UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2025
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______to ______
Commission File Number 001-38139
Byline Bancorp, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
36-3012593
(State or Other Jurisdiction of
Incorporation or Organization)
(IRS Employer
Identification Number)
180 North LaSalle Street, Suite 300
Chicago, Illinois 60601
(Address of Principal Executive Offices)
(773) 244-7000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Securities Exchange Act of 1934.
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐No ☒
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Stock
BY
New York Stock Exchange
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
Common Stock, $0.01 par value, 46,152,287 shares outstanding as of April 30, 2025
BYLINE BANCORP, INC.
March 31, 2025
INDEX
Page
PART I.
FINANCIAL INFORMATION
3
Item 1.
Financial Statements. The Unaudited Interim Condensed Consolidated Financial Statements of Byline Bancorp, Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
9
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
44
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
73
Item 4.
Controls and Procedures
74
PART II.
OTHER INFORMATION
75
Legal Proceedings
Item 1A.
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
Defaults Upon Senior Securities
Mine Safety Disclosures
Item 5.
Other Information
Item 6.
Exhibits
76
2
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
BYLINE BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
(dollars in thousands, except share data)
December 31, 2024
ASSETS
Cash and due from banks
$
73,453
58,759
Interest bearing deposits with other banks
347,861
504,379
Cash and cash equivalents
421,314
563,138
Equity and other securities, at fair value
10,675
9,865
Securities available-for-sale, at fair value (amortized cost at March 31, 2025—$1,690,716, December 31, 2024—$1,595,583)
1,538,100
1,415,696
Securities held-to-maturity, at amortized cost (fair value at December 31, 2024 —$605)
—
605
Restricted stock, at cost
26,311
27,452
Loans held for sale
21,333
3,200
Loans and leases:
Loans and leases
7,025,837
6,906,822
Allowance for credit losses - loans and leases
(100,420
)
(97,988
Net loans and leases
6,925,417
6,808,834
Servicing assets, at fair value
19,571
18,952
Premises and equipment, net
59,568
60,502
Other real estate owned
6,249
5,170
Goodwill and other intangible assets, net
196,980
198,098
Bank-owned life insurance
100,988
100,083
Deferred tax assets, net
50,703
56,458
Accrued interest receivable and other assets
207,523
228,476
Total assets
9,584,732
9,496,529
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Non-interest-bearing demand deposits
1,715,599
1,756,098
Interest-bearing deposits
5,837,709
5,702,530
Total deposits
7,553,308
7,458,628
Other borrowings
578,244
618,773
Subordinated notes, net
74,084
74,040
Junior subordinated debentures issued to capital trusts, net
71,000
70,890
Accrued interest payable and other liabilities
177,018
182,701
Total liabilities
8,453,654
8,405,032
COMMITMENTS AND CONTINGENT LIABILITIES (Note 14)
STOCKHOLDERS’ EQUITY
Preferred stock
Common stock
455
Additional paid-in capital
713,086
717,763
Retained earnings
557,704
533,901
Treasury stock, at cost
(43,783
(46,935
Accumulated other comprehensive loss, net of tax
(96,384
(113,687
Total stockholders’ equity
1,131,078
1,091,497
Total liabilities and stockholders’ equity
PreferredShares
CommonShares
Par value
0.01
Shares authorized
25,000,000
150,000,000
Shares issued
46,322,039
46,252,693
Shares outstanding
44,675,553
44,459,584
Treasury shares
1,646,486
1,793,109
See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
March 31,
(dollars in thousands, except share and per share data)
2025
2024
INTEREST AND DIVIDEND INCOME
Interest and fees on loans and leases
121,230
123,792
Interest on securities
12,127
9,734
Other interest and dividend income
1,493
4,795
Total interest and dividend income
134,850
138,321
INTEREST EXPENSE
Deposits
42,049
45,962
1,835
3,824
Subordinated notes and debentures
2,750
2,994
Total interest expense
46,634
52,780
Net interest income
88,216
85,541
PROVISION FOR CREDIT LOSSES
9,179
6,643
Net interest income after provision for credit losses
79,037
78,898
NON-INTEREST INCOME
Fees and service charges on deposits
2,703
2,427
Loan servicing revenue
3,043
3,364
Loan servicing asset revaluation
(1,051
(703
ATM and interchange fees
1,034
1,075
Change in fair value of equity securities, net
811
392
Net gains on sales of loans
4,938
5,533
Wealth management and trust income
1,082
1,157
Other non-interest income
2,304
2,228
Total non-interest income
14,864
15,473
NON-INTEREST EXPENSE
Salaries and employee benefits
36,252
33,953
Occupancy and equipment expense, net
4,852
5,284
Loan and lease related expenses
827
685
Legal, audit and other professional fees
3,251
2,719
Data processing
5,171
4,145
Net loss (gain) recognized on other real estate owned and other related expenses
42
(98
Other intangible assets amortization expense
1,118
1,345
Other non-interest expense
4,916
5,776
Total non-interest expense
56,429
53,809
INCOME BEFORE PROVISION FOR INCOME TAXES
37,472
40,562
PROVISION FOR INCOME TAXES
9,224
10,122
NET INCOME
28,248
30,440
EARNINGS PER COMMON SHARE
Basic
0.65
0.70
Diluted
0.64
4
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(dollars in thousands)
Net income
Securities available-for-sale
Unrealized holding gains (losses) arising during the period
27,270
(8,959
Tax effect
(7,128
2,389
Net of tax
20,142
(6,570
Cash flow hedges
(100
4,531
Reclassification adjustments for net gains included in net income
(3,744
(4,836
1,005
82
(2,839
(223
Total other comprehensive income (loss)
17,303
(6,793
Comprehensive income
45,551
23,647
5
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Additional
AccumulatedOther
Total
(dollars in thousands,
Paid-In
Retained
Treasury
Comprehensive
Stockholders’
except share data)
Shares
Amount
Capital
Earnings
Stock
Income (Loss)
Equity
Balance, January 1, 2024
43,764,056
451
710,488
429,036
(49,707
(100,117
990,151
Other comprehensive loss, net of tax
Issuance of common stock upon exercise of stock options, net
68,186
(331
(671
(1,002
Restricted stock activity, net
276,145
1
(3,159
1,509
(1,649
Cash dividends declared on common stock ($0.09 per share)
(3,944
Share-based compensation expense
1,846
Balance, March 31, 2024
44,108,387
452
708,844
455,532
(48,869
(106,910
1,009,049
Balance, January 1, 2025
Other comprehensive income, net of tax
1,187
13
240,782
(6,697
3,839
(2,858
Cash dividends declared on common stock ($0.10 per share)
(4,445
Repurchases of common stock
(26,000
(687
2,007
Balance, March 31, 2025
6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
CASH FLOWS FROM OPERATING ACTIVITIES
Adjustments to reconcile net income to net cash from operating activities:
Provision for credit losses
Impairment loss on premises and equipment
1,069
Impairment loss on operating lease right-of-use asset
194
Depreciation and amortization of premises and equipment
1,158
1,307
Net accretion of securities
(956
(481
Net change in fair value of equity securities
(811
(392
Net gains on sales and disposal of premises and equipment
(9
(482
(4,938
(5,533
Originations of U.S. government guaranteed loans
(89,662
(79,089
Proceeds from U.S. government guaranteed loans sold
22,221
35,005
Accretion of premiums and discounts on acquired loans, net
(2,595
(4,284
Net change in servicing assets
(619
(1,148
Net losses on sales and valuation adjustments of other real estate owned
32
18
Net amortization of other acquisition accounting adjustments
1,144
1,626
Amortization of subordinated debt issuance cost
43
Accretion of junior subordinated debentures discount
110
115
Deferred tax benefit
(369
(501
Increase in cash surrender value of bank owned life insurance
(905
(848
Changes in assets and liabilities:
5,600
(374
58,180
77,162
Net cash provided by operating activities
27,059
62,336
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of securities available-for-sale
(148,249
(106,623
Proceeds from maturities and calls of securities available-for-sale
20,069
31,953
Proceeds from paydowns of securities available-for-sale
34,658
28,916
Proceeds from maturities and calls of securities held-to-maturity
Redemptions (purchases) of Federal Home Loan Bank stock, net
1,141
(6,489
Net change in loans and leases
(124,384
(95,840
Purchases of premises and equipment
(2,012
(512
Proceeds from sales of premises and equipment
363
Proceeds from sales of assets held for sale
1,178
Proceeds from sales of other real estate owned
209
402
Net cash used in investing activities
(217,963
(146,652
7
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits
94,654
172,922
Repayments of line of credit
(11,250
Repayments of term loan
(11,667
(1,666
Proceeds from short-term borrowings
3,065,000
570,000
Repayments of short-term borrowings
(3,090,000
(425,000
Proceeds from BTFP advances
200,000
Net decrease in securities sold under agreements to repurchase
(3,862
(6,101
Dividends paid on common stock
(4,371
(3,888
Proceeds from issuance of common stock
Net cash provided by financing activities
49,080
495,017
NET CHANGE IN CASH AND CASH EQUIVALENTS
(141,824
410,701
CASH AND CASH EQUIVALENTS, beginning of period
226,136
CASH AND CASH EQUIVALENTS, end of period
636,837
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest
51,358
52,724
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Transfer of loans to other real estate owned
1,320
Right-of-use assets exchanged for operating lease liabilities
1,606
422
Common share withholding
2,858
2,651
Common dividend declared, not paid
56
8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Table dollars in thousands, except share and per share data) (Unaudited)
Note 1—Basis of Presentation
These unaudited interim condensed consolidated financial statements include the accounts of Byline Bancorp, Inc., a Delaware corporation (the "Company," "Byline," "we," "us," "our"), a bank holding company whose principal activity is the ownership and management of its Illinois state chartered subsidiary bank, Byline Bank (the "Bank"), based in Chicago, Illinois.
These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission ("SEC"). In preparing these financial statements, the Company has evaluated events and transactions subsequent to March 31, 2025 for potential recognition or disclosure. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position and results of operations for the periods presented have been included. Certain information in footnote disclosures normally included in financial statements prepared in accordance with GAAP has been condensed or omitted pursuant to the rules and regulations of the SEC and the accounting standards for interim financial statements. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Consolidated Financial Statements for the years ended December 31, 2024 and 2023.
The Company has one reportable segment. The Company’s chief operating decision makers evaluate the operations of the Company using consolidated information for purposes of allocating resources and assessing performance. Refer to Note 21—Segment Information for additional disclosures.
In accordance with the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 855, "Subsequent Events," the Company’s management has evaluated subsequent events for potential recognition or disclosure through the date of the issuance of these condensed consolidated financial statements.
On April 1, 2025, we closed our acquisition of First Security Bancorp, Inc. and its wholly-owned subsidiary, First Security Trust and Savings Bank, pursuant to an Agreement and Plan of Merger. Refer to Note 3—Acquisition of a Business for further information.
No other subsequent events were identified that would have required a change to the condensed consolidated financial statements or disclosure in the notes to the condensed consolidated financial statements.
Note 2—Accounting Pronouncements Recently Adopted or Issued
The following reflect recent accounting pronouncements that have been adopted or are pending adoption by the Company.
Adopted Accounting Pronouncements
Income Taxes – Improvements to Income Tax Disclosures (Topic 740) –In December 2023, the FASB issued ASU 2023-09 to provide additional transparency into an entity’s income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The standard requires that public business entities disclose, on an annual basis, specific categories in the rate reconciliation and additional information for reconciling items meeting a certain quantitative threshold. The amendments also require that entities disclose on an annual basis: 1) income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign taxes and 2) the income taxes paid (net of refunds received) disaggregated by individual jurisdictions exceeding 5% of total income taxes paid (net of refunds received). The amendments are effective for public business entities for annual periods beginning after December 15, 2024. The Company has evaluated the disclosure requirements of this update and has concluded it will only impact certain limited annual disclosures with no material impact to the consolidated financial statements.
Issued Accounting Pronouncements Pending Adoption
Income Statement (Topic 220) – In November 2024, the FASB issued ASU 2024-03, Income Statement (Topic 220) – Reporting Comprehensive Income – Expense Disaggregation Disclosures, to address requests from investors for more detailed information about certain expense types. The standard requires that public business entities to disclose disaggregated information about specific relevant natural expense categories underlying certain income statement expense line items. The ASU requires entities to disaggregate relevant expense caption presented on the face of the income statement within continuing operations into expense categories such as employee compensation, depreciation, and intangible asset amortization. The amendments are effective for public business entities for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Entities are required to adopt prospectively. In January 2025, the FASB issued ASU 2025-01 to amend the effective date of ASU 2024-03 to clarify that all public business entities are required to
adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. The Company is evaluating the accounting and disclosure requirements of this update and does not expect them to have a material effect on the consolidated financial statements.
Note 3—Acquisition of a Business
On April 1, 2025 we acquired all of the outstanding common stock of First Security Bancorp, Inc., a Delaware corporation ("First Security"), and its subsidiaries pursuant to an Agreement and Plan of Merger, dated September 30, 2024. First Security operated a wholly owned subsidiary, First Security Trust and Savings Bank. As a result of the acquisition, effective April 1, 2025, First Security Trust and Savings Bank was merged with and into Byline Bank.
At the effective time of the merger, each share of First Security's common stock was converted into the right to receive 2.3539 shares of Byline common stock. The value of the total merger consideration at closing was approximately $41.5 million.
Merger-related expenses, including acquisition advisory expenses of $192,000 and data processing expenses of $445,000 related to the acquisition of First Security, are reflected in non-interest expense on the Condensed Consolidated Statements of Operations for the three months ended March 31, 2025. There were no merger-related expenses in the three months ended March 31, 2024.
The acquisition of First Security Bancorp will be accounted for using the acquisition method of accounting in accordance with ASC Topic 805. Assets acquired, liabilities assumed and consideration exchanged will be 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 values are subject to refinement for up to one year after the closing date of the acquisition as additional information regarding the closing date fair values become available. The determination of the fair value of the acquired assets and liabilities is in process.
Note 4—Securities
The following tables summarize the amortized cost and fair values of securities available-for-sale and securities held-to-maturity as of the dates presented and the corresponding amounts of gross unrealized gains and losses:
AmortizedCost
GrossUnrealizedGains
GrossUnrealizedLosses
FairValue
Available-for-sale
U.S. Treasury Notes
34,525
156
(93
34,588
U.S. Government agencies
151,533
(12,803
138,735
Obligations of states, municipalities, and political subdivisions
83,637
200
78,899
Residential mortgage-backed securities
Agency
952,485
3,860
(84,293
872,052
Non-agency
157,194
11
(19,790
137,415
Commercial mortgage-backed securities
258,632
307
(32,398
226,541
Corporate securities
40,109
(1,844
38,267
Asset-backed securities
12,601
(1,000
11,603
1,690,716
4,543
(157,159
10
32,783
(213
32,570
151,912
(15,426
136,487
84,188
177
(5,059
79,306
849,297
1,415
(99,910
750,802
160,427
(22,553
137,880
261,947
160
(35,167
226,940
40,623
(2,161
38,462
14,406
(1,170
13,249
1,595,583
1,772
(181,659
Held-to-maturity
There were no securities classified as held-to-maturity as of March 31, 2025, and the Company did not classify securities as trading during the three months ended March 31, 2025 or during 2024.
Gross unrealized losses and fair values, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of the dates presented, are summarized as follows:
Less than 12 Months
12 Months or Longer
Number ofSecurities
UnrealizedLosses
4,884
22
4,956
(13
122,853
(12,790
127,809
Obligations of states, municipalities and political subdivisions
68
15,498
(229
47,485
(4,709
62,983
118
88,491
(1,396
470,776
(82,897
559,267
45,178
(728
91,637
(19,062
136,815
53
63,922
(1,220
140,071
(31,178
203,993
20
1,489
(3
36,276
(1,841
37,765
5,978
305
219,534
(3,589
919,960
(153,570
1,139,494
9,808
(15
22,762
(198
13,629
(33
120,222
(15,393
133,851
79
20,271
(418
49,154
(4,641
69,425
129
183,980
(3,879
472,665
(96,031
656,645
37,882
(1,361
91,303
(21,192
129,185
63,959
(1,887
139,283
(33,280
203,242
21
2,470
(21
35,992
(2,140
5,829
334
331,999
(7,614
937,210
(174,045
1,269,209
Certain securities have fair values less than amortized cost and, therefore, contain unrealized losses. The Company evaluated the securities which had unrealized losses for potential credit losses and determined there were none. There were 305 securities available-for-sale with unrealized losses at March 31, 2025. There was no allowance for credit losses for held-to-maturity debt securities at December 31, 2024. The evaluation for potential credit losses is based upon factors such as the creditworthiness of the issuers/guarantors, the underlying collateral, if applicable, and the continuing payment performance of the securities.
Accrued interest receivable on securities available-for-sale totaled $5.4 million at March 31, 2025 and accrued interest receivable on securities available-for-sale and held-to-maturity was $4.9 million at December 31, 2024, and are excluded from the estimate of credit losses.
The Company anticipates full recovery of amortized cost with respect to these securities by maturity. The Company does not intend to sell these securities and it is not more likely than not that the Company will be required to sell them before recovery of their amortized cost basis, which may be at maturity.
There were no proceeds from sales of securities available-for-sale, nor associated gains and losses on sales and calls of securities, for the three months ended March 31, 2025 and 2024, respectively.
Securities posted and pledged as collateral for the following purpose or beneficiary as of the following dates:
Purpose or beneficiary
Public fund deposits
475,331
471,249
Customer repurchase agreements
39,074
42,022
Letters of credit
29,973
26,703
Federal Reserve Bank
Total pledged securities
544,378
539,974
At March 31, 2025 and December 31, 2024, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’ equity.
12
At March 31, 2025, the amortized cost and fair value of debt securities are shown by contractual maturity. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.
Due in one year or less
32,022
31,735
Due from one to five years
128,568
123,945
Due from five to ten years
121,764
110,546
Due after ten years
40,051
35,866
Mortgage-backed securities
1,368,311
1,236,008
The Company hedges interest rates on certain investment securities using interest rate swaps, through which the Company pays fixed amounts and receives variable amounts. Refer to Note 16—Derivative Instruments and Hedging Activities for additional discussion.
Note 5—Loan and Lease Receivables and Allowance for Credit Losses
Loan and Lease Receivables
Outstanding loan and lease receivables as of the dates presented were categorized as follows:
December 31,
Commercial real estate
2,368,452
2,351,227
Residential real estate
726,837
725,425
Construction, land development, and other land
482,223
490,445
Commercial and industrial
2,720,659
2,612,767
Installment and other
2,056
3,901
Lease financing receivables
712,615
709,757
Total loans and leases
7,012,842
6,893,522
Net unamortized deferred fees and costs
6,939
7,122
Initial direct costs
6,056
6,178
Net minimum lease payments
672,953
675,754
Unguaranteed residual values
126,476
120,839
Unearned income
(86,814
(86,836
Total lease financing receivables
Lease financial receivables before allowance for credits losses - loans and leases
718,671
715,935
Total loans and leases consist of originated loans and leases, purchased credit deteriorated ("PCD") and acquired non-credit-deteriorated loans and leases. At March 31, 2025 and December 31, 2024, total loans and leases included the guaranteed amount of U.S. government guaranteed loans of $100.4 million and $97.6 million, respectively. At March 31, 2025 and December 31, 2024, the discount on the unguaranteed portion of U.S. government guaranteed loans was $26.0 million and $25.6 million, respectively, which are included in total loans and leases. At March 31, 2025 and December 31, 2024, commercial and industrial loans included overdraft deposits of $568,000 and $1.0 million, respectively, which were reclassified as loans. At each of March 31, 2025 and December 31, 2024, loans and leases and loans held for sale pledged as security for borrowings were $2.0 billion. Accrued interest on loans and leases were $33.9 million and $35.2 million as of March 31, 2025 and December 31, 2024, respectively, and are included in the accrued interest receivable and other assets line item on the Condensed Consolidated Statement of Financial Condition.
The minimum annual lease payments for lease financing receivables as of March 31, 2025 are summarized as follows:
Minimum LeasePayments
Remainder of 2025
184,878
2026
212,634
2027
149,406
2028
86,317
2029
34,537
Thereafter
5,181
Originated loans and leases represent originations excluding loans initially acquired in a business combination. However, once an acquired loan reaches its maturity date, and is re-underwritten and renewed, it is internally classified as an originated loan. PCD loans are those acquired from a business combination with evidence of credit quality deterioration and are accounted for under ASC Topic 326. Acquired non-credit-deteriorated loans and leases represent loans and leases acquired with an outstanding balance from a business combination without more than insignificant evidence of credit quality
14
deterioration and are accounted for under ASC Topic 310-20. The following tables summarize the balances for each respective loan and lease category as of the dates presented:
Originated
Purchased Credit Deteriorated
AcquiredNon-Credit-Deteriorated
2,106,856
78,425
186,342
2,371,623
528,387
28,353
170,656
727,396
419,892
61,204
481,096
2,629,358
13,337
82,238
2,724,933
2,015
94
2,118
718,666
6,405,174
120,209
500,454
2,071,952
82,934
199,531
2,354,417
513,422
30,515
182,165
726,102
429,596
59,673
489,269
2,509,083
14,081
93,969
2,617,133
3,847
105
3,966
715,899
36
6,243,799
127,635
535,388
PCD loans—The unpaid principal balance and carrying amount of PCD loans excluding an allowance for credit losses - loans and leases of $4.2 million as of both of the dates presented, and were as follows:
UnpaidPrincipalBalance
CarryingValue
118,880
123,780
72,791
75,023
6,656
15,869
16,671
758
769
Total purchased credit deteriorated loans
208,298
222,899
Acquired non-credit-deteriorated loans and leases—The unpaid principal balance and carrying value for acquired non-credit deteriorated loans and leases, excluding an allowance for credit losses of $3.5 million as of March 31, 2025 and $3.4 million as December 31, 2024, were as follows for the dates presented:
191,827
205,558
182,653
194,768
61,561
60,051
85,945
98,156
16
Total acquired non-credit-deteriorated loans and leases
522,007
558,590
The Company hedges interest rates on certain loans using interest rate swaps through which the Company pays variable amounts and receives fixed amounts. Refer to Note 16—Derivative Instruments and Hedging Activities for additional discussion.
15
Allowance for Credit Losses
Loans and leases considered for inclusion in the allowance for credit losses include acquired non-credit-deteriorated loans and leases, purchased credit deteriorated loans, and originated loans and leases.
The Bank’s credit risk rating methodology assigns risk ratings from 1 to 10, where a higher rating represents higher risk. Risk ratings for all loans of $1.0 million or more are reviewed annually. The risk rating categories are described by the following groupings:
Pass—Ratings 1‑4 define the risk levels of borrowers and guarantors that offer a minimal to an acceptable level of risk.
Watch—A watch asset (rating of 5) has credit exposure that presents higher than average risk and warrants greater than routine attention by Bank personnel due to conditions affecting the borrower, the borrower’s industry or the economic environment.
Special Mention—A special mention asset (rating of 6) has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date.
Substandard Accrual—A substandard accrual asset (rating of 7) has well‑defined weakness or weaknesses in cash flow and collateral coverage resulting in a distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. This classification may be used in limited cases, where despite credit severity, the borrower is current on payments and there is an agreed plan for credit remediation.
Substandard Non‑Accrual—A substandard asset (rating of 8) has well‑defined weakness or weaknesses in cash flow and collateral coverage resulting in the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.
Doubtful—A doubtful asset (rating of 9) has all the weaknesses inherent in one classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.
Loss—A loss asset (rating of 10) is considered uncollectible and of such little value that its continuance as a realizable asset is not warranted.
Revolving loans that are converted to term loans are treated as new originations and are presented by year of origination. Generally, existing term loans that are re-underwritten are reflected in the table in the year of renewal. During the three months ended March 31, 2025, there were $14.1 million of revolving loans that were converted to term loans. During the year ended December 31, 2024, $67.3 million of revolving loans that were converted to term loans.
The following tables summarize the risk rating categories of the loans and leases considered for inclusion in the allowance for credit losses - loans and leases calculation, as of the dates presented, and includes the gross charge-offs for the three months ended March 31, 2025 and the year ended December 31, 2024:
Term loans amortized cost by origination year
Revolving
2023
2022
2021
Prior
Loans
Commercial Real Estate
Pass
56,066
298,733
208,903
412,304
455,942
618,451
17,439
2,067,838
Watch
15,725
36,985
17,627
37,802
113,265
221,404
Special Mention
1,146
10,215
4,564
8,110
20,123
44,158
Substandard
518
4,782
5,887
27,036
38,223
315,604
256,621
439,277
507,741
778,875
Current period gross charge-offs
1,662
Residential Real Estate
35,247
37,300
72,006
114,261
97,837
258,148
62,559
677,358
4,196
590
16,057
95
22,859
1,368
45,165
1,684
549
26
2,614
3,189
41,496
73,145
130,344
97,932
285,305
63,927
Construction, Land Development, & Land
75,235
140,589
100,066
81,046
24,825
421,761
30,981
13,805
3,051
47,837
10,429
11,498
132,116
105,280
27,876
Commercial & Industrial
116,017
390,845
397,378
415,324
205,701
246,815
586,578
2,358,658
1,081
2,308
61,623
26,439
33,153
22,797
61,648
209,049
1,227
845
7,849
37,346
12,846
36,886
96,999
444
4,727
24,275
6,948
13,771
10,062
60,227
117,098
394,824
464,573
473,887
283,148
296,229
695,174
907
1,523
2,022
223
651
5,326
Installment and Other
358
189
59
27
352
537
2,112
543
23
Lease Financing Receivables
71,485
261,331
217,287
114,538
41,570
8,452
714,663
265
582
35
885
78
133
918
1,329
641
24
3,045
261,729
218,787
115,902
42,211
8,557
144
202
101
166
625
Total Loans and Leases
Risk Rating
279,173
1,064,034
1,036,352
1,156,552
882,123
1,157,043
667,113
6,242,390
22,494
99,780
91,139
84,855
161,975
63,022
524,346
2,373
11,060
13,482
55,885
34,731
154,417
577
6,712
30,412
13,476
43,445
104,684
280,254
1,089,478
1,153,904
1,291,585
1,036,339
1,397,194
777,083
1,051
1,725
2,123
410
2,327
7,636
17
2020
317,250
216,761
412,057
456,671
216,103
427,163
13,741
2,059,746
5,865
36,337
18,184
37,623
32,658
73,394
204,061
125
6,546
3,841
6,040
2,531
24,580
43,663
4,247
9,376
2,829
29,668
46,947
323,240
260,471
438,329
509,710
254,121
554,805
Gross charge-offs, year ended December 31, 2024
1,425
598
282
717
2,660
5,682
42,468
70,603
123,124
116,874
47,982
219,558
59,323
679,932
592
15,890
14,005
9,395
1,448
41,330
1,351
575
186
1,593
1,013
3,489
71,770
139,041
116,969
63,524
230,546
61,784
61,645
143,414
104,421
87,816
22,188
2,800
345
422,629
2,279
33,871
13,418
3,067
52,635
2,566
1,070
10,369
148,259
139,362
111,603
5,867
399,247
403,346
463,495
235,788
83,485
167,959
512,779
2,266,099
1,326
60,040
35,588
31,619
1,991
19,758
63,114
213,436
1,298
8,100
21,605
2,951
11,797
76,266
920
5,838
26,235
6,682
2,564
12,690
6,403
61,332
401,493
470,522
533,418
295,694
90,991
212,204
612,811
184
4,695
5,917
2,664
1,754
12,919
28,133
723
298
33
368
2,438
3,937
25
2,444
281,246
237,739
130,877
50,196
11,905
218
712,181
280
658
41
985
116
66
1,211
765
2,653
281,592
238,995
132,129
50,961
12,040
863
799
649
190
34
2,535
1,102,579
1,072,161
1,234,050
947,378
381,664
818,066
588,626
6,144,524
7,471
99,906
103,574
82,660
48,660
105,614
64,566
512,451
10,410
13,011
38,014
6,949
36,377
135,401
986
7,838
31,720
16,941
5,592
43,951
7,418
114,446
1,111,161
1,190,315
1,382,355
1,084,993
442,865
1,004,008
691,125
6,983
7,314
3,595
2,661
15,614
36,351
At March 31, 2025 and at December 31, 2024 there were no loans or leases which were risk rated Doubtful or Loss.
The following tables summarize contractual delinquency information of the loans and leases considered for inclusion in the allowance for credit losses - loans and leases calculation as of the dates presented:
Revolving Loans
TotalLoans
Current
309,178
255,182
434,890
506,111
755,203
2,334,069
30-59 Days Past Due
6,426
921
1,385
690
5,282
14,704
60-89 Days Past Due
276
Greater than 90 Accruing
Non-accrual
3,002
940
18,114
22,574
Total Past Due
1,439
4,387
1,630
23,672
37,554
130,159
281,363
63,330
722,672
159
1,327
597
2,083
181
2,434
2,460
185
3,942
4,724
390,962
454,943
463,342
277,242
285,297
692,451
2,681,335
3,719
6,641
547
4,542
409
17,880
167
178
143
2,989
8,523
5,359
6,379
2,147
25,540
3,862
9,630
10,545
5,906
10,932
2,723
43,598
541
2,116
71,372
258,813
215,526
113,453
40,706
8,389
708,259
113
933
465
364
38
3,352
1,344
1,410
655
500
106
4,015
2,916
3,261
2,449
1,505
168
10,412
280,141
1,076,274
1,139,574
1,274,019
1,027,298
1,358,480
773,761
6,929,547
11,584
8,495
4,031
1,601
11,189
1,008
38,021
574
4,650
4,425
12,880
6,940
26,951
53,619
13,204
14,330
17,566
9,041
38,714
3,322
96,290
19
259,084
435,352
504,816
251,522
528,332
2,316,087
560
421
278
4,044
5,303
90
316
5,607
6,013
2,977
4,383
2,005
16,822
27,014
1,387
4,894
2,599
26,473
38,330
138,794
227,682
60,331
721,443
220
1,185
440
1,845
1,461
2,596
247
2,864
1,453
4,659
400,574
463,578
519,192
290,304
89,163
203,606
609,806
2,576,223
142
1,547
2,102
294
2,846
150
7,089
317
1,715
705
871
400
4,033
777
5,080
10,409
5,357
829
4,881
2,455
29,788
919
6,944
14,226
5,390
1,828
8,598
3,005
40,910
2,442
29
277,222
234,755
129,539
49,009
11,915
217
702,657
2,890
1,803
795
470
6,011
1,414
1,839
584
4,614
4,370
4,240
2,590
1,952
13,278
1,105,872
1,177,740
1,362,315
1,072,639
438,313
966,072
686,665
6,809,616
3,032
3,910
3,117
899
8,075
20,248
2,160
2,299
832
1,080
6,697
14,882
843
6,505
14,624
10,623
2,847
23,164
3,470
62,076
5,289
12,575
20,040
12,354
4,552
37,936
4,460
97,206
Total non-accrual loans without an allowance included $1.8 million of commercial real estate loans, $790,000 of residential real estate loans, and $6.0 million of commercial and industrial loans as of March 31, 2025. The Company recognized $1.0 million of interest income on non-accrual loans and leases for the three months ended March 31, 2025.
Total non-accrual loans without an allowance included $6.0 million of commercial real estate loans, $790,000 of residential real estate loans, and $3.8 million of commercial and industrial loans, as of December 31, 2024. The Company recognized $255,000 of interest income on non-accrual loans and leases for the three months ended March 31, 2024.
The following table summarize the balance and activity within the allowance for credit losses - loans and leases, the components of the allowance for credit losses - loans and leases by loans and leases individually and collectively evaluated for impairment, and corresponding loan and lease balances by type for the three months ended March 31, 2025 are as follows:
CommercialReal Estate
ResidentialReal Estate
Construction, Land Development,and Other Land
Commercialand Industrial
Installmentand Other
LeaseFinancingReceivables
Three months ended
Beginning balance
27,873
2,920
2,445
56,589
45
8,116
97,988
Provision/(recapture)
1,386
482
6,676
(2
627
9,076
Charge-offs
(1,662
(5,326
(23
(625
(7,636
Recoveries
197
688
98
992
Ending balance
27,794
2,836
2,927
58,627
8,216
100,420
Ending balance:
Individually evaluated for impairment
6,360
61
15,580
22,001
Collectively evaluated for impairment
21,434
2,775
43,047
78,419
Total allowance for credit losses - loans and leases
Loans and leases ending balance:
27,939
1,339
40,714
69,992
2,343,684
726,057
2,684,219
6,955,845
The following table summarize the balance and activity within the allowance for credit losses - loans and leases, the components of the allowance for credit losses - loans and leases by loans and leases individually and collectively evaluated for impairment, and corresponding loan and lease balances by type for the three months ended March 31, 2024:
March 31, 2024
33,237
3,495
2,906
53,782
8,230
101,686
824
(148
5,836
6,891
(3,057
(3,619
(373
(7,049
436
232
169
838
31,440
3,348
2,930
56,231
8,384
102,366
8,905
12,772
21,677
22,535
43,459
80,689
40,778
4,658
39,889
85,325
2,227,551
728,353
528,967
2,512,836
3,139
692,043
6,692,889
2,268,329
733,011
2,552,725
6,778,214
The Company increased the allowance for credit losses - loans and leases by $2.4 million and $680,000 for the three months ended March 31, 2025 and 2024, respectively. For loans individually evaluated for impairment, the Company decreased allowance for credit losses - loans and leases by $1.6 million and $5.6 million for the for the three months ended March 31, 2025 and 2024, respectively. For loans and leases collectively evaluated for impairment, the Company increased the allowance by $4.0 million and $6.2 million for the three months ended March 31, 2025 and 2024, respectively. The change in allowance for credit losses - loans and leases collectively evaluated for impairment was mainly due to changes in expected losses driven by macro-economic factors, as well as growth in the loan and lease portfolio.
The following table presents loans to borrowers experiencing financial difficulty and with modified terms for the period presented:
Three Months Ended March 31, 2025
Payment Delay
Total Modified by Class
% of Class of Loans and Leases
3,545
0.13
%
Total modified loans
0.05
There were no borrowers receiving loan modifications during the three months ended March 31, 2024.
For the three months ended March 31, 2025, there were no loans modified due to financial difficulty within the last twelve months that had a subsequent payment default. The following table presents the amortized cost basis of loans that had a payment default as of March 31, 2024, and were modified in the twelve months prior to default:
Three Months Ended March 31, 2024
Term Modification
Combination Term Modification and Interest Rate Reduction
2,842
353
396
0.02
3,238
Modified loans are either collectively assessed based on portfolio risk segment and risk rating or individually assessed for loans exceeding $500,000. Upon the Company’s determination that a modified loan has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount.
There were $1.4 million and $2.1 million of loan commitments outstanding on modified loans at March 31, 2025 and December 31, 2024.
The following table presents the amortized cost basis of collateral-dependent loans and leases, which are individually evaluated to determine expected credit losses as of the dates presented:
Commercial Construction
Non-owner Occupied Commercial
Owner-Occupied Commercial
Multi-Family
Single Family Residence (1st Lien)
Single Family Residence (2nd Lien)
Business Assets
1,191
26,750
27,941
790
548
1,338
30,744
60,023
6,723
29,697
36,420
1,365
30,512
68,297
The following table presents the change in the balance of the allowance for credit losses - unfunded commitments for the periods presented:
For the Three Months Ended
2,391
3,636
Provision/(recapture) for unfunded commitments
103
(248
2,494
3,388
Note 6—Servicing Assets
Activity for servicing assets and the related changes in fair value for the periods presented was as follows:
Three Months Ended March 31,
19,844
Additions, net
1,670
1,851
Changes in fair value
20,992
Loans serviced for others are not included in the Condensed Consolidated Statements of Financial Condition. The unpaid principal balances of these loans serviced for others as of the dates presented were as follows:
Loan portfolios serviced for:
SBA guaranteed loans
1,546,154
1,522,389
USDA guaranteed loans
185,058
190,503
1,731,212
1,712,892
Loan servicing revenue totaled $3.0 million and $3.4 million for the three months ended March 31, 2025 and 2024, respectively.
Loan servicing asset revaluation, which represents the changes in fair value of servicing assets, resulted in a downward valuation adjustment of $1.1 million and $703,000 for the three months ended March 31, 2025 and 2024, respectively.
The fair value of servicing rights is highly sensitive to changes in underlying assumptions. Changes in secondary market premiums and prepayment speed assumptions have the most significant impact on the fair value of servicing rights. Generally, as interest rates rise on variable rate loans, loan prepayments increase due to an increase in refinance activity, which may result in a decrease in the fair value of servicing assets. Measurement of fair value is limited to the conditions existing and the assumptions used as of a particular point in time, and those assumptions may change over time. Refer to Note 15—Fair Value Measurement for further details.
Note 7—Other Real Estate Owned
The following table presents the change in OREO for the periods presented:
1,200
Net additions to OREO
Proceeds from sales of OREO
(209
(402
Gains (losses) on sales of OREO
71
(18
Valuation adjustments
(103
785
At March 31, 2025 and December 31, 2024, the balance of real estate owned did not include any foreclosed residential real estate properties recorded as a result of obtaining physical possession of the property.
At March 31, 2025 and December 31, 2024, respectively, there were $1.8 million and $818,000 of consumer mortgage loans secured by a residential real estate property in foreclosure.
There were no internally financed sales of OREO for the three months ended March 31, 2025 or 2024.
Note 8—Leases
The Company enters into leases in the normal course of business primarily for its banking facilities and branches. The Company’s operating leases have varying maturity dates through year end 2036, some of which include renewal or termination options to extend the lease. In addition, the Company leases or subleases real estate to third parties. The Company includes lease extension and termination options in the lease term if, after considering relevant economic factors, it is reasonably certain the Company will exercise the option. In addition, the Company has elected to account for any non-lease components in its real estate leases as part of the associated lease component. The Company has also elected not to recognize leases with original lease terms of 12 months or less ("short-term leases") on the Company’s Condensed Consolidated Statements of Financial Condition.
Leases are classified at the lease commencement date. Lease expense for operating leases and short-term leases is recognized on a straight-line basis over the lease term. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.
The following table summarizes the amount and balance sheet line item for our operating lease right-of-use asset and liability as of the dates presented:
Balance Sheet Line Item
Operating lease right-of-use asset
10,595
9,797
Operating lease liability
11,731
10,949
The Company uses its incremental borrowing rate at lease commencement to calculate the present value of lease payments when the rate implicit in a lease is not known. The Company’s incremental borrowing rate is based on the Federal Home Loan Bank regular advance rate, adjusted for the lease term and other factors. At March 31, 2025, the weighted average discount rate of operating leases was 3.36% and the weighted average remaining life of operating leases was 4.9 years, compared to 3.19% and 5.0 years as of December 31, 2024.
The following table presents components of total lease costs included as a component of occupancy expense on the Condensed Consolidated Statements of Operations for the following periods:
Operating lease cost
712
727
Short-term lease cost
134
87
Variable lease cost
390
423
Less: Sublease income
(133
(130
Total lease cost, net
1,103
1,107
Operating cash flows paid for operating lease amounts included in the measure of lease liabilities were $860,000 and $953,000 for the three months ended March 31, 2025 and 2024, respectively.
During the quarter ended March 31, 2024, the Company recorded $194,000 of impairment related to two branch facilities that closed at the end of the second quarter of 2024. Impairments were recognized on operating lease right-of-use assets and are reflected in other non-interest expense.
The future minimum lease payments for operating leases, subsequent to March 31, 2025, as recorded on the Condensed Consolidated Statements of Financial Condition, are summarized as follows:
Operating LeaseCommitments
2,682
3,012
2,081
1,777
1,561
1,940
Total undiscounted lease payments
13,053
Less: Imputed interest
(1,322
Net lease liabilities
The total amount of minimum rentals to be received in the future on these subleases is approximately $1.3 million, and the leases have contractual lives extending through 2030. In addition to the above required lease payments, the Company has contractual obligations related primarily to information technology contracts and other maintenance contracts.
Note 9—Goodwill, Core Deposit Intangible and Other Intangible Assets
The following tables summarize the changes in the Company’s goodwill, core deposit intangible assets, and customer relationship intangible assets for the periods presented:
For the Three Months Ended March 31,
Goodwill
Core DepositIntangible
Customer RelationshipIntangible
181,705
15,281
1,112
20,393
1,380
Amortization
(67
(1,278
14,230
1,045
19,115
1,313
Accumulated amortization
N/A
58,486
2,171
53,601
1,903
Weighted average remaining amortization period
7.4 Years
3.9 Years
8.1 Years
4.9 Years
The following table presents the estimated amortization expense for core deposit intangible and customer relationship intangible assets remaining at March 31, 2025:
EstimatedAmortization
3,355
3,566
2,676
2,101
1,432
2,145
15,275
Note 10—Income Taxes
The Company uses an estimated annual effective tax rate method in computing its interim tax provision. This effective tax rate is based on forecasted annual pre-tax income, permanent tax differences and statutory tax rates.
The effective tax rate for the three months ended March 31, 2025 and 2024 was 24.6% and 25.0%, respectively. The Company recorded discrete income tax benefit of $369,000 and $501,000 related to the exercise of stock options and vesting of restricted shares for the three months ended March 31, 2025 and 2024, respectively.
Net deferred tax assets decreased to $50.7 million at March 31, 2025 compared to $56.5 million at December 31, 2024, primarily due to the decrease in unrealized losses in available-for-sale securities during the quarter.
During the second quarter 2024, Illinois House Bill 4951 was enacted, which amends numerous Illinois tax law provisions, including a temporary limitation on Net Loss Deduction ("NLD") usage. For tax years 2024, 2025, and 2026, C Corporations are limited to applying a maximum of $500,000 of NLD to taxable income.
Note 11—Deposits
The composition of deposits was as follows as of the dates presented:
Interest-bearing checking accounts
840,435
767,835
Money market demand accounts
2,759,185
2,518,157
Other savings
483,075
483,650
Time deposits (below $250,000)
1,326,418
1,498,277
Time deposits ($250,000 and above)
428,596
434,611
At March 31, 2025, the scheduled maturities of time deposits were:
Scheduled Maturities
1,597,429
146,248
8,788
1,322
891
336
1,755,014
The Company hedges interest rates on certain money market accounts using interest rate swaps through which the Company receives variable amounts and pays fixed amounts. Refer to Note 16—Derivative Instruments and Hedging Activities for additional discussion.
Note 12—Other Borrowings
The following is a summary of the Company’s other borrowings as of the dates presented:
Federal Home Loan Bank advances
550,000
575,000
Securities sold under agreements to repurchase
28,244
32,106
Term loan
11,667
Line of credit
Byline Bank has the capacity to borrow funds from the discount window of the Federal Reserve System. As of March 31, 2025 and December 31, 2024, there were no outstanding advances under the Federal Reserve Bank discount window line. The Company pledges loans and leases as collateral for the FRB discount window borrowing. Refer to Note 5—Loan and Lease Receivables and Allowance for Credit Losses for additional discussion.
On January 17, 2024, the Company entered into a Letter Agreement with the Federal Reserve Bank ("FRB") of Chicago that allows the Bank to access the Bank Term Funding Program ("BTFP"). On January 22, 2024, the Company opened an advance of $200.0 million from the FRB as part of the BTFP. Under the terms of the BTFP, the Bank pledges securities to FRB Chicago as collateral for available advances. The advance carries a fixed interest rate of 4.91%, and matures on January 22, 2025. Advances under the BTFP were prepayable at any time without a prepayment penalty. On September 19, 2024, the BTFP advance was paid in full.
At March 31, 2025, fixed-rate Federal Home Loan Bank ("FHLB") advances totaled $200.0 million, with an interest rate of 4.45% and matured in April 2025. Total variable rate advances were $350.0 million at March 31, 2025, with interest rates between of 4.48% and 4.49% that may reset daily and maturity dates of May and June 2025. Advances from the FHLB are collateralized by residential real estate loans, commercial real estate loans, and securities. The Bank’s maximum borrowing capacity is limited to 35% of total assets. Required investment in FHLB stock is $4.50 for every $100 in advances thereafter.
Securities sold under agreements to repurchase represent a demand deposit product offered to customers that sweep balances in excess of the FDIC insurance limit into overnight repurchase agreements. The Company pledges securities as collateral for the repurchase agreements. Refer to Note 4—Securities for additional discussion.
On October 13, 2016, we entered into a $30.0 million revolving credit agreement with a correspondent bank. Through subsequent amendments, the revolving credit agreement was reduced to $15.0 million. The amended revolving line of credit bears interest at either the Secured Overnight Financing Rate ("SOFR") plus 205 basis points or Prime Rate minus 75 basis points, not to be less than 2.00%, based on the Company’s election, which is required to be communicated at least three business days prior to the commencement of an interest period. If the Company fails to provide timely notification, the interest rate will be Prime Rate minus 75 basis points. At March 31, 2025 and December 31, 2024, the line of credit had no outstanding balance.
On May 24, 2024, we entered into the First Amendment to the Second Amended and Restated Term Loan and Revolving Credit Agreement with the lender, which is effective May 26, 2024, and provides for: (1) the renewal of the revolving line-of-credit facility of up to $15.0 million, and (2) extending its maturity date to May 25, 2025, subject to the existing Negative Pledge Agreement dated October 11, 2018, as amended.
The variable term loan was paid in full in January 2025, and at March 31, 2025, there was no outstanding balance. At December 31, 2024, the variable term loan had an interest rate of 6.83% and an outstanding balance of $11.7 million.
The following table presents short-term credit lines, subject to collateral requirements, available for use as of the dates presented:
Federal Home Loan Bank line
2,749,688
2,700,234
Federal Reserve Bank of Chicago discount window line
758,589
792,345
Available federal funds lines
135,000
127,500
The Company hedges interest rates on borrowed funds using interest rate swaps through which the Company receives variable amounts and pays fixed amounts. Refer to Note 16—Derivative Instruments and Hedging Activities for additional discussion.
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Note 13—Subordinated Notes and Junior Subordinated Debentures
Subordinated Notes
In 2020, the Company issued $75.0 million in fixed-to-floating subordinated notes that mature on July 1, 2030. The subordinated notes bear a fixed interest rate of 6.00% until July 1, 2025 and a floating interest rate equal to a benchmark rate, which is expected to be the three-month SOFR, plus 588 basis points thereafter until maturity. The transaction resulted in debt issuance costs of approximately $1.7 million that is being amortized over 10 years.
As of March 31, 2025, the net liability outstanding of the subordinated notes was $74.1 million. The Company may, at its option, redeem the notes, in whole or in part, on a semi-annual basis beginning on July 1, 2025, subject to obtaining the prior approval of the Federal Reserve to the extent such approval is then required. The subordinated notes qualify as Tier 2 capital for regulatory capital purposes.
Junior subordinated debentures
Each of the junior subordinated debentures was issued to an underlying statutory trust (the "Trusts"), which issued trust preferred securities and used the proceeds from the issuance of the trust preferred securities to purchase the junior subordinated debentures of the Company. The debentures represent the sole asset of the Trusts. The Trusts are not consolidated with the Company. Accordingly, the Company reports the subordinated debentures held by the Trusts as liabilities. The Company owns all of the common securities of each trust and pays interest on each quarterly. The junior subordinated debentures qualify, and are treated as, Tier 1 regulatory capital of the Company subject to regulatory limitations. The trust preferred securities issued by each trust rank equally with the common securities in right of payment, except that if an event of default under the indenture governing the notes has occurred and is continuing, the preferred securities will rank senior to the common securities in right of payment.
As of the dates presented, the Company’s junior subordinated debentures by issuance were as follows:
Aggregate Principal Amount
Name of Trust
StatedMaturity
Contractual Rate March 31, 2025
Interest Rate Spread(1)
Metropolitan Statutory Trust I(2)
March 17, 2034
35,000
7.35%
SOFR + spread adjustment + 2.79%
First Evanston Bancorp Trust I(3)
March 15, 2035
10,000
6.34%
SOFR + spread adjustment + 1.78%
AmeriMark Capital Trust I(4)
April 23, 2034
5,000
7.30%
SOFR + spread adjustment + 2.75%
Inland Bancorp Trust II(4)
September 15, 2035
6.16%
SOFR + spread adjustment + 1.60%
Inland Bancorp Trust III(4)
December 15, 2036
6.21%
SOFR + spread adjustment + 1.65%
Inland Bancorp Trust IV(4)
June 6, 2037
7,000
6.18%
SOFR + spread adjustment + 1.62%
Inland Bancorp Trust V(4)
September 15, 2037
5.98%
SOFR + spread adjustment + 1.42%
Total liability, at par
87,000
Discount
(16,000
(16,110
Total liability, at carrying value
(1) SOFR is three month SOFR and the spread adjustment is 0.26161%. These are rates are adjusted quarterly.
(2) Assumed as part of the Company's recapitalization of its predecessor.
(3) Assumed in May 2018 as part of an acquisition.
(4) Assumed in July 2023 as part of an acquisition.
Note 14—Commitments and Contingent Liabilities
Legal contingencies—In the ordinary course of business, the Company and Bank have various outstanding commitments and contingent liabilities that are not recognized in the accompanying consolidated financial statements. In addition, the Company may be a defendant in certain claims and legal actions arising in the ordinary course of business. In the opinion of management, after consultation with legal counsel, the ultimate disposition of these matters is currently not expected to have a material adverse effect on the Company’s Consolidated Financial Statements.
Operating lease commitments—Refer to Note 8—Leases for discussion of operating lease commitments.
Commitments to extend credit—The Company is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Condensed Consolidated Statements of Financial Condition. The contractual or
notional amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.
The Company’s exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit and letters of credit is represented by the contractual or notional amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for funded instruments. The Company does not anticipate any material losses as a result of the commitments and letters of credit. Refer to Note 5—Loans and Lease Receivables and Allowance for Credit Losses for additional information on the reserve for unfunded commitments.
The following table summarizes the contract or notional amount of outstanding loan and lease commitments as of the dates presented:
Fixed Rate
Variable Rate
Commitments to extend credit
187,065
1,781,688
1,968,753
190,269
1,821,769
2,012,038
287
70,908
71,195
630
63,272
63,902
187,352
1,852,596
2,039,948
190,899
1,885,041
2,075,940
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral is primarily obtained in the form of commercial and residential real estate (including income producing commercial properties).
Letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third-party. Those guarantees are primarily issued to support public and private borrowing arrangements, bond financing and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.
Commitments to make loans are generally made for periods of 90 days or less. The fixed rate loan commitments have interest rates ranging from 2.69% to 15.00% and maturities up to 2046. Variable rate loan commitments have interest rates ranging from 4.00% to 17.75% and maturities up to 2053.
Note 15—Fair Value Measurement
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. In addition, the Company has the ability to obtain fair values for markets that are not accessible.
These types of inputs create the following fair value hierarchy:
Level 1—Quoted prices in active markets for identical assets or liabilities.
Level 2—Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the asset or liability. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available. The Company’s own data used to develop unobservable inputs may be adjusted for market considerations when reasonably available.
The categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to assets and liabilities.
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The Company used the following methods and significant assumptions to estimate fair value for certain assets measured and carried at fair value on a recurring basis:
Securities available-for-sale—The Company obtains fair value measurements from an independent pricing service. Management reviews the procedures used by the third party, including significant inputs used in the fair value calculations. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things. When market quotes are not readily accessible or available, alternative approaches are utilized, such as matrix or model pricing.
The Company’s methodology for pricing non-rated bonds focuses on three distinct inputs: equivalent rating, yield and other pricing terms. To determine the rating for a given non-rated municipal bond, the Company references a publicly issued bond by the same issuer if available as well as other additional key metrics to support the credit worthiness. Typically, pricing for these types of bonds would require a higher yield than a similar rated bond from the same issuer. A reduction in price is applied to the rating obtained from the comparable bond, as the Company believes if liquidated, a non-rated bond would be valued less than a similar bond with a verifiable rating. The reduction applied by the Company is one notch lower (i.e. a "AA" rating for a comparable bond would be reduced to "AA-" for the Company’s valuation). In 2025 and 2024, all of the ratings derived by the Company were "BBB-" or better with and without comparable bond proxies. All of the ratings of non-Agency backed bonds derived by the Company were investment grade. The fair value measurement of municipal bonds is sensitive to the rating input, as a higher rating typically results in an increased valuation. The remaining pricing inputs used in the bond valuation are observable. Based on the rating determined, the Company obtains a corresponding current market yield curve available to market participants. Other terms including coupon, maturity date, redemption price, number of coupon payments per year, and accrual method are obtained from the individual bond term sheets.
Equity and other securities—The Company utilizes the same fair value measurement methodology for equity and other securities as detailed in the securities available-for-sale portfolio above. The fair value of equity securities subject to contractual sale restrictions is measured on the basis of the market price of similar unrestricted equity securities. The fair value is only adjusted for the effect of the restrictions when the restriction of the sale is a characteristic of the equity itself and not based on the holder of the security.
Servicing assets—Fair value is based on a loan-by-loan basis taking into consideration the original term to maturity, the current age of the loan and the remaining term to maturity. The valuation methodology utilized for the servicing assets begins with generating estimated future cash flows for each servicing asset, based on their unique characteristics and market-based assumptions for prepayment speeds and costs to service. The present value of the future cash flows are then calculated utilizing market-based discount rate assumptions.
Derivative instruments—Interest rate derivatives are valued by a third party, using models that primarily use market observable inputs, such as yield curves, and are validated by comparison with valuations provided by the respective counterparties. Derivative financial instruments are included in accrued interest receivable and other assets, and accrued interest payable and other liabilities in the Condensed Consolidated Statements of Financial Condition.
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The following tables summarize the Company’s financial assets and liabilities that were measured at fair value on a recurring basis as of the dates presented:
Fair Value Measurements Using
Fair Value
Level 1
Level 2
Level 3
Financial assets
Mortgage-backed securities; residential
Non-Agency
Mortgage-backed securities; commercial
Mutual funds
2,545
Equity securities
8,130
7,842
288
Servicing assets
Derivative assets
37,806
Financial liabilities
Derivative liabilities
14,998
2,505
7,360
7,072
44,401
17,785
The following table presents additional information about financial assets measured at fair value on recurring basis for which the Company used significant unobservable inputs (Level 3):
Investment Securities
Servicing Assets
Balance, beginning of period
281
Change in fair value
Balance, end of period
285
The Company did not have any transfers to or from Level 3 of the fair value hierarchy during the three months ended March 31, 2025 and 2024.
The following table presents additional information about the unobservable inputs used in the fair value measurements on recurring basis that were categorized within Level 3 of the fair value hierarchy as of March 31, 2025:
Financial Instruments
Valuation Technique
Unobservable Inputs
Range ofInputs
WeightedAverageRange
Impact toValuation from anIncreased orHigher Input Value
Single issuer trust preferred
Discounted cash flow
Discount rate
7.9%
7.9
Decrease
Prepayment speeds
0.0% - 26.4%
17.6
0.0% - 41.0%
12.0
Expected weightedaverage loan life
0.0 - 7.1 years
3.5 years
Increase
The Company used the following methods and significant assumptions to estimate fair value for certain assets measured and carried at fair value on a non-recurring basis:
Individually Evaluated Loans—The Company individually evaluates loans that do not share similar risk characteristics, including non-accrual loans. Specific allowance for credit losses is measured based on a discounted cash flow of ongoing operations, discounted at the loan's original effective interest rate, or a calculation of the fair value of the underlying collateral less estimated selling costs. Valuations of individually assessed loans that are collateral dependent are supported by third party appraisals in accordance with the Bank's credit policy. Accordingly, individually evaluated loans are classified as Level 3.
Assets held for sale—Assets held for sale consist of former branch locations and real estate previously purchased for expansion. Assets are considered held for sale when management has approved to sell the assets following a branch closure or other events. The properties are being actively marketed and transferred to assets held for sale based on the lower of carrying value or its fair value, less estimated costs to sell. The Company records assets held for sale on the Condensed Consolidated Statements of Financial Condition within accrued interest receivable and other assets.
Other real estate owned—Certain assets held within other real estate owned represent real estate or other collateral that has been adjusted to its estimated fair value, less cost to sell, as a result of transferring from the loan portfolio at the time of foreclosure or repossession and based on management’s periodic impairment evaluation. From time to time, non-recurring fair value adjustments to other real estate owned are recorded to reflect partial write-downs based on an observable market price or current appraised value of property.
Adjustments to fair value based on such non-recurring transactions generally result from the application of lower-of-cost-or-market accounting or write-downs of individual assets due to impairment. The following tables summarize the Company’s assets that were measured at fair value on a non-recurring basis, as of the dates presented:
Non-recurring
Individually evaluated loans
21,579
1,278
25,134
Assets held for sale
3,336
29,568
24,063
2,025
The following methods and assumptions were used by the Company in estimating fair values of other assets and liabilities for disclosure purposes:
Cash and cash equivalents and interest bearing deposits with other banks—For these short-term instruments, the carrying amount is a reasonable estimate of fair value.
Securities held-to-maturity—The Company obtains fair value measurements from an independent pricing service. Management reviews the procedures used by the third party, including significant inputs used in the fair value calculations. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things. When market quotes are not readily accessible or available, alternative approaches are utilized, such as matrix or model pricing.
Restricted stock—The fair value has been determined to approximate cost.
Loans held for sale—The fair value of loans held for sale are based on quoted market prices, where available, and determined by discounted estimated cash flows using interest rates approximating the Company’s current origination rates for similar loans adjusted to reflect the inherent credit risk.
Loan and lease receivables, net—For certain variable rate loans that reprice frequently and with no significant changes in credit risk, fair value is estimated at carrying value. The fair value of other types of loans is estimated using an exit price notion. It is estimated by discounting future cash flows, using current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.
Deposits—The fair value of demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated by discounting future cash flows, using rates currently offered for deposits of similar remaining maturities.
Federal Home Loan Bank advances—The fair value of FHLB advances is estimated by discounting the agreements based on maturities using rates currently offered for FHLB advances of similar remaining maturities adjusted for prepayment penalties that would be incurred if the borrowings were paid off on the measurement date.
Securities sold under agreements to repurchase—The carrying amount approximates fair value due to maturities of less than ninety days.
Term Loan—The carrying amount approximates fair value given the variable interest rate and repricing of interest.
Subordinated notes—The fair value is based on available market prices.
Junior subordinated debentures—The fair value of junior subordinated debentures, in the form of trust preferred securities, is determined using rates currently available to the Company for debt with similar terms and remaining maturities.
Accrued interest receivable and payable—The carrying amount approximates fair value.
Commitments to extend credit and letters of credit—The fair values of these off-balance sheet commitments to extend credit and commercial and letters of credit are not considered practicable to estimate because of the lack of quoted market prices and the inability to estimate fair value without incurring excessive costs.
The estimated fair values of financial instruments not carried at fair value and levels within the fair value hierarchy are as follows:
HierarchyLevel
CarryingAmount
EstimatedFair Value
Securities held-to-maturity
Restricted stock
22,212
3,236
Loans and lease receivables, net (less individually evaluated loans at fair value)
6,877,426
6,736,898
6,753,905
6,603,019
Accrued interest receivable
39,940
40,652
Non-interest-bearing deposits
5,835,508
5,702,018
Accrued interest payable
16,346
21,114
Securities sold under repurchase agreement
Subordinated notes
74,842
73,750
74,941
75,172
Note 16—Derivative Instruments and Hedge Activities
As required by ASC 815, the Company records all derivatives on the Condensed Consolidated Statements of Financial Condition at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. The Company records derivative assets and derivative liabilities on the Condensed Consolidated Statements of Financial Condition within accrued interest receivable and other assets and accrued interest payable and other liabilities, respectively. The following tables present the fair value of the Company’s derivative financial instruments and classification on the Condensed Consolidated Statements of Financial Condition as of the dates presented:
NotionalAmount
OtherAssets
OtherLiabilities
Derivatives designated as hedging instruments
Interest rate swaps designated as cash flow hedges
650,000
22,798
26,529
(52
Derivatives not designated as hedging instruments
Other interest rate derivatives
924,507
14,999
(14,981
851,742
17,865
(17,721
Other credit derivatives
(17
17,146
(12
Total derivatives
1,590,376
(14,998
1,518,888
(17,785
Interest rate swaps designated as cash flow hedges—Cash flow hedges of interest payments associated with certain financial instruments had notional amounts totaling $650.0 million at both March 31, 2025 and December 31, 2024. The Company assesses the effectiveness of each hedging relationship by comparing the changes in fair value of the derivatives hedging instrument with the fair value of the designated hedged transactions. As of March 31, 2025, the cash flow hedges aggregating $650.0 million in notional amounts are comprised of $400.0 million pay-fixed interest rate swaps associated with certain deposits and other borrowings, and $250.0 million receive-fixed interest rate swaps associated with certain variable rate loans.
As of March 31, 2025, pay-fixed interest rate swaps are comprised of five effective hedges. The receive-fixed interest rate swaps are comprised of four effective hedges with notional amounts comprised of $200.0 million. A $50.0 million forward starting receive-fixed interest rate swap associated with certain variable rate loans will become effective in March 2026.
On April 4, 2025, the Company entered into a $100.0 million notional amount pay-fixed interest rate swap associated with certain investment securities that matures in April 2029.
For derivatives designated and that qualify as cash flow hedges of interest rate risk, the unrealized gain or loss on the derivatives is recorded in accumulated other comprehensive income (loss) and subsequently reclassified into interest income or expense in the same period during which the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to interest income or expense as interest payments are made on the hedged instruments. Interest recorded on these swap transactions included $3.7 million and $4.8 million of interest income recorded during the three months ended March 31, 2025, and 2024, respectively, and is reported as a component of interest income on loans and interest expense on deposits and other borrowings. As of March 31, 2025, the Company estimates $12.8 million of the net unrealized gain to be reclassified as a net decrease to interest expense during the next twelve months.
Accumulated other comprehensive income also includes the amortization of the remaining balance related to terminated interest rate swaps designated as cash flow hedges, which are over the original life of the cash flow hedge. In March 2023, the Company terminated interest rate swaps designated as cash flow hedges totaling $100.0 million in notional amount, of which $50.0 million became effective in May 2023 and $50.0 million became effective in June 2023. The transaction resulted in a gain of $4.2 million, net of tax, which was the clean value at termination date and began amortizing as a decrease to interest expense on the effective dates. The remaining unamortized balance was $2.6 million and $2.9 million as of March 31, 2025 and December 31, 2024, respectively.
The following table reflects the cash flow hedges as of March 31, 2025:
Notional amounts
Derivative assets fair value
Derivative liabilities fair value
Weighted average remaining maturity
2.1 years
Receive rates are determined at the time the swaps become effective. As of March 31, 2025, the weighted average pay rates of the five effective pay-fixed hedges for $400.0 million were 1.07% and the weighted average receive rates were 4.33%. As of March 31, 2025, the weighted average pay rates of the four effective receive-fixed interest rate swaps of $200.0 million in notional amounts were 7.50% and the weighted average receive rates were 7.30%.
The following table reflects the net gains (losses) recorded in accumulated other comprehensive income (loss) and the Condensed Consolidated Statements of Operations relating to the cash flow derivative instruments for the three months ended:
Amount ofLoss Recognized inAOCI
Amount ofNet GainReclassifiedfrom AOCI toIncome as anIncrease toNet InterestIncome
Amount ofGain (Loss)Recognized inOtherNon-InterestIncome
Amount ofGain Recognized inOCI
Interest rate swaps
3,744
4,836
Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to interest rate movements and other identified risks but do not meet the strict hedge accounting requirements and/or the Company has not elected to apply hedge accounting. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings.
Other interest rate derivatives—The total combined notional amount was $924.5 million as of March 31, 2025 with maturities ranging from May 2025 to March 2033. The fair values of the interest rate derivative agreements are reflected in other assets and other liabilities with corresponding gains or losses reflected in non-interest income. During the three months ended March 31, 2025 and 2024, there were $415,000 and $4,000 of net premiums related to these derivative instruments which were included in other non-interest income.
These instruments are inherently subject to market risk and credit risk. Market risk is associated with changes in interest rates and credit risk relates to the Company’s risk of loss when the counterparty to a derivative contract fails to perform according to the terms of the agreement. Market and credit risks are managed and monitored as part of the Company’s overall asset-liability management process. The credit risk related to derivatives entered into with certain qualified borrowers is managed through the Company’s loan underwriting process. The Company’s loan underwriting process also approves the Bank’s swap counterparty used to mirror the borrowers’ swap. The Company has a bilateral agreement with each swap counterparty that provides that fluctuations in derivative values are to be fully collateralized with either cash or securities.
The following table reflects other interest rate derivatives as of March 31, 2025:
14,981
Weighted average pay rates
4.95
Weighted average receive rates
5.66
Other credit derivatives— The Company has entered into risk participation agreements with counterparty banks to assume a portion of the credit risk related to borrower transactions. As of March 31, 2025 and December 31, 2024, for each period, the total notional amount of risk participated in was $9.2 million and $10.4 million, respectively, and the notional amount of risk participated out was $6.7 million and $6.8 million, respectively. The credit risk related to these other derivatives is managed through the Company’s loan underwriting process. Additionally, the Company enters into foreign currency contracts to manage foreign exchange risk associated with certain customer foreign currency transactions. These transactions were not material to the consolidated financial statements as of March 31, 2025 and December 31, 2024. The fair values of the
37
credit derivatives is reflected in accrued interest receivable and other assets and accrued interest payable and other liabilities with corresponding gains or losses reflected in non-interest income or other comprehensive income.
The Company has agreements with its derivative counterparties that contain a cross-default provision under which if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations. The Company also has agreements with certain derivative counterparties that contain a provision where if the Company fails to maintain its status as a well or adequately capitalized institution, then the counterparty could terminate the derivative positions and the Company would be required to settle its obligations resulted in a net asset position.
The following table reflects amounts included in non-interest income in the Condensed Consolidated Statements of Operations relating to derivative instruments that are not designated in a hedging relationship for the periods presented:
127
(73
128
The Company records interest rate derivatives subject to master netting agreements at their gross value and does not offset derivative asset and liabilities on the Condensed Consolidated Statements of Financial Condition. The table below summarizes the Company’s interest rate derivatives and offsetting positions as of the dates presented:
DerivativeAssetsFair Value
DerivativeLiabilitiesFair Value
Gross amounts recognized
Less: Amounts offset in the Condensed Consolidated Statements of Financial Condition
Net amount presented in the Condensed Consolidated Statements of Financial Condition
Gross amounts not offset in the Condensed Consolidated Statements of Financial Condition
Offsetting derivative positions
(1,929
1,929
(415
415
Collateral posted
(35,490
(42,770
Net credit exposure
387
(13,069
1,216
(17,370
As of March 31, 2025, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $15.0 million. If the Company had breached any of these provisions at March 31, 2025, it could have been required to settle its obligations under the agreements at their termination value less offsetting positions of $1.9 million. For purposes of this disclosure, the amount of posted collateral by the Company and counterparties is limited to the amount offsetting the derivative asset and derivative liability.
Note 17 – Share-Based Compensation
In June 2017, the Company's Board of Directors adopted, and the Company's stockholder approved, the 2017 Omnibus Incentive Compensation Plan (the "Omnibus Plan"). The Omnibus Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights and other equity-based, equity-related or cash-based awards. A total of 2,600,000 shares of our common stock have been reserved for issuance under the Omnibus Plan. As of March 31, 2025, there were 473,460 shares available for future grants under the Omnibus Plan.
The Company primarily grants time-based restricted share awards that vest over a one to three year period, subject to continued employment. The Company also grants performance-based restricted share awards. The number of shares which may be earned under the award is dependent upon the Company’s return on average assets, weighted equally over a three-year period and measured against a peer group consisting of publicly-traded bank holding companies. Results will be measured cumulatively at the end of the three years. Any earned shares will vest on the third anniversary of the grant date.
During 2025, the Company granted 323,488 shares of restricted common stock, par value $0.01 per share. Of this total, 245,413 restricted shares will vest ratably over three years on each anniversary of the grant date and 9,109 restricted shares will cliff vest on the third anniversary of the grant date, all subject to continued employment. In addition, 68,966
performance-based restricted shares were included in the 2025 grant. The number of performance-based shares which may be earned under the award is dependent upon the Company’s total stockholder return and return on average assets, weighted equally, over a three-year period ending December 31, 2027, measured against the KBW Regional Bank Index. Results will be measured cumulatively at the end of the three years and any earned shares will vest on the third anniversary of the grant date.
The following table discloses the changes in restricted shares for the three months ended March 31, 2025:
Omnibus Plan
Number of Shares
Weighted AverageGrant Date FairValue
Beginning balance, January 1, 2025
751,127
23.04
Granted
323,488
28.78
Incremental performance shares issued and vested
18,066
Vested
(294,754
24.18
Forfeited
(1,925
24.14
Ending balance outstanding at March 31, 2025
796,002
25.04
A total of 294,754 restricted shares vested during the three months ended March 31, 2025. A total of 244,548 restricted shares vested during the year ended December 31, 2024. The fair value of restricted shares that vested during the three months ended March 31, 2025 was $8.5 million. The fair value of restricted shares that vested during the year ended December 31, 2024 was $5.2 million.
The Company recognizes share-based compensation based on the estimated fair value of the restricted stock at the grant date. Share-based compensation expense is included in non-interest expense in the Condensed Consolidated Statements of Operations. The fair value of the total stock return performance-based awards granted in 2025 and 2024 were calculated based on a Monte Carlo simulation, using the following assumptions:
Performance Based Grants
Risk-free interest rate
4.15
4.47
Expected term (years)
2.85 years
Expected stock price volatility
30.01% - 34.52%
29.28% - 33.68%
Weighted average grant date fair value
28.32
20.18
The following table summarizes restricted stock compensation expense for the periods presented:
Total share-based compensation - restricted stock
Income tax benefit
530
511
Unrecognized compensation expense
16,851
14,880
2.3 Years
The fair value of the unvested restricted stock awards at March 31, 2025 was $20.8 million.
In October 2014, the Company adopted the Byline Bancorp, Inc. Equity Incentive Plan ("BYB Plan"). The maximum number of shares available for grants under this plan was 2,476,122 shares. The Company granted 1,846,968 options to purchase shares under this plan. In June 2017, the Board of Directors terminated the BYB Plan and no future grants can be made under this plan. Options to purchase a total of 333,236 shares remain outstanding under the BYB Plan at March 31, 2025.
The types of stock options granted under the BYB Plan were Time Options and Performance Options. The exercise price of each option is equal to the fair value of the stock as of the date of grant. These option awards have vesting periods ranging from one to five years and have 10-year contractual terms. Stock volatility was computed as the average of the volatilities of peer group companies. All outstanding stock options were fully vested and exercisable at March 31, 2025.
39
The fair values of the stock options were determined using the Black-Scholes-Merton model for Time Options and a Monte Carlo simulation model for Performance Options.
The following table discloses the activity in shares subject to options and the weighted average exercise prices, in actual dollars, for the three months ended March 31, 2025:
BYB Plan
Weighted Average Exercise Price
Intrinsic Value
Weighted Average Remaining Contractual Term (in Years)
334,423
11.18
5,959
0.5
Exercised
(1,187
Expired
333,236
4,992
0.2
Exercisable at March 31, 2025
A total of 1,187 stock options were exercised during the three months ended March 31, 2025. Proceeds from the exercise of the options were $13,000 and had a related tax benefit of $6,000 for the three months ended March 31, 2025. There were 434,141 stock options exercised during the year ended December 31, 2024. Proceeds from the exercise of stock options were $2.6 million with a related tax benefit of $1.6 million for the year ended December 31, 2024. No stock options vested during the three months ended March 31, 2025 or the year ended December 31, 2024. No stock option compensation expense was recognized for the three months ended March 31, 2025 or the year ended December 31, 2024.
Pursuant to the terms of the Agreement and Plan of Merger with First Evanston and its subsidiaries, dated as of November 27, 2017 (the "First Evanston Merger Agreement"), each outstanding First Evanston option held by a participant in the First Evanston Bancorp, Inc. Stock Incentive Plan (the "FEB Plan") ceased to represent a right to acquire shares of First Evanston common stock and was assumed and converted automatically into a fully vested and exercisable adjusted option to purchase shares of Byline common stock (each an "Adjusted Option"). In accordance with the First Evanston Merger Agreement, the number of shares of Byline common stock to which each such Adjusted Option relates is equal to the product (rounded down to the nearest whole share of Byline common stock) of: (a) the number of shares of First Evanston common stock subject to the First Evanston option immediately prior to May 31, 2018, multiplied by (b) 4.725. Each Adjusted Option has an exercise price per share of Byline common stock equal to the quotient (rounded up to the nearest whole cent) of (x) the per share exercise price of such First Evanston option immediately prior to May 31, 2018, divided by (y) 4.725. The description of the conversion process is based on, and qualified by, the First Evanston Merger Agreement.
The following table discloses the activity in shares subject to options under the FEB Plan and the weighted average exercise prices, in actual dollars, for the three months ended March 31, 2025:
FEB Plan
45,449
12.28
760
1.6
631
1.3
Under the FEB plan, no stock options were exercised during the three months ended March 31, 2025. A total of 57,686 stock options were exercised under the FEB plan during the during the year ended December 31, 2024, with proceeds of $675,000 and a related tax benefit of $252,000.
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Note 18—Earnings per Share
A reconciliation of the numerators and denominators for earnings per common share computations is presented below. Incremental shares represent outstanding stock options for which the exercise price is less than the average market price of the Company’s common stock during the periods presented. Options to purchase 378,685 and 657,205 shares of common stock were outstanding as of March 31, 2025 and 2024, respectively. There were 796,002 and 753,695 restricted stock awards outstanding at March 31, 2025 and 2024, respectively. For the three months ended March 31, 2025 and 2024, no stock options or restricted stock awards outstanding were excluded from the calculation of diluted earnings per common share.
The following represent the calculation of basic and diluted earnings per share for the periods presented:
Weighted-average common stock outstanding:
Weighted-average common stock outstanding (basic)
43,788,353
43,258,087
Incremental shares
501,904
469,257
Weighted-average common stock outstanding (dilutive)
44,290,257
43,727,344
Basic earnings per common share
Diluted earnings per common share
Note 19—Stockholders’ Equity
A summary of the Company’s preferred and common stock at the dates presented is as follows:
Common stock, voting
On December 6, 2023, we announced that our 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 was in effect from January 1, 2024 until December 31, 2024. No shares were repurchased under this program.
On December 5, 2024, we announced that our Board of Directors approved a new 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 is in effect from January 1, 2025 until December 31, 2025, unless terminated earlier. The shares may, at the discretion of management, be repurchased from time to time in open market purchases as market conditions warrant or in privately negotiated transactions. The Company is not obligated to purchase any shares under the program, and the program may be discontinued at any time. The actual timing, number and share price of shares purchased under the repurchase program will be determined by the Company at its discretion and will depend on a number of factors, including the market price of the Company’s stock, general market and economic conditions and applicable legal requirements. The shares authorized to be repurchased represented approximately 2.8% of the Company’s outstanding common stock at December 31, 2024.
We purchased 26,000 shares with a cost of $687,000 under the stock repurchase program during the three months ended March 31, 2025.
Repurchased shares are recorded as treasury shares on the trade date using the treasury stock method, and the cash paid is recorded as treasury stock. Treasury stock acquired is recorded at cost and is carried as a reduction of stockholders’ equity in the Condensed Consolidated Statements of Financial Condition.
For each of the three months ended March 31, 2025 and 2024, cash dividends were declared and paid to stockholders of record of our common stock of $0.10 and $0.09 per share, respectively.
On April 22, 2025, our Board of Directors declared a cash dividend of $0.10 per share payable on May 20, 2025 to stockholders of record of our common stock as of May 6, 2025.
Note 20—Consolidated Statements of Changes in Accumulated Other Comprehensive Income (Loss)
The following table summarizes the changes in accumulated other comprehensive income (loss) for the three months ended March 31, 2025 and 2024:
Unrealized Gains on Cash Flow Hedges
Unrealized Losseson Available-for-SaleSecurities
Total AccumulatedOther ComprehensiveIncome (Loss)
30,131
(130,248
29,908
(136,818
21,595
(135,282
Other comprehensive income (loss), net of tax
18,756
(115,140
Note 21—Segment Information
The Company has one reportable segment: banking operations. Loans and leases, securities, deposits, and non-interest income provide the revenues of the banking operation. Loan and lease products offered to customers generate a majority of the Company’s interest and fee income. Additionally, deposit products offered to customers generate fees and service charge income. Interest income earned on securities, and net gains on the sales of loans to third parties are other sources of revenue. Interest expense, provision for credit losses, salaries and employee benefits, and data processing provide the significant expenses in banking operations. These significant expenses are the same as those disclosed in the Company’s Consolidated Statements of Operations and Consolidated Statements of Cash Flows. Noncash items such as depreciation and amortization are also disclosed in the Company’s Consolidated Statements of Operations and Consolidated Statements of Cash Flows.
The Company’s chief operating decision makers are the Chief Executive Officer and the President. The chief operating decision makers are provided with consolidated balance sheets, income statements, and net interest margin analyses in order to evaluate revenue streams, significant expenses, and budget-to-actual results in assessing the Company’s segment and determining the allocation of resources. Additionally, the chief operating decision makers review performance of various components of banking operations, such as loan portfolio types, funding sources, and overhead, to assess product pricing and significant expenses and to evaluate return on assets. The chief operating decision makers use consolidated net income to benchmark the Company against its competitors. The benchmarking analysis coupled with monitoring budget-to-actual results are used in assessing performance and in establishing compensation.
The accounting policies of the banking operations are the same as those described in Note 1–Business and Summary of Significant Accounting Policies. Additional information about these policies can be found in Note 1 of our audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2024, which we filed with the SEC on February 28, 2025. All operations are domestic.
Three months ended March 31,
Interest and dividend income
Reconciliation of revenue:
Other noninterest income
Total consolidated revenue
149,714
153,794
Less:
Interest expense
Segment net interest income and noninterest income
103,080
101,014
Depreciation and amortization
2,848
3,216
Other segment items(1)
10,123
Income tax expense
12,158
12,494
Segment net income
Reconciliation of profit or loss:
Adjustments and reconciling items
Consolidated net income
Reconciliation of assets
Total assets for reportable segment
9,410,503
Total consolidated assets
(1) Other segment items include: legal, audit, and other professional fees, other occupancy expense, regulatory assessments, and advertising and promotion expense.
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following is a discussion and analysis of Byline Bancorp, Inc.’s financial condition and results of operations and should be read in conjunction with our Unaudited Interim Condensed Consolidated Financial Statements and notes thereto included elsewhere in this report. The words "the Company," "we," "Byline," "management," "our" and "us" refer to Byline Bancorp, Inc. and its consolidated subsidiaries, unless we indicate otherwise. In addition to historical information, this discussion contains forward looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management’s expectations. Factors that could cause such differences are discussed in the sections entitled "Special Note Regarding Forward Looking Statements" and "Risk Factors". Byline assumes no obligation to update any of these forward looking statements.
Forward-Looking Statements
Statements contained in this report and in other documents we file with or furnish to the Securities and Exchange Commission ("SEC") that are not historical facts may constitute "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Any statements about our expectations, beliefs, plans, strategies, predictions, forecasts, objectives or assumptions of future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as "anticipates," "believes," "expects," "can," "could," "may," "predicts," "potential," "opportunity," "should," "will," "estimate," "plans," "projects," "continuing," "ongoing," "expects," "seeks," "intends" and similar words or phrases. Accordingly, these statements involve estimates, known and unknown risks, assumptions and uncertainties that could cause actual strategies, actions or results to differ materially from those expressed in such statements, and are not guarantees of future results or other events or performance. Because forward-looking statements are necessarily only estimates of future strategies, actions or results, based on management’s current expectations, assumptions and estimates on the date hereof, there can be no assurance that actual strategies, actions or results will not differ materially from expectations and readers are cautioned not to place undue reliance on such statements.
Our ability to predict results or the actual effects of future plans, strategies or events is inherently uncertain. Factors which could cause actual results or conditions to differ materially from those reflected in forward-looking statements include:
These risks and uncertainties should be considered in evaluating any forward-looking statements, and undue reliance should not be placed on such statements. Forward looking statements speak only as of the date they are made. You should also consider the risks, assumptions and uncertainties set forth in the "Risk Factors" section in our Annual Report on Form 10-K for the year ended December 31, 2024 that was filed with the SEC on February 28, 2025, as well as those set forth in the reports we file with the SEC. We assume no obligation to update any of these statements in light of new information, future events or otherwise unless required under the federal securities laws.
Overview
Our Business
We are a bank holding company headquartered in Chicago, Illinois, and conduct all our business activities through our subsidiary, Byline Bank, a full service commercial bank, and Byline Bank’s subsidiaries. Through Byline Bank, we offer a broad range of banking products and services to small and medium sized businesses, commercial real estate and financial sponsors and to consumers who generally live or work near our branches. We also offer online account opening to consumer and business customers through our website and provide trust and wealth management services to our customers. In addition to our traditional commercial banking business, we provide small ticket equipment leasing solutions through Byline Financial Group, a wholly-owned subsidiary of Byline Bank, headquartered in Bannockburn, Illinois, with sales offices in Illinois, and sales representatives in Illinois, Michigan, New Jersey, and New York. We participate in U.S. government guaranteed lending programs and originate U.S. government guaranteed loans. Byline Bank is a leading originator of SBA loans and was the second most active 7(a) and 504 lender in Illinois for the quarter ended March 31, 2025.
Our results of operations depend substantially on net interest income, which is the difference between interest income on interest-earning assets, consisting primarily of interest income on loans and lease receivables, including accretion income on loans, investment securities and other short-term investments, and interest expense on interest-bearing liabilities, consisting primarily of deposits and borrowings. Our results of operations are also dependent upon our generation of non-interest income, consisting primarily of income from fees and service charges on deposits, loan servicing revenue, wealth management and trust income, ATM and interchange fees, and net gains on sales of investment securities and loans. Other factors contributing to our results of operations include our provision for credit losses, provision for income taxes, and non-interest expenses, such as salaries and employee benefits, occupancy and equipment expenses, and other miscellaneous operating costs.
We reported consolidated net income of $28.2 million, or $0.65 per basic and $0.64 per diluted common share, for the three months ended March 31, 2025, compared to net income of $30.4 million, or $0.70 per basic and per diluted common share, for the three months ended March 31, 2024, a decrease of $2.2 million. The decrease in net income was attributable to a $2.6 million increase in non-interest expense and a $2.5 million increase in the provision for credit losses, partially offset by a $2.7 million increase to net interest income. The increase in non-interest expense was primarily driven by a $2.3 million increase to salaries and employee benefits mainly due to merit increases, higher incentive compensation, and higher health insurance costs. The increase in the provision for credit losses is mainly due to growth in the loan and lease portfolio and a larger allowance for government guaranteed loans based on changes in loss rates. The increase in net interest income was primarily driven by lower interest expense on deposits and other borrowings.
Dividends declared and paid on common shares were $4.4 million and $3.9 million for the three months ended March 31, 2025 and 2024, respectively.
Our results of operations for the three months ended March 31, 2025 and 2024 yielded an annual return on average assets of 1.25% and 1.36%, and a return on average stockholders’ equity of 10.32% and 12.26%, respectively.
As of March 31, 2025, we had consolidated total assets of $9.6 billion, total gross loans and leases outstanding of $7.0 billion, total deposits of $7.6 billion, and total stockholders’ equity of $1.1 billion.
First Security Bancorp, Inc. Acquisition Section
On April 1, 2025, we completed our acquisition of First Security Bancorp, Inc. ("First Security") under the terms of a definitive merger agreement. As a result of the merger, First Security's wholly-owned bank subsidiary, First Security Trust and Savings Bank, was merged with and into Byline Bank. As of March 31, 2025, First Security reported approximately $313.4 million in total assets, $156.7 million in total loans, and $279.2 million in total deposits. Refer to Note 3—Acquisition of a Business for additional information.
Critical Accounting Policies and Significant Estimates
Our accounting and reporting policies conform to accounting principles generally accepted in the United States of America ("GAAP") and to general practices within the banking industry. To prepare financial statements and interim financial statements in conformity with GAAP, management makes estimates, assumptions and judgments based on available information. These estimates, assumptions and judgments affect the amounts reported in the financial statements and accompanying notes, which are based on information available as of the date of the financial statements. As this information changes, actual results could differ from the estimates, assumptions and judgments reflected in the financial statements. In particular, management has identified several accounting policies that, due to the estimates, assumptions and judgments inherent in those policies, are critical in understanding our financial statements.
These critical accounting policies and estimates include (i) determination of the allowance for credit losses, (ii) the valuation of intangible assets, such as goodwill, and assessment of impairment, (iii) fair value estimations, and (iv) the determination and assessment of impairment for other intangible assets.
The following is a discussion of the critical accounting policies and significant estimates that require us to make complex and subjective judgments. Additional information about these policies can be found in Note 1 of our audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2024, which we filed with the SEC on February 28, 2025.
Allowance for credit losses
The allowance for credit losses ("ACL") represents management’s estimate of current expected credit losses over the life of a financial asset carried at amortized cost at an appropriate level based upon management’s evaluation of the adequacy of collectively and individually evaluated loss reserves.
The ACL is maintained at a level that management believes is appropriate to provide for current expected credit losses as of the dates of the Consolidated Statements of Financial Condition, and we have established methodologies for the determination of its adequacy. The methodologies are set forth in a formal policy and take into consideration relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. We increase our ACL by recording provisions for current expected credit losses against our income and decrease by charge‑offs, net of recoveries.
The evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. While management uses available information to recognize losses on loans and leases, changes in economic or other conditions may necessitate revision of the estimate in future periods.
For each portfolio, management estimates expected credit losses over the life of each loan and lease utilizing lifetime or cumulative loss rate methodology. The lifetime loss rates are estimated by analyzing a combination of internal and external data related to historical performance of each loan and lease pool over a complete economic cycle. Loss rates are based on historical averages for each loan and lease pool, adjusted to reflect the impact of a forward-looking forecast of certain macroeconomic variables, primarily unemployment rates, which management considers to be both reasonable and supportable. Various economic scenarios are considered and weighted to arrive at the forecast that most reflects management’s expectation of future conditions. After a one-year forecast period, a one-year reversion period adjusts loss experience to the historical average on a straight-line basis.
Management also considers qualitative risk factor adjustments that are intended to capture internal and external trends not reflected in historical loss history. Each risk factor is assigned an allowance level based on management’s judgment as to the expected impact of each risk factor on each loan and lease portfolio and is monitored quarterly. All loans and leases of $500,000 or greater with an internal risk rating of substandard or below, or on nonaccrual status are individually evaluated for impairment on a quarterly basis.
The Company also maintains an allowance for credit losses on off-balance sheet credit exposures for unfunded loan commitments. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life based on management’s consideration of past events, current conditions, and reasonable and supportable economic forecasts. Management tracks the level and trends in unused commitments and takes into consideration the same factors as those considered for purposes of the allowance for credit losses on outstanding loans.
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Goodwill. Goodwill represents the excess of the purchase consideration over the fair value of net assets acquired in connection with our recapitalization and acquisitions using the acquisition method of accounting. Goodwill is not amortized but is periodically evaluated for impairment under the provisions of ASC Topic 350, Intangibles—Goodwill and Other ("ASC 350").
Impairment testing is performed using either a qualitative or quantitative approach at the reporting unit level. Our goodwill is allocated to Byline Bank, which is our only applicable reporting unit for the purposes of testing goodwill for impairment. We have selected November 30 as the date to perform the annual goodwill impairment test. Additionally, we perform a goodwill impairment evaluation on an interim basis when events or circumstances indicate impairment potentially exists.
Other intangible assets
Other intangible assets primarily consist of core deposit intangible assets and customer relationship intangible. In valuing intangible assets, we consider variables such as servicing costs, attrition rates and market discount rates. Intangible assets are reviewed annually, or more frequently when events or changes in circumstances occur that indicate that their carrying values may not be recoverable. If the recoverable amount of the intangible asset is determined to be less than its carrying value, we would then measure the amount of impairment based on an estimate of the fair value at that time. We also evaluate whether the events or circumstances have occurred that warrant a revision to the remaining useful lives of intangible assets. In cases where a revision is deemed appropriate, the remaining carrying amounts of the intangible assets are amortized over the revised remaining useful life. Core deposit intangibles are currently amortized over an approximate ten-year period and customer intangibles are amortized over a twelve-year period.
Fair value of Financial Instruments
ASC Topic 820, Fair Value Measurement defines fair value as the price that would be received to sell a financial asset or paid to transfer a financial liability in an orderly transaction between market participants at the measurement date.
The degree of management judgment involved in determining the fair value of assets and liabilities is dependent upon the availability of quoted market prices or observable market parameters. For financial instruments that trade actively and have quoted market prices or observable market parameters, there is minimal subjectivity involved in measuring fair value. When observable market prices and parameters are not available, management judgment is necessary to estimate fair value. In addition, changes in market conditions may reduce the availability of quoted prices or observable data. For example, reduced liquidity in the capital markets or changes in secondary market activities could result in observable market inputs becoming unavailable. Therefore, when market data is not available, we would use valuation techniques requiring more management judgment to estimate the appropriate fair value measurement.
See Note 15 of our Unaudited Interim Condensed Consolidated Financial Statements as of March 31, 2025, included in this report, for a complete discussion of our use of fair value of financial assets and liabilities and their related measurement practices.
Recently Issued Accounting Pronouncements
Refer to Note 2 of our Unaudited Interim Condensed Consolidated Financial Statements as of March 31, 2025, which is included in this report, for a description of recent accounting pronouncements, including the effective dates of adoption and anticipated effects on our results of operations and financial condition.
Primary Factors Used to Evaluate Our Business
As a financial institution, we manage and evaluate various aspects of both our results of operations and our financial condition. We evaluate the levels and trends of the line items included in our consolidated financial statements as well as various financial ratios that are commonly used in our industry. We analyze these ratios and financial trends against our own historical performance, our budgeted performance, and the final condition and performance of comparable financial institutions in our region. Comparison of our financial performance against other financial institutions is impacted by the accounting for acquired non‑credit-deteriorated and purchased credit deteriorated loans.
Results of Operations
47
Selected Financial Data
As of or for the Three Months Ended
Summary of Operations
Common Share Data
Adjusted diluted earnings per share(1)(3)
Weighted-average common shares outstanding (basic)
Weighted-average common shares outstanding (diluted)
Common shares outstanding
Cash dividends per common share
0.10
0.09
Dividend payout ratio on common stock
15.63
12.86
Book value per common share
25.32
22.88
Tangible book value per common share(1)
20.91
18.29
Key Ratios and Performance Metrics (annualized where applicable)
Net interest margin
4.07
4.00
Net interest margin, fully taxable equivalent (1)(4)
4.08
4.01
Average cost of deposits
2.30
2.56
Efficiency ratio(2)
53.66
51.94
Adjusted efficiency ratio(1)(2)(3)
53.04
51.75
Non-interest income to total revenues(1)
14.42
15.32
Non-interest expense to average assets
2.49
2.40
Adjusted non-interest expense to average assets(1)(3)
2.46
2.39
Return on average stockholders' equity
10.32
12.26
Adjusted return on average stockholders' equity(1)(3)
10.50
12.31
Return on average assets
1.25
1.36
Adjusted return on average assets(1)(3)
1.27
Pre-tax pre-provision return on average assets(1)
2.06
2.10
Adjusted pre-tax pre-provision return on average assets(1)(3)
2.09
2.11
Return on average tangible common stockholders' equity(1)
12.92
15.88
Adjusted return on average tangible common stockholders' equity(1)(3)
13.14
15.95
Non-interest-bearing deposits to total deposits
22.71
25.19
Loans and leases held for sale and loans and leases held for investment to total deposits
93.30
92.54
Deposits to total liabilities
89.35
87.49
Deposits per branch
164,202
153,129
Asset Quality Ratios
Non-performing loans and leases to total loans and leases held for investment
0.76
1.00
Non-performing assets to total assets
0.62
0.73
ACL to total loans and leases held for investment, net before ACL
1.43
1.51
Net charge-offs to average total loans and leases held for investment, net before ACL - loans and leases
0.39
0.37
Capital Ratios
Common equity to total assets
11.80
10.72
Tangible common equity to tangible assets(1)
9.95
8.76
Leverage ratio
11.98
10.91
Common equity tier 1 capital ratio
11.78
10.59
Tier 1 capital ratio
12.80
11.62
Total capital ratio
14.86
13.66
(1) Represents a non-GAAP financial measure. See "Reconciliations of non-GAAP Financial Measures" for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure.
(2) Represents non-interest expense less amortization of intangible assets divided by net interest income and non-interest income.
(3) Calculation excludes impairment charges on ROU assets and merger-related expenses.
(4) Interest income and rates include the effects of a tax equivalent adjustment to adjust tax-exempt investment income on tax-exempt investment securities to a fully taxable basis, assuming a federal income tax rate of 21%.
48
We reported consolidated net income of $28.2 million for the three months ended March 31, 2025 compared to net income of $30.4 million for the three months ended March 31, 2024, a decrease of $2.2 million. The decrease in net income was primarily attributable to an increase in non-interest expense of $2.6 million and an increase in the provision for credit losses of $2.5 million, partially offset by a $2.7 million increase in net interest income. Net income available to common stockholders was $0.65 per basic and $0.64 per diluted common share, for the three months ended March 31, 2025 compared to $0.70 per basic and per diluted common share, for the three months ended March 31, 2024.
The increase in non-interest expense was primarily due to increases in salaries and employee benefits mainly due to merit increases, higher incentive compensation, and higher health insurance costs. The increase in the provision for credit losses is mainly due to growth in the loan and lease portfolio and a larger allowance for collectively assessed government guaranteed loans based on changes in loss rates. The increase in net interest income was primarily driven by lower interest expense on deposits and other borrowings.
Our annualized return on average assets was 1.25% for the three months ended March 31, 2025 compared to 1.36% for the three months ended March 31, 2024. Our annualized return on average stockholders’ equity was 10.32% for the three months ended March 31, 2025 compared to 12.26% for the three months ended March 31, 2024. Our efficiency ratio was 53.66% for the three months ended March 31, 2025 compared to 51.94% for the three months ended March 31, 2024.
Net Interest Income
Net interest income, representing interest income less interest expense, is a significant contributor to our revenues and earnings. We generate interest income from interest and dividends on interest-earning assets, which include loans, leases and investment securities we own. We incur interest expense from interest paid on interest-bearing liabilities, which include interest-bearing deposits, subordinated debt, Federal Home Loan Bank advances, junior subordinated debentures and other borrowings. To evaluate net interest income, we measure and monitor (i) yields on our loans and other interest-earning assets, (ii) the costs of our deposits and other funding sources, (iii) our net interest spread, and (iv) our net interest margin. Net interest spread is the difference between rates earned on interest-earning assets and rates paid on interest-bearing liabilities. Net interest margin is calculated as the annualized net interest income divided by average interest-earning assets. Because non-interest-bearing sources of funds, such as non-interest-bearing deposits and stockholders’ equity, also fund interest-earning assets, net interest margin includes the benefit of these non-interest-bearing sources.
We also recognize income from the accretable discounts associated with the purchase of interest-earning assets. Because of our recapitalization and acquisitions, we derive a portion of our interest income from the accretable discounts on purchase credit deteriorated and acquired non-credit-deteriorated loans. The accretion is generally recognized over the life of the loan and is impacted by changes in expected cash flows on the loan. This accretion will continue to have an impact on our net interest income as long as loans acquired with a discount at acquisition represent a meaningful portion of our interest-earning assets. As of March 31, 2025, purchased credit deteriorated loans accounted for under ASC Topic 326 represented 1.7% of our total loan and lease portfolio compared to 1.8% at December 31, 2024.
Changes in the market interest rates we earn on interest-earning assets or pay on interest-bearing liabilities, as well as the volume and types of interest-earning assets, interest-bearing and non-interest-bearing liabilities, are usually the largest drivers of periodic changes in net interest spread, net interest margin and net interest income. In addition, our interest income includes the accretion of the discounts on our acquired loans, which will also affect our net interest spread, net interest margin and net interest income.
49
The following tables present, for the periods indicated, information about (i) average balances, the total dollar amount of interest income from interest-earning assets and the resultant average yields; (ii) average balances, the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rates; (iii) net interest income; (iv) the interest rate spread; and (v) the net interest margin. Yields have been calculated on a pre-tax basis (dollars in thousands).
AverageBalance(5)
InterestInc / Exp
AverageYield /Rate
134,032
1,012
3.06
339,449
3,828
4.54
Loans and leases(1)
6,935,790
7.09
6,681,488
7.45
Taxable securities
1,560,861
11,745
3.05
1,422,661
9,822
2.78
Tax-exempt securities(2)
154,936
1,091
2.86
159,984
2.80
Total interest-earning assets
8,785,619
135,078
6.24
8,603,582
138,554
6.48
(99,513
(102,256
All other assets
500,659
529,615
TOTAL ASSETS
9,186,765
9,030,941
Interest checking
765,919
3,262
1.73
590,406
2,429
1.65
Money market accounts
2,606,907
19,618
2,237,324
19,660
3.53
Savings
484,708
126
0.11
531,912
0.15
Time deposits
1,822,305
19,043
4.24
1,992,357
23,676
4.78
Total interest-bearing deposits
5,679,839
3.00
5,351,999
3.45
338,141
2.20
472,644
3.25
145,018
7.69
144,387
8.34
Total borrowings
483,159
4,585
3.85
617,031
6,818
4.44
Total interest-bearing liabilities
6,162,998
3.07
5,969,030
3.56
1,730,340
1,874,322
Other liabilities
183,259
188,783
1,110,168
998,806
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
Net interest spread(3)
3.17
2.92
Net interest income, fully taxable equivalent
88,444
85,774
Net interest margin, fully taxable equivalent(2)(4)
Reconciliation to reported net interest income:
Less: Tax-equivalent adjustment
228
233
Net interest margin(4)
Net loan accretion impact on margin
2,595
0.12
4,284
0.20
50
Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates. The following table sets forth the effects of changing rates and volumes on our net interest income during the periods shown. Information is provided with respect to (i) effects on interest income attributable to changes in volume (changes in volume multiplied by prior rate) and (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume). Changes applicable to both volume and rate have been allocated to volume. Yields have been calculated on a pre-tax basis. The table below is a summary of increases and decreases in interest income and interest expense resulting from changes in average balances (volume) and changes in average interest rates (dollars in thousands):
Compared to Three Months Ended March 31, 2024
Increase (Decrease) Due to
Volume
Rate
Interest income
(1,577
(1,239
(2,816
3,369
(5,931
(2,562
976
947
1,923
Tax-exempt securities
(45
Total interest income
(6,199
(3,476
833
2,606
(2,648
(42
(19
(71
(1,980
(2,653
(4,633
1,324
(5,237
(3,913
(767
(1,222
(1,989
(231
(244
(780
(1,453
(2,233
544
(6,690
(6,146
2,179
491
2,670
Net interest income for the three months ended March 31, 2025 was $88.2 million compared to $85.5 million during the same period in 2024, an increase of $2.7 million, or 3.1%. Interest income decreased $3.5 million for the three months ended March 31, 2025 compared to the same period in 2024 primarily as a result of lower yields on loans and leases. Interest expense decreased by $6.1 million for the three months ended March 31, 2025 compared to the same period in 2024 mainly due lower rates paid on interest-bearing deposits.
The net interest margin for the three months ended March 31, 2025 was 4.07%, an increase of seven basis points compared to 4.00% for the three months ended March 31, 2024. The increase was primarily attributable to lower rates paid on deposits.
Net loan accretion income was $2.6 million for the three months ended March 31, 2025 compared to $4.3 million for the three months ended March 31, 2024, a decrease of $1.7 million due to lower accretion on acquired loans. Total net loan accretion on acquired loans contributed 12 basis points to the net interest margin for the three months ended March 31, 2025 compared to 20 basis points for the three months ended March 31, 2024. Projected accretion income as of March 31, 2025 is summarized as follows:
EstimatedProjectedAccretion(1)(2)(3)
4,163
4,344
2,692
1,524
1,062
9,741
23,526
(1) Estimated projected accretion excludes contractual interest income on acquired loans and leases.
(2) Projections are undated quarterly, assume no prepayments, and are subject to change.
(3) Excludes the impact of the First Security acquisition.
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Provision for Credit Losses
The provision for credit losses reflects the amount required to maintain the ACL at an appropriate level based upon management’s evaluation of collectively and individually evaluated loss reserves. The provision for credit losses represents a charge to earnings necessary to establish an allowance for credit losses that, in management’s evaluation, is appropriate to provide coverage for current expected credit losses in the loan and lease portfolio. The ACL is increased by the provision for credit losses and is decreased by charge-offs, net of recoveries on prior charge-offs.
The provision for credit losses was $9.2 million for the three months ended March 31, 2025, compared to $6.6 million for the three months ended March 31, 2024, an increase of $2.5 million and is comprised of a provision for credit losses - loans and leases and a provision for credit losses - unfunded commitments. Provision for credit losses - loans and leases was $9.1 million for the three months ended March 31, 2025, compared to $6.9 million for the three months ended March 31, 2024, an increase of $2.2 million. The increase in provision for credit losses - loans and leases was driven by growth in the loan and lease portfolio and a larger allocation for collectively assessed government guaranteed loans based on changes in loss rates. The provision for credit losses - unfunded commitments was $103,000 for the three months ended March 31, 2025 and a recapture of $248,000 for the three months ended March 31, 2024.
Non-Interest Income
The following table presents the major components of non-interest income for the periods presented (dollars in thousands):
QTD 2025Compared to 2024
$ Change
% Change
11.4
(321
(9.5
)%
(348
49.6
(41
(3.8
419
106.8
(595
(10.8
(75
(6.4
3.5
(609
(3.9
Fees and service charges on deposits represent amounts charged to customers for banking services, such as fees on deposit accounts, and include, but are not limited to, maintenance fees, insufficient fund fees, overdraft protection fees, wire transfer fees, and other charges. Fees and service charges on deposits were $2.7 million and $2.4 million for the three months ended March 31, 2025 and 2024, respectively. The increase is primarily due to growth in deposits and increased fees.
While portions of the loans that we originate are sold and generate gains on sale revenue, servicing rights for the majority of loans that we sell are retained by us. In exchange for continuing to service loans that have been sold, we receive servicing revenue from a portion of the interest cash flow of the loan. We generated $3.0 million and $3.4 million in loan servicing revenue on the sold portion of the U.S. government guaranteed loans for the three months ended March 31, 2025 and 2024, respectively, a decrease of $321,0000 or 9.5%. The decrease in loan servicing revenue was primarily driven by a decrease in loans serviced compared to March 31, 2024 and one less day during the quarter. At March 31, 2025 and 2024, the outstanding balance of guaranteed loans serviced was $1.7 billion.
Loan servicing asset revaluation represents net changes in the fair value of our servicing assets. Loan servicing asset revaluation had a downward adjustment of $1.1 million and $703,000 for the three months ended March 31, 2025 and 2024, respectively, a change of $348,000. Changes in the revaluation were mainly due to higher prepayments.
Net gains on sales of loans were $4.9 million for the three months ended March 31, 2025 compared to $5.5 million for the three months ended March 31, 2024, a decrease of $595,000, or 10.8%, driven mainly by lower volume of sales and higher deferred costs. We sold $70.2 million of U.S. government guaranteed loans during the three months ended March 31, 2025 compared to $72.5 million during the three months ended March 31, 2024.
Wealth management and trust income represents fees charged to customers for investment, trust, or wealth management services and are primarily determined by total assets under administration. Wealth management and trust income was $1.1 million for the three months ended March 31, 2025 compared to $1.2 million for the three months ended March 31, 2024, a decrease of $75,000 or 6.4%. Assets under administration were $741.8 million and $654.1 million as of March 31, 2025 and 2024, respectively.
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Non-Interest Expense
The following table presents the major components of non-interest expense for the periods presented (dollars in thousands):
6.8
(432
(8.2
20.7
532
19.6
1,026
24.7
Net gain recognized on other real estate owned and other related expenses
140
(143.2
(227
(16.9
(860
(14.9
2,620
4.9
Salaries and employee benefits, the single largest component of our non-interest expense, totaled $36.3 million for the three months ended March 31, 2025 compared to $34.0 million for the three months ended March 31, 2024, an increase of $2.3 million, or 6.8%. The increases were primarily a result of merit increases, decreased deferred costs, increased incentives and higher health insurance costs. Our staffing decreased from 1,064 full-time equivalent employees as of March 31, 2024 to 1,032 as of March 31, 2025.
Occupancy and equipment expense, net, was $4.9 million for the three months ended March 31, 2025 compared to $5.3 million for the three months ended March 31, 2024, a decrease of $432,000 or 8.2%. The decrease is primarily due to lower real estate taxes, depreciation, and building maintenance expenses.
Loan and lease related expenses were $827,000 for the three months ended March 31, 2025 compared to $685,000 for the three months ended March 31, 2024, an increase of $142,000, or 20.7%. The increase was primarily driven by higher broker fees and higher appraisals and surveys, both due to growth in the loan and lease portfolio.
Legal, audit, and other professional fees were $3.3 million for the three months ended March 31, 2025 compared to $2.7 million for the three months ended March 31, 2024, an increase of $532,000 , or 19.6%. The increase was principally driven by merger-related legal expenses incurred in the first quarter of 2025 and increased audit and other professional fees.
Data processing was $5.2 million for the three months ended March 31, 2025, compared to $4.1 million for the three months ended March 31, 2024, an increase of $1.0 million or 24.7%. The increase was primarily driven by increased software licensing costs as a result of additional technology investment and merger-related data processing expenses incurred in the first quarter of 2025.
Other non-interest expense was $4.9 million for the three months ended March 31, 2025 compared to $5.8 million for the three months ended March 31, 2024, a decrease of $860,000, or 14.9%. The decrease was primarily due to branch consolidation charges taken in the first quarter of 2024.
Our efficiency ratio was 53.66% for the three months ended March 31, 2025 compared to 51.94% for the three months ended March 31, 2024. The change in our efficiency ratio for the three months ended March 31, 2025 was driven by increased non-interest expense. Our adjusted efficiency ratio was 53.04% for the three months ended March 31, 2025 compared to 51.75% for the three months ended March 31, 2024.
Please refer to the "Reconciliation of Non-GAAP Financial Measures" for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure.
Income Taxes
Our provision for income taxes for the three months ended March 31, 2025 totaled $9.2 million compared to $10.1 million for the three months ended March 31, 2024, a decrease of $898,000, or 8.9%. The decrease in income tax expense was principally due to a decrease in net income before provision for income taxes. Our effective tax rate was 24.6% for the three months ended March 31, 2025 and 25.0% for the three months ended March 31, 2024.
We expect our effective tax rate for 2025 to be approximately 25-27%.
Financial Condition
Condensed Consolidated Statements of Financial Condition Analysis
Our total assets increased by $88.2 million, or 0.9%, to $9.6 billion at March 31, 2025 compared to $9.5 billion at December 31, 2024. The increase in total assets was primarily due to an increase of $137.1 million in total loans and leases and loans held for sale, or 2.0%, from $6.9 billion at December 31, 2024 to $7.0 billion at March 31, 2025, and an increase in securities available-for-sale of $122.4 million, or 8.6% from $1.4 billion at December 31, 2024 to $1.5 billion as March 31, 2025. Our originated loan and lease portfolio increased by $161.4 million and our purchased credit deteriorated loans and acquired non-credit-deteriorated loans and leases portfolio decreased by $42.4 million. The increase in our originated portfolio was primarily attributed to growth in the commercial and industrial portfolio. The decrease in our purchased credit deteriorated loans and acquired non-credit-deteriorated loans and leases portfolio was attributed to decreases in commercial and residential real estate resulting mainly from renewals and resolutions.
Total liabilities increased by $48.6 million, or 0.6%, to $8.5 billion at March 31, 2025 compared to $8.4 billion at December 31, 2024. Total deposits increased by $94.7 million, or 1.3%, driven by growth in money market accounts, offset by a decrease in time deposits. Other borrowings decreased by $40.5 million, or 6.5%, mainly due to lower FHLB advances and repayment of the term loan.
Investment Portfolio
Our investment securities portfolio consists of securities classified as available-for-sale and held-to-maturity. There were no securities classified as trading in our investment portfolio as of March 31, 2025 or December 31, 2024. All available-for sale securities are carried at fair value and may be used for liquidity purposes should management consider it to be in our best interest. Securities available-for-sale consist primarily of residential mortgage-backed securities, commercial mortgage-backed securities and U.S. government agencies securities.
Securities available-for-sale increased by $122.4 million, or 8.6%, from $1.4 billion at December 31, 2024 to $1.5 billion at March 31, 2025. The increase was mainly attributed to purchases of securities, net of maturities, calls, and repayments.
During the quarter ended March 31, 2025, our last remaining held-to-maturity security, which was carried at amortized cost, matured.
The following table summarizes the fair value of the available-for-sale and held-to-maturity securities portfolio as of the dates presented (dollars in thousands):
Total available-for-sale
Total held-to-maturity
54
Certain securities have fair values less than amortized cost and, therefore, contain unrealized losses. At March 31, 2025, we evaluated the securities that had an unrealized loss for credit losses and determined there were none. There were 305 investment securities with unrealized losses at March 31, 2025. We anticipate full recovery of amortized cost with respect to these securities by maturity, or sooner in the event of a more favorable market interest rate environment. We do not intend to sell these securities and it is not more likely than not that we will be required to sell them before recovery of their amortized cost basis, which may be at maturity.
The following table (dollars in thousands) set forth certain information regarding contractual maturities and the weighted average yields of our investment securities as of March 31, 2025. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.
Maturity as of March 31, 2025
Due in One Year or Less
Due from One toFive Years
Due from Five toTen Years
Due after Ten Years
WeightedAverageYield(1)
5,008
4.25
29,517
U.S. government agencies
22,933
51,048
1.86
71,398
2.19
6,154
3.61
4,081
21,909
23,750
3.51
33,897
2.53
Residential mortgage- backed securities
36,891
1.59
39,578
1.66
876,016
3.16
2.98
Commercial mortgage- backed securities
2,675
2.57
15,377
240,580
3.24
26,094
5.31
14,015
3.58
2.07
168,134
2.93
176,719
1,313,841
3.14
Total non-taxable securities classified as obligations of states, municipalities and political subdivisions were $53.4 million at March 31, 2025, a decrease of $105,000 from December 31, 2024.
There were no holdings of securities of any one issuer, other than U.S. government-sponsored entities and agencies, with total outstanding balances greater than 10% of our stockholders’ equity as of March 31, 2025 or December 31, 2024.
Restricted Stock
As a member of the Federal Home Loan Bank system, Byline Bank is required to maintain an investment in the capital stock of the FHLB. No market exists for this stock, and it has no quoted market value. The stock is redeemable at par by the FHLB and is, therefore, carried at cost. In addition, Byline Bank owns stock of Bankers’ Bank that was acquired as part of a bank acquisition. The stock is redeemable at par and carried at cost. As of March 31, 2025 and December 31, 2024, we held $26.3 million and $27.5 million, respectively, in FHLB and Bankers’ Bank stock. We evaluate impairment of our investment in FHLB and Bankers’ Bank based on the ultimate recoverability of the par value rather than by recognizing temporary declines in value. We did not identify any indicators of impairment of FHLB and Bankers’ Bank stock as of March 31, 2025 and December 31, 2024.
55
Loan and Lease Portfolio
Lending-related income is the most important component of our net interest income and is the main driver of the results of our operations. Total loans and leases at March 31, 2025 and December 31, 2024 were $7.0 billion and $6.9 billion, respectively, an increase of $119.0 million, or 1.7%. Originated loans and leases were $6.4 billion at March 31, 2025, an increase of $161.4 million, or 2.6%, compared to $6.2 billion at December 31, 2024. Purchased credit deteriorated loans and acquired non-credit-deteriorated loans and leases were $620.7 million at March 31, 2025, a decrease of $42.4 million, or 6.4%, compared to $663.0 million at December 31, 2024. The increase in our originated portfolio was primarily attributed to organic loan and lease growth, and renewals of acquired loans and leases that are now reflected in originated loans. The decrease in the purchased credit deteriorated and acquired non-credit-deteriorated loan and lease portfolio was driven mainly by renewals of acquired loans and leases as well as resolutions.
We strive to maintain a relatively diversified loan portfolio to help reduce the risk inherent in concentration in certain types of collateral. Loans, excluding leases, are typically made to real estate, manufacturing, wholesale, retail and service businesses for working capital needs, business expansions and operations. As of March 31, 2025, the loan portfolio included $431.7 million of unguaranteed 7(a) SBA and USDA loans with exposure to the following top three industries: 19.9% retail trade, 13.6% accommodation and food services, and 9.3% manufacturing. The following table shows our allocation of originated, purchase credit deteriorated and acquired non-credit-deteriorated loans and leases as of the dates presented (dollars in thousands):
% of Total
Originated loans and leases
30.0
7.5
7.4
6.0
6.2
37.4
36.3
0.0
0.1
Leasing financing receivables
10.2
10.4
Total originated loans and leases
91.1
90.4
Purchased credit deteriorated loans
1.1
1.2
0.4
1.7
1.8
Acquired non-credit-deteriorated loans and leases
2.7
2.9
2.4
2.6
0.9
1.4
7.2
7.8
100.0
Total loans and leases, net of allowance for credit losses - loans and leases
Loans collateralized by real estate include: commercial real estate, residential real estate, and construction, land development, and other land. In the aggregate, loans collateralized by real estate comprised 51.0% and 51.6% of the total loan and lease portfolio at March 31, 2025 and December 31, 2024, respectively.
Commercial Real Estate Loans. Commercial real estate loans, including owner occupied and non-owner occupied, comprised the largest portion of the real estate loan portfolio as of March 31, 2025 and totaled $2.4 billion, or 66.2% of real estate loans and 33.8% of the total loan and lease portfolio. At December 31, 2024, commercial real estate loans totaled $2.4 billion, or 66.0% of real estate loans and 34.1% of the total loan and lease portfolio. Purchased credit deteriorated commercial real estate loans decreased from $82.9 million as of December 31, 2024 to $78.4 million as of March 31, 2025, as a result of the migration of renewed loans to originated, paydowns, and resolutions.
As part of our risk assessment strategy, we strive to maintain a diversified commercial real estate portfolio, which is reviewed periodically by primary collateral type and geographic location. The following tables present details of our commercial real estate portfolio by collateral type and state (location of the property), as of the date presented:
Owner Occupied Amount
Owner Occupied % of Total Loans and Leases
Non-Owner Occupied Amount
Non-Owner Occupied % of Total Loans and Leases
Total Amount
% of Total Loans and Leases
Commercial Real Estate (CRE)
Industrial/Warehouse
632,256
9.0
458,256
6.5
1,090,512
15.5
Retail/Restaurant
348,908
5.0
116,889
465,797
6.7
Office
87,716
157,752
2.2
245,468
3.4
Gas Stations
103,519
1.5
10,377
113,896
Mixed Use
43,645
0.6
40,205
83,850
Senior Housing/Healthcare
30,638
22,542
0.3
53,180
0.7
Other(1)
142,901
2.0
172,848
315,749
4.6
CRE, prior to deferred fees and costs
1,389,583
19.7
978,869
14.0
33.7
3,917
(746
3,171
Total CRE
1,393,500
19.8
978,123
33.8
CRE Geography
Illinois
1,063,665
15.1
550,575
1,614,240
22.9
California
43,267
92,421
135,688
1.9
Wisconsin
71,151
1.0
60,388
131,539
New Jersey
7,693
90,259
97,952
Florida
18,104
41,336
59,440
Indiana
45,376
13,116
58,492
0.8
Michigan
26,195
14,712
40,907
Texas
22,406
18,132
40,538
North Carolina
2,759
23,901
26,660
Georgia
6,523
19,435
25,958
All Others(2)
82,444
54,594
137,038
(1) Represents collateral types that represent less than 1% of the total loan and lease portfolio.
(2) Represents states and territories with less than 1% of the CRE portfolio.
The composition of the CRE loan portfolio remained stable at March 31, 2025 compared to December 31, 2024. Industrial/warehouse, retail/restaurant, and office remain the top three collateral types in the CRE portfolio, and represented 25.6% of total loans and leases held for investment at March 31, 2025 compared to 26.8% at December 31, 2024. CRE office represents 10.4% of our total CRE portfolio as of March 31, 2025, compared to 10.5% as of December 31, 2024. Geographically, CRE loans in Illinois decreased to 22.9% of total loans and leases held for investment and represented 68.1% of total CRE loans at March 31, 2025, compared to 23.1% of total loans
57
and leases held for investment and 67.8% of total CRE loans at December 31, 2024. CRE loans outside of Illinois comprised 10.7% of total loans and leases held for investment as of March 31, 2025, compared to 10.9% as of December 31, 2024.
Owner occupied CRE loans were $1.4 billion, or 19.8% of our loan and lease portfolio at March 31, 2025, compared to $1.4 billion, or 20.0% of our loan and lease portfolio at December 31, 2024, an increase of $14.7 million, or 1.1%. Non-owner occupied CRE loans were $978.1 million, or 13.9% of our loan and lease portfolio at March 31, 2025, compared to $975.6 million, or 14.1% of our loan and lease portfolio at December 31, 2024, an increase of $2.5 million, or 0.3%. Non-owner occupied CRE loans were 81.2% and 82.6% of Byline Bank total capital, at March 31, 2025 and December 31, 2024, respectively.
At March 31, 2025 and December 31, 2024, CRE loan concentration, as defined in the Federal Register to include owner-occupied and non-owner occupied CRE loans, construction land development and other land loans, multifamily property loans, and loans to finance CRE, construction and land development activities (that are not secured by real estate), as a percentage of Byline Bank total capital were 275.1% and 278.2%, respectively. We have not experienced portfolio concentration shift during the three months ended March 31, 2025, nor have we changed our CRE underwriting standards.
Residential real estate loans. Residential real estate loans totaled $727.4 million at March 31, 2025 compared to $726.1 million at December 31, 2024, an increase of $1.3 million, or 0.2%. The residential real estate loan portfolio comprised 20.3% of real estate loans as of March 31, 2025 and December 31, 2024, and 10.4% of total loans and leases at March 31, 2025 and December 31, 2024. Purchased credit deteriorated and acquired non-credit-deteriorated residential real estate loans decreased from $212.7 million at December 31, 2024 to $199.0 million at March 31, 2025, a decrease of $13.7 million, or 6.4%. Multifamily real estate loans were $435.3 million and $429.9 million, or 36.1% and 36.4% of Byline Bank total capital at March 31, 2025 and December 31, 2024, respectively.
Construction, land development, and other land loans. Construction, land development, and other land loans totaled $481.1 million at March 31, 2025 compared to $489.3 million at December 31, 2024, a decrease of $8.2 million, or 1.7%. The construction, land development and other land loan portfolio comprised 13.5% and 13.7% of real estate loans at March 31, 2025 and December 31, 2024, respectively, and 6.9% and 7.1% of the total loan and lease portfolio at March 31, 2025 and December 31, 2024, respectively. The construction, land development and other land loan portfolio was 39.9% and 41.3% of Byline Bank total capital, at March 31, 2025 and December 31, 2024, respectively.
Commercial and industrial loans. Commercial and industrial loans totaled $2.7 billion at March 31, 2025 and $2.6 billion at December 31, 2024, an increase of $107.8 million, or 4.1%. The commercial and industrial loan portfolio comprised 38.8% and 37.9% of the total loan and lease portfolio at March 31, 2025 and December 31, 2024, respectively. Included in the commercial and industrial loans is our sponsored finance portfolio, as of March 31, 2025, we had $704.4 million in sponsor finance loans outstanding, to 62 portfolio companies.
Lease financing receivables. Lease financing receivables comprised 10.2% and 10.4% of the loan and lease portfolio at March 31, 2025 and December 31, 2024, respectively. Total lease financing receivables were $718.7 million and $715.9 million at March 31, 2025 and December 31, 2024, respectively, an increase of $2.7 million, or 0.4%.
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Loan and Lease Portfolio Maturities and Interest Rate Sensitivity
The following table shows our loan and lease portfolio by scheduled maturity at March 31, 2025 (dollars in thousands):
Due after One YearThrough Five Years
Due after Five YearsThrough Fifteen Years
Due after Fifteen Years
FloatingRate
FixedRate
170,447
294,814
807,439
380,956
198,344
100,626
9,888
144,342
14,665
22,363
188,959
154,533
15,758
74,304
48,961
8,844
33,963
146,833
23,588
190,147
4,777
17,718
2,375
39,279
512,997
423,244
1,182,004
165,861
267,278
29,544
9,151
552
397
901
165
25,352
660,771
32,543
284,258
977,404
2,104,902
1,907,640
417,448
459,926
88,884
164,712
17,783
3,881
25,701
27,903
1,802
1,226
1,596
15,328
447
3,130
273
4,306
3,246
2,240
5,492
5,605
21,620
3,908
46,571
28,350
4,975
7,104
3,375
Acquired non-credit- deteriorated loans and leases
19,258
12,200
109,575
8,418
6,039
19,296
2,111
9,445
4,110
9,084
45,972
3,257
6,915
8,345
3,370
89,603
17,714
26,507
616
16,367
5,400
741
32,501
1,872
40,052
1,672
Total acquired non-credit- deteriorated loans and leases
28,779
39,739
188,051
40,054
53,006
29,313
6,097
115,415
334,657
1,021,051
2,339,524
1,976,044
475,429
496,343
99,287
283,502
At March 31, 2025, 46.2% of the loan and lease portfolio bears interest at fixed rates and 53.8% at floating rates. The expected life of our loan portfolio will differ from contractual maturities because borrowers may have the right to curtail or prepay their loans with or without penalties. Because a portion of the portfolio is accounted for under ASC 326, the carrying value is significantly affected by estimates and it is impracticable to allocate scheduled payments for those loans based on those estimates. Consequently, the tables presented include information limited to contractual maturities of the underlying loans.
Allowance for Credit Losses - Loans and Leases
The ACL is determined by us on a quarterly basis, although we are engaged in monitoring the appropriate level of the allowance on a more frequent basis. The ACL reflects management’s estimate of current expected credit losses inherent in the loan and lease portfolios. The computation includes elements of judgment and high levels of subjectivity.
Factors considered by us include, but are not limited to, actual loss experience, peer loss experience, changes in size and risk profile of the portfolio, identification of individual problem loan and lease situations that may affect a borrower’s ability to repay, application of a
reasonable and supportable forecast, and evaluation of the prevailing economic conditions. Changes in conditions may necessitate revision of the estimate in future periods.
We assess the ACL based on three categories: (i) originated loans and leases, (ii) acquired non-credit-deteriorated loans and leases, and (iii) purchased credit deteriorated loans.
Total ACL was $100.4 million at March 31, 2025 compared to $98.0 million at December 31, 2024, an increase of $2.4 million, or 2.5%. The increase was primarily due to growth in the loan and lease portfolio and higher allowance on commercial and industrial loans. Total ACL to total loans and leases held for investment, net before ACL, was 1.43% and 1.42% of total loans and leases at March 31, 2025 and December 31, 2024, respectively. As of March 31, 2025, approximately $40.3 million of the ACL was allocated to the unguaranteed portion of SBA 7(a) and USDA loans.
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The following tables present an analysis of the allowance credit losses - loans and leases for the periods presented (dollars in thousands):
ResidentialRealEstate
Construction,LandDevelopment,and OtherLand
CommercialandIndustrial
Balance at December 31, 2024
Provision/(recapture) for PCD loans
117
(25
(20
69
Provision/(recapture) for acquired non-credit-deteriorated loans
(53
(30
250
Provision/(recapture) for originated loans
(38
235
6,698
8,841
Total provision/(recapture)
Charge-offs for PCD loans
Charge-offs for acquired non-credit deteriorated loans
(10
(65
Charge-offs for originated loans
(1,609
(5,316
(7,571
Total charge-offs
Recoveries for PCD loans
Recoveries for acquired non-credit deteriorated loans
Recoveries for originated loans
Total recoveries
Net (charge-offs) recoveries
(1,465
(4,638
(527
(6,644
Balance at March 31, 2025
Ending ACL Balances
PCD loans
3,494
4,250
Acquired non-credit-deteriorated loans
1,553
389
567
3,485
Originated loans
22,747
1,977
2,360
57,366
92,685
Loans individually evaluated for impairment
Loans collectively evaluated for impairment
Loans and leases ending balance
Total loans and leases at March 31, 2025, gross
Ratio of net charge-offs to average loans outstanding during the year
0.00
0.08
0.27
0.03
0.38
Loans ending balance as a percentage of total loans, gross
0.40
0.58
33.36
10.33
6.85
38.20
10.23
99.00
33.76
10.35
38.78
100.00
Balance at December 31, 2023
Provision/(recapture) for acquired impaired loans
629
(61
(347
196
Provision/(recapture) for acquired non-impaired loans and leases
(44
(68
Provision for originated loans
239
(126
6,225
360
6,763
Total provision
Charge-offs for acquired impaired loans
(74
Charge-offs for acquired non-impaired loans and leases
(58
Charge-offs for originated loans and leases
(2,983
(3,561
(6,917
Recoveries for acquired impaired loans
Recoveries for acquired non-impaired loans and leases
Recoveries for originated loans and leases
432
834
(2,621
(3,387
(204
(6,211
Balance at March 31, 2024
7,392
877
1,722
10,142
2,026
639
624
1,310
4,602
22,022
1,832
2,156
53,199
8,383
87,622
Total loans and leases at March 31, 2024, gross
Ratio of net charge-offs to average loans and leases outstanding during the period (annualized)
0.16
0.21
Loans and leases ending balance as a percentage of total loans and leases, gross
0.50
32.77
10.76
7.80
37.16
10.21
98.75
33.47
10.81
37.66
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Non-Performing Assets
Non-performing loans and leases include loans and leases 90 days past due and still accruing and loans and leases accounted for on a non-accrual basis. Non-performing assets consist of non-performing loans and leases plus other real estate owned. Non-performing assets at March 31, 2025 and December 31, 2024 totaled $59.9 million and $67.2 million, with the decrease driven mainly by decreases to non-accrual loans and leases mainly due to charge-offs and resolutions. The U.S. government guaranteed portion of non-performing loans totaled $9.4 million at March 31, 2025 and $9.9 million at December 31, 2024.
Total OREO increased from $5.2 million at December 31, 2024 to $6.2 million at March 31, 2025. The increase in OREO resulted from new properties transferred to OREO.
The following table sets forth the amounts of non-performing loans and leases, non-performing assets, and OREO as of the dates presented (dollars in thousands):
Non-performing assets:
Non-accrual loans and leases(1)(2)
Past due loans and leases 90 days or more and still accruing interest
Total non-performing loans and leases
Total non-performing assets
59,868
67,246
Total non-performing loans and leases as a percentage of total loans and leases
0.90
Total non-accrual loans and leases as a percentage of total loans and leases
Total non-performing assets as a percentage of total assets
0.71
Allowance for credit losses - loans and leases, as a percentage of non-performing loans and leases
187.28
157.85
Allowance for credit losses - loans and leases, as a percentage of non-accrual loans and leases
Non-performing assets guaranteed by U.S. government:
Non-accrual loans guaranteed
9,424
9,862
Past due loans 90 days or more and still accruing interest guaranteed
Total non-performing loans guaranteed
Total non-performing loans and leases not guaranteed as a percentage of total loans and leases
0.63
Total non-accrual loans and leases not guaranteed as a percentage of total loans and leases
Total non-performing assets not guaranteed as a percentage of total assets
0.53
0.60
Our loan and lease growth is funded primarily through core deposits. We gather deposits primarily through each of our 45 branch locations in the Chicago metropolitan area and one branch in Wauwatosa, Wisconsin. Through our branch network, online, mobile and direct banking channels, we offer a variety of deposit products including demand deposit accounts, interest-bearing products, savings accounts, and certificates of deposit. We offer competitive online, mobile, and direct banking channels. Small businesses are a significant source of low cost deposits as they value convenience, flexibility, and access to local decision makers that are responsive to their needs.
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Total deposits at March 31, 2025 were $7.6 billion, representing an increase of $94.7 million, or 1.3%, compared to $7.5 billion at December 31, 2024, driven by an increase in interest-bearing checking accounts and money market demand accounts. Non-interest-bearing deposits were $1.7 billion, or 22.7% of total deposits at March 31, 2025, a decrease of $40.5 million, or 2.3%, compared to $1.8 billion at December 31, 2024, or 23.5% of total deposits. Core deposits were 86.5% and 85.9% of total deposits at March 31, 2025 and December 31, 2024, respectively.
The following table shows the average balance amounts and the average contractual rates paid on our deposits for the periods presented (dollars in thousands):
For Three Months Ended
AverageBalance
AverageRate
Other Savings
Time deposits (below $100,000)
809,276
4.14
982,090
4.84
Time deposits ($100,000 and above)
1,013,029
4.32
1,010,267
4.72
7,410,179
7,226,321
Our average cost of deposits was 2.30% during the three months ended March 31, 2025, compared to 2.56% for the three months ended March 31, 2024. This decrease was principally attributed to lower rates on time deposits as a result of the changing interest rate environment, an increase in interest bearing deposits and corresponding decrease in non-interest bearing deposits related to deposit flows. The ratio of our average non-interest bearing deposits to total average deposits was 23.4% during the three months ended March 31, 2025, compared to 25.9% during the three months ended March 31, 2024.
We had $256.1 million in brokered time deposits at March 31, 2025 and $364.8 million at December 31, 2024, which represented 3.4% and 4.9% of total deposits, respectively. The decrease in brokered deposits was due to increases in other sources of funding.
The following table shows time deposits and other time deposits of $250,000 or more by time remaining until maturity as of March 31, 2025 (dollars in thousands):
Less than $250,000
$250,000 or Greater
Uninsured Portion
Three months or less
623,803
188,662
812,465
70,162
Over three months through six months
384,554
123,518
508,072
47,268
Over six months through 12 months
277,566
105,135
382,701
43,635
Over 12 months
40,495
11,281
51,776
3,781
164,846
Total estimated uninsured deposits were $2.3 billion and $2.2 billion as of March 31, 2025 and December 31, 2024. As of March 31, 2025 and December 31, 2024, liquidity coverage of uninsured deposits was approximately 102% and 105%, respectively.
Short Term and Long Term Borrowings
In addition to deposits, we also utilize FHLB advances as a supplementary funding source to finance our operations. The Bank’s advances from the FHLB are collateralized by commercial, residential and multi-family real estate loans and securities. At both March 31, 2025 and December 31, 2024, we had maximum available borrowing capacity from the FHLB of $2.7 billion, subject to the availability of collateral.
At March 31, 2025, the Company had $550.0 million of FHLB advances outstanding with a maturities ranging from April 2025 to June 2025.
On January 17, 2024, the Company entered into a Letter Agreement with the Federal Reserve Bank of Chicago that allows the bank to access the Bank Term Funding Program ("BTFP"). On January 22, 2024, the Company opened an advance of $200.0 million from the FRB as part of the BTFP. Under the terms of the BTFP, the bank pledged securities to FRB Chicago as collateral for available advances. The advance carried a fixed interest rate of 4.91%. Advances under the BTFP were prepayable at any time without a prepayment penalty. On September 19, 2024, we repaid the BTFP advance in full.
The Company has the capacity to borrow funds from the discount window of the Federal Reserve System. There were no borrowings outstanding under the Federal Reserve Bank discount window line as of March 31, 2025 and December 31, 2024. The Company pledges loans as collateral for any borrowings under the Federal Reserve Bank discount window.
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The following table sets forth certain information regarding our short-term borrowings at the dates and for the periods presented (dollars in thousands):
Federal Reserve Bank discount window borrowing:
Average balance outstanding
Maximum outstanding at any month-end period during the year
Balance outstanding at end of period
Weighted average interest rate during period
Weighted average interest rate at end of period
Federal Home Loan Bank advances:
299,889
259,176
470,000
Weighted average interest rate during period(1)
2.04
1.92
5.47
Federal funds purchased:
Bank Term Funding Program:
153,846
4.92
4.91
Term Loan:
2,908
16,685
16,667
6.97
7.77
7.62
Revolving Line of Credit:
5,316
7,500
8.33
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Customer Repurchase Agreements (Sweeps)
Securities sold under agreements to repurchase represent a demand deposit product offered to customers that sweep balances in excess of the FDIC insurance limit into overnight repurchase agreements. We pledge securities as collateral for the repurchase agreements. Securities sold under agreements to repurchase decreased by $3.9 million, from $32.1 million at December 31, 2024 to $28.2 million at March 31, 2025.
Liquidity
We manage liquidity based upon factors that include the amount of core deposits as a percentage of total deposits, the level of diversification of our funding sources, the amount of non-deposit funding used to fund assets, the availability of unused funding sources, off-balance sheet obligations, the availability of assets to be readily converted into cash without undue loss, the amount of cash and liquid securities we hold and the re-pricing characteristics and maturities of our assets when compared to the re-pricing characteristics of our liabilities, the ability to securitize and sell certain pools of assets and other factors.
Our liquidity needs are primarily met by cash and investment securities positions, growth in deposits, cash flow from amortizing loan portfolios, and borrowings from the FHLB. For additional information regarding our operating, investing, and financing cash flows, see Consolidated Statements of Cash Flows in our Unaudited Interim Condensed Consolidated Financial Statements included elsewhere in this report.
As of March 31, 2025, Byline Bank had maximum borrowing capacity from the FHLB of $3.3 billion and $758.6 million from the FRB. As of March 31, 2025, Byline Bank had open FHLB advances of $550.0 million and open letters of credit of $11.4 million. Based on collateral and securities pledged, our available aggregate borrowing capacity at March 31, 2025 was $1.1 billion. In addition, Byline Bank had uncommitted federal funds lines available of $135.0 million available at March 31, 2025.
As of December 31, 2024, Byline Bank had maximum borrowing capacity from the FHLB of $3.3 billion and $792.3 million from the FRB. As of December 31, 2024, Byline Bank had open advances of $575.0 million and open letters of credit of $11.5 million. Based on collateral and securities pledged, our available aggregate borrowing capacity at December 31, 2024 was $1.1 billion. In addition, Byline Bank had an uncommitted federal funds line available of $127.5 million available at December 31, 2024.
The Company is currently party to a revolving credit agreement with a correspondent bank with availability of up to $15.0 million that matures on May 25, 2025. The revolving line of credit bears interest at either SOFR plus 205 basis points or the Prime Rate minus 75 basis points, not to be less than 2.00%, based on the Company’s election, which is required to be communicated at least three business days prior to the commencement of an interest period. If the Company fails to provide timely notification, the interest rate will be Prime Rate minus 75 basis points. At March 31, 2025 and December 31, 2024, the line of credit had a no outstanding balance.
The variable term loan was paid off in January 2025 and at March 31, 2025 had no balance. At December 31, 2024, the variable term loan had an interest rate of 6.83% and an outstanding balance of $11.7 million.
There are regulatory limitations that affect the ability of Byline Bank to pay dividends to the Company. See Note 20 of our Consolidated Financial Statements, included in our Annual Report on Form 10-K for the year ended December 31, 2024 for additional information. Management believes that such limitations will not impact our ability to meet our ongoing short-term cash obligations.
We expect that our cash and liquidity resources will be generated by the operations of Byline Bank, which we expect to be sufficient to satisfy our liquidity and capital requirements for at least the next twelve months.
Capital Resources
Stockholders’ equity at March 31, 2025, increased $39.6 million, or 3.6% and was $1.1 billion compared to December 31, 2024. The increase was primarily driven by increases to retained earnings from net income and a decrease in the unrealized loss on our available-for-sale securities.
The Company and Byline Bank are subject to various regulatory capital requirements administered by federal banking regulators. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by federal banking regulators that, if undertaken, could have a direct material effect on our financial statements.
Under applicable bank regulatory capital requirements, each of the Company and Byline Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. Byline Bank must also meet certain specific capital guidelines under the prompt corrective action framework. The capital amounts and classification are subject to qualitative judgments by the federal banking regulators about components, risk weightings and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Company and Byline Bank to maintain minimum amounts and ratios of CET1 capital, Tier 1 capital and total capital to risk-weighted assets and of Tier 1 capital to average consolidated assets, (referred to as the "leverage ratio"), as defined under these capital requirements.
As of March 31, 2025, Byline Bank exceeded all applicable regulatory capital requirements and was considered "well-capitalized." There have been no conditions or events since March 31, 2025 that management believes have changed Byline Bank’s classifications.
The regulatory capital ratios for the Company and Byline Bank to meet the minimum capital adequacy standards and for Byline Bank to be considered well capitalized under the prompt corrective action framework and the Company’s and Byline Bank’s actual capital amounts and ratios are set forth in the following tables as of the dates presented (dollars in thousands):
Actual
Minimum CapitalRequired
Required to beConsideredWell Capitalized
Ratio
Total capital to risk weighted assets:
Company
1,269,585
683,487
8.00
Bank
1,204,298
14.15
681,060
851,325
10.00
Tier 1 capital to risk weighted assets:
1,093,801
512,615
6.00
1,103,514
12.96
510,795
Common Equity Tier 1 (CET1) to risk weighted assets:
1,006,801
384,461
4.50
383,096
553,361
6.50
Tier 1 capital to average assets:
365,334
12.10
364,837
456,046
5.00
1,242,391
14.74
674,471
1,181,699
14.07
672,045
840,056
1,073,042
12.73
505,853
1,087,350
12.94
504,033
986,042
11.70
379,390
378,025
546,036
11.74
365,470
11.92
364,899
456,124
The ratios above reflect the Company’s election to opt into the regulators’ joint CECL transition provision, which allows the Company to phase in the capital impact of the adoption of CECL over the next three years beginning January 1, 2022. Accordingly, capital ratios as of March 31, 2025 reflect 100% of the CECL impact and December 31, 2024 reflect 75% of the CECL impact.
The Company and Byline Bank must maintain a capital conservation buffer consisting of CET1 capital greater than 2.5% of risk-weighted assets above the required minimum risk-based capital levels in order to avoid limitations on paying dividends, repurchasing shares, and paying discretionary bonuses. The conservation buffers for the Company and Byline Bank exceed the minimum capital requirement as of March 31, 2025.
Provisions of state and federal banking regulations may limit, by statute, the amount of dividends that may be paid to the Company by Byline Bank without prior approval of Byline Bank’s regulatory agencies. The Company is economically dependent on the cash dividends received from Byline Bank. These dividends represent the primary cash flow from operating activities used to service obligations. For the three months ended March 31, 2025 the Company received $15.0 million in cash dividends from Byline Bank, in order to pay the required interest on its outstanding subordinated note, junior subordinated debentures in connection with its trust preferred securities interest, principal and interest payments related to its term note and revolving line of credit, and to fund other Company-related activities. For the year ended December 31, 2024, the Company received $46.0 million in cash dividends from Byline Bank, in order to pay the required interest on its outstanding subordinated note and junior subordinated debentures in connection with its trust preferred securities interest, principal and interest on its term loan and revolving line of credit, and to fund other Company-related activities.
On December 6, 2023, we announced that our Board of Directors approved a new stock repurchase program authorizing the purchase of up to an aggregate of 1,250,000 shares of our outstanding common stock. The program was in effect from January 1, 2024 until December 31, 2024, and we did not purchase any shares of our common stock under the stock repurchase program during 2024.
On December 5, 2024, we announced that our Board of Directors approved a new stock repurchase program authorizing the purchase of up to an aggregate of 1,250,000 shares of our outstanding common stock. The program will be in effect from January 1, 2025 until December 31, 2025, unless terminated earlier. The shares may, at the discretion of management, be repurchased from time to time in open market purchases as market conditions warrant or in privately negotiated transactions. We are not obligated to purchase any shares
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under the program, and the program may be discontinued at any time. The actual timing, number and share price of shares purchased under the repurchase program will be determined by us at our discretion and will depend on a number of factors, including the market price of our stock, general market and economic conditions and applicable legal requirements. The shares authorized to be repurchased represented approximately 2.8% of the Company’s outstanding common stock at December 31, 2024. We purchased 26,000 shares under this program during the three months ended March 31, 2025 for a total cost of $687,000.
Off-Balance Sheet Items and Other Financing Arrangements
We are a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers. These financial instruments include commitments to extend credit, commercial letters of credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Condensed Consolidated Statements of Financial Condition. The contractual or notional amounts of those instruments reflect the extent of involvement we have in particular classes of financial instruments.
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. We evaluate each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by Byline Bank upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral is primarily obtained in the form of commercial and residential real estate (including income producing commercial properties).
Letters of credit are conditional commitments issued by Byline Bank to guarantee the performance of a customer to a third-party. Those guarantees are primarily issued to support public and private borrowing arrangements, bond financing and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.
Our exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments. We use the same credit policies in making commitments and conditional obligations as for funded instruments. We do not anticipate any material losses as a result of the commitments and standby letters of credit.
We enter into interest rate swaps that are used to manage differences in the amount, timing, and duration of our known or expected cash receipts and its known or expected cash payments principally related to certain variable rate loans, money market accounts and variable rate borrowings. We also enter into interest rate swaps with certain qualified borrowers to facilitate the borrowers’ risk management strategies and concurrently entered into mirror-image derivatives with a third party counterparty.
We recognize derivative financial instruments at fair value regardless of the purpose or intent for holding the instrument. We record derivative assets and derivative liabilities on the Condensed Consolidated Statements of Financial Condition within accrued interest receivable and other assets, and accrued interest payable and other liabilities, respectively. Because the derivative assets and liabilities recorded on the balance sheet at March 31, 2025 do not represent the amounts that may ultimately be paid under these contracts, these assets and liabilities are listed in the table below (dollars in thousands):
Notional
Asset
Liability
See Note 16 of our Unaudited Interim Condensed Consolidated Financial Statements as of March 31, 2025, included in this report, and Note 21 of our Consolidated Financial Statements, included in our Annual Report on Form 10-K for the year ended December 31, 2024 for additional information on derivatives.
GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures
Some of the financial measures included in our "Selected Financial Data" are not measures of financial performance in accordance with GAAP. Our management uses the non‑GAAP financial measures set forth below in its analysis of our performance:
We believe that these non‑GAAP financial measures provide useful information to its management and investors that is supplementary to our financial condition, results of operations and cash flows computed in accordance with GAAP; however, we acknowledge that our non‑GAAP financial measures have a number of limitations. As such, you should not view these disclosures 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.
Reconciliations of Non-GAAP Financial Measures
As of or For the Three Months Ended March 31,
(dollars in thousands, except per share data)
Net income and earnings per share excluding significant items
Reported Net Income
Significant items:
Impairment charges on ROU asset
Merger-related expense
637
Tax benefit
(134
Adjusted Net Income
28,751
30,582
Reported Diluted Earnings per Share
Adjusted Diluted Earnings per Share
70
Adjusted non-interest expense:
Non-interest expense
Less: Impairment charges on ROU asset
Less: Merger-related expenses
Adjusted non-interest expense
55,792
53,615
Adjusted non-interest expense excluding amortization of intangible assets:
Less: Amortization of intangible assets
Adjusted non-interest expense excluding amortization of intangible assets
54,674
52,270
Pre-tax pre-provision net income:
Pre-tax income
Add: Provision for credit losses
Pre-tax pre-provision net income
46,651
47,205
Adjusted pre-tax pre-provision net income:
Merger-related expenses
Adjusted pre-tax pre-provision net income
47,288
47,399
Taxable equivalent net interest income:
Add: Tax-equivalent adjustment
Total revenues:
Add: non-interest income
Total revenues
Tangible common stockholders' equity:
Total stockholders' equity
Less: Goodwill and other intangibles
202,133
Tangible common stockholders' equity
934,098
806,916
Tangible assets:
Tangible assets
9,387,752
9,208,370
Average tangible common stockholders' equity:
Average total stockholders' equity
Less: Average goodwill and other intangibles
197,514
202,773
Average tangible common stockholders' equity
912,654
796,033
Average tangible assets:
Average total assets
Average tangible assets
8,989,251
8,828,168
Tangible net income available to common stockholders:
Net income available to common stockholders
Add: After-tax intangible asset amortization
826
Tangible net income available to common stockholders
29,074
31,426
Adjusted tangible net income available to common stockholders:
Tax benefit on significant items
Adjusted tangible net income available to common stockholders
29,577
31,568
Pre-tax pre-provision return on average assets:
Pre-tax pre-provision return on average assets
Adjusted pre-tax pre-provision return on average assets:
Net interest margin, fully taxable equivalent
Total average interest-earning assets
Non-interest income to total revenues:
Non-interest income
Non-interest income to total revenues
Adjusted non-interest expense to average assets:
Adjusted non-interest expense to average assets
Adjusted efficiency ratio:
Adjusted efficiency ratio
Adjusted return on average assets:
Adjusted net income
Adjusted return on average assets
Adjusted return on average stockholders' equity:
Average stockholders' equity
Adjusted return on average stockholders' equity
Tangible common equity to tangible assets:
Tangible common equity
Tangible common equity to tangible assets
Return on average tangible common stockholders' equity:
Return on average tangible common stockholders' equity
Adjusted return on average tangible common stockholders' equity:
Adjusted return on average tangible common stockholders' equity
Tangible book value per share:
Tangible book value per share
72
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Our primary market risk is interest rate risk, which is defined as the risk of loss of net interest income or net interest margin because of changes in interest rates.
We seek to measure and manage the potential impact of interest rate risk. Interest rate risk occurs when interest-earning assets and interest-bearing liabilities mature or re-price at different times, on a different basis or in unequal amounts. Interest rate risk also arises when our assets, liabilities and off-balance sheet contracts each respond differently to changes in interest rates, including as a result of explicit and implicit provisions in agreements related to such assets and liabilities and in off-balance sheet contracts that alter the applicable interest rate and cash flow characteristics as interest rates change.
We are also exposed to interest rate risk through the retained portion of the U.S. government guaranteed loans we make and the related servicing rights. Our U.S. government guaranteed loan portfolio is comprised primarily of SBA 7(a) loans, virtually all of which are quarterly or monthly adjustable with the prime rate. The SBA portfolio reacts differently in a rising rate environment than our other non-guaranteed portfolios. Generally, when interest rates rise, the prepayments in the SBA portfolio tend to increase.
Our management of interest rate risk is overseen by our Board of Directors and management asset liability committees based on a risk management infrastructure approved by our Board of Directors that outline reporting and measurement requirements. Our risk management infrastructure also requires a periodic review of all key assumptions used, such as identifying appropriate interest rate scenarios, setting loan prepayment rates based on historical analysis, non-interest-bearing and interest-bearing demand deposit decay rate assumptions, liability repricing beta based on historical analysis and the targeted investment term of capital. The committees closely monitor our interest sensitivity exposure, asset and liability allocation decisions, liquidity and capital positions, and local and national economic conditions and attempts to structure the loan and investment portfolios and funding sources to maximize earnings within acceptable risk tolerances.
We manage the interest rate risk associated with our interest-bearing liabilities by managing the interest rates and tenors associated with our borrowings from the FHLB, our other borrowings, and deposits from our customers that we rely on for funding. We manage the interest rate risk associated with our interest-earning assets by managing the interest rates and tenors associated with our investment and loan portfolios, from time to time purchasing and selling investment securities.
We utilize interest rate derivatives to hedge our interest rate exposure on commercial loans when it meets our customers’ and Byline Bank’s needs. As of March 31, 2025, we had a notional amount of $1.6 billion of interest rate derivatives outstanding that includes customer derivatives and those on Byline Bank's balance sheet. The overall effectiveness of our hedging strategies is subject to market conditions, the quality of our execution, the accuracy of our valuation assumptions, the associated counterparty credit risk and changes in interest rates.
We do not engage in speculative trading activities relating to interest rates, foreign exchange rates, commodity prices, equities or credit.
Evaluation of Interest Rate Risk
We evaluate interest rate risk through the use of two different models: net interest income ("NII") simulations and economic value of equity ("EVE") simulations. The simulations provide an estimate of the impact of changes in interest rates on equity and net interest income based on a variety of assumptions. Changes in assumptions may significantly alter the results of our simulations.
We use an NII simulation model to measure and evaluate potential changes in our net interest income. We run various hypothetical interest rate scenarios at least quarterly and compare these results against a scenario with no changes in interest rates. Our NII simulation model incorporates various assumptions, which we believe are reasonable but which may have a significant impact on results such as: (1) asset prepayment speed assumptions, (2) predefined credit spreads for both investment securities and loans, (3) re-pricing characteristics for market-rate-sensitive instruments on and off balance sheet, and (4) the effect of interest rate limitations in our assets, such as floors and caps. Because of limitations inherent in any approach used to measure interest rate risk, simulation results are not intended as a forecast of the actual effect of a change in market interest rates on our results but rather as a means to better plan and execute appropriate asset-liability management strategies and manage our interest rate risk.
We use an EVE simulation to analyze the Company's long-term view of interest rate risk as it analyzes the Company's future cash flows. EVE is defined as the present value of the Company's assets, less the present value of its liabilities, adjusted for off-balance sheet items, with the results showing a theoretical change in the economic value of stockholders' equity as interest rates change. Our EVE simulation model incorporates various assumptions, which we believe are reasonable but which may have a significant impact on results such as: (1) asset prepayment speed assumptions, (2) deposit decay rate assumptions, (3) predefined credit spreads for both investment securities and loans (4) re-pricing characteristics for market-rate-sensitive instruments on and off balance sheet, (5) amortization schedule, and (6) discount rates associated with the products on balance sheet.
Potential changes to our net interest income and economic value of equity in hypothetical rising and declining interest rate scenarios calculated as of March 31, 2025 are presented below.
Estimated Increase/Decrease in Net Interest Income(1)
Estimated PercentageChange in EVE
Year ending March 31,
As of
Basis Point Change in Interest Rates
+300
8.4%
13.1%
(15.5)%
+200
6.3%
9.4%
(9.9)%
+100
3.5%
5.0%
(4.7)%
-100
(2.4)%
(4.3)%
4.3%
-200
(4.8)%
(8.8)%
7.7%
-300
(5.4)%
(11.6)%
8.9%
(1) Does not include the impact of the acquisition of First Security
We also conduct NII simulations that incorporate a dynamic balance sheet and ramp rate shock scenarios. The balance sheet reflects management’s growth expectations, while interest rates are modeled using an implied forward yield curve, reflecting market expectations of future rate movements. Ramp rate shocks are applied gradually, shifting up or down by 1/12th of the total change each month over the first 12 months. Under these scenarios, a gradual 100 and 200 basis point downward ramp rate shock would decrease NII by 2.3% and 4.4%, respectively, over the next 12 months. Conversely, a gradual 100 and 200 basis point upward ramp rate shock would increase NII by 2.8% and 5.7%, respectively, over the same period.
The Bank's aggregate interest rate risk exposure is monitored and managed based on the economic outlook and under guidance of board-approved policy limits. The results of the simulations are hypothetical, and a variety of factors might cause actual results to differ substantially from what is depicted, including: the timing, magnitude, and frequency of interest rate changes, changes in market conditions, depositor behavior changes, and management strategies.
Item 4. Controls and Procedures.
The Company’s management, including our Chief Executive Officer and our Chief Financial Officer, have evaluated the effectiveness of our "disclosure controls and procedures" (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")), as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of March 31, 2025, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and is accumulated and communicated to the Company’s management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting during the quarter ended March 31, 2025, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
The design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
PART II-OTHER INFORMATION
Item 1. Legal Proceedings.
We operate in a highly regulated environment. From time to time we are a party to various litigation matters incidental to the conduct of our business. We are not presently party to any legal proceedings the resolution of which we believe would have a material adverse effect on our business, prospects, financial condition, liquidity, results of operation, cash flows or capital levels.
Item 1A. Risk Factors.
There have been no material changes to the risk factors previously disclosed in the "Risk Factors" section included in our Form 10-K for our fiscal year ended December 31, 2024 that was filed with the SEC on February 28, 2025.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On December 5, 2024, we announced that our Board of Directors approved a new stock repurchase program authorizing the purchase of up to an aggregate of 1,250,000 shares of our outstanding common stock. The program will be in effect from January 1, 2025 until December 31, 2025, unless terminated earlier. The shares may, at the discretion of management, be repurchased from time to time in open market purchases as market conditions warrant or in privately negotiated transactions. We are not obligated to purchase any shares under the program, and the program may be discontinued at any time. The actual timing, number and share price of shares purchased under the repurchase program will be determined by us at our discretion and will depend on a number of factors, including the market price of our stock, general market and economic conditions and applicable legal requirements.
The table below includes information regarding purchases of our common stock during the quarter ended March 31, 2025.
Issuer Purchases of Equity Securities
Maximum Number of
Average
Total Number of Shares
Shares that
Number of
Price
Purchased as Part of a
May Yet Be
Paid per
Publicly Announced
Purchased Under the
Purchased(1)
Share
Plan or Program
January 1 - January 31, 2025
398
28.68
1,250,000
February 1 - February 28, 2025
98,449
28.91
March 1 - March 31, 2025
26,000
26.41
1,224,000
124,847
28.39
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Item 6. Exhibits.
EXHIBIT
Number
Description
3.1
Amended and Restated Certificate of Incorporation (filed as Exhibit 3.1 to the Company’s Registration Statement on Form S-1, as amended (File No. 333-218362) filed on June 19, 2017 and incorporated herein by reference)
3.2
Amended and Restated Bylaws (filed as Exhibit 3.2 to the Company’s Registration Statement on Form S-1, as amended (File No. 333-218362) filed on June 19, 2017 and incorporated herein by reference)
4.1
Certain instruments defining the rights of holders of long-term debt securities of the registrant and its subsidiaries are omitted pursuant to Item 601(b)(4)(iii) of Regulation S-K. The registrant hereby undertakes to furnish to the SEC, upon request, copies of any such instruments.
31.1
Certification of the Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, and Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certification of the Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, and Section 302 of the Sarbanes-Oxley Act of 2002
32.1(a)
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Financial information from the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2025, formatted in Inline XBRL interactive data files pursuant to Rule 405 of Regulation S-T: (i) Condensed Consolidated Statements of Condition; (ii) Condensed Consolidated Statements of Operations; (iii) Condensed Consolidated Statements of Comprehensive Income (Loss); (iv) Condensed Consolidated Statements of Changes in Stockholders’ Equity; (v) Condensed Consolidated Statements of Cash Flows; and (vi) Notes to Condensed Consolidated Financial Statements
104
Cover Page Interactive Data File – the cover page XBRL tags are embedded with the Inline XBRL document.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: May 2, 2025
By:
/s/
Roberto R. Herencia
Chief Executive Officer
(Principal Executive Officer)
Thomas J. Bell III
Executive Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)
77