425: Atlantic Union Bancshares Eyes Mid-Atlantic Dominance with Sandy Spring Bancorp Acquisition

Atlantic Union Bancshares is proceeding with its acquisition of Sandy Spring Bancorp, aiming to create the largest regional bank in the lower Mid-Atlantic.

Summary

• Atlantic Union Bancshares is acquiring Sandy Spring Bancorp to create a leading regional bank in the lower Mid-Atlantic.
• The acquisition aims to combine the number one regional depository market share banks in Maryland and Virginia.
• The deal is expected to benefit customers with an expanded branch network and enhanced product offerings.
• Shareholders are expected to benefit from differentiated financial performance.
• The Federal Reserve Bank of Richmond approved the merger on January 13, 2025.
• Approvals from the Virginia Bureau of Financial Institutions and the Maryland Office of Financial Regulation are pending.
• Shareholder meetings for approval are scheduled for February 5th.
• The transaction is expected to close on April 1st.
• The combined franchise will operate in attractive and stable markets, including North Carolina and Maryland.
• Sandy Spring operates exclusively in the Washington-Baltimore combined statistical area, which has a population of 10 million and a low unemployment rate of 3.1%.
• The acquisition is expected to be 25% to 30% accretive to earnings per share.
• Atlantic Union plans to sell $2 billion of commercial real estate loans as part of the acquisition.
• The company expects to issue all shares related to the forward equity raise.
• The commercial real estate portfolio sale is expected to achieve approximately $0.90 on the dollar.
• Rates have moved up a bit since the deal was announced, which will lead to more accretion income as we go forward.

Sentiment

Score: 8

Explanation: The document expresses strong confidence in the strategic rationale and financial benefits of the merger, with positive comments from management and expectations of increased accretion. While there are inherent risks in any merger, the overall tone is optimistic.

Positives

• The acquisition will create the largest regional bank in the lower Mid-Atlantic.
• The combined entity will have an expanded branch network and enhanced product offerings.
• The acquisition is expected to be accretive to earnings per share, with estimates between 25% and 30%.
• The company is confident in the economy of its markets and its increased presence in North Carolina and planned expansion in Maryland.
• The commercial real estate portfolio sale is expected to achieve approximately $0.90 on the dollar.
• The company expects to issue all shares related to the forward equity raise.

Negatives

• The merger is subject to remaining regulatory approvals from the Virginia Bureau of Financial Institutions and the Maryland Office of Financial Regulation.
• The integration of the two companies may be more difficult, time-consuming, or costly than expected.
• There is potential for adverse reactions from customers or changes to business or employee relationships.
• The company will sell $2 billion of commercial real estate loans as part of the acquisition.

Risks

• Failure to obtain remaining regulatory approvals could delay or prevent the merger.
• Integration of the two companies may be more difficult, time-consuming, or costly than expected.
• Adverse reactions from customers or changes to business or employee relationships could negatively impact the combined company.
• Changes in economic and market conditions, interest rates, or regulations could affect the anticipated benefits of the merger.
• The potential dilutive effect of shares of Atlantic Union's common stock to be issued in the proposed transaction.

Future Outlook

Atlantic Union expects to close the transaction on April 1, 2025, pending regulatory and shareholder approvals, and anticipates significant financial benefits from the merger, including increased accretion and a stronger market position.

Management Comments

• The acquisition of Sandy Spring will join the number one regional depository market share bank in Maryland with the number one regional depository market share bank in Virginia.
• We believe the proposed acquisition will benefit our customers and markets with an expanded and even more convenient branch network, enhanced product offerings, a robust community benefit plan and access to more capital.
• We are confident in the economy in all our markets and with our increased presence in North Carolina and our planned expansion in Maryland with the Sandy Spring merger, we believe we do, and will, operate in some of the most attractive and stable markets in the country.

Industry Context

This merger reflects a trend of consolidation in the banking industry, as institutions seek to gain scale, expand their market presence, and improve efficiency in a competitive environment. The focus on the Mid-Atlantic region highlights the attractiveness of this market due to its stable economy and affluent population.

Comparison to Industry Standards

• The combined entity aims to compete with other large regional banks in the Mid-Atlantic region.
• Key competitors include Truist Financial Corporation and PNC Financial Services.
• The success of the merger will depend on effective integration and the ability to realize cost synergies and revenue opportunities.
• The expected accretion of 25-30% is a positive sign, but the actual results will depend on market conditions and execution.

Stakeholder Impact

• Shareholders are expected to benefit from differentiated financial performance.
• Customers will benefit from an expanded branch network and enhanced product offerings.
• Teammates will benefit with expanded career opportunities, resources and capabilities.

Next Steps

• Obtain remaining regulatory approvals from the Virginia Bureau of Financial Institutions and the Maryland Office of Financial Regulation.
• Secure shareholder approval at the special meetings on February 5th.
• Close the transaction on April 1st.
• Integrate the two companies.
• Execute the commercial real estate portfolio sale.
• Implement deposit rate strategies to bring down overall deposit rates.

Key Dates