In an effort to strengthen its position in Chicago, Byline Bancorp, Inc. BY has entered a cash and stock merger deal worth $41 million with First Security Bancorp, Inc. Per the agreement, the latter and its subsidiary, First Security Trust and Savings Bank, will combine with Byline Bancorp. The completion of the deal, subject to regulatory approvals, the approval of First Security’s stockholders and the satisfaction of certain other closing conditions, is expected in the second quarter of 2025.

Headquartered in Elmwood Park, IL, First Security has total assets of $354.8 million, total loans of $201.4 million and total deposits of $321.8 million.

The merger is expected to solidify Byline’s position as Chicago’s largest community bank, with assets under $10 billion, loans of $7.3 billion and deposits worth $7.8 billion, along with 45 branches across the greater Chicago metropolitan area.

Terms & Financial Impacts of Byline-First Security Merger

Per the terms of the deal, Byline will issue 2.1794 shares of its common stock for each outstanding share of First Security or 1.5 million shares to First Security, subject to adjustment.

Based on the closing share price of Byline as of Sept. 27 of $26.16 per share, the transaction is valued at $38.4 million or $57.01 per First Security common stock.

The outstanding First Security preferred shares will be redeemed in cash at closing with an estimated value of $2.6 million, in accordance with the terms of the certificate of designation.

Total pre-tax merger-related costs are expected to be $7 million.

Significant cost savings are anticipated to be realized as part of the transaction. About 70% of the cost savings are anticipated to be realized in 2025, and then 100% in 2026 and thereafter.

The deal is expected to be accretive to BY’s earnings in the mid-single digits. There will be minimal tangible book value dilution, which is expected to be earned back in less than a year.

Management Comments

Roberto R. Herencia, the executive chairman and CEO of Byline Bancorp, stated, “First Security Trust and Savings Bank is a highly respected financial institution that shares our core values of exceptional customer service and building lasting relationships within the communities we serve and call home. At Byline, our M&A strategy is centered on finding the right partners – those who align with our values and strengthen our presence in complementary markets.”

Alberto J. Paracchini, the president of BY, said, “We are pleased to add this high-quality and complimentary Chicagoland franchise through a partnership that aligns with our strategy of being the preeminent commercial bank in Chicago. First Security brings a solid core deposit base that further enhances balance sheet flexibility, while its loan mix adds valuable diversification to our portfolio.”

Paracchini added, “Together, 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.”

First Security’s chairman and CEO, Danny Wirtz, commented, “By joining forces with Byline, we are aligning with a partner that shares our commitment to exceptional customer service, innovation and community focus. First Security Bancorp was founded on the principles of offering tailored products and services to meet our customers’ financial needs, and this partnership will further those principles. 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.”

BY’s Price Performance & Zacks Rank

Over the past six months, BY shares have gained 28.3% compared with the industry’s 15.8% growth.

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Currently, Byline Bancorp carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Inorganic Growth Efforts by Other Finance Firms

Zions Bancorporation’s ZION arm, California Bank & Trust (CB&T), agreed to acquire four branches from California-based FirstBank. Per the agreement, CB&T will take over roughly $730 million in deposits and $420 million in loans. The deal is anticipated to be completed in the first quarter of 2025, subject to customary approvals.

CB&T will offer employment opportunities to California-based FirstBank employees in its existing team of more than 900 associates.

The strategic initiative aligns with Zions' growth strategy to deepen its footprint and expand market share in the targeted regions. It will expand ZION’s physical presence in Coachella Valley to six locations and add roughly 15,000 new customers, leading to a combined 7% market share in the region.

Likewise, Camden National Corp. CAC signed an agreement to acquire Northway Financial, Inc. in an all-stock transaction valued at $86.6 million.

CAC will likely benefit from cost savings of 35% of Northway’s non-interest expenses, 75% of which will be phased in 2025, and the rest will be realized thereafter. The entire restructuring costs will be realized upon the completion of the transaction.

The deal is anticipated to be 19.9% and 32.7% accretive to CAC’s 2025 and 2026 earnings per share, respectively, assuming the phased-in cost savings. Also, tangible book value is expected to be diluted by 16.2%, with a projected earn-back period of 3.3 years.

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