Under the terms of the merger agreement, each share of FLIC common stock was converted into the right to receive 0.5175 shares of ConnectOne common stock, with cash paid in lieu of fractional shares. ConnectOne's September 2024 investor presentation and joint press release disclosed implied pricing multiples of approximately 0.74x FLIC's tangible book value (versus a 1.33x median for comparable nationwide bank M&A deals with deal values between $150 million and $1 billion announced in the prior 12 months), a negative 3.0% core deposit premium, and 10.8x FLIC's 2025 estimated earnings (versus a 12.0x comparable-transaction median). Separately, in its fairness opinion to the FLIC board, Piper Sandler calculated its own implied transaction metrics using FLIC's August 31, 2024 share/RSU count and the September 3, 2024 closing price: an aggregate implied transaction value of approximately $289.3 million, an implied purchase price of $12.64 per FLIC share, 76% of tangible book value per share, 12.9x LTM earnings per share, 15.0x 2024E consensus EPS, 11.0x 2025E consensus EPS, a tangible book premium to core deposits (deposits excluding CDs over $100,000) of negative 2.9%, and a market premium as of September 3, 2024 of negative 0.3%. At closing, ConnectOne shareholders were expected to own approximately 76% of the combined company and FLIC shareholders approximately 23.6% on a fully diluted basis, per the joint proxy statement/prospectus (Form S-4).
The combined company, operating under the ConnectOne brand, had approximately $14 billion in total assets, $11 billion in total deposits and $11 billion in total loans at completion, with a pro forma market capitalization of over $1.2 billion based on ConnectOne's September 4, 2024 closing price. First of Long Island, headquartered in Melville, NY, had approximately $4.2 billion of assets, $3.3 billion of loans and $3.4 billion of deposits as of June 30, 2024, operated 40 branches in the New York metropolitan area, and ranked #4 in Nassau County and #5 in Suffolk County in deposit market share among banks with under $100 billion in assets (per S&P Capital IQ Pro data as of June 30, 2023), with approximately 92% of its deposits located in Nassau or Suffolk counties. Pro forma, approximately 30% of the combined company's deposit franchise and approximately 34 branches were expected to be located in the Long Island market, and the FLIC board noted the combined company would hold the 4th and 5th largest deposit market shares in Nassau and Suffolk Counties, respectively.
On financial impact, ConnectOne projected the deal would be approximately 36% accretive to its 2025 earnings per share, as adjusted for an illustrative full phase-in of cost savings (9% accretive excluding interest-rate marks, per the investor presentation). Tangible book value per share dilution was projected at approximately 12% (0.5% excluding rate marks), with an earnback period of approximately 2.9 years (0.4 years excluding rate marks). ConnectOne targeted a pro forma 2025 estimated return on average tangible common equity of approximately 14%, a 2025 estimated efficiency ratio of approximately 45%, and 2025 estimated return on average assets of approximately 1.0%, assuming full phase-in of cost savings. The presentation modeled cost savings equal to 35% of FLIC's noninterest expense, phased in 50% in 2025 and 100% thereafter. As part of the transaction, ConnectOne raised approximately $100 million of Tier 2 qualifying subordinated debt prior to closing, with net proceeds downstreamed to ConnectOne Bank as common equity; the merger agreement separately committed ConnectOne to raise up to $200 million in new capital (subordinated debt or a combination of subordinated debt and common equity) if required to obtain necessary regulatory approval, per the joint proxy statement/prospectus. Pro forma capital ratios with the subordinated debt raise were disclosed at approximately 7.9% TCE/TA, 9.8% CET1 and 13.3% total capital ratio. The presentation also disclosed purchase-accounting assumptions including a gross credit mark of approximately $67 million (2.0% of FLIC's loan portfolio), a loan interest rate mark of approximately $198 million (6.1% of the loan portfolio) accreted straight-line over five years, and approximately $38 million of after-tax merger charges fully reflected in tangible book value at closing.
The joint proxy statement/prospectus on Form S-4 (filed December 10, 2024, as amended, with a final 424B3 prospectus filed December 31, 2024) disclosed a detailed background of the merger. FLIC, advised by Piper Sandler, had conducted a strategic review beginning in late 2022; in January 2023 Piper Sandler approached 13 financial institution holding companies about a potential sale, five expressed initial interest, and four (including ConnectOne) signed confidentiality agreements. Two parties, ConnectOne and an unnamed "Party B," submitted non-binding indications of interest in February 2023, but market turmoil following the March 2023 regional bank failures caused both to pause. FLIC's CEO Christopher Becker subsequently held exploratory discussions through 2023 and 2024 with ConnectOne and three other unnamed parties referred to in the filing as Party C, Party D and Party E, including a brief due diligence process with Party D in March 2024 that did not proceed due to market conditions. The FLIC board's recommendation noted the company's advisors had reached out to a total of 16 parties over the process. Discussions with ConnectOne re-accelerated in April 2024; on May 22, 2024 ConnectOne submitted a new non-binding indication of interest proposing a potential capital raise of up to $200 million, board seats for up to three FLIC directors, and senior roles for certain FLIC executives, followed by a 60-day mutual exclusivity agreement. The exchange ratio was negotiated between 0.50 and 0.54 ConnectOne shares per FLIC share before the parties agreed on 0.5175 on September 2, 2024. Keefe, Bruyette & Woods (KBW) rendered a fairness opinion to the ConnectOne board, and Piper Sandler rendered a fairness opinion to the FLIC board, both dated September 4, 2024, concluding the exchange ratio was fair, from a financial point of view, to their respective clients.
Under the merger agreement, the FLIC board agreed to recommend shareholder approval and not to solicit competing acquisition proposals, subject to a customary fiduciary-out exception for unsolicited superior proposals, and both companies' directors and certain executive officers entered into voting agreements to support the deal. Closing was conditioned on approval by both companies' shareholders, receipt of required regulatory approvals, effectiveness of ConnectOne's Form S-4 registration statement, and Nasdaq listing approval for the shares to be issued. The merger agreement provided that if terminated under certain circumstances in connection with a competing acquisition transaction, FLIC would owe ConnectOne a termination fee of $11,845,000. Following completion, ConnectOne's board was expanded to 15 members; Christopher Becker, former President and CEO of First National Bank of Long Island and FLIC, was appointed Vice Chairman of ConnectOne, and two additional independent FLIC directors, Peter Quick and Ed Haye, joined the ConnectOne board. The merger was structured to qualify as a tax-free reorganization under Section 368(a) of the Internal Revenue Code.
Keefe, Bruyette & Woods, Inc., A Stifel Company, served as financial advisor to ConnectOne, and Windels Marx Lane & Mittendorf, LLP served as its legal counsel. Piper Sandler & Co. served as financial advisor to First of Long Island, and Luse Gorman PC served as its legal counsel, as confirmed in the September 2024 merger-announcement press release, the joint proxy statement/prospectus, and the June 2025 closing press release.