Byline Bancorp has agreed to acquire Illinois State Bancorp in a cash and stock deal worth about 87.9 million dollars, continuing the Chicago lender's run of acquisitions in its home market.
Under the agreement, Byline will issue roughly 1.4 million of its own shares and pay about 28.9 million dollars in cash to Illinois State Bancorp shareholders, with a further 5.1 million dollars in cash to settle outstanding stock options. The headline figure values each Illinois State Bancorp common share at 261.23 dollars, struck against a Byline closing price of 37.63 dollars. Both boards have unanimously approved the transaction.
Illinois State Bancorp is a small but dense franchise. It held total assets of about 617.3 million dollars at the end of the first half of this year, against loans of 470.5 million dollars and deposits of 510.5 million dollars. It operates four branches, three across Chicagoland and one in Bourbonnais. On completion the combined company will run 48 branches.
Roberto Herencia, Byline's Executive Chairman and Chief Executive Officer, called the deal another meaningful step in the bank's growth strategy. Alberto Paracchini, Byline's President, said the partnership would drive sustainable growth and enhance long term stockholder value. Florian Barbi, Chairman, President and Chief Executive Officer of Illinois State Bancorp, said it had been critical to identify a partner that would preserve his bank's values and customer focused culture.
The arithmetic behind the deal is worth setting out, because it explains the shape of the consideration. A target with 510.5 million dollars of deposits is being bought for 87.9 million dollars, and roughly two thirds of that is being paid in Byline paper rather than cash. Using stock for the larger part of the price preserves the acquirer's capital position while giving the selling shareholders continued exposure to the combined bank, which is the structure a buyer reaches for when it intends to keep acquiring.
The loan to deposit ratio at the target is about 92 per cent, which is a fully lent balance sheet rather than a pile of cheap funding. That suggests Byline is buying a working commercial franchise and its customer relationships rather than simply acquiring deposits to fund its own lending, which has been the motive behind a good deal of consolidation among United States community banks.
Byline has been among the more acquisitive banks of its size in the Chicago market, and a move that takes the branch network to 48 while adding only four locations indicates infill rather than expansion into new territory. Overlapping footprints are where cost savings in bank mergers actually come from.
The transaction is expected to close in the first quarter of next year, subject to regulatory approvals, the approval of Illinois State Bancorp shareholders and other customary conditions. Byline Bancorp is listed on the New York Stock Exchange.
