Byline Bancorp, Inc. Reports Full Year and Fourth Quarter 2019 Financial Results

Full Year 2019 Highlights

  • Net income of $57.0 million, or $1.48 per diluted share

  • Return on average assets improved to 1.08% for 2019

  • Net interest margin of 4.47% for 2019

  • Efficiency ratio improved to 61.09% for 2019 compared to 65.15% for 2018

  • Originated loans and leases increased $597.9 million, or 26.7%, from December 31, 2018

Fourth Quarter 2019 Highlights

  • Net income of $15.9 million, or $0.41 per diluted share

  • Return on average assets of 1.16%

  • Net interest margin of 4.32%

  • Efficiency ratio of 60.93% for the fourth quarter of 2019

  • Originated loans and leases increased $67.5 million, or 2.4%, from September 30, 2019

  • Initiated cash dividend of $0.03 per share to common stockholders for the quarter and approved share repurchase program

Byline Bancorp, Inc. (the "Company" or "Byline")(NYSE: BY), the parent company of Byline Bank (the "Bank"), today reported net income of $15.9 million, or $0.41 per diluted share, for the fourth quarter of 2019, compared with net income of $15.3 million, or $0.39 per diluted share, for the third quarter of 2019, and net income of $17.1 million, or $0.46 per diluted share, for the fourth quarter of 2018. The Company’s financial results include certain costs associated with its integration of First Evanston Bancorp, Inc. and its bank subsidiary First Bank & Trust, and its acquisition and integration of Oak Park River Forest Bankshares, Inc. ("Oak Park River Forest") and its bank subsidiary Community Bank of Oak Park River Forest. Excluding these merger-related expenses, core system conversion expenses, and impairment charges on assets held for sale, adjusted net income1 was $16.1 million, or $0.42 per adjusted diluted share1, for the fourth quarter of 2019, compared with $16.2 million, or $0.41 per adjusted diluted share, for the third quarter of 2019, and $18.1 million, or $0.49 per adjusted diluted share, for the fourth quarter of 2018. A reconciliation of adjusted net income and adjusted diluted earnings per share to net income and diluted earnings per share, respectively, according to accounting principles generally accepted in the United States of America ("GAAP") is provided in the financial tables at the end of this release.

Alberto J. Paracchini, President and Chief Executive Officer of Byline, commented, "Our fourth quarter performance completed another strong year for the Byline franchise. In 2019, we completed another accretive acquisition with the addition of Oak Park River Forest Bankshares, capitalized on disruption in the Chicago marketplace to add significant new banking talent to our organization, and continued to attract new commercial clients to the Bank. As we moved through the year, we also made steady progress on improving our deposit mix and better managing our funding costs. Our improving profitability enabled us to initiate a cash dividend in the fourth quarter and deliver additional value to our shareholders. With the strong foundation we have built and our unique positioning in the Chicago market, we believe we have good opportunities to continue enhancing the value of our franchise in the coming years."

1

Represents a non-GAAP financial measure. See "Reconciliation of non-GAAP Financial Measures" for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure.

STATEMENTS OF OPERATIONS

Net Interest Income

The following table presents net interest income for the periods indicated:

Three Months Ended

Year Ended

December 31,

September 30,

June 30,

March 31,

December 31,

December 31,

December 31,

(dollars in thousands)

2019

2019

2019

2019

2018

2019

2018

INTEREST AND DIVIDEND INCOME

Interest and fees on loans and

leases

$

58,203

$

63,391

$

59,524

$

54,383

$

56,646

$

235,501

$

184,972

Interest on taxable securities

6,683

6,554

6,237

5,759

5,334

25,233

19,037

Interest on tax-exempt securities

529

486

428

343

355

1,786

1,095

Other interest and dividend

income

500

598

571

625

560

2,294

1,847

Total interest and dividend

income

65,915

71,029

66,760

61,110

62,895

264,814

206,951

INTEREST EXPENSE

Deposits

9,325

9,618

9,306

8,076

7,115

36,325

19,329

Federal Home Loan Bank

advances

1,917

2,771

2,174

2,099

1,719

8,961

6,160

Subordinated debentures and

other borrowings

759

802

832

850

800

3,243

2,857

Total interest expense

12,001

13,191

12,312

11,025

9,634

48,529

28,346

Net interest income

$

53,914

$

57,838

$

54,448

$

50,085

$

53,261

$

216,285

$

178,605

The following table presents the quarter-to-date schedule of average interest-earning assets and average interest-bearing liabilities for the periods indicated:

For the Three Months Ended

December 31, 2019

September 30, 2019

(dollars in thousands)

Average

Balance(5)

Interest

Inc / Exp

Average

Yield /

Rate

Average

Balance(5)

Interest

Inc / Exp

Average

Yield /

Rate

ASSETS

Cash and cash equivalents

$

38,624

$

220

2.25

%

$

34,225

$

253

2.93

%

Loans and leases(1)

3,807,731

58,203

6.06

%

3,860,770

63,391

6.51

%

Taxable securities

1,025,975

6,963

2.69

%

996,750

6,899

2.75

%

Tax-exempt securities(2)

84,640

529

2.48

%

76,161

486

2.53

%

Total interest-earning assets

$

4,956,970

$

65,915

5.28

%

$

4,967,906

$

71,029

5.67

%

Allowance for loan and lease losses

(32,688

)

(32,246

)

All other assets

502,764

500,102

TOTAL ASSETS

$

5,427,046

$

5,435,762

LIABILITIES AND STOCKHOLDERS’ EQUITY

Deposits

Interest checking

$

399,065

$

612

0.61

%

$

358,185

$

524

0.58

%

Money market accounts

790,565

1,945

0.98

%

735,724

1,917

1.03

%

Savings

474,394

63

0.05

%

475,417

114

0.10

%

Time deposits

1,231,641

6,705

2.16

%

1,270,050

7,063

2.21

%

Total interest-bearing deposits

2,895,665

9,325

1.28

%

2,839,376

9,618

1.34

%

Federal Home Loan Bank advances

371,730

1,917

2.05

%

530,055

2,771

2.07

%

Other borrowed funds

80,039

759

3.76

%

70,080

802

4.54

%

Total borrowings

451,769

2,676

2.35

%

600,135

3,573

2.36

%

Total interest-bearing liabilities

$

3,347,434

$

12,001

1.42

%

$

3,439,511

$

13,191

1.52

%

Non-interest-bearing demand deposits

1,288,960

1,223,556

Other liabilities

44,907

42,914

Total stockholders’ equity

745,745

729,781

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

5,427,046

$

5,435,762

Net interest spread(3)

3.86

%

4.15

%

Net interest income

$

53,914

$

57,838

Net interest margin(4)

4.32

%

4.62

%

Net loan accretion impact on margin

$

5,418

0.43

%

$

7,703

0.62

%

(1)

Loan and lease balances are net of deferred origination fees and costs and initial indirect costs. Non-accrual loans and leases are included in total loan and lease balances.

(2)

Interest income and rates exclude the effects of a tax equivalent adjustment to adjust tax exempt investment income on tax exempt investment securities to a fully taxable basis due to immateriality.

(3)

Represents the average rate earned on interest-earning assets minus the average rate paid on interest-bearing liabilities.

(4)

Represents net interest income (annualized) divided by total average earning assets.

(5)

Average balances are average daily balances.

Net interest income for the fourth quarter of 2019 was $53.9 million, a decrease of $3.9 million, or 6.8%, from $57.8 million for the third quarter of 2019.

The decrease in net interest income was primarily due to:

  • A decrease of $5.2 million in interest and fees on loans and leases, mainly due to a $2.3 million decrease in accretion income on acquired loans and lower average yields on loans as a result of decreases in short-term rates in September and October 2019.

Partially offset by:

  • A decrease of $854,000 in interest expense on Federal Home Loan Bank advances, mostly due to a decrease in average advances during the quarter as average lower-cost deposits grew; and

  • A decrease of $293,000 in interest expense on deposits, as a result of lower average time deposit balances and cost attributable to maturities of higher-rate time deposits.

Net interest margin for the fourth quarter of 2019 was 4.32%, a decrease of 30 basis points compared to 4.62% for the third quarter of 2019. Total net accretion income on acquired loans contributed 43 basis points to the net interest margin for the fourth quarter of 2019 compared to 62 basis points for the third quarter of 2019, a decrease of 19 basis points. The net interest margin decrease during the fourth quarter of 2019 was primarily driven by decreased loan and lease yields largely resulting from decreased loan accretion income and decreases in short-term rates.

The average cost of total deposits was 0.88% for the fourth quarter of 2019, a decrease of six basis points compared to the third quarter of 2019, mainly due to a favorable change in deposit mix and a lower average cost of time deposits. Average non-interest-bearing demand deposits, money market accounts, and interest-bearing checking accounts grew by $65.4 million, $54.8 million, and $40.9 million, respectively, while average time deposits decreased by $38.4 million.

Provision for Loan and Lease Losses

The provision for loan and lease losses was $4.4 million for the fourth quarter of 2019, a decrease of $1.5 million compared to $5.9 million for the third quarter of 2019. The fourth quarter included allocations of $3.2 million for originated loans and leases, $524,000 for acquired non-impaired loans, and $694,000 for acquired impaired loans. The provision during the fourth quarter of 2019 for originated loans reflects growth in that portfolio, particularly the unguaranteed portion of government guaranteed loans.

Non-interest Income

The following table presents the components of non-interest income for the periods indicated:

Three Months Ended

Year Ended

December 31,

September 30,

June 30,

March 31,

December 31,

December 31,

December 31,

(dollars in thousands)

2019

2019

2019

2019

2018

2019

2018

NON-INTEREST INCOME

Fees and service charges on

deposits

$

1,635

$

1,612

$

1,441

$

1,770

$

1,852

$

6,458

$

6,445

Loan servicing revenue

2,834

2,692

2,630

2,539

2,667

10,695

10,272

Loan servicing asset revaluation

(2,545

)

(1,610

)

(1,223

)

(1,261

)

(2,862

)

(6,639

)

(9,269

)

ATM and interchange fees

1,150

973

945

717

1,010

3,785

4,313

Net gains on sales of securities

available-for-sale

178

973

160

1,151

164

Change in fair value of equity

securities, net

381

(15

)

551

499

1,416

Net gains on sales of loans

8,735

9,405

7,472

6,233

9,337

31,845

31,551

Wealth management and trust

income

704

653

626

595

679

2,578

1,545

Other non-interest income

1,622

918

768

896

1,447

4,204

5,505

Total non-interest income

$

14,516

$

14,806

$

14,183

$

11,988

$

14,290

$

55,493

$

50,526

Non-interest income for the fourth quarter of 2019 was $14.5 million, a decrease of $290,000, or 2.0%, compared to $14.8 million for the third quarter of 2019.

The decrease in total non-interest income was primarily due to:

  • An increase of $935,000 in loan servicing asset revaluation, reflecting an unfavorable change in fair value of the servicing asset as a result of increased prepayments and discount rates; and

  • A decrease of $670,000 in net gains on sales of loans, mainly due to a decrease in average premium on sales of government guaranteed loans.

Partially offset by:

  • An increase of $704,000 in other non-interest income, mostly due to a favorable swap valuation adjustment and increased swap activity; and

  • An increase in the change in fair value of equity securities, net, of $396,000 due to an increase in the fair value of those securities.

During the fourth quarter of 2019, the Company sold $101.5 million of U.S. government guaranteed loans compared to $93.3 million during the third quarter of 2019. The increase in sales is principally due to the timing of loans closed becoming fully funded.

Non-interest Expense

The following table presents the components of non-interest expense for the periods indicated:

Three Months Ended

Year Ended

December 31,

September 30,

June 30,

March 31,

December 31,

December 31,

December 31,

(dollars in thousands)

2019

2019

2019

2019

2018

2019

2018

NON-INTEREST EXPENSE

Salaries and employee benefits

$

24,228

$

24,537

$

23,652

$

22,892

$

21,548

$

95,309

$

80,382

Occupancy expense, net

4,306

3,745

4,337

4,280

4,027

16,668

15,829

Equipment expense

935

767

732

669

641

3,103

2,419

Loan and lease related expenses

2,648

1,949

1,841

1,577

2,223

8,015

6,109

Legal, audit and other professional

fees

2,340

4,066

2,981

2,066

2,746

11,453

11,373

Data processing

2,678

4,062

3,849

3,144

2,846

13,733

18,242

Net loss (gain) recognized on other

real estate owned and other

related expenses

122

95

252

196

48

665

235

Regulatory assessments

157

228

371

(59

)

462

697

1,744

Other intangible assets

amortization expense

2,003

2,003

1,959

1,773

1,834

7,738

5,629

Advertising and promotions

1,114

843

732

709

590

3,398

1,723

Telecommunications

488

474

537

464

391

1,963

1,710

Other non-interest expense

2,675

2,679

2,711

2,968

2,732

11,033

9,501

Total non-interest expense

$

43,694

$

45,448

$

43,954

$

40,679

$

40,088

$

173,775

$

154,896

Non-interest expense for the fourth quarter of 2019 was $43.7 million, a decrease of $1.8 million, or 3.9%, from $45.4 million for the third quarter of 2019.

The decrease in total non-interest expense was primarily due to:

  • A decrease of $1.7 million in legal, audit and other professional fees, as the prior quarter reflected $1.5 million of non-recurring professional services costs;

  • A decrease of $1.4 million in data processing expense, mostly due to expenses associated with our Oak Park River Forest core system conversion during the prior quarter; and

  • A decrease of $309,000 in salaries and employee benefits, as the prior quarter included acquisition related salary and employee benefit costs.

Partially offset by:

  • An increase of $699,000 in loan and lease related expenses due to higher loan expenses on government guaranteed loans;

  • An increase of $561,000 in occupancy expense, net, largely due to a favorable accrual adjustment to property tax expense in the prior quarter as well as an increase in rental expense related to office expansion; and

  • An increase of $271,000 in advertising and promotions expense due to additional media advertisement during the quarter.

The Company’s efficiency ratio was 60.93% for the fourth quarter of 2019, compared with 59.81% for the third quarter of 2019. Excluding merger-related expenses, core system conversion expenses, and impairment charges on assets held for sale, the Company’s adjusted efficiency ratio1 was 60.51% for the fourth quarter of 2019, compared with 58.17% for the third quarter of 2019.

(1)

Represents a non-GAAP financial measure. See "Reconciliation of non-GAAP Financial Measures" for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure.

INCOME TAXES

The Company recorded income tax expense of $4.5 million during the fourth quarter of 2019, an effective tax rate of 22.1%, compared to $5.9 million during the third quarter of 2019, an effective tax rate of 27.9%. The decrease in the effective tax rate was due to tax benefits recorded as a result of the recognition of tax assets associated with other real estate owned.

STATEMENTS OF FINANCIAL CONDITION

Total assets were $5.5 billion at December 31, 2019, an increase of $83.5 million compared to $5.4 billion at September 30, 2019, and an increase of $579.2 million compared to $4.9 billion at December 31, 2018.

The current quarter increase was primarily due to:

  • An increase in securities of $154.7 million, reflecting purchases of mortgage-backed securities during the quarter;

  • An increase in loans held for sale of $4.6 million, largely due to the timing of loan originations during the quarter; and

  • An increase in other real estate owned of $3.4 million due to the volume of transfers in exceeding sales.

Partially offset by:

  • A decrease in loans and leases of $45.4 million, mostly due to a decrease of $112.9 million in our acquired loan portfolio, partially offset by an increase of $67.5 million in our originated loan portfolio; and

  • A decrease in cash and cash equivalents of $28.1 million due to the redeployment of cash into earning assets.

The following table shows our allocation of the originated, acquired impaired, and acquired non-impaired loans and leases at the dates indicated:

December 31, 2019

September 30, 2019

December 31, 2018

(dollars in thousands)

Amount

% of Total

Amount

% of Total

Amount

% of Total

Originated loans and leases

Commercial real estate

$

792,263

20.9

%

$

772,559

20.2

%

$

652,234

18.6

%

Residential real estate

483,072

12.8

%

497,839

13.0

%

466,309

13.3

%

Construction, land development, and other land

235,794

6.2

%

236,780

6.2

%

144,128

4.1

%

Commercial and industrial

1,160,996

30.7

%

1,096,400

28.6

%

803,508

22.9

%

Installment and other

5,372

0.1

%

7,818

0.2

%

11,718

0.3

%

Leasing financing receivables

158,155

4.2

%

156,758

4.1

%

159,901

4.6

%

Total originated loans and leases

$

2,835,652

74.9

%

$

2,768,154

72.3

%

$

2,237,798

63.8

%

Acquired impaired loans

Commercial real estate

$

135,914

3.6

%

$

142,435

3.7

%

$

146,808

4.2

%

Residential real estate

100,223

2.7

%

109,409

2.9

%

113,934

3.3

%

Construction, land development, and other land

5,373

0.1

%

4,562

0.1

%

3,779

0.1

%

Commercial and industrial

16,909

0.4

%

18,349

0.5

%

12,617

0.4

%

Installment and other

249

0.0

%

267

0.0

%

404

0.0

%

Total acquired impaired loans

$

258,668

6.8

%

$

275,022

7.2

%

$

277,542

8.0

%

Acquired non-impaired loans and leases

Commercial real estate

$

348,365

9.2

%

$

391,294

10.2

%

$

462,565

13.2

%

Residential real estate

128,527

3.4

%

141,855

3.7

%

124,659

3.6

%

Construction, land development, and other land

37,490

1.0

%

39,657

1.0

%

37,442

1.1

%

Commercial and industrial

153,660

4.1

%

187,413

4.9

%

328,672

9.4

%

Installment and other

944

0.0

%

1,269

0.0

%

1,596

0.0

%

Leasing financing receivables

22,355

0.6

%

26,426

0.7

%

31,352

0.9

%

Total acquired non-impaired loans and leases

$

691,341

18.3

%

$

787,914

20.5

%

$

986,286

28.2

%

Total loans and leases

$

3,785,661

100.0

%

$

3,831,090

100.0

%

$

3,501,626

100.0

%

Allowance for loan and lease losses

(31,936

)

(31,585

)

(25,201

)

Total loans and leases, net of allowance for loan and lease losses

$

3,753,725

$

3,799,505

$

3,476,425

ASSET QUALITY

Non-Performing Assets

The following table sets forth the amounts of non-performing loans and leases (excluding acquired impaired), non-performing assets, and other real estate owned at the dates indicated:

December 31,

September 30,

June 30,

March 31,

December 31,

(dollars in thousands)

2019

2019

2019

2019

2018

Non-performing assets:

Non-accrual loans and leases

$

36,272

$

39,529

$

34,027

$

28,539

$

25,834

Past due loans and leases 90 days or more and still accruing interest

996

Accruing troubled debt restructured loans

1,771

2,204

1,529

1,921

1,813

Total non-performing loans and leases

38,043

41,733

36,552

30,460

27,647

Other real estate owned

9,896

6,502

6,531

4,595

5,041

Total non-performing assets

$

47,939

$

48,235

$

43,083

$

35,055

$

32,688

Total non-performing loans and leases as a percentage of total loans and leases

1.00

%

1.09

%

0.95

%

0.85

%

0.79

%

Total non-performing assets as a percentage of total assets

0.87

%

0.89

%

0.80

%

0.70

%

0.66

%

Allowance for loan and lease losses as a percentage of non-performing loans and leases

83.95

%

75.68

%

85.17

%

88.99

%

91.15

%

Non-performing assets guaranteed by U.S. government:

Non-accrual loans guaranteed

$

4,232

$

4,167

$

4,723

$

5,070

$

4,245

Past due loans 90 days or more and still accruing interest guaranteed

Accruing troubled debt restructured loans guaranteed

381

Total non-performing loans guaranteed

$

4,232

$

4,167

$

4,723

$

5,070

$

4,626

Total non-performing loans and leases not guaranteed as a percentage of total loans and leases

0.89

%

0.98

%

0.82

%

0.71

%

0.66

%

Total non-performing assets not guaranteed as a percentage of total assets

0.79

%

0.81

%

0.71

%

0.60

%

0.57

%

Variances in non-performing assets:

  • Non-performing loans and leases were $38.0 million at December 31, 2019, a decrease of $3.6 million from $41.7 million at September 30, 2019, principally due to loan resolutions; and

  • Other real estate owned was $9.9 million at December 31, 2019, an increase of $3.4 million from $6.5 million at September 30, 2019 due to higher volume of transfers from loans exceeding sales.

U.S. government guaranteed balances of non-performing loans were consistent at $4.2 million at December 31, 2019 and September 30, 2019.

Allowance for Loan and Lease Losses

The following table presents the balance and activity within the allowance for loan and lease losses for the periods indicated:

Three Months Ended

Year Ended

December 31,

September 30,

June 30,

March 31,

December 31,

December 31,

December 31,

(dollars in thousands)

2019

2019

2019

2019

2018

2019

2018

Allowance for loan and lease losses, beginning of period

$

31,585

$

31,132

$

27,106

$

25,201

$

23,424

$

25,201

$

16,706

Provision for loan and lease losses

4,387

5,931

6,391

3,999

3,882

20,708

18,795

Net charge-offs of loans and leases

(4,036

)

(5,478

)

(2,365

)

(2,094

)

(2,105

)

(13,973

)

(10,300

)

Allowance for loan and lease losses, end of period

$

31,936

$

31,585

$

31,132

$

27,106

$

25,201

$

31,936

$

25,201

Allowance for loan and lease losses to period end total loans and leases held for investment

0.84

%

0.82

%

0.81

%

0.76

%

0.72

%

0.84

%

0.72

%

Net charge-offs (annualized) to average loans and leases outstanding during the period

0.42

%

0.56

%

0.25

%

0.24

%

0.24

%

0.37

%

0.35

%

Provision for loan and lease losses to net charge-offs during the period

1.09x

1.08x

2.70x

1.91x

1.84x

1.48x

1.82x

The allowance for loan and lease losses as a percentage of total loans and leases held for investment increased to 0.84% at December 31, 2019, compared to 0.82% at September 30, 2019 and 0.72% at December 31, 2018.

In June 2016, the Financial Accounting Standards Board ("FASB") issued new authoritative guidance on the recognition of credit losses which replaces the incurred loss impairment methodology in current authoritative guidance with a methodology that reflects expected credit losses. In November 2019, the FASB delayed the effective date of the new authoritative guidance for entities, like the Company, that are not classified as Public Business Entities. Assuming the Company remains an emerging growth company, the new authoritative guidance is effective for fiscal years beginning after December 15, 2022. The Company is in process of implementation and determining the impact that this new authoritative guidance will have on the Company’s consolidated financial statements.

Net Charge-Offs

Net charge-offs during the fourth quarter of 2019 were $4.0 million, or 0.42% of average loans and leases, on an annualized basis, a decrease of $1.4 million compared to $5.5 million, or 0.56% of average loans and leases, during the third quarter of 2019, and an increase from $2.1 million, or 0.24%, for the comparable quarter one year ago.

The net charge-offs during the quarter were primarily attributed to the unguaranteed portion of U.S. government guaranteed loans. Net charge-offs for the fourth quarter of 2019 included $3.6 million in the unguaranteed portion of U.S. government guaranteed loans, while net charge-offs for the third quarter of 2019 included $4.8 million and fourth quarter of 2018 included $1.8 million in the unguaranteed portion of U.S. government guaranteed loans.

Deposits and Other Liabilities

The following table presents the composition of deposits at the dates indicated:

December 31,

September 30,

June 30,

March 31,

December 31,

(dollars in thousands)

2019

2019

2019

2019

2018

Non-interest-bearing demand deposits

$

1,279,641

$

1,221,431

$

1,240,375

$

1,163,255

$

1,192,873

Interest-bearing checking accounts

338,185

372,049

345,081

305,393

296,339

Money market demand accounts

881,387

745,154

728,954

611,634

640,401

Other savings

475,839

471,878

480,756

468,524

476,418

Time deposits (below $250,000)

916,723

966,866

980,162

967,999

911,603

Time deposits ($250,000 and above)

255,802

302,936

284,915

291,711

232,282

Total deposits

$

4,147,577

$

4,080,314

$

4,060,243

$

3,808,516

$

3,749,916

Total deposits were $4.1 billion at December 31, 2019, an increase of $67.3 million compared to September 30, 2019, an increase of 1.6%. Non-interest-bearing deposits rose to 30.9% of total deposits at December 31, 2019 from 29.9% at September 30, 2019.

The increase in the current quarter was primarily due to:

  • An increase in money market demand deposits of $136.2 million, from $745.2 million at September 30, 2019 to $881.4 million at December 31, 2019, largely driven by growth in business account balances; and

  • An increase in non-interest-bearing demand deposits of $58.2 million, from $1.2 billion at September 30, 2019 to $1.3 billion at December 31, 2019, also driven by increases in business account balances.

Partially offset by:

  • A decrease in time deposits of $97.3 million, from $1.3 billion at September 30, 2019 to $1.2 billion at December 31, 2019, principally driven by decreases in brokered certificates; and

  • A decrease in interest-bearing checking deposits of $33.9 million, from $372.0 million at September 30, 2019 to $338.2 million at December 31, 2019, mainly driven by NOW business account balances.

Total borrowings and other liabilities were $624.1 million at December 31, 2019, an increase of $2.0 million from $622.1 million at September 30, 2019, mainly due to an increase in securities sold under agreements to repurchase partially offset by a decrease in FHLB advances.

Stockholders’ Equity

Total stockholders’ equity was $750.1 million at December 31, 2019, an increase of $14.2 million from $735.9 million at September 30, 2019. The increase was due to net income generated during the quarter less dividends declared. On December 12, 2019, the Company announced that its Board of Directors declared the first cash dividend on its common stock of $0.03 per share for the fourth quarter of 2019.

Stockholders’ equity increased $99.4 million from $650.7 million at December 31, 2018. The increase was mainly due to net income generated during the year and the stock consideration issued in connection with the acquisition.

On November 1, 2019, the Company announced that its Board of Directors approved a stock repurchase program authorizing the purchase of up to an aggregate of 1,250,000 shares of the Company’s outstanding common stock. The program will be in effect until December 31, 2020, unless terminated earlier. The Company has not made any stock repurchases under this program.

The following table presents the actual regulatory capital dollar amounts and ratios of the Company and Byline Bank as of December 31, 2019:

Actual

Minimum Capital

Required

Required to be

Considered

Well Capitalized

December 31, 2019

Amount

Ratio

Amount

Ratio

Amount

Ratio

Total capital to risk weighted assets:

Company

$

627,573

14.43

%

$

347,835

8.00

%

N/A

N/A

Bank

602,684

13.87

%

347,564

8.00

%

$

434,454

10.00

%

Tier 1 capital to risk weighted assets:

Company

$

594,477

13.67

%

$

260,876

6.00

%

N/A

N/A

Bank

569,588

13.11

%

260,673

6.00

%

$

347,564

8.00

%

Common Equity Tier 1 (CET1) to risk weighted assets:

Company

$

537,539

12.36

%

$

195,657

4.50

%

N/A

N/A

Bank

569,588

13.11

%

195,504

4.50

%

$

282,395

6.50

%

Tier 1 capital to average assets:

Company

$

594,477

11.39

%

$

208,771

4.00

%

N/A

N/A

Bank

569,588

10.92

%

208,647

4.00

%

$

260,809

5.00

%

Capital ratios for the period presented are based on the Basel III regulatory capital framework as applied to the Company’s current business and operations, and are subject to, among other things, completion and filing of the Company’s regulatory reports and ongoing regulatory review and implementation guidance.

Conference Call, Webcast and Slide Presentation

The Company will host a conference call and webcast at 9:00 a.m. Central Time (10:00 a.m. Eastern Time) on Friday, January 24, 2020 to discuss its full year and quarterly financial results. Analysts and investors may participate in the question-and-answer session. The call can be accessed via telephone at (877) 512-8755. A recorded replay can be accessed through February 7, 2020 by dialing (877) 344-7529; passcode: 10138134.

A slide presentation relating to the fourth quarter 2019 results will be accessible prior to the scheduled conference call. The slide presentation and webcast of the conference call can be accessed on the News and Events page of the Company’s investor relations website at www.bylinebancorp.com.

About Byline Bancorp, Inc.

Headquartered in Chicago, Byline Bancorp, Inc. is the parent company for Byline Bank, a full service commercial bank serving small- and medium-sized businesses, financial sponsors, and consumers. Byline Bank has approximately $5.5 billion in assets and operates more than 50 full service 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 five Small Business Administration lenders in the United States.

Non-GAAP Financial Measures

This release contains certain financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America ("GAAP"). These measures include adjusted net income, adjusted diluted earnings per share, adjusted efficiency ratio, adjusted non-interest expense to average assets, non-interest income to total revenues, adjusted return on average stockholders’ equity, adjusted return on average assets, pre-tax pre-provision return on average assets, adjusted pre-tax pre-provision return on average assets, tangible book value per common share, tangible common equity to tangible assets, return on average tangible common stockholders' equity, and adjusted return on average tangible common stockholders' equity. Management believes that these non-GAAP financial measures provide useful information to management and investors that is supplementary to the Company’s financial condition, results of operations and cash flows computed in accordance with GAAP; however, management acknowledges that our non-GAAP financial measures have a number of limitations. As such, these disclosures should not be viewed as a substitute for results determined in accordance with GAAP financial measures that we and other companies use. Management also uses these measures for peer comparison. See "Reconciliation of Non-GAAP Financial Measures" in the financial schedules included in this press release for a reconciliation of the non-GAAP financial measures to the comparable GAAP financial measures. Additionally, please refer to the Company’s Annual Report on Form 10-K for the detailed definitions of these non-GAAP financial measures.

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 judgement 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 its Annual Report on Form 10-K and other reports filed with the Securities and Exchange Commission, including among other things under the heading "Risk Factors" in such Annual Report on Form 10-K. 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.

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (unaudited)

December 31,

September 30,

June 30,

March 31,

December 31,

(dollars in thousands)

2019

2019

2019

2019

2018

ASSETS

Cash and due from banks

$

48,228

$

75,275

$

57,513

$

50,026

$

30,190

Interest bearing deposits with other banks

32,509

33,564

31,802

31,971

91,670

Cash and cash equivalents

80,737

108,839

89,315

81,997

121,860

Equity and other securities, at fair value

8,031

7,648

7,662

7,216

Securities available-for-sale, at fair value

1,186,292

1,031,933

969,029

964,553

817,656

Securities held-to-maturity, at amortized cost

4,412

4,417

4,421

4,425

99,266

Restricted stock, at cost

22,127

24,331

22,937

19,202

19,202

Loans held for sale

11,732

7,176

18,473

510

19,827

Loans and leases:

Loans and leases

3,785,661

3,831,090

3,863,148

3,567,566

3,501,626

Allowance for loan and lease losses

(31,936

)

(31,585

)

(31,132

)

(27,106

)

(25,201

)

Net loans and leases

3,753,725

3,799,505

3,832,016

3,540,460

3,476,425

Servicing assets, at fair value

19,471

19,939

19,760

19,534

19,693

Accrued interest receivable

13,283

13,013

12,913

11,974

10,863

Premises and equipment, net

96,140

96,006

96,588

97,069

97,680

Assets held for sale

15,362

15,472

16,329

13,596

14,489

Other real estate owned, net

9,896

6,502

6,531

4,595

5,041

Goodwill

148,353

145,638

145,638

128,177

128,177

Other intangible assets, net

31,902

33,905

35,908

31,646

33,419

Bank-owned life insurance

9,750

9,699

9,634

6,087

5,961

Deferred tax assets, net

38,315

33,388

35,737

30,534

35,643

Due from counterparty

43,145

47,045

34,226

20,691

5,338

Other assets

29,136

33,822

34,119

27,659

32,034

Total assets

$

5,521,809

$

5,438,278

$

5,391,236

$

5,009,925

$

4,942,574

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES

Non-interest-bearing demand deposits

$

1,279,641

$

1,221,431

$

1,240,375

$

1,163,255

$

1,192,873

Interest-bearing deposits:

NOW, savings accounts, and money market accounts

1,695,411

1,589,081

1,554,791

1,385,551

1,413,158

Time deposits

1,172,525

1,269,802

1,265,077

1,259,710

1,143,885

Total deposits

4,147,577

4,080,314

4,060,243

3,808,516

3,749,916

Accrued interest payable

3,677

4,778

4,522

4,390

3,484

Line of credit

Federal Home Loan Bank advances

490,000

506,000

500,000

425,000

425,000

Securities sold under agreements to repurchase

49,638

32,290

32,885

34,369

34,166

Junior subordinated debentures issued to capital trusts, net

37,334

37,207

37,059

36,912

36,768

Accrued expenses and other liabilities

43,468

41,823

38,852

31,989

42,568

Total liabilities

4,771,694

4,702,412

4,673,561

4,341,176

4,291,902

STOCKHOLDERS’ EQUITY

Preferred stock

10,438

10,438

10,438

10,438

10,438

Common stock

379

378

378

362

361

Additional paid-in capital

580,965

579,564

578,828

548,005

546,849

Retained earnings

159,033

144,525

129,379

116,363

102,522

Accumulated other comprehensive income (loss), net of tax

(700

)

961

(1,348

)

(6,419

)

(9,498

)

Total stockholders’ equity

750,115

735,866

717,675

668,749

650,672

Total liabilities and stockholders’ equity

$

5,521,809

$

5,438,278

$

5,391,236

$

5,009,925

$

4,942,574

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

Three Months Ended

Year Ended

December 31,

September 30,

June 30,

March 31,

December 31,

December 31,

December 31,

(dollars in thousands, except per share data)

2019

2019

2019

2019

2018

2019

2018

INTEREST AND DIVIDEND INCOME

Interest and fees on loans and leases

$

58,203

$

63,391

$

59,524

$

54,383

$

56,646

$

235,501

$

184,972

Interest on taxable securities

6,683

6,554

6,237

5,759

5,334

25,233

19,037

Interest on tax-exempt securities

529

486

428

343

355

1,786

1,095

Other interest and dividend income

500

598

571

625

560

2,294

1,847

Total interest and dividend income

65,915

71,029

66,760

61,110

62,895

264,814

206,951

INTEREST EXPENSE

Deposits

9,325

9,618

9,306

8,076

7,115

36,325

19,329

Federal Home Loan Bank advances

1,917

2,771

2,174

2,099

1,719

8,961

6,160

Subordinated debentures and other

borrowings

759

802

832

850

800

3,243

2,857

Total interest expense

12,001

13,191

12,312

11,025

9,634

48,529

28,346

Net interest income

53,914

57,838

54,448

50,085

53,261

216,285

178,605

PROVISION FOR LOAN AND LEASE LOSSES

4,387

5,931

6,391

3,999

3,882

20,708

18,795

Net interest income after provision

for loan and lease losses

49,527

51,907

48,057

46,086

49,379

195,577

159,810

NON-INTEREST INCOME

Fees and service charges on deposits

1,635

1,612

1,441

1,770

1,852

6,458

6,445

Loan servicing revenue

2,834

2,692

2,630

2,539

2,667

10,695

10,272

Loan servicing asset revaluation

(2,545

)

(1,610

)

(1,223

)

(1,261

)

(2,862

)

(6,639

)

(9,269

)

ATM and interchange fees

1,150

973

945

717

1,010

3,785

4,313

Net gains on sales of securities

available-for-sale

178

973

160

1,151

164

Change in fair value of equity securities,

net

381

(15

)

551

499

1,416

Net gains on sales of loans

8,735

9,405

7,472

6,233

9,337

31,845

31,551

Wealth management and trust income

704

653

626

595

679

2,578

1,545

Other non-interest income

1,622

918

768

896

1,447

4,204

5,505

Total non-interest income

14,516

14,806

14,183

11,988

14,290

55,493

50,526

NON-INTEREST EXPENSE

Salaries and employee benefits

24,228

24,537

23,652

22,892

21,548

95,309

80,382

Occupancy expense, net

4,306

3,745

4,337

4,280

4,027

16,668

15,829

Equipment expense

935

767

732

669

641

3,103

2,419

Loan and lease related expenses

2,648

1,949

1,841

1,577

2,223

8,015

6,109

Legal, audit, and other professional fees

2,340

4,066

2,981

2,066

2,746

11,453

11,373

Data processing

2,678

4,062

3,849

3,144

2,846

13,733

18,242

Net loss recognized on other real estate owned and other related expenses

122

95

252

196

48

665

235

Regulatory assessments

157

228

371

(59

)

462

697

1,744

Other intangible assets amortization

expense

2,003

2,003

1,959

1,773

1,834

7,738

5,629

Advertising and promotions

1,114

843

732

709

590

3,398

1,723

Telecommunications

488

474

537

464

391

1,963

1,710

Other non-interest expense

2,675

2,679

2,711

2,968

2,732

11,033

9,501

Total non-interest expense

43,694

45,448

43,954

40,679

40,088

173,775

154,896

INCOME BEFORE PROVISION FOR INCOME TAXES

20,349

21,265

18,286

17,395

23,581

77,295

55,440

PROVISION FOR INCOME TAXES

4,497

5,923

5,075

4,798

6,460

20,293

14,247

NET INCOME

15,852

15,342

13,211

12,597

17,121

57,002

41,193

Dividends on preferred shares

196

196

195

196

196

783

783

INCOME AVAILABLE TO COMMON

STOCKHOLDERS

$

15,656

$

15,146

$

13,016

$

12,401

$

16,925

$

56,219

$

40,410

EARNINGS PER COMMON SHARE

Basic

$

0.41

$

0.40

$

0.35

$

0.34

$

0.47

$

1.51

$

1.21

Diluted

$

0.41

$

0.39

$

0.34

$

0.34

$

0.46

$

1.48

$

1.18

BYLINE BANCORP, INC. AND SUBSIDIARIES

SELECTED FINANCIAL DATA (unaudited)

As of or For the Three Months Ended

As of or For the Year Ended

(dollars in thousands, except share and

December 31,

September 30,

June 30,

March 31,

December 31,

December 31,

December 31,

per share data)

2019

2019

2019

2019

2018

2019

2018

Earnings per Common Share

Basic earnings per common share

$

0.41

$

0.40

$

0.35

$

0.34

$

0.47

$

1.51

$

1.21

Diluted earnings per common share

$

0.41

$

0.39

$

0.34

$

0.34

$

0.46

$

1.48

$

1.18

Adjusted diluted earnings per common share(2)(3)(4)

$

0.42

$

0.41

$

0.41

$

0.38

$

0.49

$

1.62

$

1.43

Weighted average common shares outstanding (basic)

37,872,835

37,831,356

37,263,352

36,169,477

36,116,189

37,290,486

33,292,619

Weighted average common shares outstanding (diluted)

38,537,899

38,487,180

37,948,006

36,876,574

36,900,589