ConnectOne's 4Q Beat Shows Ongoing Momentum: Earnings Outlook

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1:32Bloomberg Audio Studios.

1:35Frank Sorrentino:Podcasts, radio, news. You're listening to Bloomberg Business Week with Carol Masser and Tim Stenevek on Bloomberg Radio. Our next guest is already betting on the U.S. has been for a while. We were talking about Connect One Bank Corp, which reported earnings last week. Stock is trading up about 1.6 percent today, up about 5 percent in the past three trading sessions. And I should point out that Keith Bruett & Woods raising its price target on the stock to$32 a share. That, Tim, happening on Friday. Great to have back with us, Frank Sorrentino. He's founder, chairman, and CEO of the New Jersey-based ConnectOne Bank.

2:10He has a$1.4 billion market cap, up close to 7 % so far this year. Welcome back. How are you? Doing great. 26 is a great year ahead of us, I really believe. A lot of people said, you know, survive till 25. Well, here we are. It's 2026, and things are looking really up. So very confident about what's happening. Well, as Carol mentioned, it's not just you guys betting on the U.S. Spain's largest bank betting big on the U.S. We already have foreign banks here. What's your view on the deal? What's the competitive landscape for the U.S. and like for business? Look, you know, there's a lot of consolidation going on in the U.S.

2:46markets for financial institutions. You know, the United States is sort of a rare breed across the globe where we have some 4 ,300 banks today, which you don't find in most countries. And so there's a natural consolidation going on. We have a very, very accommodative administration and regulatory agencies that are allowing for some of those M &A activities to take place. And, you know, notwithstanding what everyone would like to say about the U.S. and all the headlines and whatnot, there's a lot of foreign capital that wants to find its way into the United States. And so when you see a deal like this that you just announced, clearly that's foreign capital moving to make an investment here in the United States.

3:28You know, for banks like ConnectOne that are in the market in the region that Webster was in or is in, you know, we see that as a boon for us. Why? Why? Well, anytime there's consolidation like that or a merger, clients get impacted. The ability to do certain types of loans may go away. Certain products get phased out or whatnot. There's a lot of turmoil in that wake. And so generally, smaller banks are there to pick up the pieces. And so we're excited to see this transaction take place. We've asked you in the past about M &A, mostly from the perspective of you going out and buying other banks.

4:09What about bigger banks coming knocking on your door? Does that happen? Listen, it's always, yeah, it's always, you know, I've said to our investors, you know, our, everyone where, you know, our job is to continue to make ourselves unavailable to be sold. But certainly that's always a possibility for every institution and it should be for every company, right? A, it forces you to run your company in the best way possible. But certainly there's always that opportunity out there.

4:39Frank Sorrentino:Did you say availability to be sold? Always. Every company should look at their business plan and their model, looking at what value... If you want to talk about a value of a company, the value is what someone's willing to pay you for it, right? So how do you set the company up to be the most profitable, the best company in your market, in the products that you provide. And if that's true, they'll always be someone interested in an acquisition. But sometimes you have to spend money, right, to do a strategy that pays off longer term. When I say profitable, it may not be financial profitability.

5:17I mean, are we creating value? And so one of the things I'm the most proud of, we've been at Connect One 21 years with pretty much the same management team. And we've created an enormous amount of value over those 21 years and no one's been able to buy us. Not yet. That's right. But you're open to it. As I said, I think everyone should be open to that.

5:41Frank Sorrentino:We were talking with our team here. By the way, you just saw it in the transaction with Webster, right? That was a fantastic company, well-run, well-managed, great markets, and someone offered them a price they just could not refuse. I mean, what's fascinating, I think around us, we used to have a bunch of retail and then they left and two banks have opened up. Citibank across from us is a Capital One. It's like a cafe and so on and so forth. It's not retail that's coming in. I just feel like banks are popping up. I mean, banking has been a pretty good business for a while, especially the last couple of years, it feels like.

6:18Yeah. And I think it will continue to be.

6:21Frank Sorrentino:And is it because of the consolidation or is it? Well, that's part of it. What is it that's really juicing it? Look, part of it, certainly, if you have less banks, first off, you're going to have bigger banks that have bigger balance sheets and the ability to provide better products and services, and that's more desirable. We're also seeing, at the ground floor, all of our clients are getting bigger and smarter and more sophisticated, and so they have needs for more financial products. So, not to dismiss the small community, bank that doesn't have a lot of that product and service set. But what we see here, certainly in the New York Metro market, our clients are getting larger, they're getting bigger, they're entertaining M &A, and so they're leapfrogging in size.

7:08And so they need a bank that can continue to service their needs. And so part of our growth strategy, yeah, it's, you know, we want to create value, and we want to grow our earnings and all that other stuff. But I also recognize if we're not growing Connect One, we're not going to be able to satisfy our clients' needs as they're growing. And to me, that's an incredibly important part of our organization. One of the reasons we like to talk to you is because you have a great view on small business, specifically on construction, on builders. That's sort of the DNA of your bank. You've been really consistently, quarter after quarter, at least with us, optimistic about that demographic that you serve.

7:42Does that optimism remain today? Yeah, nothing's really changed in my view and through the clientele that we have relative to when we talk specifically about construction and probably in multifamily and industrial warehouse and manufacturing in those areas, there's just not enough product on the market. And when it comes to apartments and homes and condos, we are so woefully short, specifically here in the New York metro market, that I don't think you could build enough to satisfy that in any short period of time. So to say I'm optimistic would be an understatement.

8:20Frank Sorrentino:Well, what do you make of the story? I mean, we were watching Home Builders on the move this week, and this is, was it Lenar, and I forget who else, that has apparently approached the administration about building affordable homes. They call them Trump homes, including private investors. It sounds like there's a lot of details to be worked out. I don't know. How are you viewing something like that? Does this kind of make sense as maybe a first step to figuring out a strategy, or does it, I don't know? Yeah. So the answer is yes. It's a great idea to think about affordability first, you know, relative to, you know, new homes, home ownership.

8:53Again, it's rent to buy, I think is the strategy. I think home ownership is great, you know, all these other things. But, you know, the real impediment and the reason why we don't have enough homes today is not because of capital, and it's not because of bank lending. There's political change that has sort of crept into the system, you just can't build. You have to, you know, between environmental issues and, you know, the parochial town issue, town by town issues, zoning issues, insurance needs, whatever it is, creating, you know, creating this environment where it's just difficult to build. So unleash, you know, unleash the ability for builders to build and you'll have affordable housing.

9:37Well, our producer Talia has got one eye on the show and one eye on what Bill Pulte is saying on Fox News right now, Fox Business. He's actually saying he's the head of Fannie and Freddie, not actively looking at the Trump Homes idea. He's saying this on Fox Business as we speak.

9:53Frank Sorrentino:So come and go pretty quickly. Well, that's just one. Yeah. Yeah. One voice there. But an important one when it comes to certainly the housing market. You know, as you're talking about housing and you've got me thinking about infrastructure. And maybe it's because we're seeing this right now in the midst of sort of unprecedented or historic freezing weather here in New York and challenges that are associated with that. But you've got a lot of big players betting big on infrastructure right now. Are you able to play in infrastructure at all? Most of it's bigger than what we can manage. But I would agree that there is so much need for infrastructure build.

10:28You drive on any road, go across any bridge. It's really good. I use the subway often here in New York. I mean, there's clearly a need for infrastructure spending just about everywhere. But right now, that's a little too big of a swing to take. Generally, those things are beyond our balance capabilities.

10:48Frank Sorrentino:We've been talking kind of macro and big. But hold on. However, all of that infrastructure, I'm excited. That's part of my speech, too. All that infrastructure capital that's coming in when they repave the turnpike or they build a new section to the subway or build any of these products, think about it. They all need shovels. The workers all have to go to the deli. They all need their clothes cleaned. They all need to buy shoes. And those are all the businesses that Connect One supports. Economic velocity, right? Infrastructure, yeah. Infrastructure spending is great for the economy. All right.

11:20Frank Sorrentino:What about President Trump's new choice of a Fed chair? Will he be potentially great for the U.S. economy? Look, you know, he's an interesting choice based on what everyone expected. I think he's the exact opposite of what everyone expected would actually happen. And if you look at his history and what he's focused on, the thing that I like the most is that he is data-driven. And I've said those words on this show often. I think the Fed needs to look at the data and make decisions about what they're gonna do with our money supply. You've heard me speak many times on this show about that interest rates maybe aren't the most important thing we need to be focused on, but the Fed balance sheet is.

12:04And very few people want to talk about that. He wants to talk about that. And he is saying that Fed balance sheet is too big. It needs to be reined in. It is causing market distortions. And really, interest rates can afford to be lower if we get the Fed balance sheet under control. And I happen to absolutely agree with that position. Don't go.

12:25Frank Sorrentino:Can we just Can you stick around? We got like, what, two and a half hours to go? Always appreciate it. We get such a great view of what's going on. Glad you're optimistic. We could use some optimism, certainly here in 2026. Frank, thank you so much. Always great to be here. Always appreciate it. Frank Sorrentino, founder, chairman, and chief executive officer of Connect One Bancor, joining us right here in studio.

12:51They told us to expect change. They warned us about the transition. But honestly, they forgot the best part. This is the chapter where we finally focus on us. LifeMD delivers expert menopause and midlife care right from your home. From hormone health to holistic wellness, LifeMD helps you feel your best for the best years of your life. LifeMD, it's just getting good. Visit LifeMD.com slash goodlife. Hello, hello. I'm Malcolm Gladwell, host of the podcast Smart Talks with IBM. I recently sat down with IBM's chairman and CEO, Arvind Krishna, and I asked him, how can companies use AI to its fullest potential to create smarter business?

13:38My one advice to them, pick areas you can scale. Don't pick the shiny little toys on the side. For example? If anybody has more than 10 % of what they had for customer service 10 years ago, they're already five years behind. If anybody is not using AI to make their developers who write software 30 % more productive today, with the goal of being 70 % more productive. Yeah. Wow. So we are not asking our clients to be the first experiment on it. We say, you can leverage what we did. We are happy to bring out all our learnings, including what needs to change in the process, because the biggest change is not technology.

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