Byline Bancorp achieves $37 million net income, 12 consecutive quarters of strong performance amid macroeconomic challenges and prepares for future growth opportunities.

Carly - Operator - (00:01:21)

Good morning and welcome to the Byline Bancorp third quarter 2025 earnings call. My name is Carly and I'll be the conference operator for the all lines have been placed on mute on mute to prevent any background noise. After the speaker's remarks, there'll be a question answer period. If you'd like to ask a question during that period, simply press the STAR button followed by one on your telephone keypad. If you'd like to withdraw your question, please press Star and two if you're listening via speakerphone, please ensure you lift the handset prior to asking a question. If you require operator assistance throughout the call, please press STAR and zero. Please note this conference call is being recorded at this time. I'd like to introduce Brooks Rennie, Head of Investor Relations at Byline Bancorp to.

Brooks Rennie - Head of Investor Relations - (00:01:59)

Thank you Carly Good morning everyone and thank you for joining us today for the Byline Bancorp third quarter 2025 earnings call. In accordance with Regulation FD, this call is being recorded and is available via webcast, our investor relations website, along with our earnings release and the corresponding presentation slides. As part of today's call, management may make certain statements that constitute projections, beliefs or other forward looking statements regarding future events or the future financial performance of the company. We caution that such statements are subject to certain risks, uncertainties and other factors that could cause actual results to differ materially from those discussed. The Company's risk factors are disclosed and discussed in SEC filings. In addition, our remarks and slides may reference or contain certain non GAAP financial measures which are intended to supplement but not substitute for the most directly comparable GAAP measures. Reconciliation of each non GAAP financial measures to the comparable GAAP financial measure can be found within the appendix of the earnings release. For additional information about risks and uncertainties, please see the forward looking statement and non GAAP financial measures disclosures in the earnings release. As a reminder for investors this quarter we plan on attending the Hovde Financial Services Conference in Naples, Florida and the Piper Sandler Financial Services Conference in Miami in November. With that, I would now like to turn the conference call over to Alberto Paracini, President of Byline Bancorp.

Alberto Paracini - President - (00:03:28)

Thank you Brooks and good morning everyone and thank you for joining the call this morning to go over our third quarter results with me today are Chairman and CEO Roberto Herencia, our CFO Tom Bell, and our Chief Credit Officer Mark Fusinato. This quarter we streamlined the format to focus on key highlights for the quarter and our financial results so we can move quickly to Q&A and allow ample time for discussion before we get started. I'd like to pass the call over to our chairman Roberto Herencia for his remarks. Roberto.

Roberto Herencia - (00:04:02)

Alberto, thank you and good morning to all. Appreciate you spending some time with us here this morning. The quarter caps a string of 12 consecutive quarters of very strong financial performance for Byline and highlights the consistency of our execution, the resiliency of our business model and the optionality and flexibility we strive to maintain in our operating model. The team continues to run a very good bank and for that we have to thank our team members and employees. Results reflect each and every one of their contributions which we value dearly. This quarter our SBA team went above and beyond anticipating government shutdown and allowing us to end the quarter strong and prepare as well for the end of the shutdown whenever that comes. Profitability metrics for the quarter were once again top quartile as Alberto and Tom will review. Credit quality continues to be stable to improve in some segments which, against the backdrop of macroeconomic uncertainty, heightened geopolitical tensions and more recently the federal government shutdown has been surprising to the positive. We continue to be vigilant over those risks. Capital flexibility is a major differentiator. Our capital ratios are strong and continue to build commit to strong profitability and solid revenue growth. Our primary deployment options, which Alberto has covered clearly in the past, continue to be the same. Our stance on 10 billion asset threshold and M and A remain unchanged. We are open to disciplined deals that make sense like the ones you have seen in the past. We have the capital to be opportunistic and believe we can deliver strong financial results on our own without the need to force a deal on the things that truly matter. What our employees have tangibly achieved since we last spoke to you, we were recognized by the SBA in early August with the 2024 SBA 7A504 and Expert Lender of the Year awards. The second year in a row, the Chicago Sun Times has named Byline bank one of Chicago's best workplaces. We now rank as one of the top 25 workplaces in the city and fifth among large companies. These results are based on our Workplace Policies Practices philosophy. In addition to employee survey results measuring the employee experience, Byline was also named once again to the 2026 America's Best Workplaces by Best Companies Group. As a result of our high level of employee engagement scores on our annual survey, we continue to be very focused on employee engagement development and attracting the best talent. We continue to experience, as a result, low levels of employee turnover. With that, I'm happy to turn over the call to Alberto.

Alberto Paracini - President - (00:07:29)

Great and thank you Roberto. In terms of the agenda for today, I'll kick us off with the highlights for the quarter, followed by Tom, who will cover the financials in more detail. I'll then return with closing comments before we open the call up for questions. So with that, let's turn to our results for the quarter. We delivered net income of $37 million or $0.82 per diluted share on revenue of $116 million, a strong performance driven by solid execution. Revenue and EPS grew both quarter on quarter and 13.6% and 19% respectively on a year on year basis. Our performance continues to reflect excellent profitability with pre-tax pre-provision income of $55 million pre tax preparation, ROA of 2.25% and ROE of 15.1% and ROTCE of 15.1% which remains comfortably above our cost of capital. Notwithstanding continued growth in our capital base. The margin expanded 9 basis points from the last quarter to 4.27%, supported by an improved deposit mix and higher asset yields. Expenses remain well managed and while our efficiency ratio is strong at 51%, we continue to actively look for ways to become more efficient and invest in the business at the same time. Moving on to the Balance sheet loans grew 6% linked quarter and 11% on a year to date basis ending at 7.5 billion. Deposits totaled 7.8 billion at quarter end and were up 1% linked quarter and 7% on a year to date basis. Demand for credit remains stable from last quarter with originations coming in at 264 million driven by our commercial banking and equipment leasing teams moving to credit. Credit costs declined this quarter with the provision coming in at 5.3 million, a decrease of 6.6 million compared to last quarter. Asset quality metrics all improved with NPAs, NPLs and net charge offs all declining compared to the prior quarter. The allowance remains strong at 1.42% of total loans. Turning to capital Capital levels continue to grow and remain robust with CET1 surpassing 12%. Annual book value per share grew nicely this quarter up 5% late quarter and 12% year on year. This quarter we also refinanced 75 million in subordinated debt. We leveraged the upgrade to our credit rating earlier this year with strong market demand to issue debt at an attractive level. That reflected a 266 basis point improvement in our credit spreads. With that said, we continue to build capital support, balance sheet growth, future MA opportunities and increased capital flexibility. With that, I'd like to turn over the call to Tom, who will provide you with more detail on our results.

Tom Bell - Chief Financial Officer - (00:10:26)

Thank you Alberto and good morning everyone. Starting with our loans on Slide 5, total loans increased $107 million or 6% annualized and was $7.5 billion at September 30th. As Alberto mentioned, origination activity was solid for the quarter with $264 million in new loans up 25% compared to a year ago. Payoff activity decreased $41 million from Q2 and stood at $205 million. Loan commitments grew and draw activity added to the loan growth for the quarter even as line utilization remained relatively flat at 59%. As we look ahead for Q4, we expect loan growth to continue in the mid single digits. I would like to note that our loan growth could be impacted somewhat by higher government loan. Sorry, impact is somewhat higher by the government shutdown that goes into effect maybe in 2026. As a result, our government guaranteed loan originations will remain on balance sheet until the government is reopened. Turning to Slide 6, total deposits were $7.8 billion for the quarter, up slightly from the prior quarter. The uptick in deposits was due to non interest bearing accounts increasing $160 million or 9% linked quarter which was driven by seasonality in deposits. This was offset by decreases in time deposits driven by lower brokered CDs and CDs shifting into money market accounts. We saw continued improvement in the mix which drove Deposit costs lower by 11 basis points to 2.16%. Turning to Slide 7, we had record net interest income of $99.9 million in Q3, up 4.1% from the prior quarter primarily due to organic loan growth and lower rates paid on deposits. This was offset by higher interest expense related to refinancing of the $75 million of sub debt this quarter which contributed a 7 basis points drag on NIM. The net interest margin grew to 4.27%, up 9 basis points linked quarter and year over year. NIM expanded 39 basis points. Specifically, we saw lower interest expense on deposits and higher rates on earning assets. As a reminder, our SBA loans reset on a quarterly lag. As a result, the mid September rate cut is effective October 1st. With the market expectations of two Fed cuts in the fourth quarter, we expect net interest income of 97 to $99 million. I would note that earning asset growth and disciplined pricing has generated growing NII in this declining rate in environment. Turning to Slide 8 Non interest income totaled $15.9 million in the third quarter, up 9.5% from the last quarter primarily due to $7 million gain in sale on loans sold driven by higher volumes. The SBA loan pipeline is solid. However, due to the government shutdown, we are currently unable to sell and settle loans in the secondary market. Timing will determine the impact of our gain on sale income for Q4. As a result, we will not be providing gain on sale guidance for the fourth quarter. Turning to Slide 9, our non interest expense came in at $60.5 million up 1.5% from the prior quarter. The increase reflects higher salary employee benefits including a $2 million in higher incentive compensation accruals due to higher performance and a $1.5 million increase in non interest expense which includes $843,000 of remaining expense associated with the calls sub debt. These were partially offset by merger related and secondary public offering expenses recorded in the second quarter. Our efficiency ratio stood at 51% compared to 52.6% in the second quarter, an improvement of 161 basis points for Q4. We expect non interest expense in the same range as Q3 results. Turning to slide 10 in the third quarter we saw credit metrics improve. Our allowance for credit losses decreased slightly to $105.7 million representing 1.42% of total loans, down 5 basis points from the prior quarter. The decline was primarily due to individually assessed loan resolutions in in the quarter offset by loan growth and higher adjustments to economic factors. We recorded a $5.3 million provision for credit losses in Q3 compared to $11.9 million in Q2. Net charge offs decreased to $7.1 million compared to $7.7 million in the previous quarter. NPLs to total loans and leases decreased to 85 basis points in Q3 from 92 basis points in Q2 NPAs total assets decreased to 69 basis points in Q3 from 75 basis points in Q2. Moving on to capital on Slide 11 this quarter, our capital increased further with CET1 at 12.15%. Intangible common equity ratio was 10.78%. We increased our tangible book value per share by $1.02, up 5% lean quarter and up 12% compared to last year. For the quarter, our total capital was 15.81% which grew meaningfully due to the sub debt issuance. If you exclude the sub debt that was called on October 1st, total capital is approximately 15.14%. With that, Alberto, back to you.

Alberto Paracini - President - (00:16:11)

Thank you Tom. So to wrap up on Slide 12, we continue to execute well against our strategic priorities and are focused on building the predictability preeminent commercial banking franchise in Chicago. Earlier this year, we announced the expansion of our commercial payments business and the hiring of an experienced team to lead that effort. We've been focused on putting the infrastructure in place, establishing the requisite controls, and I'm happy to report that our pipelines are starting to build. Looking forward, we're focused on onboarding customers and scaling. Scaling the business in 2026. We're also getting closer to the $10 billion asset mark. We anticipate crossing the threshold during the first quarter of next year, which means we will not see the effect of Durbin Amendment and higher insurance assessments until 2027. Looking ahead for the rest of this year, our pipeline remains healthy, and we're optimistic about our ability to continue to execute for customers and. And deliver results for our shareholders. I'd like to thank all of our employees for supporting our customers and for their contributions to our results this quarter. With that operator, we can open the call up for questions.

Carly - Operator - (00:17:28)

Thank you very much. We now have to open the lines for the Q and A. If you'd like to ask a question, please signal now by pressing star followed by one on your telephone keypad. If you'd like to remove yourself at line questioning, please signal now by pressing star followed by two. As a reminder to raise a question will be star followed by one. Our first question comes from David Long. From Raymond James. David, your line is now open.

David Long - Equity Analyst - (00:17:49)

Good morning, everyone.

Tom Bell - Chief Financial Officer - (00:17:52)

Morning, Dave.

David Long - Equity Analyst - (00:17:52)

Morning, Dave. You know, let's talk about the margin here and net interest income. The bank screened as asset sensitive. You look at slide 7, and it indicates each 25 basis point cut in a rate scenario hits your NII by about 2 1/2 million. What are the assumptions that are built into that right now?

Tom Bell - Chief Financial Officer - (00:18:18)

Hi, Dave. Good morning. It's Tom. I mean, we have been beating the model assumptions. I think it's in part due to what the competition is offering us as far as rates, resets on deposits. And I think, again, we talked a little bit about, and the past, some of the premiums that were maybe paid during the liquidity events of years past. And we continue to look at the competition and look at where we can adjust rates. And I think that's what we've been really disciplined on.

Alberto Paracini - President - (00:18:49)

Dave, to add to what Tom just said, I think also analytically we're better and we have gotten better. So in addition to just the competitive environment in Chicago overall improving over the years and becoming, for those of us that have been in the market for a long time, becoming certainly much more rational over the years, I think analytically, we're getting a bit better in being able to segment customers and being able to basically drive improvements in costs related to accounts and different segments of our business, which has contributed to what Tom just said, which is essentially just outperforming our model a bit. So I think that's what you're seeing. You're seeing the effect of that.

Tom Bell - Chief Financial Officer - (00:19:46)

And I would also just add you can look at the yields on loans and you know, given the rate declines, you are seeing loan yields come down just from the resets based on the mix between fixed and floating. We have benefited a little bit more too, because rates have been higher. So any of the fixed rate refinancings that have been coming, cash flowing out, we've improved nicely on including securities.

David Long - Equity Analyst - (00:20:09)

Got it. No, that's some very good color. And then in the quarter, the obvious, you know, obviously on the funding side, really nice change in the mix. Your funding, your deposit costs in particular came down. wiggle room do you have on the funding side and the deposit side to, to still lower those costs, giving you an opportunity to continue to beat this model.

Tom Bell - Chief Financial Officer - (00:20:35)

You know, again, I think we are asset sensitive and we do expect, you know, I gave guidance on nii. We have obviously asset growth. That's helped us nicely too. But we have some room on the CD book. It continues to reprice, lower. We've been very short on the CD book and I think, you know, there are certainly some rack rate, you know, deposits that we're not going to be able to reprice. So it's kind of a mix. Dave, I don't really know.

David Long - Equity Analyst - (00:21:03)

Thank you for taking my questions.

Carly - Operator - (00:21:12)

Thank you very much. Our next question comes from Adam Crow from Piper Sana. Adam, your line is now open.

Adam Kroll - (00:21:20)

Hi, good morning. This is Adam Kroll on for Nathan Race. And thanks for taking my questions?

Tom Bell - Chief Financial Officer - (00:21:27)

Yeah. Good morning, Adam.

Alberto Paracini - President - (00:21:28)

Hi, Adam. How are you?

Adam Kroll - (00:21:31)

Yeah, so I guess given the recent pickup in M and A activity, especially in the Midwest, and with your capital continuing to build up pretty strong levels. I'd be curious just to hear your thoughts. updated thoughts on M&A and how you're thinking about managing capital levels?

Alberto Paracini - President - (00:21:49)

Yes. So I think, you know, Roberto touched on it right at the beginning of the call, Adam, and I think we're certainly open for M&A. So we're, you know, in terms of the usual discussion around how our conversations, I think we actively engage in conversations, so I think that remains consistent. So we're certainly open and actively looking at opportunities that may present themselves in the marketplace here. But that's going to be. I think consistent with the discipline around transactions that make sense for us to do that, we think deliver value for shareholders. So with that caveat, I think, you know, we continue to look at opportunities and, you know, are hopeful that we'll be able to continue to find situations that make sense, as we have done in the past. As far as capital priorities, I think those also remain consistent. You know, we want to fund the growth of the bank. We want to have capital that we can use opportunistically for M and A. We want to have a stable and growing dividend that we can comfortably afford. And we have the safety valve, which is we have a buyback authorization in place. And when we have opportunities to acquire our stock at attractive levels, we have the flexibility to do that.

Adam Kroll - (00:23:39)

Got it. And then I appreciate the comments about crossing $10 billion organically next year, but I was just curious if you could size up the estimated impact from Durbin Amendment.

Alberto Paracini - President - (00:23:54)

I think I'm glad you asked the question because we have not been asked that question directly on the call before. So I think for Durbin today, as we would look at the impact, it would be somewhere between four and a half to $5 million on the. And that includes the FDIC effect as well. And that would, you know, as you know, if we cross at any point in 2026, the Durbin impact doesn't really go into effect until July 1st of the following year. So that would be 20, 20, 27. Whereas the, you know, the effect of higher insurance costs comes after four consecutive quarters above $10 billion.

Adam Kroll - (00:24:42)

Got it.

Alberto Paracini - President - (00:24:42)

Thank you for asking. Yeah, no, and thank you for asking the question because now we have that on the, on the record.

Adam Kroll - (00:24:51)

Yeah, no problem. If I could squeeze in one more just, you know, I appreciate the comments on Byline Bancorp anticipating and preparing for the government shutdown, but I was curious if you could just touch on how the government shutdown has impacted your SBA lending business so far and is there an upcoming deadline where it will materially impact your gain on sale in the fourth quarter?

Alberto Paracini - President - (00:25:15)

Very good question. And as you know, we have been in the SBA business for some time, so, you know, we've had to navigate through shutdowns before. So our team is very experienced in terms of being able to navigate through usually the short term impact of a shutdown. So I think the first thing I would say is from an origination standpoint, we continue to be active in originating SBA loans so that continue to market, continue to try to originate, you know, new business on things that are in the pipeline. What we do is we tend to, in anticipation of a shutdown, pull PLP numbers so that we can continue to fund and close those loans. Given that we have the highest designation in the program under the preferred lender program. The thing that potentially gets impacted, and it typically is a timing issue, is during a shutdown, we cannot sell and settle loans. So to the degree that we have loans that are available for sale and ready to be sold and the shutdown is still in effect, then we are effectively holding those loans until the government is back to work and we can then sell the loans in the secondary market. And that's typically a timing issue. So I would say in the short run, unless we really get here into a protracted shutdown, where we're here, let's say mid November or so, and the government is still not back to work, that that may impact, you know, the timing of, you know, loans that we would otherwise would be selling in the fourth quarter, we may then, you know, sell probably in the, in the first quarter. So that would be the short term impact. And you know, obviously that has a positive effect too because we're essentially even though we can sell them. So yes, you know, there might be a delay or timing issue with gain-on-sale income. We actually earned the carry on the loan because we'll carry the loans on our balance sheet. So but that's hopefully that answers your question. And I think that's the, that's in short, the summary on that.

Adam Kroll - (00:27:59)

Yeah, I really appreciate the details and thanks for taking my questions.

Alberto Paracini - President - (00:28:04)

Thanks, Adam.

Carly - Operator - (00:28:07)

Thank you very much. Our next question comes from Brian Martin, from Janie Montgomery Scott. Brian, your line's now open.

Brian Martin - Equity Analyst - (00:28:14)

Hey, good morning everyone. Congrats on the quarter.

Tom Bell - Chief Financial Officer - (00:28:18)

Thank you, Brian. Thanks, Brian.

Brian Martin - Equity Analyst - (00:28:21)

Say, Tom, you mentioned in your remarks, I think on the deposit mix change, it sounds as though maybe that may bounce back a little bit with the dda just in terms of how to think about kind of NII and margin. Some of that was seasonal, the strong growth this quarter and the mix changes that you think it's kind of sustainable where that mix is at today?

Tom Bell - Chief Financial Officer - (00:28:41)

No, that's correct. It's seasonality. There were outflows in DDA.

Brian Martin - Equity Analyst - (00:28:51)

Yep. Gotcha. Okay. All right. And then, you know, can you just. Talk a little bit about. You guys talked about the competitive landscape, had I guess heard from several other banks recently. Just the competition has gotten stronger on the deposit side and even on the loan side in the market. What you're seeing competitively is it sounds like it's gotten a little bit easier from your commentary, but that's over time rather than just kind of recently but just the competitive landscape. Just a little commentary if you can on loans and deposits.

Tom Bell - Chief Financial Officer - (00:29:23)

You know, it's still competitive. I would just again remind everyone, right we, we're still a relationship bank. We bring in core deposits with our commercial accounts and that helps support our margin and our spread. So it's not all at the margin funding that is going on here. So we're benefiting from that. And then I think just being short on the CD book has allowed us to reprice just given the expectations of more cuts to come here. So it's still competitive. I think you can see where the market is trading or offers are for new money so to speak but it's more about the relationship and the small business banking relationships and our commercial relationships.

Alberto Paracini - President - (00:30:07)

Brian, just to add to one thing on the question, particularly on the asset. Side. I think Tom is spot on in that it's always competitive. But look I, when you look at markets in general, you know, whether it's investment grade, whether it's high yield spreads are at all time tight levels, so it's not inconsistent to think that you know some of that would, would spill in into kind of the market and from. Yeah, do we see some of that? Yes, some businesses have become a little bit more competitive or there's more competition. People are willing to trade off a bit more in pricing in order to get high quality transactions but it's always competitive and you just have to manage your business accordingly.

Brian Martin - Equity Analyst - (00:31:13)

Gotcha. No, I appreciate that Alberto. And maybe just one back to the margin, just one comment Tom. I guess it sounds like obviously good expansion in the quarter but it sounds like even with that expansion you kind of went through the benefit from, you had the impact from the subordinated debt and they're just trying to get a sense for maybe if you can talk or give a little thought on where the margin given the seasonality that comes back on this DDA and then the impact of that sub debt in the quarter kind of where did the margin kind of end the month or exit the quarter in September as a starting point as we look forward?

Tom Bell - Chief Financial Officer - (00:31:51)

Brian, Our NII guidance is still right in the same range. It's a little bit lower on the low end just because we are expecting two cuts here in the fourth quarter so we are still asset sensitive and we will have some slight decline in net interest income from that. So the margin would go down a little bit I would say, you know, to be determined based based on the Fed.

Brian Martin - Equity Analyst - (00:32:14)

Cuts Okay, all right, maybe just the last one. Yeah, I hear you.

Tom Bell - Chief Financial Officer - (00:32:22)

A lot of polls, you know, related, it's about a million and a half dollars related to the interest expense on the subordinated debt that goes away. So that benefits us. You know, we have earning asset growth that benefits us. So you know, we, we still think we're in the same range around that range.

Brian Martin - Equity Analyst - (00:32:40)

Yeah, okay, I appreciate that, Tom. And then last one for me was can you guys just give a little commentary, just talk a little bit about the Commercial Payments team and kind of where that, you know, kind of what that business is and where it's, you know, what your expectations kind of high level are so we can watch that going forward. And thank you for taking the questions.

Alberto Paracini - President - (00:33:00)

Sure, you bet. So I think earlier in the year we announced and there was, there's some, we actually got some picked up in press in that we had hired a team, some experienced bankers, some of our bankers here had worked with these individuals before. So we had an opportunity to really bring on board high quality, talented individuals and we were fortunate to do that. But the gist of that business is really a commercial payments business. So think about high, trying to do business with businesses that are, you know, originate a lot of ACH transactions, process payroll, for example. So you would have, you know, payroll processors in that business as well as looking to be a sponsor bank for issuing and acquiring debit or prepaid cards. So that in summary, Brian, that's kind of the gist of the business. You know, I like to use the term commercial payments because it's really more on the commercial banking side as opposed to this is not a retail product or this is not something that's targeted at consumers, is really trying to, you know, do business with program sponsors that are high users of, you know, payment products. And so far I think as I said on the comments, you know, initially it's about building the infrastructure, having the proper controls, making sure that we have, you know, the necessary hires to support the team. Not just from a sales standpoint but, you know, operationally and from a risk management standpoint. So that's been completed. We've been actively, you know, calling and you know, trying to start building the business. The pipelines are, you know, growing. We have, you know, customers that we're in the process of onboarding. These are as you could probably, you know, imagine, these are not, these are, there's more to onboarding a high volume type commercial customer as opposed to a simple kind of loan and the faucet basic relationship. So the onboarding process A little bit lengthier, but we feel good where the team is. The pipeline is building and we'll start seeing the impact of that in 2026 and, and beyond. So we're super excited about that segment of our business.

Brian Martin - Equity Analyst - (00:36:01)

Gotcha. And just to clarify, those credits typically smaller, granular credits, Are they larger credits? What is the typical size range in those transactions?

Tom Bell - Chief Financial Officer - (00:36:13)

Yeah, there's very little in credit, if any. It's really just a function more on the deposit side and on the treasury management side, Brian.

Brian Martin - Equity Analyst - (00:36:23)

Gotcha. Okay, I appreciate that. Thanks, guys.

Alberto Paracini - President - (00:36:29)

Thanks, Brian. Thank you, Brian.

Carly - Operator - (00:36:32)

Thank you very much. As a reminder, if you'd like to raise a question on today's call, please signal now by pressing star followed by one on your telephone keypad. Our next question comes from Brandon Rudd from Stevens. Brandon, your line's now open.

Brandon Rudd - (00:36:46)

Hey.

Tom Bell - Chief Financial Officer - (00:36:48)

Hey, Brian.

Brandon Rudd - (00:36:48)

Most of my questions have been asked and answered already, but maybe just one modeling question here.. Do you have the amount of fixed rate loans that are maturing over the next 12 months and how those yields compare to your new origination yields?

Tom Bell - Chief Financial Officer - (00:37:04)

Yes. For 2026, it's roughly like $750 million. And I would say that, you know, again, depending on what happens with the forward curves, rates are at or slightly higher than where we are today.

Brandon Rudd - (00:37:24)

Okay, got it.

Tom Bell - Chief Financial Officer - (00:37:25)

So there's still a, there's still lots of reset, yes. Gotcha.

Brandon Rudd - (00:37:31)

Okay. And maybe just one. Because it was a topic early in. The earnings season, I should ask, can. You remind us of your NDFI exposure and what clients fall into that bucket for you?

Alberto Paracini - President - (00:37:46)

Yeah, it is so a general comment. So, Brandon, we have roughly around $221 million that we would categorize in the call report as Non-Depository Financial Institutions (NDFI). So that represents, you know, just under 3% of our total loan portfolio. The one thing I would tell you about that, that consists of commercial related transactions and business that we have done for, you know, for a long time. So we are not. That doesn't include anything. We haven't started anything. For example, to have a business that's focused on financing, you know, private credit funds or, or financing structured asset backed structured transactions. These are things like we finance, for instance, the acquisition of practices where a registered investment advisor acquires another small registered investment advisor, and we finance that practice. So there's a lot of granularity in that exposure. And, you know, it's not the. I would say it's an exposure that's materially different than, for example, the couple of cases that you guys Saw this quarter related to Non-Depository Financial Institutions (NDFI) lending by some other institutions.

Brandon Rudd - (00:39:20)

Got it. Okay, thank you. And then Tom, I think your comment on expenses in the fourth quarter similar to 3Q so 59ish million dollars on a core basis, is that, is that also a good run rate to start off with for 2026 and then later on in inflation and growth there?

Tom Bell - Chief Financial Officer - (00:39:40)

You know, we're not really giving guidance on 26, but I would just say that there's incentive compensation that's built in this year that in theory, you know, we reset for next year. So higher performance this year warrant higher higher incentives. So we start over and I would expect those expense numbers to be lower. Got it.

Brandon Rudd - (00:40:01)

Okay. Thank you for taking my questions.

Tom Bell - Chief Financial Officer - (00:40:04)

Thank you, Matthew. Thanks, Brandon.

Carly - Operator - (00:40:08)

Thank you very much. Our next question comes to. Excuse me, Matthew Rent from kbw. Matthew, your line is now open.

Matthew Rent - (00:40:16)

Hey everybody. Hope everybody's doing well today. Just a follow up to the expense question.

Alberto Paracini - President - (00:40:22)

I appreciate the guidance for next quarter. In the prepared remarks, you mentioned that you believe you can get the efficiency ratio lower. So I was wondering if there was any initiatives you were contemplating or if there's any new technologies you were investing in that could drive operational efficiency. Yes, good question, Matt. I think maybe the right way to think about it is this is something that we're constantly looking at. We're constantly looking for ways in which we can operate more efficiently. You know, as you have seen, if you look at the trend with our efficiency ratio, you know, it tends to bounce off. I think we've been in that kind of 49% to 52% range, which, you know, compared to others, compared to peers, you know, I think we fare very well with it. What I would highlight with that is, you know, it's something that we always want to be focused on because it provides us with investment capital to reinvest back into the business. So I wouldn't view it as just we have a program that we're doing and we're trying to execute against that program. We're constantly looking for ways in which we can, you know, try to drive that efficiency as low as we can, or at least we can maintain it at the levels kind of where it's at today so that we can generate opportunities for reinvestment back into the business. Got it.

Matthew Rent - (00:41:58)

Thank you. I appreciate the caller. I'll step back.

Carly - Operator - (00:42:04)

Thank you very much. Next question comes from Yannara Bohain from Hove Group, Yanara. Your line is now open.

Anira - (00:42:14)

Hi, good morning, this is Anira on for Brendan from Hovde Group Good morning. First question is just to do with capital. We noticed that the share repurchasing decreased this quarter. Any thoughts on creating a more active repurchase program again and how you're thinking of reinvesting capital?

Alberto Paracini - President - (00:42:41)

Yeah, I think consistent with the priorities that, that we mentioned earlier in the call Yannara, it's, I think capital priorities is, you know, be able to support the growth of the company, support organic growth, have capital flexibility to pursue M&A consistent with, you know, transactions that, you know, like transactions we've done in the past, transactions that make sense, that meet our criteria. We certainly want to, you know, be able to execute on that and have the flexibility to do so, maintain a growing, you know, comfortable dividend over time. And the last thing is really the safety valve which is really, you know, if we find ourselves having excess capital and we have opportunities to acquire the stock at what we think are attractive levels for shareholders, then we would do that.

Anira - (00:43:47)

Perfect, thank you. And then my follow up question is to do with new loan yields. So you guys originated 260 million in originations this quarter. Can you speak to where new paper priced this quarter in relation to the portfolio yield of 7.14%?

Tom Bell - Chief Financial Officer - (00:44:09)

Sure. This is Tom. I mean again, depending on the asset class, you know, you do have different yields, but I would still say that spreads are 250 basis points over SOFR to 300 basis points over and then obviously the SBA business is higher than that.

Anira - (00:44:32)

Thank you. That's all my questions.

Tom Bell - Chief Financial Officer - (00:44:36)

Great, thank you. Thank you.

Carly - Operator - (00:44:39)

Thank you very much. As a reminder, if you would like to raise a question on today's call, please signal now by pressing star followed by one on your telephone keypad. Our next question is a follow up from David Long, from Raymond James. David, your line is now open.

David Long - Equity Analyst - (00:44:54)

Hey guys, just wanted to follow up on credit. The two things. One, the reserve level looks like reserves were released in the quarter. Was that more a function of loan mix, portfolio performance or the economic outlook?

Tom Bell - Chief Financial Officer - (00:45:10)

I think it was more around the resolution of loans with specific reserves. David. So we worked those assets out. You. Know, we took the charges against the specific reserves and you know, you know, we don't have those reserves anymore. Got it.

David Long - Equity Analyst - (00:45:27)

And then with the SBA shutdown, how is that going to impact your reserving? I mean, if you're going to hold onto these loans potentially a little bit longer, maybe just talk through that process and how you think about that.

Tom Bell - Chief Financial Officer - (00:45:43)

I mean, we would look, we would kind of, if we're holding, I think that it's a good Question. So thank you for asking. So if we're holding the full loan as opposed to the, you know, call it just the unguaranteed portion only. We. Would have to be thinking about a more protracted shutdown. David, you know, we would still probably carry those loans as help for sale. But to answer the philosophical question as to how would we think if we were balance sheeting those loans, how would we think think about setting reserves? I think we would look through the guaranteed portion and look at the, at the unguaranteed exposure and then reserve accordingly.

David Long - Equity Analyst - (00:46:33)

Okay, awesome. Thanks, guys. Appreciate it. You bet. Thanks, Dave.

Carly - Operator - (00:46:39)

Thank you very much. Our next question is a follow up from Brian Martin, from Jenny Montgomery Scott. Brian, your line is now open.

Brian Martin - Equity Analyst - (00:46:47)

Yep. Thanks, guys. Just one last one for me was on the going back to the M and A for just one moment. It's given that greater priority than the buyback. Can you just remind us, Alberto, just in terms of what you're looking for in a transaction, what's important on the M and A, opportunities you're going to consider and does it matter larger or smaller today or, you know, would you think about doing multiple deals at once? Just trying to understand that dynamic. Thank you.

Alberto Paracini - President - (00:47:14)

Yeah, I think still very consistent with the What we think is the opportunity set here in Chicago. So, you know, broadly, Brian, I think institutions between, let's say $400 million, you know, and up to maybe a couple billion dollars, you know, obviously we've grown a bit, so we can, we have the ability to tackle something a little bit larger today than, let's say, what we did, you know, two years ago or three years ago. The geography still consistent, you know, the greater Chicago metropolitan area. That means, you know, does that mean strictly just the city limits of Chicago? No, greater Chicago. Chicago, the suburbs, you know, maybe going all the way up to Milwaukee, maybe going down a bit into northwest Indiana. I think those are markets consistent with that. Financially attractive, strategically attractive. And we pay, as, you know, we pay a lot of attention to deposits. If we think about the last three transactions that we've done, those were essentially transactions for us to acquire deposits, you know, and then, you know, redeploy those funds over time into the different lending businesses that we have. So it would, it would have to be consistent, you know, with that, you know, but each opportunity is different. Each situation is different. And the good news is we built a team and we have a lot of experience with the team that's here, that's done transactions here, as opposed to just general experience that we may have from just being in the business and having done M and A over the years. So we feel good about our team, our process, our playbook. And I think, hopefully, as you guys can have seen, the results show that in our results, I should say.

Brian Martin - Equity Analyst - (00:49:29)

Yep. All right. Thank you for that insight, Alberto.

Carly - Operator - (00:49:31)

I appreciate it. Thank you very much. We currently have no further questions, so I'd like to hand back to Mr. Alberto Paracini for any further remarks.

Alberto Paracini - President - (00:49:43)

Great. So thank you, Carly. And thank you all for joining the call today and for your interest in byline. We want to wish you a happy Halloween, a happy Thanksgiving holiday, happy holiday season, and we look forward to speaking to you again in the new year. Thank you.

Carly - Operator - (00:50:06)

As we conclude today's call, we'd like to thank everyone for joining you. Now, disconnect your lines.