| ACQUISITIONS |
2. ACQUISITIONS
Sandy Spring Bancorp, Inc. Acquisition
On April 1, 2025, the Company completed its previously announced acquisition of Sandy Spring, the holding company for Sandy Spring Bank, headquartered in Olney, Maryland. Under the terms of the Sandy Spring merger agreement, at the effective time of the Sandy Spring acquisition, each outstanding share of Sandy Spring common stock was converted into the right to receive 0.900 shares of the Company’s common stock, with cash paid in lieu of fractional shares, resulting in 41.0 million additional shares issued, or an aggregate transaction value of approximately $1.3 billion, based on the closing price per share of the Company’s common stock as quoted on the New York Stock Exchange (“NYSE”) on March 31, 2025, which was the last trading day prior to the consummation of the acquisition. With the acquisition of Sandy Spring, the Company acquired more than 50 branches in Virginia, Maryland, and Washington, D.C., enhancing the Company’s presence in Northern Virginia and Maryland.
Goodwill associated with the Sandy Spring acquisition totaled $540.8 million at March 31, 2026, allocated between the Company’s Wholesale Banking ($431.7 million) and Consumer Banking ($109.1 million) reporting segments, which is not deductible for tax purposes. The goodwill at March 31, 2026 was calculated based on the fair values of the assets acquired and liabilities assumed as of the acquisition date, inclusive of measurement period adjustments primarily related to loans, other assets, and other liabilities, which resulted in a $44.0 million increase in goodwill associated with the Sandy Spring acquisition compared to April 1, 2025. As of March 31, 2026, the measurement period concluded and goodwill was finalized.
The following table provides a summary of the consideration transferred and the fair value of the assets acquired and liabilities assumed as of the date of the Sandy Spring acquisition, inclusive of the aforementioned measurement period adjustments (dollars in thousands).
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Purchase price consideration |
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$ |
1,275,969 |
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Fair value of assets acquired: |
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Cash and cash equivalents |
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$ |
270,211 |
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Securities available for sale ("AFS") |
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1,266,925 |
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Restricted stock |
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68,310 |
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Loans held for sale ("LHFS") - CRE |
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1,839,638 |
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LHFS - Non-CRE |
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29,152 |
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LHFI |
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8,572,384 |
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Premises and equipment |
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59,402 |
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Core deposit intangible ("CDI") and other intangibles |
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290,650 |
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Bank owned life insurance ("BOLI") |
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170,482 |
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Lease right of use ("ROU") assets |
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40,808 |
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Other assets (1) |
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337,509 |
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Total assets |
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$ |
12,945,471 |
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Fair value of liabilities assumed: |
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Deposits |
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$ |
11,227,922 |
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Short-term borrowings |
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272,201 |
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Long-term borrowings |
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560,761 |
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Lease liabilities |
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40,808 |
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Other liabilities |
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108,631 |
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Total liabilities |
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$ |
12,210,323 |
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Fair value of net assets acquired |
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$ |
735,148 |
Goodwill |
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$ |
540,821 |
(1) Other assets include deferred tax assets, accrued interest receivable, accounts receivable, and other intangibles, as well as other miscellaneous assets acquired from Sandy Spring.
The Company assessed the fair value for significant assets acquired and liabilities assumed based on the following methods:
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Cash and cash equivalents: The fair value was determined to approximate the carrying amount based on the short-term nature of these assets.
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Securities AFS: The fair value of the investment portfolio was based on pricing obtained by independent pricing services and quoted market prices.
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Restricted stock: The carrying value approximates the fair value.
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LHFS CRE and non-CRE: Fair values were estimated using a discounted cash flow analysis that considered factors including loan type, interest rate type, prepayment speeds, duration, and current discount rates.
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LHFI: Fair values for LHFI were estimated using a discounted cash flow analysis that considered factors including loan type, interest rate type, prepayment speeds, duration, and current discount rates. The discount rates were developed considering market participants’ view of loan types, liquidity risk, the maturity of the loans, service costs and a required return of capital. Expected cash flows were derived using inputs that considered estimated credit losses and prepayments.
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Premises and equipment: The fair value of bank premises and equipment held for use was valued by obtaining recent market data for similar property types with adjustments for characteristics of individual properties.
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CDI and other intangibles: CDI represents the future economic benefit of acquired customer deposits. The fair value of the CDI asset was estimated based on a discounted cash flow methodology that incorporated expected customer attrition rates, cost of deposit base, net maintenance cost associated with customer deposits, and the cost for
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alternative funding sources. The discount rates used were based on market rates. Other intangibles include customer relationship intangible assets and non-compete intangible assets. Customer relationship intangible assets represent the value associated with customer relationships related to the wealth management business that was acquired. Non-compete intangible assets represent the value associated with non-compete agreements for former employees in place at the date of the acquisition. |
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BOLI: The fair value of BOLI is carried at its current cash surrender value, which is the most reasonable estimate of fair value.
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Lease ROU assets and lease liabilities: The fair value of the lease ROU assets was measured at an amount equal to the lease liability and evaluated for favorable or unfavorable lease terms when compared with market terms on a lease-by-lease basis.
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Deposits: The fair value of interest-bearing and non-interest-bearing deposits is the amount payable on demand at the acquisition date. The fair value of time deposits was estimated using a discounted cash flow calculation that includes a market rate analysis of the current rates offered by market participants for certificates of deposits that mature in the same period.
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Short-Term Borrowings: Acquired short term borrowings consisted of Federal Home Loan Bank (“FHLB”) overnight borrowings and borrowings under repurchase agreements. The carrying amount on short-term borrowings was determined to approximate fair value.
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Long-Term Borrowings: The fair values of long-term borrowings, including trust preferred securities and subordinated debt, were estimated using a discounted cash flow approach analysis, factoring in market terms and the structural terms of the borrowings.
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Unaudited Pro forma Impact of the Acquisition
The following table presents for illustrative purposes only certain unaudited pro forma information as if the Company had acquired Sandy Spring on January 1, 2025. These results combine the historical results of Sandy Spring in the Company's Consolidated Statements of Income and while certain adjustments were made for the estimated impact of certain fair value adjustments and other acquisition-related activity. These results are not indicative of what would have occurred had the Sandy Spring acquisition taken place on January 1, 2025. No adjustments have been made to the pro forma results regarding possible revenue enhancements, provision for credit losses, or expense efficiencies. Pro forma adjustments below include the net impact of Sandy Spring’s accretion and the elimination of merger-related costs. Merger-related costs as disclosed in the Company’s Consolidated Statement of Income were related to the Sandy Spring acquisition and include costs associated with employee severance, other employee related costs, professional fees, information technology related costs, including system conversion, and lease and contract termination expenses. Merger-related costs have been expensed as incurred. The Company expects to achieve further operating cost savings and other business synergies, as a result of the Sandy Spring acquisitions, which are not reflected in the pro forma amounts below (dollars in thousands):
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Pro forma |
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Three Months Ended |
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March 31, |
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2025 (2) |
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(unaudited) |
Total revenues (1) |
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$ |
360,315 |
Net income available to common shareholders (3) |
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$ |
70,582 |
(1) Includes net interest income and noninterest income.
(2) Includes the net impact of Sandy Spring’s accretion adjustments of $21.0 million.
(3) Excludes merger-related costs of $4.6 million.
The Company’s operating results for the three months ended March 31, 2026, include the operating results of the acquired assets and assumed liabilities of Sandy Spring subsequent to the acquisition on April 1, 2025. Revenues and earnings since the acquisition date of the former operations of Sandy Spring have not been disclosed due to the merging of certain processes and the conversion of Sandy Spring’s systems that occurred in the fourth quarter of 2025. As a result, separate financial information is not readily available.
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