S-1/A: Hoyne Bancorp's IPO: Mutual-to-Stock Conversion

Hoyne Bancorp, Inc. is offering up to 7.935 million shares at $10.00 each in its mutual-to-stock conversion to boost capital, support growth, and enhance employee ownership.

Summary

• Hoyne Bancorp, Inc. is converting from a mutual holding company to a stock holding company structure, offering common stock for sale.
• The offering range is 5,100,000 to 6,900,000 shares, with a potential increase to 7,935,000 shares, all priced at $10.00 per share.
• Estimated net proceeds from the offering range from $48.6 million to $76.7 million (at the adjusted maximum).
• 50% of the net proceeds will be invested in Hoyne Savings Bank to strengthen its capital position and support planned growth, especially in commercial lending.
• A new charitable foundation will receive 2.0% of the total shares offered and $250,000 in cash.
• An Employee Stock Ownership Plan (ESOP) is expected to purchase 8.0% of the common stock issued in the offering.
• Directors and executive officers expect to subscribe for an aggregate of 240,000 shares.
• The subscription and community offerings are expected to close on November 5, 2025, at 1:00 p.m. Central Time, with a possible extension to December 19, 2025.
• Hoyne Bancorp, Inc. has applied to list its common stock on the Nasdaq Capital Market under the symbol HYNE.
• As an emerging growth company, Hoyne Bancorp, Inc. intends to use extended transition periods for complying with new or revised financial accounting standards.
• As of June 30, 2025, Hoyne Savings Bank reported total assets of $453.4 million, total deposits of $357.2 million, and total equity of $88.9 million.
• The company recorded a net loss of $48,000 for the six months ended June 30, 2025, a significant improvement from a $1.4 million net loss in the same period of 2024.
• For the year ended December 31, 2024, a net loss of $2.0 million was reported, compared to a net income of $1.5 million in 2023.
• The allowance for credit losses stood at 0.94% of total loans and 327.7% of non-performing loans as of June 30, 2025.
• The company restated its 2024 financial statements to correct an error related to the accounting for closed bank branches.

Sentiment

Score: 4

Explanation: The filing outlines a strategic capital raise and conversion with clear growth objectives and improved financial metrics in the most recent quarter. However, historical losses, significant pro forma discounts compared to peers, and potential dilution present notable challenges and uncertainties for investors.

Positives

• The conversion will enhance the capital base to support growth, with 50% of net proceeds invested in Hoyne Savings Bank.
• Increased flexibility to absorb credit quality losses and support expanded commercial lending through an enhanced equity position and increased loans-to-one borrower limitations.
• The offering enables the company to attract and retain directors, management, and employees through stock-based benefit plans, including an ESOP and equity incentive plans.
• The additional capital raised may facilitate future mergers and acquisitions, although no specific plans exist currently.
• The offering provides members with an opportunity to acquire an equity ownership interest in the company's future.
• Net loss significantly decreased to $48,000 for the six months ended June 30, 2025, from $1.4 million for the same period in 2024, indicating improved operating results.
• Asset quality remains strong, with non-performing assets as a percentage of total assets at 0.35% as of June 30, 2025.
• The allowance for credit losses as a percentage of non-performing loans increased substantially to 327.72% as of June 30, 2025, from 137.24% at December 31, 2024, indicating robust coverage.
• Hoyne Savings Bank is well-capitalized, with a Tier 1 leverage ratio of 20.0% as of June 30, 2025, significantly exceeding the 9.0% regulatory requirement.
• The company boasts a 138-year operating history in Cook County, Illinois, with deep community ties and established customer relationships.
• An experienced management team, including CEO Walter F. Healy with 37 years of banking experience, is in place to execute the strategic plan.
• Investments in technological innovation have expanded consumer and commercial digital platforms, enhancing customer experience and driving operating efficiencies.
• Optimization of the branch network through consolidations and upgrades to Interactive Teller Machines provides 24/7 access and virtual enhancement of the footprint.

Negatives

• The company reported a net loss of $48,000 for the six months ended June 30, 2025, and a net loss of $2.0 million for the year ended December 31, 2024.
• Pro forma net income per share is very low ($0.02), and the price-to-earnings multiple is considered 'not meaningful' due to pro forma loss per share.
• Return on average assets and return on average equity were negative for both the six months ended June 30, 2025, and the year ended December 31, 2024.
• The capital raised in the offering is expected to negatively impact return on equity until it can be fully and effectively deployed.
• Potential dilution to stockholders from the implementation of new stock-based benefit plans, estimated at 12.3% if new shares are issued.
• The contribution to the charitable foundation will dilute ownership by up to 2.0% and is expected to reduce net income for the year ended December 31, 2025, by approximately $1.3 million after-tax at the adjusted maximum offering range.
• Unrealized losses on available-for-sale securities totaled $17.9 million as of June 30, 2025.
• The geographic concentration of the loan portfolio in Cook County, Illinois, makes the company vulnerable to local economic downturns, especially given the county's population decline (4.6% since 2020, projected 2.6% decrease over next five years) and higher unemployment rate (5.7% in March 2025 vs. national 4.2%).
• The company faces increased lending risks due to its strategy of growing the commercial real estate and commercial and industrial loan portfolios.
• The restatement of 2024 financial statements due to an accounting error, although corrected, highlights past financial reporting issues.
• Pro forma pricing ratios at the midpoint of the offering range indicated a significant discount of 47.9% on a price-to-book value basis and 50.5% on a price-to-tangible book value basis compared to the peer group average.

Risks

• Increasing the commercial loan portfolio could expose the company to increased lending risks and related loan losses.
• The allowance for credit losses may not be sufficient to cover actual loan losses, which would negatively affect operating results.
• Geographic concentration of the loan portfolio in Cook County, Illinois, makes the company vulnerable to local economic downturns, including population decline and real estate value fluctuations.
• The level of the commercial real estate loan portfolio may subject the company to additional regulatory scrutiny, potentially leading to increased costs or curtailment of lending.
• Credit risk associated with residential property, particularly a decline in real estate values in the Chicago MSA, could lead to losses if borrowers default.
• The company may not achieve significant profitability from its business strategies and growth plan in the near term, as expenses related to growth may outpace revenues.
• Failure to manage growth effectively, including attracting and retaining experienced bankers, could negatively affect financial condition and operating results.
• Dependence on the management team and other key personnel means the loss of their services or inability to hire additional personnel could harm the business.
• Opportunistic mergers and acquisitions involve risks such as dilution of tangible book value, integration challenges, and diversion of management's attention.
• Dependence on information technology and telecommunications systems and third-party service providers means system failures, interruptions, and cybersecurity breaches could have a material adverse effect.
• Ineffective liquidity management could adversely affect financial results and condition, especially if funding sources are impaired.
• Strong competition within the market area from larger financial institutions could hurt profits and slow growth.
• Failure to maintain the company's reputation could adversely affect performance.
• Security breaches and cybersecurity threats could compromise information and expose the company to liability.
• Failure to keep pace with technological change could materially adversely impact the business.
• Operational risks, including fraud, unauthorized transactions, and system errors, could result in material financial loss.
• Acts of terrorism and other external events could impact the business and financial markets.
• Changes in laws and regulations, including those from the IDFPR, FDIC, and Federal Reserve Board, could have a material adverse impact on operations and financial performance.
• A tightening of credit markets and liquidity risk could impair the ability to fund operations and jeopardize financial condition.
• Inflation can have an adverse impact on the business and on customers, affecting asset values, income, and loan repayment ability.
• Changes in interest rates could affect profits and the value of assets and liabilities, potentially decreasing Net Portfolio Value (NPV) and Net Interest Income (NII).
• Periodic changes to accounting rules, such as CECL, may change the treatment and recognition of critical financial line items and affect profitability.
• Noncompliance with anti-money laundering requirements (USA PATRIOT Act, Bank Secrecy Act) could result in fines or sanctions.
• The cost of additional finance and accounting systems, procedures, compliance, and controls for public company reporting requirements will increase expenses.
• Changes in management's estimates and assumptions may have a material impact on financial statements and operating results.
• Environmental liability risk associated with lending activities or properties owned could lead to substantial expenses.
• The future price of common stock may be less than the $10.00 per share purchase price in the offering.
• The capital raised in the offering may negatively impact return on equity until the business plan is fully implemented.
• Broad discretion in using the proceeds of the offering; failure to effectively deploy may have an adverse effect on financial performance.
• There may be a limited trading market in common stock, hindering the ability to sell shares and potentially lowering the market price.
• Stock-based and other benefit plans will increase costs and dilute ownership interest.
• Various factors, including anti-takeover provisions in the certificate of incorporation and bylaws, may make takeover attempts more difficult.
• Holders of common stock may not receive dividends.
• There may be a delay in an investor's ability to sell shares of common stock immediately following the offering.
• Investment decisions in the subscription and community offerings are irrevocable under certain conditions.
• Emerging growth company status and reliance on reduced reporting requirements could make common stock less attractive to investors.
• The distribution of subscription rights could have adverse income tax consequences if deemed to have an ascertainable value.
• The designation of Delaware courts as the sole and exclusive forum for certain stockholder actions could limit stockholders' ability to obtain a favorable judicial forum.

Future Outlook

Hoyne Bancorp, Inc. aims to become a leading community banking institution by expanding its commercial real estate and commercial and industrial loan portfolios, leveraging technology to enhance customer experience and operating efficiencies, and maintaining prudent credit risk management. The company plans to pursue opportunistic growth both organically and through potential mergers and acquisitions. The conversion is expected to enhance the capital base, improve risk management flexibility, and attract/retain talent through equity ownership. As an emerging growth company, it intends to utilize extended transition periods for new accounting pronouncements, which may affect comparability with other public companies.

Management Comments

• Walter F. Healy's extensive experience in commercial banking provides the board of directors with valuable knowledge for Hoyne Savings Bank's business.
• Thomas S. Manfre brings over 30 years of commercial bank management experience across various areas including retail, marketing, treasury management, commercial, operational, information technology, investment advisory, and financial areas.
• Management believes that growth of business operations is essential to future profitability.
• Management believes the allowance for credit losses is adequate to account for the probable losses inherent in the loan portfolios.
• Management expects a substantial portion of maturing certificates of deposit to be renewed.

Industry Context

The Chicago-Naperville-Elgin, IL-IN-WI Metropolitan Statistical Area (Chicago MSA), where Hoyne operates, has experienced significant consolidation among banking institutions, creating opportunities for Hoyne Savings Bank to capture customer relationships that may have been disrupted. While the region boasts a large and diversified economy, Cook County has seen population decline and higher unemployment rates compared to national averages, which could impact consumer demand and borrowers' ability to repay loans. The financial services industry is increasingly technology-driven, necessitating continuous investment in digital platforms to remain competitive against traditional and non-bank entities.

Comparison to Industry Standards

• Pro forma pricing ratios at the midpoint of the offering range indicated a discount of 47.9% on a price-to-book value basis and a discount of 50.5% on a price-to-tangible book value basis compared to the peer group average.
• The price-to-earnings multiple for Hoyne Bancorp is 'not meaningful' due to pro forma loss per share, contrasting with the peer group's average of 18.31x.
• Hoyne Bancorp's efficiency ratio and pro forma core earnings as a percentage of equity and assets are less favorable compared to the peer group measures.
• The demographic growth characteristics of Hoyne Bancorp's primary market area are less favorable in comparison to the peer group's primary market areas.
• Hoyne Bancorp's capacity to pay dividends is less favorable based on its lower pro forma earnings compared to the peer group's earnings.
• Hoyne Bancorp exhibits a stronger pro forma capital position and more favorable funding composition relative to the comparable peer group measures.
• The company demonstrates stronger loan growth and a higher pro forma capital position in comparison to the peer group measures.
• The peer group for valuation includes: Affinity Bancshares, Inc. (AFBI), BV Financial, Inc. (BVFL), Catalyst Bancorp, Inc. (CLST), Central Plains Bancshares, Inc. (CPBI), Home Federal Bancorp, Inc. of Louisiana (HFBL), IF Bancorp, Inc. (IROQ), Magyar Bancorp, Inc. (MGYR), SR Bancorp, Inc. (SRBK), and Texas Community Bancshares, Inc. (TCBS). PB Bankshares, Inc. (PBBK) was excluded from the updated appraisal pricing due to an announced acquisition.

Management Changes

Corporate Governance

Legal Proceedings

• Not presently involved in any legal proceedings of a material nature.
• From time to time, the company is a party to legal proceedings incidental to its business to enforce security interests in collateral pledged to secure loans.

Related Party Transactions

• Loan transactions with directors, executive officers, and their immediate families are conducted in the ordinary course of business on substantially the same terms as comparable loans to non-affiliated persons.
• Aggregate deposits from directors, executive officers, and their affiliates amounted to approximately $2.0 million at June 30, 2025, and December 31, 2024.
• Related party loans had a beginning balance of $313,000 at December 31, 2024, and $308,000 at June 30, 2025, with repayments of $5,000 during the first six months of 2025 and $11,000 during 2024.

Stakeholder Impact

• Shareholders: Potential for equity ownership and participation in future growth, but also face risks of dilution from stock-based benefit plans and charitable contributions. Future dividends are uncertain, and anti-takeover provisions may limit premium offers. The stock price may be volatile.
• Employees: Will benefit from the establishment of an Employee Stock Ownership Plan (ESOP) and future stock-based incentive plans, which are intended to aid in recruitment and retention of talent.
• Customers: Will continue to receive existing banking services, with a focus on enhanced commercial lending products and improved digital platforms. Deposit accounts will remain FDIC-insured with unchanged terms.
• Community: The newly established Hoyne Charitable Foundation, funded with 2.0% of shares and $250,000 cash, will provide financial support to local charitable organizations, fostering community ties.
• Depositors: Eligible depositors will receive subscription rights to purchase common stock and interests in a liquidation account, preserving certain rights from the mutual structure.

Next Steps

• Complete the conversion and stock offering.
• List common stock on the Nasdaq Capital Market under the symbol HYNE.
• Hoyne Savings, MHC members will vote on the plan of conversion at a special meeting on November 13, 2025.
• Receive final regulatory approval from the Federal Reserve Board and the IDFPR to complete the conversion and offering.
• Implement new stock-based benefit plans (Employee Stock Ownership Plan and equity incentive plans) no earlier than six months after the offering, subject to stockholder approval.
• Hoyne Bancorp, Inc. will submit a three-year operating plan, conflicts of interest policy, gift instrument, bylaws, and certificate of organization to the Federal Reserve Board within six months of completing the stock offering.
• Continue to assess personnel needs and add new lenders, credit analysts, and treasury management personnel to facilitate planned growth.
• Continue to make upgrades to online and mobile banking suites and streamline internal processes to enhance customer experience and operating efficiencies.
• Pursue opportunistic growth organically and through potential mergers and acquisitions.

Key Dates

Recommendation

The conversion to a stock holding company and the associated capital raise are strategic moves to support growth, particularly in commercial lending, and enhance risk management. While the company has a long history and an experienced management team, historical net losses and a significant discount in pro forma valuation compared to peers indicate underlying challenges. The potential for dilution from stock-based plans and charitable contributions, coupled with the uncertainties of deploying new capital effectively and the competitive market in Cook County, suggest a 'hold' recommendation. Investors should monitor the execution of the growth strategy, improvements in profitability, and the effective deployment of the raised capital before considering a stronger position.

Keywords

Hoyne Bancorp, HYNE, Mutual-to-Stock Conversion, IPO, Community Bank, Commercial Lending, Financial Services, Illinois Banking, Capital Raise, Stock Offering, Corporate Governance, Risk Management, Financial Performance, Nasdaq Capital Market, Emerging Growth Company, Cook County, Loan Portfolio, Deposits, Asset Quality, CECL, ESOP, Charitable Foundation