Byline Bancorp and Illinois State Bancorp Announce Definitive Merger Agreement
Byline Bancorp, Inc. (NYSE: BY) and Illinois State Bancorp, Inc. have entered into a definitive merger agreement that will expand Byline Bancorp’s presence across the Chicago market and strengthen its commercial and community banking franchise.
Under the terms of the agreement, Illinois State Bancorp and its wholly owned banking subsidiaries will merge with and into Byline Bancorp in a transaction consisting of both cash and stock. Based on Byline’s closing share price of $37.63 on October 5, 2026, the transaction has an estimated value of approximately $87.9 million.
The proposed combination is expected to increase Byline’s market density, expand its customer relationships and add a stable core deposit base as the company continues to pursue growth across the Chicago metropolitan area.
Following completion of the transaction, the combined banking organization is expected to operate 48 branches, with approximately $10.5 billion in assets, $8.0 billion in loans and $8.4 billion in deposits.
The transaction remains subject to regulatory approvals, approval by Illinois State Bancorp shareholders and other customary closing conditions. The companies currently expect the merger to close during the first quarter of 2027.
Expanding Byline’s Chicago Banking Franchise
The proposed merger represents another step in Byline Bancorp’s strategy of building scale while maintaining a relationship-focused approach to commercial and community banking.
Chicago is a significant market for Byline, and the addition of Illinois State Bancorp will give the combined institution greater density across several communities.
Rather than entering an entirely new geographic market, the transaction allows Byline to expand within an area where it already has an established presence.
The combination is expected to provide opportunities to deepen relationships with businesses, consumers and community organizations while increasing the scale of the bank’s deposit and lending operations.
For regional and community banks, scale can provide advantages in technology investment, product development, risk management and operational efficiency. At the same time, maintaining local decision-making and personalized customer service remains an important differentiator in commercial banking.
The two institutions have emphasized that their shared focus on relationship banking and community engagement was an important consideration in reaching the agreement.
Illinois State Bancorp Brings Established Community Banking Relationships
Illinois State Bancorp is headquartered in Chicago and is the parent company of First Nations Bank and The Bank of Bourbonnais.
The company has operated in its markets for more than 35 years, providing commercial and community banking services throughout the Chicagoland and Kankakee County markets.
As of June 30, 2026, Illinois State Bancorp reported approximately $617.3 million in consolidated assets, including approximately $470.5 million in loans and $510.5 million in deposits.
Its banking subsidiaries operate three branch locations in the Chicagoland area and one branch in Bourbonnais, Illinois.
The institution’s established customer relationships represent an important component of the proposed transaction.
For Byline, the acquisition adds an established deposit and lending franchise that complements its existing Chicago operations. The additional relationships could also provide opportunities to introduce customers to a broader range of financial products and services following the integration of the two organizations.
Byline Leadership Highlights Shared Values
Roberto R. Herencia, Executive Chairman and Chief Executive Officer of Byline Bancorp, said the transaction represents another meaningful step in the company’s growth strategy.
“This partnership represents another meaningful step in Byline’s growth strategy and further strengthens our position in the Chicago market,” Herencia said.
He highlighted Illinois State Bancorp’s deep customer relationships and community banking franchise, adding that the combined organization will be positioned to continue providing local decision-making, personalized service and financial expertise.
The comments underscore the strategic rationale behind the transaction.
While the merger will increase Byline’s scale, management is positioning the combination as an expansion of an existing community and commercial banking model rather than a fundamental change in the institution’s approach to customers.
Stable Deposits Remain a Key Strategic Benefit
One of the significant benefits identified by Byline is the addition of Illinois State Bancorp’s core deposit base.
Deposits remain an important source of funding for banks, particularly as institutions seek to maintain competitive lending operations while managing funding costs and liquidity.
Illinois State Bancorp had approximately $510.5 million in deposits as of June 30, 2026. Integrating these deposits into Byline’s larger banking franchise will contribute to the combined organization’s expected $8.4 billion deposit base.
A stable core deposit franchise can provide banks with a more durable funding platform for commercial and consumer lending.
The transaction therefore has implications beyond simply increasing branch count or geographic presence. The deposit relationships are an important component of the proposed combination’s financial rationale.
Expanding Customer Relationships
Alberto J. Paracchini, President of Byline Bancorp, emphasized the importance of shared values and complementary banking cultures.
“At Byline, we have always believed that successful partnerships begin with shared values, strong cultures, and a common commitment to serving customers and communities,” Paracchini said.
He described Illinois State Bancorp as a high-quality and complementary Chicago-area franchise and highlighted its potential to expand Byline’s customer reach.
The combined organization is expected to benefit from opportunities to deepen relationships with existing customers and develop new relationships within communities served by both banks.
For commercial banks, customer relationships can extend across multiple financial products, including business lending, treasury management, deposits, cash management and other financial services.
Greater market density can therefore create opportunities for cross-selling and relationship expansion while allowing the bank to serve a larger customer base from an established local footprint.
Illinois State Bancorp Seeks Long-Term Continuity
Florian J. Barbi, Chairman, President and Chief Executive Officer of Illinois State Bancorp, said selecting the right partner was critical to the future of the franchise.
“When evaluating the future of our franchise, it was critical to identify a partner that would preserve the values and customer-focused culture that define Illinois State Bancorp,” Barbi said.
He pointed to Byline’s Chicago presence, relationship-driven banking approach, local decision-making and continued investment in technology, innovation and fraud management as areas of alignment between the two institutions.
These factors were presented as important considerations in determining that Byline was an appropriate strategic partner.
For Illinois State Bancorp customers and employees, the proposed merger is expected to provide access to a larger banking organization while maintaining a focus on the local markets in which the institution has historically operated.
Technology and Fraud Management as Areas of Focus
The reference to technology, innovation and fraud management is particularly relevant as banks continue to invest in digital capabilities and security infrastructure.
Community and regional banks increasingly compete not only on personal service but also on the quality and security of their digital banking platforms.
Technology investment can support online and mobile banking, payments, customer onboarding, data analytics, fraud detection and operational efficiency.
Byline’s continued investment in these areas could provide additional capabilities to customers joining the combined organization.
Fraud management is also becoming increasingly important across the financial-services industry as banks face evolving risks associated with digital payments, identity theft, account takeover and other forms of financial crime.
The ability to combine community banking relationships with modern technology and risk-management capabilities can be an important component of a bank’s competitive position.
Transaction Structure
Under the definitive merger agreement, Byline will issue approximately 1.4 million shares of common stock and pay approximately $28.9 million in cash to shareholders of Illinois State Bancorp.
Byline will also pay approximately $5.1 million in cash in connection with the settlement of all outstanding Illinois State Bancorp stock options.
Based on Byline’s October 5, 2026 closing stock price of $37.63, the transaction represents a fully diluted value of approximately $87.9 million, or approximately $261.23 per Illinois State Bancorp common share.
The combination of stock and cash provides Illinois State Bancorp shareholders with both an immediate cash component and exposure to the future performance of the combined banking organization through Byline shares.
The final value of the stock component can fluctuate depending on Byline’s share price before the transaction closes.
Board Approval and Expected Closing
The boards of directors of both Byline Bancorp and Illinois State Bancorp have unanimously approved the definitive merger agreement.
The transaction is expected to close in the first quarter of 2027, subject to several conditions.
These include obtaining the required regulatory approvals, receiving approval from Illinois State Bancorp shareholders and satisfying other customary closing requirements.
Until the transaction closes, both organizations will continue to operate as separate institutions.
Regulatory review will be an important part of the process because bank mergers require consideration of issues including financial condition, management, capital, liquidity, community needs, compliance and other regulatory factors.
Financial and Strategic Implications
The proposed combination reflects continued consolidation among community and regional banking institutions.
Banks can pursue mergers for several reasons, including expanding geographic reach, strengthening deposits, increasing lending capacity, improving operating scale and gaining greater resources for technology and regulatory investment.
For Byline, the transaction provides an opportunity to increase its presence in the Chicago market while adding an established community banking franchise.
The combined institution’s expected $10.5 billion in assets, $8.0 billion in loans and $8.4 billion in deposits would provide additional scale while preserving a significant local branch presence.
The increase to 48 branches would also give Byline a broader physical distribution network across the markets it serves.
Advisors Supporting the Transaction
Several professional advisers are supporting the companies as they move toward completion of the proposed merger.
Vedder Price P.C. is serving as legal advisor to Byline Bancorp.
D.A. Davidson & Co. is serving as financial advisor to Illinois State Bancorp, while Barack Ferrazzano Kirschbaum & Nagelberg LLP is serving as Illinois State Bancorp’s legal advisor.
The involvement of financial and legal advisers reflects the complexity of a bank merger, which requires detailed financial analysis, regulatory preparation, legal documentation and shareholder processes.
Strengthening Byline’s Position in Chicago
The proposed acquisition of Illinois State Bancorp provides Byline Bancorp with another opportunity to strengthen its position as a commercial and community banking institution in the Chicago region.
The transaction combines Byline’s existing scale with Illinois State Bancorp’s established relationships across Chicagoland and Kankakee County.
With approximately $10.5 billion in assets expected following completion, the combined organization will have greater resources to serve commercial customers, consumers and communities while continuing to invest in technology, fraud management and other banking capabilities.
For Illinois State Bancorp, the transaction provides a path to continue serving its customers as part of a larger banking organization with a substantial Chicago presence.
For Byline, the merger adds deposits, loans, customers and branches while reinforcing its strategy of expanding through complementary banking partnerships.
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