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ConnectOne eyes 60% cost saves with Bancorp of New Jersey buy

ConnectOne Bancorp Inc. expects to achieve 60% cost saves as part of its in-market acquisition of Bancorp of New Jersey Inc.

The significant branch overlap of the two banks should enable the cost saves, management said, painting the forecast as "very, very conservative." On an Aug. 16 deal call, executives compared the deal to ConnectOne's most recent acquisition, of Greater Hudson Bank, which closed on Jan. 2. CFO William Burns said ConnectOne had forecast 40% cost saves in the Greater Hudson deal but ended up achieving more than 50%. That suggests the 60% cost save rate for Bancorp of New Jersey should prove achievable considering more significant branch overlap, Burns said. Management said eight of the target's nine branches are within walking distance of ConnectOne branches.

"This is a unique transaction with significant overlap, and the brick-and-mortar locations are almost on top of one another. Comparing that to Greater Hudson, which we completed earlier this year, we had no branch closures," Burns said.

CEO and Chairman Frank Sorrentino III said the additional scale gained from the deal was a significant benefit, especially for an in-market bank. At closing, ConnectOne will jump to the No. 5 bank from No. 8 bank by deposit market share in Bergen County, N.J., a high-income county in the New York City metro area. For the New Jersey state deposit market share rankings, the deal pushes ConnectOne up one spot to No. 7.

"We're in a market today where banks in that size category are having difficulty [getting] to the next step. And I think it was just only natural that two in-market competitors could come together, exact out an enormous amount of cost saves and just build a stronger, better, faster company by coming together," Sorrentino said.

Sorrentino has previously said he sees scale as vitally important, and he hinted on the call that more deal activity could be on the horizon for ConnectOne.

"I wanted to add that the transaction continues to build on our franchise, making us even more attractive in the M&A landscape," he said.

ConnectOne executives also laid out some potential cost saves and revenue synergies that were not included in the 60% estimate, such as repricing deposits or restructuring both liabilities and the securities portfolio. On the liability side of the balance sheet, Burns said the bank will have an opportunity to reprice some core deposits by evaluating relationships on a case-by-case basis. However, he said the bank would not rush to reprice those deposits since the projected 3.5 year earnback represents the "worst-case" scenario and any deposit repricing would lower that figure.