Morningstar DBRS has assigned initial Long-Term Issuer Ratings of BBB (high) to ConnectOne Bank and BBB to ConnectOne Bancorp, Inc., with a Stable trend for all credit ratings. These ratings reflect the company's sound and growing banking franchise, resilient earnings generation, and robust asset quality, supported by strong client relationships and conservative loan underwriting.
The pending acquisition of The First of Long Island Corporation, expected to close in the second quarter of 2025, is anticipated to enhance ConnectOne's franchise by adding approximately $4.1 billion in assets and diversifying both deposits and loans. This merger is expected to significantly increase ConnectOne's scale on Long Island.
Morningstar DBRS noted ConnectOne's reliance on spread income due to limited fee-income contribution and substantial commercial real estate (CRE) exposures, which aggregate to approximately 62% of total loans on a pro forma basis. However, conservative underwriting has historically resulted in low loss levels. The company's CET1 ratio was 10.97% as of year-end 2024, projected to be around 10% post-merger, with a tangible common equity to tangible assets ratio of 9.73% as of March 31, 2025.
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