SEGMENT REPORTING

9 Months Ended

Sep. 30, 2020

SEGMENT REPORTINGCurrently, 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 reflects 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 and assets are included in the Community Banking segment, as the majority of parent company functions is related to this segment. Beginning on April 1, 2020, the Community Banking segment includes the impact from the Revere acquisition. 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 $1.4 million and $0.4 million for the three months ended September 30, 2020 and 2019, respectively, and were $3.2 million and $1.3 million for the nine months ended September 30, 2020 and 2019, respectively.

The Insurance segment is conducted through Sandy Spring Insurance, a subsidiary of the Bank. Sandy Spring Insurance 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, occupancy, support charges and other expenses. Non-cash charges associated with amortization of intangibles were not significant for the three and nine months ended September 30, 2020 and 2019.

The Investment Management segment is conducted through West Financial and RPJ, subsidiaries of the Bank. These asset management and financial planning firms, located in McLean, Virginia and Falls Church, Virginia, respectively, provide 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 and RPJ had approximately $3.1 billion in combined assets under management as of September 30, 2020. Major revenue sources include non-interest income earned on the above services. Expenses include personnel, occupancy, support charges and other expenses. Non-cash charges associated with amortization of intangibles were $0.5 million and $1.4 million for the three and nine months ended September 30, 2020, and were not significant for the same periods in the prior year.

Information for the operating segments and reconciliation of the information to the Condensed Consolidated Financial Statements for the periods indicated are presented in the following tables:


	Three Months Ended September 30, 2020
(In thousands)	Community Banking		Insurance		Investment Management		Inter-Segment Elimination		Total
Interest income	$	112,985	$	1	$	1	$	(3)	$	112,984
Interest expense	15,503		—		—		(3)		15,500
Provision for credit losses	7,003		—		—		—		7,003
Non-interest income	24,746		2,119		2,746		(221)		29,390
Non-interest expense	57,856		1,580		1,722		(221)		60,937
Income before income taxes	57,369		540		1,025		—		58,934
Income tax expense	13,912		149		231		—		14,292
Net income	$	43,457	$	391	$	794	$	—	$	44,642


Assets	$	12,678,396	$	11,289	$	57,088	$	(68,642)	$	12,678,131


	Three Months Ended September 30, 2019
(In thousands)	Community Banking		Insurance		Investment Management		Inter-Segment Elimination		Total
Interest income	$	87,068	$	13	$	4	$	(3)	$	87,082
Interest expense	20,295		—		—		(3)		20,292
Provision for credit losses	1,524		—		—		—		1,524
Non-interest income	14,080		2,123		2,538		(168)		18,573
Non-interest expense	41,806		1,635		1,652		(168)		44,925
Income before income taxes	37,523		501		890		—		38,914
Income tax expense	9,162		138		231		—		9,531
Net income	$	28,361	$	363	$	659	$	—	$	29,383


Assets	$	8,437,588	$	11,615	$	22,033	$	(33,698)	$	8,437,538


	Nine Months Ended September 30, 2020
(In thousands)	Community Banking		Insurance		Investment Management		Inter-Segment Elimination		Total
Interest income	$	311,771	$	5	$	3	$	(10)	$	311,769
Interest expense	48,447		—		—		(10)		48,437
Provision for credit losses	90,158		—		—		—		90,158
Non-interest income	57,976		5,446		7,705		(645)		70,482
Non-interest expense	184,921		4,319		5,526		(645)		194,121
Income before income taxes	46,221		1,132		2,182		—		49,535
Income tax expense	8,396		313		535		—		9,244
Net income	$	37,825	$	819	$	1,647	$	—	$	40,291


Assets	$	12,678,396	$	11,289	$	57,088	$	(68,642)	$	12,678,131


	Nine Months Ended September 30, 2019
(In thousands)	Community Banking		Insurance		Investment Management		Inter-Segment Elimination		Total
Interest income	$	262,465	$	15	$	9	$	(10)	$	262,479
Interest expense	62,764		—		—		(10)		62,754
Provision for credit losses	3,029		—		—		—		3,029
Non-interest income	39,643		5,296		7,660		(501)		52,098
Non-interest expense	123,876		4,359		5,270		(501)		133,004
Income before income taxes	112,439		952		2,399		—		115,790
Income tax expense	26,924		265		625		—		27,814
Net income	$	85,515	$	687	$	1,774	$	—	$	87,976


Assets	$	8,437,588	$	11,615	$	22,033	$	(33,698)	$	8,437,538