8-K: ConnectOne Bancorp to Acquire First of Long Island Corporation in $284 Million Merger

ConnectOne Bancorp will acquire The First of Long Island Corporation in an all-stock merger valued at approximately $284 million, creating a combined entity with approximately $14 billion in assets.

Summary

• ConnectOne Bancorp, Inc. and The First of Long Island Corporation have agreed to merge, with ConnectOne as the surviving entity.
• First of Long Island shareholders will receive 0.5175 shares of ConnectOne common stock for each share of First of Long Island common stock.
• The transaction is valued at approximately $284 million, or about $12.40 per First of Long Island share, based on ConnectOne's closing stock price on September 4, 2024.
• The combined company will have approximately $14 billion in total assets, $11 billion in total deposits, and $11 billion in total loans.
• The merger is expected to close in mid-2025, pending shareholder and regulatory approvals.
• ConnectOne plans to raise approximately $100 million in subordinated debt prior to the transaction closing.
• The merger is projected to be 36% accretive to ConnectOne's earnings per share in 2025, adjusted for cost savings.
• Tangible book value per share dilution is projected at 12%, with an earnback period of approximately 2.9 years.

Sentiment

Score: 8

Explanation: The document conveys a positive outlook on the merger, highlighting strategic benefits, financial accretion, and strong management support. The projected financial metrics are favorable, and the management commentary is optimistic. However, there is a mention of tangible book value dilution, which is a minor negative.

Positives

• The merger creates a premier middle-market bank focused on the New York metro area.
• The combined company will have significant scale, with $14 billion in assets and a market capitalization of over $1.2 billion.
• The transaction enhances ConnectOne's presence on Long Island.
• The merger is expected to be accretive to ConnectOne's earnings per share.
• The combined company will have a strong capital and liquidity position.
• The merger is expected to deliver a return on average tangible common equity of approximately 14% in 2025.
• The merger is expected to deliver an efficiency ratio of approximately 45% in 2025.

Negatives

• Tangible book value per share dilution is projected at 12%.

Risks

• The merger is subject to shareholder and regulatory approvals.
• There may be difficulties and delays in integrating First of Long Island's business.
• There may be business disruption following the proposed transaction.
• Changes in asset quality and credit risk could impact the combined company.
• The inability to sustain revenue and earnings growth could impact the combined company.
• Changes in interest rates and capital markets could impact the combined company.
• The reaction to the transaction of the companies' clients, employees and counterparties could impact the combined company.
• The impact, extent and timing of technological changes, capital management activities, and other actions of the Federal Reserve Board and legislative and regulatory actions and reforms could impact the combined company.

Future Outlook

The combined company is expected to be a premier middle-market bank focused on serving the greater New York metro area, with significant scale and enhanced presence on Long Island. The transaction is expected to be accretive to ConnectOne's earnings per share and deliver a strong return on average tangible common equity.

Management Comments

• Frank Sorrentino III, Chairman and Chief Executive Officer of ConnectOne Bank, stated that the transaction is a natural fit and enhances their franchise value.
• Chris Becker, CEO of The First National Bank of Long Island, said that the partnership will position the combined company for greater success.

Industry Context

This merger reflects a trend of consolidation in the banking industry, particularly among community and regional banks seeking to gain scale and market share. The combination of ConnectOne and First of Long Island will create a larger, more competitive player in the New York metro area.

Comparison to Industry Standards

• The merger will establish ConnectOne as one of the top 5 banks on Long Island, in terms of deposit market share, based on S&P Capital IQ Pro data.
• First of Long Island is ranked #4 in Nassau County and #5 in Suffolk County in deposit market share among banks under $100 billion of assets.
• The projected return on average tangible common equity of approximately 14% and an efficiency ratio of approximately 45% in 2025 are strong metrics compared to industry averages.

Management Changes

Stakeholder Impact

• Shareholders of First of Long Island will receive ConnectOne stock.
• Clients of both banks will have access to an expanded range of services and enhanced capabilities.
• Employees of both banks will be integrated into the combined company.

Next Steps

• Shareholders of both First of Long Island and ConnectOne will need to approve the transaction.
• Regulatory approvals will need to be obtained.
• ConnectOne will need to raise approximately $100 million in subordinated debt.
• The companies will work towards integrating their operations.

Key Dates

Keywords

merger, acquisition, banking, ConnectOne Bancorp, First of Long Island Corporation, financial services, New York metro, community bank, subordinated debt, accretive