• Net Income: $30.3 million or $0.69 per diluted share.
• Revenue: $102 million.
• Return on Average Assets (ROA): 129 basis points.
• Return on Tangible Common Equity (ROTCE): 14.5%.
• Pre-Tax Pre-Provision Income: $47.5 million.
• Net Interest Income: $87.5 million.
• Net Interest Margin (NIM): 3.89%.
• Total Loans: $6.9 billion.
• Total Deposits: $7.5 billion.
• Efficiency Ratio: 52%.
• Allowance for Credit Losses (ACL): $98.4 million.
• Non-Performing Loans (NPLs) to Total Loans: 1.02%.
• Common Equity Tier 1 (CET1) Ratio: 11.35%.
• Total Capital Ratio: 14.41%.
• Tangible Common Equity (TCE) Ratio: 9.72%.

• Warning! GuruFocus has detected 6 Warning Sign with BY.

Release Date: October 25, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Byline Bancorp Inc (NYSE:BY) reported strong profitability metrics, ranking in the top quartile among peers.
• The company announced a merger with First Security Bank Corp, adding $355 million in assets and $323 million in deposits.
• Net income for the third quarter was $30.3 million, or $0.69 per diluted share, with a strong return on tangible common equity of 14.5%.
• Total revenue increased to $102 million, driven by higher net interest income and non-interest income.
• Byline Bancorp Inc (NYSE:BY) was recognized with multiple workplace awards, highlighting its positive work culture and employee satisfaction.

Negative Points

• The net interest margin declined by 10 basis points to 3.89% due to higher cash balances and lower accretion.
• Loan growth remained flat at $6.9 billion, impacted by higher payoffs of acquired loans.
• Non-performing loans increased slightly, with NPLs to total loans at 1.02%, excluding government-guaranteed loans.
• Provision expenses rose to $7.5 million, attributed to increases in individually assessed loans in the government-guaranteed loan portfolio.
• Interest-bearing deposit costs increased more than expected, impacting the overall cost structure.

Q & A Highlights

Q: Alberto, could you expand on your enthusiasm and excitement coming out of the strategic planning process heading into next year? Are you optimistic about acquisitions as well? A: Yes, we see continued opportunities for transactions similar to the one we just announced. We are the largest publicly traded commercial bank in our market under $10 billion, and when we cross that threshold, we'll be the largest in our size category. This presents an excellent runway to continue executing our strategy. We are optimistic about attracting banking talent and serving customers well.

Q: Can you frame where you are from an infrastructure compliance perspective in preparing to cross the $10 billion threshold? A: We've been preparing for this over time, even as a smaller company. Investments will primarily be in people as we get close to crossing $10 billion. We want to ensure we have the capabilities and staff to meet heightened regulatory expectations. Organically, this could happen between the second half of 2025 and the first half of 2026, with flexibility to manage the timeline.

Q: Regarding loan growth outlook, have you seen changes in behavior from the commercial real estate side with initial rate cuts? A: We need to see more short-term rates coming down to impact behavior significantly. Our commercial real estate pipeline is higher today than at any point this year, but this is not strictly rate-driven. Well-capitalized sponsors are taking advantage of opportunities, and we are positioned to lend to them.

Q: On credit and net charge-offs, do you expect the trend to continue at the current level, or will it normalize? A: Pay attention to the PCD component, as these are acquired loans now flowing through charge-offs. Excluding PCD, the charge-off rate is around 35 basis points, consistent with our historical rate.

Q: With capital levels above your target, any thoughts on deploying excess capital? A: If we generate excess capital and operate above our short to medium-term needs, we'll look for ways to return it to shareholders, such as dividends or buybacks. We also want the flexibility to act on attractive market opportunities, as we did this quarter.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.