Member News — ConnectOne Bancorp, Inc. to Expand into Hudson Valley through Merger with Greater Hudson Bank
July 12th, 2018
ConnectOne Bancorp, Inc. (Nasdaq:CNOB) (“ConnectOne”), parent company of ConnectOne Bank, and Greater Hudson Bank (OTCQX:GHDS) (“Greater Hudson”) are pleased to jointly announce that ConnectOne and Greater Hudson Bank have entered into a definitive agreement pursuant to which Greater Hudson will merge into ConnectOne in an all-stock transaction. Greater Hudson’s commercial lending and deposit rich franchise is consistent with ConnectOne’s stated growth strategy and enhances its strong franchise in the NY/NJ metro market by extending C&I lending capabilities, adding experienced bankers, and enhancing core deposit funding. The combination is strategically compelling with Greater Hudson’s loan-to-deposit ratio of approximately 85%, solid noninterest-bearing deposits and CRE concentration ratio of 336% complementing ConnectOne’s financial profile.
Key Transaction Highlights:
- Solidifies ConnectOne’s recently established New York operations and meaningfully expedites organic growth plans in Rockland, Orange and Westchester counties with immediate presence in demographically attractive Hudson Valley region
- Greater Hudson franchise will add $401.7 million in deposits, $340.7 million in loans (as of March 31, 2018), and a team of seasoned lenders and core deposit gathering specialists
- Establishes SBA line of business for ConnectOne, enhances C&I lending capabilities and provides significant potential to expand Greater Hudson’s current and future business
- Complements ConnectOne’s financial profile in several areas including but not limited to core deposit funding, liquidity, CRE concentration, and earning asset mix and yield
- Creates opportunity to leverage ConnectOne’s technology investments and operating model to further drive efficiencies
- Creates long-term value for shareholders and increases scarcity value of ConnectOne’s franchise
Key Financial Impact Highlights:
- EPS accretive: Approximately 2.5% accretive to ConnectOne’s earnings per share (on a fully phased in basis), excluding the impact of potential revenue enhancement opportunities
- Minimal tangible book value dilution: Approximately 1% dilutive to tangible book value per share at closing
- Short earn back period: Earn back of tangible book value dilution projected to be approximately two years using the cross-over method
- Strong internal rate of return: Projected to be over 20%
- Capital neutral transaction; results in strong pro forma capital ratios to support future growth
- Pro forma combined company total assets of $5.7 billion, deposits of $4.2 billion, and loans of $4.5 billion (as of March 31, 2018)
Under the terms of the agreement Greater Hudson Bank will merge with and into ConnectOne Bank and each outstanding share of Greater Hudson Bank common stock will be exchanged for 0.245 shares of ConnectOne common stock. The transaction is presently valued at $76.3 million, or approximately $6.16 per GHDS share, based upon the closing common stock price of $25.15 for ConnectOne Bancorp as of July 11, 2018.
The transaction has been unanimously approved by the Board of Directors of both companies and is expected to be completed early in the first quarter of 2019, subject to approval by Greater Hudson’s shareholders, as well as regulatory approvals and other customary closing conditions.
“This transaction reflects a financially attractive, compelling expansion opportunity to combine with a similarly-minded, commercially-focused lender operating within the 75-mile radius of NYC where ConnectOne has excelled. It also strongly supports our stated growth strategy, which includes opportunistic growth through M&A, to enhance our desirable and valuable franchise,” said Frank Sorrentino, ConnectOne’s Chairman and Chief Executive Officer. “Greater Hudson is a strong strategic fit for ConnectOne and allows the company to establish scale in the Hudson Valley region, add respected, talented bankers, establish an SBA line of business and further enhance our C&I lending capabilities. We are excited to bring the ConnectOne operating model and the significant technological capabilities at our disposal to Greater Hudson’s franchise and anticipate this strategic initiative will provide considerable opportunities for both of our institutions. We look forward to continuing to deliver extraordinary client service to all ConnectOne and Greater Hudson clients, as well as providing enhanced value to our shareholders.”
“We are delighted to announce our plans to join with the ConnectOne team. We believe the expanded depth of financial products and services that will be available to our customers, the increased liquidity that will be provided to our shareholders and our shared vision of improving the communities that we serve, provides significant value for all of our stakeholders,” said Edward Lutz, President and Chief Executive Officer of Greater Hudson.
Effective at the closing of the transaction, one current director of Greater Hudson’s board will join the Board of Directors of both ConnectOne Bancorp, Inc. and ConnectOne Bank.
Piper Jaffray & Co. served as financial advisor to ConnectOne and Windels Marx Lane & Mittendorf served as its legal counsel. Keefe, Bruyette & Woods, Inc., a Stifel Company, served as financial advisor to Greater Hudson and Hogan Lovells US LLP served as its legal counsel.