Byline Bancorp, Inc. Reports First Quarter 2021 Financial Results

Select First Quarter 2021 Highlights

• Net income of $21.8 million, or $0.56 per diluted share
• Net interest margin of 3.77%
• Return on average assets of 1.34%, as adjusted¹ 1.37%
• Efficiency ratio of 51.25%
• Non-interest bearing deposits 40.1% of total deposits
• Originated loans and leases increased $181.0 million, total production of $411.8 million
• Common Equity Tier 1 to risk weighted assets of 12.09%

Byline Bancorp, Inc. (the “Company” or “Byline”) (NYSE: BY), the parent company of Byline Bank (the “Bank”), today reported net income of $21.8 million, or $0.56 per diluted share, for the first quarter of 2021, compared with net income of $12.3 million, or $0.31 per diluted share, for the fourth quarter of 2020 and net income of $3.0 million, or $0.07 per diluted share for the first quarter 2020. Adjusted net income¹ was $22.2 million, or $0.57 per adjusted diluted share, for the first quarter of 2021, compared with $15.2 million, or $0.38 per adjusted diluted share¹, for the fourth quarter of 2020 and $3.5 million, or $0.09 per adjusted diluted share for the first quarter of 2020.

Roberto R. Herencia, Executive Chairman and Chief Executive Officer of Byline Bancorp, commented, “We delivered a very strong first quarter driven by solid loan and lease production and deposit gathering across our commercial banking platform, the continued reduction in our average cost of deposits, improved asset quality, and increased efficiencies following our ongoing branch consolidations. The significant progress we have made in enhancing our earnings power through organic growth and accretive acquisitions resulted in the highest return on average stockholders’ equity since our IPO in 2017.”

Alberto J. Paracchini, President of Byline Bancorp, added, “Increasing confidence in the strength of the economic recovery is being reflected in higher loan demand and a growing loan pipeline. Given our strong liquidity and capital, we believe we are well positioned to support a higher level of loan growth going forward, which should lead to further increases in our level of profitability with a favorable shift in our mix of earning assets in the coming quarters,” said Mr. Paracchini.

Board Declares Cash Dividend of $0.06 per Share

On April 27, 2021, the Company’s Board of Directors declared a cash dividend of $0.06 per share, payable on May 25, 2021, to stockholders of record of the Company’s common stock as of May 11, 2021.

First Quarter 2021 Updates

Paycheck Protection Program (PPP)

As of March 31, 2021, over $501.2 million of PPP loans were in various stages of the SBA forgiveness process, with over $283.7 million approved for forgiveness by the SBA. As of April 26, 2021, we have received over 2,800 applications and approved the funding of $329.8 million of second round PPP loans.

We have helped our customers navigate over 6,600 applications, resulting in $964.8 million in PPP funds to help these small businesses to support their employees during COVID-19.

⁽¹⁾ Represents non-GAAP financial measures. See “Reconciliation of non-GAAP Financial Measures” for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure.

The following table presents the net PPP loans outstanding as of March 31, 2021:

Loan and Lease Deferrals

In support of customers impacted by COVID-19 and keeping with regulatory guidance, we began offering relief through payment deferrals during the first quarter of 2020. The following table shows active deferrals by category at the dates indicated (dollars in thousands):

STATEMENTS OF OPERATIONS

Net Interest Income

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

⁽²⁾ Excludes PPP loans.

The following table presents the average interest-earning assets and average interest-bearing liabilities for the periods indicated. Net interest income and margin are adjusted to reflect tax-exempt interest income on a tax-equivalent basis using tax rates effective as of the end of the period:

Net interest income for the first quarter of 2021 was $56.6 million, an increase of $620,000, or 1.1%, from the fourth quarter of 2020.

The increase in net interest income was primarily due to:

• An increase of $367,000 in interest income on loans and leases, due to the recognition of net fee income related to PPP loan forgiveness; and
• A decrease of $393,000 in interest expense on deposits, due to maturities of higher-rate time deposits and lower rates paid;

Partially offset by:

• A decrease of $163,000 in interest income on securities, due to elevated prepayment speeds and runoff of higher yielding securities resulting in lower yields.

Tax-equivalent net interest margin for the first quarter of 2021 was 3.78%, flat compared to the fourth quarter of 2020. Total net accretion income on acquired loans contributed 13 basis points to the net interest margin for the first quarter of 2021 compared to 16 basis points for the fourth quarter of 2020, a decrease of three basis points. PPP interest income and net fee income combined contributed $7.0 million to net interest income for the first quarter 2021 compared to $5.5 million for the fourth quarter 2020.

The average cost of total deposits was 0.12% for the first quarter of 2021, a decrease of three basis points compared to the fourth quarter of 2020, mainly due to a lower average cost of time deposits and interest-bearing demand, as well as a favorable change in deposit mix. Average non-interest-bearing demand deposits increased $162.3 million, while average time deposits decreased by $25.1 million. Average non-interest-bearing demand deposits were 38.9% of average total deposits for the first quarter of 2021 compared to 36.3% the fourth quarter of 2020.

Provision for Loan and Lease Losses

The provision for loan and lease losses was $4.4 million for the first quarter of 2021, a decrease of $5.9 million compared to $10.2 million for the fourth quarter of 2020. The provision during the first quarter of 2021 mainly included net specific impairments of $5.6 million primarily driven by the unguaranteed portion of government guaranteed loans, partially offset by a release in provision for acquired impaired loans.

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 2021 was $15.7 million, a decrease of $1.9 million, or 11.0%, compared to $17.7 million for the fourth quarter of 2020.

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

• A decrease of $1.1 million in net gains on sales of loans, mainly due to lower volume of loans sold; and
• A decrease of $1.4 million in net gains on sales of securities available-for-sale resulting from decreased volume of sales.

Partially offset by:

• A decrease of $793,000 for loan servicing asset revaluation charges, which was $1.5 million for the current quarter compared to $2.3 million in the prior quarter, due to changes in fair value of the servicing asset.

During the first quarter of 2021, we sold $73.9 million of U.S. government guaranteed loans compared to $108.1 million during the fourth quarter of 2020.

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 2021 was $38.8 million, a decrease of $8.2 million, or 17.4%, from $47.0 million for the fourth quarter of 2020 mainly attributed to our strategic branch consolidation efforts during the fourth quarter of 2020.

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

• A decrease of $6.8 million in other non-interest expense, mainly due to lower impairment charges on assets held for sale and net losses on other asset disposals; and
• A decrease of $1.1 million in occupancy and equipment expense, net, mainly due to lower lease obligation expense.

Partially offset by:

• An increase of $878,000 in legal, audit and other professional fees mainly due to increased loan-related and other legal fees.

Our efficiency ratio improved to 51.25% for the first quarter of 2021 compared to 61.22% for the fourth quarter of 2020. Excluding impairment charges on assets held for sale, the Company's adjusted efficiency ratio¹ was 50.41% for the first quarter of 2021, compared with 55.77% for the fourth quarter of 2020.

INCOME TAXES

We recorded income tax expense of $7.4 million during the first quarter of 2021, compared to $4.2 million during the fourth quarter of 2020. The effective tax rate for both periods was 25.3%.

STATEMENTS OF FINANCIAL CONDITION

Total assets were $6.8 billion at March 31, 2021, an increase of $359.5 million compared to $6.4 billion at December 31, 2020.

The current quarter increase was primarily due to:

• An increase in securities of $228.0 million, principally a result of purchases of mortgage backed securities during the quarter;
• An increase in loans and leases of $114.1 million, primarily due to the new round of PPP loan funding; and
• An increase in bank-owned life insurance of $50.2 million primarily due to the purchase of additional policies.

Partially offset by:

• A decrease in other assets of $107.1 million mainly due to the timing of settlement of government guaranteed loans and securities sold during the prior quarter.

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 (excluding acquired impaired), other real estate owned, and accruing troubled debt restructured loans at the dates indicated:

Variances in non-performing assets were:

• Non-performing loans and leases were $37.1 million at March 31, 2021, a decrease of $4.0 million from $41.1 million at December 31, 2020; and
• Other real estate owned was $6.0 million at March 31, 2021, a decrease of $398,000 from $6.4 million at December 31, 2020 mainly due to sales and write downs.

U.S. government guaranteed balances of non-performing loans were $3.4 million at March 31, 2021 and $3.6 million at December 31, 2020.

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 to 1.47% at March 31, 2021 compared to 1.53% at December 31, 2020. The allowance for loan and lease losses as a percentage of total loans and leases held for investment excluding PPP loans decreased to 1.71% at March 31, 2021 from 1.74% at December 31, 2020.

In June 2016, the Financial Accounting Standards Board (“FASB”) issued new guidance on the recognition of credit losses, which replaces the incurred loss impairment methodology with a methodology that reflects expected credit losses. In November 2019, the FASB delayed the effective date of the standard for smaller reporting companies, which includes emerging growth companies. Assuming we remain an emerging growth company, the standard is effective for fiscal years beginning after December 15, 2022. We are in the process of implementation and determining the impact that this new authoritative guidance will have on our consolidated financial statements.

Net Charge-Offs

Net charge-offs during the first quarter of 2021 and fourth quarter of 2020 were $5.1 million for each quarter, or 0.47% of average loans and leases, on an annualized basis, for each quarter.

Net charge-offs for the first quarter of 2021 included $3.3 million in the unguaranteed portion of U.S. government guaranteed loans, while net charge-offs for the fourth quarter of 2020 included $5.0 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 $5.0 billion at March 31, 2021, an increase of $272.5 million, or 5.7%, compared to $4.8 billion at December 31, 2020. Non-interest-bearing deposits were 40.1% and 37.1% of total deposits at March 31, 2021 and December 31, 2020, respectively.

The increase in the current quarter was primarily due to:

• An increase in non-interest-bearing deposits of $253.0 million, due to increases in commercial deposits; and
• An increase in interest-bearing checking accounts of $73.2 million, mostly due to increases in personal and brokered accounts.

Partially offset by:

• A decrease in money market demand accounts of $67.4 million, principally driven by decreases purchase money market deposits offset by increases in seasonal public funds.

Total borrowings and other liabilities were $931.8 million at March 31, 2021, an increase of $98.6 million from $833.2 million at December 31, 2020, primarily driven by an increase in Federal Home Loan Bank advances of $95.0 million. The Paycheck Protection Program Liquidity Facility increased $15.7 million to $387.6 million at March 31, 2021 from $371.9 million at December 31, 2020.

Stockholders’ Equity

Total stockholders’ equity was $793.8 million at March 31, 2021, a decrease of $11.7 million from $805.5 million at December 31, 2020. The decrease was primarily due to a decrease in the fair value of available-for-sale securities.

Under its board approved stock repurchase program announced in the fourth quarter of 2020, the Company repurchased an aggregate of 332,744 shares at an average price per share of $19.12 and is authorized to purchase up to an aggregate of 1,250,000 shares of the Company’s outstanding common stock. The program is in effect until December 31, 2022, unless terminated earlier.

The following table presents the actual regulatory capital dollar amounts and ratios of the Company and Byline Bank as of March 31, 2021:

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

Conference Call, Webcast and Slide Presentation

We will host a conference call and webcast at 9:00 a.m. Central Time on Friday, April 30, 2021 to discuss our quarterly financial results. Analysts and investors may participate in the question-and-answer session. The call can be accessed via telephone at (877) 512-8755. A recorded replay can be accessed through May 14, 2021 by dialing (877) 344-7529; passcode: 10153981.

A slide presentation relating to our first quarter 2021 results will be accessible prior to the conference call. The slide presentation and webcast of the conference call can be accessed on our investor relations website at www.bylinebancorp.com.

About Byline Bancorp, Inc.

Headquartered in Chicago, Byline Bancorp, Inc. is the parent company for Byline Bank, a full service commercial bank serving small- and medium-sized businesses, financial sponsors, and consumers. Byline Bank has approximately $6.7 billion in assets and operates more than 40 full service branch locations throughout the Chicago and Milwaukee metropolitan areas. Byline Bank offers a broad range of commercial and retail banking products and services including small ticket equipment leasing solutions and is one of the top five Small Business Administration lenders in the United States.

Non-GAAP Financial Measures

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

Forward-Looking Statements

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

The COVID-19 pandemic is adversely affecting us, our employees, customers, counterparties and third-party service providers, and the ultimate extent of the impacts on our business, financial position, results of operations, liquidity, and prospects is uncertain. Deterioration in general business and economic conditions, including increases in unemployment rates or turbulence in U.S. or global financial markets, could adversely affect our revenues and the values of our assets and liabilities, reduce the availability of funding, and lead to a tightening of credit and further increase stock price volatility. In addition, changes to statutes, regulations, or regulatory policies or practices as a result of, or in response to COVID-19, could affect us in substantial and unpredictable ways.

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

Certain risks and important factors that could affect Byline’s future results are identified in our Annual Report on Form 10-K and other reports we file with the Securities and Exchange Commission, including among other things under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020. 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.