ConnectOne Bancorp, Inc. CNOB has agreed to acquire The First of Long Island Corp. FLIC. The all-stock transaction is valued at $284 million.

Details of the Acquisition Pursued by ConnectOne Bancorp

The First of Long Island, based in Melville, NY, operates 40 branches in the New York Metropolitan area, with roughly 92% of its deposits belonging to Nassau or Suffolk Counties. As of June 30, 2024, FLIC had approximately $4.2 billion in assets, $3.3 billion in loans and $3.4 billion in deposits.

Upon the closure of the transaction, FLIC will be merged with ConnectOne Bancorp, with an anticipated post-tax merger charge of $38 million.

The combined entity will operate under ConnectOne and is anticipated to have roughly $14 billion in total assets, $11 billion in total deposits and total loans. Per the agreement, CNOB will pay 0.5175 shares of its stock for each share of The First of Long Island common stock.
 
Further, as part of the deal, ConnectOne Bancorp intends to raise roughly $100 million of tier 2 qualifying subordinated debt before the closure of the deal. These proceeds will be injected into ConnectOne Bancorp’s subsidiary, ConnectOne Bank, as equity capital.

Also, upon the closure of the deal, Chris Becker, CEO of The First of Long Island, will transition into the role of vice chairman of ConnectOne, and two independent members of FLIC will join the board of CNOB. The deal has been unanimously approved by the board of directors of both entities and is expected to close by mid-2025, subject to customary closing conditions.

CNOB’s Rationale Behind the Acquisition

CNOB will likely benefit from expected cost-savings of 35% of FLIC’s non-interest expense, 50% of which will be phased in 2025, and the rest will be realized thereafter.

The deal is anticipated to be 36% accretive to 2025 earnings per share, assuming the execution of cost-savings. Also, tangible book value is expected to dilute by 12% with a projected earn-back period of approximately 2.9 years.

Further, CNOB projects roughly 14% average tangible common equity and 1% return on average assets, alongside an efficiency ratio of 45% in 2025, adjusting for the phased-in cost savings.

This transaction is likely to improve the deposit mix through low-cost deposits with more than 30% non-interest-bearing deposits. Also, it will enhance the bank’s funding profile, alongside boosting liquidity. This will keep the company well-positioned for margin expansion in a falling-rate environment.

Moreover, the deal meaningfully accelerates ConnectOne Bancorp’s Long Island expansion strategy and reduces the loan-to-deposit ratio and commercial real estate concentration, leading to a balanced loan portfolio.

Frank Sorrentino III, chairman and CEO of ConnectOne Bank, stated, “Strategically, this is a compelling transaction which enhances our franchise value, solidifies ConnectOne’s presence in the New York City market and accelerates our Long Island growth strategy. Additionally, adding over $3 billion in deposits, the combination will establish ConnectOne as one of the top 5 banks on Long Island, in terms of deposit market share.”

This move aligns with the company’s inorganic growth strategy. Since January 2019, the company has acquired GHB, BoeFly, and BNJ to enhance its accessibility to superior workforce and talent acquisition or to realize cost or revenue synergies.