News Details

First Quarter 2019 Highlights

• Net income of $12.6 million, or $0.34 per diluted share
  • Adjusted net income¹ of $14.0 million, or $0.38 per adjusted diluted share
• Net interest margin of 4.43% for the first quarter of 2019, compared to 4.69% for the fourth quarter of 2018, and 4.45% for the first quarter of 2018
  • Net interest margin, excluding accretion income,¹ of 3.97% for the first quarter of 2019, compared to 4.13% for the fourth quarter of 2018, and 4.14% for the first quarter of 2018
• Originated loans and leases grew to $2.5 billion at March 31, 2019, an increase of $249.7 million, or 11.2%, from December 31, 2018
• Efficiency ratio of 62.68% for the first quarter of 2019, compared to 56.63% for the fourth quarter of 2018, and 68.83% for the first quarter of 2018
  • Adjusted efficiency ratio¹ of 59.55% for the first quarter of 2019, compared to 54.76% for the fourth quarter of 2018, and 68.55% for the first quarter of 2018
• Return on average assets of 1.03% for the first quarter of 2019, compared to 1.39% for the fourth quarter of 2018, and 0.82% for the first quarter of 2018
• Return on average stockholders’ equity of 7.75% for the first quarter of 2019, compared to 10.61% for the fourth quarter of 2018, and 5.97% for the first quarter of 2018
• Reached $5.0 billion in total assets for the first time in franchise history

CHICAGO--(BUSINESS WIRE)-- Byline Bancorp, Inc. (the “Company” or “Byline”)(NYSE: BY), the parent company of Byline Bank (the “Bank”), today reported net income of $12.6 million, or $0.34 per diluted share, for the first quarter of 2019, compared with net income of $17.1 million, or $0.46 per diluted share, for the fourth quarter of 2018, and net income of $6.8 million, or $0.22 per diluted share, for the first quarter of 2018. The Company’s financial results include certain costs associated with its integration of First Evanston Bancorp, Inc. (“First Evanston”) and its bank subsidiary First Bank & Trust, and its pending acquisition of Oak Park River Forest Bankshares, Inc. Excluding these merger-related expenses, core system conversion expenses, and impairment charges on assets held for sale, adjusted net income¹ was $14.0 million, or $0.38 per adjusted diluted share, for the first quarter of 2019, compared with $18.1 million, or $0.49 per adjusted diluted share, for the fourth quarter of 2018, and $6.1 million, or $0.21 per adjusted diluted share, for the first quarter of 2018. A reconciliation of adjusted net income and adjusted diluted earnings per share to net income and diluted earnings per share, respectively, according to accounting principles generally accepted in the United States of America (“GAAP”) is provided in the financial tables at the end of this release.

Alberto J. Paracchini, President and Chief Executive Officer of Byline, commented, “We are pleased to report another quarter of strong results driven by solid organic growth, stable asset quality and operating performance despite challenges in the operating environment.

“During the quarter, and thanks to our bankers and team members, we continued to experience healthy growth in our loan and deposit portfolio and eclipsed $5.0 billion in total assets. We also successfully completed a core system conversion during the quarter, an important milestone, which reflects positively on the hard work and dedication of our employees.

“We remain focused on executing our strategy of pursuing disciplined organic growth in 2019. We believe our pending acquisition of Oak Park River Forest Bankshares, Inc. will enhance our position in an attractive Chicago metropolitan market, provide an important source of low-cost deposits, and further enhance the value of the Byline franchise. Oak Park River Forest recently received its stockholders’ approval for the transaction, which we expect to close this quarter. Completing the acquisition and ensuring a smooth transition for customers and colleagues is a top priority for the remainder of 2019,” said Mr. Paracchini.

STATEMENTS OF OPERATIONS

Net Interest Income

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

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

Net interest income for the first quarter of 2019 was $50.1 million, a decrease of $3.2 million, or 6.0%, from $53.3 million for the fourth quarter of 2018.

The decrease in net interest income was primarily due to:

• A decrease of $2.3 million in interest and fees on loans and leases, primarily due to a $1.2 million decrease in accretion income and lower day count, partially offset by growth in loan originations;
• An increase of $961,000 in interest expense on deposits, primarily due to certificate of deposits promotions during the quarter to expand our Retail customer base; and
• An increase of $380,000 in interest expense on Federal Home Loan Bank advances, primarily due to an increase in average advances outstanding during the quarter.

Partially offset by:

• An increase of $413,000 in interest income on securities, primarily due to additional purchases during the first quarter of 2019.

Net interest margin for the first quarter of 2019 was 4.43%, a decrease of 26 basis points compared to 4.69% for the fourth quarter of 2018. Total net accretion income on acquired loans contributed 46 basis points to the net interest margin for the first quarter of 2019 compared to 56 basis points for the fourth quarter of 2018, a decrease of 10 basis points. Net interest margin excluding loan accretion decreased 16 basis points to 3.97% during the first quarter of 2019, compared to 4.13% for the fourth quarter of 2018.

The average cost of total deposits was 0.87% for the first quarter of 2019, an increase of 12 basis points compared to the fourth quarter of 2018, primarily due to increased rates on interest-bearing deposits. Additionally, there was growth in average time deposits of $65.1 million, partially offset by decreases in average money market accounts of $40.1 million, average interest checking of $15.8 million, and average savings of $18.3 million.

Provision for Loan and Lease Losses

The provision for loan and lease losses was $4.0 million for the first quarter of 2019, an increase of $117,000 compared to $3.9 million for the fourth quarter of 2018. The first quarter provision included allocations of $2.0 million for originated loans and leases, $1.6 million for acquired non-impaired loans, and $354,000 for acquired impaired loans. The increased provision during the first quarter of 2019 was primarily due to increases in the general reserves driven by newly originated loans and renewals of acquired non-impaired loans that are now reflected with originated loans, and specific impairments in the unguaranteed balance of the U.S. government guaranteed portfolio.

Non-interest Income

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

Non-interest income for the first quarter of 2019 was $12.0 million, a decrease of $2.3 million compared to $14.3 million for the fourth quarter of 2018.

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

• A decrease of $3.1 million in net gains on sales of loans, primarily due to a decrease in government guaranteed loan sales;
• A decrease of $551,000 in other non-interest income, primarily due to property tax adjustments in our leasing portfolio and a decrease in swap fee income; and
• A decrease of $293,000 in ATM and interchange fees, primarily due to reduced transactional account volume during the quarter.

Partially offset by:

• A reduction of $1.6 million in loan servicing asset revaluation, primarily due to the change in fair value of the servicing asset as a result of decreased prepayment rates; and
• An increase in the fair value of equity securities, net of $499,000 due to the adoption of new accounting guidance in the first quarter of 2019. Following the adoption, beginning in the current quarter we reflect changes in the fair value of certain equity investments in the Consolidated Statements of Operations.

During the first quarter of 2019, the Company sold $66.2 million of U.S. government guaranteed loans compared to $87.4 million during the fourth quarter of 2018, contributing to the decrease in net gains on sale of loans for the quarter. The decrease in sales is primarily due to the timing of loans closed becoming fully funded and the mix of loans sold. The fourth quarter of 2018 includes sales of $30.1 million of USDA loans while the first quarter of 2019 included $479,000.

Non-interest Expense

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

Non-interest expense for the first quarter of 2019 was $40.7 million, an increase of $591,000, or 1.5%, from $40.1 million for the fourth quarter of 2018.

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

• An increase of $1.3 million in salaries and employee benefits, primarily due to higher payroll taxes and costs associated with our core system conversion, primarily training;
• An increase of $427,000 in data processing expense, primarily due to a final contract termination expense incurred during the first quarter related to the Bank’s successful core system conversion; and
• An increase of $253,000 in occupancy expense, net, primarily due to costs associated with seasonal weather fluctuations in the Chicagoland area.

Partially offset by:

• A decrease of $680,000 in legal, audit and other professional fees, primarily due to professional services incurred in the fourth quarter of 2018 related to the acquisition of Oak Park River Forest Bankshares, Inc. and our successful core system conversion;
• A decrease of $646,000 in loan and lease related expenses, primarily due to decreased broker fee expenses associated with U.S. government guaranteed loan sales due to decreased loan sales; and
• A decrease of $521,000 in regulatory assessments, primarily due to an FDIC credit.

The Company’s efficiency ratio was 62.68% for the first quarter of 2019, compared with 56.63% for the fourth quarter of 2018. Excluding merger-related expenses, core system conversion expenses, and impairment charges on assets held for sale, the Company’s adjusted efficiency ratio¹ was 59.55% for the first quarter of 2019, compared with 54.76% for the fourth quarter of 2018.

INCOME TAXES

The Company recorded income tax expense of $4.8 million during the first quarter of 2019, an effective tax rate of 27.6%, compared to $6.5 million during the fourth quarter of 2018, an effective tax rate of 27.4%, a decrease of $1.7 million. The decrease was primarily due to the decrease in net income recorded during the quarter.

STATEMENTS OF FINANCIAL CONDITION

Total assets were $5.0 billion at March 31, 2019, an increase of $67.4 million compared to $4.9 billion at December 31, 2018, and an increase of $1.5 billion compared to $3.5 billion at March 31, 2018.

The current quarter increase was primarily due to:

• An increase in loans and leases of $65.9 million, primarily due to an increase of $249.7 million in our originated loan portfolio, partially offset by a decrease of $183.8 million in our acquired loan portfolio;
• An increase in securities of $59.3 million, primarily due to additional purchases of treasury, agency, mortgage-backed, and corporate securities during the quarter. Additionally, upon adoption of new accounting guidance in the first quarter of 2019, we elected to reclassify $94.8 million of securities held-to-maturity to securities available-for-sale, which did not impact the Consolidated Statements of Operations or regulatory capital ratios; and
• An increase in due from counterparty of $15.4 million due to the timing of the settlement of loans sold at March 31, 2019.

Partially offset by:

• A decrease in interest bearing deposits with other banks of $59.7 million, primarily due to a lower reserve requirement;
• A decrease in loans held for sale of $19.3 million, primarily due to the government shutdown and the timing of loan closings at March 31, 2019; and
• A decrease in deferred tax assets, net of $5.1 million, primarily due to a decrease in deferred tax assets associated with unrealized losses on available-for-sale securities and utilization of operating loss carryforwards during the first quarter of 2019.

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

ASSET QUALITY

Non-Performing Assets

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

Variances in non-performing assets:

• Non-performing loans and leases were $30.5 million at March 31, 2019, an increase of $2.9 million from $27.6 million at December 31, 2018; and
• Other real estate owned was $4.8 million at March 31, 2019, a decrease of $515,000 from $5.3 million at December 31, 2018, primarily due to properties sold during the first quarter of 2019.

Non-performing assets included $5.1 million of U.S. government guaranteed balances at March 31, 2019 and $4.6 million at December 31, 2018, an increase of $444,000 primarily due to additional non-accrual loans.

Allowance for Loan and Lease Losses

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

The allowance for loan and lease losses as a percentage of total loans and leases held for investment decreased from 0.77% at March 31, 2018, and increased from 0.72% at December 31, 2018, compared to 0.76% at March 31, 2019.

Net Charge-Offs

Net charge-offs during the first quarter of 2019 were $2.1 million, or 0.24% of average loans and leases, on an annualized basis, consistent with $2.1 million, or 0.24% of average loans and leases, during the fourth quarter of 2018, and a decrease from $4.2 million, or 0.75%, for the comparable quarter one year ago. This decrease was primarily due to a charge-off related to one commercial loan relationship.

Net charge-offs for the first quarter of 2019 included $1.7 million in the unguaranteed portion of U.S. government guaranteed loans while net charge-offs for the fourth quarter of 2018 included $1.8 million in the unguaranteed portion of U.S. government guaranteed loans.

Deposits and Other Liabilities

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

Total deposits were $3.8 billion at March 31, 2019, an increase of $58.6 million compared to December 31, 2018, primarily due to time deposit promotions. Non-interest-bearing deposits to total deposits decreased slightly from 31.8% at December 31, 2018 to 30.5% at March 31, 2019.

The increase in the current quarter was primarily due to:

• An increase in time deposits of $115.8 million, to $1.3 billion at March 31, 2019, primarily driven by promotional campaigns to expand our Retail customer base; and
• An increase in interest-bearing checking deposits of $9.1 million, from $296.3 million at December 31, 2018 to $305.4 million at March 31, 2019, primarily driven by an increase in public funds.

Partially offset by:

• A decrease in non-interest-bearing demand deposits of $29.6 million, to $1.2 billion at March 31, 2019, primarily driven by escrow payments to Cook County property taxes; and
• A decrease in money market demand deposits of $28.8 million, from $640.4 million at December 31, 2018 to $611.6 million at March 31, 2019, primarily driven by a $40.3 million decrease in public funds.

Total borrowings and other liabilities were $532.7 million at March 31, 2019, a decrease of $9.3 million from $542.0 million at December 31, 2018, primarily due to a decrease in accrued expenses and other liabilities.

Stockholders’ Equity

Total stockholders’ equity was $668.7 million at March 31, 2019, an increase of $18.1 million from $650.7 million at December 31, 2018, primarily due to net income generated during the quarter. Stockholders’ equity increased $205.8 million from $462.9 million at March 31, 2018, primarily due to the $152.1 million in stock consideration issued in connection with the First Evanston acquisition.

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

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

Conference Call, Webcast and Slide Presentation

The Company will host a conference call and webcast at 9:00 a.m. Central Time (10:00 a.m. Eastern Time) on Friday, April 26, 2019 to discuss its quarterly financial results. Analysts and investors may participate in the question-and-answer session. The call can be accessed via telephone at (877) 512-8755. A recorded replay can be accessed through May 10, 2019 by dialing (877) 344-7529; passcode: 10130060.

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

About Byline Bancorp, Inc.

Headquartered in Chicago, Byline Bancorp, Inc. is the parent company for Byline Bank, a full service commercial bank serving small- and medium-sized businesses, financial sponsors, and consumers. Byline Bank has approximately $5.0 billion in assets and operates more than 50 full service branch locations throughout the Chicago and Milwaukee metropolitan areas. Byline Bank offers a broad range of commercial and retail banking products and services including small ticket equipment leasing solutions and is one of the top 10 Small Business Administration lenders in the United States.

Non-GAAP Financial Measures

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

Forward-Looking Statements

This communication contains forward-looking statements within the meaning of the U.S. federal securities laws. Forward-looking statements include, without limitation, statements concerning plans, estimates, calculations, forecasts and projections with respect to the anticipated future performance of the Company. These statements are often, but not always, made through the use of words or phrases such as “may”, “might”, “should”, “could”, “predict”, “potential”, “believe”, “expect”, “continue”, “will”, “anticipate”, “seek”, “estimate”, “intend”, “plan”, “projection”, “would”, “annualized”, “target” and “outlook”, or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. Forward-looking statements involve estimates and known and unknown risks, and reflect various assumptions and involve elements of subjective judgement and analysis, which may or may not prove to be correct, and which are subject to uncertainties and contingencies outside the control of Byline and its respective affiliates, directors, employees and other representatives, which could cause actual results to differ materially from those presented in this communication. No representations, warranties or guarantees are or will be made by Byline as to the reliability, accuracy or completeness of any forward-looking statements contained in this communication or that such forward-looking statements are or will remain based on reasonable assumptions. You should not place undue reliance on any forward-looking statements contained in this communication.

In addition, this communication contains forward-looking statements related to the pending merger of Byline and Oak Park River Forest Bankshares, Inc., including, but not limited to, with respect to the expected completion date, financial benefits and other effects of the transaction. Factors that could cause actual results to differ materially from those presented in this communication regarding the pending merger may include, but are not limited to, the reaction to the transaction of the companies’ customers, employees, and counterparties; customer disintermediation; inflation; expected synergies, cost savings, and other financial benefits of the proposed transaction might not be realized within the expected timeframes or might be less than projected; credit and interest rate risks associated with Byline’s and Oak Park River Forest Bankshares, Inc.’s respective businesses, customers, borrowings, repayment, investment, and deposit practices; general economic conditions, either nationally or in the market areas in which Byline and Oak Park River Forest Bankshares, Inc. operate or anticipate doing business, are less favorable than expected; new regulatory or legal requirements or obligations, and other risks.

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