Business leader at the helm of ConnectOne might facilitate additional mergers and acquisitions amid the escalating market environment of increased consolidation.
ConnectOne Bank Set to Expand Under Favorable Regulatory Climate
In a shift from the more stringent regulatory environment of the past, ConnectOne Bank is poised to grow significantly through an acquisition under the current administration. The bank, led by CEO Frank Sorrentino III, has submitted a merger application to the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve, and the New Jersey Department of Banking.
The acquisition of The First of Long Island, valued at $284 million, will bring $3.3 billion in deposits to ConnectOne, making it a more significant regional banking player. This move is part of ConnectOne's long-term strategy, as the bank has been preparing for asset growth for the past three years.
The acquisition will also help ConnectOne reduce its commercial real estate exposure. The substantial residential portfolio of The First of Long Island will offset ConnectOne's commercial real estate focus, providing a more balanced asset base.
Under Sorrentino's leadership, ConnectOne has maintained a strong underwriting team and taken a disciplined approach to lending. In the second quarter, ConnectOne had $2.5 billion in multifamily loans and a delinquency ratio of 1.06%, giving it the 14th-highest multifamily loan delinquency ratio among U.S. banks. The bank has been steadily adding to its loan-loss reserve, with a provision for credit losses of $3.8 million for the third quarter.
Sorrentino anticipates a "more common sense approach" to regulation and enforcement in the banking industry under the current administration, which he believes will be more favorable for mergers and acquisitions (M&A) in banking. He expects this more permissive regulatory climate to facilitate strategic acquisitions like the one with The First of Long Island, aiming to increase market share and operational efficiencies.
The loan-to-deposit ratio of ConnectOne Bank will decrease due to the acquisition, currently sitting at 107.81%. The bank has been working to reduce its nonrelationship loans this year to improve this ratio. Notably, the loss of Durbin Amendment income due to the acquisition is deemed "inconsequential" by ConnectOne's CEO.
The transaction between ConnectOne and First of Long Island is expected to close in the first half of 2025. ConnectOne filed an S-4 with the Securities and Exchange Commission this month regarding the acquisition, which will push ConnectOne's assets above the $10 billion threshold.
This acquisition marks an exciting step forward for ConnectOne Bank, reflecting the bank's commitment to growth and strategic expansion in the current favorable regulatory climate.
The acquisition of The First of Long Island by ConnectOne Bank, valued at $284 million, will allow for a significant expansion in both finance and business, as it will bring $3.3 billion in deposits and likely increase market share. Under the current administration, CEO Frank Sorrentino III expects a more permissive regulatory climate, facilitating strategic acquisitions like this one.
