of the following, whichever gives him the highest net after-tax amount: (a) the full payments and benefits provided for under the agreement, in which case he would be responsible for any resulting excise tax, or (b) one dollar less than the amount that would subject him to the excise tax.
Under the terms of his agreement, Mr. Schrider is prohibited from conflicts of interest, and is required to maintain the confidentiality of nonpublic information regarding the company and its clients. He is also bound by a covenant not to compete for one year and not to solicit employees for two years following termination of employment, except in the event of a change in control.
Philip J. Mantua and Joseph J. O’Brien, Jr. – The company entered into employment agreements with Mr. Mantua and Mr. O’Brien on January 13, 2012 to provide for each executive’s employment in their respective positions. The terms of the present agreements end on June 30, 2023. Each year, the Board may act to extend the term for an additional year so that the remaining term becomes two years. The agreements do not automatically renew. The agreements address such matters as base salary, participation in incentive compensation, participation in benefit plans, vacation, insurance and other fringe benefits.
The agreements do not provide for any special or additional compensation in the event of termination due to retirement, death or resignation. In the event of termination due to disability, the executive will receive base compensation, less any applicable disability benefits, and health and welfare benefits for the remaining term of the agreement. In the event of termination by the company without just cause, or termination by the executive with good reason, as defined in the agreements, the executive will receive his base salary for the remaining term of the agreement at the highest annual rate paid in the 12 months preceding the termination plus annual cash bonuses (pro-rated for a partial year) as a lump sum payment.
If, in connection with a change in control, as defined by Section 409A of the Internal Revenue Code, the executive’s employment is terminated, either involuntarily without just cause or voluntarily with good reason, within six months prior to the change in control or up to two years after the change in control, the executive will receive a lump-sum payment equal to 2.99 times the sum of annual salary at the highest rate paid in the preceding 12 months plus the amount of any cash bonus received for the past 12 months. The executive would also receive the continuation of health, life and disability insurance benefits for a period of three years following termination. If the total value of the benefits provided and payments
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| | Notice and Proxy Statement | 2022 |
EXECUTIVE COMPENSATION |
made to the executive in connection with a change in control, either under the agreement alone or together with other payments and benefits received, would result in an “excess parachute payment” under Section 280G of the Internal Revenue Code, the severance payment will be reduced or revised so that the aggregate payments do not include an excess parachute payment.
The executive is prohibited from conflicts of interest and is required to maintain the confidentiality of nonpublic information regarding the company and its clients. The executive is also bound by a covenant not to compete and not to interfere with other employees following termination of employment for the remaining term of the agreement. The post-termination restrictions do not apply if there is a change in control or if the executive’s employment is terminated without just cause by the company or with good reason by the executive.
Kenneth C. Cook – The company entered into an employment agreement with Mr. Cook on September 23, 2019 in connection with the acquisition of Revere Bank, for which he served as co-Chief Executive Officer, which became effective on April 1, 2020 when the acquisition was completed. The agreement has a term of 30 months. The agreement addresses such matters as base salary, participation in incentive compensation, participation in benefit plans, vacation, insurance and other fringe benefits.
The agreement does not provide for any special or additional compensation in the event of termination due to retirement, death, disability or resignation without good reason. In the event of termination by the company without just cause, or termination by Mr. Cook with good reason, as defined in the agreement, Mr. Cook will receive his base salary for the remaining term of the agreement at the highest annual rate paid in the 12 months preceding the termination plus annual cash bonuses (pro-rated for a partial year) as a lump sum payment. The agreement does not provide for any special severance benefit in the event of termination in connection with a change in control.
Mr. Cook is prohibited from conflicts of interest and is required to maintain the confidentiality of nonpublic information regarding the company and its clients. Mr. Cook is also bound by covenants not to compete, not to solicit clients, and not to interfere with other employees following termination of employment for any reason for a period of 24 months.
R. Louis Caceres – Mr. Caceres has a change in control agreement with the company. The change in control agreement has a term of two years. On each anniversary date of the agreement, the agreement will automatically be extended for an additional year, unless either party has given written notice at least 60 days prior to the anniversary date of the agreement that the agreement will not be extended.
If a change in control occurs and Mr. Caceres’ employment is involuntarily terminated without just cause or Mr. Caceres voluntarily terminates employment with good reason, as defined in the agreement, during the term of the agreement, Mr. Caceres will be entitled to a payment equal to 2.99 times his total compensation, which is defined as one year’s base salary plus bonus payments and all other taxable compensation. Mr. Caceres would also receive the continuation of health, life and disability insurance benefits for a period of three years following termination. Under the change in control agreement, if the total value of the benefits provided and payments made to Mr. Caceres in connection with a change in control, either under the change in control agreement alone or together with other payments and benefits that he has the right to receive, would result in the imposition of an excise tax under Section 280G of the Internal Revenue Code, his severance payment will be reduced or revised so that the aggregate payments do not trigger the payment of the excise tax.
EQUITY AWARDS – CONSEQUENCES OF TERMINATION OF EMPLOYMENT
The following table shows how RSAs are treated if a named executive officer terminates employment:
Event | Consequences | |
Death | Unvested RSAs immediately vest | |
Disability | Unvested RSAs immediately vest | |
Voluntary or involuntary termination | Unvested RSAs are forfeited | |
Change in control | No impact absent termination of employment; unvested RSAs immediately vest upon a qualifying termination within 24 months of the change in control(1) | |
| (1) | For grants prior to 2020, RSAs will immediately vest in the event of termination of employment, other than for just cause, within 12 months of a change in control. |
| | Notice and Proxy Statement | 2022 | 49 |
EXECUTIVE COMPENSATION |
The following table shows how PRSUs are treated if a named executive officer terminates employment:
Event | Consequences | |
Death | PRSUs immediately vest at target level | |
Disability | PRSUs continue to earn and pay based on actual performance | |
Involuntary termination for just cause | PRSUs are forfeited | |
Involuntary termination without just cause | PRSUs continue to earn and pay based on actual performance, prorated to reflect the portion of the performance period that the executive officer was employed by the company | |
Voluntary termination | PRSUs are forfeited | |
Retirement(1) | PRSUs continue to earn and pay based on actual performance, subject to execution of a general release of claims | |
Change in control | PRSUs continue to earn based on continued employment, with performance measures deemed to be satisfied at the target level; PRSUs immediately vest upon a qualifying termination within 24 months of the change in control | |
| (1) | Retirement means any voluntary or involuntary termination (other than for death, disability or just cause) after the executive reaches age 65 or age 60 with ten years of continuous service. |
OTHER POTENTIAL PAYMENTS
Following termination of employment, our named executive officers would receive payment of retirement benefits and nonqualified deferred compensation under the various plans in which they participate. The value of those benefits as of December 31, 2021 is set forth in the Pension PlanBenefits and Nonqualified Deferred Compensation tables. All of our named executive officers are fully vested in the benefits described in those sections, except for Mr. O’Brien, whose unvested balance in the EIRP was $6,718 at December 31, 2021, and there is no increase in those benefits upon termination. Benefits under the EIRP are forfeited in the event of termination for cause.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Potential payments to our named executive officers pursuant to existing plans and arrangements in event of their termination or 401(k) Plana change of control as of December 31, 2021 are not included. The amounts shown in the table do not reflect any limitations imposedbelow. These amounts are estimates only. The actual amounts to be paid can only be determined at the time the executive becomes eligible for payment. Valuation of equity awards was based on participants in the TARP-CPP,closing price of our common stock on December 31, 2021, which was $48.08 per share. In the event of termination for just cause or resignation without good reason, the named executive officers would havereceive only their salary through the effectdate of reducing, and possibly eliminating, any severance payments.
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| POTENTIAL PAYMENTS UPON TERMINATION | Daniel J. Schrider | Philip J. Mantua | Frank Small | R. Louis Caceres | William W. Hill, IV | |||||||||||||||
| Termination without a Change-in-Control: | ||||||||||||||||||||
Retirement: (1) | ||||||||||||||||||||
| Employment agreements | $ | - | $ | - | n/a | $ | - | n/a | ||||||||||||
EIRP (2) | 163,280 | 129,313 | 1,338,959 | 101,793 | - | |||||||||||||||
| Equity awards | - | - | - | - | - | |||||||||||||||
| Total | $ | 163,280 | $ | 129,313 | $ | 1,338,959 | $ | 101,793 | $ | - | ||||||||||
| Death: | ||||||||||||||||||||
| Employment agreements | $ | - | $ | - | n/a | $ | - | n/a | ||||||||||||
EIRP (2) | 163,280 | 248,578 | 1,338,959 | 192,700 | ||||||||||||||||
Equity awards (3) | 131,261 | 71,076 | 63,261 | 74,178 | 60,834 | |||||||||||||||
| Total | $ | 294,541 | $ | 319,654 | $ | 1,402,220 | $ | 266,878 | $ | 60,834 | ||||||||||
| Disability: | ||||||||||||||||||||
Employment agreements (4) | $ | 38,300 | $ | 269,449 | n/a | $ | 167,687 | n/a | ||||||||||||
EIRP (2) | 163,280 | 248,578 | 1,338,959 | 192,700 | ||||||||||||||||
Equity awards (3) | 131,261 | 71,076 | 63,261 | 74,178 | 60,834 | |||||||||||||||
| Total | $ | 294,541 | $ | 589,103 | $ | 1,402,220 | $ | 434,565 | $ | 60,834 | ||||||||||
| Voluntary termination by executive officer: | ||||||||||||||||||||
| Employment agreements | - | $ | - | n/a | - | n/a | ||||||||||||||
EIRP (2) | 163,280 | 129,313 | $ | 1,338,959 | $ | 101,793 | ||||||||||||||
| Equity awards | - | - | - | - | ||||||||||||||||
| Total | $ | 163,280 | $ | 129,313 | $ | 1,338,959 | $ | 101,793 | $ | - | ||||||||||
| Termination by Bancorp with just cause | None | None | None | None | ||||||||||||||||
| Termination by Bancorp without Just Cause or by executive with Good Reason: | ||||||||||||||||||||
Employment agreements (5) | $ | 950,800 | $ | 269,449 | n/a | $ | 167,687 | n/a | ||||||||||||
EIRP (2) | 163,280 | 129,313 | 1,338,959 | 101,793 | - | |||||||||||||||
| Equity awards | - | - | - | - | - | |||||||||||||||
| Total | $ | 1,114,080 | $ | 398,762 | $ | 1,338,959 | $ | 268,480 | $ | - | ||||||||||
| Termination in connection with a Change-in- Control: | ||||||||||||||||||||
Employment or Change-in-Control agreements - comp and benefits (6) | $ | 1,652,903 | $ | 804,284 | $ | 1,018,266 | $ | 881,311 | $ | 886,236 | ||||||||||
Employment agreements-tax gross up (7) | - | - | ||||||||||||||||||
EIRP (2) | 163,280 | 248,578 | 1,338,959 | 192,700 | - | |||||||||||||||
Equity awards (3) | 131,261 | 71,076 | 63,261 | 74,178 | 60,834 | |||||||||||||||
| Total | $ | 2,420,486 | $ | 947,070 | ||||||||||||||||
EXECUTIVE COMPENSATION |
Name | Death ($) | Disability ($) | Termination ($) | Change in ($) | ||||||||||||||
Daniel J. Schrider | Cash severance(1)(2) | — | — | 2,125,000 | 4,216,021 | |||||||||||||
Welfare benefits(3) | — | 74,978 | 49,804 | 89,974 | ||||||||||||||
Split-dollar life insurance(4) | 2,125,000 | — | — | — | ||||||||||||||
RSAs(5) | 1,173,633 | 1,173,633 | — | 1,173,633 | ||||||||||||||
PRSUs(6) | 1,103,484 | — | — | 1,103,484 | ||||||||||||||
Philip J. Mantua | Cash severance(1)(2)(7) | — | 660,000 | 978,750 | 1,950,975 | |||||||||||||
Welfare benefits(3) | — | 29,882 | — | 59,764 | ||||||||||||||
Split-dollar life insurance(4) | 1,100,000 | — | — | — | ||||||||||||||
RSAs(5) | 451,423 | 451,423 | — | 451,423 | ||||||||||||||
PRSUs(6) | 423,056 | — | — | 423,056 | ||||||||||||||
Joseph J. O’Brien, Jr. | Cash severance(1)(2)(7) | — | 776,250 | 1,263,750 | 2,519,075 | |||||||||||||
Welfare benefits(3) | — | 29,882 | — | 59,764 | ||||||||||||||
Split-dollar life insurance(4) | 1,293,750 | — | — | — | ||||||||||||||
RSAs(5) | 577,970 | 577,970 | — | 577,970 | ||||||||||||||
PRSUs(6) | 557,680 | — | — | 557,680 | ||||||||||||||
Kenneth C. Cook | Cash severance(1)(2)(7) | — | 337,500 | 512,813 | — | |||||||||||||
RSAs(5) | 301,173 | 301,173 | — | 301,173 | ||||||||||||||
PRSUs(6) | 153,904 | — | — | 153,904 | ||||||||||||||
R. Louis Caceres | Cash severance(1)(2) | — | — | — | 1,943,500 | |||||||||||||
Welfare benefits(3) | — | — | — | 59,764 | ||||||||||||||
Split-dollar life insurance(4) | 1,100,000 | — | — | — | ||||||||||||||
RSAs(5) | 416,998 | 416,998 | — | 416,998 | ||||||||||||||
PRSUs(6) | 323,482 | — | — | 323,482 | ||||||||||||||
| (1) | Amounts are payable under |
Amounts listed under “Change in control and qualifying termination” do not reflect the fact that under the employment agreement the company has entered into with Mr. Schrider |
| (3) | Amount represents health insurance benefits to be paid under the applicable employment or change in control agreement based upon monthly premiums being paid as of December 31, 2021. |
| (4) | Amounts are payable to the named executive officer’s beneficiaries under split-dollar life insurance agreements that the company has entered into with the named executive officers. |
| (5) | Amount represents the value of unvested RSAs that would vest upon termination of employment. |
| (6) | Amount represents the value of PRSUs that would vest and be paid upon death or a qualified termination following a change in control. Following termination due to disability, retirement or without just cause, PRSU payments remain subject to the company’s actual performance. Therefore, no amounts are shown for these scenarios. |
| (7) | Amounts listed under “Disability” will be reduced by |
| | Notice and Proxy Statement | 2022 | 51 |
CEO PAY RATIO |
PROPOSAL IICEO PAY RATIO: A Non-Binding Resolution
The company is required by SEC rules to Approvedisclose the Compensation
The company selected October 29, 2021 as the determination date for identifying the median employee. Year-to-date taxable wages paid from January 1, 2021 to October 29, 2021 for all employees as of the determination date, with the exception of Mr. Schrider, were arrayed from lowest to highest. Wages of newly hired permanent employees were adjusted to represent wages for the entire measurement period. This period in which any obligation arising from Bancorp’s participationcaptured all incentive payments for the tax year as well as the vesting of equity awards, as applicable. The median employee was identified, and total compensation for the median employee was calculated in the TARP-CPP remainsmanner required for the Summary Compensation Table. Mr. Schrider’s total compensation for 2021, as disclosed in the Summary Compensation Table, was $2,645,831 and the median employee’s was $93,268, producing a ratio of 28 to 1.
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PROPOSAL 2: APPROVAL OF AMENDMENTS TO THE COMPANY’S ARTICLES OF INCORPORATION TO DECLASSIFY THE BOARD OF DIRECTORS |
APPROVAL OF AMENDMENTS TO THE COMPANY’S ARTICLES OF INCORPORATION TO DECLASSIFY THE BOARD OF DIRECTORS
BACKGROUND
The company’s Articles of Incorporation currently divide the Board of Directors into three classes, with the members of each class serving for staggered three-year terms. As a result, only one class of directors stands for election at each annual meeting of shareholders, such that shareholders vote on and elect approximately one-third of the Board each year. At this annual meeting, our shareholders are being asked to approve and adopt a proposal to amend the Articles of Incorporation to declassify the Board.
The Executive and Governance Committee considered and then recommended to the Board the proposed amendments to the company’s Articles of Incorporation to declassify the Board. The Board accepted this recommendation, determined that the proposed amendments are advisable, and unanimously approved the amendments, subject to shareholder approval at this annual meeting.
If shareholders approve the amendments, they will become effective upon the filing of Articles of Amendment to the company’s Articles of Incorporation with the Maryland Department of Assessments and Taxation. We intend to file the Articles of Amendment shortly after the annual meeting.
TEXT OF THE PROPOSED AMENDMENTS
Section (B) of ARTICLE IX of the Articles of Incorporation would be deleted in its entirety and replaced with new Section (B). Additions are indicated in double underline, and deletions are indicated in strikethrough.
B. Classified Board Election of Directors. Until the 2022 annual meeting of shareholders, the The Board of Directors of the Corporation shall be divided into three classes as nearly equal in number as the then total number of directors constituting the entire Board of Directors shall permit, which classes shall be designated Class I, Class II and Class III. At each annual meeting of shareholders beginningin 1992with the 2023 annual meeting of shareholders, successors to theclass ofdirectors whose terms expires at such annual meeting shall be elected for a term of three yearsexpiring at the next annual meeting of shareholders following the director’s election and until such director’s successor is elected and qualifies, or until his or her earlier death, resignation, disqualification or removal.
(1)The following directors shall be assigned to Class I and shall serve until the 1994 annual meeting of shareholders:
Andrew N. Adams, Jr.
Robert L. Mitchell
Robert L. Orndorff, Jr.
(2)The following directors shall be assigned to Class 11 and shall serve until the 1993 annual meeting of shareholders:
William M. Canby
John Chirtea
Willard H. Derrick
Hunter R. Hollar
(3)The following directors shall be assigned to Class III and shall serve until the 1992 annual meeting of shareholders.
Charles F. Mess
Louisa W. Riggs
Francis Snowden
W. Drew Stabler
Notwithstanding the foregoing, a director whose term shall expire at any annual meeting shall continue to serve until such time as his successor shall have been duly elected and shall have qualifiedunless his position on the Board of Directors shall have been abolished by action taken to reduce the size of the Board of Directors prior to said meeting.
| | Notice and Proxy Statement | 2022 | 53 |
PROPOSAL 2: APPROVAL OF AMENDMENTS TO THE COMPANY’S ARTICLES OF INCORPORATION TO DECLASSIFY THE BOARD OF DIRECTORS |
Should the number of directors of the Corporation be reduced, the directorship(s) eliminated shall be allocated among classes as appropriate so that the number of directors in each class is as nearly equal as possible. The Board of Directors shall designate, by the name of the incumbent(s), the position(s) to be abolished. Notwithstanding the foregoing, no decrease in the number of directors shall have the effect of shortening the term of any incumbent director. Should the number of directors of the Corporation be increased, the additional directorships shall be allocated among classes as appropriate so that the number of directors in each class is as nearly equal as possible.
Whenever the holders of anyone or more series of preferred stock of the Corporation shall have the right, voting separately as a class, to elect one or more directors of the Corporation, the Board of Directors shall consist of said directors so elected in addition to the number of directors fixed as provided above in this Article IX. Notwithstanding the foregoing, and except as otherwise may be required by applicable law, whenever the holders of anyone or more series of preferred stock of the Corporation shall have the right, voting separately as a class, to elect one or more directors of the Corporation, the terms of the director or directors elected by such holders shall expire at the next succeeding annual meeting of shareholders.
ARTICLE XI of the Articles of Incorporation would be deleted in its entirety and replaced with new ARTICLE XI.
Subject to the rights of the holders of any class separately entitled to elect one or more directors, any vacancy occurring in the Board of Directors may be filled by the affirmative vote of a majority of the directors then in office, whether or not a quorum, or by the affirmative vote of the holders of a majority of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors.A director so chosen by shareholders shall hold office for the remainder of the term of the class to which the director is assigned.A director elected by theBoard of Directorsshareholders to fill a vacancy resulting from the removal of a director shall hold office for the remainder of the term of the removed director. A director elected by the Board of Directors to fill a vacancy resulting from any cause other than removal of a director shall hold office for a term expiring at the followinguntil the next annual meeting of shareholders and until his or her successor is elected and qualifies.
REASONS FOR THE PROPOSED AMENDMENTS
The Executive and Governance Committee and the Board periodically consider our corporate governance practices and structures in light of the continuing evolution of best practices. As part of that process, the Board considers corporate trends, peer practices, the views of our institutional shareholders and the guidelines of proxy advisory firms. As such, the Executive and Governance Committee and the Board have, from time to time, reviewed the classified board structure.
The Board recognizes that a classified structure may offer advantages, such as promoting continuity and stability, encouraging its directors to take a long-term perspective and reducing the company’s vulnerability to coercive takeover tactics. The Board also recognizes the growing sentiment among the investment community in favor of annual elections, that many institutional investors believe that the election of directors is the primary means for shareholders to influence corporate governance policies and to hold management accountable for implementing those policies, and that a classified board structure does not enable shareholders to express a view on each director’s performance by means of an annual vote.
After carefully weighing these and other factors (including that the number of public companies with classified boards continues to decline), the Board has determined that it is in the best interests of the company and our shareholders to declassify the Board and recommends that shareholders approve the proposed amendments to effectuate the declassification.
EFFECT OF THE PROPOSED AMENDMENTS
If the proposed amendments are approved, the current classified board structure will be phased out over a three-year period beginning at the 2023 annual meeting of shareholders. Directors elected to three-year terms prior to the effectiveness of the proposed amendment (including the directors elected at this annual meeting) will complete those terms. Beginning with the 2023 annual meeting, directors will stand for election on an annual basis for one-year terms. Beginning with the 2025 annual meeting of shareholders, all directors will stand for election annually and the Board will no longer be classified.
If the proposed amendments to the Articles of Incorporation to declassify the Board are not approved by our shareholders, the Articles of Incorporation will not be amended as set forth above and the Board will continue to be classified with directors serving staggered, three-year terms.
REQUIRED VOTE
The affirmative vote of at least 80 percent of outstanding shares of common stock entitled to vote at the annual meeting is required for shareholders to approve the proposed amendments to the Articles of Incorporation.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THIS PROPOSAL.
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PROPOSAL 3: ADVISORY VOTE TO APPROVE THE COMPENSATION FOR THE NAMED EXECUTIVE OFFICERS |
ADVISORY VOTE TO APPROVE THE COMPENSATION FOR THE NAMED EXECUTIVE OFFICERS
The Dodd-Frank Wall Street Reform and Protection Act requires companies to submit to the shareholders a non-binding vote on the compensation of Bancorp’sthe 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”“Say on Pay” proposal, gives Bancorp’sour shareholders the opportunity to endorse or not endorse Bancorp’sthe executive paycompensation 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 will not be binding on the board of directorsBoard and may not be construed as overruling a decision by the boardBoard nor to create or imply any additional fiduciary duty by the board.Board. However, the Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements.
The board of directorsBoard believes that the compensation practices of Bancorpthe company are designed to accomplish the objectives described in the Compensation Discussion and Analysis and that they are appropriately aligned towith the long-term success of Bancorpthe company and the interests of shareholders.
VOTING STANDARD
This matter will be decided by the vote of a majority of the votes cast at the annual meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVALTHIS PROPOSAL.
| | Notice and Proxy Statement | 2022 | 55 |
PROPOSAL 4: RATIFICATION OF THE APPOINTMENT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
RATIFICATION OF THE COMPENSATIONAPPOINTMENT OF THE NAMED EXECUTIVE OFFICERS.
The Audit Committee of the Board is directly responsible for the appointment, compensation, retention and oversight of the independent registered public accounting firm retained to audit the company’s financial statements. The committee has appointed Ernst & Young LLP to serve as the firm of Grant Thornton LLP as Bancorp’scompany’s independent registered public accounting firm for 2010.fiscal 2022. In accordance with established policy, the boardBoard is submitting this proposalthe appointment of Ernst & Young LLP 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 2011.
In reaching its decision to engage Ernst & Pullen,Young LLP, (McGladrey), which had previously servedthe committee considered the independence factors, the length of the audit firm’s tenure as the company’s independent auditor, for Bancorp. The reportsthe audit firm’s past performance, the audit firm’s relationship with the committee and with management, and the fee structure that was negotiated. After discussion of McGladrey onthese factors, the consolidated financial statementscommittee concluded that it was in the best interests of Bancorp asshareholders to continue the engagement of and for the fiscal year ended December 31, 2007 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 year ended December 31, 2007, 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.
Ernst & Young LLP provides tax compliance services for trust clients of Sandy Spring Bank, the proposal, againstfees for which are billed to those clients. These services, which are permissible under applicable independence standards, were pre-approved by the proposal or abstain from voting. committee.
Representatives of Ernst & Young LLP are expected to be present at the annual meeting, will have the opportunity to make a statement if they desire to do so, and are expected to be available to respond to appropriate questions.
VOTING STANDARD
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 UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE RATIFICATION OF GRANT THORNTON LLP AS BANCORP'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2010.
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.the company and subsidiaries by Grant ThorntonErnst & Young LLP for the yearyears ended December 31, 20092021 and 2008December 31, 2020, together with fees billed for other services.
2021 ($) | 2020 ($) | |||||||
Audit Fees | 1,050,000 | 1,280,500 | ||||||
Audit-Related Fees | — | — | ||||||
Tax Services | 279,000 | 207,000 | ||||||
All Other Fees | — | — | ||||||
Total | 1,329,000 | 1,487,500 | ||||||
“Audit Fees” consist of fees for professional services rendered for the annual audit of the company’s consolidated financial statements, including the integrated audit of internal control over financial reporting, and review of financial statements included in the company’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. Also included in 2020 are fees related to implementation of the current expected credit loss model and the acquisitions of Revere Bank and Rembert Pendleton Jackson.
“Tax Services” consist of 1099 processing fees for trust clients of Sandy Spring Bank.
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| 2009 | 2008 | |||||||
Audit Fees(1) | $ | 382,080 | $ | 361,905 | ||||
| Audit-Related Fees | - | - | ||||||
| Tax Services | - | - | ||||||
PROPOSAL 4: RATIFICATION OF THE APPOINTMENT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
AUDIT COMMITTEE’S PREAPPROVAL POLICIES AND PROCEDURES
The Audit Committeecommittee is required to pre-approve all auditing services and permitted non-audit services provided by Bancorp'sthe company’s independent registered public accounting firm. There is anfirm, Ernst & Young LLP. An exception for preapproval of non-audit services if may be made if:
the aggregate amount of all such non-audit services provided to Bancorpthe company constitutes not more than 5% of the total amount of revenues paid by it to itsthe independent registered public accounting firmsfirm during the fiscal year in which the non-audit services are provided;
such services were not recognized by Bancorpthe company 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. committee prior to the completion of the audit.
All audit services, tax services and permitted non-audit services to be performed by Bancorp's independent registered public accounting firmErnst & Young LLP have been preapproved by the Audit Committeecommittee as required by SEC regulations and the Audit Committee'scommittee’s charter without exception. The committee also has determined that the amount and nature of non-audit services rendered by Ernst & Young LLP to the company is consistent with its independence.
| | Notice and Proxy Statement | 2022 | 57 |
The committee (1) has reviewedis directly responsible for the appointment and discussedoversight of the audited financial statements with management; (2) has discussed with Bancorp's independent registered public accounting firm, including review of their general qualifications, specific experience in the financial sector, and compensation structure. The committee has engaged Ernst & Young LLP since 2013. The company’s management is responsible for its internal controls and financial reporting process. Ernst & Young LLP is responsible for performing an independent audit of the company’s consolidated financial statements and issuing an opinion on the conformity of those financial statements with accounting principles generally accepted in the United States and expressing an opinion on the effectiveness of the company’s internal control over financial reporting.
In 2021, the committee met eight times, four of which were to approve quarterly earnings releases, to carry out its duties and responsibilities as set forth in the Audit Committee charter that is available on the company’s investor relations website.
In fulfilling its oversight duties, the committee:
reviewed and discussed with management and Ernst & Young LLP the scope and effectiveness of the company’s disclosure controls and procedures;
reviewed and discussed the company’s audited and unaudited financial statements with management and Ernst & Young LLP each quarter, prior to filing with the SEC and releasing to the public, for purposes of evaluating their accuracy and fair presentation of the company’s financial condition;
discussed with Ernst & Young LLP the critical audit matters and 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 Bancorp's independent registered public accounting firm required by applicable requirementrequirements of the Public Company Accounting Oversight Board and the SEC, including, but not limited to, the audit strategy, scope and plan for the audit work, and the significant risks and areas of audit focus;
met with Ernst & Young LLP, with and without members of management present, to discuss the results of their evaluation of the integrity of the company’s financial reporting;
received and reviewed the written disclosures and the letter from Ernst & Young LLP required by applicable standards of the Public Company Accounting Oversight Board;
reviewed and discussed independence with Bancorp's independent registered public accounting firm. Ernst & Young LLP the matter of auditor independence;
met regularly with the company’s chief internal auditor, with and without members of management present, to review and approve the annual risk-based audit plan, to review all audit reports, to track the timely resolution of any findings, and to assess the performance of the chief internal auditor; and
reviewed and monitored compliance with the “whistleblower” provisions of the Sarbanes-Oxley Act.
Based upon this review, discussion, disclosures,the reviews and materialsdiscussions described in (1) through (3),above, the committee recommended to the boardcompany’s Board of directorsDirectors that the audited financial statements be included in the company’s Annual Report on Form 10-K for the year ended December 31, 2009. 2021.
February 16, 2022 Pamela A. Little, Chair
Brian J. Lemek
Walter C. Martz II
Mark C. Micklem
Robert L. Orndorff
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INFORMATION ABOUT THE MEETING |
HOW CAN I PARTICIPATE IN THE ANNUAL MEETING?
Our annual meeting will be held on May 18, 2022 at 10:00 a.m., Eastern Time by means of a live webcast. There will be no physical location for the annual meeting. To participate in the virtual meeting, access the meeting site https://meetnow.global/MMYUPAD and register using the control number found on your Notice of Internet Availability of Proxy Materials, proxy card or voting instruction form. You must have the control number in order to vote your shares at the meeting. Online access will begin at 9:30 a.m. We encourage you to access the meeting webcast prior to the start time. If you hold your shares through an intermediary, such as a broker or bank, you must pre-register with our transfer agent, as described below, to obtain a control number that will allow you to vote at the annual meeting.
HOW CAN I ASK QUESTIONS?
You may submit questions either before or during the meeting. To submit a question, access the virtual meeting site at https://meetnow.global/MMYUPAD. Click on the Q&A icon and submit your question. Questions pertinent to meeting matters will be answered during the meeting, subject to time limitations.
WILL I BE ABLE TO VOTE MY SHARES DURING THE MEETING?
You will be able to vote your shares electronically during the annual meeting. Please see “Voting Matters” below for additional information on voting. We encourage you to vote your shares prior to the annual meeting.
Pre-registration for Beneficial Holders. Shareholders holding shares through an intermediary, such as a broker or bank, must register in advance if they want to vote their shares at the annual meeting. These shareholders must submit a copy of your legal proxy reflecting your Sandy Spring Bancorp, Inc. holdings along with your name and email address to Computershare by email to legalproxy@computershare.com or by mail to: Computershare, Sandy Spring Bancorp, Inc., Legal Proxy, P.O. Box 43001, Providence, RI 02940-3001. Requests for registration must be received no later than 5:00 p.m. Eastern Time on May 13, 2021. To access the meeting go to https://meetnow.global/MMYUPAD.
Shares Entitled to Vote. Holders of the company’s common stock, par value $1.00 per share, as of the close of business on the record date of March 9, 2002 are eligible to vote at the annual meeting. On that date, 45,425,662 shares of common stock were outstanding and eligible to vote. Each share of common stock entitles the holder to one vote on the items of business to be considered at the annual meeting.
Quorum Requirements. The committee also haspresence, in person or by proxy, of holders of a majority of the company’s outstanding common stock is required to constitute a quorum for the transaction of business at the annual meeting. Shareholders who deliver valid proxies or attend the meeting virtually using their control number will be considered whetherpart of the amountquorum. Once a share is represented for any purpose at the meeting, it is deemed present for quorum purposes for the remainder of the meeting. We intend to include as present at the meeting shares present but not voting, shares for which we have received proxies but for which holders have abstained from voting, and naturebroker “non-votes” (explained below).
Voting Procedures. You may vote your shares in one of non-audit services renderedseveral ways, depending upon how you own your shares.
If you are a shareholder of record, you can vote any one of four ways:
Voting on the internet. Go to www.envisionreports.com/sasr and follow the instructions. You will need to have your control number (from your Notice of Internet Availability or proxy card) with you when you go to the website.
Voting by Bancorp'stelephone. Call the phone number on your proxy card or voting instruction form and follow the instructions. You will need to have your control number with you when you call.
Voting by mail. Complete, sign, date and return your proxy card in the envelope provided in advance of the meeting.
Voting at the virtual meeting. You will be able to vote your shares at the virtual meeting by accessing the virtual meeting site https://meetnow.global/MMYUPAD and registering as a shareholder with the control number found on your Notice of Internet Availability of Proxy Materials or proxy card.
If you hold your shares through a bank, broker or other nominee, you must follow the voting instructions you receive from the holder of record to vote your shares. If you wish to vote at the annual meeting, you must follow the instructions above to obtain a control number. If you hold your
| | Notice and Proxy Statement | 2022 | 59 |
INFORMATION ABOUT THE MEETING |
shares through a bank, broker, or other nominee, it is critical that you cast your vote if you want it to count for Proposals 1, 2 and 3. Your broker isnot allowed to vote shares on your behalf on such matters without your specific instruction.If you do not instruct your broker how to vote on these matters, no votes will be cast on your behalf. Your broker will have discretion to vote any uninstructed shares on matters considered routine items, such as ratification of the appointment of the independent registered public accounting firm (Proposal 4).
All shares represented by valid proxies that are consistent with its independence.
Employee shareholders. If you participate in the Sandy Spring Bank 401(k) Plan (the “401(k) plan”), and your plan account holds shares of Bancorpour common stock, you must provide voting instructions to Principal Trust Company, the trustee for the 401(k) plan by internet, telephone, or proxy card for the shares to be voted according to your instructions. Your voting instructions to the trustee will be held in strict confidence. The deadline to provide voting instructions for shares held in the 401(k) plan is May 13, 2022, at 11:59 p.m., Eastern time. After the voting instruction deadline, you will not be able to submit voting instructions or change prior voting instructions for any shares. If you do not direct the trustee how to vote the shares in your 401(k) plan account, the trustee will vote the shares in the 401(k) plan in the same proportion as the voting instructions it receives from other participants as of the date the proposal was submitted. The Board disclaims any responsibility for the contentvoting instruction deadline.
VOTES REQUIRED
Proposal 1: Election of the proposal and the statement in support of the proposal, whichDirectors. Directors are presented in the form received from the shareholder.
Proposal 2: Amendment of Articles of Incorporation. The amendments to the Articles of Incorporation to declassify the Board will be required to amendapproved if the company's articlesholders of incorporation. Under the articles of incorporation, an 80%at least 80 percent vote of the outstanding shares would be required for approval. In addition, under Maryland law, amendmentsof common stock entitled to vote at the articlesannual meeting vote in favor of incorporation require recommendation from the Board prior to submission toamendments.
Proposal 3: Advisory vote on executive compensation. The advisory vote on the shareholders.
Proposal 4: Ratification of appointment of independent registered public accounting firm. Ratification of the manner in which their shares are to be voted on this proposal, such sharesselection of Ernst & Young LLP as our independent registered public accounting firm for 2022 will be counted as abstentions. Onapproved if the passage of this matter, abstentionsvotes cast “for” the proposal exceed the votes cast “against” the proposal.
Abstentions and Broker Non-Votes.Abstentions, “broker non-votes” (explained below) and failure to cast a vote are not considered “votes cast” and will therefore have no effect on the voting result.
A “broker non-vote” occurs on an item of business when a registered shareholder does not vote its client’s shares on the item but votes on another matter presented at the 2011meeting. This typically occurs when the registered shareholder (usually a broker or bank) has either voting instructions from its client or discretionary voting authority under NYSE rules to vote on one item of business and not on other items. Brokers and other share custodians do not have discretion to vote on non-routine matters unless the beneficial owner of the shares has given explicit voting instructions. Consequently, if you do not give your broker or share custodian explicit voting instructions, your shares will not be voted on the election of directors, amendment of the Articles of Incorporation, or the advisory vote on executive compensation, and your shares will instead be considered “broker non-votes” on each such item. The ratification of the appointment of Ernst & Young LP as our independent registered public accounting firm for 2022 is considered a routine matter and, as such, your broker or share custodian of record is entitled to vote your shares on such proposal in its discretion if you do not provide voting instructions on that item.
Revocation of Proxies. Shareholders who execute proxies retain the right to revoke them at any time before their shares are voted by proxy at the meeting. A shareholder may revoke a proxy by delivering a signed statement to our Corporate Secretary prior to the annual meeting or by delivering an executed proxy bearing a later date (including a proxy given by internet or telephone). You may also revoke a previously issued proxy by voting at the virtual annual meeting.
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| | Notice and Proxy Statement | 2022 |
INFORMATION ABOUT THE MEETING |
To reduce the amount of paper used in producing these proxy materials, as well as lower printing and mailing expenses, the company is furnishing its proxy statement and annual report via the Internet according to the SEC rules for “Notice and Access.” On or about April [ ], 2022, the company mailed a Notice of Internet Availability of Proxy Materials to all shareholders who had not previously elected to receive their proxy materials by mail or electronically containing instructions on how to access this proxy statement and our annual report and how to vote online. Upon receipt of the Notice of Internet Availability, shareholders may choose to request a printed copy of proxy materials at no charge, and this preference will be maintained for future mailings.
To reduce the expenses of delivering duplicate proxy materials to shareholders, we rely on SEC rules that permit us to deliver a single proxy statement and annual report with separate proxy cards, or separate Notices of Internet Availability, to multiple shareholders who share an address, unless we receive contrary instructions. If (1) you and another registered holder share an address and each receive paper copies of our proxy material and wish to receive only one paper copy or (2) you share an address with another registered holder, received a single set of our proxy materials, and would like to receive separate copies, you may request a change in delivery preferences by telephoning our transfer agent at 1-800-368-5948 or writing the transfer agent at Computershare Trust Company, P.O. Box 505005, Louisville, KY 40233.
If a bank, broker, or other nominee, holds your shares and you receive multiple copies of our proxy materials and you would like to receive only one copy, or if you and another shareholder receive only one copy and would like to receive multiple copies, please contact your bank, broker or nominee.
COSTS OF PROXY SOLICITATION
We will pay the cost of soliciting proxies. In addition to soliciting proxies by mail or electronic delivery, we also may solicit proxies through our directors, officers, and employees. None of our directors, officers or employees will receive any additional or special compensation for soliciting proxies. In addition, we have engaged Alliance Advisors, LLC to assist us in soliciting proxies at an estimated cost of $7,000 plus expenses. We also will reimburse banks, brokers and other nominees for their expenses in sending proxy materials to their customers who are beneficial owners of our stock.
PROPOSALS FOR THE 2023 ANNUAL MEETING OF SHAREHOLDERS
Under SEC Rule 14a-8, a shareholder desiring to make a proposal to be included in the proxy statement for the 2023 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 24, 2010 unless the date of the 2011 annual meeting is more than 30 days from May 5, 2011, in which case the deadline is a reasonable time before Bancorp begins to print and mail proxy materials. Anymust submit such proposals shall be subjectproposal to the requirements of the proxy rules adopted under the Securities Exchange Act of 1934.
In addition, under our Bylaws, if a shareholder wishes to present nominations for director nominee,candidates for election to the following information: full name, age,Board or other business for consideration at an annual meeting of shareholders, the shareholder must give the Corporate Secretary written notice of the shareholder’s intent to do so. The notice must be received by the Corporate Secretary no later than 90 days and no earlier than 120 days prior to the anniversary 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 preparationyear’s annual meeting. However, if the date of its disclosures regarding the solicitation of proxies for election of directors. The name of eachannual meeting is more than 30 days before or more than 60 days after such candidate for directoranniversary date, then the notice must be placedreceived no earlier than 120 days prior to such annual meeting and no later than the later of the 90 days prior to such annual meeting or the 10 days following the day on which public announcement of the date of the annual meeting is first made by the company. To be in nominationproper form, the notice must contain the information required by Article II, Section 13 of our Bylaws.
If the shareholder (or a qualified representative of the shareholder) does not appear at the annual meeting byto present a shareholder present in person. The nominee must alsonomination or proposed business, such nomination shall be present in person atdisregarded and such proposed business shall not be transacted.
Communications to the annual meeting. A vote forBoard may be sent to Sandy Spring Bancorp, Inc., Attention: Corporate Secretary, 17801 Georgia Avenue, Olney, Maryland 20832 and marked to the attention of the Board or any of its committees, the independent directors as a person who has not been duly nominated pursuant to these requirements will be deemed to be void.
In the event that any matter not described herein is properly presented for a shareholder vote at the annual meeting, or any adjournment thereof, the persons named in the form of proxy will vote in accordance with their best judgment. At the time this proxy statement went to print, the company knew of no other matters that might be presented for shareholder action at the annual meeting.
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ANNEX A: NON-GAAP FINANCIAL MEASURES |
ANNEX A: NON-GAAP FINANCIAL MEASURES
As discussed in the Compensation Discussion and Analysis included in this proxy statement, the Compensation Committee uses non-GAAP financial measures to evaluate the company’s performance under the company’s incentive compensation plans. Typically, the Compensation Committee adjusts GAAP net income, or elements of net income, for non-core performance items so that participants are compensated for the company’s core performance and not penalized or rewarded for non-core charges or unusual gains.
Non-GAAP measures used in this proxy statement consist of the following:
| • | Pre-provision net revenue. Pre-provision net revenue is calculated as net interest income plus non-interest income minus non-interest expense. This metric is equivalent to GAAP net income exclusive of the effects of income taxes and the provision (credit) for credit losses. |
| • | Non-GAAP efficiency ratio. The efficiency ratio is non-interest expense as a percentage of net interest income plus non-interest income. The non-GAAP efficiency ratio adjusts non-interest expense to exclude amortization of intangible assets, loss on early redemption of FHLB borrowings, and merger and acquisition expense, adjusts net interest income to include tax-equivalent income, and adjusts non-interest income to exclude investment securities gains. |
| • | Adjusted EPS. Adjusted earnings and the related measure of adjusted earnings per share reflect net income exclusive of merger and acquisition expense, branch closing costs, loss on early redemption of FHLB borrowings, and merger-related provision for credit losses, on a net of tax basis. |
| • | Core ROAA. Core income and the related measure of core return on average assets reflect net income exclusive of gain on the sale of held to maturity and available for sale securities, amortization of intangibles, goodwill and nonrecurring items, on a net of tax basis. |
These non-GAAP financial measures should not be viewed as a substitute for financial results in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures with similar names that may be presented by other companies. The following tables present reconciliations of these non-GAAP measures to the board or such directorapplicable amounts measured in care of the Secretary at Bancorp's main office by mail, courier, or facsimile or by e-mail through Bancorp’s "contact us" feature of the investor relations area of its Web site ataccordance with GAAP.
www.sandyspringbank.com PRE-PROVISION.
(In thousands) | 2021 | |||||||
Net income | $235,107 | |||||||
Plus/(less) non-GAAP adjustments: | ||||||||
Income tax expense | 76,552 | |||||||
Provision/(credit) for credit losses | (45,556) | |||||||
Pre-provision net revenue | $266,103 | |||||||
| | Notice and Proxy Statement | 2022 | A-1 |
ANNEX A: NON-GAAP FINANCIAL MEASURES |
NON-GAAP EFFICIENCY RATIO
(Dollars in thousands) | 2021 | |||||||
Non-interest expense (a) | $260,470 | |||||||
Less non-GAAP adjustments: | ||||||||
Amortization of intangible assets | 6,600 | |||||||
Loss on FHLB redemption | 9,117 | |||||||
Merger and acquisition expense | 45 | |||||||
Non-interest expense – as adjusted (b) | $244,708 | |||||||
Net interest income plus non-interest income (c) | $526,573 | |||||||
Plus non-GAAP adjustment: | ||||||||
Tax-equivalent income | 3,703 | |||||||
Less non-GAAP adjustment: | ||||||||
Investment securities gains | 212 | |||||||
Net interest income plus non-interest income – as adjusted (d) | $530,064 | |||||||
Efficiency ratio (GAAP) (a ÷ c) | 49.47% | |||||||
Efficiency ratio (non-GAAP) (b ÷ d) | 46.17% | |||||||
3-YEAR ADJUSTED CUMULATIVE EPS
(In thousands, except per share data) | 2021 | 2020 | 2019 | |||||||||
Net income | $235,107 | $96,953 | $116,433 | |||||||||
Plus non-GAAP adjustments (net of tax): | ||||||||||||
Merger and acquisition expense | 34 | 19,614 | 999 | |||||||||
Branch closing costs | 1,944 | 712 | 359 | |||||||||
Loss on FHLB redemption | 6,779 | 4,619 | — | |||||||||
Merger-related provision for credit losses | — | 13,636 | — | |||||||||
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Net income – as adjusted | $243,864 | $135,534 | $117,791 | |||||||||
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Diluted weighted average common shares | 46,899 | 44,132 | 35,618 | |||||||||
Diluted net income per common share (GAAP) | $4.98 | $2.19 | $3.25 | |||||||||
Diluted net income per common share – as adjusted (non-GAAP) | $5.20 | $3.05 | $3.29 | |||||||||
A-2 |
| | Notice and Proxy Statement | 2022 |
ANNEX A: NON-GAAP FINANCIAL MEASURES |
CORE ROAA
(Dollars in thousands) | 2021 | |||||||
Net income (a) | $235,107 | |||||||
Plus/(less) non-GAAP adjustments (net of tax1): | ||||||||
Merger and acquisition expense | 36 | |||||||
Investment securities gains | (167) | |||||||
Loss on FHLB redemption | 7,202 | |||||||
Amortization of intangible assets | 5,214 | |||||||
Core income (non-GAAP) (b) | $247,392 | |||||||
Average assets (c) | $12,818,202 | |||||||
Return on average assets (GAAP) (a ÷ c) | 1.83% | |||||||
Core return on average assets (non-GAAP) (b ÷ c) | 1.93% | |||||||
| (1) | Net of federal tax only for comparability to peer group. |
| | Notice and Proxy Statement | 2022 | A-3 |
