In most years, the timely completion of a bank M&A deal — especially between community banks — would be routine.
But Chicago-based Byline Bancorp's closing late last week of its $129 million cash-and-stock acquisition of Inland Bancorp — which boosted Byline to $8.7 billion of assets and more than 40 branches in the Chicago and Milwaukee metro areas — was notable because analysts have been watching pending mergers closely for any hints of insurmountable delays.
One of the principal reasons for the scrutiny has been the Biden administration's call in 2021 for ramped-up M&A examinations. Deal activity has slowed dramatically since, as would-be buyers took note of several deals taking months longer to close than planned and others getting nixed amid difficulty clearing higher regulatory hurdles.
The Byline-Inland transaction, when announced in November 2022, was projected to close by the end of the second quarter. The companies effectively met their deadline, a more favorable result than that of multiple deals over the course of 2022 and this year.
For example, MVB Financial in Fairmont, West Virginia, and Integrated Financial Holdings in North Carolina, called off their planned $98 million merger in May. MVB cited both "delays in regulatory processes" and "changing market conditions that have pressured bank industry stock prices" in the wake of prominent regional bank failures in the spring of this year.
Also in May, the planned merger of TD Bank Group and First Horizon was abandoned, with both companies blaming multiple regulatory delays. That deal, valued at $13.4 billion when announced in February 2022, was originally expected to close in the fall of last year. But it was pushed off multiple times as the banks worked to navigate intense scrutiny of the transaction.
Only 28 deals were announced through April of this year, according to S&P Global Market Intelligence. That was half the volume during the same period a year earlier, and 2022 was a slow year. There were just 168 U.S. bank M&A deals announced last year, down from 205 in 2021.
Michael Jamesson, a principal at the bank consulting firm Jamesson Associates, said in a recent interview that tougher regulatory reviews have weighed heavily on the minds of industry observers who view further consolidation as necessary. He said many small banks are struggling to keep up with the technology spending of larger banks and intense competition broadly. Elevated deposit costs also are hurting many community banks. Many of these banks would benefit from combining with larger banks. Buyers, he said, gain added scale, geographic diversity and new or expanded business lines.
Those are the kinds of advantages Alberto Paracchini, president of Byline, touted in a news release Monday, two days after the transaction was officially done.
"We believe this transaction creates a great opportunity to grow our presence and expand our position in Chicagoland by complementing Inland's strengths with Byline's capabilities and breadth of product and service offerings," Paracchini said.
Inland —based in Oak Brook, Illinois, and parent of Inland Bank and Trust — had more than $1 billion of assets and 10 branches, primarily in the western and northern suburbs of Chicago.
When the deal was announced, Byline estimated there would be cost reductions of about 30% of Inland's expense base. The transaction was expected to be more than 10% accretive to Byline's earnings per share in 2024. The buyer said it would earn back tangible book value dilution in less than three years.
Bank M&A in Illinois has been relatively active this year compared with national trends, according to S&P. Of the 28 U.S. deals through April, five involved targets in Illinois, more than any other state.
Illinois repealed unit banking laws in the 1980s — about two decades after most states. Unit banking limited banks to a single location in one county. The repeal lag in Illinois postponed consolidation and, as a result, the state is still peppered with small, privately held banks. Many of them, like Inland, are in and around Chicago.
