The combination would give the $9.6 billion-asset Byline about $201 million of loans and $322 million of deposits as well as one branch in suburban Chicago. It would gain another $355 million of assets.
"We believe this partnership will enhance our financial position, drive sustainable growth, and create long-term value for our stockholders, all while reinforcing our commitment to our core markets and staying true to our local roots," Alberto Paracchini, president of Byline, said in a press release announcing the deal late Monday.
Byline currently operates 46 branches throughout the Chicago and Milwaukee areas. The combined bank would have $7.3 billion of loans and $7.8 billion of deposits.
The deal, slated to close in the second quarter of 2025, marks the fourth acquisition for Byline in Illinois over the past six years and its first since last year, when it paid $165 million in cash and stock
"We believe Byline can leverage First Security's strengths to drive continued growth in the Chicago market, while also creating greater value for our customers and the communities we serve," Danny Wirtz, chairman and CEO of First Security, said in the release.
The transaction priced First Security at 131% of its tangible book value. S&P Global data showed that targets in the Midwest over the past 12 months were on average priced at about 124% of tangible book.
Byline projected the First Security deal would drive mid-single-digit earnings per share accretion. It expects $7 million of merger-related expenses, though it also said it anticipates "significant cost savings" from the deal.
By region, the Midwest is the
A big driver for M&A in Illinois has been the sheer number of small banks operating in the state. Those banks are facing the same issues challenging lenders nationwide, including technology cost pressures, fierce competition and heavy regulation.
Yet Illinois, and Chicago in particular, are relatively flush with banks because of a decision to repeal unit banking laws years after other states. Those laws, which limited banks to a single branch in a county, postponed consolidation and led to a proliferation of small, privately held banks, Federal Reserve researchers said in a report.
There are more than 60 Illinois-based banks with less than 1% deposit market share operating in Chicago and neighboring suburbs, according to the Federal Deposit Insurance Corp. That is roughly double the comparable figure in New York City.
For Byline, taking out one of those small Chicago-area banks should prove "an easily digestible acquisition," Hovde analyst Brendan Nosal said. First Security "strikes us as a clean, profitable institution with a healthy core deposit franchise and well-diversified loan book."
