Unassociated Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549

FORM 11-K

FOR ANNUAL REPORTS OF EMPLOYEE STOCK
PURCHASE, SAVINGS AND SIMILAR PLANS
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

(Mark One)

x
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES  EXCHANGE ACT OF 1934.

 
 For the fiscal year ended December 31, 2010.

OR

¨
TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

 
 For the transition period from _____________ to ______________

Commission file number:  0-19065

A.   Full title of the plan and the address of the plan, if different from that of the issuer named below:

Sandy Spring Bancorp, Inc. Cash and Deferred Profit Sharing Plan

B.   Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:

Sandy Spring Bancorp, Inc.
17801 Georgia Avenue
Olney, Maryland 20832

 
 
 

Sandy Spring Bancorp, Inc. Cash and Deferred Profit Sharing Plan

Table of Contents
 
   
Report of Independent Registered Public Accounting Firm
1
   
Financial Statements
  
   
Statements of Net Assets Available for Benefits
2
Statement of Changes in Net Assets Available for Benefits
3
   
Notes to Financial Statements
4
   
Supplementary Schedule
  
   
Schedule of Assets (Held at End of Year)
11
   
Consent of Independent Registered Public Accounting Firm
 
   
Signatures
12
   
Exhibits
 13

 
 
 
 
Report of Independent Registered Public Accounting Firm

To the Trustees and Participants
Sandy Spring Bancorp, Inc. Cash and Deferred Profit Sharing Plan

We have audited the accompanying statements of net assets available for benefits of the Sandy Spring Bancorp, Inc. Cash and Deferred Profit Sharing Plan (the “Plan”) as of December 31, 2010 and 2009, and the related statement of changes in net assets available for benefits for the year ended December 31, 2010. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2010 and 2009, and the changes in net assets available for benefits for the year ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.

Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary schedule of assets (held at end of year) as of December 31, 2010 is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplemental information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplementary schedule is the responsibility of the Plan’s management. The supplementary schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.


/s/ ParenteBeard LLC
 
Reading, Pennsylvania
June 20, 2011
 
 
1
 

Sandy Spring Bancorp, Inc. Cash and Deferred Profit Sharing Plan

Statements of Net Assets Available For Benefits
December 31, 2010 and 2009
  

   
2010
    
2009
  
Assets
            
Investments:
            
Cash and money market funds
   $ 5,691,169     $ 4,144,546  
Mutual funds
     35,888,050       29,136,502  
Common stock
     5,977,623       3,350,770  
      47,556,842       36,631,818  
                 
Receivables:
                
Employer contributions
     9,973       51,816  
Accrued interest
     26,848       32,187  
Notes receivable from participants
     528,852       455,536  
      565,673       539,539  
Total Assets
     48,122,515       37,171,357  
                 
Liabilities
                
Due to broker for securities purchased
     -       24,897  
Accrued administrative expenses
     22,183       15,613  
Total Liabilities
     22,183       40,510  
Net Assets Available for Benefits
   $ 48,100,332     $ 37,130,847  

See notes to Financial Statements.

 
2
 

Sandy Spring Bancorp, Inc. Cash and Deferred Profit Sharing Plan

Statement of Changes In Net Assets Available For Benefits
Year Ended December 31, 2010
  

Additions to net assets attributed to:
      
Investment income:
      
Net appreciation in fair value of investments
   $ 7,585,759  
Interest and dividends
     719,702  
Total Investment Income:
     8,305,461  
         
Interest income on notes receivable from participants
     19,138  
         
Contributions:
        
Participant
     3,033,063  
Employer
     1,365,743  
Rollover
     269,105  
Total Contributions:
     4,667,911  
Total Additions
     12,992,510  
         
Deductions from net assets attributed to:
        
Benefits paid to participants
     1,941,699  
Administrative expenses
     81,326  
Total Deductions
     2,023,025  
         
Net Increase in Net Assets Available for Benefits
     10,969,485  
         
Net Assets Available for Benefits:
        
Beginning balance
     37,130,847  
Ending balance
   $ 48,100,332  

See notes to Financial Statements

 
3
 

Sandy Spring Bancorp, Inc. Cash and Deferred Profit Sharing Plan
 
Notes to Financial Statements

Note 1.  Plan Description And Summary of Significant Accounting Policies

Plan description:  The following description of the Sandy Spring Bancorp, Inc. Cash and Deferred Profit Sharing Plan (the Plan) provides only general information.  Participants should refer to the plan document for a more complete description of the Plan’s provisions.

General:  The Plan is a defined contribution plan covering substantially all employees of Sandy Spring Bancorp, Inc. and its related companies (the Company) who are eighteen or older, and are credited with three months of eligible service, as defined.  The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).

Employee contributions:  Each year, participants may authorize their employer to defer up to 100% of their annual compensation for contribution to the Plan in accordance with procedures established by the plan administrator, up to allowable IRS limitations.  Participants who have attained age 50 before the end of the plan year are eligible to make catch-up contributions.  Amounts deferred will not currently be subject to federal or state income taxation until withdrawn from the Plan upon retirement, death or disability or separation from service.  Earnings on such contributions will accumulate income tax deferred until the account is distributed.  Participants may also contribute amounts representing qualified rollover distributions from other qualified defined benefit or defined contribution plans.

Employer contributions:  The Company contributes a percentage of base compensation, as defined by the Plan that its participating employees defer to the Plan.  For the 2010 plan year, the employer match was made in accordance with the following Safe Harbor formula:  100% of the first 3% of base compensation that is deferred and 50% of the next 2% of base compensation that is deferred.  Each year, the Company, at its discretion, may elect to pay a profit sharing bonus.  In 2010 there was no profit sharing bonus granted.

Notes receivable from participants:  Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50% of their vested account balance.  The loans are secured by the vested balance in the participant’s account and bear an interest rate reasonable at the time the loan is made.  Interest rates are based on the prime rate at the time of the loan’s inception.  Current rates range from 3.25% to 8.25%.  There is also a $150 origination fee, which is taken from the participant’s account.  Principal and interest is paid ratably through payroll deductions.

Participant accounts:  Each participant’s account is credited with the participant’s contribution and allocations of (a) its employer’s contribution and, (b) Plan earnings/losses.  Allocations are based on participant earnings or account balances, as defined.  Loan fees are charged to the respective participant’s account.  The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account.  Participants may direct the investment of their accounts into various investment options offered by the Plan.

Vesting:  Participants are immediately vested in their contributions and any profit sharing contributions plus actual earnings thereon.  Vesting is also immediate in any Safe Harbor employer matching contributions made after January 1, 2006.  Vesting in the employer’s matching contribution made prior to January 1, 2006, is based on years of continuous service.  A participant vests 20% per year after one year of service, and is 100% vested after five years of credited service.

 
4
 

Sandy Spring Bancorp, Inc. Cash and Deferred Profit Sharing Plan
 
Notes to Financial Statements

Note 1.  Plan Description And Summary of Significant Accounting Policies (continued)

Payment of benefits:  Upon termination of service due to retirement, total and permanent disability before retirement, or termination of employment, participants are entitled to receive the full vested value of their accounts.  Upon the participant’s death, the value of a participant’s account is paid to the participant’s beneficiary.  Participant account balances may be paid in a lump sum.  If the total value of the participant’s vested account balance is $1,000 or less, the plan administrator may require a distribution of the entire account balance in a lump sum.  A participant may elect a hardship distribution prior to separation of service provided the participant meets the hardship distribution requirements of the Plan.

Forfeited accounts:  At December 31, 2010 and December 31, 2009, forfeited nonvested accounts totaled $24,428 and $2,579, respectively.  These accounts are used to reduce employer contributions.  During 2010 forfeitures totaling $24,428 were used to fund employer contributions.

Expenses of the Plan:  The Plan’s administrative expenses are paid by either the Plan, or the Company as provided by the Plan document.  The asset-based fees are deducted prior to allocation of the Plan’s investment earnings activity and thus are not separately identifiable as an expense.  Five of the investment vehicle options assess short term redemption fees, which are charged against net appreciation.  Those funds are: Royce Micro Cap Invmt Fund, Scout Small Cap Fund, DWS Dreman Small Cap Value Fund – CI S, Morgan Stanley Inst International Equity Fund and the T.Rowe Price Real Estate Fd.

A summary of the Plan’s significant accounting policies follows:

Basis of accounting:  The financial statements of the Plan are prepared under the accrual method of accounting.

Estimates:  The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and changes therein, and disclosure of contingent assets and liabilities.  Actual results could differ from those estimates.

Investment valuation and income recognition:  Investments are reported at fair value.  See Note 2 for a discussion of fair value measurements.

Purchases and sales of securities are recorded on a trade-date basis.  Interest income is recorded on the accrual basis.  Dividends are reported on the ex-dividend date.

Notes receivable from participants:  Notes receivable from participants are measured at their unpaid principal balance plus any accrued but unpaid interest.  Delinquent notes from participants are reclassified as distributions based upon the terms of the plan document.

Risks and uncertainties:  The Plan invests in marketable equity securities (common stocks) and mutual funds.  Such investments are exposed to various risks such as market risk and credit risk.  Due to the level of risk associated with such investments and the level of uncertainty related to changes in the value of such investments, it is at least reasonably possible that changes in risks in the near term could materially affect investment balances and the amounts reported in the financial statements.

Payment of benefits:  Benefits are recorded when paid.

 
5
 

Sandy Spring Bancorp, Inc. Cash and Deferred Profit Sharing Plan
 
Notes to Financial Statements

Note 1.  Plan Description And Summary of Significant Accounting Policies (continued)

New Accounting Pronouncements:  In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2010-06 “Fair Value Measurements and Disclosures:  Improving Disclosures about Fair Value Measurements”, (“ASU 2010-06”), which provides a greater level of disaggregated information and more robust disclosures about valuation techniques and inputs to fair value measurements, transfers in and out of Levels 1 and 2, and the separate presentation of information in Level 3 reconciliations on a gross basis rather than net.  New disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009.  Level 3 disclosures are effective for fiscal years beginning after December 15, 2010.  Adoption of ASU 2010-06 had no material impact on the Plan’s financial statements but expanded disclosures about certain fair value measurements.

In September 2010, FASB issued Accounting Standards Update No. 2010-25 “Plan Accounting-Defined Contribution Pension Plans:  Reporting Loans to Participants by Defined Contribution Pension Plans, (“ASU 2010-25”), which clarifies how loans to participants should be classified and measured by participant defined contribution pension benefit plans.  Loans are required to be classified as notes receivable from participants, which are segregated from plan investments and measured at their unpaid principal balance plus any accrued but unpaid interest.  ASU 2010-25 is applied retrospectively to all prior periods presented effective for fiscal years ending after December 15, 2010.  The Plan adopted ASU 2010-25 and has presented loans to participants in accordance with this guidance as of December 31, 2010 and 2009.

 
6
 

Sandy Spring Bancorp, Inc. Cash and Deferred Profit Sharing Plan
 
Notes to Financial Statements

Note 2.  Fair Value Measurements

The Plan measures, on a recurring basis, its investments at fair value in accordance with FASB codification “Fair Value Measurements and Disclosures,” which provides the framework for measuring fair value.  The standard for fair value measurement establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements).  The three levels of fair value hierarchy are described below.

Basis of Fair Value Measurement

Level 1- Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2- Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;

Level 3- Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e. supported by little or no market activity).

A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at December 31, 2010 and 2009.

Cash and money market funds: Valued at amortized cost, which approximates fair value.

Common stocks: Valued at the closing price reported on the active market on which the individual securities are traded.

Mutual funds: Valued at the net asset value (“NAV”) of shares held by the plan at year end based on the quoted market price of the respective funds.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

The following tables set forth, by level, within the fair value hierarchy, the Plan’s assets at fair value as of December 31, 2010 and 2009.  Assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement:

 
7
 
 
Sandy Spring Bancorp, Inc. Cash and Deferred Profit Sharing Plan
 
Notes to Financial Statements

Note 2.  Fair Value Measurements (continued)

   
Quoted Prices in
                    
   
Active Markets
    
Significant Other
    
Significant
        
   
for Identical
    
Observable
    
Unobservable
    
Balance as of
  
   
Assets
    
Inputs
    
Inputs
    
December 31,
  
   
(Level 1)
    
(Level 2)
    
(Level 3)
    
2010
  
Cash and money market funds
   $ 5,691,169     $ -     $ -     $ 5,691,169  
Sandy Spring Bancorp, Inc. common stock
     5,977,623       -       -       5,977,623  
Mutual funds:
                                
Index funds
     3,470,725       -       -       3,470,725  
Balanced funds
     3,578,519       -       -       3,578,519  
Growth funds
     10,085,398       -       -       10,085,398  
Fixed income funds
     6,731,101       -       -       6,731,101  
Value funds
     2,443,084       -       -       2,443,084  
Other funds
     9,579,223       -       -       9,579,223  
Total mutual funds
     35,888,050       -       -       35,888,050  
Total investments at fair value
   $ 47,556,842     $ -     $ -     $ 47,556,842  

   
Quoted Prices in
                    
   
Active Markets
          
Significant
        
   
for Identical
    
Significant Other
    
Unobservable
    
Balance as of
  
   
Assets
    
Observable Inputs
    
Inputs
    
December 31,
  
   
(Level 1)
    
(Level 2)
    
(Level 3)
    
2009
  
Cash and money market funds
   $ 4,144,546     $ -     $ -     $ 4,144,546  
Sandy Spring Bancorp, Inc. common stock
     3,350,770       -       -       3,350,770  
Mutual funds:
                                
Index funds
     3,641,273       -       -       3,641,273  
Balanced funds
     3,002,499       -       -       3,002,499  
Growth funds
     8,016,202       -       -       8,016,202  
Fixed income funds
     5,803,722       -       -       5,803,722  
Value funds
     4,422,266       -       -       4,422,266  
Other funds
     4,250,540       -       -       4,250,540  
Total mutual funds
     29,136,502       -       -       29,136,502  
Total investments at fair value
   $ 36,631,818     $ -     $ -     $ 36,631,818  

 
8
 

Sandy Spring Bancorp, Inc. Cash and Deferred Profit Sharing Plan
 
Notes to Financial Statements

Note 3.   Investments

The following table presents the fair value of investments.  Investments that represent five percent or more of the Plan’s net assets available for benefits are separately identified as of December 31:

Investments
  
2010
    
2009
  
             
At Fair Value as Determined by Quoted Market Prices:
            
Mutual Funds:
            
American Funds Amcap R-5
   $ 2,362,002 *   $ 1,941,131  
Dodge & Cox Stock Fund
     4,137,903       3,508,033  
Neuberger & Berman Genesis Trust
     2,817,242       2,253,992  
Oakmark Equity & Income I
     3,578,519       3,002,499  
PIMCO Total Return Instl Fund
     4,112,128       3,209,642  
Royce Micro Cap Invmt Fund
     3,035,538       2,331,602  
Other Mutual Funds
     15,844,718       12,889,603  
Common Stock:
                
Sandy Spring Bancorp, Inc.
     5,977,623       3,350,770  
At Estimated Fair Value:
                
Cash and Money Market Funds:
                
Government Obligations Tax Managed Fund #636
     5,686,175       4,115,705  
Other Cash and Money Market Funds
     4,994       28,841  
Total Investments
   $ 47,556,842     $ 36,631,818  

*Investments did not represent 5% or more of the Plan’s net assets available for benefits for the respective year, but is shown for comparative purposes.

During 2010, the Plan’s investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated in value by $7,585,759 as follows:

Mutual Funds
   $ 4,008,686  
Common Stock
     3,577,073  
Total investment appreciation in value
   $ 7,585,759  

Note 4.  Plan Termination
Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA.  In the event of Plan termination, participants will become 100% vested in their accounts.

 
9
 

Sandy Spring Bancorp, Inc. Cash and Deferred Profit Sharing Plan
 
Notes to Financial Statements

Note 5.  Tax Status
By letter dated March 31, 2008, the Internal Revenue Service has determined that the Plan is qualified and the trust established under the Plan is tax-exempt in accordance with applicable sections of the Internal Revenue Code (IRC).  The Plan has been amended since receiving the determination letter.  The plan administrator believes that the Plan is designed and is currently being operated in compliance with the applicable requirements of the IRC.

Accounting principles generally accepted in the United States of America require Plan Management to evaluate tax positions taken by the Plan and recognize a tax liability if the organization has taken an uncertain position that more likely than not would not be sustained upon examination by the Internal Revenue Service.  Management has evaluated the tax positions taken by the Plan and has determined that no uncertain tax positions have been taken or are expected to be taken that would require recognition or disclosure in the financial statements.  The Plan may be subject to routine tax audits; however no audits are currently in progress.  The Plan remains subject to income tax examination for years ending after December 31, 2007.

Note 6.  Related Party Transactions
The Plan allows participants to have salary deferral contributions as well as any employer contributions made during the year invested in the common stock of Sandy Spring Bancorp, Inc.  Sandy Spring Bancorp, Inc. is the plan sponsor and therefore, these transactions qualify as party-in-interest.  For 2010, total purchases at market value related to the stock were $948,032 and total sales at market value related to the stock were $1,858,106.  Participants are not required to make investments in employer securities.  In addition, the Plan has notes receivable from participants, which are secured by the vested balances in the participant’s accounts.

Note 7.  Trustee and Plan Administrator
Trustee:  Sandy Spring Bank is the trustee of the Plan’s funds.

Plan Administration:  The Company is the plan administrator and is responsible for maintaining records on participants, determining eligibility for benefits, and interpreting and administrating the provisions of the Plan.

 
10
 

Sandy Spring Bancorp, Inc. Cash and Deferred Profit Sharing Plan
 
Schedule Of Assets (Held At End Of year)
Form 5500, Schedule H, Item 4i
December 31, 2010
  

Employer Identification Number – 52-1532952
Plan Number - 002

(a)
  
(b)
  
(c)
  
(d)
    
(e)
  
  
  
Identity of issuer
  
Description of Investment
  
Cost
    
Current value
  
                     
   
American Funds Amcap R-5
  
Mutual Fund
     **     $ 2,362,002  
   
Calamos Growth A
  
Mutual Fund
     **       1,671,199  
   
Columbia Mid Cap Value Opportunity Fund R4
  
Mutual Fund
     **       854,149  
   
Dodge & Cox Stock Fund
  
Mutual Fund
     **       4,137,903  
   
DWS Dreman Small Cap Value Fund – CI S
  
Mutual Fund
     **       408,395  
   
Federated Govt Obligations Fd #5
  
Money Market Fund
     **       829  
   
Government Obligations Tax Managed Fund #636
  
Money Market Fund
     **       5,686,175  
   
MFS International New Discovery Fund I
  
Mutual Fund
     **       1,723,579  
   
Morgan Stanley Inst International Equity Fund
  
Mutual Fund
     **       1,955,434  
   
Neuberger & Berman Genesis Trust
  
Mutual Fund
     **       2,817,242  
   
Oakmark Equity & Income I
  
Mutual Fund
     **       3,578,519  
   
PIMCO Total Return Instl Fund
  
Mutual Fund
     **       4,112,128  
   
Royce Micro Cap Invmt Fund
  
Mutual Fund
     **       3,035,538  
   
Scout Small Cap Fund
  
Mutual Fund
     **       199,417  
   
T.Rowe Price Real Estate Fd
  
Mutual Fund
     **       1,762,307  
   
Vanguard 500 Index Fund Signal Shares
  
Mutual Fund
     **       2,216,455  
   
Vanguard Equity Income Inv
  
Mutual Fund
     **       1,180,540  
   
Vanguard Inflation Protected Securities – Adm
  
Mutual Fund
     **       1,385,129  
   
Vanguard Mid-Cap Index Fund Signal Shares
  
Mutual Fund
     **       1,254,270  
   
Vanguard Short Term Fed - Inv
  
Mutual Fund
     **       1,233,844  
*
  
Sandy Spring Bancorp, Inc.
  
Common Stock
     **       5,977,623  
*
  
Sandy Spring Bancorp, Inc.
  
Cash Account
     **       4,165  
*
  
Participant Loans
  
Loans, ranging from 3.25%-8.25%,
                
       
maturities through November 2018
   $ -       528,852  
Total Investments
               $ 48,085,694  

*Represents a party-in-interest to the Plan.
**Cost is not required for participant-directed plans.

 
11
 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefits plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.

Sandy Spring Bancorp, Inc. Cash and Deferred Profit
Sharing Plan
(Name of Plan)
   
By:
Sandy Spring Bancorp, Inc.
 
Plan Sponsor and Administrator
 
/s/ Daniel J. Schrider
Daniel J. Schrider, President and Chief Executive Officer
Sandy Spring Bancorp, Inc.

Date:  June 20, 2011

 
12