425: ConnectOne Bancorp to Acquire The First of Long Island Corporation in $284 Million Merger

ConnectOne Bancorp and The First of Long Island Corporation have agreed to merge, creating a premier New York metro community bank with approximately $14 billion in assets.

Summary

• ConnectOne Bancorp, Inc. and The First of Long Island Corporation have entered into a definitive merger agreement.
• First of Long Island will merge into ConnectOne, with the combined entity operating under the ConnectOne brand.
• The transaction is valued at approximately $284 million, with First of Long Island shareholders receiving 0.5175 shares of ConnectOne common stock for each share of First of Long Island common stock.
• The merger is expected to close in mid-2025, pending shareholder and regulatory approvals.
• The combined company will have approximately $14 billion in total assets, $11 billion in total deposits, and $11 billion in total loans.
• ConnectOne plans to raise approximately $100 million in subordinated debt prior to closing.
• The merger is projected to be 36% accretive to ConnectOne's earnings per share in 2025, adjusted for cost savings, with a tangible book value per share dilution of 12% and an earnback period of approximately 2.9 years.
• ConnectOne projects a return on average tangible common equity of approximately 14% and an efficiency ratio of approximately 45% in 2025, adjusted for cost savings.
• Following the merger, Christopher Becker, CEO of The First National Bank of Long Island, will become Vice Chairman of ConnectOne, and two current independent members of First of Long Island's board will join ConnectOne's Board of Directors.

Sentiment

Score: 8

Explanation: The document presents a positive outlook on the merger, highlighting the strategic benefits, financial accretion, and management's confidence in the combined company's future performance. The transaction appears well-structured and is expected to create significant value for shareholders.

Positives

• The merger creates a premier middle-market bank focused on the greater New York metro area.
• The pro forma company will have significant scale, with $14 billion in assets and a market capitalization of over $1.2 billion.
• The transaction allows ConnectOne to leap over the $10 billion threshold with significant scale.
• The merger materially enhances ConnectOne's presence on Long Island.
• The companies have highly compatible client-first cultures.
• ConnectOne is an experienced acquirer and integrator.
• The transaction is expected to be accretive to ConnectOne's earnings per share in 2025.
• The combined company is projected to deliver a return on average tangible common equity of approximately 14% and an efficiency ratio of approximately 45% in 2025, adjusted for an illustrative full phase-in of cost savings.

Negatives

• Tangible book value per share dilution is projected at 12%, with an earnback period of approximately 2.9 years.

Risks

• The merger is subject to shareholder and regulatory approvals, and other customary closing conditions.
• There are risks associated with integrating First of Long Island's business and realizing cost savings and other benefits.
• The transaction could face 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 is a risk.
• Changes in interest rates and capital markets could affect the combined company.
• The reaction to the transaction of the companies' clients, employees and counterparties is a risk.
• 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 are risks.

Future Outlook

The combined company aims to create a premier middle-market bank focused on serving the greater New York metro area, with enhanced scale and a strong presence on Long Island. The merger is expected to be accretive to earnings and offer positive pro forma benefits while maintaining a rigorous risk management culture and a strong capital and liquidity position.

Management Comments

• Frank Sorrentino III, Chairman and Chief Executive Officer of ConnectOne Bank, stated that the transaction is a natural fit and enhances franchise value, solidifies ConnectOne's presence in the New York City market, and accelerates their Long Island growth strategy.
• Chris Becker, CEO of The First National Bank of Long Island, stated that the partnership is the coming together of two market-adjacent companies that will be positioned for greater success.

Industry Context

This announcement reflects the ongoing consolidation trend in the banking industry, particularly among community and regional banks seeking to gain scale, expand their market presence, and improve efficiency. The merger allows ConnectOne to significantly enhance its presence on Long Island and compete more effectively with larger institutions in the New York metro area.

Comparison to Industry Standards

• The projected 36% EPS accretion is a strong indicator of the potential financial benefits of the merger, exceeding typical accretion levels seen in similar transactions.
• The projected 14% return on average tangible common equity (ROATCE) is above the industry average for banks of similar size, suggesting improved profitability.
• The projected efficiency ratio of 45% is considered excellent, indicating efficient operations and cost management.
• The tangible book value earnback period of 2.9 years is within an acceptable range for M&A transactions in the banking sector.
• Comparable companies in the regional banking space, such as New York Community Bancorp and Valley National Bancorp, often target similar financial metrics in their acquisitions.

Management Changes

Stakeholder Impact

• Shareholders of First of Long Island will receive ConnectOne common stock.
• Customers 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, with potential changes in roles and responsibilities.

Next Steps

• Obtain shareholder approvals from both First of Long Island and ConnectOne.
• Secure regulatory approvals.
• Complete the merger, expected in mid-2025.
• Integrate First of Long Island's business into ConnectOne.
• Raise approximately $100 million in subordinated debt.

Key Dates