Byline Bancorp, Inc. Reports Full Year and Fourth Quarter 2021 Financial Results

Select Full Year 2021 Financial Highlights

• Net income of $92.8 million, or $2.40 per diluted share
• Net interest margin of 3.84%
• Return on average assets of 1.40%
• Efficiency ratio of 57.27%
• Originated loans and leases increased $425.9 million, or 11.6%
• Non-interest-bearing deposits increased $395.7 million, or 22.5%
• Top SBA lender for Illinois and Wisconsin for the eighth consecutive year
• Returned $40.3 million capital to common stockholders through dividends and share repurchases

Select Fourth Quarter 2021 Financial Highlights

• Net income of $17.2 million, or $0.45 per diluted share
• Total revenue¹ of $80.7 million, including $61.7 million net interest income and $19.0 million non-interest income
• Net interest margin of 3.96%
• Return on average assets of 1.02%, as adjusted¹ 1.56%
• Total loan and lease production of $313.7 million
• Common Equity Tier 1 to risk weighted assets of 11.39%

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 $17.2 million, or $0.45 per diluted share, for the fourth quarter of 2021, compared with net income of $25.3 million, or $0.66 per diluted share, for the third quarter of 2021, and net income of $12.3 million, or $0.31 per diluted share, for the fourth quarter 2020. Adjusted net income¹ was $26.3 million, or $0.69 per adjusted diluted share, for the fourth quarter of 2021, compared with $26.4 million, or $0.69 per adjusted diluted share¹, for the third quarter of 2021, and $15.2 million, or $0.38 per adjusted diluted share, for the fourth quarter of 2020.

Roberto R. Herencia, Executive Chairman and Chief Executive Officer of Byline Bancorp, commented, “A lot has changed in the last year, and our fourth quarter and full year results highlight the value of our diversified business model, which allowed us to deliver strong results for our shareholders. This was an extraordinary year for the Byline franchise that brought both challenges and opportunities. I’m proud of how we came together to support our customers and communities while consistently executing on our strategic plan to drive organic loan and deposit growth resulting in a higher level of profitability. As we look ahead, I’m confident in our ability to create shareholder value as we continue to invest in talent and technology to drive revenue growth and efficiency improvement. We remain well positioned to support our continued growth and I want to thank all our employees for being flexible, for being resilient, and for bringing our core values to life for the benefit of our customers every day.”

Alberto J. Paracchini, President of Byline Bancorp, added, “We ended 2021 on a good note as our fourth quarter results were supported by continued strong inflows of commercial non-interest bearing deposits and annualized loan and lease growth of 6.6%, excluding PPP loans. During the quarter we announced the consolidation of six branch locations and the disposition of real estate in efforts to adapt to changes in customer behavior and improve operating efficiencies. During 2021, we returned $40.3 million of capital to shareholders through common dividends and share repurchases. As we moved through the year, we saw a favorable shift in our mix of earning assets and produced record earnings for the company. As we enter this new year in a strong position, we believe we continue to have a healthy loan pipeline and our focus remains on supporting new and existing customers, executing our strategy, and growing the value of our franchise.”

Board Approves Redemption of Series B Preferred Stock

On January 25, 2022, the Company's Board of Directors approved the redemption of all of the outstanding shares of the Company’s 7.50% fixed-to-floating, noncumulative perpetual preferred stock, Series B ("Series B Preferred Stock"), on March 31, 2022. The Company currently has 10,438 shares of Series B Preferred Stock, with a liquidation of preference of $1,000 per share, plus any declared and unpaid dividends from any prior dividend period.

Board Declares Cash Dividend of $0.09 per Share

On January 25, 2022, the Company's Board of Directors declared a cash dividend of $0.09 per share, payable on February 22, 2022, to stockholders of record of the Company's common stock as of February 8, 2022.

Consolidation of Six Branches and Disposal of Real Estate

On December 10, 2021 Byline announced plans to continue to optimize its branch network, dispose of a portfolio of owned real estate properties and reduce the amount of office square footage it occupies as part of its efforts to adapt to changes in customer behavior and improve operating efficiencies. Byline Bank plans to consolidate six of its 44 full-service branches during the second quarter of 2022. The Company also plans to dispose of a real estate portfolio that includes former branch locations and other properties and reduce the amount of office square footage it occupies to accommodate current trends in remote working preferences. The impact of the branch consolidations and the strategic real estate reduction is expected to result in total charges of approximately $15.0 million, of which $13.0 million were incurred during the fourth quarter 2021, with the remainder to be incurred during the first half of 2022, and expects to generate approximately $5.3 million in annualized cost savings. We expect to reinvest approximately 70% of the anticipated annualized cost savings into talent and technology that will further enhance our digital banking capabilities.

STATEMENTS OF OPERATIONS

Net Interest Income

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

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:

Net interest income for the fourth quarter of 2021 was $61.7 million, an increase of $1.9 million, or 3.1%, from the third quarter of 2021.

The increase in net interest income was primarily due to:

• An increase of $2.3 million in interest income on loans and leases, due to higher balances and yields on loans and leases.

Partially offset by:

• A decrease of $452,000 in other interest and dividend income due to lower dividends on equity investments.

Tax-equivalent net interest margin for the fourth quarter of 2021 was 3.97%, an increase of five basis points compared to the third quarter of 2021. Total net accretion income on acquired loans contributed nine basis points to the net interest margin for the fourth quarter of 2021 compared to 11 basis points for the third quarter of 2021, a decrease of two basis points. PPP loan interest income and net fee income combined contributed $4.5 million to net interest income for the fourth quarter of 2021 compared to $5.4 million for the third quarter of 2021.

The average cost of total deposits was 0.08% for the fourth quarter of 2021, flat compared to the third quarter of 2021. Average non-interest-bearing demand deposits increased $116.4 million, while average money market account deposits increased by $58.4 million. Average non-interest-bearing demand deposits were 42.0% of average total deposits for the fourth quarter of 2021 compared to 41.1% during the third quarter of 2021.

Provision for Loan and Lease Losses

The provision for loan and lease losses was a recapture of $1.3 million for the fourth quarter of 2021, a decrease of $1.6 million compared to a provision of $352,000 for the third quarter of 2021. The recapture of provision during the fourth quarter of 2021 was mainly driven by a decrease in non-performing loans and leases, and changes in qualitative factors due to continuing economic improvement.

Non-interest Income

The following table presents the components of non-interest income for the periods indicated:

Non-interest income for the fourth quarter of 2021 was $19.0 million, an increase of $519,000, or 2.8%, compared to $18.5 million for the third quarter of 2021.

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

• An increase of $178,000 in the fair value of equity securities, net, due to changes in the market value of securities; and
• An increase of $162,000 in net gains on sales of loans due to higher volume of loans sold.

Partially offset by:

• A decrease in net realized losses on securities available-for-sale of $152,000 due to sales of securities.

During the fourth quarter of 2021, we sold $113.9 million of U.S. government guaranteed loans compared to $104.2 million during the third 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 fourth quarter of 2021 was $59.0 million, an increase of $14.8 million, or 33.5%, from $44.2 million for the third quarter of 2021.

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

• An increase of $11.1 million in other non-interest expense mainly due to $8.4 million of impairment charges on assets held for sale and $4.1 million on branch consolidation charges; and
• An increase of $2.9 million in salaries and employee benefits mainly related to increases in salary expense of $499,000 with new additional hires, increase of $1.5 million in commissions and incentive expense, and $573,000 related to branch consolidation charges; and
• An increase of $1.2 million in loan and lease related expenses mainly related to higher expenses associated with originations of government guaranteed loans.

Our efficiency ratio was 70.88% for the fourth quarter of 2021 compared to 54.18% for the third quarter of 2021. Excluding asset impairment charges, our adjusted efficiency ratio¹ was 55.46% for the fourth quarter of 2021, compared with 52.35% for the third quarter of 2021.

INCOME TAXES

We recorded income tax expense of $5.9 million during the fourth quarter of 2021, compared to $8.5 million during the third quarter of 2021. The effective tax rate was 25.5% and 25.1% for the fourth quarter and third quarter of 2021, respectively.

STATEMENTS OF FINANCIAL CONDITION

Total assets were $6.7 billion at December 31, 2021, a decrease of $8.3 million compared to $6.7 billion at September 30, 2021.

The current quarter decrease was primarily due to:

• A decrease in net loans and leases of $66.5 million due to PPP forgiveness.

Partially offset by:

• An increase in securities available for sale of $26.9 million due to purchases of securities.

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

Paycheck Protection Program

The following table presents the net PPP loans outstanding as of December 31, 2021:

PPP loans decreased by $144.4 million in the fourth quarter of 2021 primarily as a result of forgiveness of PPP loans. Forgiveness for the fourth quarter 2021 was $160.3 million compared to $202.4 million for the third quarter of 2021.

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 $23.1 million at December 31, 2021, a decrease of $11.3 million from $34.5 million at September 30, 2021 primarily due to payoffs and resolutions; and
• Other real estate owned was $2.1 million at December 31, 2021, a decrease of $921,000 from $3.0 million at September 30, 2021 due to sales.

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 decreased to 1.21% at December 31, 2021 compared to 1.31% at September 30, 2021. The allowance for loan and lease losses as a percentage of total loans and leases held for investment excluding PPP loans decreased to 1.25% at December 31, 2021 from 1.40% at September 30, 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. Assuming we remain an emerging growth company, 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 fourth quarter of 2021 were $4.3 million, or 0.37% of average loans and leases, on an annualized basis, an increase of $2.8 million compared to $1.5 million, or 0.13% of average loans and leases, during the third quarter of 2021, and a decrease of $854,000 from $5.1 million or 0.47% of average loans and leases from the comparable period a year ago.

Net charge-offs for the fourth quarter of 2021 included $1.5 million in the unguaranteed portion of U.S. government guaranteed loans, while net charge-offs for the third quarter of 2021 and fourth quarter of 2020 included $1.3 million and $5.0 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 remained at $5.2 billion at December 31, 2021 compared to September 30, 2021. Non-interest-bearing deposits were 41.9% and 41.1% of total deposits at December 31, 2021 and September 30, 2021, respectively.

The decrease in the current quarter was primarily due to:

• A decrease in interest bearing checking deposits of $80.4 million primarily due to decreases in public funds deposits.

Partially offset by:

• An increase in non-interest-bearing deposits of $40.7 million, due to increases in consumer deposits; and
• An increase in money market demand accounts of $48.9 million, principally driven by business accounts.

Total borrowings and other liabilities were $704.7 million at December 31, 2021, a decrease of $17.1 million from $721.8 million at September 30, 2021, primarily driven by the repayment of the Paycheck Protection Program Liquidity Facility of $156.4 million, offset by increases in Federal Home Loan Bank advances of $135.0 million.

Stockholders’ Equity

Total stockholders’ equity was $836.4 million at December 31, 2021, an increase of $12.0 million from $824.4 million at September 30, 2021. The increase was primarily due to an increase in retained earnings, offset by a decrease in the fair value of available-for-sale securities.

Under its stock repurchase program, the Company repurchased an aggregate 1,331,708 shares at an average price of $21.68 during 2021. The Company did not repurchase any shares during the fourth quarter.

The following table presents actual regulatory capital dollar amounts and ratios of the Company and Byline Bank as of December 31, 2021:

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, January 28, 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 337883. A recorded replay can be accessed through February 11, 2022 by dialing (866) 813-9403; passcode: 531731.

A slide presentation relating to our fourth quarter 2021 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 $6.7 billion in assets and operates more than 40 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.

The COVID-19 pandemic is adversely affecting us, our employees, customers, counterparties and third-party service providers, and the ultimate extent of the impacts on our business, financial position, results of operations, liquidity, and prospects is uncertain. Deterioration in general business and economic conditions, including increases in unemployment rates or turbulence in U.S. or global financial markets, could adversely affect our revenues and the values of our assets and liabilities, reduce the availability of funding, and lead to a tightening of credit and further increase stock price volatility. In addition, changes to statutes, regulations, or regulatory policies or practices as a result of, or in response to COVID-19, could affect us in substantial and unpredictable ways.

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, 2020. 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.