Byline Bancorp, Inc. Common Stock 2026 Q3 Earnings Call

Thank you, Ben. Good morning, everyone, and thank you for joining us today for the Byline Bancorp third quarter 2026 earnings call. In accordance with Regulation FD, this call is being recorded and is available via webcast on 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 its 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 measure 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 in non-GAAP financial measures disclosures in the earnings release. As a reminder for investors, we plan to participate in two investor conferences during the quarter, the Hovde Group Financial Services Conference in Orlando and the Piper Sandler Financial Services Conference in Miami, both in November. With that, I will now turn the conference call over to Alberto Paracchini, president of Byline Bancorp.

Thank you, Brooks. Good morning, everyone, and thank you for joining us to review our third quarter results. With me today are our chairman and CEO, Roberto Herencia, our CFO, Tom Bell, and our chief credit officer, Mark Fucinato. In terms of the agenda for today, I'll kick us off with the highlights for the quarter, followed by Tom, who will walk you through the financials. I'll come back before wrapping up the call for questions. As always, you can find the deck for this morning on the IR section of our website, and please refer to the disclaimer at the front. Before we get started, I'd like to pass the call over to Roberto for his comments.

Roberto? Thank you, Alberto, and good morning to all.

Thank you for spending a few minutes with us this morning. Another excellent quarter with notable positive developments. Financial results were solid and consistent. Quite a few records achieved this quarter. Key metrics were once again top quartile or up decile among our peer group. We increased our dividend during the quarter and continued to repurchase shares opportunistically. We also announced the acquisition of Illinois State Bancorp, and with that, the analyst community gets the certainty they've been so eager to obtain as to when we will cross the $10 billion threshold. Before passing the call back to Alberto and the team, I would like to talk about these details. I want to spend a few minutes, as I usually do, talking about our people and leadership, which is, of course, what makes these results possible.

Sadly, I first want to take a moment to remember our colleague, Matt Robertson, who passed away in September. Matt was part of the Byline family for more than seven years and led one of our commercial real estate teams. He was an accomplished banker and a respected leader in the Chicago commercial real estate community. What stands out the most about Matt is the impact he had on the people around him. Matt was a mentor to many of our younger bankers and credit professionals. He was known for his positive attitude, his commitment to his colleagues and customers, and the energy he brought to Byline every day. I talk often about the importance of our people and the culture we are building at Byline. Matt represented so much of what we value: relationships, mentorship, teamwork, and genuinely caring about the people around you.

We miss Matt greatly, and our thoughts remain with his wife, his children, and all of Matt's family, friends, and colleagues. We are grateful for the time we had with Matt and for the lasting impact he made at Byline and on so many of us personally. More broadly, I am especially proud that Byline was recently named one of American Banker's 2026 Best Banks to Work For. This recognition is particularly meaningful because employee feedback is a central part of this evaluation. We work hard to build a culture where people feel connected to the organization, have opportunities to develop and build meaningful careers, and understand the important role they play in our success. We remain focused on developing our people, creating opportunities from within and making sure we have the leadership depth necessary for $10 billion and beyond. We actually do. This leads directly to the leadership transitions and organizational changes we announced earlier this month, effective January 1, 2027.

Brogan Ptacin, Head of Commercial Banking, and Mark Fucinato, Chief Credit Officer, will retire at the end of this year after a combined 25 years of service to Byline. Brogan has been instrumental in building our commercial banking franchise and strengthening our position in the Chicago market. Mark has played an equally important role in strengthening our credit infrastructure and building the disciplined credit culture that is fundamental to how we operate. Both have also invested considerable time in developing the people around them. A condition to their retirement. I am being playful with that last comment, of course, just a bit. We are incredibly grateful for their leadership and the lasting positive impact they have had here at Byline.

We're delighted that Brogan and Mark will remain involved in advisory capacities for the foreseeable future with us. If we had an official Chicago Bankers Hall of Fame, these two individuals would be inducted without a wait period. As part of these planned transitions, we shared in an 8-K earlier this month, the names of the Named Executive Officers that will lead the reorganized commercial bank and credit functions. There are also many other promotions that cascade from these changes beyond the NEOs, including expanded responsibilities and even a swap or exchange of roles into C-suite leaders as part of our commitment to developing leadership. Singling out all of them would not be appropriate in an earnings call.

The overarching message, however, is that these moves are intentional, giving talented leaders opportunities to lead different parts of the organization, building broader experience, and strengthening our executive bench as we cross the $10 billion threshold. We have known for some time that these transitions were approaching, and we've been deliberate in preparing for them. To me, that is what good succession planning looks like. We are confident in the team we have in place and excited about what this next generation of leadership will bring to Byline. I am proud of the organization we're building together. These changes demonstrate the depth of leadership we have developed across the company and reinforce something I have said many times, our people and our culture are fundamental to our success.

This team, our people in general, anchors the optimism and excitement I feel about Byline's growth prospects and our progress towards becoming the premier commercial bank in Chicago. With that, Alberto, I'll turn it back to you.

Great. Thank you, Roberto. Moving on to slide 4 on the deck. The third quarter combined strong financial results with several important milestones. We delivered record net income and revenue, expanded our net interest margin, and grew deposits while maintaining strong capital levels. We also announced definitive agreement to acquire Illinois State Bancorp and returned capital to shareholders through a higher dividend as well as share repurchases. All in all, a very productive quarter for Byline. Net income came in at $41.8 million or $0.94 per diluted share, up from $40.2 million and $0.90 last quarter. EPS was up 4% linked quarter and up approximately 15% from a year ago. Revenue reached a record $121 million, up 3% from the second quarter with growth in both net interest income and non-interest income.

These results translated into an ROA of 167 basis points, ROTCE of just under 15%, and pre-tax pre-provision ROA of 245 basis points. Expenses totaled $59.8 million, and our efficiency ratio was 48.4%. While the ratio increased from the second quarter, it improved by 260 basis points on a year-on-year basis. Turning to the balance sheet. Deposits grew $168 million or 8.5% annualized to $8 billion. Our loan to deposit ratio declined to 93.2% from 96.1% last quarter, and we used excess cash to reduce wholesale funding and manage the size of the balance sheet. Loans and leases declined roughly 1% to $7.5 billion as elevated payoffs more than offset strong origination activity. We ended the quarter with assets just below $10 billion and have flexibility to manage the balance sheet through year-end.