Byline Bancorp(US:BY)2021-11-04 16:00PART I. FINANCIAL INFORMATION Financial Statements This section presents Byline Bancorp, Inc.'s unaudited interim condensed consolidated financial statements for the three and nine months ended September 30, 2021 Key Financial Highlights (as of September 30, 2021 vs. December 31, 2020) | Financial Metric | September 30, 2021 | December 31, 2020 | Change | |---|---|---|---| | Total Assets | $6.70 billion | $6.39 billion | +4.9% | | Net Loans and Leases | $4.55 billion | $4.27 billion | +6.6% | | Total Deposits | $5.16 billion | $4.75 billion | +8.6% | | Total Stockholders' Equity | $824.4 million | $805.5 million | +2.3% | Key Operational Highlights (Nine Months Ended September 30, 2021 vs. 2020) | Operational Metric | Nine Months 2021 | Nine Months 2020 | Change | |---|---|---|---| | Net Income | $75.6 million | $25.2 million | +200% | | Diluted EPS | $1.95 | $0.64 | +205% | | Net Interest Income | $174.7 million | $159.0 million | +9.9% | | Provision for Loan and Lease Losses | $2.8 million | $45.7 million | -94.0% | Note 1—Basis of Presentation This note outlines the preparation of unaudited interim condensed consolidated financial statements in accordance with U.S. GAAP, affirming a single reportable segment - The financial statements are prepared under GAAP for interim reporting and should be read alongside the company's 2020 annual financial statements35 - The company operates as a single reportable segment, with consolidated information used for operational evaluation37 Note 3—Securities This note details the company's securities portfolio, comprising available-for-sale and held-to-maturity instruments, and addresses unrealized losses Securities Portfolio Summary (Fair Value) | Category | September 30, 2021 | December 31, 2020 | |---|---|---| | Securities Available-for-Sale | $1,427.6 million | $1,447.2 million | | Securities Held-to-Maturity | $4.0 million | $4.6 million | - As of September 30, 2021, 97 available-for-sale securities had temporary unrealized losses totaling $18.9 million, with no intent or requirement to sell before cost recovery5356 - Securities pledged as collateral decreased to $361.0 million at September 30, 2021, from $731.8 million at December 31, 202058 Note 4—Loan and Lease Receivables This note details the loan and lease portfolio, which grew to $4.61 billion by September 30, 2021, highlighting key categories and PPP loan changes Loan and Lease Portfolio Composition | Loan Category | Sept 30, 2021 | Dec 31, 2020 | |---|---|---| | Commercial real estate | $1,615.9 million | $1,416.7 million | | Commercial and industrial | $1,535.4 million | $1,372.5 million | | Paycheck Protection Program (PPP) | $275.6 million | $527.0 million | | Residential real estate | $507.2 million | $569.4 million | | Lease financing receivables | $334.5 million | $223.3 million | | Construction, land development | $340.4 million | $231.6 million | | Total Loans and Leases | $4,609.2 million | $4,340.5 million | - Originated loans and leases increased to $4.10 billion, while acquired portfolios decreased due to reclassification and paydowns6870 Note 5—Allowance for Loan and Lease Losses and Reserve for Unfunded Commitments This note details the Allowance for Loan and Lease Losses (ALLL), which decreased to $60.6 million by September 30, 2021, reflecting lower provisions and net charge-offs ALLL Activity (Nine Months Ended Sept 30, 2021) | Metric | Amount (in thousands) | |---|---| | Beginning Balance (Jan 1, 2021) | $66,347 | | Provision for Loan & Lease Losses | $2,750 | | Charge-offs | ($10,366) | | Recoveries | $1,867 | | Ending Balance (Sept 30, 2021) | $60,598 | - The ALLL to total loans ratio was 1.31% at September 30, 2021, decreasing from 1.53% at year-end 2020299 - Total non-accrual loans decreased to $34.5 million at September 30, 2021, from $41.1 million at December 31, 202091 - Troubled Debt Restructurings (TDRs) decreased to $4.2 million at September 30, 2021, from $8.1 million at year-end 2020919495 Note 11—Deposits This note details the $5.16 billion increase in total deposits by September 30, 2021, primarily driven by growth in non-interest-bearing demand deposits Deposit Composition | Deposit Type | Sept 30, 2021 | Dec 31, 2020 | |---|---|---| | Non-interest-bearing demand | $2,117.7 million | $1,762.7 million | | Interest-bearing checking | $652.8 million | $494.4 million | | Money market demand | $1,057.4 million | $1,142.7 million | | Other savings | $627.3 million | $564.7 million | | Time deposits | $703.0 million | $787.5 million | | Total Deposits | $5,158.3 million | $4,752.0 million | Note 17 – Share-Based Compensation This note outlines share-based compensation under the 2017 Omnibus Plan, detailing restricted stock grants and outstanding awards, with $2.97 million in related expense - A total of 308,452 restricted shares were granted in the first nine months of 2021, with various vesting schedules189190 - As of September 30, 2021, 698,331 shares were available for future grants under the 2017 Omnibus Plan187 - Total unrecognized compensation expense for restricted stock was $7.8 million, with a remaining weighted-average amortization period of 2.4 years195 Note 19—Stockholders' Equity This note details stockholders' equity at $824.4 million as of September 30, 2021, including share repurchases and common stock dividends declared - The Board of Directors expanded the stock repurchase program in July 2021, authorizing the repurchase of an additional 1,250,000 shares213 - During the nine months ended September 30, 2021, the company repurchased 1,331,708 shares at a cost of $28.9 million214 - Cash dividends of $0.09 per common share were declared for Q3 2021, totaling $0.21 per share for the first nine months215 Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's overview of the company's financial performance and condition, highlighting significant increases in net income and asset growth Q3 2021 vs Q3 2020 Performance | Metric | Q3 2021 | Q3 2020 | Change | |---|---|---|---| | Net Income | $25.3 million | $13.1 million | +$12.2 million | | Diluted EPS | $0.66 | $0.34 | +$0.32 | | Net Interest Income | $59.8 million | $53.5 million | +$6.3 million | | Provision for Loan/Lease Losses | $0.4 million | $15.7 million | -$15.3 million | - The significant increase in net income was primarily driven by a substantial decrease in the provision for loan and lease losses, reflecting improved credit quality269273 - Total assets increased by $313.8 million (4.9%) to $6.7 billion, supported by a $406.2 million (8.5%) increase in total deposits327328 - Active payment deferrals related to COVID-19 were reduced to $2.0 million, representing 0.05% of loans and leases (excluding PPP loans)229352 Results of Operations This section details the company's operating results, highlighting a significant increase in net income for both the quarter and nine-month period, driven by lower provisions and higher net interest income - The increase in net interest income for Q3 2021 was driven by higher average loan balances and a lower cost of funds270 - The decrease in non-interest income for Q3 2021 was mainly due to a downward revaluation of the loan servicing asset270300 - The increase in non-interest expense for Q3 2021 was primarily due to higher salaries and employee benefits from new hires312314 - The efficiency ratio for Q3 2021 was 54.18%, with an adjusted efficiency ratio of 52.35%272322 Financial Condition This section details the company's financial condition, reporting $6.7 billion in total assets and $5.2 billion in deposits as of September 30, 2021, while maintaining a well-capitalized status - Total assets grew by $313.8 million, driven by a $268.7 million increase in loans and leases327 - Total deposits increased by $406.2 million, with non-interest-bearing deposits growing by $355.1 million328368 - Non-performing assets decreased by 21.0% to $37.5 million from $47.5 million at year-end 2020364 - The company and Byline Bank exceeded all regulatory capital requirements, with the company's Total capital to risk-weighted assets ratio at 14.78%389390 Quantitative and Qualitative Disclosures About Market Risk This section details the company's primary market risk, interest rate risk, and its management through simulation models, along with credit risk mitigation strategies - The primary market risk is identified as interest rate risk, arising from mismatches in asset and liability repricing414 Net Interest Income Sensitivity (Immediate Parallel Shift) | Rate Change | % Change in NII (Year 1) | % Change in NII (Year 2) | |---|---|---| | +300 bps | +23.7% | +34.7% | | +200 bps | +15.1% | +22.8% | | +100 bps | +5.7% | +9.7% | | -100 bps | -3.2% | -6.8% | - The company manages credit risk through well-defined underwriting policies, portfolio diversification, and an independent credit review process416 Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2021, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2021423 - No material changes occurred in internal control over financial reporting during the quarter ended September 30, 2021424 PART II. OTHER INFORMATION Legal Proceedings The company is not currently involved in any legal proceedings expected to have a material adverse effect on its financial condition or operations - The company is not currently party to any legal proceedings expected to have a material adverse effect on its business or financial condition428 Risk Factors No material changes to the risk factors previously disclosed in the company's 2020 Annual Report on Form 10-K have occurred - No material changes to risk factors have occurred since the filing of the 2020 Form 10-K429 Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's stock repurchase program, expanded in July 2021, and the shares repurchased during the third quarter Share Repurchases (Quarter Ended September 30, 2021) | Period | Total Shares Purchased | Average Price Paid per Share | |---|---|---| | July 2021 | 378,512 Shares | $22.56 per Share | | August 2021 | 1,268 Shares | $25.17 per Share | | September 2021 | 81,948 Shares | $22.92 per Share | | Total | 461,728 Shares | $22.63 per Share | - The Board of Directors authorized an expansion of the stock repurchase program on July 27, 2021, allowing for the repurchase of an additional 1,250,000 shares430 Defaults Upon Senior Securities No defaults upon senior securities were reported during the period - No defaults upon senior securities occurred during the period432 Other Information No other information was reported under this item - No other information was reported under this item434