ConnectOne Bancorp to merge with The First of Long Island to create $14bn bank

ConnectOne Bancorp, Inc. (Nasdaq: CNOB), the parent company of ConnectOne Bank, announced a definitive merger agreement with The First of Long Island Corporation (Nasdaq: FLIC), the parent company of The First National Bank of Long Island. This merger will enable ConnectOne Bancorp to significantly expand its footprint on Long Island and the greater New York metro area.

Deal Overview and Financial Details

Under the agreement, The First of Long Island Corporation will merge with and into ConnectOne Bancorp, Inc., resulting in a combined company with approximately $14 billion in total assets, $11 billion in total deposits, and $11 billion in total loans. The shareholders of The First of Long Island Corporation will receive 0.5175 shares of ConnectOne Bancorp common stock for each share they own, valuing the transaction at approximately $284 million or $12.40 per share, based on ConnectOne’s closing stock price of $23.97 as of September 4, 2024.

Following the announcement of the merger, ConnectOne’s stock saw a slight increase, rising to $24.96 as investors responded positively to the anticipated benefits of the merger. However, shares of The First of Long Island experienced a slight dip, trading at a 0.80% discount to their last close price. This reaction reflects typical market dynamics in all-stock deals where the acquiring company’s stock influences the valuation of the acquired entity.

Strategic Significance of the Merger

The merger positions ConnectOne Bancorp as a leading middle-market bank in the New York metro area. The company will leap over the $10 billion asset threshold, gaining significant scale and enhanced market presence. With around 30% of the pro forma deposit franchise located in Nassau and Suffolk counties, the combined entity will become one of the top five banks on Long Island by deposit market share.

Frank Sorrentino III, Chairman and CEO of ConnectOne Bank, highlighted the strategic benefits of the merger: “This transaction is a natural fit as both ConnectOne and First of Long Island share a strong credit culture, a long-term track record of strong financial performance, and a deep commitment to putting clients at the center of our businesses.”

The merger will also provide financial benefits, as the all-stock transaction is expected to be approximately 36% accretive to ConnectOne’s earnings per share in 2025. The tangible book value per share dilution is projected at 12%, with an earnback period of about 2.9 years.

Operational and Cultural Integration

The combined company will operate under the ConnectOne brand, and First of Long Island’s CEO Chris Becker will assume the role of Vice Chairman of ConnectOne. Two independent board members from First of Long Island will also join the ConnectOne Board of Directors, ensuring a smooth transition and alignment of both organizations.

Both banks have emphasized their commitment to a client-first culture and robust risk management practices, which they believe will enable a seamless integration. “Together, we leverage the strengths, expertise, and resources of both companies to offer our clients the muscle and support of a $14 billion institution with a people-first culture backed by modern infrastructure,” Becker stated.

Expected Timeline and Approvals

The transaction, unanimously approved by the Boards of Directors of both companies, is expected to close in mid-2025. The merger is subject to approval by the shareholders of both ConnectOne Bancorp, Inc. and The First of Long Island Corporation, as well as regulatory approvals and customary closing conditions.

To support the transaction, ConnectOne plans to raise approximately $100 million in subordinated debt before the transaction closes, which will be used as equity capital for ConnectOne Bank.

Implications for Long Island Banking Landscape

The merger marks a significant move in the competitive Long Island banking landscape, where The First National Bank of Long Island has established a strong presence with 40 branches across the New York metropolitan area. The combined entity’s enhanced scale and reach will provide a broader range of services to its customers while solidifying ConnectOne’s presence in this key market.