Byline Bancorp, Inc. Reports Third Quarter 2023 Financial Results

Net income of $28.2 million, $0.65 diluted earnings per share

Byline Bancorp, Inc. (NYSE:BY), today reported:

STATEMENTS OF OPERATIONS HIGHLIGHTS

Net Interest Income

Net interest income for the third quarter of 2023 was $92.5 million, an increase of $16.3 million, or 21.4%, from the second quarter of 2023. The increase in net interest income was primarily due to an increase of $26.3 million in interest income and fees on loans and leases due to loans acquired and higher yields; partially offset by an increase of $12.4 million in deposit interest expense due to deposits assumed and higher rates on deposits.

Tax-equivalent net interest margin¹ for the third quarter of 2023 was 4.47%, an increase of 14 basis points compared to the second quarter of 2023. Total net loan accretion income impact on the margin contributed 50 basis points to the net interest margin for the third quarter of 2023 compared to three basis points for the second quarter of 2023.

The average cost of total deposits was 2.13% for the third quarter of 2023, an increase of 43 basis points compared to the second quarter of 2023, as a result of higher rates on money market accounts and time deposits. Average non-interest-bearing demand deposits were 28.8% of average total deposits for the third quarter of 2023 compared to 31.7% during the second quarter of 2023.

Provision for Credit Losses

The provision for credit losses was $8.8 million for the third quarter of 2023, an increase of $3.0 million compared to $5.8 million for the second quarter of 2023, mainly attributed to a $2.7 million provision allocated for acquired non-credit-deteriorated loans resulting from acquisition accounting. The provision for credit losses is comprised of a provision for loan and lease losses of $7.9 million and a provision for unfunded commitments of $938,000.

Non-interest Income

Non-interest income for the third quarter of 2023 was $12.4 million, a decrease of $1.9 million, or 13.4%, compared to $14.3 million for the second quarter of 2023. The decrease in total non-interest income was primarily due to a decrease of $2.8 million in the valuation of the loan servicing asset reflecting higher discount rates and higher prepayment rates, partially offset by an increase of $769,000, or 13.5%, in the net gain on sales of loans. During the third quarter of 2023, we sold $101.6 million of U.S. government guaranteed loans compared to $85.9 million during the second quarter of 2023.

Non-interest Expense

Non-interest expense for the third quarter of 2023 was $57.9 million, an increase of $8.6 million, or 17.4%, from $49.3 million for the second quarter of 2023. The increase in total non-interest expense was mainly due to an increase of $5.3 million in salaries and employee benefits and an increase of $2.2 million in data processing, both primarily driven by merger-related expenses.

Our efficiency ratio was 53.75% for the third quarter of 2023 compared to 52.92% for the second quarter of 2023. Excluding significant items, our adjusted efficiency ratio¹ for the third quarter 2023 was 47.35%, compared to 51.39% for the second quarter of 2023.

Income Taxes

We recorded income tax expense of $9.9 million during the third quarter of 2023, compared to $9.2 million during the second quarter of 2023. The effective tax rate was 26.0% and 26.1% for the third quarter of 2023 and second quarter of 2023, respectively.

STATEMENTS OF FINANCIAL CONDITION HIGHLIGHTS

Assets

Total assets were $8.9 billion as of September 30, 2023, an increase of $1.4 billion, or 18.1%, compared to $7.6 billion at June 30, 2023.

The current quarter increase was primarily due to an increase in net loans and leases of $1.0 billion mainly due to the acquisition; an increase in securities available-for-sale of $114.2 million, driven by increases in acquired securities; and an increase in cash and cash equivalents of $108.7 million mainly to support loan and lease portfolio growth and customer-related activities.

Non-performing loans and leases were $52.1 million at September 30, 2023, an increase of $13.8 million from $38.3 million at June 30, 2023. The increase was primarily the result of $13.7 million of non-performing acquired purchased credit deteriorated (PCD) loans.

Allowance for Credit Losses ("ACL") - Loans and Leases

ACL was $105.7 million as of September 30, 2023, an increase of $13.0 million, or 14.1%, from $92.7 million at June 30, 2023. The increase includes $10.6 million for PCD loans and a $2.7 million provision for acquired non-credit-deteriorated loans, as a result of the recent acquisition. Additional provision for originated loans and leases and an increase in individually assessed impairments were reduced by net charge-offs.

Net charge-offs of loans and leases during the third quarter of 2023 were $5.4 million, or 0.33% of average loans and leases, on an annualized basis. This was an increase of $1.1 million compared to net charge-offs of $4.3 million, or 0.31% of average loans and leases, during the second quarter of 2023.

Deposits and Other Liabilities

Total deposits increased to $7.0 billion at September 30, 2023 compared to $5.9 billion at June 30, 2023. Non-interest-bearing deposits were 28.2% and 30.3% of total deposits at September 30, 2023 and June 30, 2023, respectively. Estimated total uninsured deposits were $1.8 billion and $1.5 billion as of September 30, 2023 and June 30, 2023, and represented 26.1% and 25.9% of total deposits, respectively. The increase in deposits in the current quarter was mainly due to the deposits assumed and increased deposit campaigns. The increase in time deposits of $327.9 million was principally due to increased personal time deposits. The increase in money market demand accounts of $462.2 million was due to increases in consumer and commercial deposits. The increase in non-interest-bearing demand deposits of $166.1 million was mainly due to increases in assumed commercial deposits.

Total borrowings and other liabilities were $1.1 billion at September 30, 2023, an increase of $225.1 million from $844.7 million at June 30, 2023, primarily driven by increases in Federal Home Loan Bank advances, assumed junior subordinated debentures, accrued expenses and other liabilities.

Stockholders' Equity

Total stockholders' equity was $919.9 million at September 30, 2023, an increase of $106.0 million from $813.9 million at June 30, 2023. The increase was primarily due to stock consideration issued in connection with the acquisition.

Conference Call, Webcast and Slide Presentation

We will host a conference call and webcast at 9:00 a.m. Central Time on Friday, October 27, 2023, to discuss our quarterly financial results. Analysts and investors may participate in the question-and-answer session. The call can be accessed via telephone at (833) 470-1428; passcode 719791. A recorded replay can be accessed through November 10, 2023, by dialing (866) 813-9403; passcode: 404695.

A slide presentation relating to our third quarter 2023 results will be accessible prior to the conference call. The slide presentation and webcast of the conference call can be accessed on our investor relations website at www.bylinebancorp.com.

About Byline Bancorp, Inc.

Headquartered in Chicago, Byline Bancorp, Inc. is the parent company of Byline Bank, a full service commercial bank serving small- and medium-sized businesses, financial sponsors, and consumers. Byline Bank has approximately $8.9 billion in assets and operates 48 branch locations throughout the Chicago and Milwaukee metropolitan areas. Byline Bank offers a broad range of commercial and retail banking products and services including small ticket equipment leasing solutions and is one of the top Small Business Administration lenders in the United States.

Forward-Looking Statements

This communication contains forward-looking statements within the meaning of the U.S. federal securities laws. Forward-looking statements include, without limitation, statements concerning plans, estimates, calculations, forecasts and projections with respect to the anticipated future performance of the Company. These statements are often, but not always, made through the use of words or phrases such as ‘‘may'', ‘‘might'', ‘‘should'', ‘‘could'', ‘‘predict'', ‘‘potential'', ‘‘believe'', ‘‘expect'', ‘‘continue'', ‘‘will'', ‘‘anticipate'', ‘‘seek'', ‘‘estimate'', ‘‘intend'', ‘‘plan'', ‘‘projection'', ‘‘would'', ‘‘annualized'', "target" and ‘‘outlook'', or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. Forward-looking statements involve estimates and known and unknown risks, and reflect various assumptions and involve elements of subjective judgment and analysis, which may or may not prove to be correct, and which are subject to uncertainties and contingencies outside the control of Byline and its respective affiliates, directors, employees and other representatives, which could cause actual results to differ materially from those presented in this communication.

No representations, warranties or guarantees are or will be made by Byline as to the reliability, accuracy or completeness of any forward-looking statements contained in this communication or that such forward-looking statements are or will remain based on reasonable assumptions. You should not place undue reliance on any forward-looking statements contained in this communication.

Certain risks and important factors that could affect Byline's future results are identified in our Annual Report on Form 10-K and other reports we file with the Securities and Exchange Commission, including among other things under the heading "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2022. Any forward-looking statement speaks only as of the date on which it is made, and Byline undertakes no obligation to update any forward-looking statement, whether to reflect events or circumstances after the date on which the statement is made, to reflect new information or the occurrence of unanticipated events, or otherwise unless required under the federal securities laws.