On July 1, 2023, the Company acquired all of the outstanding common stock of Inland Bancorp, Inc. ("Inland") and its subsidiaries pursuant to an Agreement and Plan of Merger, dated as of November 30, 2022 (the "Merger Agreement"). Inland was merged with and into Byline. As a result of the merger, Inland’s wholly owned subsidiary bank, Inland Bank and Trust, was merged with and into Byline Bank, with Byline Bank as the surviving bank. The acquisition improves the Company’s footprint in the Chicagoland market, diversifies its commercial banking business, and strengthens the core deposit base.

In a related but separate transaction, on March 31, 2023, Byline entered into a side letter agreement with the majority shareholder of Inland in which Byline agreed to purchase 2,408,992 shares of Inland common stock. The purchase price was calculated based on the terms of the Merger Agreement. The transaction was completed on June 30, 2023, which resulted in the payment of cash in the amount of $9.9 million.

At the effective time of the merger (the "Effective Time"), each share of Inland’s common stock was converted into the right to receive: (1) 0.19 shares of Byline’s common stock, par value $0.01 per share, and (2) a cash payment in the amount of $0.68 per share, with cash paid in lieu of any fractional shares. The per share cash consideration was based on the total $21.2 million divided by the outstanding shares of Inland common stock. Based on the closing price of shares of the Company’s common stock of $18.09, as reported by the New York Stock Exchange, and 5,932,323 shares of common stock issued with respect to the outstanding shares of Inland common stock, the stock consideration was valued at $107.3 million. Options to acquire 288,200 shares of Inland common stock that were outstanding at the Effective Time were canceled, at the option holders' election, in exchange for a cash payment in accordance with the Merger Agreement of $424,000, to be paid after the closing date. In addition, the 2,408,992 shares of Inland common stock purchased on June 30, 2023 were canceled as of the effective time of the transaction. The value of the total merger consideration at closing was $138.9 million. Stock issuance costs were $299,000.

The transaction resulted in goodwill of $33.4 million, which is nondeductible for tax purposes, as this acquisition was a nontaxable transaction. Goodwill represents the premium paid over the fair value of the net tangible and intangible assets acquired and reflects related synergies expected from the combined operations.

Merger-related expenses, including acquisition advisory expenses of $653,000, core system conversion expenses of $640,000, salaries and employee benefits of $17,000, and other non-interest expenses of $81,000 related to the Inland acquisition are reflected in non-interest expense on the Consolidated Statements of Operations for the three months ended June 30, 2023.

Merger-related expenses for the six months ended June 30, 2023, including acquisition advisory expenses of $909,000, core system conversion expenses of $839,000, salaries and employee benefits of $36,000, and other non-interest expenses of $96,000 related to the Inland acquisition are reflected in non-interest expense on the Consolidated Statements of Operations for the six months ended June 30, 2023.

There were no merger related expenses in the three and six months ended June 30, 2024.

The acquisition of Inland was accounted for using the acquisition method of accounting in accordance with ASC Topic 805. Assets acquired, liabilities assumed, and consideration exchanged were recorded at their respective acquisition date fair values. Determining the fair value of assets and liabilities involves significant judgment regarding methods and assumptions

used to calculate estimated fair values. Fair value adjustments associated with this transaction were finalized during the second quarter of 2024.

The following table presents a summary of the fair values of assets acquired and liabilities assumed as of the acquisition date:


Assets
Cash and cash equivalents	$	39,731
Securities available-for-sale		239,602
Restricted stock		3,058
Loans		808,000
Allowance for credit losses		(10,596	)
Premises and equipment		11,307
Operating lease right-of-use asset		3,813
Other intangible assets		17,250
Bank-owned life insurance		12,455
Deferred tax assets, net		14,848
Other assets		21,023
Total assets acquired		1,160,491
Liabilities
Deposits		964,491
Federal Home Loan Bank advances		40,000
Securities sold under agreements to repurchase		455
Junior subordinated debentures		32,661
Operating lease liability		4,034
Accrued expenses and other liabilities		13,288
Total liabilities assumed		1,054,929
Net assets acquired	$	105,562
Consideration paid
Common stock (5,932,323 shares issued at $18.09 per share)		107,017
Cash paid		31,897
Total consideration paid		138,914
Goodwill	$	33,352

The following table presents the fair value and gross contractual amounts receivable of acquired non-credit-deteriorated loans from the Inland acquisition, and their respective expected contractual cash flows as of the acquisition date:


Fair value	$	582,831
Gross contractual amounts receivable		699,918
Estimate of contractual cash flows not expected to be collected(1)		4,239
Estimate of contractual cash flows expected to be collected		695,679

(1) Includes interest payments not expected to be collected due to loan prepayments as well as principal and interest payments not expected to be collected due to customer default.

The following table provides the unaudited pro forma information for the results of operations for the three and six months ended June 30, 2023, as if the acquisition had occurred on January 1, 2023. The pro forma results combine the historical results of Inland into the Company’s Consolidated Statements of Operations, including the impact of certain acquisition accounting adjustments, which includes loan discount accretion, intangible assets amortization, deposit premium accretion, fixed assets amortization, and borrowing discount amortization. The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the results that would have been obtained had the acquisition actually occurred on January 1, 2023. No assumptions have been applied to the pro forma results of operations regarding possible revenue enhancements, provision for credit losses, expense efficiencies or asset dispositions. Recognized acquisition-related expenses and other adjustments related to the timing of expenses, are included in net income in the following table:


	For the Three Months Ended		For the Six Months Ended
	June 30,		June 30,
	2023		2023
Total revenues (net interest income and non-interest income)	$	103,200	$	210,995
Net income	$	27,670	$	52,995
Earnings per share—basic	$	0.64	$	1.23
Earnings per share—diluted	$	0.64	$	1.22

Revenues and earnings of the acquired company since the acquisition date have not been disclosed as it is not practicable as Inland was merged into the Company and separate financial information is not readily available.