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Community Bank to be sold for $42 million

Byline Bancorp to purchase last remaining locally owned bank by second quarter of 2019

October 18th, 2018 10:28 AM

Photo by Alexa Rogals

By Timothy Inklebarger

Staff Reporter

Byline Bancorp has announced its plan to purchase Community Bank of Oak Park River Forest in 2019 in a cash and stock transaction valued at $42 million.

The transaction is expected to be completed in the second quarter of 2019, according to a joint press release by Byline and Community Bank.

Community Bank, founded in Oak Park in 1996, is the only locally owned bank in Oak Park and River Forest, with three locations: 1001 Lake St. and 810 S. Oak Park Ave., in Oak Park, and 7751 Lake St. in River Forest.

The sale was unanimously approved by the boards of directors of both banks, the press release states, and closing the deal is subject to regulatory approvals and approval by Community Bank stockholders. 

Byline noted in the press release that it would cut about 40 percent of Community Bank's "expense base" in making the transaction. Those cuts will be phased in over two years, according to an investor presentation Byline Bank filed with the Securities and Exchange Commission.

Community Bank President and CEO Walter Healy, who could not be reached immediately for additional comment, said in the press release that Byline Bank shares the local bank's "commitment to serving our communities and being a trusted partner that helps our customers reach their financial goals."

"We look forward to offering our customers the increased convenience and capabilities of a larger bank while maintaining the highly personalized, local service they have come to expect from Community Bank of Oak Park River Forest," Healy added.

The announcement notes that Community Bank has $325 million in assets, $254 million in loans and $293 million in deposits, as of June 30.

"We believe the combination of Byline and Oak Park River Forest will enhance the customer banking experience by offering greater convenience while still providing the same commitment to superior customer service," Alberto Paracchini, president and chief executive officer of Byline, said in the press release. "This acquisition will provide us with a strong presence in Oak Park and River Forest, two Chicago metropolitan markets with communities that avidly support local business and community development."

Common stock in Community Bank will be converted into the right to receive 7.9321 shares of Byline stock and $33.38 in cash, Byline noted.

The announcement comes about a month after Crain's Chicago Business first reported that Community Bank was up for sale.

The bank was targeted for a hostile takeover attempt in 2016 by its second largest shareholder, Elk Grove Village-based First American Bank, which holds an 11 percent stake in the local bank.

First American Bank offered to pay shareholders $134.32 per share, but shareholders rejected the deal.

In September, First American Chairman and CEO Thomas Wells told Wednesday Journal that he had only heard about the sale in news reports, but added that he would welcome "a vigorous sale of the bank."

"We want to get a good bidding process, so shareholders maximize the value they've earned over the years," Wells said in September. "Original shareholders have been in some 20 years; it would be nice to liquidate that investment and reinvest."

Wells said in a telephone interview on Oct. 18 that the First American Bank hopes the bank is sold, so it becomes more profitable, but noted that his bank has not heard from Community Bank on the potential sale.

"It's one of the things that concerns us," he said. "That doesn't mean they haven't struck a good deal. If the transaction hasn't been exposed to the marketplace, we're suspicious about how vigorous the bidding process was."

Wells said the move would save money on Community Bank's bookkeeping and compliance requirements, because as part of a larger institution it would benefit from economies of scale.

"Compliance is a greater burden for smaller banks than big banks," he said. "It doesn't mean they're doing it poorly."

Wells also said the sale was driven in part by its difficulty in retaining capital.

"Community Bank has to take all their earnings and service debt at the holding company, so they can't grow their assets," Wells said. "That's the conundrum they face."

First American Bank's offer for Community Bank two years ago was a cash offer and did not include stock, which is different from Byline's offer, which is made up of both cash and stock.

Wells said First American has not had the opportunity to review Byline's stock, but as Community Bank's second largest shareholder, they would have to consider what the stock might be worth when the deal closes.

"Cash is easier to understand," he said. "It doesn't make the stock bad, it's just another thing to consider.

"Using stock suggests [Byline Bank] doesn't have the excess capital to pay for a big cash purchase. That's not bad, and as long as the stock holds up, it's a good thing."

Wells added that there needs to be a consolidation of banks in the market because most small banks "have difficulty growing and extending their reach in the market."

The announcement follows Byline Bank's purchase of another locally owned bank, First Evanston Bancorp, Inc., in May. That deal went through for $178.6 million, according to a Byline Bank press release.

Wells said Byline Bank's way of growing is through acquisitions – that's a good thing for Community Bank shareholders. 

"If you can grow, you can continue to prosper, but if it's difficult to grow, then you need to think about selling," he said.

tim@oakpark.com

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  • Jeffrey Smith (Facebook Verified)

    Posted: October 21st, 2018 7:52 PM

    Quick question - did Byline contribute to Trump and the GOP? Asking for a friend who's sentimentally attached to American democracy.

  • Ramona Lopez (Facebook Verified)

    Posted: October 19th, 2018 11:26 AM

    Granted, to have a seat at the table one would need to pony up millions. In the meantime though, I've quadrupled my money in a year buying Canadian cannabis stocks. There is money to be made for us little people as well if you do your research and play your cards right.

  • Christopher Bell (Facebook Verified)

    Posted: October 19th, 2018 6:51 AM

    With regard to weed deal - that deal was sealed by influencial /connect parties years ago. All of the investors, owners had rights/ money/ exit long ago, Looked at doing it in Detroit and lets just say unless you are in $10-20MM worth range, cant even get seat at table...

  • Christopher Bell (Facebook Verified)

    Posted: October 19th, 2018 6:47 AM

    The Board likely looked at several factors - rising interest rates, tougher banking due to disruption by Venmo etc, Oak Park at tipping point (demographics changing toward less wealthy perhaps/ aging out), stock market at crazy multiple, needing scale to compete over long run (mention it) - but they are smart to get out while they can - and frankly would do the same... Take money and RUN.

  • Christopher Bell (Facebook Verified)

    Posted: October 19th, 2018 6:41 AM

    Kevin - We are in an everything bubble - housing, stocks, art etc. prices have been fueled by easy money fed and tax cuts. Both are smart money to get out as I have been trying with sports facility business and other side investments. When this bubble pops, it will be tough - especially on middle class that have most wealth in house...

  • Kline Maureen (Facebook Verified)

    Posted: October 18th, 2018 6:46 PM

    Kevin, good point. And you ask if we're living in a crazy world - I can sum it up for you in four words: IT'S GOING TO POT - - but seriously, the pot business is a growth business, banking not so much (i.e., more profit in pot than banks - though a pot bank could be quite profitable)

  • Kevin Peppard from Oak Park (Facebook Verified)

    Posted: October 18th, 2018 6:23 PM

    Locally owned bank, with a record of community involvement, sells for $42 million. Locally owned medical marijuana business, with the expectation that marijuana will become legal for everyone, sells for 15 times that. Are we living in a crazy world?

  • John Kehoe from Oak Park (Facebook Verified)

    Posted: October 18th, 2018 4:42 PM

    We have banked at Community since they first opened in 1996. We love the personal attention and service and hope it remains. However, since we will be leaving Oak Park in the near future, we would have had to find a different bank anyway. I just hope it will be one as committed to local community as CBOPRF.

  • Christopher Bell (Facebook Verified)

    Posted: October 18th, 2018 3:37 PM

    Byline Bank is a roll up/consolidator of small banks - public and very focused on profit. Anyone who has done a roll up (I was part of senior team that bought 24 software companies and took it public) , knows the acquired culture rarely wins - unless it is exceptional or very unique. Further, they have SOP /process they will implement. Bottom line is culture will change - the question is by how much?

  • Katie Bodendorfer Garner (Facebook Verified)

    Posted: October 18th, 2018 3:20 PM

    Disappointed. We've been there for 15 years and like banking locally.

  • Bill Dwyer (Facebook Verified)

    Posted: October 18th, 2018 1:23 PM

    Been a customer for years. I really hope they maintain the culture. Good people there.

  • Judith Alexander from Oak Park (Facebook Verified)

    Posted: October 18th, 2018 12:48 PM

    I hope it's true that Byline shares Community Bank's commitment to the local community. For now, the loss of a locally-owned bank seems a real loss for our Oak Park and River Forest.

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