Atlantic Union says $1.6 billion deal on track to close ahead of schedule

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Atlantic Union is on track to finalize its acquisition of Sandy Spring Bancorp.

Atlantic Union Bankshares in Richmond, Virginia, said a bid to substantially bolster its presence in neighboring Maryland could come together even sooner than originally planned.

The $25 billion-asset bank's plan to acquire Olney, Maryland-based Sandy Spring Bancorp for $1.6 billion in stock, announced in October, was the third-largest bank deal inked in 2024. Originally expected to close by the end of the third quarter this year, Atlantic Union's chief executive said during the company's earnings call Thursday that it could be finalized as soon as April.

Atlantic Union CEO John Asbury said the bank received regulatory approval from the Federal Reserve, clearing a key hurdle seven weeks after applying for it. Several large acquisitions had over the past couple of years faced monthslong delays in securing federal regulators' nod — some deals were nixed altogether — amid heightened M&A scrutiny under the Biden administration.

The two largest deals of 2024, both valued at about $2 billion, closed early this month. Those combinations included Kansas City, Missouri-based UMB Financial's acquisition of Heartland Financial USA in Denver and Winter Haven, Florida-based SouthState Corp.'s acquisition of McKinney, Texas-based Independent Bank Group.

President Trump, who took office this week, campaigned on a deregulation platform that investment bankers expect will speed up deal timelines.

"Dealmakers finally have the clarity they need to proceed with cautious optimism and pursue ambitious growth in 2025," said Ernst & Young's Mitch Berlin, Americas strategy and transactions vice chair.

Atlantic Union's Sandy Spring deal awaits approval from the Virginia Bureau of Financial Institutions and the Maryland Office of Financial Regulation. Asbury said each company's respective shareholder approvals were expected at special meetings slated for Feb. 5. Barring surprises, he said, "we expect to close the transaction on April 1."

The "merger integration planning process is well underway with the Sandy Spring team and from the meetings I've attended, I remain highly confident in our cultural compatibility, the strategic logic of merger and its potential," Asbury said.

With Sandy Spring, Atlantic Union would gain more than $14 billion of assets, creating a combined company with nearly $40 billion of assets. The merged company would have total deposits of $32 billion and loans of about $30 billion.

It would rank as the No. 1 regional bank in both Virginia and Maryland, Asbury said.

The Indiana-based company grew fourth-quarter loans and profits in part because of an acquisition in Nashville, and it expects to bulk up further with a deal in Minnesota's Twin Cities that was among the largest announced in 2024.

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Atlantic Union's mid-Atlantic footprint would add more than 50 branches and double its wealth business, increasing assets under management by more than $6.5 billion. The bank's footprint would stretch from Baltimore through Washington, D.C., to Richmond and Hampton Roads, a region Asbury termed the "golden crescent." 

The Sandy Spring deal announcement followed Atlantic Union's early 2024 acquisition of American National Bankshares in Danville, Virginia. That $507 million all-stock deal extended Atlantic Union's footprint into Southern Virginia cities and gave it a presence in North Carolina's Piedmont Triad market. 

Atlantic Union reported fourth-quarter net income available to common shareholders of $54.8 million and earnings per share of 61 cents. A year earlier it posted earnings of $53.9 million, or 72 cents.

Its fourth-quarter loans increased 18% from a year earlier to $18.3 billion, boosted by the American National deal.

It reported net interest income of $183.2 million, up from $153.5 million a year earlier. Its net interest margin was flat from the year-ago level at 3.26%.

"The macroeconomic environment remains favorable in our footprint, and we do not expect that to change in the near term," Asbury said. "Our markets continue to appear healthy, and our lending pipelines imply we should expect mid-single-digit annualized loan growth in 2025. ... We believe that a good indicator of economic health is employment, and the three states where we operate continue to have unemployment rates better than the last reported national average unemployment rate of 4.1%."

Atlantic Union said its fourth-quarter noninterest income of $35.2 million was up from $30 million a year earlier.

The bank's noninterest expenses rose to $129.7 million for the fourth quarter from $108 million in the final quarter of 2023, reflecting the acquisition of American National and $5.6 million of pretax merger-related costs tied to the pending Sandy Spring deal.

Credit costs remained low. Net charge-offs for the fourth quarter totaled $1.4 million, or 0.03% of total average loans held for investment on an annualized basis, compared to $1.2 million, or 0.03%, a year earlier.  

However, the company recorded a provision for credit losses of $17.5 million, up from $2.6 million in the prior quarter and $8.7 million a year earlier.

Asbury said the higher provision was driven by a $13.1 million specific reserve on a $27.7 million asset-based commercial-and-industrial loan "involving an apparent misrepresentation of its borrowing base, which was identified at year-end. … Aside from this atypical event, credit remains solid."

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