ConnectOne Bank moves quickly. The Bergen County-based institution is the fastest-growing bank in the state. It has reached $3.3 billion in assets around a $545 million market cap in less than 10 years.
Last year, the bank announced a merger with Union-based Center Bancorp, closed the deal and integrated the company — all within less than six months.
Now, as the bank prepares to mark its 10th anniversary, NJBIZ caught up with CEO Frank Sorrentino and asked him some questions about his bank's acceleration.
NJBIZ: It was only in 2005 that ConnectOne, first called North Jersey Community Bank, began as a very small community bank. How has the bank managed to grow so dramatically between then and now?
Frank Sorrentino: At the time, we felt that there was a vacuum in our local northern New Jersey market for a good community bank that understood the small and medium-sized business owner. Not only was it planned to be the typical community bank that would shake your hand and kiss your baby, but it would also be a bank that recognizes the dramatic shift going on in the banking space — technology, and the very important role that it was playing. If you wanted to get in front of the best business owners, be they small or medium-sized, you needed to have the tools, products and services they require. That become our differentiating factor as a community bank. Others didn't want to invest in the technology infrastructure. We found ourselves in a no-man's land. That's why we had the growth rate we did.
But if you ask any of our clients, they would tell you we are the same bank as we were at the start. We just have a better platform of services and scale today. We can get in front of bigger clientele and support them as they grow, and that's been a hallmark of our company. One of the things most community banks don't understand well is that, if they're not growing at a fast enough rate, then their clients generally surpass them in their needs. One of the things I would hold out as a great accomplishment at ConnectOne Bank is that generally doesn't happen with our client base. We're going at the same rate, or a faster rate, then they are.
NJBIZ: And your own story is idiosyncratic in this industry. Can you talk about that — as well as what implications it has for your management style?
FS: My background is not in banking, it's in construction. So I think two things would come through in talking with our management team: 1) I don't think like a banker, I think like an entrepreneur; 2) I succeeded in the construction industry in large part due to my technological sophistication and my ability to organize. Creating a timeline for our goals to ensure that they're done is what keeps us on track. Something that I learned is a sense of urgency, and I bring that to this organization. We do things in a quick fashion, even when it's not required to do it that way. That's exemplified by how quickly we moved on the Center Bancorp merger.
NJBIZ: Speaking of that, what was the impetus for the merger with Center Bancorp?
FS: We had a terrific experience in generating organic loan growth. But because we're a fairly new organization, we struggled somewhat with deposit growth. That's why we merged with a 94-year-old organization that had a very deep deposit base yet was struggling to generate organic loan growth. From that perspective, it was a perfect match.
Here we are today, a much larger company. When you look at the balance sheet, we're also better aligned, which allows us to create more value for our shareholders.
NJBIZ: Do you see more mergers in the future of ConnectOne?
FS: Our strategy in that regard is different than others, in that we're not dependent on M&A. When we say we're the fasting-growing bank in the state of New Jersey — all that growth occurred organically. We were near $1.5 billion in assets even without the merger. We were comfortable with our growth trajectory and the value we were bringing with shareholders.
But we've said since our IPO (in February 2013), having a publically traded stock put us in the position being able to evaluate M&A activity. But it's still not the emphasis of the company; we're very much focusing on organic growth and this newly merged entity. We didn't merge so that we could start acquiring more. We just wanted to become even more effective at generating organic business. So if we never did another merger — that would be OK with us. … Some of the best deals are the ones you don't do.
NJBIZ: Given that the amount of M&A activities in New Jersey's banking industry is increasing, there's certain to be more mergers in the future. What are your thoughts on this trend?
FS: What's happening nationwide, and in New Jersey as well, is more activity of this sort than normal. Actually, I think that the number of transactions is probably close to the same as it was in the past, but there are less institutions, so the number looks bigger — the denominator is getting smaller. That's an important distinction.
All that being said, I think what's starting to happen is some valuations for banking institutions have gotten a little bit stronger. Boards and shareholders in this environment — with a low GDP growth rate in the country, coupled with low interest rates and this onslaught of continuous changes to the regulatory environment — are being moved to think of their franchise value and what the future really looks like. And for the smallest institutions, or those that are not performing well, the easier choice is to be acquired.
NJBIZ: Back in April, your institution announced it would be carving its way into the Newark market. What went into deciding to establish a branch there?
FS: Newark, in our opinion, is an underserved market. Again, very similar to why we started in 2005, there was a vacuum we identified there, in the central business area, after a number of community banks had been acquired. We starting doing business with those clients, and there was a continuous refrain about the lack of community bank services in that environment. We thought it seemed like a good place to put an office, and we've been very happy with our success in that marketplace.
NJBIZ: Do you have more predictions for the industry?
FS: As we enter 2015, we are seeing both the number of banks as well as the number of branches in the country in decline. This fact, coupled with the exciting number of trends developing in banking such as mobile payment, developments in loan systems and even connection capability (video chat, more connected bankers), will make for a new, changing banking environment.
E-mail to: firstname.lastname@example.org
Title: Chairman and CEO
Affiliation: ConnectOne Bank
One More Thing: The $243 million ConnectOne merger with Center Bancorp, which gave the bank 24 new Garden State branches, was the largest deal of this sort in 2014 — a year with quite a few M&A transactions.