RICHMOND, Va. & OLNEY, Md. - Atlantic Union Bankshares Corporation (NYSE: NYSE:AUB) and Sandy Spring Bancorp, Inc. (Nasdaq: NASDAQ:SASR) have announced a definitive agreement for Atlantic Union to acquire Sandy Spring in an all-stock transaction valued at approximately $1.6 billion. The merger, poised to create the largest regional bank headquartered in the lower Mid-Atlantic, is expected to significantly bolster the combined company's presence in Northern Virginia and Maryland.
The transaction values Sandy Spring common stock at roughly $34.93 per share based on Atlantic Union's closing stock price as of October 18, 2024. Upon completion, Sandy Spring shareholders will receive 0.900 shares of Atlantic Union common stock for each share of Sandy Spring common stock held.
The combined entity will have pro forma total assets of $39.2 billion, total deposits of $32.0 billion, and gross loans of $29.8 billion, as of September 30, 2024. This merger will add 53 branch locations to Atlantic Union's network and is expected to double its wealth management business, with an increase of over $6.5 billion in assets under management.
John C. Asbury (NYSE:ABG), President and CEO of Atlantic Union, expressed that the merger aligns with their long-term vision to establish a dominant regional bank, with Virginia as its cornerstone, spanning the lower mid-Atlantic into the Southeast. Daniel J. Schrider, Chair, President, and CEO of Sandy Spring Bank, also endorsed the merger, highlighting the benefits of enhanced scale and market diversity for clients and growth opportunities for employees.
Three members of Sandy Spring's board of directors, including Schrider, will join Atlantic Union's board upon closing the transaction, which has received unanimous approval from both companies' boards of directors. The deal is expected to close by the end of the third quarter of 2025, pending regulatory approvals and approval by shareholders of both banks.
The merger announcement coincided with Atlantic Union's conference call to discuss its third quarter earnings, which included participation from Sandy Spring to discuss the merger details. Senior leadership of Atlantic Union also made themselves available virtually to the news media.
Atlantic Union Bankshares Corporation, the holding company for Atlantic Union Bank, operates 129 branches and approximately 150 ATMs across Virginia, Maryland, and North Carolina. Sandy Spring Bancorp, Inc., the holding company for Sandy Spring Bank, is a community bank serving the Greater Washington, D.C. region with over 50 locations.
This strategic move is based on a press release statement and is subject to the conditions outlined therein.
In other recent news, Sandy Spring Bancorp has seen significant developments, particularly in its second-quarter performance. The company reported a net income of $22.8 million, a rise from the first quarter's $20.4 million, and a boost in core deposits and commercial and industrial loans, along with an improved net interest margin of 2.46%. Total assets also increased to $14 billion, indicating a solid performance in line with strategic initiatives.
DA Davidson recently adjusted its outlook on Sandy Spring Bancorp, increasing the price target from $23.00 to $33.00 while maintaining a Neutral rating. This adjustment follows a quarter-over-quarter net interest margin (NIM) increase of 5 basis points, a 4% growth in loans, and a robust 10% rise in core deposit growth. DA Davidson's revised 2025 estimates anticipate higher operating expenses, but project that Sandy Spring Bancorp's NIM could exceed 3%, and its return on assets (ROA) could surpass 1% late in 2025.
Looking ahead, Sandy Spring Bancorp projected funded loan production to remain between $200 million to $250 million per quarter. The bank also anticipated a gradual improvement in loan yields as fixed-rate loans reprice in 2025 and 2026. The company's goal is to achieve a net interest margin of 3% or higher by the end of next year.
InvestingPro Insights
As Sandy Spring Bancorp (SASR) prepares to merge with Atlantic Union Bankshares, investors should consider some key financial metrics and insights from InvestingPro.
Sandy Spring's current market capitalization stands at $1.47 billion, which aligns closely with the $1.6 billion valuation in the merger agreement. The company's P/E ratio of 16.34 suggests a reasonable valuation relative to its earnings, especially considering the 74.41% price total return over the past year.
InvestingPro Tips highlight that Sandy Spring has maintained dividend payments for 29 consecutive years, a testament to its financial stability and commitment to shareholder returns. This track record could be an attractive feature for Atlantic Union shareholders post-merger. Currently, Sandy Spring offers a dividend yield of 4.17%, which may factor into the overall value proposition of the merger for both sets of shareholders.
However, it's worth noting that Sandy Spring's revenue growth has been negative, with a -13.63% decline in the last twelve months. This contraction might be one of the driving factors behind the merger, as the combined entity could potentially leverage economies of scale to reverse this trend.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and metrics that could provide deeper insights into Sandy Spring's financial health and future prospects as it enters this significant corporate transition.
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