Sandy Spring Bancorp in Olney, Md., posted lower third-quarter earnings as expenses rose and net interest income declined.

The parent company of Sandy Spring Bank said Thursday that it earned $11.1 million, down roughly 8% from a year earlier but up more than 58% from the second quarter. The $4.2 billion-asset company's second-quarter earnings were reduced by a roughly $6.1 million jury verdict against the bank in a case involving a former employee. Though insurance paid at least part of the damages, Sandy Spring said it reserved an undisclosed amount of funds to pay for the cost associated with the case.

Earnings per share totaled 44 cents, which was in line with average estimates from analysts polled by Bloomberg.

Net interest income fell 8%, to $32.4 million, from a year earlier as the company reported a 12% jump in total loans. The third quarter of 2013 included $3.7 million in loan interest recoveries from previously nonperforming commercial loans. Excluding the recoveries, net interest income grew 2% year over year, Sandy Spring said.

Residential mortgages increased by 17%, to $699 million, and commercial business loans rose almost 11%, to $369 million. Sandy Spring's net interest margin was 3.42%, down 46 basis points from a year earlier.

Third-quarter noninterest income jumped 12%, to roughly $12.6 million, due to more business in the insurance and wealth management sectors. Noninterest expenses were up 6% from last year, to $28.6 million, because of increases in salaries and litigation costs.

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