Byline Bancorp, Inc. Reports First Quarter 2022 Financial Results

Select First Quarter 2022 Financial Highlights

• Net income of $22.3 million, or $0.58 per diluted share
• Net interest income of $58.7 million and $19.4 million non-interest income
  • Total revenue¹ of $78.2 million
• Net interest margin of 3.81%
• Return on average assets of 1.35%
• Efficiency ratio of 54.96%
• Non-interest bearing deposits 41.3% of total deposits
• Originated loan and leases increased $299.5 million, total loan and lease production of $324.9 million
• Common Equity Tier 1 to risk weighted assets of 10.75%

Byline Bancorp, Inc. ("Byline", the “Company”, "we", "our", or "us")(NYSE: BY), the parent company of Byline Bank (the “Bank”), today reported net income of $22.3 million, or $0.58 per diluted share, for the first quarter of 2022, compared with net income of $17.2 million, or $0.45 per diluted share, for the fourth quarter of 2021, and net income of $21.8 million, or $0.56 per diluted share, for the first quarter 2021.

Roberto R. Herencia, Executive Chairman and Chief Executive Officer of Byline Bancorp, Inc., commented, “During the first quarter, we delivered strong results driven by solid loan and lease production and deposit gathering across our commercial banking platform. We continue to manage our operating expenses prudently, even as we invest for the future. Our credit quality remains strong, and we continue to approach credit decisions with a through-the-cycle lens. We continued to return capital to our stockholders, including repurchasing nearly $8 million of common stock. The year is off to a great start, and I would like to thank the Byline employees, who once again enabled our strong performance through their dedication and hard work.”

Alberto J. Paracchini, President of Byline Bancorp, Inc. added, “While the geopolitical and macro environment has become more volatile, we remain focused on executing our strategy. Despite this environment, our results during the quarter show we continued to effectively support our customers and I am encouraged that our more resilient and diversified franchise can generate solid returns in uncertain markets.”

Redemption of Series B Preferred Stock

On March 31, 2022, the Company redeemed all 10,438 outstanding shares of its 7.5% fixed-to-floating noncumulative perpetual preferred stock, Series B. The redemption totaled $10.6 million, including the quarterly dividend payment.

Board Declares Cash Dividend of $0.09 per Share

On April 26, 2022, the Company's Board of Directors declared a cash dividend of $0.09 per share, payable on May 23, 2022, to stockholders of record of the Company's common stock as of May 9, 2022.

STATEMENTS OF OPERATIONS

Net Interest Income

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:

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

Net interest income for the first quarter of 2022 was $58.7 million, a decrease of $3.0 million, or 4.8%, from the fourth quarter of 2021.

The decrease in net interest income was primarily due to:

• A decrease of $3.1 million in interest income on loans and leases, due to lower fee income mainly due to lower volume of PPP loan forgiveness.

Partially offset by:

• An increase of $536,000 in interest income on securities due to the rising interest rate environment.

Tax-equivalent net interest margin for the first quarter of 2022 was 3.82%, a decrease of 15 basis points compared to the fourth quarter of 2021. Total net accretion income on acquired loans contributed 10 basis points to the net interest margin for the first quarter of 2022 compared to nine basis points for the fourth quarter of 2021, an increase of one basis point. PPP loan interest income and net fee income combined, contributed $2.7 million to net interest income for the first quarter of 2022 compared to $4.5 million for the fourth quarter of 2021.

The average cost of total deposits was 0.08% for the first quarter of 2022, flat compared to the fourth quarter of 2021. Average non-interest-bearing demand deposits increased $25.5 million, while average money market account deposits increased by $166.0 million. Average non-interest-bearing demand deposits were 41.7% of average total deposits for the first quarter of 2022 compared to 42.0% during the fourth quarter of 2021.

Provision for Loan and Lease Losses

The provision for loan and lease losses was $5.0 million for the first quarter of 2022, an increase of $6.3 million compared to a recapture of provision of $1.3 million for the fourth quarter of 2021. The increase in provision during the first quarter of 2022 was mainly driven by changes to qualitative factors surrounding macroeconomic environment and growth in the loan and lease 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 2022 was $19.4 million, an increase of $412,000, or 2.2%, compared to $19.0 million for the fourth quarter of 2021.

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

• An increase of $1.2 million in other non-interest income due to higher swap income; and
• A decrease of $1.3 million in loan servicing asset revaluation charges due to lower downward asset revaluation adjustment resulting from favorable fair value adjustments due to decreased prepayment speeds and discount rates.

Partially offset by:

• A decrease in net gains on sales of loans of $2.1 million due to lower volume of sales and lower premium rates.

During the first quarter of 2022, we sold $102.3 million of U.S. government guaranteed loans compared to $113.9 million during the fourth quarter of 2021.

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 2022 was $44.6 million, a decrease of $14.4 million, or 24.4%, from $59.0 million for the fourth quarter of 2021.

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

• A decrease of $12.4 million in asset impairment charges, which were taken during the fourth quarter of 2021 due to branch consolidations and our real estate strategy; and
• A decrease of $3.2 million in loan and lease related expenses mainly related to the recapture of government guaranteed loan expenses.

Our efficiency ratio was 54.96% for the first quarter of 2022 compared to 70.88% for the fourth quarter of 2021. Excluding asset impairment charges, our adjusted efficiency ratio¹ was 55.46% for the fourth quarter of 2021.

INCOME TAXES

We recorded income tax expense of $6.3 million during the first quarter of 2022, compared to $5.9 million during the fourth quarter of 2021. The effective tax rate was 22.0% and 25.5% for the first quarter of 2022 and fourth quarter of 2021, respectively. The decrease in the effective tax rate during the first quarter of 2022 was a result of income tax benefits related to share-based compensation.

STATEMENTS OF FINANCIAL CONDITION

Total assets were $6.8 billion at March 31, 2022, an increase of $138.5 million compared to $6.7 billion at December 31, 2021.

The current quarter increase was primarily due to:

• An increase in net loans and leases of $247.5 million primarily due to growth in originated commercial real estate and commercial and industrial loans.

Partially offset by:

• A decrease in securities available-for-sale of $85.2 million due to changes in market values and additional paydowns received during the period.

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

PPP loans outstanding were $36.3 million as of March 31, 2022, compared with $123.7 million at December 31, 2021. The decreased was as a result of forgiveness of PPP loans. Forgiveness for the first quarter 2022 was $73.7 million compared to $160.3 million for the fourth quarter of 2021. As of March 31, 2022, 279 PPP loans remain outstanding, and more than 94% of PPP loan balances have been forgiven.

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 $20.3 million at March 31, 2022, a decrease of $2.9 million from $23.1 million at December 31, 2021 primarily due to payoffs.

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 increased to 1.24% at March 31, 2022 compared to 1.21% at December 31, 2021.

In June 2016, the Financial Accounting Standards Board (“FASB”) issued new guidance on the recognition of credit losses, otherwise known as "CECL", which replaces the incurred loss impairment methodology with a methodology that reflects current expected credit losses. In November 2019, the FASB delayed the effective date of the standard for smaller reporting companies, which includes emerging growth companies. The Company anticipates adopting the standard on December 31, 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 2022 were $549,000, or 0.05% of average loans and leases, on an annualized basis, a decrease of $3.7 million compared to $4.3 million, or 0.37% of average loans and leases, during the fourth quarter of 2021, and a decrease of $4.6 million from $5.1 million or 0.47% of average loans and leases from the comparable period a year ago.

Net charge-offs for the first quarter of 2022 included $362,000 in the unguaranteed portion of U.S. government guaranteed loans, while net charge-offs for the fourth quarter of 2021 and first quarter of 2021 included $1.5 million and $3.3 million, respectively, 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 increased to $5.5 billion at March 31, 2022 compared to $5.2 billion at December 31, 2021. Non-interest-bearing deposits were 41.3% and 41.9% of total deposits at March 31, 2022 and December 31, 2021, respectively.

The increase in the current quarter was primarily due to:

• An increase in money market demand accounts of $251.4 million, driven primarily by business accounts; and
• An increase in non-interest-bearing deposits of $123.2 million, due to increases in commercial deposits.

Partially offset by:

• A decrease in time deposits of $44.6 million, principally driven by maturities.

Total borrowings and other liabilities were $515.9 million at March 31, 2022, a decrease of $188.9 million from $704.7 million at December 31, 2021, primarily driven by a $210.0 million decrease in FHLB advances.

Stockholders’ Equity

Total stockholders’ equity was $788.7 million at March 31, 2022, a decrease of $47.7 million from $836.4 million at December 31, 2021. The decrease was primarily due to an increase in accumulated other comprehensive loss, the repurchase of shares of our common stock under the Company's stock repurchase program, and the redemption of the Series B Preferred Stock. These were offset by an increase to retained earnings.

Under its stock repurchase program, the Company repurchased an aggregate 282,819 shares of its common stock at an average price of $26.84 per share during the first quarter of 2022.

The following table presents actual regulatory capital dollar amounts and ratios of the Company and Byline Bank as of March 31, 2022:

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 29, 2022 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 (844) 200-6205; passcode 864125. A recorded replay can be accessed through May 13, 2022 by dialing (866) 813-9403; passcode: 091877.

A slide presentation relating to our first quarter 2022 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 $6.8 billion in assets and operates more than 30 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.

Forward-Looking Statements

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

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

Certain risks and important factors that could affect Byline’s future results are identified in 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, 2021. 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.