Byline Bancorp(BY)2025-04-25 18:22Financial Data and Key Metrics Changes - The company reported net income of $28.2 million or $0.64 per diluted share, with total revenue at $103 million, down slightly from the prior quarter but up 2% year-on-year [27][28] - Pre-tax pre-provision income was $47.3 million, with a pre-tax pre-provision ROA of 209 basis points, marking the 10th consecutive quarter above 200 basis points [28][31] - Net interest income was $88.2 million, flat from the prior quarter, with a net interest margin (NIM) of 407 basis points, up 6 basis points from last quarter [28][37] Business Line Data and Key Metrics Changes - Total loans increased to $7 billion, up 8% annualized, with strong origination activity of $310 million, primarily driven by commercial banking and leasing [33][34] - Total deposits rose to $7.6 billion, up 5.1% annualized, with a shift in deposit mix from time to money market accounts [35] - Non-interest income totaled $14.9 million, lower than last quarter due to seasonality and lower gains from the SBA business [39] Market Data and Key Metrics Changes - The company experienced a decline in deposit costs by 26 basis points, driven by a better deposit mix [30] - Asset quality improved, with non-performing loans decreasing by 14 basis points to 76 basis points as of quarter end [31][42] - The allowance for credit losses remained strong at 1.43% of total loans, with credit costs at $9.2 million for the quarter [32][43] Company Strategy and Development Direction - The company aims to become the preeminent commercial bank in Chicago, with aspirations to cross the $10 billion asset mark [15][47] - Management emphasized a disciplined risk management approach while navigating through heightened uncertainty and volatility in the market [22][24] - The company is focused on organic growth and potential M&A opportunities, despite market disruptions [66][69] Management's Comments on Operating Environment and Future Outlook - Management noted a cautious sentiment among clients regarding capital expenditures and new investments due to evolving trade policies and economic uncertainty [22][23] - The company remains optimistic about its business model's resilience and its ability to support clients through the current environment [24][25] - Management expressed confidence in their capital planning and priorities, emphasizing growth support as the primary focus [14] Other Important Information - The company successfully integrated First Security, completing the transaction and systems conversion within 207 days [25][26] - Kroll Bond Rating Agency upgraded the company's debt rating, highlighting its financial strength and sound risk management practices [45][46] Q&A Session Summary Question: Current loan activity and organic growth outlook - Management reported strong demand for credit with $310 million in gross origination for the quarter, maintaining a mid-single-digit growth outlook for loans [55][59] Question: Impact of SBA underwriting changes - Management welcomed tighter standards in SBA underwriting, stating their own standards remained consistent and expressing optimism about long-term benefits [60][62][65] Question: M&A landscape and acquisition opportunities - Conversations regarding potential acquisitions are ongoing, with management optimistic about the fundamental reasons for M&A remaining intact despite market volatility [66][69] Question: Credit quality and reserve levels - Management noted no significant themes driving the increase in criticized and classified loans, emphasizing the importance of trend lines [80][84] - The reserve levels are calibrated based on economic forecasts, with potential adjustments depending on economic conditions [86][88] Question: Pre-provisioned earnings power and risks - Management highlighted the importance of managing expenses, net interest income, and non-interest income to maintain pre-tax pre-provision ROA above 2% [91][95] Question: Sponsor finance portfolio and approach - The company has a $700 million sponsor finance portfolio, focusing on lower middle-market companies with conservative leverage [98][100] Question: SBA gain on sales outlook - Management expects SBA gain on sales to average around $5 million per quarter, with current premiums close to 10% [111] Question: Integration of First Security and future expenses - Management indicated that the first clean quarter from the First Security integration would likely be the third quarter, with a focus on providing clarity on expenses [163][168]