SEGMENT REPORTING

3 Months Ended

Mar. 31, 2019

Note 16 - Segment Reporting

Currently, the Company conducts business in three operating segments—Community Banking, Insurance and Investment Management. Each of the operating segments is a strategic business unit that offers different products and services. The Insurance and Investment Management segments were businesses that were acquired in separate transactions where management of the acquired business was retained. The accounting policies of the segments are the same as those of the Company. However, the segment data reflect inter-segment transactions and balances.

The Community Banking segment is conducted through Sandy Spring Bank and involves delivering a broad range of financial products and services, including various loan and deposit products to both individuals and businesses. Parent company income is included in the Community Banking segment, as the majority of effort of these functions is related to this segment. Major revenue sources include net interest income, gains on sales of mortgage loans, trust income fees and service charges on deposit accounts. Expenses include personnel, occupancy, marketing, equipment and other expenses. Non-cash charges associated with amortization of intangibles were $0.4 million for both the three months ended March 31, 2019 and March 31, 2018, respectively.

The Insurance segment is conducted through Sandy Spring Insurance Corporation, a subsidiary of the Bank, and offers annuities as an alternative to traditional deposit accounts. Sandy Spring Insurance Corporation operates Sandy Spring Insurance, a general insurance agency located in Annapolis, Maryland, and Neff and Associates, located in Ocean City, Maryland. Major sources of revenue are insurance commissions from commercial lines, personal lines, and medical liability lines. Expenses include personnel and support charges. Non-cash charges associated with amortization of intangibles were not significant for the three months ended March 31, 2019 and 2018, respectively.

The Investment Management segment is conducted through West Financial Services, Inc., a subsidiary of the Bank. This asset management and financial planning firm, located in McLean, Virginia, provides comprehensive investment management and financial planning to individuals, families, small businesses and associations including cash flow analysis, investment review, tax planning, retirement planning, insurance analysis and estate planning. West Financial currently has approximately $1.6 billion in assets under management. Major revenue sources include non-interest income earned on the above services. Expenses include personnel and support charges. Non-cash charges associated with amortization of intangibles were not significant for the three months ended March 31, 2019 and 2018, respectively.

Information for the operating segments and reconciliation of the information to the condensed consolidated financial statements for the periods indicated is presented in the following tables:

	Three Months Ended March 31, 2019
	Community				Investment		Inter-Segment
(In thousands)	Banking		Insurance		Mgmt.		Elimination		Total
Interest income	$	88,183	$	1	$	2	$	(3)	$	88,183
Interest expense		21,436		-		-		(3)		21,433
Provision (credit) for loan losses		(128)		-		-		-		(128)
Noninterest income		12,707		1,904		2,525		(167)		16,969
Noninterest expense		41,211		1,420		1,728		(167)		44,192
Income before income taxes		38,371		485		799		-		39,655
Income tax expense		8,993		135		210		-		9,338
Net income	$	29,378	$	350	$	589	$	-	$	30,317


Assets	$	8,326,141	$	11,519	$	20,564	$	(30,324)	$	8,327,900

	Three Months Ended March 31, 2018
	Community				Investment		Inter-Segment
(In thousands)	Banking		Insurance		Mgmt.		Elimination		Total
Interest income	$	75,504	$	-	$	1	$	(1)	$	75,504
Interest expense		12,614		-		-		(1)		12,613
Provision for loan losses		1,997		-		-		-		1,997
Non-interest income		13,171		1,822		2,279		(154)		17,118
Non-interest expense		47,031		1,379		1,385		(154)		49,641
Income before income taxes		27,033		443		895		-		28,371
Income tax expense		6,353		123		230		-		6,706
Net income	$	20,680	$	320	$	665	$	-	$	21,665


Assets	$	7,894,964	$	8,984	$	16,216	$	(25,246)	$	7,894,918