Sandy Spring Bancorp (SASR) Status Update summary

Strategic merger announcement and rationale

• The merger with Sandy Spring Bancorp creates the largest regional bank in the Mid-Atlantic, with $39.2 billion in assets, a dense, contiguous franchise, and a leading deposit market share in Virginia and Maryland.

• The transaction is a 100% stock deal valued at $1.6 billion, with Sandy Spring shareholders receiving 0.90 shares of Atlantic Union for each share, and is expected to close by Q3 2025.

• Sandy Spring shareholders will own approximately 29% of the combined company, and three Sandy Spring board members, including the CEO, will join the board.

• The merger completes the 'Golden Crescent' strategy, expands into affluent markets, and aims for top quartile financial returns and enhanced scale and capabilities.

• The combined entity will add 53 branches and over $6.5 billion in wealth management AUM, strengthening its presence from Baltimore through Washington D.C., Richmond, and into the Southeast.

Financial performance and guidance update

• Q3 2024 adjusted operating earnings rose 32% quarter-over-quarter to $74.5 million, with EPS of $0.83 and strong returns on tangible common equity (19.2%) and assets (1.25%).

• Net interest margin for Q3 was 3.38%, with full-year 2024 NIM guidance between 3.35% and 3.40%, and Q4 targeted at 3.4%-3.45%.

• Loan balances are projected to end 2024 between $18.5B and $19B, with deposit balances between $20B and $20.5B; full-year net interest income is expected at $720M-$725M.

• Adjusted non-interest income for the year is expected at $120M-$125M, and adjusted non-interest expenses at $445M-$450M.

• Mid-single-digit loan growth is expected, supported by healthy pipelines despite some CRE payoffs.

Merger financial impact and balance sheet actions

• The deal is expected to be 23% accretive to EPS by 2026, with a tangible book value earn-back of 2 years and a 20% internal rate of return.

• Pro forma return on assets is projected at ~1.50% and return on tangible common equity at ~20% for 2026, with a 44% efficiency ratio.

• $350M in new equity was raised, and up to $2B of Sandy Spring's CRE loans will be sold post-close to reduce CRE concentration and loan-to-deposit ratios.

• CRE loans identified for sale are high-quality, mostly retail and multifamily, with an average duration of about four years; the sale is expected to be at a low-90s mark to par.

• The combined company will maintain strong capital and liquidity, with a CET1 ratio of ~10% at closing and total risk-based capital at 13.8%.