A wide range of potential suitors could be interested in buying Olney, Md.-based Sandy Spring Bancorp Inc. as the company reportedly seeks a deal partner.
The company is working with financial advisers as it considers selling itself, according to a recent report that listed Glen Allen, Va.-based Atlantic Union Bankshares Corp. as a potential buyer with which the company has had deal talks. Other possible deal partners include United Bankshares Inc., M&T Bank Corp., PNC Financial Services Group Inc. and F.N.B. Corp., sources said in interviews with S&P Global Market Intelligence.
"They're going to need to get somebody that's hopefully substantially bigger and somebody who either has an interest in the D.C. marketplace or Baltimore marketplace where they're fairly well represented," Janney analyst Daniel Cardenas said in an interview.
Sandy Spring, which declined to comment for this article, had $14.01 billion in assets at the end of the second quarter, while Atlantic Union Bankshares had $24.76 billion in assets at the end of the second quarter, according to S&P Global Market Intelligence data. With $29.95 billion in total assets, the Charleston, W.Va.-based United Bankshares is another potential buyer, Cardenas said. United Bankshares is currently working through its planned acquisition of Peachtree Corners, Ga.-based Piedmont Bancorp Inc., which the company announced in May. The deal is expected to close late in the fourth quarter or early in the first quarter of 2025.
"I know they're in the middle of an acquisition right now, but they're at $30 billion," Cardenas said. "That would be a big deal for them."
Buffalo NY-based M&T Bank Corp., or Pittsburgh, Pa.-based PNC and F.N.B. Corp., could also be interested in acquiring the company, said Fred Cummings, the president and founder of Elizabeth Park Capital Management, an asset management firm with a stake in Sandy Spring. The companies had total assets of $208.86 billion, $556.52 billion and $47.71 billion, respectively, as of the end of the second quarter.
In terms of pricing, Elizabeth Park would be "very happy" with a deal in which Sandy Spring sold for 140% of tangible book value or more, Cummings said in an interview. Elizabeth Park Capital Management took a position in Sandy Spring in the second quarter and finished the period holding 0.43% of its common shares, according to S&P Global Market Intelligence data. The asset manager took the stake based on the view that Sandy Spring was being undervalued due to its large concentration of commercial real estate (CRE) loans, Cummings said.
"They have very solid capital levels, a reasonably attractive deposit franchise and they could make an attractive acquisition target given their scarcity value in the greater D.C. metro market," Cummings said. "That's why we decided to take the position."
Sandy Spring's CRE loan-to-risk-based capital ratio was 322.95% at the end of the second quarter, according to S&P Global Market Intelligence data. That concentration could shape the structure of a potential deal, D.A. Davidson analyst Manuel Navas said in an interview.
"If the deal is ultimately consummated, there might be some capital raising involved to keep the CRE concentration below 300% post deal or it's going to be a buyer that already has a lower CRE concentration to begin with," Navas said.
Of the five banks sources named as potential buyers, PNC had the lowest concentration of CRE loans as a percentage of risk-based capital at the end of the second quarter at 84.56%, while Atlantic Union had the highest at 288.40%.
