The First of Long Island Corporation (CNOB) Earnings Call Transcript & Summary

Hello, and welcome to the ConnectOne, First of Long Island Merger Call. [Operator Instructions] I would now like to turn the conference over to Siya Vansia, Executive Vice President, Chief Brand and Innovation Officer for ConnectOne. You may begin.

Good morning. We appreciate you joining today's call to discuss the definitive agreement for First of Long Island to merge into ConnectOne. Leading today's call will be Frank Sorrentino, ConnectOne's Chairman and CEO; Christopher Becker, First of Long Island's President and CEO; and Bill Burns, ConnectOne's Chief Financial Officer. Before we begin, the notice of this call on a listen-only basis over the Internet was distributed this morning in a press release that has been covered by the financial media. We will also be referencing a slide presentation during management's comments today, which can be accessed by visiting ConnectOne's website at ir.connectonebank.com. At this time, let me remind you that certain statements and assumptions in this conference call contain are based upon forward-looking information and are being made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to numerous assumptions, uncertainties and known or unknown risks, which could cause actual results to differ materially from those anticipated. These risk factors are more fully discussed in the company's filings with the Securities and Exchange Commission. The forward-looking statements included in this conference call are made only as of the date of this call, and the company is not obligated to publicly update or revise them. I will now turn the call over to Frank Sorrentino. Frank, please go ahead.

Thank you, Siya. We appreciate everyone taking the time to join us this morning. I'm excited to be here, along with Chris Becker, Bill Burns and other key executives from both our teams, as we work together in creating a premier and valuable Greater New York banking franchise. The First National Bank of Long Island is a solid, successful, well-capitalized profitable community bank with pristine credit and a 100-year operating history. The combination of ConnectOne Bancorp and First of Long Island Corporation will create a $14 billion bank holding company that will be well positioned to deliver increased value to our clients, our employees and our shareholders. Anticipated to close in mid-2025, the transaction brings together 2 highly complementary banks. Like ConnectOne, First of Long Island is commercially focused and a superb fit for us. In fact, we couldn't be more alike as we both share a strong credit culture, a highly aligned focus on client service and efficiency and a commitment to the communities we serve. The combination adds $3.4 billion in deposits and will establish ConnectOne as one of the top 5 banks on Long Island in terms of deposit market share. Further, with an expanded market reach and higher legal lending limit, our platform is situated for continued growth and deeper deposits with existing clients. We believe this transaction offers significant strategic benefits as well as a compelling financial impact, as Bill will discuss later on. On the strategic side, this transaction solidifies our current presence in the New York City market while accelerating our growth strategy on Long Island, which would take years to organically replicate. The combination enhances our core funding. Bank of Long Island has attractive deposit base, low 2.18% cost of funds, reflecting a 33% noninterest-bearing composition. Combination also further diversifies ConnectOne's loan portfolio resulting in lower CRE portfolio composition day 1, while enabling ConnectOne to meaningfully accelerate C&I and business lending efforts on Long Island. From a growth perspective, we're equally excited about the expansion into desirable markets with significant upside. As many of you know, ConnectOne has a high level of familiarity with the Long Island market as we've been expanding there organically over the past few years, having opened our first branch there in 2018. As you can see from our presentation on Slide 4, First of Long Island has a very meaningful and established presence in many key communities throughout Nassau and Suffolk Counties. The map tells the story pretty well with an attractive footprint consisting of some 40 locations across Long Island and New York City. Notably, there is very little client and geographic overlap across our 2 businesses, and we believe the addition of First of Long Island substantial branch and client network significantly accelerates the expansion of our relationships and presence in this very attractive Long Island markets. Notably, post transaction, 30% of our deposit base would be native for Long Island. That represents a substantial increase from where we are today. Importantly, we're adding more than just mass, the First of Long Island's franchise value and have a tremendous amount to offer their clients, including additional products and services as well as incremental lending capabilities. clients will also be able to leverage our Hudson Valley, South Florida and New Jersey footprint as well as our deep commercial expertise. And of course, we provide an expanded product set and technological solutions for both their employees and the clients. Further, the expertise we've built is a larger institution on the compliance risk and operational fronts will support the joint company's growth. Culturally, First of Long Island also has an outstanding reputation and is known for its conservative underwriting, and like ConnectOne has a history of exceptional credit quality. Nevertheless, we've conducted a very comprehensive and rigorous due diligence process. Bill will speak a little more to this -- to the purchase accounting marks in the transaction. But our expectation is that those marks will reduce as time passes to the closing in the first half of next year. The merger is subject to regulatory approval and the approval of the shareholders of both ConnectOne and First of Long Island. The transaction has been unanimously approved by both companies' Boards of Directors. Upon completion of the transaction, ConnectOne will be governed by an exceptional Board of Directors, welcoming Chris Becker as our Vice Chair of the Board, and additionally 2 independent directors from First of Long Island. Finally, we've known Chris and his team for many years. They've built a well-respected, commercially-focused middle-market bank with a strong credit culture and a differentiated approach to business banking. We have a tremendous amount of respect for First of Long Island's history and its current team, which we value highly as they will contribute to ConnectOne's growth and profitability. So let me stop here, and I'll turn the call over to Chris for a few minutes to share his perspective. Chris?

Thanks, Frank. I, too, would like to highlight First of Long Island's enthusiasm for this transaction. We're excited about the prospects for the partnership and what it means to our bank's shareholders, clients and employees. Our cultures, values and operating philosophies are similar, and I believe that creates a significant and compelling story. Both companies have histories of solid asset quality and strong credit cultures, which work very well together. Of course, as Frank mentioned, this represents a tremendous opportunity of growth and returns. We have great relationships with our clients, and I know many First National Bank of Long Island customers are going to be incredibly excited to have access to the wide breadth of products and services that ConnectOne will be able to provide them. I'm excited to join the ConnectOne team and look forward to deepening our client relationships by helping them to continue to build their network in new ways. Finally, our Board of Directors is unanimous in their support for the merger. And I'd like to thank Frank and both teams for their support and leadership and helping making this great partnership a reality. Let me pass it over to Bill Burns to cover the financial terms of the transaction as well as the attractive pro forma metrics.

Well, thank you very much, Chris. All of us at ConnectOne are looking forward to working with you and your team at Long Island. And good morning to everyone on the call. Thank you for joining us to hear more about this value-enhancing transaction. I'm going to start with a quick overview. And if you'd like to follow along, I'm on Slide 10. This is a tax-free, 100% stock merger. The exchange ratio consideration is 0.5175 shares of ConnectOne Bancorp for each share of First of Long Island Corporation, and that places the per share value of $12.40 as of close of business yesterday, representing about 75% of tangible book value and 11x First Long Island's estimate for 2025 EPS estimate. That discount to tangible book is largely reflected of a -- reflective of a net interest margin that has been under pressure for First of Long Island. Not surprisingly, that's due to Fed tightening and an inverted yield curve, while the credit quality has remained pristine. First of Long Island shareholders will comprise approximately 24% of the pro forma combined financial institutions. We turn to Page 12 now to review the estimated financial impact of the transaction. The deal is 36% accretive to EPS, and we estimate that will be fully phased in by the start of 2026. Tangible book value dilution is at 11.9% with an earn back of less than 3 years. And that tangible book value dilution is just calculated as of today. We expect that with lower interest rates in the future and further loan amortization, the marks could be lower and the earn back shorter when the deal actually closes in 2025. And looking at the deal without the rate marks, the book value dilution and the earnback is de minimis. On the right side of Slide 12 are the pro forma capital ratios both before and after our planned sub-debt issuance of $100 million, which will take place not until next year, but prior to the deal closing in 2025. In both cases, whether before or after the debt issuance, our capital remains strong. Our expectation is to downstream all of the proceeds of the sub debt to the bank in the form of equity. And this structure works well for us for the following reasons: First, our holding company's current tangible common equity ratio is a more than healthy 9.5%, reflecting both sound capital management and effective hedging of our AOCI. Second, is the low existing double leverage ratio at the holding company of 102%. And third, is a solid liquidity at our holding company, reflecting our current cash reserve of approximately $35 million and a prudent common dividend payout ratio here at ConnectOne. On this page, we've also estimated the pro forma CRE concentration metric of 445. Being over 400 is nothing new for ConnectOne. We've been at this level or higher since our founding almost 20 years ago and have built our risk controls around that fact. And the ratio has actually trended lower in recent years, and we expect the combination with First Long Island to facilitate further reductions as we move forward. I'm going to turn to Slide 13, talk about the valuation upside created by the combination. The transaction catapults our asset size of just under $10 billion to over $14 billion, while our market cap, which is now less than $1 billion moves up to more than $1.2 billion. The resulting company will have a size and scale that can result in higher performance metrics and place us in a larger peer group that generally benefits from higher valuations. Earnings after closing of the transaction will be aided by both cost saves and accretion from the interest rate marks, leading to much improved estimated pro forma metrics, including a return on tangible common equity of 14%, efficiency ratio in the range of 44%, net interest margin of 3.12 and in my opinion, there is a bias toward that ratio being even higher than net interest margin. The bottom right on Slide 13, it illustrates the undervaluation of the CNOB stock price, that undervaluation could potentially be 30% or more if we were to match peers in the $10 billion to $25 billion range for our price to earnings ratio. Now I want to take a deeper dive into the interest rate marks. The total interest rate mark on loans is about 6% or $200 million. We're creating it over 5 years in the model with 1/3 related to residential and 2/3 to commercial, which is roughly the same breakdown as it is in the loan portfolio. The discount rates we use to compute the interest rate marks range from 5% to 9%. On the low end of that range, discount rate range was the residential mortgage portfolio, while the high end was applied to purchase credit deteriorated PCD loans. Now regarding credit marks, first, let's -- none of us forget that First of Long Island has the track record of impeccable credit quality as evidenced by historical charge-offs as next to nothing. However, in accordance with GAAP and purchase accounting, it is appropriate to take upfront nonaccretable credit reserves where credit quality impairment can be calculated and documented for so-called PCD loans. As you probably know, multifamily loans collateralized by New York City rent-regulated apartment buildings have been in focus due to rising cap rates and declining property market values. Although it is true that some of that concern is subsided recently due to easing concerns over inflation combined with lower rate expectations. And mind you, the actual performance of First of Long Island rent-regulated loans have been sound to date and expect to hold up in the foreseeable future. Nevertheless, due to current market conditions, which have lower collateral values, we took credit reserves for this segment, and those reserves will serve to mitigate potential risk. In summary, for the $500 million in rent-regulated outstandings, the estimated total credit mark is $35 million or 7% of that $500 million, and makes up the majority of total estimated nonaccretable marks for the entire loan portfolio. And if you wanted to add the interest rate marks of the rent-regulated portfolio, you'd add another $54 million, and the resulting total market rent-regulated portfolio is about 18%. Now I want to segue into the extensive credit due diligence process we've undertaken, which we believe was even beyond what would typically be deemed necessary. We had significant support from independent expert loan review firms and consultants. Close to 100% of commercial loan exposure or nearly 1,000 files were reviewed. This included all of the multifamily rent-regulated loans as well as about 90% of C&I and other CRE. We also analyzed roughly 1/3 of the residential portfolio, which consists mostly of season performing loans and well underwritten jumbos. Interest rate mark determination was calculated by a nationally recognized valuation expert, and we shared those results with our accountants. Overall, due diligence confirmed that First National Bank of Long Island has a prudent credit philosophy and discipline. Its client base is comprised of highly reputable and financially strong sponsor and they have consistently applied sound underwriting, including conservative LTVs and debt service coverage ratios with average LTVs under 60% and DSCRs generally in excess of 1.4. I'm going to talk a little bit now about the cost saves, give you some color there. The cost save target utilized in our model is 35%. We believe that based on our past performance with mergers, this target will be met or even surpassed. Although branch closures will be modest, there are several areas targeted for cost saves, including core system contracts, consultants and reallocation of resources. The pro forma-combined efficiency ratio we're projecting to be about 44% in 2025, which is actually above our run rate of the low 40s during a more normal operating environment a couple of years ago. So again, we feel very comfortable with the expense save target used in our modeling, and we welcome, First of Long Island's similar culture of expense discipline. I also wanted to mention a tax adjustment to First of Long Island's forward street estimates, which you can see on a line item in the appendix, I think it's Slide 17. The low rate is -- the low tax rate is a result of low pretax earnings coming from First of Long Island at the present time, which has also been supplemented with smart tax strategies that will just not be available to the combined entity due to our combined size. The result is that we bumped up that tax rate to ConnectOne's 26% to accurately reflect the effective tax rate on future earnings. In the presentation on Slide 8, there is some information about balance sheet composition, which we've illustrated there. The transaction strengthens our balance sheet on both the asset and liability sides of the balance sheet. On the asset side, CRE loan composition declines from 68% to 63%, while residential loans increased from 3% to 12%. ConnectOne has always had a low percentage of residential loans, and I believe 12%, which is still fairly low as a better place to be from a loan portfolio composition vantage point. Securities as a percentage of assets increases from 6% to 9%, and that gives us more liquidity to fund growth in future years while minimizing the leverage of capital. The liabilities, noninterest-bearing demand increases quite significantly from 17% of total deposits to 22%, while brokered deposits declined from 15% of total deposits to 12%. And the loan-to-deposit ratio on a pro forma basis improves materially from 108 to 104. And with that, Frank, I'll turn it back over to you.

Thanks, Bill. As you've heard, we believe this represents an exceptional and timely strategic opportunity for ConnectOne and is a terrific transaction in terms of franchise value, markets, clients, employees, culture and our balance sheets. It's accretive to earnings and will enhance our competitive positioning in a period of anticipated Fed rate reductions. I believe both franchises will benefit as a result of this partnership by creating a truly premier New York Metro community bank, providing significant potential value creation for our shareholders. With that, I'd like to open it up for questions. Operator?

[Operator Instructions] Your first question comes from the line of Daniel Tamayo with Raymond James.

Congrats on the deal. I guess, first, just -- I'm just curious, looking out to the pro forma balance sheet the impact that has on your growth expectations, I guess, kind of midyear next year, if you could look out to that point, like how you think this now impacts the expectation for loan growth and deposit growth? And then also the loan deposit ratio coming down to 104%, if that's a comfortable number there or if that you think you'll continue to reduce that?

So on the growth expectation, Daniel, I would say that ConnectOne was looking at potentially a pretty strong pipeline going into 2025. And with rates coming down somewhat, I do think that we would see that pipeline only increase in size. So thinking about our stand-alone growth in the single digits, mid- to high single digits was probably appropriate. This could potentially accelerate that based on the fact that we now would have capabilities across Long Island where we've been putting a lot of efforts. I can't say for sure. I would believe that on the First of Long Island side that they would also would have shared that growth probably would be picking up in the second half of next year as well. But I think overall, we're still going to see good growth potential going forward into next year. And as far as the loan-to-deposit ratio, we've been working very hard to get our loan-to-deposit ratio down a bit over the year. We've made some good progress there. Having it settle in at around 104 or so, I think there's a little bit more room for improvement. But we've always operated the company right around that 100% or so loan-to-deposit ratio, and we wouldn't feel uncomfortable running it from this point forward.

Okay. Great. And then maybe a question for Bill, if you could help us out with -- you talked about the accretion, but maybe where you see the margin settling out once the deal closes?

Yes. So the expectation -- obviously, we've got the interest rate mark that help targets net interest margin. And on that basis alone, we would be a little bit north of 3% on a combined basis. Having said that, both institutions are positioned very well for -- to improve from rate cuts. Both of us have made announcements that we would increase our margins by 5 basis points for every cut in interest rates. So there's a lot of a view on Wall Street that the cuts are coming a little faster. So that's going to improve our position. I also think given the better deposit mix that we're going to have, we can afford to be just a little bit more aggressive in fine-tuning our interest rates. So I would say those that net interest margin forecast of just over 3% is on the low end.

Okay. A little over 3%, excluding any benefit from rate cuts you were saying, right?

Well, that's a projection out a year, but I think that the projection from rate cuts that are in there are not quite enough. If anything, it's too little, okay? I hope I was clear there.

Yes.

Your next question comes from the line of Matthew Breese with Stephens Inc.

And maybe just a follow-up on that NIM question. What was the expected accretable yields for the first quarter or maybe even the first year after everything is kind of consolidated?

Well, it's 5 years straight line. So I don't have that number right in front of me, but you could probably calculate it, and I can talk with you afterwards about the exact number. It's calculable, okay? Yes.

Okay. And then maybe we can just go to the presentation for a second. Yes, on Page 12, you have the pro forma profitability metrics. It looks like these numbers are based on 2025. And so I had a couple of questions because of that. First, what is -- if you want to just measure it by ROA, what is pro forma profitability with all the interest rate marks just given the FLIC notation there? And then second, because only 50% of the cost saves are in 2025, maybe you could help us with either a 2026 ROA estimate or kind of your exit ROA in 2025?

Right. Good questions, Matt. I probably need a little bit more work, and we'll get to that in our earnings call next -- in October. But on this page is for illustrative purposes to show what '25 would be, assuming everything has been phased in. So I would say the numbers for this, for '25 are overstated because they're an illustry of analysis versus what we would do starting in '26. It has to do with the timing. You're talking about a deal that may close in the middle of next year, and then we have to phase in the cost saves, don't really get all the benefits in '25. But we felt more comfortable with the '25 estimates and the '26 estimates on a stand-alone basis. That's why we did it this way. Okay. I did mention in my remarks that it was based -- the accretion was based on starting fully phased in '26.

Understood. Could you just clarify the footnote. The footnote says that the pro forma profitability excludes the impact of interest rate marks.

That's for the -- excluding the rate marks page. So assuming that we didn't have -- this is the second column, the 9%, 0.5 and 0.4, so that's just showing what the deal would be if we didn't have any rate marks and it would show that there's very little tangible book dilution. On many deals -- these presentations are showing that to see what it would look like without rate marks since they're so large just to get...

I was referring to the pro forma profitability as the same foot notation. So it shows that your pro forma profitability of a 1% ROA in 2025, the footnote says that it excludes interest rate marks. I wanted to clarify that.

I have to -- what do you think that is -- hold on 1 second, Matt, it's fully phased in. That's what means here, right? It's -- this thing here assumes that it's fully phased in, right?

The marks are only in this call.

And this should be also. I think that we should have the -- sorry, that footnote you're looking at one should also include the second footnote. I will work with you on this as we try to fine-tune the models. There's a lot of moving parts here and depends when the deal closes. And we're looking out to '26 now for the fully phased numbers, okay? I'm sure you also -- I understand why you need to do something for '25 as well, but it will be a stub period in '25 because the deal probably close, say, in the second quarter of next year.

Understood. Okay. My last one is, in today's environment, there's a ton of focus on concentrations, particularly those over 500%. You noted in your comments, you've been over 400 for 20 years now. But even yourselves and past calls have talked about lowering that series concentration and providing to 445. Where do you think you need to be if it's not to appease the regulators, is it to appease the market and help your multiple? And how fast do you think you can get there?

Matt, I don't really like to look at it that way. I think I've described this before. It's not that we have a goal or a number to get to that we think makes sense to the market. It's really more about how we want to build the business going forward. And the ability to attract high-quality deposits and really become a more small regional community bank requires us to do more in the way of business lending. That business lending provides a lot of opportunities on the deposit side and naturally would allow our CRE concentration to be reduced. I think you'll see us doing less in the more transactional type multifamily and other categories and more -- not C&I for the sake of doing C&I, but C&I be doing business with the businesses, and you couldn't ask for a better market than First of Long Island's market in Nassau and Suffolk counties in order to be doing that. They have some of the most renowned names of business owners in that marketplace that will allow us to expand in a really smart way that will help us to build our deposits, build a better, more rounded organization, increase our opportunities for fee income and reduce our significant -- or reduce our reliance on CRE. So we look at it more from the positive of how the company is growing and maturing as opposed to, oh, we don't like this number, we want to reduce it. We are not telling our CRE clients, hey, we're out of business. As a matter of fact, we're growing certain parts of the CRE portfolio, but at a slower rate than some of the other things that we're doing.

And Matt, I just want to add one thing, and that is -- I think I mentioned it in the remarks, but maybe it wasn't clear. The composition of the CRE is going to be lower by 5 percentage points. And so when we build the capital back up, we're going to get more bang for our buck in reducing that ratio. So besides the organic things and other methods we have reduced CRE concentration, this new combination makes it easier for us to lower our CRE concentration.

Understood. Okay. My last question is I've always considered ConnectOne to be a growth story, an earnings story and 9 times out of 10 when the deals were mostly focused on cost saves and things like that. What are you excited about on the revenue side where we might see acceleration because of the combination? Frank, you had mentioned fee income and a larger lending limit. Maybe just talk about -- maybe something that things that aren't necessarily in the deck, but if you're excited to grow the top line.

So Matt, as I just said before, we don't see this as an opportunity to go in and slash cost. Yes, we will be able to rationalize all the costs of both companies going forward, and we believe we'll be able to return to our more historic efficiency ratio and continue to be able to grow the company. As you can see, this catapults directly pass the $10 billion mark, which really didn't have a whole lot of expense risk for us. But the ability to have a regional presence in the markets that we've created and that we serve, I think is going to accelerate our profitability over time. We're going to have the ability to compete with the best of the bunch here in the New York City market. We're going to have the fighting weight to pretty much go up against just about anyone on anything we see fit. And I think when you bring together some of the technological advantages and capabilities that we've brought for small- to medium-sized businesses and you look at our ability to execute in a much more nimble fashion, I think it's going to be really great to work together with Chris and his team across that entire market and be able to really take advantage of probably one of, if not the healthiest markets in the country at a time when there's an enormous amount of M&A going on in that market and creating a lot of disruption. Now I know we're part of that story. We are also creating some level of disruption. But the way I see it, this is not about cost saves. People at First of Long Island are -- all they're going to see is the good of this transaction and how it benefits their businesses and their lives. And I really believe this is going to accelerate both our potential for growth and our profitability.

[Operator Instructions] Your next question comes from the line of Chris O'Connell with KBW.

Congratulations. I just wanted to follow up on the CRE concentration and the pro forma $100 million sub debt raise. Any color as to just how you guys landed on kind of that level of the sub debt raise and just the thought process of going into that and determining kind of where you wanted to fall out on the CRE concentration or total capital on a pro forma basis?

Well, we looked at the numbers and felt that we didn't need to do much, ,but felt it was a good idea to do something and then commit to something. And by the way, the company is growing anyway. First Long Island didn't have any subordinated debt at all, and we could use it for our capital structure. So it was something that wasn't -- we didn't feel as necessary, but was good in the context of the whole process.

Got it. And just on the loan portfolio review. FLIC has a very good strong credit track record. And as you guys landed on the rent-regulated credit mark in particular. Just any color around just the overall third-party review or process into how that mark came about and what made you guys feel comfortable there?

Well, as I said in the investor presentation, first off, the review of the portfolio resulted in really high marks in terms of sponsors and -- another thing was a fairly low rate. Part of First of Long Island's strategy was to get the best borrowers and they may have charged them a little bit less. So there's less stress on those loans than most probably. So the portfolio is good. However, as part of purchase accounting for the PCD loans, you need to look at the value of the collateral. And right now, it's in a little bit of state of flux. There are market transactions out there that are -- have been severely depressed. We also went out to appraisers. We went out to 3 nationally recognized appraisers and got cap rates for those. And we used the combination of cap rates as well as market transactions for different areas of New York City and went loan by loan and took a look and saw if there could be any shortfall in loan to value at a certain point in time. And with that, that's the basic premise for coming up with a calculation methodology and documentation to take that reserve, which I believe is important to mitigate the risk in that portfolio, especially because there's a focus on that from the investor community.

Understood. That's helpful. And then I know it's early days, but looking at pro forma after the close, is there any contemplated portfolio sales on the loan side post-close in the marks?

I wouldn't rule it out, but nothing that I feel that we need to do, okay? But certainly, we're always looking for transactions actual or synthetic that can help our risk controls or cosmetically help our risk perception.

Your next question comes from the line of Frank Schiraldi with Piper Sandler.

I have a couple left on. Bill, just one more on the margin. Just want to make sure I'm thinking about it correctly. You may have already talked from [indiscernible] but in terms of -- I think you gave a number like 310 or 312 maybe for...

Right.

Now that includes expectations of like the current forward curve in terms of what rates are going to do. I mean how many rate cuts does that have baked into it, I guess?

Right. It comes from -- in this model, it comes from The Street estimates and then the purchase accounting on top of it. So The Street estimates are not necessarily our estimates but it's what you've put in for our margin respectively. Okay?

Okay. And then given just -- that's largely a contiguous host a significant overlap. I mean the cost saves, those don't assume or don't require any branch closures. Is that fair?

Yes. There's just a few in there, but there's always ways to be more efficient. And I listened to some of them, there's some big contracts that we'll be terminating. We have some ideas for reallocation of resources. Every deal we've done in the past we have exceeded the cost estimates by far. And part of our calculus when we announce deals, is I don't want anyone thinking that we can't achieve it or we put an extra high number in there to get the deal to look better. That was in the Bank of New Jersey deal. I think we put 65% in. And Frank thinks we got 90% cost, you think we had 110% cost size. It's really like 85% instead of 65%. And the ones that are announced at 40%, we get like 50%. So I feel really comfortable with the 35%, and they'll probably be higher.

Okay. Got it. And then just on the onetime costs or expenses associated with the $38 million. Is there anything elevated in there, you can kind of any additional breakout, I guess, of those costs? I assume that's not -- doesn't include sub debt or maybe it does, the cost to raise sub debt?

No. No, that doesn't include that. Just any upfront charges mostly has to do with severance and employment contract as well as major contracts and conversion costs and as well as rebranding costs.

Okay. Okay. And then just lastly, on the rent-regulated stuff. I don't know if there's any sort of maturity or repricing schedule you can provide on FLIC's portfolio?

Have we put it -- have you put it in your prior investor presentation. We'll start to do that and combine it for both of us and work with Chris to provide that information. But hold on a second. It's similar to us. It's similar to us in that a smaller portion is in the remainder of '24 and '25, and then it does reprice at a greater volume in '26 and '27, okay? So right now, we're dealing with repricings of a relatively smaller amount. This is probably across the industry, but it bodes well for margin expansion in future years, because even if rates fall in future years, there's still a good portion of both our portfolios that is going to reprice in '26 and '27.

Your next question is a follow-up from Matthew Breese with Stephens Inc.

Just a quick follow-up on exposures. What is the pro for rent-regulated multifamily? I would say, anything over 50% rent regulated and the pro forma office exposure? That's all I have.

Bill, what was about pro forma office? The -- in terms of the rent regulated, significant portion is over 50% of First of Long Island's -- 57%, on average, 57% on average, a little bit higher than us in terms of the makeup of the whole portfolio. And the office exposure, which we due diligence is $216 million.

This concludes the question-and-answer session. I will turn the call to management for closing remarks.

Well, I wanted to say thank you to everyone for joining today, and I really appreciate time and effort. There will be lots of great updates as we move along. So thank you for your interest today and look forward to speaking to you in the future.

This concludes today's conference call. We thank you for joining. You may now disconnect your lines.