Segment Reporting

6 Months Ended

Jun. 30, 2012

Segment Reporting

Note 15 - 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 acquisition 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 on sales of investment products and service charges on deposit accounts. Expenses include personnel, occupancy, marketing, equipment and other expenses. Non-cash charges associated with amortization of intangibles related to the acquired entities amounted to $0.4 million and $0.4 million in for the three months ended June 30, 2012 and 2011, respectively. For the six months ended June 30, 2012 and 2011, these non-cash charges amounted to $0.7 million and $0.7 million, 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 related to the acquired entities was not significant for the three and six months ended June 30, 2012 and 2011, 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 $808 million 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 related to the acquired entities was not significant for the three and six months ended June 30, 2012 and 2011, respectively. .

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

	Three Months Ended June 30, 2012
	Community				Investment		Inter-Segment
(In thousands)	Banking		Insurance		Mgmt.		Elimination			Total
Interest income	$	35,558	$	2	$	2	$	(4	)	$	35,558
Interest expense		5,753		-		-		(4	)		5,749
Provision for loan and lease losses		1,585		-		-		-			1,585
Noninterest income		9,306		1,026		1,364		(203	)		11,493
Noninterest expenses		27,365		954		742		(203	)		28,858
Income before income taxes		10,161		74		624		-			10,859
Income tax expense		3,379		30		243		-			3,652
Net income	$	6,782	$	44	$	381	$	-		$	7,207
Assets	$	3,870,262	$	13,180	$	15,537	$	(43,802	)	$	3,855,177

	Three Months Ended June 30, 2011
	Community					Investment		Inter-Segment
(In thousands)	Banking		Insurance			Mgmt.		Elimination			Total
Interest income	$	35,025	$	2		$	2	$	(21	)	$	35,008
Interest expense		6,875		-			-		(21	)		6,854
Provision for loan and lease losses		1,151		-			-		-			1,151
Noninterest income		8,520		1,099			1,385		(202	)		10,802
Noninterest expenses		24,086		1,141			813		(202	)		25,838
Income before income taxes		11,433		(40	)		574		-			11,967
Income tax expense		3,463		(16	)		224		-			3,671
Net income	$	7,970	$	(24	)	$	350	$	-		$	8,296
Assets	$	3,642,323	$	12,708		$	14,092	$	(57,107	)	$	3,612,016

	Six Months Ended June 30, 2012
	Community				Investment		Inter-Segment
(In thousands)	Banking		Insurance		Mgmt.		Elimination			Total
Interest income	$	70,173	$	3	$	5	$	(8	)	$	70,173
Interest expense		11,667		-		-		(8	)		11,659
Provision for loan and lease losses		2,249		-		-		-			2,249
Noninterest income		17,800		2,312		2,761		(406	)		22,467
Noninterest expenses		52,232		2,168		1,547		(406	)		55,541
Income before income taxes		21,825		147		1,219		-			23,191
Income tax expense		6,973		60		475		-			7,508
Net income	$	14,852	$	87	$	744	$	-		$	15,683
Assets	$	3,870,262	$	13,180	$	15,537	$	(43,802	)	$	3,855,177

	Six Months Ended June 30, 2011
	Community				Investment		Inter-Segment
(In thousands)	Banking		Insurance		Mgmt.		Elimination			Total
Interest income	$	69,814	$	3	$	4	$	(63	)	$	69,758
Interest expense		13,657		-		-		(63	)		13,594
Provision for loan and lease losses		2,666		-		-		-			2,666
Noninterest income		16,078		2,390		2,731		(405	)		20,794
Noninterest expenses		48,433		2,292		1,580		(405	)		51,900
Income before income taxes		21,136		101		1,155		-			22,392
Income tax expense		6,314		41		450		-			6,805
Net income	$	14,822	$	60	$	705	$	-		$	15,587
Assets	$	3,642,323	$	12,708	$	14,092	$	(57,107	)	$	3,612,016