Breaking from its strategy of buying only Chicago-area banks, MAF Bancorp Inc. announced Wednesday that it is buying St. Francis Capital Corp. of Brookfield, Wis., for $264 million in stock.
The deal would give the $6 billion-asset MAF, which is headquartered in Clarendon Hills, Ill., a strong foothold in the Milwaukee area, where St. Francis ranks fifth in deposit share. Combined with its pending acquisition of Fidelity Bancorp Inc. in Chicago, the deal would nearly double MAF's branch network, to 67 offices in Illinois and Wisconsin, and would boost its assets to more than $9 billion.
In a conference call Wednesday, Alan Koranda, MAF's chairman and chief executive officer, called the deal a "midwestern strategic alliance" and said it is a natural extension of MAF's franchise, because Milwaukee is only about 85 miles from Chicago.
"The markets are continuing to grow together into a megalopolis," Mr. Koranda said.
The acquisition would also further diversify MAF's loan portfolio, which is still heavily concentrated in one- to four-family loans. These loans accounted for 90% of MAF's portfolio two years ago and make up 77% of it today. St. Francis, by contrast, has larger concentrations of commercial real estate and multifamily loans. After the completion of the St. Francis and Fidelity deals, only 63% of MAF's loans would be one- to four-family mortgages.
Mr. Koranda said that MAF is keeping its eyes open for deals - even outside the Chicago and Milwaukee markets - but that its focus in the coming months would be on integrating St. Francis and Fidelity. MAF is also planning to fill in the gap between its two primary markets by building branches, he said.
According to Mr. Koranda, there is room for growth in Milwaukee, the nation's 27th-largest metropolitan market.
"There are parts of the Greater Milwaukee market that St. Francis doesn't serve," he said. "There are a lot of dollars out there available to attract over time."
MAF's $101 million deal for the $723 million-asset Fidelity is expected to close in July, and the St. Francis sale is expected to close in the fourth quarter.
St. Francis' president and CEO, Thomas R. Perz, said the largest publicly traded thrift in the Milwaukee area decided to sell because the market was becoming more competitive and its board feared it could not maintain an acceptable growth rate. Its assets have fallen by 8% since Sept. 30, 2000, and loans and deposits have also dipped slightly. (St. Francis' fiscal year ends Sept. 30.)
The St. Francis name would remain, however. Mr. Koranda said MAF decided not to merge St. Francis with its Mid America Bank, because St. Francis, founded in 1923, has strong recognition in the Milwaukee area.
St. Francis shareholders would receive 0.79 shares of MAF for each of their shares, and the deal is equal to 1.39 times book value.
Investors seemed to approve of the pairing. MAF's stock closed at $35.10 a share Wednesday, up 4.37% from Tuesday's close. St. Francis' stock rose 10.93%, to $27.51.
Daniel Cardenas, an analyst with Howe Barnes Investments Inc. in Chicago, said the deal makes sense, because despite the size difference between Chicago and Milwaukee, the companies' cultures, clients, and markets are similar. He also said MAF's first foray beyond its base should not be considered overreaching.
"There is a little geographic jump, but you're not so far away that you can't keep an eye on what's going on," Mr. Cardenas said.
The deal would not satisfy an agreement that MAF made with the Department of Justice late last year in which it said it would open or acquire two branches in minority communities by mid-2005.
In August it said it was being investigated for alleged violations of the Fair Housing and Equal Credit Opportunity Acts. In December it said it would establish the branches, implement special marketing campaigns to increase minority lending, and provide $10 million of benefits to borrowers through particular programs to help minorities buy homes.
