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Based in Englewood Cliffs, NJ, ConnectOne Bancorp (NASDAQ:CNOB) scheduled a $44 million IPO with a market capitalization of $131 million at a price range mid-point of $27.50, for Tuesday, February 12, 2013.

Five IPOs are scheduled for the week of February 4. The full IPO calendar is available here.

S-1 filed February 1, 2013.

Manager, Joint Managers: Stifel. Co Managers: Keefe, Bruyette & Woods; Sandler O'Neill.

SUMMARY
CNOB is a small New Jersey bank that generated a 25% increase in net interest income for the nine months ended September 2012 vs 2011, along with a 27% increase in net profit.

The IPO will increase stock holders equity by $40 million, to $110 million from $70 million. IPO money will be used to expand the business.

VALULATON

Valuation Ratios

IPO Mrkt

Price /

Price /

Price /

Price /

% offered

annualized Sept 9 mos

Cap (MM)

Interest income

Earnings

BookValue

TangibleBV

in IPO

ConnectOne Bancorp (CNOB)

$131

3.3

16.1

1.2

1.2

34%

Compared to four other New Jersey banks CNOB is priced in the middle in terms of Price / Sales (Interest Income), Price / Book and Profit Margin. CNOB is the most expensive in terms of Price / Earnings. The four New Jersey banks are Penns Woods Bancorp (NASDAQ:PWOD), Peapack-Gladstone Financial (NASDAQ:PGC), Center Bancorp (NASDAQ:CNBC), and Lakeland Bancorp (LBAI).

Glossary of financial terms

OBSERVATIONS
CNOB is growing faster than most New Jersey banks but the P/E is also higher. The expectation is that the IPO money will fuel a profit surge.

Because CNOB is on the small side in terms of assets, it may be easier to generate organic growth with the new capital. But, because the IPO is relatively small the after-market trading may be somewhat illiquid.

CONCLUSION
Ok to take: neutral to positive.

BUSINESS
CNOB was formed in 2008 to serve as the holding company for North Jersey Community Bank.

CNOB is a community-based, full-service commercial bank that serves the banking needs of small to medium-sized businesses, professional entities and individuals than can a branch or subsidiary of a larger out-of-market institution.

CNOB was recognized as one of the top five performing community banks in 2010 and one of the top 15 best performing community banks in 2011 with assets between $500 million and $5 billion in the United States by SNL Financial LC.

MARKET AREA
CNOB's banking offices are located in Bergen, Hudson and Monmouth Counties in New Jersey, which include some of the most affluent markets in the United States.

CNOB also attracts business and customers from a broader region, primarily defined as the northeastern quarter of the State of New Jersey, from Route 195 to the south and Route 287 to the west to the New York state border on the north.

Bergen County, where 93.5% of CNOB's total deposits as of September 30, 2012, are located, is home to significant employers including Benjamin Moore, the Hertz Corporation, Pathmark and Volkswagen Group of America. Furthermore, CNBC, LG USA and Unilever of North America are headquartered in the Borough of Englewood Cliffs (company headquarters location).

Looking at the broader state economic environment, 20 Fortune 500 companies are headquartered in New Jersey, primarily concentrated in the northeast quarter of the state, the core market area. Among Russell 3000 companies, 102 are headquartered in New Jersey, and Bergen County is home to more of these companies (17) than any other county in the State.

ORGANIC GROWTH
Historically, CNOB has concentrated on organic growth, through opening new branches and offering new technology and product delivery channels to acquire new customers.

CNOB expects the bulk of its growth to continue to be organic. The goal is to open new offices in the counties contained in the broader trade area discussed above.

However, CNOB does not believe that it needs to establish a physical location in each market that it served.

CNOB believes that advances in technology have created new delivery channels which allow CNOB to service customers and maintain business relationships without a physical presence, and that these customers can also be serviced through a regional office.

CNOB believes the key to customer acquisition and retention is establishing quality teams of lenders and business relationship officers who will frequently go to the customer, rather than having the customer come into the branch.

CNOB's expansion into Monmouth County, through the opening of the Holmdel, New Jersey, office, is an example of this strategy. CNOB opened the branch in July 2011 and, as of September 30, 2012, had $20.0 million in total deposits at the Holmdel branch.

HURRICANE SANDY'S IMPACT
While CNOB waived overdraft and certain other fees for customers in the immediate aftermath of the storm, the costs incurred by the Bank were not significant, and the storm did not have a significant impact on CNOBs operations.

COMPETITORS
New Jersey Banks
Penns Woods Bancorp
Peapack-Gladstone Financial
Center Bancorp
Lakeland Bancorp

Larger Regional Banks
Valley National Bancorp, (NYSE:VLY)
Susquehanna Bancshares (NASDAQ:SUSQ)

DIVIDEND POLICY
No dividends.

USE OF PROCEEDS
CNOB expects to net $40 million from its IPO. Proceeds are allocated to provide regulatory capital to support future asset growth and continued expansion of the Bank's business.

Disclaimer: This IPO report is based on a reading and analysis of CNOB's S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

Source: IPO Preview: ConnectOne Bancorp