SEGMENT REPORTING

12 Months Ended

Dec. 31, 2018

Note 24 - 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 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 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 totaled $1.9 million for the year ended December 31, 2018 and were not significant for the years ended December 31, 2017 and 2016, 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 were not significant for the years ended December 31, 2018, 2017 and 2016, 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 $1.5 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 related to the acquired entities was not significant for the years ended December 31, 2018, 2017 and 2016, respectively.

Information for the operating segments and reconciliation of the information to the consolidated financial statements for the years ended December 31 is presented in the following tables:

	2018
	Community				Investment		Inter-Segment
(In thousands)	Banking		Insurance		Mgmt.		Elimination		Total
Interest income	$	324,081	$	3	$	8	$	(10)	$	324,082
Interest expense		63,647		-		-		(10)		63,637
Provision for loan losses		9,023		-		-		-		9,023
Non-interest income		45,841		6,153		9,670		(615)		61,049
Non-interest expenses		168,261		5,601		6,536		(615)		179,783
Income before income taxes		128,991		555		3,142		-		132,688
Income tax expense		30,827		169		828		-		31,824
Net income	$	98,164	$	386	$	2,314	$	-	$	100,864


Assets	$	8,246,282	$	9,165	$	16,332	$	(28,507)	$	8,243,272

	2017
	Community				Investment		Inter-Segment
(In thousands)	Banking		Insurance		Mgmt.		Elimination		Total
Interest income	$	194,798	$	2	$	7	$	(8)	$	194,799
Interest expense		26,039		-		-		(8)		26,031
Provision for loan losses		2,977		-		-		-		2,977
Non-interest income		37,447		6,233		8,335		(772)		51,243
Non-interest expenses		119,607		5,533		4,731		(772)		129,099
Income before income taxes		83,622		702		3,611		-		87,935
Income tax expense		33,684		(399)		1,441		-		34,726
Net income	$	49,938	$	1,101	$	2,170	$	-	$	53,209


Assets	$	5,446,056	$	8,873	$	13,126	$	(21,380)	$	5,446,675

	2016
	Community				Investment		Inter-Segment
(In thousands)	Banking		Insurance		Mgmt.		Elimination		Total
Interest income	$	170,556	$	3	$	5	$	(8)	$	170,556
Interest expense		21,012		-		-		(8)		21,004
Provision (credit) for loan losses		5,546		-		-		-		5,546
Non-interest income		38,769		5,418		7,568		(713)		51,042
Non-interest expenses		114,368		5,097		4,306		(713)		123,058
Income before income taxes		68,399		324		3,267		-		71,990
Income tax expense		22,337		130		1,273		-		23,740
Net income	$	46,062	$	194	$	1,994	$	-	$	48,250


Assets	$	5,092,283	$	7,732	$	13,650	$	(22,282)	$	5,091,383