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Sandy Spring to jump over $10B in assets with $460.7M deal for Revere Bank

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Sandy Spring to jump over $10B in assets with $460.7M deal for Revere Bank

Olney, Md.-based Sandy Spring Bancorp Inc. agreed to acquire Rockville, Md.-based Revere Bank in an all-stock deal valued at $460.7 million.

Revere Bank will be merged into Sandy Spring Bank under the terms of the deal. Revere Bank shareholders will receive 1.05 Sandy Spring common shares for each Revere Bank common share they own.

As of June 30, Sandy Spring Bancorp had total assets of $8.40 billion, and Revere Bank had total assets of $2.63 billion, according to S&P Global Market Intelligence data. The deal will result in Sandy Spring jumping over the critical $10 billion threshold, which would subject it to various Dodd-Frank Act regulations such as the Durbin Amendment or a cap on interchange fees. The company will have $11.2 billion in assets after the acquisition, which is expected to close in the first quarter of 2020.

Sandy Spring shareholders will own roughly 74% of the combined company, and Revere Bank shareholders will own the remaining 26%.

S&P Global Market Intelligence calculates the deal is 161.3% of common equity and 180.2% of tangible common equity and 15.6x earnings, on an aggregate basis. The deal value is 17.58% of assets, 21.70% of deposits and the tangible book premium to core deposits ratio is 12.91%.

S&P Global Market Intelligence valuations for bank and thrift targets in the mid-Atlantic region between Sept. 24, 2018, and Sept. 24, 2019, averaged 139.36% of book and 150.27% of tangible book and had a median of 16.73x last-12-months earnings, on an aggregate basis.

Sandy Spring will expand in Maryland by 11 branches to be ranked eighth with a 4.79% share of approximately $149.67 billion in total market deposits.

Revere Bank Co-Presidents and CEOs Ken Cook and Drew Flott will join the surviving entity upon completion of the deal. Cook will become executive vice president, while Flott will be division executive. In Cook's new role, he will serve as the president of commercial banking and will work closely with Jay O'Brien, Sandy Spring Bank's executive vice president and chief banking officer. O'Brien will oversee the combined company's commercial real estate, personal and business banking, institutional, treasury management, and marketing divisions.

In an investor presentation, Sandy Spring said cost savings are targeted at 45% of Revere Bank's noninterest expenses. The company is expecting about 75% of the cost savings to be realized by year-end 2020, and 100% of the cost savings will be realized by year-end 2021. The company expects EPS accretion of 9.1% in the first year of fully phased-in cost savings. It expects to incur transaction expenses of about $32 million, on a pretax basis.

Sandy Spring also showed how the current expected credit loss standard affected its forecasts for tangible book value dilution from the deal and the earnback period. The company forecasts around 4.8% of tangible book value dilution under CECL, an increase from around 3.8% under current accounting standards, and the earnback period increased to around 3 years under CECL from around 2.5 years.

Three Revere Bank board members will be appointed to Sandy Spring's board, according to the presentation.

The Kafafian Group Inc. was Sandy Spring's financial adviser, while Boenning & Scattergood Inc. provided a fairness opinion to the company. Sandler O’Neill & Partners LP was Revere Bank's financial adviser in the deal, also providing a fairness opinion. Kilpatrick Townsend & Stockton LLP was Sandy Spring's legal counsel, while Windels Marx Lane & Mittendorf LLP was Revere Bank's legal counsel.

To use S&P Global Market Intelligence's branch analytics tools to compare market overlap, click here. To create custom maps, click here.

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