UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2021~~2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______to ______

Commission File Number 001-38139

Byline Bancorp, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware

36-3012593

(State or Other Jurisdiction of

Incorporation or Organization)

(IRS Employer

Identification Number)

180 North LaSalle Street, Suite 300

Chicago, Illinois 60601

(Address of Principal Executive Offices)

(773) 244-7000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒No ☒No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934.


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐No☐No ☒

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock	BY	New York Stock Exchange

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Common Stock, $0.01 par value, ~~37,711,380~~ 37,477,753\shares outstanding as of November 2, ~~2021~~2022

BYLINE BANCORP, INC.

FORM 10-Q

September 30, ~~2021~~2022

INDEX


		Page

PART I.	FINANCIAL INFORMATION	3
Item 1.	Financial Statements. The Unaudited Interim Condensed Consolidated Financial Statements of Byline Bancorp, Inc. ~~filed as part of the report:~~	3
	Notes to Unaudited Interim Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	43
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	7876
Item 4.	Controls and Procedures	7977

PART II.	OTHER INFORMATION	8078
Item 1.	Legal Proceedings	8078
Item 1A.	Risk Factors	8078
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	8078
Item 3.	Defaults Upon Senior Securities	8078
Item 4.	Mine Safety Disclosures	8078
Item 5.	Other Information	8078
Item 6.	Exhibits	8179

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(UNAUDITED)



(dollars in thousands, except share data)	September 30, 2021			December 31, 2020			September 30, 2022			December 31, 2021
ASSETS
Cash and due from banks	$	46,900		$	41,432		$	56,546		$	35,247
Interest bearing deposits with other banks		95,978			41,988			159,744			122,684
Cash and cash equivalents		142,878			83,420			216,290			157,931
Equity and other securities, at fair value		10,299			8,764			7,279			10,578
Securities available-for-sale, at fair value		1,427,605			1,447,230			1,181,654			1,454,542
Securities held-to-maturity, at amortized cost (fair value at September 30, 2021—$4,033, December 31, 2020 —$4,573)		3,887			4,395
Securities held-to-maturity, at amortized cost (fair value at September 30, 2022—$3,825, December 31, 2021 —$3,992)								3,877			3,885
Restricted stock, at cost		15,927			10,507			27,077			22,002
Loans held for sale		48,372			7,924			33,975			64,460
Loans and leases:
Loans and leases		4,609,228			4,340,535			5,275,471			4,537,128
Allowance for loan and lease losses		(60,598	)		(66,347	)		(64,655	)		(55,012	)
Net loans and leases		4,548,630			4,274,188			5,210,816			4,482,116
Servicing assets, at fair value		23,597			22,042			21,127			23,744
Premises and equipment, net		76,995			86,728			59,049			62,548
Other real estate owned, net		3,033			6,350			4,402			2,112
Goodwill and other intangible assets, net		167,296			172,631			160,484			165,558
Bank-owned life insurance		60,992			10,009			81,592			80,039
Deferred tax assets, net		45,165			40,181			91,532			50,329
Accrued interest receivable and other assets		129,775			216,283			178,433			116,328
Total assets	$	6,704,451		$	6,390,652		$	7,277,587		$	6,696,172
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Non-interest-bearing demand deposits	$	2,117,749		$	1,762,676		$	2,142,183		$	2,158,420
Interest-bearing deposits		3,040,529			2,989,355			3,470,273			2,996,627
Total deposits		5,158,278			4,752,031			5,612,456			5,155,047
Other borrowings		539,119			647,901			653,954			519,723
Subordinated notes, net		73,473			73,342			73,648			73,517
Junior subordinated debentures issued to capital trusts, net		36,796			36,451			37,232			36,906
Accrued interest payable and other liabilities		72,367			75,463			152,732			74,597
Total liabilities		5,880,033			5,585,188			6,530,022			5,859,790
STOCKHOLDERS’ EQUITY
Preferred stock		10,438			10,438			—			10,438
Common stock		386			384			389			387
Additional paid-in capital		592,192			587,165			597,049			593,753
Retained earnings		258,077			191,098			326,560			271,676
Treasury stock, at cost		(31,161	)		(1,668	)		(51,535	)		(31,570	)
Accumulated other comprehensive income (loss), net of tax		(5,514	)		18,047
Accumulated other comprehensive loss, net of tax								(124,898	)		(8,302	)
Total stockholders’ equity		824,418			805,464			747,565			836,382
Total liabilities and stockholders’ equity	$	6,704,451		$	6,390,652		$	7,277,587		$	6,696,172


	September 30, 2021				December 31, 2020				September 30, 2022				December 31, 2021
	Preferred Shares		Common Shares		Preferred Shares		Common Shares		Preferred Shares		Common Shares		Preferred Shares		Common Shares
Par value	$	0.01	$	0.01	$	0.01	$	0.01	$	0.01	$	0.01	$	0.01	$	0.01
Shares authorized		50,000		150,000,000		50,000		150,000,000		50,000		150,000,000		50,000		150,000,000
Shares issued		10,438		39,170,541		10,438		38,736,540		—		39,515,466		10,438		39,203,747
Shares outstanding		10,438		37,690,087		10,438		38,618,054		—		37,465,902		10,438		37,713,903
Treasury shares		—		1,480,454		—		118,486		—		2,049,564		—		1,489,844

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


	Three Months Ended					Nine Months Ended						Three Months Ended						Nine Months Ended
	September 30,					September 30,						September 30,						September 30,
(dollars in thousands, except share and per share data)	2021			2020		2021			2020			2022			2021			2022			2021
INTEREST AND DIVIDEND INCOME
Interest and fees on loans and leases	$	56,291		$	51,036	$	164,423		$	155,347		$	72,824		$	56,291		$	187,924		$	164,423
Interest on securities		5,534			7,070		17,982			22,616			6,402			5,534			18,821			17,982
Other interest and dividend income		947			128		1,837			1,342			677			947			1,522			1,837
Total interest and dividend income		62,772			58,234		184,242			179,305			79,903			62,772			208,267			184,242
INTEREST EXPENSE
Deposits		986			2,760		3,465			14,810			5,971			986			9,186			3,465
Other borrowings		349			465		1,333			2,838			3,232			349			4,724			1,333
Subordinated notes and debentures		1,592			1,485		4,785			2,699			1,825			1,592			5,119			4,785
Total interest expense		2,927			4,710		9,583			20,347			11,028			2,927			19,029			9,583
Net interest income		59,845			53,524		174,659			158,958			68,875			59,845			189,238			174,659
PROVISION FOR LOAN AND LEASE LOSSES		352			15,740		2,750			45,713			4,176			352			15,079			2,750
Net interest income after provision for loan and lease losses		59,493			37,784		171,909			113,245			64,699			59,493			174,159			171,909
NON-INTEREST INCOME
Fees and service charges on deposits		1,867			1,603		5,299			4,731			2,128			1,867			6,071			5,299
Loan servicing revenue		3,344			2,936		9,301			8,674			3,422			3,344			10,186			9,301
Loan servicing asset revaluation		(2,650	)		1,122		(4,148	)		(2,653	)		(2,342	)		(2,650	)		(8,209	)		(4,148	)
ATM and interchange fees		1,201			1,028		3,257			3,089			1,007			1,201			3,187			3,257
Net realized gains on securities available-for-sale		130			1,037		1,456			2,412
Net realized gains (losses) on securities available-for-sale													(2	)		130			50			1,456
Change in fair value of equity securities, net		(275	)		154		36			301			(581	)		(275	)		(1,313	)		36
Net gains on sales of loans		12,761			12,671		33,350			23,900			5,580			12,761			26,390			33,350
Wealth management and trust income		815			693		2,305			1,970			995			815			2,943			2,305
Other non-interest income		1,302			990		4,383			1,946			1,785			1,302			6,274			4,383
Total non-interest income		18,495			22,234		55,239			44,370			11,992			18,495			45,579			55,239
NON-INTEREST EXPENSE
Salaries and employee benefits		25,978			23,126		72,372			67,197			29,587			25,978			86,243			72,372
Occupancy and equipment expense, net		4,982			5,220		15,617			16,103			3,919			4,982			13,456			15,617
Impairment charge on assets held for sale													—			1,434			—			3,981
Loan and lease related expenses		1,175			2,053		3,629			4,631			530			1,175			581			3,629
Legal, audit and other professional fees		2,710			2,390		7,822			6,802			2,733			2,710			7,153			7,822
Data processing		3,108			2,661		8,710			8,152			3,370			3,108			9,952			8,710
Net loss recognized on other real estate owned and other related expenses		42			349		1,052			1,324			275			42			487			1,052
Other intangible assets amortization expense		1,738			1,947		5,335			5,732			1,611			1,738			5,075			5,335
Other non-interest expense		4,447			3,941		11,466			12,460			4,153			3,013			11,559			7,485
Total non-interest expense		44,180			41,687		126,003			122,401			46,178			44,180			134,506			126,003
INCOME BEFORE PROVISION FOR INCOME TAXES		33,808			18,331		101,145			35,214			30,513			33,808			85,232			101,145
PROVISION FOR INCOME TAXES		8,502			5,260		25,549			10,038			7,857			8,502			19,982			25,549
NET INCOME		25,306			13,071		75,596			25,176			22,656			25,306			65,250			75,596
Dividends on preferred shares		196			196		587			587			—			196			196			587
INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	25,110		$	12,875	$	75,009		$	24,589		$	22,656		$	25,110		$	65,054		$	75,009
EARNINGS PER COMMON SHARE
Basic	$	0.68		$	0.34	$	1.99		$	0.65		$	0.61		$	0.68		$	1.76		$	1.99
Diluted	$	0.66		$	0.34	$	1.95		$	0.64		$	0.61		$	0.66		$	1.73		$	1.95

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)


	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	September 30,						September 30,						September 30,						September 30,
(dollars in thousands)	2021			2020			2021			2020			2022			2021			2022			2021
Net income	$	25,306		$	13,071		$	75,596		$	25,176		$	22,656		$	25,306		$	65,250		$	75,596
Securities available-for-sale
Unrealized holding gains (losses) arising during the period		(8,439	)		33			(32,876	)		30,100
Reclassification adjustments for net gains included in net income		(130	)		(1,037	)		(1,456	)		(2,412	)
Unrealized holding losses arising during the period														(66,365	)		(8,439	)		(205,036	)		(32,876	)
Reclassification adjustments for net (gains) losses included in net income														2			(130	)		(50	)		(1,456	)
Tax effect		2,387			280			9,560			(7,710	)		18,004			2,387			55,640			9,560
Net of tax		(6,182	)		(724	)		(24,772	)		19,978			(48,359	)		(6,182	)		(149,446	)		(24,772	)
Cash flow hedges
Unrealized holding gains arising during the period		651			—			1,606			—			20,531			651			45,088			1,606
Reclassification adjustments for net losses included in net income		29			22			71			64
Reclassification adjustments for net (gains) losses included in net income														(327	)		29			(8	)		71
Tax effect		(189	)		(7	)		(466	)		(18	)		(5,481	)		(189	)		(12,230	)		(466	)
Net of tax		491			15			1,211			46			14,723			491			32,850			1,211
Total other comprehensive income (loss)		(5,691	)		(709	)		(23,561	)		20,024
Comprehensive income	$	19,615		$	12,362		$	52,035		$	45,200
Total other comprehensive loss														(33,636	)		(5,691	)		(116,596	)		(23,561	)
Comprehensive income (loss)													$	(10,980	)	$	19,615		$	(51,346	)	$	52,035

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)


										Additional									Accumulated Other			Total
(dollars in thousands,	Preferred Stock				Common Stock					Paid-In			Retained			Treasury			Comprehensive			Stockholders’
except share data)	Shares		Amount		Shares			Amount		Capital			Earnings			Stock			Income (Loss)			Equity
Balance, January 1, 2021		10,438	$	10,438		38,618,054		$	384	$	587,165		$	191,098		$	(1,668	)	$	18,047		$	805,464
Net income		—		—		—			—		—			21,798			—			—			21,798
Other comprehensive loss, net of tax		—		—		—			—		—			—			—			(26,394	)		(26,394	)
Issuance of common stock upon exercise of stock options		—		—		55,908			1		750			—			—			—			751
Restricted stock activity, net		—		—		274,739			—		—			—			(244	)		—			(244	)
Issuance of common stock in connection with employee stock purchase plan		—		—		25,894			—		515			—			—			—			515
Cash dividends declared on preferred stock		—		—		—			—		—			(196	)		—			—			(196	)
Cash dividends declared on common stock ($0.06 per share)		—		—		—			—		—			(2,315	)		—			—			(2,315	)
Repurchase of common stock		—		—		(332,744	)		—		—			—			(6,363	)		—			(6,363	)
Share-based compensation expense		—		—		—			—		779			—			—			—			779
Balance, March 31, 2021		10,438	$	10,438		38,641,851		$	385	$	589,209		$	210,385		$	(8,275	)	$	(8,347	)	$	793,795
Net income		—		—		—			—		—			28,492			—			—			28,492
Other comprehensive income, net of tax		—		—		—			—		—			—			—			8,524			8,524
Issuance of common stock upon exercise of stock options		—		—		11,031			—		135			—			—			—			135
Restricted stock activity, net		—		—		(19,166	)		—		—			—			(344	)		—			(344	)
Cash dividends declared on preferred stock		—		—		—			—		—			(195	)		—			—			(195	)
Cash dividends declared on common stock ($0.06 per share)		—		—		—			—		—			(2,319	)		—			—			(2,319	)
Repurchase of common stock		—		—		(538,744	)		—		—			—			(12,093	)		—			(12,093	)
Share-based compensation expense		—		—		—			—		1,078			—			—			—			1,078
Balance, June 30, 2021		10,438	$	10,438		38,094,972		$	385	$	590,422		$	236,363		$	(20,712	)	$	177		$	817,073
Net income		—		—		—			—		—			25,306			—			—			25,306
Other comprehensive loss, net of tax		—		—		—			—		—			—			—			(5,691	)		(5,691	)
Issuance of common stock upon exercise of stock options		—		—		25,866			—		283			—			—			—			283
Restricted stock activity, net		—		—		12,879			1		(1	)		—			(38	)		—			(38	)
Issuance of common stock in connection with employee stock purchase plan		—		—		16,590			—		408			—			—			—			408
Cash dividends declared on preferred stock		—		—		—			—		—			(196	)		—			—			(196	)
Cash dividends declared on common stock ($0.09 per share)		—		—		—			—		—			(3,396	)		—			—			(3,396	)
Repurchase of common stock						(460,220	)		—		—			—			(10,411	)		—			(10,411	)
Share-based compensation expense		—		—		—			—		1,080			—			—			—			1,080
Balance, September 30, 2021		10,438	$	10,438		37,690,087		$	386	$	592,192		$	258,077		$	(31,161	)	$	(5,514	)	$	824,418
Net income		—		—		—			—		—			17,189			—			—			17,189
Other comprehensive loss, net of tax		—		—		—			—		—			—			—			(2,788	)		(2,788	)
Issuance of common stock upon exercise of stock options		—		—		23,092			—		187			—			100			—			287
Restricted stock activity, net		—		—		(9,994	)		—		—			—			(509	)		—			(509	)
Issuance of common stock in connection with employee stock purchase plan		—		—		10,718			1		293			—			—			—			294
Cash dividends declared on preferred stock		—		—		—			—		—			(196	)		—			—			(196	)
Cash dividends declared on common stock ($0.09 per share)		—		—		—			—		—			(3,394	)		—			—			(3,394	)
Share-based compensation expense		—		—		—			—		1,081			—			—			—			1,081
Balance, December 31, 2021		10,438	$	10,438		37,713,903		$	387	$	593,753		$	271,676		$	(31,570	)		(8,302	)	$	836,382

Additional

Accumulated
Other

Total

(dollars in thousands,

Preferred Stock

Common Stock

Paid-In

Retained

Treasury

Comprehensive

Stockholders’

except share data)

Shares

Amount

Shares

Amount

Capital

Earnings

Stock

Income (Loss)

Equity

Balance, January 1, 2020

10,438

$
10,438

38,256,500

$
379

$
580,965

$
159,033

$
—

$
(700
)

$
750,115

Net income

—

—

—

—

—

2,966

—

—

2,966

Other comprehensive income,
   net of tax

—

—

—

—

—

—

—

11,048

11,048

Issuance of common stock
   upon exercise of stock options

—

—

55,402

1

676

—

—

—

677

Restricted stock activity

—

—

174,036

—

—

—

—

—

—

Issuance of common stock in
   connection with employee
   stock purchase plan

—

—

15,569

—

268

—

—

—

268

Cash dividends declared on
   preferred stock

—

—

—

—

—

(196
)

—

—

(196
)
Cash dividends declared on
   common stock ($0.03 per
   share)

—

—

—

—

—

(1,151
)

—

—

(1,151
)
Repurchase of common stock

—

—

(118,486
)

—

—

—

(1,668
)

—

(1,668
)
Share-based compensation
   expense

—

—

—

—

608

—

—

—

608

Balance, March 31, 2020

10,438

$
10,438

38,383,021

$
380

$
582,517

$
160,652

$
(1,668
)

$
10,348

$
762,667

Net income

—

—

—

—

—

9,139

—

—

9,139

Other comprehensive income,
   net of tax

—

—

—

—

—

—

—

9,685

9,685

Issuance of common stock
   upon exercise of stock options

—

—

5,196

—

56

—

—

—

56

Restricted stock activity

—

—

—

1

(1
)

—

—

—

—

Cash dividends declared on
   preferred stock

—

—

—

—

—

(195
)

—

—

(195
)
Cash dividends declared on
   common stock ($0.03 per
   share)

—

—

—

—

—

(1,152
)

—

—

(1,152
)
Share-based compensation
   expense

—

—

—

—

735

—

—

—

735

Balance, June 30, 2020

10,438

$
10,438

38,388,217

$
381

$
583,307

$
168,444

$
(1,668
)

$
20,033

$
780,935

Net income

—

—

—

—

—

13,071

—

—

13,071

Other comprehensive loss,
   net of tax

—

—

—

—

—

—

—

(709
)

(709
)
Issuance of common stock
   upon exercise of stock options

—

—

165,375

1

1,814

—

—

—

1,815

Restricted stock activity

—

—

(5,886
)

—

—

—

—

—

—

Issuance of common stock in
   connection with employee
   stock purchase plan

—

—

21,210

1

268

—

—

—

269

Cash dividends declared on
   preferred stock

—

—

—

—

—

(196
)

—

—

(196
)
Cash dividends declared on
   common stock ($0.03 per
   share)

—

—

—

—

—

(1,157
)

—

—

(1,157
)
Share-based compensation
   expense

—

—

—

—

668

—

—

—

668

Balance, September 30, 2020

10,438

$
10,438

38,568,916

$
383

$
586,057

$
180,162

$
(1,668
)

$
19,324

$
794,696

Net income

—

—

—

—

—

12,291

—

—

12,291

Other comprehensive loss,
   net of tax

—

—

—

—

—

—

—

(1,277
)

(1,277
)
Issuance of common stock
   upon exercise of stock options

—

—

49,138

1

540

—

—

—

541

Cash dividends declared on
   preferred stock

—

—

—

—

—

(196
)

—

—

(196
)
Cash dividends declared on
   common stock ($0.03 per
   share)

—

—

—

—

—

(1,159
)

—

—

(1,159
)
Share-based compensation
   expense

—

—

—

—

568

—

—

—

568

Balance, December 31, 2020

10,438

$
10,438

38,618,054

$
384

$
587,165

$
191,098

$
(1,668
)

$
18,047

$
805,464

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)


										Additional									Accumulated Other			Total														Additional									Accumulated Other			Total
(dollars in thousands,	Preferred Stock				Common Stock					Paid-In			Retained			Treasury			Comprehensive			Stockholders’			Preferred Stock						Common Stock					Paid-In			Retained			Treasury			Comprehensive			Stockholders’
except share data)	Shares		Amount		Shares			Amount		Capital			Earnings			Stock			Income (Loss)			Equity			Shares			Amount			Shares			Amount		Capital			Earnings			Stock			Income (Loss)			Equity
Balance, January 1, 2021		10,438	$	10,438		38,618,054		$	384	$	587,165		$	191,098		$	(1,668	)	$	18,047		$	805,464
Balance, January 1, 2022																										10,438		$	10,438			37,713,903		$	387	$	593,753		$	271,676		$	(31,570	)	$	(8,302	)	$	836,382
Net income		—		—		—			—		—			21,798			—			—			21,798			—			—			—			—		—			22,311			—			—			22,311
Other comprehensive loss, net of tax		—		—		—			—		—			—			—			(26,394	)		(26,394	)		—			—			—			—		—			—			—			(48,086	)		(48,086	)
Issuance of common stock upon exercise of stock options		—		—		55,908			1		750			—			—			—			751
Issuance of common stock upon exercise of stock options, net																										—			—			117,254			—		(9	)		—			(872	)		—			(881	)
Restricted stock activity, net		—		—		274,739			—		—			—			(244	)		—			(244	)		—			—			263,283			1		(1	)		—			(700	)		—			(700	)
Issuance of common stock in connection with employee stock purchase plan		—		—		25,894			—		515			—			—			—			515
Cash dividends declared on preferred stock		—		—		—			—		—			(196	)		—			—			(196	)
Cash dividends declared on common stock ($0.06 per share)		—		—		—			—		—			(2,315	)		—			—			(2,315	)
Repurchase of common stock		—		—		(332,744	)		—		—			—			(6,363	)		—			(6,363	)
Share-based compensation expense		—		—		—			—		779			—			—			—			779
Balance, March 31, 2021		10,438	$	10,438		38,641,851		$	385	$	589,209		$	210,385		$	(8,275	)	$	(8,347	)	$	793,795
Net income		—		—		—			—		—			28,492			—			—			28,492
Other comprehensive income, net of tax		—		—		—			—		—			—			—			8,524			8,524
Issuance of common stock upon exercise of stock options		—		—		11,031			—		135			—			—			—			135
Restricted stock activity, net		—		—		(19,166	)		—		—			—			(344	)		—			(344	)
Cash dividends declared on preferred stock		—		—		—			—		—			(195	)		—			—			(195	)
Cash dividends declared on common stock ($0.06 per share)		—		—		—			—		—			(2,319	)		—			—			(2,319	)
Repurchase of common stock		—		—		(538,744	)		—		—			—			(12,093	)		—			(12,093	)
Share-based compensation expense		—		—		—			—		1,078			—			—			—			1,078
Balance, June 30, 2021		10,438	$	10,438		38,094,972		$	385	$	590,422		$	236,363		$	(20,712	)	$	177		$	817,073
Net income		—		—		—			—		—			25,306			—			—			25,306
Other comprehensive loss, net of tax		—		—		—			—		—			—			—			(5,691	)		(5,691	)
Issuance of common stock upon exercise of stock options		—		—		25,866			—		283			—			—			—			283
Restricted stock activity, net		—		—		12,879			1		(1	)		—			(38	)		—			(38	)
Issuance of common stock in connection with employee stock purchase plan		—		—		16,590			—		408			—			—			—			408
Return of common stock in connection with employee stock purchase plan																										—			—			(39	)		—		(1	)		—			—			—			(1	)
Redemption of preferred stock																										(10,438	)		(10,438	)		—			—		—			—			—			—			(10,438	)
Cash dividends declared on preferred stock		—		—		—			—		—			(196	)		—			—			(196	)		—			—			—			—		—			(196	)		—			—			(196	)
Cash dividends declared on common stock ($0.09 per share)		—		—		—			—		—			(3,396	)		—			—			(3,396	)		—			—			—			—		—			(3,394	)		—			—			(3,394	)
Repurchase of common stock		—		—		(460,220	)		—		—			—			(10,411	)		—			(10,411	)		—			—			(282,819	)		—		—			—			(7,590	)		—			(7,590	)
Share-based compensation expense		—		—		—			—		1,080			—			—			—			1,080			—			—			—			—		1,264			—			—			—			1,264
Balance, September 30, 2021		10,438	$	10,438		37,690,087		$	386	$	592,192		$	258,077		$	(31,161	)	$	(5,514	)	$	824,418
Balance, March 31, 2022																										—		$	—			37,811,582		$	388	$	595,006		$	290,397		$	(40,732	)	$	(56,388	)	$	788,671
Net income																										—			—			—			—		—			20,283			—			—			20,283
Other comprehensive loss, net of tax																										—			—			—			—		—			—			—			(34,874	)		(34,874	)
Issuance of common stock upon exercise of stock options, net																										—			—			86,001			—		(590	)		—			(939	)		—			(1,529	)
Restricted stock activity, net																										—			—			(19,046	)		—		(31	)		—			(518	)		—			(549	)
Issuance of common stock in connection with employee stock purchase plan																										—			—			22,565			—		—			—			537			—			537
Cash dividends declared on common stock ($0.09 per share)																										—			—			—			—		—			(3,402	)		—			—			(3,402	)
Repurchase of common stock																										—			—			(232,000	)		—		—			—			(5,529	)		—			(5,529	)
Share-based compensation expense																										—			—			—			—		1,553			—			—			—			1,553
Balance, June 30, 2022																										—		$	—			37,669,102		$	388	$	595,938		$	307,278		$	(47,181	)	$	(91,262	)	$	765,161
Net income																										—			—			—			—		—			22,656			—			—			22,656
Other comprehensive loss, net of tax																										—			—			—			—		—			—			—			(33,636	)		(33,636	)
Restricted stock activity, net																										—			—			(28,951	)		1		(88	)		—			(199	)		—			(286	)
Cash dividends declared on common stock ($0.09 per share)																										—			—			—			—		—			(3,374	)		—			—			(3,374	)
Repurchase of common stock																										—			—			(174,249	)		—		—			—			(4,155	)		—			(4,155	)
Share-based compensation expense																										—			—			—			—		1,199			—			—			—			1,199
Balance, September 30, 2022																										—		$	—			37,465,902		$	389	$	597,049		$	326,560		$	(51,535	)	$	(124,898	)	$	747,565

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Nine Months Ended						Nine Months Ended
	September 30,						September 30,
(dollars in thousands)	2021			2020			2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	75,596		$	25,176		$	65,250		$	75,596
Adjustments to reconcile net income to net cash from operating activities:
Provision for loan and lease losses		2,750			45,713			15,079			2,750
Impairment loss on assets held for sale		3,981			747			—			3,981
Depreciation and amortization of premises and equipment		4,603			4,849			3,276			4,603
Net amortization of securities		6,649			5,445			3,360			6,649
Net change in fair value of equity securities, net		(36	)		(301	)		1,313			(36	)
Net realized gains on securities available-for-sale		(1,456	)		(2,412	)		(50	)		(1,456	)
Net losses (gains) on sales and valuation adjustments of premises and equipment		(497	)		156
Net gains on sales and valuation adjustments of premises and equipment								(93	)		(497	)
Net gains on sales of loans		(33,350	)		(23,900	)		(26,390	)		(33,350	)
Originations of U.S. government guaranteed loans		(323,010	)		(301,177	)		(269,505	)		(323,010	)
Proceeds from U.S. government guaranteed loans sold		312,733			232,251			320,601			312,733
Accretion of premiums and discounts on acquired loans, net		(5,001	)		(10,754	)		(4,418	)		(5,001	)
Net change in servicing assets		(1,555	)		(1,796	)		2,617			(1,555	)
Net losses on sales and valuation adjustments of other real estate owned		755			999			191			755
Net amortization of other acquisition accounting adjustments		5,261			5,676			5,075			5,261
Amortization of subordinated debt issuance cost		131			41			131			131
Accretion of junior subordinated debentures discount		345			385			326			345
Share-based compensation expense		2,937			2,011			4,016			2,937
Deferred tax provision, net of valuation		4,108			2,643			2,207			4,108
Increase in cash surrender value of bank owned life insurance		(983	)		(202	)		(1,550	)		(983	)
Loss on redemption of junior subordinated debentures		0			112
Changes in assets and liabilities:
Accrued interest receivable and other assets		9,706			(3,161	)		(54,598	)		9,706
Accrued interest payable and other liabilities		(17,565	)		20,552			118,791			(17,565	)
Net cash provided by operating activities		46,102			3,053			185,629			46,102
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of securities available-for-sale		(514,506	)		(742,303	)		(94,430	)		(514,506	)
Proceeds from maturities and calls of securities available-for-sale		37,108			173,581			22,832			37,108
Proceeds from paydowns of securities available-for-sale		269,286			189,913			114,026			269,286
Proceeds from sales of securities available-for-sale		280,962			80,509			23,293			280,962
Proceeds from maturities and calls of securities held-to-maturity		500			0			—			500
Redemption (purchases) of Federal Home Loan Bank stock, net		(5,420	)		12,475
Purchases of Federal Home Loan Bank stock, net								(5,075	)		(5,420	)
Net change in loans and leases		(272,913	)		(596,536	)		(742,449	)		(272,913	)
Purchases of premises and equipment		(1,762	)		(4,148	)		(3,329	)		(1,762	)
Proceeds from sales of premises and equipment		296			32			28			296
Proceeds from sales of assets held for sale		4,919			0			2,903			4,919
Proceeds from sales of other real estate owned		2,998			874			356			2,998
Investment in bank owned life insurance		(50,000	)		0			—			(50,000	)
Proceeds from bank owned life insurance death benefit		0			69
Net cash used in investing activities		(248,532	)		(885,534	)		(681,845	)		(248,532	)

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(UNAUDITED)


	Nine Months Ended						Nine Months Ended
	September 30,						September 30,
(dollars in thousands)	2021			2020			2022			2021
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits	$	406,321		$	662,724		$	457,409		$	406,321
Proceeds from short-term borrowings		11,953,000			6,407,800			16,555,400			11,953,000
Repayments of short-term borrowings		(11,832,000	)		(6,682,800	)		(16,445,400	)		(11,832,000	)
Proceeds from Paycheck Protection Program Liquidity Facility (PPPLF) advances		196,679			449,889
Proceeds from Paycheck Protection Program Liquidity Facility ("PPPLF") advances								—			196,679
Repayments of PPPLF advances		(412,182	)		(279	)		—			(412,182	)
Proceeds from subordinated notes, net		0			73,258
Repayments of junior subordinated debentures		0			(1,500	)
Net decrease in securities sold under agreements to repurchase		(14,279	)		(3,688	)
Net increase (decrease) in securities sold under agreements to repurchase								24,231			(14,279	)
Dividends paid on preferred stock		(587	)		(587	)		(196	)		(587	)
Dividends paid on common stock		(7,928	)		(3,412	)		(10,084	)		(7,928	)
Proceeds from issuance of common stock		1,731			3,085			927			1,731
Redemption of preferred stock								(10,438	)		—
Repurchases of common stock		(28,867	)		(1,668	)		(17,274	)		(28,867	)
Net cash provided by financing activities		261,888			902,822			554,575			261,888
NET INCREASE IN CASH AND CASH EQUIVALENTS		59,458			20,341
NET CHANGE IN CASH AND CASH EQUIVALENTS								58,359			59,458
CASH AND CASH EQUIVALENTS, beginning of period		83,420			80,737			157,931			83,420
CASH AND CASH EQUIVALENTS, end of period	$	142,878		$	101,078		$	216,290		$	142,878
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest	$	8,901		$	21,130		$	15,780		$	8,901
Cash paid during the period for taxes	$	25,525		$	7,697		$	28,048		$	25,525
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Transfer of loans to other real estate owned							$	2,837		$	436
Common dividend declared, not paid	$	102		$	1,196		$	86		$	102

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

Note 1—Basis of Presentation

These unaudited interim condensed consolidated financial statements include the accounts of Byline Bancorp, Inc., a Delaware corporation (the “Company,” “Byline,” “we,” “us,” “our”), a bank holding company whose principal activity is the ownership and management of its Illinois state chartered subsidiary bank, Byline Bank (the “Bank”), based in Chicago, Illinois.

These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission (“SEC”). In preparing these financial statements, the Company has evaluated events and transactions subsequent to September 30, ~~2021~~2022 for potential recognition or disclosure. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position and results of operations for the periods presented have been included. Certain information in footnote disclosures normally included in financial statements prepared in accordance with GAAP has been condensed or omitted pursuant to the rules and regulations of the SEC and the accounting standards for interim financial statements. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Consolidated Financial Statements for the years ended December 31, 2021, 2020, ~~2019,~~ and ~~2018.~~2019.

The Company has one reportable segment. The Company’s chief operating decision maker evaluates the operations of the Company using consolidated information for purposes of allocating resources and assessing performance. Therefore, segments disclosures are currently not required.

In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 855, “Subsequent Events,” the Company’s management has evaluated subsequent events for potential recognition or disclosure through the date of the issuance of these condensed consolidated financial statements.

The Company has 1 reportable segment. The Company’s chief operating decision maker evaluates the operations of the Company using consolidated information for purposes of allocating resources and assessing performance. Therefore, segments disclosures are not required.

No subsequent events were identified that would have required a change to the condensed consolidated financial statements or disclosure in the notes to the condensed consolidated financial statements.

Certain prior period amounts have been reclassified to conform to current period presentation. These reclassifications did not result in any changes to previously reported net income or stockholders’ equity.

Note 2—Accounting Pronouncements Recently Adopted or Issued

The following reflect recent accounting pronouncements that have been adopted or are pending adoption by the Company. As the Company qualifies as an emerging growth company and has elected the extended transition period for complying with new or revised accounting pronouncements, it is not subject to new or revised accounting standards applicable to public companies during the extended transition period. The accounting pronouncements pending adoption below reflect effective dates for the Company as an emerging growth company with the extended transition period.

~~BYLINE BANCORP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Table dollars in thousands, except share and per share data) (Unaudited)~~

~~Adopted Accounting Pronouncement~~

~~Leases (Topic 842)~~—~~On January 1, 2021, the Company adopted ASU No. 2016-02~~ ~~Leases~~ and subsequent amendments thereto, which requires the Company to recognize most leases on the balance sheet. We adopted the standard under a modified retrospective approach as of the date of adoption and elected to apply several of the available practical expedients, including:

•

~~Carry over of historical lease determination and lease classification conclusions~~

•

~~Carry over of historical initial direct cost balances for existing leases~~

•

~~Option not to recognize right-of-use assets and lease liabilities that arise from short-term leases (i.e. lease terms of twelve months or less)~~

•

~~Use of hindsight in determining the lease term and right-of-use assets~~

•

~~Accounting for lease and non-lease components in contracts in which the Company is a lessee as a single lease component~~

Adoption of the leasing standard resulted in the recognition of operating right-of-use assets of $10.5 million and operating lease liabilities of $11.7 million as of January 1, 2021. These amounts were determined based on the present value of remaining minimum lease payments, discounted using the Company’s incremental borrowing rate as of the date of adoption. This guidance also applies to the Company’s investment in direct financing leases, which are included in loans, but did not have a material impact. There was no material impact to the timing of expense or income recognition in the Company’s Consolidated Statements of Operations. Prior periods were not restated and continue to be presented under legacy GAAP. Refer to Note 8—Leases for further details.

Issued Accounting Pronouncements Pending Adoption

Financial Instruments—Credit Losses (Topic 326)—In June 2016, ~~FASB~~the Financial Accounting Standards Board ("FASB") issued ~~ASU~~Accounting Standards Update ("ASU") No. 2016‑13, Measurement of Credit Losses on Financial ~~Instruments~~.Instruments. Current GAAP requires an “incurred loss” methodology for recognizing credit losses that delays recognition until it is probable a loss has been incurred. The main objective of this ASU is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The amendments in this ASU replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The amendments in this ASU require a financial asset (or group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. The measurement of expected credit losses will be based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. Upon adoption, a banking organization must record a one-time adjustment to its credit loss allowances as of the beginning of the fiscal year of adoption equal to the difference, if any, between the amount of credit loss allowances under the prior methodology and the amount required under the new standard. The amendments in this ASU broaden the information that an entity must consider in

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

developing its expected credit loss estimate for assets measured either collectively or individually. The use of forecasted information incorporates more timely information in the estimate of expected credit loss, which will be more useful to users of the financial statements. In February 2022, FASB issued ASU No. 2022-02, Troubled Debt Restructurings (TDRs) and Vintage Disclosures, which eliminates the specific accounting guidance for TDRs and updates the vintage disclosure requirements to require disclosure of current period charge-offs by year of origination. This guidance will be implemented upon adoption. In November 2019, FASB issued ASU No. 2019-10, Effective Dates,, which delays the effective date of the ASU for entities not classified as ~~a public business entity. Assuming the~~Public Business Entities. The Company ~~remains an emerging growth company, the Company anticipates adopting~~will adopt the standard on December 31, 2022. The ~~Company is~~new guidance will result in an increase in the ~~process of implementation and determining the impact that this ASU~~allowance for loan losses, which will ~~have on the Company’s Consolidated Financial Statements.~~

~~Income Taxes (Topic 740)—In December 2019, FASB issued ASU No. 2019-12,~~ ~~Simplifying the Accounting for Income Taxes~~. The amendments in the ASU simplify the accounting for income taxes by removing the following: the exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items; the exception toreflect the requirement to ~~or not to recognize a deferred tax liability for a foreign entity when it becomes an equity method investment or it becomes a subsidiary, respectively; and~~include expected losses on purchased credit-impaired loans. The extent of the exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. The amendments in the ASU changes current authoritative guidance by requiring the recognition of franchise tax that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax; requiring an evaluation when a step up in the tax basis of goodwill should be considered part the of business combination; specifying that it is not required to allocate the consolidated amount of current and deferred tax expense to a legal entity that is

~~BYLINE BANCORP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Table dollars in thousands, except share and per share data) (Unaudited)~~

not subject to tax in its separate financial statements; and requiring that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The amendments are effective for annual periods beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022. Early adoption is permitted. Assuming the Company remains an emerging growth company, the new authoritative guidanceincrease will ~~be effective for reporting periods after January 1, 2022. The Company is currently evaluating the provisions of ASU No. 2019-12 to determine the potential impact the new standard will have~~depend on the ~~Company’s Consolidated Financial Statements.~~composition of the loan portfolio, as well as the economic conditions and forecasts as of the adoption date.

Reference Rate Reform (Topic 848)—In March 2020, FASB issued ASU No. 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial ~~Reporting~~ ~~and in January 2021, the FASB issued ASU No. 2021-01,~~ ~~Reference Rate Reform~~.Reporting. The amendments in the ASU provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments in the ASU provide optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference ~~LIBOR~~the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued. The ASU is intended to help stakeholders during the global market-wide reference rate transition period. The amendments in the ASU will be in effect for all entities as of March 12, 2020 through December 31, 2022. Banking regulators have provided guidance that prohibits new financial contracts from referencing LIBOR as the relevant index after December 31, 2021. The guidance goes on to indicate that beginning after June 2023, LIBOR can no longer be used for existing financial contracts. In December 2021, management approved the use of Term Secured Overnight Financing Rate ("SOFR") as an alternative reference rate to LIBOR. Other alternative reference rates may be considered in the future. At September 30, 2022, $822.4 million of loans, derivatives with a notional amount of $457.5 million, and securities available for sale with a fair value of $43.9 million, include fallback provisions that define the trigger events (an occurrence that precipitates the conversion from LIBOR to a new reference rate), and allow for the selection of a benchmark replacement and a spread adjustment between LIBOR and that benchmark replacement. Junior subordinated debentures with a carrying value of $37.2 million were also tied to LIBOR.

Fair Value Measurement (Topic 820) - In June 2022, the FASB issued ASU No. 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The guidance in the ASU clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account on the equity security and, therefore, is not considered in measuring fair value. The ASU also requires additional disclosures about the restriction. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The Company is ~~currently~~ evaluating the ~~impact~~accounting and disclosure requirements of ~~reference rate reform~~this update and does not expect them to ~~determine the potential impact the new standard will~~ have a material effect on the ~~Company’s Consolidated Financial Statements.~~consolidated financial statements.

Note 3—Securities

The following tables summarize the amortized cost and fair values of securities available-for-sale and securities held-to-maturity as of the dates shown and the corresponding amounts of gross unrealized gains and losses:


September 30, 2021	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
September 30, 2022										Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale
U.S. Treasury Notes	$	8,487	$	91	$	0		$	8,578	$	32,745	$	—	$	(1,828	)	$	30,917
U.S. Government agencies		124,244		885		(1,865	)		123,264		152,254		172		(21,525	)		130,901
Obligations of states, municipalities, and political subdivisions		101,499		3,725		(164	)		105,060		71,550		1		(7,986	)		63,565
Residential mortgage-backed securities
Agency		794,856		3,303		(12,986	)		785,173		726,035		—		(120,937	)		605,098
Non-agency		64,645		86		(722	)		64,009		132,847		—		(24,762	)		108,085
Commercial mortgage-backed securities
Agency		237,376		3,179		(3,146	)		237,409		194,347		—		(34,417	)		159,930
Corporate securities		64,842		2,002		(17	)		66,827		45,320		—		(3,704	)		41,616
Asset-backed securities		37,203		83		(1	)		37,285		43,582		—		(2,040	)		41,542
Total	$	1,433,152	$	13,354	$	(18,901	)	$	1,427,605	$	1,398,680	$	173	$	(217,199	)	$	1,181,654

September 30, 2021

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value

Held-to-maturity

Obligations of states, municipalities, and
political subdivisions

$
3,887

$
146

$
0

$
4,033

Total

$
3,887

$
146

$
0

$
4,033

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)


September 30, 2022	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Held-to-maturity
Obligations of states, municipalities, and political subdivisions	$	3,877	$	—	$	(52	)	$	3,825
Total	$	3,877	$	—	$	(52	)	$	3,825


December 31, 2021	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale
U.S. Treasury Notes	$	18,447	$	37	$	(8	)	$	18,476
U.S. Government agencies		141,096		661		(2,367	)		139,390
Obligations of states, municipalities, and political subdivisions		86,454		3,238		(56	)		89,636
Residential mortgage-backed securities
Agency		756,549		2,122		(15,015	)		743,656
Non-agency		146,499		4		(1,267	)		145,236
Commercial mortgage-backed securities
Agency		214,417		2,795		(3,661	)		213,551
Corporate securities		65,814		1,586		(54	)		67,346
Asset-backed securities		37,206		49		(4	)		37,251
Total	$	1,466,482	$	10,492	$	(22,432	)	$	1,454,542


December 31, 2021	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Held-to-maturity
Obligations of states, municipalities, and political subdivisions	$	3,885	$	107	$	—	$	3,992
Total	$	3,885	$	107	$	—	$	3,992

The Company did not classify securities as trading during the nine months ended September 30, 2022 or during 2021.

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

December 31, 2020

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value

Available-for-sale

U.S. Treasury Notes

$
23,468

$
344

$
0

$
23,812

U.S. Government agencies

113,088

600

(137
)

113,551

Obligations of states, municipalities, and
political subdivisions

135,513

6,991

(85
)

142,419

Residential mortgage-backed securities

Agency

764,951

13,645

(205
)

778,391

Non-agency

32,654

332

(5
)

32,981

Commercial mortgage-backed securities

Agency

244,496

6,046

(390
)

250,152

Corporate securities

59,020

1,850

(102
)

60,768

Asset-backed securities

45,255

26

(125
)

45,156

Total

$
1,418,445

$
29,834

$
(1,049
)

$
1,447,230

December 31, 2020

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value

Held-to-maturity

Obligations of states, municipalities, and political
subdivisions

$
4,395

$
178

$
0

$
4,573

Total

$
4,395

$
178

$
0

$
4,573

~~The Company did 0t classify securities as trading during the nine months ended September 30, 2021 or during 2020.~~

Gross unrealized losses and fair values, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, are summarized as follows:


			Less than 12 Months					12 Months or Longer					Total							Less than 12 Months					12 Months or Longer					Total
September 30, 2021	# of Securities		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
September 30, 2022																		# of Securities		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Available-for-sale
U.S. Treasury Notes																			6	$	30,917	$	(1,828	)	$	—	$	—		$	30,917	$	(1,828	)
U.S. Government agencies		10	$	74,687	$	(1,506	)	$	9,641	$	(359	)	$	84,328	$	(1,865	)		17		44,100		(5,144	)		69,740		(16,381	)		113,840		(21,525	)
Obligations of states, municipalities and political subdivisions		7		8,097		(164	)		0		0			8,097		(164	)		71		59,633		(6,932	)		2,776		(1,054	)		62,409		(7,986	)
Residential mortgage-backed securities
Agency		51		620,325		(12,626	)		11,805		(360	)		632,130		(12,986	)		101		154,271		(18,027	)		450,804		(102,910	)		605,075		(120,937	)
Non-agency		5		34,310		(722	)		0		0			34,310		(722	)		19		84,376		(18,943	)		23,709		(5,819	)		108,085		(24,762	)
Commercial mortgage-backed securities
Agency		21		75,001		(2,369	)		26,823		(777	)		101,824		(3,146	)		47		87,638		(14,347	)		65,745		(20,070	)		153,383		(34,417	)
Corporate securities		2		5,041		(17	)		0		0			5,041		(17	)		24		39,806		(3,514	)		1,810		(190	)		41,616		(3,704	)
Asset-backed securities		1		4,997		(1	)		0		0			4,997		(1	)		7		30,838		(563	)		10,704		(1,477	)		41,542		(2,040	)
Total		97	$	822,458	$	(17,405	)	$	48,269	$	(1,496	)	$	870,727	$	(18,901	)		292	$	531,579	$	(69,298	)	$	625,288	$	(147,901	)	$	1,156,867	$	(217,199	)
Held-to-maturiy
Obligations of states, municipalities, and political subdivisions																			5	$	3,825	$	(52	)	$	—	$	—		$	3,825	$	(52	)
Total																			5	$	3,825	$	(52	)	$	—	$	—		$	3,825	$	(52	)


			Less than 12 Months					12 Months or Longer					Total
December 31, 2021	# of Securities		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Available-for-sale
U.S. Treasury Notes		1	$	9,946	$	(8	)	$	—	$	—		$	9,946	$	(8	)
U.S. Government agencies		10		64,585		(1,590	)		19,223		(777	)		83,808		(2,367	)
Obligations of states, municipalities and political subdivisions		3		9,507		(56	)		—		—			9,507		(56	)
Residential mortgage-backed securities
Agency		51		612,280		(13,894	)		25,412		(1,121	)		637,692		(15,015	)
Non-agency		14		96,372		(1,257	)		761		(10	)		97,133		(1,267	)
Commercial mortgage-backed securities
Agency		19		64,473		(1,994	)		37,063		(1,667	)		101,536		(3,661	)
Corporate securities		3		7,502		(54	)		—		—			7,502		(54	)
Asset-backed securities		3		15,978		(4	)		—		—			15,978		(4	)
Total		104	$	880,643	$	(18,857	)	$	82,459	$	(3,575	)	$	963,102	$	(22,432	)

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

Less than 12 Months

12 Months or Longer

Total

December 31, 2020

# of
Securities

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Available-for-sale

U.S. Government agencies

5

$
30,639

$
(137
)

$
0

$
0

$
30,639

$
(137
)
Obligations of states,
   municipalities and political
   subdivisions

2

210

(85
)

0

0

210

(85
)
Residential mortgage-backed
   securities

Agency

8

45,253

(198
)

472

(7
)

45,725

(205
)
Non-agency

2

3,963

(5
)

0

0

3,963

(5
)
Commercial mortgage-backed
   securities

Agency

8

55,554

(390
)

0

0

55,554

(390
)
Corporate securities

6

10,916

(102
)

0

0

10,916

(102
)
Asset-backed securities

6

24,436

(99
)

4,952

(26
)

29,388

(125
)
Total

37

$
170,971

$
(1,016
)

$
5,424

$
(33
)

$
176,395

$
(1,049
)

Certain securities have fair values less than amortized cost and, therefore, contain unrealized losses. The Company evaluated the securities that had an unrealized loss for other than temporary impairment and determined all declines in value to be temporary. There were 97292 securities available-for-sale with unrealized losses at September 30, ~~2021.~~2022. There were 0five securities held-to-maturity with unrealized losses at September 30, ~~2021.~~2022. The Company anticipates full recovery of amortized cost with respect to these securities by ~~maturity, or sooner, in the event of a more favorable market interest rate environment.~~maturity. The Company does not intend to sell these securities and it is not more likely than not that the Company will be required to sell them before recovery of their amortized cost basis, which may be at maturity.

The proceeds from all sales of securities available-for-sale, and the associated gains and losses on sales and calls of securities, for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 are listed below:


	For the Three Months Ended				For the Nine Months Ended				For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,				September 30,				September 30,
	2021		2020		2021		2020		2022		2021		2022		2021
Proceeds	$	0	$	35,092	$	186,850	$	80,509	$	10,287	$	—	$	23,293	$	186,850
Gross gains		130		1,037		2,525		2,494		38		130		100		2,525
Gross losses		0		0		1,069		82		40		—		50		1,069

There were ~~$130,000~~$2,000 in net losses and ~~$1.5~~$50,000 in net gains on sales of securities reclassified from accumulated other comprehensive income into earnings during the three and nine months ended September 30, 2022, respectively. There were $130,000 and $1.5 million in net gains reclassified from accumulated other comprehensive income into earnings for the three and nine months ended September 30, 2021, respectively. ~~There were $1.0 million and $2.4 million in net gains reclassified from accumulated other comprehensive income into earnings for the three and nine months ended September 30, 2020, respectively.~~

Securities posted and pledged as collateral were ~~$361.0~~$331.8 million and ~~$731.8~~$332.3 million at September 30, ~~2021~~2022 and December 31, ~~2020, respectively, of which carrying amounts of $361.0 million and $323.9 million were pledged at~~2021. At September 30, ~~2021~~2022 and December 31, ~~2020, respectively. At September 30,~~ 2021, ~~and December 31, 2020,~~ of those pledged, the carrying amounts of securities pledged as collateral for public fund deposits were ~~$311.3~~$242.7 million and ~~$245.1~~$277.1 million, respectively, and for customer repurchase agreements of ~~$38.7~~$64.9 million and ~~$64.1~~$38.8 million, respectively. At September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, there were 0no securities pledged for advances from the Federal Home Loan Bank. Other securities were pledged for ~~derivative positions,~~ letters of credit and for purposes required or permitted by law. At September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than ~~10%~~10% of stockholders’ equity.

~~BYLINE BANCORP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Table dollars in thousands, except share and per share data) (Unaudited)~~

At September 30, ~~2021,~~2022, the amortized cost and fair value of debt securities are shown by contractual maturity. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.

Amortized
Cost

Fair
Value

Available-for-sale

Due in one year or less

$
23,201

$
23,402

Due from one to five years

26,476

27,466

Due from five to ten years

209,435

211,691

Due after ten years

77,163

78,455

Mortgage-backed securities

1,096,877

1,086,591

Total

$
1,433,152

$
1,427,605

Held-to-maturity

Due from one to five years

3,887

4,033

Total

$
3,887

$
4,033

~~Note 4—Loan and Lease Receivables~~

~~Outstanding loan and lease receivables as of the dates shown were categorized as follows:~~

September 30,

December 31,

2021

2020

Commercial real estate

$
1,615,875

$
1,416,731

Residential real estate

507,226

569,387

Construction, land development, and other land

340,428

231,602

Commercial and industrial

1,535,412

1,372,452

Paycheck Protection Program ("PPP")

275,619

527,044

Installment and other

1,396

1,942

Lease financing receivables

334,484

223,295

Total loans and leases

4,610,440

4,342,453

Net unamortized deferred fees and costs

(5,484
)

(5,764
)
Initial direct costs

4,272

3,846

Allowance for loan and lease losses

(60,598
)

(66,347
)
Net loans and leases

$
4,548,630

$
4,274,188

September 30,

December 31,

2021

2020

Lease financing receivables

Net minimum lease payments

$
337,512

$
234,472

Unguaranteed residual values

22,338

8,690

Unearned income

(25,366
)

(19,867
)
Total lease financing receivables

334,484

223,295

Initial direct costs

4,272

3,846

Lease financial receivables before allowance for
lease losses

$
338,756

$
227,141


	Amortized Cost		Fair Value
Available-for-sale
Due in one year or less	$	3,479	$	3,472
Due from one to five years		91,916		85,381
Due from five to ten years		188,480		168,618
Due after ten years		61,576		51,070
Mortgage-backed securities		1,053,229		873,113
Total	$	1,398,680	$	1,181,654
Held-to-maturity
Due in one year or less	$	2,719	$	2,697
Due from one to five years		1,158		1,128
Total	$	3,877	$	3,825

1514

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

Note 4—Loan and Lease Receivables

Outstanding loan and lease receivables as of the dates shown were categorized as follows:


	September 30,			December 31,
	2022			2021
Commercial real estate	$	1,865,689		$	1,663,256
Residential real estate		481,300			480,236
Construction, land development, and other land		458,864			327,143
Commercial and industrial		1,966,385			1,580,235
Paycheck Protection Program ("PPP")		1,571			127,184
Installment and other		1,323			1,322
Lease financing receivables		490,613			354,135
Total loans and leases		5,265,745			4,533,511
Net unamortized deferred fees and costs		4,511			(674	)
Initial direct costs		5,215			4,291
Allowance for loan and lease losses		(64,655	)		(55,012	)
Net loans and leases	$	5,210,816		$	4,482,116


	September 30,			December 31,
	2022			2021
Lease financing receivables
Net minimum lease payments	$	482,688		$	352,948
Unguaranteed residual values		47,911			27,953
Unearned income		(39,986	)		(26,766	)
Total lease financing receivables		490,613			354,135
Initial direct costs		5,215			4,291
Lease financing receivables before allowance for lease losses	$	495,828		$	358,426

Total loans and leases consist of originated loans and leases, acquired impaired loans and acquired non-impaired loans and leases. At September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, total loans and leases included the guaranteed amount of U.S. government guaranteed loans of ~~$396.6~~$130.9 million and ~~$635.0~~$231.2 million respectively. At September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the discount on the unguaranteed portion of U.S. government guaranteed loans was ~~$27.9~~$27.1 million and ~~$28.3~~$28.3 million, respectively, which are included in total loans and leases. At September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, installment and other loans included overdraft deposits of ~~$477,000~~$527,000 and ~~$496,000,~~$445,000, respectively, which were reclassified as loans. At September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, loans and leases and loans held for sale pledged as security for borrowings were ~~$2.0~~$2.1 billion and ~~$2.3~~$1.9 billion, respectively.

The minimum annual lease payments for lease financing receivables as of September 30, ~~2021~~2022 are summarized as follows:


	Minimum Lease Payments		Minimum Lease Payments
2021	$	27,875
2022		110,733	$	35,111
2023		85,005		154,438
2024		59,682		126,780
2025		39,328		91,453
2026				55,181
Thereafter		14,889		19,725
Total	$	337,512	$	482,688

Originated loans and leases represent originations excluding loans initially acquired in a business combination. However, once an acquired non-impaired loan reaches its maturity date, and is re-underwritten and renewed, it is internally

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

classified as an originated loan. Acquired impaired loans are loans acquired from a business combination with evidence of credit quality deterioration and are accounted for under ASC Topic 310-30. Acquired non-impaired loans and leases represent loans and leases acquired from a business combination without more than insignificant evidence of credit quality deterioration and are accounted for under ASC Topic 310-20. Acquired leases and revolving loans having evidence of credit quality deterioration do not qualify to be accounted for as acquired impaired loans and are accounted for under ASC Topic 310-20. The following tables summarize the balances for each respective loan and lease category as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


September 30, 2021	Originated		Acquired Impaired		Acquired Non-Impaired		Total
September 30, 2022									Originated		Acquired Impaired		Acquired Non-Impaired		Total
Commercial real estate	$	1,298,454	$	84,821	$	235,103	$	1,618,378	$	1,652,890	$	56,974	$	159,130	$	1,868,994
Residential real estate		387,578		61,893		58,283		507,754		410,285		37,246		34,313		481,844
Construction, land development, and other land		336,460		1,746		206		338,412		456,463		1,144		—		457,607
Commercial and industrial		1,480,076		6,651		49,678		1,536,405		1,938,320		3,029		26,959		1,968,308
Paycheck Protection Program		268,081		0		0		268,081		1,522		—		—		1,522
Installment and other		998		169		275		1,442		1,016		153		199		1,368
Lease financing receivables		331,149		0		7,607		338,756		492,744		—		3,084		495,828
Total loans and leases	$	4,102,796	$	155,280	$	351,152	$	4,609,228	$	4,953,240	$	98,546	$	223,685	$	5,275,471


December 31, 2021	Originated		Acquired Impaired		Acquired Non-Impaired		Total
Commercial real estate	$	1,379,000	$	72,160	$	214,588	$	1,665,748
Residential real estate		379,796		49,401		51,317		480,514
Construction, land development, and other land		323,886		1,312		201		325,399
Commercial and industrial		1,534,745		4,014		43,202		1,581,961
Paycheck Protection Program		123,712		—		—		123,712
Installment and other		940		164		264		1,368
Lease financing receivables		352,247		—		6,179		358,426
Total loans and leases	$	4,094,326	$	127,051	$	315,751	$	4,537,128

Acquired impaired loans—The unpaid principal balance and carrying amount of all acquired impaired loans are summarized below. The balances do not include an allowance for loan and lease losses of $2.4 million and $3.2 million at September 30, 2022 and December 31, 2021, respectively.


	September 30, 2022				December 31, 2021
	Unpaid Principal Balance		Carrying Value		Unpaid Principal Balance		Carrying Value
Commercial real estate	$	97,445	$	56,974	$	113,257	$	72,160
Residential real estate		81,765		37,246		95,056		49,401
Construction, land development, and other land		7,894		1,144		8,571		1,312
Commercial and industrial		4,977		3,029		10,201		4,014
Installment and other		823		153		858		164
Total acquired impaired loans	$	192,904	$	98,546	$	227,943	$	127,051

The following table summarizes the changes in accretable yield for acquired impaired loans for the three and nine months ended September 30, 2022 and 2021:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2022			2021			2022			2021
Beginning balance	$	13,529		$	24,474		$	18,595		$	27,696
Accretion to interest income		(2,550	)		(3,080	)		(7,367	)		(9,896	)
Reclassification from nonaccretable difference, net		1,696			1,217			1,447			4,811
Ending balance	$	12,675		$	22,611		$	12,675		$	22,611

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

December 31, 2020

Originated

Acquired
Impaired

Acquired
Non-Impaired

Total

Commercial real estate

$
1,017,587

$
108,484

$
295,599

$
1,421,670

Residential real estate

414,220

78,840

79,211

572,271

Construction, land development, and other land

226,408

4,113

212

230,733

Commercial and industrial

1,276,527

10,178

82,195

1,368,900

Paycheck Protection Program

517,815

0

0

517,815

Installment and other

1,267

202

536

2,005

Lease financing receivables

214,636

0

12,505

227,141

Total loans and leases

$
3,668,460

$
201,817

$
470,258

$
4,340,535

~~Acquired impaired loans—The unpaid principal balance and carrying amount of all acquired impaired loans are summarized below.~~ ~~The balances do not include an allowance for loan and lease losses of $4.3 million and $6.5 million, at September 30, 2021 and December 31, 2020, respectively.~~

September 30, 2021

December 31, 2020

Unpaid
Principal
Balance

Carrying
Value

Unpaid
Principal
Balance

Carrying
Value

Commercial real estate

$
126,738

$
84,821

$
154,233

$
108,484

Residential real estate

108,560

61,893

126,086

78,840

Construction, land development, and other land

9,301

1,746

12,677

4,113

Commercial and industrial

12,115

6,651

15,925

10,178

Installment and other

866

169

917

202

Total acquired impaired loans

$
257,580

$
155,280

$
309,838

$
201,817

~~The following table summarizes the changes in accretable yield for acquired impaired loans for the three and nine months ended September 30, 2021 and 2020:~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

2021

2020

2021

2020

Beginning balance

$
24,474

$
31,868

$
27,696

$
40,009

Accretion to interest income

(3,080
)

(5,763
)

(9,896
)

(15,420
)
Reclassification from nonaccretable difference, net

1,217

5,727

4,811

7,243

Ending balance

$
22,611

$
31,832

$
22,611

$
31,832

~~BYLINE BANCORP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Table dollars in thousands, except share and per share data) (Unaudited)~~

Acquired non-impaired loans and ~~leases~~—leases— The unpaid principal balance and carrying value for acquired non-impaired loans and leases at September 30, ~~2021~~2022 and December 31, ~~2020~~2021 were as follows:


	September 30, 2021				December 31, 2020				September 30, 2022				December 31, 2021
	Unpaid Principal Balance		Carrying Value		Unpaid Principal Balance		Carrying Value		Unpaid Principal Balance		Carrying Value		Unpaid Principal Balance		Carrying Value
Commercial real estate	$	240,271	$	235,103	$	302,091	$	295,599	$	162,716	$	159,130	$	219,277	$	214,588
Residential real estate		58,858		58,283		80,104		79,211		34,718		34,313		51,839		51,317
Construction, land development, and other land		271		206		278		212		63		—		265		201
Commercial and industrial		51,468		49,678		84,608		82,195		28,040		26,959		44,827		43,202
Installment and other		286		275		553		536		206		199		273		264
Lease financing receivables		7,638		7,607		13,978		12,505		3,091		3,084		6,199		6,179
Total acquired non-impaired loans and leases	$	358,792	$	351,152	$	481,612	$	470,258	$	228,834	$	223,685	$	322,680	$	315,751

Note 5—Allowance for Loan and Lease Losses and Reserve for Unfunded Commitments

Loans and leases considered for inclusion in the allowance for loan and lease losses include acquired non-impaired loans and leases, those acquired impaired loans with credit deterioration after acquisition, and originated loans and leases. Although all acquired loans and leases are included in the following table, only those with credit deterioration subsequent to acquisition date are included in the allowance for loan and lease losses.

The following tables summarize the balance and activity within the allowance for loan and lease losses, the components of the allowance for loan and lease losses in terms of loans and leases individually and collectively evaluated for impairment, and corresponding loan and lease balances by type for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021, are as follows:


September 30, 2022	Commercial Real Estate			Residential Real Estate			Construction, Land Development, and Other Land		Commercial and Industrial			Paycheck Protection Program		Installment and Other			Lease Financing Receivables			Total
Allowance for loan and lease losses
Three months ended
Beginning balance	$	19,818		$	2,489		$	1,792	$	34,735		$	—	$	11		$	3,591		$	62,436
Provision		1,115			204			553		2,040			—		2			262			4,176
Charge-offs		(1,102	)		(17	)		—		(1,184	)		—		(3	)		(416	)		(2,722	)
Recoveries		219			5			—		161			—		—			380			765
Ending balance	$	20,050		$	2,681		$	2,345	$	35,752		$	—	$	10		$	3,817		$	64,655
Nine months ended
Beginning balance	$	16,918		$	1,628		$	522	$	33,129		$	—	$	9		$	2,806		$	55,012
Provision		4,465			1,056			1,823		6,350			—		4			1,381			15,079
Charge-offs		(1,839	)		(17	)		—		(4,301	)		—		(3	)		(1,103	)		(7,263	)
Recoveries		506			14			—		574			—		—			733			1,827
Ending balance	$	20,050		$	2,681		$	2,345	$	35,752		$	—	$	10		$	3,817		$	64,655
Ending balance:
Individually evaluated for impairment	$	6,094		$	—		$	—	$	12,584		$	—	$	—		$	—		$	18,678
Collectively evaluated for impairment		12,631			1,831			2,247		23,089			—		8			3,817			43,623
Loans acquired with deteriorated credit quality		1,325			850			98		79			—		2			—			2,354
Total allowance for loan and lease losses	$	20,050		$	2,681		$	2,345	$	35,752		$	—	$	10		$	3,817		$	64,655

September 30, 2021

Commercial
Real Estate

Residential
Real Estate

Construction,
Land
Development,
and
Other Land

Commercial
and
Industrial

Paycheck
Protection
Program

Installment
and Other

Lease
Financing
Receivables

Total

Allowance for loan and
   lease losses

Three months ended

Beginning balance

$
19,541

$
1,364

$
619

$
38,284

$
0

$
9

$
1,902

$
61,719

Provision/(recapture)

1,108

(225
)

(61
)

(1,218
)

0

(2
)

750

352

Charge-offs

(564
)

(65
)

0

(1,456
)

0

0

(399
)

(2,484
)
Recoveries

287

2

0

380

0

0

342

1,011

Ending balance

$
20,372

$
1,076

$
558

$
35,990

$
0

$
7

$
2,595

$
60,598

Nine months ended

Beginning balance

$
19,584

$
2,400

$
1,352

$
41,183

$
0

$
15

$
1,813

$
66,347

Provision/(recapture)

2,891

(1,257
)

(468
)

226

0

(8
)

1,366

2,750

Charge-offs

(2,644
)

(76
)

(326
)

(6,172
)

0

0

(1,148
)

(10,366
)
Recoveries

541

9

0

753

0

0

564

1,867

Ending balance

$
20,372

$
1,076

$
558

$
35,990

$
0

$
7

$
2,595

$
60,598

Ending balance:

Individually evaluated for
   impairment

$
8,420

$
0

$
0

$
16,142

$
0

$
0

$
0

$
24,562

Collectively evaluated for
   impairment

9,314

723

550

18,572

0

7

2,595

31,761

Loans acquired with
   deteriorated credit
   quality

2,638

353

8

1,276

0

0

0

4,275

Total allowance for loan
   and lease losses

$
20,372

$
1,076

$
558

$
35,990

$
0

$
7

$
2,595

$
60,598

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)


September 30, 2022	Commercial Real Estate		Residential Real Estate		Construction, Land Development, and Other Land		Commercial and Industrial		Paycheck Protection Program		Installment and Other		Lease Financing Receivables		Total
Loans and leases ending balance:
Individually evaluated for impairment	$	44,977	$	4,782	$	5,541	$	35,979	$	—	$	—	$	—	$	91,279
Collectively evaluated for impairment		1,767,043		439,816		450,922		1,929,300		1,522		1,215		495,828		5,085,646
Loans acquired with deteriorated credit quality		56,974		37,246		1,144		3,029		—		153		—		98,546
Total loans and leases	$	1,868,994	$	481,844	$	457,607	$	1,968,308	$	1,522	$	1,368	$	495,828	$	5,275,471


September 30, 2021	Commercial Real Estate			Residential Real Estate			Construction, Land Development, and Other Land			Commercial and Industrial			Paycheck Protection Program		Installment and Other			Lease Financing Receivables			Total
Allowance for loan and lease losses
Three months ended
Beginning balance	$	19,541		$	1,364		$	619		$	38,284		$	—	$	9		$	1,902		$	61,719
Provision/(recapture)		1,108			(225	)		(61	)		(1,218	)		—		(2	)		750			352
Charge-offs		(564	)		(65	)		—			(1,456	)		—		—			(399	)		(2,484	)
Recoveries		287			2			—			380			—		—			342			1,011
Ending balance	$	20,372		$	1,076		$	558		$	35,990		$	—	$	7		$	2,595		$	60,598
Nine months ended
Beginning balance	$	19,584		$	2,400		$	1,352		$	41,183		$	—	$	15		$	1,813		$	66,347
Provision/(recapture)		2,891			(1,257	)		(468	)		226			—		(8	)		1,366			2,750
Charge-offs		(2,644	)		(76	)		(326	)		(6,172	)		—		—			(1,148	)		(10,366	)
Recoveries		541			9			—			753			—		—			564			1,867
Ending balance	$	20,372		$	1,076		$	558		$	35,990		$	—	$	7		$	2,595		$	60,598
Ending balance:
Individually evaluated for impairment	$	8,420		$	—		$	—		$	16,142		$	—	$	—		$	—		$	24,562
Collectively evaluated for impairment		9,314			723			550			18,572			—		7			2,595			31,761
Loans acquired with deteriorated credit quality		2,638			353			8			1,276			—		—			—			4,275
Total allowance for loan and lease losses	$	20,372		$	1,076		$	558		$	35,990		$	—	$	7		$	2,595		$	60,598


September 30, 2021	Commercial Real Estate		Residential Real Estate		Construction, Land Development, and Other Land		Commercial and Industrial		Paycheck Protection Program		Installment and Other		Lease Financing Receivables		Total
Loans and leases ending balance:
Individually evaluated for impairment	$	45,563	$	3,946	$	—	$	37,689	$	—	$	—	$	—	$	87,198
Collectively evaluated for impairment		1,487,994		441,915		336,666		1,492,065		268,081		1,273		338,756		4,366,750
Loans acquired with deteriorated credit quality		84,821		61,893		1,746		6,651		—		169		—		155,280
Total loans and leases	$	1,618,378	$	507,754	$	338,412	$	1,536,405	$	268,081	$	1,442	$	338,756	$	4,609,228

The Company increased the allowance for loan and lease losses by $2.2 million and $9.6 million for the three and nine months ended September 30, 2022, respectively, and recaptured $1.1 million and $5.7 million for the three and nine months ended September 30, 2021, respectively. For acquired impaired loans, the Company recaptured $112,000 and $831,000 of the allowance for the three and nine months ended September 30, 2022, respectively. The Company increased the allowance by $405,000 and recaptured $2.2 million for the three and nine months ended September 30, 2021, respectively.

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

For loans individually evaluated for impairment, the Company increased allowance for loan and lease losses by $

September 30, 2021

Commercial
Real Estate

Residential
Real Estate

Construction,
Land
Development,
and
Other Land

Commercial
and
Industrial

Paycheck
Protection
Program

Installment
and Other

Lease
Financing
Receivables

Total

Loans and leases ending balance:

Individually evaluated for
   impairment

$
45,563

$
3,946

$
0

$
37,689

$
0

$
0

$
0

$
87,198

Collectively evaluated for
   impairment

1,487,994

441,915

336,666

1,492,065

268,081

1,273

338,756

4,366,750

Loans acquired with
   deteriorated
   credit quality

84,821

61,893

1,746

6,651

0

169

0

155,280

Total loans and leases

$
1,618,378

$
507,754

$
338,412

$
1,536,405

$
268,081

$
1,442

$
338,756

$
4,609,228

September 30, 2020

Commercial
Real Estate

Residential
Real Estate

Construction,
Land
Development,
and
Other Land

Commercial
and
Industrial

Paycheck
Protection
Program

Installment
and Other

Lease
Financing
Receivables

Total

Allowance for loan and lease losses

Three months ended

Beginning balance

$
14,110

$
3,741

$
1,491

$
30,108

$
0

$
36

$
1,814

$
51,300

Provision

6,421

291

1,029

7,603

0

1

395

15,740

Charge-offs

(1,566
)

(250
)

(701
)

(3,254
)

0

0

(374
)

(6,145
)
Recoveries

19

8

53

83

0

0

200

363

Ending balance

$
18,984

$
3,790

$
1,872

$
34,540

$
0

$
37

$
2,035

$
61,258

Nine months ended

Beginning balance

$
7,965

$
1,990

$
610

$
19,377

$
0

$
50

$
1,944

$
31,936

Provision/(recapture)

14,149

2,031

1,910

26,844

0

(13
)

792

45,713

Charge-offs

(3,206
)

(259
)

(701
)

(12,057
)

0

0

(1,392
)

(17,615
)
Recoveries

76

28

53

376

0

0

691

1,224

Ending balance

$
18,984

$
3,790

$
1,872

$
34,540

$
0

$
37

$
2,035

$
61,258

Ending balance:

Individually evaluated for
   impairment

$
4,516

$
77

$
0

$
10,189

$
0

$
0

$
0

$
14,782

Collectively evaluated for
   impairment

11,825

3,413

1,685

22,450

0

37

2,035

41,445

Loans acquired with
   deteriorated
  credit quality

2,643

300

187

1,901

0

0

0

5,031

Total allowance for loan and
  lease losses

$
18,984

$
3,790

$
1,872

$
34,540

$
0

$
37

$
2,035

$
61,258

September 30, 2020

Commercial
Real Estate

Residential
Real Estate

Construction,
Land
Development,
and
Other Land

Commercial
and
Industrial

Paycheck
Protection
Program

Installment
and Other

Lease
Financing
Receivables

Total

Loans and leases ending balance:

Individually evaluated for
   impairment

$
39,001

$
1,636

$
0

$
37,253

$
0

$
0

$
0

$
77,890

Collectively evaluated for
   impairment

1,191,740

547,563

234,230

1,281,067

622,191

2,929

200,089

4,079,809

Loans acquired with
  deteriorated credit quality

117,114

84,197

4,804

10,489

0

214

0

216,818

Total loans and leases

$
1,347,855

$
633,396

$
239,034

$
1,328,809

$
622,191

$
3,143

$
200,089

$
4,374,517

1.3 million and recaptured $

2.4 million for the three and nine months ended September 30, 2022, respectively. The Company recaptured ~~$1.1~~$1.0 million of the allowance on loans and ~~$5.7~~increased the allowance by $602,000 for the three and nine months ended September 30, 2021, respectively.

For loans and leases collectively evaluated for impairment, the Company increased allowance for loan and lease losses by $992,000 and $12.8 million for the three and nine months ended September 30, 2022, respectively. The Company recaptured $498,000 and $4.2 million of the allowance for loan and lease losses for the three and nine months ended September 30, 2021, ~~respectively, and increased the allowance by $10.0 million and $29.3 million for the three and nine months ended September 30, 2020,~~ respectively. ~~For acquired impaired loans, the Company increased the~~The increase in allowance for loan and lease losses by $405,000 and recaptured $2.2 million of allowance for the three and nine months ended September 30, 2021, respectively. The Company increased the allowance for loan and lease losses by $295,000 and $2.3 million for the three and nine months ended September 30, 2020, respectively for acquired impaired loans.

~~BYLINE BANCORP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Table dollars in thousands, except share and per share data) (Unaudited)~~

For loans individually evaluated for impairment, the Company recaptured $1.0 million of the allowance for loan and lease losses and increased the allowance by $602,000 for the three and nine months ended September 30, 2021, respectively. The Company increased the allowance on loans individually evaluated for impairment by $768,000 and $4.1 million for the three and nine months ended September 30, 2020, respectively. For loans collectively evaluated for impairment was mainly driven by changes to qualitative factors surrounding macroeconomic environment and rising interest rates, as well as growth in the ~~Company decreased the allowance for~~ loan and lease losses by $498,000 and $4.2 million for the three and nine months ended September 30, 2021, and increased the allowance for loan and lease losses by $8.9 million and $23.0 million for the three and nine months ended September 30, 2020, respectively.portfolio.

An allowance for loan and lease loss allocation has not been made for ~~Paycheck Protection Program (“PPP”)~~PPP loans as these loans are fully guaranteed by the Small Business ~~Association~~Administration ("SBA"). On a quarterly basis, the Company assesses the collectability of its government guarantee loan and lease portfolio using historical loss experience in its small business lending unit.

The following tables summarize the recorded investment, unpaid principal balance, and related allowance for loans and leases losses considered impaired as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, which exclude acquired impaired loans. For purposes of these tables, the unpaid principal balance represents the outstanding contractual balance. Impaired loans include loans that are individually evaluated for impairment as well as troubled debt restructurings for all loan categories. The sum of non-accrual loans and loans past due 90 days still on accrual will differ from the total impaired loan amount.


September 30, 2021	Recorded Investment		Unpaid Principal Balance		Related Allowance
September 30, 2022							Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded
Commercial real estate	$	20,432	$	25,512	$	—	$	24,339	$	26,728	$	—
Residential real estate		3,850		3,901		—		4,782		4,891		—
Construction, land development, and other land								5,541		5,541		—
Commercial and industrial		14,212		15,999		—		10,979		11,892		—
With an allowance recorded
Commercial real estate		25,131		26,569		8,420		20,638		22,198		6,094
Residential real estate		96		152		0
Commercial and industrial		23,477		25,614		16,142		25,000		26,215		12,584
Total impaired loans	$	87,198	$	97,747	$	24,562	$	91,279	$	97,465	$	18,678


December 31, 2020	Recorded Investment		Unpaid Principal Balance		Related Allowance
December 31, 2021							Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded
Commercial real estate	$	32,473	$	34,792	$	—	$	17,233	$	19,252	$	—
Residential real estate		1,558		1,644		—		1,802		1,919		—
Commercial and industrial		17,944		19,917		—		16,624		19,148		—
With an allowance recorded
Commercial real estate		13,696		14,919		5,034		17,818		20,117		6,538
Residential real estate		272		274		78
Commercial and industrial		29,412		32,018		18,848		19,446		21,198		14,500
Total impaired loans	$	95,355	$	103,564	$	23,960	$	72,923	$	81,634	$	21,038

2019

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

The following tables summarize the average recorded investment and interest income recognized for loans and leases considered impaired, which ~~excludes~~exclude acquired impaired loans, for the three and nine months ~~ended:~~ended September 30, 2022 and 2021:


September 30, 2021	Average Recorded Investment		Interest Income Recognized
					For the Three Months Ended September 30,
						2022				2021
						Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded
Commercial real estate	$	28,480	$	920		$	23,362	$	424	$	23,900	$	304
Residential real estate		2,788		109			4,795		9		3,871		80
Construction, land development, and other land							5,541		75		—		—
Commercial and industrial		16,668		481			10,371		204		14,268		185
With an allowance recorded
Commercial real estate		27,620		1,185			23,698		327		30,980		632
Residential real estate		207		2			58		—		132		—
Commercial and industrial		28,785		1,666			21,354		731		25,901		675
Total impaired loans	$	104,548	$	4,363		$	89,179	$	1,770	$	99,052	$	1,876


September 30, 2020	Average Recorded Investment		Interest Income Recognized
					For the Nine Months Ended September 30,
						2022				2021
						Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded
Commercial real estate	$	22,511	$	927		$	20,462	$	1,053	$	28,480	$	920
Residential real estate		1,615		26			3,329		77		2,788		109
Construction, land development, and other land		2,984		220			3,079		276		-		-
Commercial and industrial		16,991		493			12,919		494		16,668		481
With an allowance recorded
Commercial real estate		13,329		526			22,783		1,074		27,620		1,185
Residential real estate		460		21			29		—		207		2
Commercial and industrial		21,352		1,078			20,782		1,337		28,785		1,666
Total impaired loans	$	79,242	$	3,291		$	83,383	$	4,311	$	104,548	$	4,363

The following tables summarize the risk rating categories of the loans and leases considered for inclusion in the allowance for loan and lease losses calculation, excluding acquired impaired loans, as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


September 30, 2021	Commercial Real Estate		Residential Real Estate		Construction, Land Development, and Other Land		Commercial and Industrial		Paycheck Protection Program		Installment and Other		Lease Financing Receivables		Total
September 30, 2022																	Commercial Real Estate		Residential Real Estate		Construction, Land Development, and Other Land		Commercial and Industrial		Paycheck Protection Program		Installment and Other		Lease Financing Receivables		Total
Pass	$	1,297,981	$	422,843	$	291,496	$	1,261,335	$	268,081	$	1,190	$	335,475	$	3,878,401	$	1,669,578	$	424,124	$	423,076	$	1,752,765	$	1,522	$	1,138	$	492,624	$	4,764,827
Watch		143,047		16,862		37,795		196,288		0		83		264		394,339		80,609		13,597		21,754		135,377		—		77		1,784		253,198
Special Mention		48,605		3,036		7,375		30,841		0		0		1,934		91,791		16,800		1,750		6,092		39,123		—		—		902		64,667
Substandard		43,924		3,120		0		41,290		0		0		786		89,120		45,033		5,127		5,541		38,014		—		—		518		94,233
Doubtful		0		0		0		0		0		0		297		297		—		—		—		—		—		—		—		—
Loss		0		0		0		0		0		0		—		—		—		—		—		—		—		—		—		—
Total	$	1,533,557	$	445,861	$	336,666	$	1,529,754	$	268,081	$	1,273	$	338,756	$	4,453,948	$	1,812,020	$	444,598	$	456,463	$	1,965,279	$	1,522	$	1,215	$	495,828	$	5,176,925

December 31, 2020

Commercial
Real Estate

Residential
Real Estate

Construction,
Land
Development,
and
Other Land

Commercial
and
Industrial

Paycheck
Protection
Program

Installment
and Other

Lease
Financing
Receivables

Total

Pass

$
1,064,623

$
463,103

$
180,458

$
1,027,399

$
517,815

$
1,706

$
222,818

$
3,477,922

Watch

134,381

22,086

46,162

225,930

0

96

47

428,702

Special Mention

60,022

3,795

0

56,784

0

0

2,721

123,322

Substandard

54,160

4,447

0

48,609

0

1

955

108,172

Doubtful

0

0

0

0

0

0

600

600

Loss

0

0

0

0

0

0

0

0

Total

$
1,313,186

$
493,431

$
226,620

$
1,358,722

$
517,815

$
1,803

$
227,141

$
4,138,718

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)


December 31, 2021	Commercial Real Estate		Residential Real Estate		Construction, Land Development, and Other Land		Commercial and Industrial		Paycheck Protection Program		Installment and Other		Lease Financing Receivables		Total
Pass	$	1,397,228	$	406,948	$	286,434	$	1,341,826	$	123,712	$	1,123	$	354,380	$	3,911,651
Watch		123,248		19,062		31,768		177,638		—		81		1,992		353,789
Special Mention		37,340		3,118		5,885		21,586		—		—		1,609		69,538
Substandard		35,772		1,985		—		36,897		—		—		348		75,002
Doubtful		—		—		—		—		—		—		97		97
Loss		—		—		—		—		—		—		—		—
Total	$	1,593,588	$	431,113	$	324,087	$	1,577,947	$	123,712	$	1,204	$	358,426	$	4,410,077

The following tables summarize contractual delinquency information for acquired non-impaired and originated loans and leases by category at September 30, 2022 and December 31, 2021:


September 30, 2022	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days and Accruing		Non- accrual		Total Past Due		Current		Total
Commercial real estate	$	—	$	896	$	—	$	16,428	$	17,324	$	1,794,696	$	1,812,020
Residential real estate		609		—		—		5,127		5,736		438,862		444,598
Construction, land development, and other land		—		—		—		—		—		456,463		456,463
Commercial and industrial		557		3,206		—		13,113		16,876		1,948,403		1,965,279
Paycheck Protection Program		—		—		—		—		—		1,522		1,522
Installment and other		1		—		—		—		1		1,214		1,215
Lease financing receivables		287		84		—		497		868		494,960		495,828
Total	$	1,454	$	4,186	$	—	$	35,165	$	40,805	$	5,136,120	$	5,176,925


December 31, 2021	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days and Accruing		Non- accrual		Total Past Due		Current		Total
Commercial real estate	$	5,185	$	2,361	$	—	$	12,751	$	20,297	$	1,573,291	$	1,593,588
Residential real estate		14,282		852		—		1,450		16,584		414,529		431,113
Construction, land development, and other land		5,885		—		—		—		5,885		318,202		324,087
Commercial and industrial		2,479		1,097		—		8,600		12,176		1,565,771		1,577,947
Paycheck Protection Program		—		—		—		—		—		123,712		123,712
Installment and other		3		35		—		—		38		1,166		1,204
Lease financing receivables		1,661		251		—		329		2,241		356,185		358,426
Total	$	29,495	$	4,596	$	—	$	23,130	$	57,221	$	4,352,856	$	4,410,077

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

~~The following tables summarize contractual delinquency information for acquired non-impaired and originated loans and leases by category at September 30, 2021 and December 31, 2020:~~

September 30, 2021

30-59
Days
Past Due

60-89
Days
Past Due

Greater
than 90
Days and
Accruing

Non-
accrual

Total
Past Due

Current

Total

Commercial real estate

$
330

$
1,426

$
0

$
17,082

$
18,838

$
1,514,719

$
1,533,557

Residential real estate

1,087

0

0

2,127

3,214

442,647

445,861

Construction, land development,
and other land

2,035

0

0

0

2,035

334,631

336,666

Commercial and industrial

1,653

594

0

14,272

16,519

1,513,235

1,529,754

Paycheck Protection Program

0

0

0

0

0

268,081

268,081

Installment and other

39

0

0

0

39

1,234

1,273

Lease financing receivables

973

98

0

984

2,055

336,701

338,756

Total

$
6,117

$
2,118

$
0

$
34,465

$
42,700

$
4,411,248

$
4,453,948

December 31, 2020

30-59
Days
Past Due

60-89
Days
Past Due

Greater
than 90
Days and
Accruing

Non-
accrual

Total
Past Due

Current

Total

Commercial real estate

$
1,544

$
4,194

$
0

$
15,969

$
21,707

$
1,291,479

$
1,313,186

Residential real estate

1,686

0

0

1,929

3,615

489,816

493,431

Construction, land development,
and other land

0

0

0

0

0

226,620

226,620

Commercial and industrial

4,521

1,290

0

21,936

27,747

1,330,975

1,358,722

Paycheck Protection Program

517,815

517,815

Installment and other

6

0

0

1

7

1,796

1,803

Lease financing receivables

996

376

0

1,268

2,640

224,501

227,141

Total

$
8,753

$
5,860

$
0

$
41,103

$
55,716

$
4,083,002

$
4,138,718

~~Trouble~~Troubled debt restructurings (“TDRs”) are granted due to borrower financial difficulty and provide for a modification of loan repayment terms. TDRs are treated in the same manner as impaired loans for purposes of calculating the allowance for loan and lease losses. The tables below present TDRs by loan category as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


September 30, 2022	Number of Loans		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Charge-offs		Specific Reserves
Accruing:
Commercial real estate		2	$	553	$	553	$	—	$	171
Commercial and industrial		1		34		34		—		34
Residential real estate		2		150		150		—		—
Total accruing		5		737		737		—		205
Non-accruing:
Commercial real estate		4		777		775		2		147
Commercial and industrial		6		2,065		1,015		1,050		119
Total non-accruing		10		2,842		1,790		1,052		266
Total troubled debt restructurings		15	$	3,579	$	2,527	$	1,052	$	471


December 31, 2021	Number of Loans		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Charge-offs		Specific Reserves
Accruing:
Commercial real estate		5	$	1,703	$	1,703	$	—	$	215
Commercial and industrial		1		56		56		—		131
Residential real estate		2		168		168		—		—
Total accruing		8		1,927		1,927		—		346
Non-accruing:
Commercial real estate		4		1,034		918		116		111
Commercial and industrial		3		1,745		588		1,157		—
Total non-accruing		7		2,779		1,506		1,273		111
Total troubled debt restructurings		15	$	4,706	$	3,433	$	1,273	$	457

Loans modified as troubled debt restructurings that occurred during the three and nine months ended September 30, 2022 and 2021 were:

September 30, 2021

Number
of
Loans

Pre-
Modification
Outstanding
Recorded
Investment

Post-
Modification
Outstanding
Recorded
Investment

Charge-offs

Specific
Reserves

Accruing:

Commercial real estate

7

$
2,130

$
2,130

$
—

$
209

Commercial and industrial

1

63

63

—

63

Residential real estate

2

173

173

—

0

Total accruing

10

2,366

2,366

—

272

Non-accruing:

Commercial real estate

3

856

740

116

311

Commercial and industrial

3

1,730

1,107

623

508

Total non-accruing

6

2,586

1,847

739

819

Total troubled debt restructurings

16

$
4,952

$
4,213

$
739

$
1,091


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2022			2021			2022			2021
Accruing:
Beginning balance	$	1,358		$	2,395		$	1,927		$	2,495
Additions		—			—			—			281
Net payments		(621	)		(29	)		(1,190	)		(410	)
Net transfers from non-accrual		—			—			—			—
Ending balance		737			2,366			737			2,366
Non-accruing:
Beginning balance		1,134			4,441			1,506			5,650
Additions		756			—			756			673
Net payments		(96	)		(2,584	)		(468	)		(3,568	)
Charge-offs		(4	)		(10	)		(4	)		(908	)
Net transfers to accrual		—			—			—			—
Ending balance		1,790			1,847			1,790			1,847
Total troubled debt restructurings	$	2,527		$	4,213		$	2,527		$	4,213

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

December 31, 2020

Number
of
Loans

Pre-
Modification
Outstanding
Recorded
Investment

Post-
Modification
Outstanding
Recorded
Investment

Charge-offs

Specific
Reserves

Accruing:

Commercial real estate

8

$
2,187

$
2,187

$
—

$
104

Commercial and industrial

1

78

78

—

78

Residential real estate

3

230

230

—

0

Total accruing

12

2,495

2,495

—

182

Non-accruing:

Commercial real estate

4

1,609

1,362

247

102

Commercial and industrial

14

4,420

4,288

132

3,157

Total non-accruing

18

6,029

5,650

379

3,259

Total troubled debt restructurings

30

$
8,524

$
8,145

$
379

$
3,441

~~In addition, there was 0 commitment outstanding on troubled debt restructurings at September 30, 2021 or December 31, 2020.~~

~~Loans modified as troubled debt restructurings that occurred during the three and nine months ended September 30, 2021 and 2020 were:~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

2021

2020

2021

2020

Accruing:

Beginning balance

$
2,395

$
3,151

$
2,495

$
1,771

Additions

0

604

281

604

Net payments

(29
)

(1,462
)

(410
)

(1,538
)
Net transfers from non-accrual

0

0

0

1,456

Ending balance

2,366

2,293

2,366

2,293

Non-accruing:

Beginning balance

4,441

7,449

5,650

8,800

Additions

0

0

673

5,633

Net payments

(2,584
)

(302
)

(3,568
)

(1,688
)
Charge-offs

(10
)

(852
)

(908
)

(4,994
)
Net transfers to accrual

0

0

0

(1,456
)
Ending balance

1,847

6,295

1,847

6,295

Total troubled debt restructurings

$
4,213

$
8,588

$
4,213

$
8,588

There wereno0 troubled debt restructurings that subsequently defaulted within twelve months of the restructure date during the three and nine months ended September 30, ~~2021~~2022 or ~~2020.~~2021. In addition, there was no commitment outstanding on troubled debt restructurings at September 30, 2022 or December 31, 2021.

~~At September 30, 2021 and December 31, 2020,~~

The following table presents the change in the balance of the reserve for unfunded commitments ~~was $1.5 million and $1.9 million, respectively. During the three and nine months ended~~as of September 30, ~~2021, there was a recapture for unfunded commitments of $79,000~~2022 and ~~$363,000, respectively. During the three and nine months ended September 30, 2020, the provision for unfunded commitments was $519,000 and $1.2 million, respectively.~~ 2021:


	For the Three Months Ended					For the Nine Months Ended
	September 30,					September 30,
	2022		2021			2022		2021
Beginning balance	$	2,191	$	1,604		$	1,403	$	1,887
Provision/(recapture) for of unfunded commitments		136		(79	)		924		(362	)
Ending balance	$	2,327	$	1,525		$	2,327	$	1,525

There were 0no charge-offs or recoveries related to the reserve for unfunded commitments during the periods.

~~BYLINE BANCORP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Table dollars in thousands, except share and per share data) (Unaudited)~~

Note 6—Servicing Assets

Activity for servicing assets and the related changes in fair value for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 was as follows:


	Three Months Ended September 30,					Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020		2021			2020			2022			2021			2022			2021
Beginning balance	$	24,683		$	18,351	$	22,042		$	19,471		$	22,155		$	24,683		$	23,744		$	22,042
Additions, net		1,564			1,794		5,703			4,449			1,314			1,564			5,592			5,703
Changes in fair value		(2,650	)		1,122		(4,148	)		(2,653	)		(2,342	)		(2,650	)		(8,209	)		(4,148	)
Ending balance	$	23,597		$	21,267	$	23,597		$	21,267		$	21,127		$	23,597		$	21,127		$	23,597

Loans serviced for others are not included in the Condensed Consolidated Statements of Financial Condition. The unpaid principal balances of these loans serviced for others as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021 were as follows:


	September 30,		December 31,		September 30,		December 31,
	2021		2020		2022		2021
Loan portfolios serviced for:
SBA guaranteed loans	$	1,471,367	$	1,395,713	$	1,510,665	$	1,510,375
USDA guaranteed loans		143,847		135,543		193,169		183,026
Total	$	1,615,214	$	1,531,256	$	1,703,834	$	1,693,401

Loan servicing revenue totaled ~~$3.3~~$3.4 million and ~~$2.9~~$3.3 million for ~~each of~~ the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. Loan servicing revenue totaled ~~$9.3~~$10.2 million and ~~$8.7~~$9.3 million for ~~each of~~ the nine months ended September 30, 2022 and 2021, ~~and 2020,~~ respectively.

Loan servicing asset revaluation, which represents the changes in fair value of servicing assets, resulted in a downward valuation adjustment of ~~$2.7~~$2.3 million and ~~an upward valuation adjustment of $1.1~~$2.7 million for the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. Loan servicing asset ~~revaluations~~revaluation resulted in a downward valuation ~~adjustments~~adjustment of ~~$4.1~~$8.2 million and ~~$2.7~~$4.1 million for the nine months ended September 30, 2022 and 2021, ~~and 2020,~~ respectively.

The fair value of servicing rights is highly sensitive to changes in underlying assumptions. Changes in secondary market premiums and prepayment speed assumptions have the most significant impact on the fair value of servicing rights.

Generally, as interest rates rise on variable rate loans, loan prepayments increase due to an increase in refinance activity, which may result in a decrease in the fair value of servicing assets. Measurement of fair value is limited to the conditions existing and the assumptions used as of a particular point in time, and those assumptions may change over time. Refer to Note 15—Fair Value Measurement for further details.

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

Note 7—Other Real Estate Owned

The following table presents the change in other real estate owned (“OREO”) for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020			2022			2021			2022			2021
Beginning balance	$	4,417		$	8,652		$	6,350		$	9,896		$	4,749		$	4,417		$	2,112		$	6,350
Net additions to OREO		0			41			436			127			—			—			2,837			436
Proceeds from sales of OREO		(1,498	)		(224	)		(2,998	)		(874	)		(131	)		(1,498	)		(356	)		(2,998	)
Gains (losses) on sales of OREO		114			(41	)		133			44
Gains on sales of OREO														—			114			76			133
Valuation adjustments		0			(278	)		(888	)		(1,043	)		(216	)		—			(267	)		(888	)
Ending balance	$	3,033		$	8,150		$	3,033		$	8,150		$	4,402		$	3,033		$	4,402		$	3,033

At September 30, ~~2021 and December 31, 2020,~~2022, the balance of real estate owned included 0$2.3 million in foreclosed residential real estate properties recorded as a result of obtaining physical possession of the property. At December 31, 2021, the balance of real estate owned included

~~BYLINE BANCORP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Table dollars in thousands, except share and per share data) (Unaudited)~~

no foreclosed residential real estate properties.

At September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process was ~~$3.1 million~~$842,000 and ~~$3.3~~$2.5 million, respectively.

There were 0no internally financed sales of OREO for the three ~~and~~or nine months ended September 30, ~~2021~~2022 or ~~2020.~~2021.

Note 8—Leases

The Company enters into leases in the normal course of business primarily for its banking facilities and branches. The Company’s operating leases have varying maturity dates through year end 2042, some of which include renewal or termination options to extend the lease. In addition, the Company leases or subleases real estate to third parties. The Company includes lease extension and termination options in the lease term if, after considering relevant economic factors, it is reasonably certain the Company will exercise the option. In addition, the Company has elected to account for any non-lease components in its real estate leases as part of the associated lease component. The Company has also elected not to recognize leases with original lease terms of 12 months or less ~~(short-term leases)~~("short-term leases") on the Company’s ~~balance sheet.~~Condensed Consolidated Statements of Financial Condition.

Leases are classified at the lease commencement date. Lease expense for operating leases and short-term leases is recognized on a straight-line basis over the lease term. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.

The following table summarizes the amount and balance sheet line item for our operating lease right-of-use asset and liability as of September 30, ~~2021:~~2022:


	Balance Sheet Line Item	September 30, 2021		Balance Sheet Line Item	September 30, 2022		December 31, 2021
Operating lease right-of-use asset	Accrued interest receivable and other assets	$	11,580	Accrued interest receivable and other assets	$	10,551	$	11,646
Operating lease liability	Accrued interest payable and other liabilities		13,744	Accrued interest payable and other liabilities		13,911		15,629

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

The Company uses its incremental borrowing rate at lease commencement to calculate the present value of lease payments when the rate implicit in a lease is not known. The Company’s incremental borrowing rate is based on the FHLB regular advance rate, adjusted for the lease term and other factors. At September 30, ~~2021,~~2022, the weighted-average discount rate of operating leases was ~~0.85%~~1.28% and the weighted average remaining life of operating leases was 5.6 years, compared to 0.99% and 6.0 ~~years.~~years as of December 31, 2021.

The following table presents components of total lease costs included as a component of occupancy expense on the Condensed Consolidated Statements of Operations for the following periods:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Operating lease cost	$	682		$	625		$	2,260		$	2,563
Short-term lease cost		47			42			160			164
Variable lease cost		384			586			1,264			1,260
Less: Sublease income		(158	)		(166	)		(434	)		(479	)
Total lease cost, net	$	955		$	1,087		$	3,250		$	3,508

The future minimum lease payments for operating leases, subsequent to September 30, ~~2021,~~2022, as recorded on the ~~balance sheet,~~Condensed Consolidated Statements of Financial Condition, are summarized as follows:


	Operating Lease Commitments			Operating Lease Commitments
2021	$	1,515
2022		3,618		$	1,001
2023		2,412			3,530
2024		2,194			3,469
2025		1,505			2,487
2026					1,720
Thereafter		3,108			2,364
Total undiscounted lease payments		14,352			14,571
Less: imputed interest		(608	)		(660	)
Net lease liabilities	$	13,744		$	13,911

The Company’s rental expenses for the three months ended September 30, 2022 and 2021 ~~and 2020~~ were ~~$1.2~~$1.1 million and ~~$1.6~~$1.2 million, respectively. The Company’s rental expenses for the nine months ended September 30, 2022 and 2021 ~~and 2020~~ were ~~$4.0~~$3.7 million and ~~$4.9~~$4.0 million, ~~respectively.~~respectively For the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, the Company received ~~$166,000~~$158,000 and ~~$184,000,~~$166,000, respectively, in sublease income. For the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, the Company received ~~$479,000~~$434,000 and ~~$549,000,~~$479,000, respectively, in sublease income.

The total amount of minimum rentals to be received in the future on these subleases is approximately ~~$1.5~~$1.0 million, and the leases have contractual lives extending through2026. In addition to the above required lease payments, the Company has contractual obligations related primarily to information technology contracts and other maintenance contracts.

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

~~2026. In addition to the above required lease payments, the Company has contractual obligations related primarily to information technology contracts and other maintenance contracts.~~

Note 9—Goodwill, Core Deposit Intangible and Other Intangible Assets

The following tables summarize the changes in the Company’s goodwill, core deposit intangible assets, and customer relationship intangible assets for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


	For the Three Months Ended September 30,																For the Three Months Ended September 30,
	2021								2020								2022								2021
	Goodwill		Core Deposit Intangible			Customer Relationship Intangible			Goodwill		Core Deposit Intangible			Customer Relationship Intangible			Goodwill		Core Deposit Intangible			Customer Relationship Intangible			Goodwill		Core Deposit Intangible			Customer Relationship Intangible
Beginning balance	$	148,353	$	18,346		$	2,335		$	148,353	$	25,459		$	2,658		$	148,353	$	11,945		$	1,796		$	148,353	$	18,346		$	2,335
Amortization		—		(1,672	)		(66	)		—		(1,825	)		(122	)		—		(1,529	)		(81	)		—		(1,672	)		(66	)
Ending balance	$	148,353	$	16,674		$	2,269		$	148,353	$	23,634		$	2,536		$	148,353	$	10,416		$	1,715		$	148,353	$	16,674		$	2,269
Accumulated amortization	N/A		$	38,792		$	947		N/A		$	31,832		$	680		N/A		$	45,050		$	1,501		N/A		$	38,792		$	947
Weighted average remaining amortization period	N/A		5.0 Years			8.5 Years			N/A		5.8 Years			9.7 Years			N/A		4.5 Years			6.4 Years			N/A		5.0 Years			8.5 Years


	Nine Months Ended September 30,																For the Nine Months Ended September 30,
	2021								2020								2022								2021
	Goodwill		Core Deposit Intangible			Customer Relationship Intangible			Goodwill		Core Deposit Intangible			Customer Relationship Intangible			Goodwill		Core Deposit Intangible			Customer Relationship Intangible			Goodwill		Core Deposit Intangible			Customer Relationship Intangible
Beginning balance	$	148,353	$	21,809		$	2,469		$	148,353	$	29,111		$	2,791		$	148,353	$	15,004		$	2,201		$	148,353	$	21,809		$	2,469
Amortization		—		(5,135	)		(200	)		—		(5,477	)		(255	)		—		(4,588	)		(486	)		—		(5,135	)		(200	)
Ending balance	$	148,353	$	16,674		$	2,269		$	148,353	$	23,634		$	2,536		$	148,353	$	10,416		$	1,715		$	148,353	$	16,674		$	2,269
Accumulated amortization	N/A		$	38,792		$	947		N/A		$	31,832		$	680		N/A		$	45,050		$	1,501		N/A		$	38,792		$	947
Weighted average remaining amortization period	N/A		5.0 Years			8.5 Years			N/A		5.8 Years			9.7 Years			N/A		4.5 Years			6.4 Years			N/A		5.0 Years			8.5 Years

The following table presents the estimated amortization expense for core deposit intangible and customer relationship intangible assets remaining at September 30, ~~2021:~~2022:


	Estimated Amortization		Estimated Amortization
2021	$	1,737
2022		6,386	$	1,596
2023		4,336		4,336
2024		2,286		2,286
2025		1,721		1,721
2026				1,157
Thereafter		2,477		1,035
Total	$	18,943	$	12,131

Note 10—Income Taxes

The Company uses an estimated annual effective tax rate method in computing its interim tax provision. This effective tax rate is based on forecasted annual pre-tax income, permanent tax differences and statutory tax rates.

The effective tax rate for the nine months ended September 30, 2022 and 2021 was 23.4% and ~~2020 was 25.3% and 28.5%~~25.3%, respectively. The Company recorded discrete income tax benefit of ~~$166,000~~$2.1 million and ~~a provision of $231,000~~$166,000 related to the exercise of stock options and vesting of restricted shares for the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

Net deferred tax assets increased to ~~$45.2~~$91.5 million at September 30, ~~2021~~2022 compared to ~~$40.2~~$50.3 million at December 31, ~~2020~~2021 primarily as a result of unrealized losses on available-for-sale securities.

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

During the second quarter 2021, Illinois Senate Bill 2017 was passed which created a temporary limitation on Net Loss Deduction ("NLD") usage. For tax years 2021, 2022, and 2023, C Corporations are limited to applying a maximum of $100,000 of NLD to taxable income. NLDs that are limited during these years have an extended expiration date for the years in which they are limited. The extended expiration of the Company’s NLD carryforwards are from December 31, 2026 to ~~December 31, 2033~~.

Note 11—Deposits

The composition of deposits was as follows as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:

September 30,

December 31,

2021

2020

Non-interest-bearing demand deposits

$
2,117,749

$
1,762,676

Interest-bearing checking accounts

652,824

494,424

Money market demand accounts

1,057,419

1,142,709

Other savings

627,294

564,700

Time deposits (below $250,000)

553,364

600,810

Time deposits ($250,000 and above)

149,628

186,712

Total deposits

$
5,158,278

$
4,752,031


	September 30,		December 31,
	2022		2021
Non-interest-bearing demand deposits	$	2,142,183	$	2,158,420
Interest-bearing checking accounts		616,139		572,426
Money market demand accounts		1,485,815		1,106,272
Other savings		669,734		638,218
Time deposits (below $250,000)		586,198		532,589
Time deposits ($250,000 and above)		112,387		147,122
Total deposits	$	5,612,456	$	5,155,047

There were 0$122.7 million of brokered deposits included in ~~Time~~time deposits ~~of $250,000 or more~~below $250,000 at September 30, ~~2021, and $35.0 million~~2022. There were no brokered deposits included in time deposits at December 31, ~~2020, respectively.~~2021.

At September 30, 2022, the scheduled maturities of time deposits were:


	Scheduled Maturities
2022	$	160,645
2023		479,550
2024		29,339
2025		14,293
2026 and thereafter		14,758
Total	$	698,585

The Company hedges interest rates on certain money market accounts using interest rate swaps through which the Company receives variable amounts and pays fixed amounts. Refer to Note 16—Derivative Instruments and Hedging Activities for additional discussion.

Note 12—Other Borrowings

The following is a summary of the Company’s other borrowings as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


	September 30,		December 31,		September 30,		December 31,
	2021		2020		2022		2021
Paycheck Protection Program Liquidity Facility	$	156,404	$	371,907
Federal Home Loan Bank advances		355,000		234,000	$	600,000	$	490,000
Securities sold under agreements to repurchase		27,715		41,994		53,954		29,723
Line of credit		—		—		—		—
Total	$	539,119	$	647,901	$	653,954	$	519,723

On April 21, 2020, the Bank entered into a Letter Agreement with the Federal Reserve Bank of Chicago that allows the Bank to access the Paycheck Protection Program Liquidity Facility (the “PPPLF”). Under the terms of the PPPLF, the Bank pledges loans originated under the PPP to the Federal Reserve Bank of Chicago as collateral for available advances under the PPPLF. Advances under the PPPLF are in an amount equal to the aggregate principal amount of PPP loans pledged by Byline Bank, carry an interest rate of 35 basis points and mature on the maturity date of the PPP loans pledged as collateral for the advance. As of September 30, 2021, the PPPLF balance was $156.4 million with an interest rate of 0.35% with various maturity dates from ~~April 2022~~ to ~~February 2026~~.

Byline Bank has the capacity to borrow funds from the discount window of the Federal Reserve System. As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, there were 0no outstanding advances under the Federal Reserve Bank discount window line.

At September 30, ~~2021,~~2022, fixed-rate Federal Home Loan Bank (“FHLB”) advances totaled ~~$355.0~~$200.0 million, with interest rates ranging from ~~0.00%~~3.28% to ~~0.22%~~3.65% and maturities ranging from November ~~2021~~2022 to ~~May~~December 2022. Total variable rate advances were $400.0 million at September 30, 2022, with interest rates ranging from 2.91% to 3.00%, that may reset daily, and mature in November 2022. Advances from the FHLB are collateralized by residential real estate loans, commercial real estate loans, and securities. The Bank’s maximum borrowing capacity is limited to ~~35%~~35% of total assets. Required investment in FHLB stock is ~~$4.50~~$4.50 for every $100 in ~~advances.~~advances thereafter.

Securities sold under agreements to repurchase represent a demand deposit product offered to customers that sweep balances in excess of the FDIC insurance limit into overnight repurchase agreements. The Company pledges securities as collateral for the repurchase agreements. Refer to Note 3—Securities for additional discussion.

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

On October 13, 2016, the Company entered into a ~~$30.0~~$30.0 million revolving credit agreement with a correspondent bank. Through subsequent amendments, the revolving credit agreement was reduced to ~~$15.0~~$15.0 million and the maturity of the credit facility was extended to October ~~9, 2020~~6, 2023. The amended revolving line of credit bears interest at either ~~the London Interbank Offered Rate (“LIBOR”)~~SOFR plus 195 basis points or ~~the~~ Prime Rate minus 75 basis points, not to be less than 2.00%, based on the Company’s election, which is required to be communicated at least three business days prior to the commencement of an interest period. If the Company fails to provide timely notification, the interest rate will be Prime Rate minus 75 basis points. At September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the line of credit had 0no outstanding balance. ~~On October 8, 2021, the Company extended the maturity of the credit facility to~~ ~~October 7, 2022~~.

The following table presents short-term credit lines available for use as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:

September 30,

December 31,

2021

2020

Federal Home Loan Bank line

$
1,910,295

$
2,016,212

Federal Reserve Bank of Chicago discount window line

622,306

874,677

Available federal funds lines

115,000

115,000


	September 30,		December 31,
	2022		2021
Federal Home Loan Bank line	$	1,877,936	$	1,883,349
Federal Reserve Bank of Chicago discount window line		797,131		602,962
Available federal funds lines		135,000		115,000

The Company hedges interest rates on borrowed funds using interest rate swaps through which the Company receives variable amounts and pays fixed amounts. Refer to Note 16—Derivative Instruments and Hedging Activities for additional discussion.

Note 13—Subordinated Notes and Junior Subordinated Debentures

In 2020, the Company issued ~~$75.0~~$75.0 million in fixed-to-floating subordinated notes that mature on July 1, 2030. The subordinated notes bear a fixed interest rate of ~~6.00%~~6.00% until July 1, 2025 and a floating interest rate equal to a benchmark rate, which is expected to be the three-month ~~Secured Overnight Financing Rate,~~SOFR, plus 588 basis points thereafter until maturity. The transaction resulted in debt issuance costs of approximately ~~$1.7~~$1.7 million that ~~will be~~is being amortized over 10 years.

As of September 30, ~~2021,~~2022, the net liability outstanding of the subordinated notes was ~~$73.5~~$73.6 million. The Company may, at its option, redeem the notes, in whole or in part, on a semi-annual basis beginning on July 1, 2025, subject to obtaining the prior approval of the Federal Reserve to the extent such approval is then required. The subordinated notes qualify as Tier 2 capital for regulatory capital purposes.

At September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company’s junior subordinated debentures by issuance were as follows:


Name of Trust	Aggregate Principal Amount September 30, 2021			Aggregate Principal Amount December 31, 2020			Stated Maturity	Contractual Rate at September 30, 2021			Interest Rate Spread	Aggregate Principal Amount September 30, 2022			Aggregate Principal Amount December 31, 2021			Stated Maturity	Contractual Rate at September 30, 2022			Interest Rate Spread
Metropolitan Statutory Trust 1	$	35,000		$	35,000		March 17, 2034		2.91	%	Three-month LIBOR + 2.79%	$	35,000		$	35,000		March 17, 2034		6.32	%	Three-month LIBOR + 2.79%
First Evanston Bancorp Trust I		10,000			10,000		March 15, 2035		1.90	%	Three-month LIBOR + 1.78%		10,000			10,000		March 15, 2035		5.07	%	Three-month LIBOR + 1.78%
Total liability, at par		45,000			45,000								45,000			45,000
Discount		(8,204	)		(8,549	)							(7,768	)		(8,094	)
Total liability, at carrying value	$	36,796		$	36,451							$	37,232		$	36,906

In 2004, the Company’s predecessor, Metropolitan Bank Group, Inc., issued ~~$35.0~~$35.0 million floating rate junior subordinated debentures to Metropolitan Statutory Trust 1, which was formed for the issuance of trust preferred securities. The debentures bear interest at three-month LIBOR plus ~~2.79% (2.91%~~2.79% (6.32% and ~~3.02%~~3.01% at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively). Interest is paid on a quarterly basis. The Company has the right to redeem the debentures, in whole or in part, on any interest payment date on or after March 2009. Accrued interest payable was ~~$41,000~~$76,000 and ~~$45,000~~$45,000 as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

As part of the First Evanston acquisition, the Company assumed the obligations to First Evanston Bancorp Trust I of ~~$10.0~~$10.0 million in principal amount, which was formed for the issuance of trust preferred securities. Beginning on March 15, 2010, the interest rate reset to the three-month LIBOR plus ~~1.78% (1.90%~~1.78% (5.07% and ~~2.00%~~1.98% at September 30, ~~2021~~2022 and December 31,

~~BYLINE BANCORP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Table dollars in thousands, except share and per share data) (Unaudited)~~

~~2020,~~ 2021, respectively), which is in effect until the debentures mature in 2035. Interest is paid on a quarterly basis. The Company has the right to redeem the debentures, in whole or in part, on any interest payment date on or after March 2010. The Company

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

has the option to defer interest payments on the debentures from time to time for a period not to exceed five consecutive years. Accrued interest payable was ~~$8,000~~$22,000 and ~~$9,000~~$9,000 as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

The Trusts are not consolidated with the Company. Accordingly, the Company reports the subordinated debentures held by the Trusts as liabilities. The Company owns all of the common securities of each trust. The junior subordinated debentures qualify, and are treated as, Tier 1 regulatory capital of the Company subject to regulatory limitations. The trust preferred securities issued by each trust rank equally with the common securities in right of payment, except that if an event of default under the indenture governing the notes has occurred and is continuing, the preferred securities will rank senior to the common securities in right of payment.

Note 14—Commitments and Contingent Liabilities

Legal ~~contingencies~~—contingencies—In the ordinary course of business, the Company and Bank have various outstanding commitments and contingent liabilities that are not recognized in the accompanying consolidated financial statements. In addition, the Company may be a defendant in certain claims and legal actions arising in the ordinary course of business. In the opinion of management, after consultation with legal counsel, the ultimate disposition of these matters is currently not expected to have a material adverse effect on the Company’s Consolidated Financial Statements.

Operating lease ~~commitments~~—commitments—Refer to Note 8—~~Lease~~Leases for discussion of operating lease commitments.

Commitments to extend ~~credit~~—credit—The Company is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Condensed Consolidated Statements of Financial Condition. The contractual or notional amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

The Company’s exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit and letters of credit is represented by the contractual or notional amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for funded instruments. The Company does not anticipate any material losses as a result of the commitments and letters of credit.

The following table summarizes the contract or notional amount of outstanding loan and lease commitments at September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:

September 30, 2021

December 31, 2020

Fixed Rate

Variable Rate

Total

Fixed Rate

Variable Rate

Total

Commitments to extend credit

$
173,848

$
1,520,986

$
1,694,834

$
106,183

$
1,261,872

$
1,368,055

Letters of credit

653

58,479

59,132

652

58,120

58,772

Total

$
174,501

$
1,579,465

$
1,753,966

$
106,835

$
1,319,992

$
1,426,827


	September 30, 2022						December 31, 2021
	Fixed Rate		Variable Rate		Total		Fixed Rate		Variable Rate		Total
Commitments to extend credit	$	251,525	$	1,734,481	$	1,986,006	$	176,014	$	1,578,405	$	1,754,419
Letters of credit		536		58,144		58,680		599		58,543		59,142
Total	$	252,061	$	1,792,625	$	2,044,686	$	176,613	$	1,636,948	$	1,813,561

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral is primarily obtained in the form of commercial and residential real estate (including income producing commercial properties).

Letters of credit are conditional commitments issued by the Company to guarantee to a third-party the performance of a customer. Those guarantees are primarily issued to support public and private borrowing arrangements, bond financing and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

Commitments to make loans are generally made for periods of 90 days or less. The fixed rate loan commitments have interest rates ranging from ~~1.25%~~1.00% to ~~18.00%~~18.00% and maturities up to ~~2050~~2048. Variable rate loan commitments have interest rates ranging from ~~1.25%~~1.75% to ~~8.25%~~10.25% and maturities up to ~~2044~~2048.

Note 15—Fair Value Measurement

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. In addition, the Company has the ability to obtain fair values for markets that are not accessible.

These types of inputs create the following fair value hierarchy:

Level 1—1—Quoted prices in active markets for identical assets or liabilities.

Level 2—2—Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3—3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the asset or liability. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available. The Company’s own data used to develop unobservable inputs may be adjusted for market considerations when reasonably available.

The categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to assets and liabilities.

The Company used the following methods and significant assumptions to estimate fair value for certain assets measured and carried at fair value on a recurring basis:

Securities ~~available-for-sale~~—available-for-sale—The Company obtains fair value measurements from an independent pricing service. Management reviews the procedures used by the third party, including significant inputs used in the fair value calculations. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things. When market quotes are not readily accessible or available, alternative approaches are utilized, such as matrix or model pricing.

The Company’s methodology for pricing non-rated bonds focuses on three distinct inputs: equivalent rating, yield and other pricing terms. To determine the rating for a given non-rated municipal bond, the Company references a publicly issued bond by the same issuer if available as well as other additional key metrics to support the credit worthiness. Typically, pricing for these types of bonds would require a higher yield than a similar rated bond from the same issuer. A reduction in price is applied to the rating obtained from the comparable bond, as the Company believes if liquidated, a non-rated bond would be valued less than a similar bond with a verifiable rating. The reduction applied by the Company is one notch lower (i.e. a “AA” rating for a comparable bond would be reduced to “AA-” for the Company’s valuation). In ~~2021~~2022 and ~~2020,~~2021, all of the ratings derived by the Company were “BBB” or better with and without comparable bond proxies. The fair value measurement of municipal bonds is sensitive to the rating input, as a higher rating typically results in an increased valuation. The remaining pricing inputs used in the bond valuation are observable. Based on the rating determined, the Company obtains a corresponding current market yield curve available to market participants. Other terms including coupon, maturity date, redemption price, number of coupon payments per year, and accrual method are obtained from the individual bond term sheets.

Equity and other ~~securities~~—securities—The Company utilizes the same fair value measurement methodology for equity and other securities as detailed in the securities available-sale portfolio above.

Servicing ~~assets~~—assets—Fair value is based on a loan-by-loan basis taking into consideration the original term to maturity, the current age of the loan and the remaining term to maturity. The valuation methodology utilized for the servicing assets begins with generating estimated future cash flows for each servicing asset, based on their unique characteristics and market-based assumptions for prepayment speeds and costs to service. The present value of the future cash flows are then calculated utilizing market-based discount rate assumptions.

Derivative ~~instruments~~—instruments—Interest rate derivatives are valued by a third party, using models that primarily use market observable inputs, such as yield curves, and are validated by comparison with valuations provided by the respective

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

counterparties. Derivative financial instruments are included in other assets and other liabilities in the Condensed Consolidated Statements of Financial Condition.

The following tables summarize the Company’s financial assets and liabilities that were measured at fair value on a recurring basis at September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


			Fair Value Measurements Using								Fair Value Measurements Using
September 30, 2021	Fair Value		Level 1		Level 2		Level 3
September 30, 2022									Fair Value		Level 1		Level 2		Level 3
Financial assets
Securities available-for-sale
U.S. Treasury Notes	$	8,578	$	8,578	$	—	$	—	$	30,917	$	30,917	$	—	$	—
U.S. Government agencies		123,264		—		123,264		—		130,901		—		130,901		—
Obligations of states, municipalities, and political subdivisions		105,060		—		105,060		—		63,565		—		63,565		—
Mortgage-backed securities; residential
Agency		785,173		—		785,173		—		605,098		—		605,098		—
Non-Agency		64,009		—		64,009		—		108,085		—		108,085		—
Mortgage-backed securities; commercial
Agency		237,409		—		237,409		—		159,930		—		159,930		—
Corporate securities		66,827		—		66,827		—		41,616		—		41,616		—
Asset-backed securities		37,285		—		37,285		—		41,542		—		41,542		—
Equity and other securities, at fair value
Mutual funds		4,424		4,424		—		—		2,505		2,505		—		—
Equity securities		5,875		—		5,189		686		4,774		—		4,109		665
Servicing assets		23,597		—		—		23,597		21,127		—		—		21,127
Derivative assets		13,463		—		13,463		—		68,072		—		68,072		—
Financial liabilities
Derivative liabilities		12,348		—		12,348		—		18,505		—		18,505		—


			Fair Value Measurements Using								Fair Value Measurements Using
December 31, 2020	Fair Value		Level 1		Level 2		Level 3
December 31, 2021									Fair Value		Level 1		Level 2		Level 3
Financial assets
Securities available-for-sale
U.S. Treasury Notes	$	23,812	$	23,812	$	—	$	—	$	18,476	$	18,476	$	—	$	—
U.S. Government agencies		113,551		—		113,551		—		139,390		—		139,390		—
Obligations of states, municipalities, and political subdivisions		142,419		—		142,419				89,636		—		89,636
Mortgage-backed securities; residential
Agency		778,391		—		778,391		—		743,656		—		743,656		—
Non-Agency		32,981		—		32,981		—		145,236		—		145,236		—
Mortgage-backed securities; commercial
Agency		250,152		—		250,152		—		213,551		—		213,551		—
Corporate securities		60,768		—		60,768		—		67,346		—		67,346		—
Asset-backed securities		45,156		—		45,156		—		37,251		—		37,251		—
Equity and other securities, at fair value
Mutual funds		2,983		2,983		—		—		4,880		4,880		—		—
Equity securities		5,781		—		5,096		685		5,698		—		5,012		686
Servicing assets		22,042		—		—		22,042		23,744		—		—		23,744
Derivative assets		17,149		—		17,149		—		13,375		—		13,375		—
Financial liabilities
Derivative liabilities		18,133		—		18,133		—		9,665		—		9,665		—

~~The Company did 0t have any transfers to or from Level 3 of the fair value hierarchy during the nine months ended September 30, 2021 and 2020.~~

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

The following table presents additional information about financial assets measured at fair value on recurring basis for which the Company used significant unobservable inputs (Level 3):


	Nine Months Ended September 30,											Nine Months Ended September 30,
	2021		2020			2021			2020			2022			2021		2022			2021
	Investment Securities					Servicing Assets						Investment Securities					Servicing Assets
Balance, beginning of period	$	685	$	700		$	22,042		$	19,471		$	686		$	685	$	23,744		$	22,042
Additions, net		0		0			5,703			4,449			—			—		5,592			5,703
Change in fair value		1		(16	)		(4,148	)		(2,653	)		(21	)		1		(8,209	)		(4,148	)
Balance, end of period	$	686	$	684		$	23,597		$	21,267		$	665		$	686	$	21,127		$	23,597

The Company did not have any transfers to or from Level 3 of the fair value hierarchy during the nine months ended September 30, 2022 and 2021.

The following table presents additional information about the unobservable inputs used in the fair value measurements on recurring basis that were categorized within Level 3 of the fair value hierarchy as of September 30, ~~2021:~~2022:

Financial Instruments

Valuation Technique

Unobservable Inputs

Range of
Inputs

Weighted
Average
Range

Impact to
Valuation from an
Increased or
Higher Input Value

Single issuer trust preferred

Discounted cash flow

Discount rate

5.3% - 6.4%

~~3.1% - 6.4%~~

~~4.5~~5.8

Decrease

Servicing assets

Discounted cash flow

Prepayment speeds

0.0% - 33.7%

~~0.5% - 31.8%~~

~~14.3~~13.5

Decrease

Discount rate

6.3% - 55.7%

~~(3.0)% - 50.0%~~

~~8.1~~11.7

Decrease

Expected weighted
average loan life

~~0.2~~0.0 - ~~8.5~~9.0 years

3.9 years

Increase

The Company used the following methods and significant assumptions to estimate fair value for certain assets measured and carried at fair value on a ~~0n-recurring~~non-recurring basis:

Impaired loans (excluding acquired impaired loans)—Impaired loans, other than those existing on the date of a business acquisition, are primarily carried at the fair value of the underlying collateral, less estimated costs to sell, if the loan is collateral dependent. Valuations of impaired loans that are collateral dependent are supported by third party appraisals in accordance with the Bank’s credit policy. Other valuation methods include analysis of discounted cash flows, which measures the present value of expected future cash flows discounted at the loan’s effective interest rate. Impaired loans that are not collateral dependent are not material.

Assets held for ~~sale~~—sale—Assets held for sale consist of former branch locations and real estate previously purchased for expansion. Assets are considered held for sale when management has approved to sell the assets following a branch closure or other events. The properties are being actively marketed and transferred to assets held for sale based on the lower of carrying value or its fair value, less estimated costs to sell. The Company records assets held for sale on the Condensed Consolidated Statements of Financial Condition within accrued interest receivable and other assets.

Other real estate ~~owned~~—owned—Certain assets held within other real estate owned represent real estate or other collateral that has been adjusted to its estimated fair value, less cost to sell, as a result of transferring from the loan portfolio at the time of foreclosure or repossession and based on management’s periodic impairment evaluation. From time to time, non-recurring fair value adjustments to other real estate owned are recorded to reflect partial write-downs based on an observable market price or current appraised value of property.

Adjustments to fair value based on such non-recurring transactions generally result from the application of lower-of-cost-or-market accounting or write-downs of individual assets due to impairment. The following tables summarize the

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

Company’s assets that were measured at fair value on a non-recurring basis, excluding acquired impaired loans, as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


			Fair Value Measurements Using								Fair Value Measurements Using
September 30, 2021	Fair Value		Level 1		Level 2		Level 3
September 30, 2022									Fair Value		Level 1		Level 2		Level 3
Non-recurring
Impaired loans (excluding acquired impaired loans)
Commercial real estate	$	37,143	$	—	$	—	$	37,143	$	38,883	$	—	$	—	$	38,883
Residential real estate		3,946		—		—		3,946		4,782		—		—		4,782
Construction, land development, and other land										5,541						5,541
Commercial and industrial		21,547		—		—		21,547		23,395		—		—		23,395
Assets held for sale		10,982		—		—		10,982		8,391		—		—		8,391
Other real estate owned		3,033		—		—		3,033		4,402		—		—		4,402


			Fair Value Measurements Using								Fair Value Measurements Using
December 31, 2020	Fair Value		Level 1		Level 2		Level 3
December 31, 2021									Fair Value		Level 1		Level 2		Level 3
Non-recurring
Impaired loans (excluding acquired impaired loans)
Commercial real estate	$	41,135	$	—	$	—	$	41,135	$	28,513	$	—	$	—	$	28,513
Residential real estate		1,752		—		—		1,752		1,802		—		—		1,802
Commercial and industrial		28,508		—		—		28,508		21,570		—		—		21,570
Assets held for sale		13,023		—		—		13,023		9,153		—		—		9,153
Other real estate owned		6,350		—		—		6,350		2,112		—		—		2,112

The following methods and assumptions were used by the Company in estimating fair values of other assets and liabilities for disclosure purposes:

Cash and cash equivalents— and interest bearing deposits with other banks—For these short-term instruments, the carrying amount is a reasonable estimate of fair value.

Securities ~~held-to-maturity~~—held-to-maturity—The Company obtains fair value measurements from an independent pricing service. Management reviews the procedures used by the third party, including significant inputs used in the fair value calculations. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things. When market quotes are not readily accessible or available, alternative approaches are utilized, such as matrix or model pricing.

Restricted ~~stock~~—stock—The fair value has been determined to approximate cost.

Loans held for sale—The fair value of loans held for sale are based on quoted market prices, where available, and determined by discounted estimated cash flows using interest rates approximating the Company’s current origination rates for similar loans adjusted to reflect the inherent credit risk.

Loan and lease receivables, ~~net~~—net—For certain variable rate loans that reprice frequently and with no significant changes in credit risk, fair value is estimated at carrying value. The fair value of other types of loans is estimated using an exit price notion. It is estimated by discounting future cash flows, using current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

~~Deposits~~—Deposits—The fair value of demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated by discounting future cash flows, using rates currently offered for deposits of similar remaining maturities.

~~Paycheck Protection Program Liquidity Facility~~—Federal funds purchased—The carrying amount approximates fair value.

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

Federal Home Loan Bank ~~advances~~—advances—The fair value of FHLB advances is estimated by discounting the agreements based on maturities using rates currently offered for FHLB advances of similar remaining maturities adjusted for prepayment penalties that would be incurred if the borrowings were paid off on the measurement date.

Securities sold under agreements to ~~repurchase~~—repurchase—The carrying amount approximates fair value due to maturities of less than ninety days.

Subordinated ~~notes~~—notes—The fair value is based on available market prices.

Junior subordinated ~~debentures~~—debentures—The fair value of junior subordinated debentures, in the form of trust preferred securities, is determined using rates currently available to the Company for debt with similar terms and remaining maturities.

Accrued interest receivable and ~~payable~~—payable—The carrying amount approximates fair value.

Commitments to extend credit and letters of ~~credit~~—credit—The fair values of these off-balance sheet commitments to extend credit and commercial and letters of credit are not considered practicable to estimate because of the lack of quoted market prices and the inability to estimate fair value without incurring excessive costs.

The estimated fair values of financial instruments not carried at fair value and levels within the fair value hierarchy are as follows:


			September 30,				December 31,						September 30,				December 31,
	Fair Value		2021				2020				Fair Value		2022				2021
	Hierarchy Level		Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value		Hierarchy Level		Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial assets
Cash and due from banks		1	$	46,900	$	46,900	$	41,432	$	41,432		1	$	56,546	$	56,546	$	35,247	$	35,247
Interest bearing deposits with other banks		2		95,978		95,978		41,988		41,988		2		159,744		159,744		122,684		122,684
Securities held-to-maturity		2		3,887		4,033		4,395		4,573		2		3,877		3,825		3,885		3,992
Other restricted stock		2		15,927		15,927		10,507		10,507
Restricted stock												2		27,077		27,077		22,002		22,002
Loans held for sale		3		48,372		54,739		7,924		8,848		3		33,975		34,879		64,460		69,081
Loans and lease receivables, net (less impaired loans at fair value)		3		4,485,994		4,478,323		4,202,793		4,205,906		3		5,138,215		5,113,663		4,430,231		4,428,509
Accrued interest receivable		3		18,857		18,857		20,678		20,678		3		21,718		21,718		18,875		18,875
Financial liabilities
Non-interest-bearing deposits		2		2,117,749		2,117,749		1,762,676		1,762,676		2		2,142,183		2,142,183		2,158,420		2,158,420
Interest-bearing deposits		2		3,040,529		3,041,101		2,989,355		2,990,735		2		3,470,273		3,463,575		2,996,627		2,997,026
Accrued interest payable		2		1,687		1,687		1,478		1,478		2		2,844		2,844		262		262
Paycheck Protection Program Liquidity Facility		2		156,404		156,404		371,907		371,907
Federal Home Loan Bank advances		2		355,000		355,000		234,000		234,000		2		600,000		600,000		490,000		490,000
Securities sold under repurchase agreement		2		27,715		27,715		41,994		41,994		2		53,954		53,954		29,723		29,723
Subordinated notes		2		73,473		83,291		73,342		76,627		2		73,648		74,645		73,517		81,744
Junior subordinated debentures		3		36,796		40,777		36,451		40,543		3		37,232		40,002		36,906		40,901

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

Note 16—Derivative Instruments and Hedge Activities

As required by ASC 815, the Company records all derivatives on the ~~balance sheet~~Condensed Consolidated Statements of Financial Condition at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. The Company records derivative assets and derivative liabilities on the Condensed Consolidated Statements of Financial Condition within accrued interest receivable and other assets and accrued interest payable and other liabilities, respectively. The following tables present the fair value of the Company’s derivative financial instruments and classification on the Condensed Consolidated Statements of Financial Condition as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


	September 30, 2021							December 31, 2020							September 30, 2022							December 31, 2021
			Fair Value							Fair Value							Fair Value							Fair Value
	Notional Amount		Other Assets		Other Liabilities			Notional Amount		Other Assets		Other Liabilities			Notional Amount		Other Assets		Other Liabilities			Notional Amount		Other Assets		Other Liabilities
Derivatives designated as hedging instruments
Interest rate swaps designated as cash flow hedges		400,000	$	1,799	$	(192	)	$	0	$	0	$	0		$	550,000	$	49,191	$	—		$	400,000	$	4,140	$	—
Derivatives not designated as hedging instruments
Other interest rate derivatives		458,698		11,664		(12,148	)		383,410		17,149		(18,116	)		549,662		18,881		(18,505	)		439,876		9,235		(9,660	)
Other credit derivatives		7,788		0		(8	)		8,437		0		(17	)		6,902		—		—			7,571		—		(5	)
Total derivatives	$	866,486	$	13,463	$	(12,348	)	$	391,847	$	17,149	$	(18,133	)	$	1,106,564	$	68,072	$	(18,505	)	$	847,447	$	13,375	$	(9,665	)

Interest rate swaps designated as cash flow ~~hedges~~—hedges—Cash flow hedges of interest payments associated with certain other borrowings had notional amounts totaling ~~$400.0~~$550.0 million as of September 30, ~~2021. There were 0 cash flow hedges outstanding at~~2022, and $400.0 million as of December 31, ~~2020.~~2021. The Company assesses the effectiveness of each hedging relationship by comparing the changes in fair value of the derivatives hedging instrument with the fair value of the designated hedged transactions. As of September 30, ~~2021,~~2022, the cash flow hedges aggregating ~~$400.0~~$550.0 million in notional amounts are comprised of ~~five~~six forward starting pay fixed interest rate swaps ~~of which one for $100.0 million is effective in March 2022; one for $50.0 million is effective in September 2022;~~totaling $400.0 million; two totaling ~~$200.0~~$200.0 million are effective in March 2023; two totaling $100.0 million are effective in May 2023; one for $50.0 million is effective in June 2023; and one for ~~$50.0~~$50.0 million is effective ~~May~~in September 2023.

Included in other comprehensive income is the remaining balance related to previously terminated interest rate swaps designated as cash flow hedges of ~~$253,000~~$32,000 as of September 30, ~~2021~~2022 and ~~$304,000~~$199,000 as of December 31, ~~2020.~~2021. These are amortized over the original life of the cash flow hedge. Interest recorded on these swap transactions was ~~$29,000~~income of $327,000 and ~~$22,000~~an expense of $29,000 during the three months ended September 30, ~~2021,~~2022, and ~~2020,~~2021, respectively, and is reported as a component of interest expense on deposits and other borrowings. Interest recorded on these swap transactions was ~~$71,000~~income of $8,000 and ~~$64,000~~an expense of $71,000 during the nine months ended September 30, ~~2021,~~2022 and ~~2020,~~2021, respectively, and is reported as a component of interest expense on deposits and other borrowings. As of September 30, ~~2021,~~2022, the Company estimates ~~$868,000~~$10.2 million of the unrealized ~~loss~~gain to be reclassified as ~~an increase~~a decrease to interest expense during the next twelve months.

The following table reflects the cash flow hedges as of September 30, ~~2021:~~2022:


Notional amounts	$	400,000	$	550,000
Derivative assets fair value		1,799		49,191
Derivative liabilities fair value		192		—
Weighted average maturity	5.2 years		4.5 years

The weighted average pay rates of the ~~forward~~ swaps are ~~0.98%~~1.33% as of September 30, 2022, and ~~weighted average~~ receive rates ~~will be~~are determined at the time the forward swaps become effective. The weighted average receive rates for the two effective hedges of $150.0 million are 2.77% as of September 30, 2022.

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

The following table reflects the net gains (losses) recorded in accumulated other comprehensive income (loss) and the Condensed Consolidated Statements of Operations relating to the cash flow derivative instruments for the nine months ended:

September 30, 2021

September 30, 2020

Amount of
Loss
Recognized in
OCI

Amount of
Loss
Reclassified
from OCI to
Income as an
Increase to
Interest
Expense

Amount of
Gain (Loss)
Recognized in
Other
Non-Interest
Income

Amount of
Loss
Recognized in
OCI

Amount of
Loss
Reclassified
from OCI to
Income as an
Increase to
Interest
Expense

Amount of
Gain (Loss)
Recognized in
Other
Non-Interest
Income

Interest rate swaps

$
1,606

$
(71
)

$
—

$
—

$
(64
)

$
—


	September 30, 2022						September 30, 2021
	Amount of Gain Recognized in OCI		Amount of Gain Reclassified from OCI to Income as an Increase to Interest Expense		Amount of Gain (Loss) Recognized in Other Non-Interest Income		Amount of Gain Recognized in OCI		Amount of Loss Reclassified from OCI to Income as an Increase to Interest Expense			Amount of Gain (Loss) Recognized in Other Non-Interest Income
Interest rate swaps	$	45,088	$	8	$	—	$	1,606	$	(71	)	$	—

Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to interest rate movements and other identified risks but do not meet the strict hedge accounting requirements and/or the Company has not elected to apply hedge accounting. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings.

Other interest rate ~~derivatives~~—derivatives—The total combined notional amount was ~~$458.7~~$549.7 million as of September 30, ~~2021~~2022 with maturities ranging from January ~~2022~~2023 to ~~September 2031~~July 2032. The fair values of the interest rate derivative agreements are reflected in other assets and other liabilities with corresponding gains or losses reflected in non-interest income. During the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, there were ~~$134,000~~$394,000 and ~~$41,000~~$134,000 of net transaction fees, respectively, included in other non-interest income, related to these derivative instruments. During the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, there were ~~$840,000~~$2.0 million and ~~$700,000~~$840,000 of net transaction fees, respectively, included in other non-interest income, related to these derivative instruments.

These instruments are inherently subject to market risk and credit risk. Market risk is associated with changes in interest rates and credit risk relates to the Company’s risk of loss when the counterparty to a derivative contract fails to perform according to the terms of the agreement. Market and credit risks are managed and monitored as part of the Company’s overall asset-liability management process. The credit risk related to derivatives entered into with certain qualified borrowers is managed through the Company’s loan underwriting process. The Company’s loan underwriting process also approves the Bank’s swap counterparty used to mirror the borrowers’ swap. The Company has a bilateral agreement with each swap counterparty that provides that fluctuations in derivative values are to be fully collateralized with either cash or securities.

The following table reflects other interest rate derivatives as of September 30, ~~2021:~~2022:

Notional amounts

$
458,698

Derivative assets fair value

11,664

Derivative liabilities fair value

12,148

Weighted average pay rates

4.23
%
Weighted average receive rates

3.03
%
Weighted average maturity

5.6 years


Notional amounts	$	549,662
Derivative assets fair value		18,881
Derivative liabilities fair value		18,505
Weighted average pay rates		4.14	%
Weighted average receive rates		5.79	%
Weighted average maturity	5.6 years

Other ~~credit derivatives~~—derivatives— The Company has entered into risk participation agreements with counterparty banks to assume a portion of the credit risk related to borrower transactions. The credit risk related to these other ~~credit~~ derivatives is managed through the Company’s loan underwriting process. The total notional amount was ~~$7.8~~$6.9 million and ~~$8.4~~$7.6 million as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. Additionally, the Company enters into foreign currency contracts to manage foreign exchange risk associated with certain customer foreign currency transactions. These transactions were not material to the consolidated financial statements as of September 30, 2022 and December 21, 2021. The fair ~~value~~values of the ~~other~~ credit derivatives ~~are~~is reflected in other assets and liabilities with corresponding gains or losses reflected in non-interest income or other comprehensive income.

The Company has agreements with its derivative counterparties that contain a cross-default provision under which if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations. The Company also has agreements with certain derivative counterparties that contain a provision where if the Company fails to maintain its status as a well or adequately capitalized institution, then the counterparty could terminate the derivative positions and the Company would be required to settle its obligations resulted in a net asset position.

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

as a well or adequately capitalized institution, then the counterparty could terminate the derivative positions and the Company would be required to settle its obligations resulted in a net asset position.

The following table reflects amounts included in non-interest income in the Condensed Consolidated Statements of Operations relating to derivative instruments that are not designated in a hedging relationship for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


	Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
	September 30,				September 30,					September 30,				September 30,
	2021		2020		2021		2020			2022		2021		2022		2021
Other interest rate derivatives	$	98	$	113	$	482	$	(627	)	$	233	$	98	$	801	$	482
Other credit derivatives		2		3		9		(8	)		1		2		6		9
Total	$	100	$	116	$	491	$	(635	)	$	234	$	100	$	807	$	491

The Company records interest rate derivatives subject to master netting agreements at their gross value and does not offset derivative asset and liabilities on the Condensed Consolidated Statements of Financial Condition. The table below summarizes the Company’s interest rate derivatives and offsetting positions as of:

September 30, 2021

December 31, 2020

Derivative
Assets
Fair Value

Derivative
Liabilities
Fair Value

Derivative
Assets
Fair Value

Derivative
Liabilities
Fair Value

Gross amounts recognized

$
13,463

$
(12,348
)

$
17,149

$
(18,133
)
Less: Amounts offset in the Consolidated Statements of
   Financial Condition

—

—

—

—

Net amount presented in the Consolidated Statements of
   Financial Condition

$
13,463

$
(12,348
)

$
17,149

$
(18,133
)
Gross amounts not offset in the Consolidated Statements of
   Financial Condition

Offsetting derivative positions

(1,814
)

1,814

—

—

Collateral posted

(11,649
)

9,740

(17,149
)

18,133

Net credit exposure

$
—

$
(794
)

$
—

$
—


	September 30, 2022						December 31, 2021
	Derivative Assets Fair Value			Derivative Liabilities Fair Value			Derivative Assets Fair Value			Derivative Liabilities Fair Value
Gross amounts recognized	$	68,072		$	(18,505	)	$	13,375		$	(9,665	)
Less: Amounts offset in the Condensed Consolidated Statements of Financial Condition		—			—			—			—
Net amount presented in the Condensed Consolidated Statements of Financial Condition	$	68,072		$	(18,505	)	$	13,375		$	(9,665	)
Gross amounts not offset in the Condensed Consolidated Statements of Financial Condition
Offsetting derivative positions		(39	)		39			(3,253	)		3,253
Collateral posted		(64,273	)		18,466			(10,122	)		6,412
Net credit exposure	$	3,760		$	—		$	—		$	—

As of September 30, ~~2021,~~2022, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was ~~$12.3~~$18.5 million. The Company has posted ~~$9.7~~$18.5 million collateral related to these agreements as of September 30, ~~2021.~~2022. If the Company had breached any of these provisions at September 30, ~~2021,~~2022, it could have been required to settle its obligations under the agreements at their termination value less offsetting positions of ~~$1.8 million.~~$39,000. For purposes of this disclosure, the amount of posted collateral by the Company and counterparties is limited to the amount offsetting the derivative asset and derivative liability.

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

Note 17 – Share-Based Compensation

In June 2017, the ~~Company~~Company's Board of Directors adopted, and the Company's stockholder approved, the 2017 Omnibus Incentive Compensation Plan (the “Omnibus Plan”) ~~in connection with our IPO.~~. The Omnibus Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights and other equity-based, equity-related or cash-based awards. A total of 1,550,000 shares of our common stock have been reserved for issuance under the Omnibus Plan. As of September 30, ~~2021,~~2022, there were ~~698,331~~414,791 shares available for future grants under the Omnibus Plan.

The Company primarily grants time-based restricted share awards that vest over a one to four year period, subject to continued employment. The Company also grants performance-based restricted share awards. The number of shares which may be earned under the award is dependent upon the Company’s return on average assets, weighted equally over a three-year period and measured against a peer group consisting of publicly-traded bank holding companies. Results will be measured cumulatively at the end of the three years. Any earned shares will vest on the third anniversary of the grant date.

During ~~2021,~~2022, the Company granted ~~308,452~~298,452 shares of restricted common stock, par value ~~$0.01~~$0.01 per share. Of this total, ~~119,344~~166,290 restricted shares will vest ratably over four years on each anniversary of the grant date, ~~109,475 restricted shares will vest ratably on the last business day of 2021, 2022 and 2023, 38,279~~73,018 restricted shares will vest ratably over three years on each anniversary of the grant date, ~~9,141~~12,661 restricted shares will cliff vest on the third anniversary of the grant date, 2,776 restricted shares will vest in one year, and ~~130~~1,219 restricted shares ~~have~~ vested ~~all subject to continued employment.~~

immediately. In addition, ~~32,083~~42,488 performance-based restricted shares were included in the ~~February 2021 grant. The number of shares which may be earned under the award is dependent upon the Company’s return on average assets, weighted equally, over~~2022 grant that have a ~~three-year~~three year performance period ending December 31, 2023, measured against a peer group consisting of publicly-traded bank holding companies. Results will be measured cumulatively at the end of the three years. Any earned shares will vest on the third anniversary of the grant date.2024.

The following table discloses the changes in restricted shares for the nine months ended September 30, ~~2021:~~2022:


	Omnibus Plan					Omnibus Plan
	Number of Shares			Weighted Average Grant Date Fair Value		Number of Shares			Weighted Average Grant Date Fair Value
Beginning balance, January 1, 2021		383,539		$	18.75
Beginning balance, January 1, 2022							542,520		$	19.04
Granted		308,452			19.38		298,452			26.90
Incremental performance shares vested							1,074
Vested		(103,187	)		19.52		(188,672	)		19.07
Forfeited		(9,740	)		20.58		(24,832	)		21.89
Ending balance outstanding at September 30, 2021		579,064		$	18.92
Ending balance outstanding at September 30, 2022							628,542		$	22.65

A total of ~~103,187~~188,672 restricted shares vested during the nine months ended September 30, ~~2021.~~2022. A total of ~~113,264~~148,577 restricted shares vested during the year ended December 31, ~~2020.~~2021. The fair value of restricted shares that vested during the nine months ended September 30, ~~2021~~2022 was ~~$2.2~~$4.9 million. The fair value of restricted shares that vested during the year ended December 31, ~~2020~~2021 was ~~$1.4~~$3.4 million.

The Company recognizes share-based compensation based on the estimated fair value of the restricted stock at the grant date. Share-based compensation expense is included in non-interest expense in the Condensed Consolidated Statements of Operations.

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

The following table summarizes restricted stock compensation expense for the nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


	Nine Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2022		2021
Total share-based compensation - restricted stock	$	2,966	$	2,019	$	4,016	$	2,966
Income tax benefit		826		562		1,139		826
Unrecognized compensation expense		7,840		5,566		10,479		7,840
Weighted-average amortization period remaining	2.4 years		2.4 years		2.5 years		2.4 years

The fair value of the unvested restricted stock awards at September 30, ~~2021~~2022 was ~~$14.2~~$12.7 million.

In October 2014, the Company adopted the Byline Bancorp, Inc. Equity Incentive Plan (“BYB Plan”). The maximum number of shares available for grants under this plan was 2,476,122 shares. ~~During 2016 and 2015, the~~The Company granted1,846,968 options to purchase ~~212,400 and 1,634,568~~ shares ~~respectively; the Company did 0t grant any stock options during 2017.~~under this plan. In June 2017, the Board of Directors terminated the BYB Plan and 0no future grants can be made under this plan. Options to purchase a total of ~~1,344,548~~816,060 shares remain outstanding under the BYB Plan at September 30, ~~2021.~~2022.

The types of stock options granted under the BYB Plan were Time Options and Performance Options. The exercise price of each option is equal to the fair value of the stock as of the date of grant. These option awards have vesting periods ranging from one to five years and have 10-year contractual terms. Stock volatility was computed as the average of the volatilities of peer group companies. All outstanding stock options were fully vested and exercisable at September 30, ~~2021.~~2022.

The fair values of the stock options were determined using the Black-Scholes-Merton model for Time Options and a Monte Carlo simulation model for Performance Options.

The following table discloses the activity in shares subject to options and the weighted average exercise prices, in actual dollars, for the nine months ended September 30, ~~2021:~~2022:

BYB Plan

Number of Shares

Weighted Average Exercise Price

Intrinsic
Value

Weighted Average Remaining Contractual Term (in Years)

Beginning balance, January 1, 2021

1,390,579

$
11.36

$
5,724

4.4

Exercised

(46,031
)

13.66

$
359

Expired

0

Ending balance outstanding at September 30, 2021

1,344,548

$
11.28

$
17,851

3.7

Exercisable at September 30, 2021

1,344,548

$
11.28

$
17,851

3.7


	BYB Plan
	Number of Shares			Weighted Average Exercise Price		Intrinsic Value		Weighted Average Remaining Contractual Term (in Years)
Beginning balance, January 1, 2022		1,337,048		$	11.26	$	21,519		3.5
Exercised		(520,988	)		11.18	$	7,742
Expired		—
Ending balance outstanding at September 30, 2022		816,060		$	11.30	$	7,300		2.6
Exercisable at September 30, 2022		816,060		$	11.30	$	7,300		2.6

A total of ~~46,031~~520,988 stock options were exercised during the nine months ended September 30, ~~2021,~~2022 with proceeds of ~~which were $629,000, with~~$470,000 and a related tax benefit of ~~$100,000.~~$2.1 million. A total of ~~19,496~~53,531 stock options were exercised during the year ended December 31, ~~2020. During the year ended December 31, 2020,~~2021, with proceeds of ~~$253,000~~$751,000 and a related tax benefit of ~~$39,000. NaN~~$121,000. No stock options vested during the ~~three or~~ nine months ended September 30, ~~2021.~~2022.

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

The Company recognizes share-based compensation based on the estimated fair value of the option at the grant date. Forfeitures are estimated based upon industry standards. Share-based compensation expense is included in non-interest expense in the Consolidated Statements of Operations. ~~The following table summarizes~~did not recognize any stock option compensation expense ~~for the~~during three or nine months ended September 30, ~~2021 and 2020:~~

Nine Months Ended September 30,

2021

2020

Total share-based compensation - stock options

$
0

$
7

Income tax benefit

0

2

Unrecognized compensation expense - stock options

0

0

Weighted-average amortization period remaining

0.0 years

0.0 years

2022 or 2021. There was 0no unrecognized stock option compensation expenses as of September 30, ~~2021.~~2022.

Pursuant to the terms of the Agreement and Plan of Merger ~~Agreement, upon the Effective Time,~~with First Evanston and its subsidiaries, dated as of November 27, 2017 (the "Merger Agreement"), each outstanding First Evanston ~~Option~~option held by a participant in the First Evanston Bancorp, Inc. Stock Incentive Plan (the “FEB Plan”) ceased to represent a right to acquire shares of First Evanston common stock and was assumed and converted automatically into a fully vested and exercisable adjusted option to purchase shares of Byline common stock (each an “Adjusted Option”). In accordance with the Merger Agreement, the number of shares of Byline common stock to which each such Adjusted Option relates is equal to the product (rounded down to the nearest whole share of Byline common stock) of: (a) the number of shares of First Evanston common stock subject to the First Evanston Option immediately prior to May 31, 2018, multiplied by ~~(ii) 4.725.~~(b) 4.725. Each Adjusted Option has an exercise price per share of Byline common stock equal to the quotient (rounded up to the nearest whole cent) of (x) the per share exercise price of such First Evanston Option immediately prior to May 31, 2018, divided by (y) ~~4.725.~~4.725. The description of the conversion process is based on, and qualified by, the Merger Agreement.

The following table discloses the activity in shares subject to options under the FEB Plan and the weighted average exercise prices, in actual dollars, for the nine months ended September 30, ~~2021:~~2022:

FEB Plan

Number of Shares

Weighted Average Exercise Price

Intrinsic
Value

Weighted Average Remaining Contractual Term (in Years)

Beginning balance, January 1, 2021

233,630

$
11.52

$
918

3.3

Exercised

(46,774
)

$
11.55

$
313

Expired

0

Ending balance outstanding at September 30, 2021

186,856

$
11.52

$
2,437

3.3

Exercisable at September 30, 2021

186,856

$
11.52

$
2,437

3.3


	FEB Plan
	Number of Shares		Weighted Average Exercise Price		Intrinsic Value		Weighted Average Remaining Contractual Term (in Years)
Beginning balance, January 1, 2022		170,697	$	11.60	$	2,688		3.4
Exercised		—
Expired		—
Ending balance outstanding at September 30, 2022		170,697	$	11.60	$	1,476		2.6
Exercisable at September 30, 2022		170,697	$	11.60	$	1,476		2.6

No~~A total of 46,774~~ stock options were exercised during the nine months ended September 30, ~~2021, proceeds of which were $540,000 and a related tax benefit of $87,000.~~2022. A total of ~~255,615~~62,366 stock options were exercised during the year ended December 31, ~~2020,~~2021, proceeds of which were ~~$2.8 million~~$705,000 and a related tax benefit of ~~$219,000. NaN~~$153,000. No stock options vested during the ~~three or~~ nine months ended September 30, ~~2021.~~2022.

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

Note 18—Earnings per Share

A reconciliation of the numerators and denominators for earnings per common share computations is presented below. Incremental shares represent outstanding stock options for which the exercise price is less than the average market price of the Company’s common stock during the periods presented. Options to purchase ~~1,531,404~~986,757 and ~~1,676,371~~1,531,404 shares of common stock were outstanding as of September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. There were ~~579,064~~628,542 and ~~392,439~~579,064 restricted stock awards outstanding at September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. For the three and nine months ended September 30, 2022 and 2021, 0no stock options outstanding were excluded from the calculation of diluted earnings per common share. For the three and nine months ended September 30, 2020, 105,657 and 50,000 stock options outstanding were excluded from the calculation of diluted earnings per common share, as their effect would have been anti-dilutive.

The following represent the calculation of basic and diluted earnings per share for the periods presented:

Three Months Ended
September 30,

Nine Months Ended
September 30,

2021

2020

2021

2020

Net income

$
25,306

$
13,071

$
75,596

$
25,176

Less: Dividends on preferred shares

196

196

587

587

Net income available to common stockholders

$
25,110

$
12,875

$
75,009

$
24,589

Weighted-average common stock outstanding:

Weighted-average common stock outstanding (basic)

37,200,778

38,057,350

37,773,350

37,973,694

Incremental shares

817,523

191,985

749,762

278,269

Weighted-average common stock outstanding (dilutive)

38,018,301

38,249,335

38,523,112

38,251,963

Basic earnings per common share

$
0.68

$
0.34

$
1.99

$
0.65

Diluted earnings per common share

$
0.66

$
0.34

$
1.95

$
0.64


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income	$	22,656	$	25,306	$	65,250	$	75,596
Less: Dividends on preferred shares		—		196		196		587
Net income available to common stockholders	$	22,656	$	25,110	$	65,054	$	75,009
Weighted-average common stock outstanding:
Weighted-average common stock outstanding (basic)		36,851,973		37,200,778		37,012,316		37,773,350
Incremental shares		519,186		817,523		569,550		749,762
Weighted-average common stock outstanding (dilutive)		37,371,159		38,018,301		37,581,866		38,523,112
Basic earnings per common share	$	0.61	$	0.68	$	1.76	$	1.99
Diluted earnings per common share	$	0.61	$	0.66	$	1.73	$	1.95

Note 19—Stockholders’ Equity

A summary of the Company’s preferred and common stock at September 30, ~~2021~~2022 and December 31, ~~2020~~2021 is as follows:


	September 30,		December 31,		September 30,		December 31,
	2021		2020		2022		2021
Series B 7.5% fixed to floating non-cumulative perpetual preferred stock
Preferred stock
Par value	$	0.01	$	0.01	$	0.01	$	0.01
Shares authorized		50,000		50,000		50,000		50,000
Shares issued		10,438		10,438		—		10,438
Shares outstanding		10,438		10,438		—		10,438
Common stock, voting
Par value	$	0.01	$	0.01	$	0.01	$	0.01
Shares authorized		150,000,000		150,000,000		150,000,000		150,000,000
Shares issued		39,170,541		38,736,540		39,515,466		39,203,747
Shares outstanding		37,690,087		38,618,054		37,465,902		37,713,903
Treasury shares		1,480,454		118,486		2,049,564		1,489,844

During 2016, the Company authorized and issued Series B ~~7.50%~~7.50% fixed-to-floating non-voting, noncumulative perpetual preferred stock with a liquidation preference of $1,000 per share, plus the amount of unpaid dividends, if any, which iswas redeemable at the Company’s option on or after March 31, 2022. Holders of Series B Preferred Stock dodid not have any rights to convert such stock into shares of any other class of capital stock of the Company. Holders of Series B Preferred Stock ~~are~~were entitled to receive a fixed dividend of ~~7.50%~~7.50% per annum from the original issue date through December 30, 2021~~, after which the dividend is paid at a floating rate of three-month LIBOR plus 5.41% per annum.~~.

On February 15, 2022, the Company gave notice of its intention to redeem all of its outstanding shares of the Series B Preferred Stock (the “Preferred Stock Redemption”). The Preferred Stock Redemption was in accordance with the terms of the Certificate of Designations of the Series B Preferred Stock dated as of June 16, 2017 (the “Certificate of Designation”). On March 31, 2022, the Company redeemed all 10,438 outstanding shares of Series B Preferred Stock. Under the Certificate of

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

~~The Company Series B Preferred Stock is included in Tier 1 capital for regulatory capital purposes and is redeemable at~~Designations, the ~~option of the Company at a~~per share redemption price was the liquidation preference of ~~$1,000~~$1,000 per share plus an amount equal to any declared and unpaid dividends ~~(i) in whole or part on~~thereon for any prior dividend ~~payment date on or after March 31, 2022,~~period and (ii) in whole but not in part prior to March 31, 2022, within 90 days following a regulatory event, as defined in the Certificate of Designations of the Company Series B Preferred Stock. The Company must receive approval of the Federal Reserve Board prior to any redemption of the Company Series B Preferred Stock.totaled $10.6 million.

For the ~~three~~nine months ended September 30, ~~2021 and 2020,~~2022, the Company declared and paid dividends on the Series B preferred stock of ~~$196,000.~~$196,000. For the three and nine months ended September 30, 2021, ~~and 2020,~~ the Company declared and paid dividends on the Series B preferred stock of ~~$587,000.~~$196,000 and $587,000.

On December 10, 2020, the Company announced that its Board of Directors approved a stock repurchase program authorizing the purchase of up to an aggregate of 1,250,000 shares of the Company’s outstanding common stock, and on July 27, 2021, the Company's Board of Directors authorized an expansion of its current stock repurchase program. Under the extended program, the Company is authorized to repurchase an additional 1,250,000 shares of the Company's outstanding common stock. The shares may, at the discretion of management, be repurchased from time to time in open market purchases as market conditions warrant or in privately negotiated transactions. The Company is not obligated to purchase any shares under the program, and the program may be discontinued at any time. The actual timing, number and share price of shares purchased under the repurchase program will be determined by the Company at its discretion and will depend on a number of factors, including the market price of the Company’s stock, general market and economic conditions and applicable legal requirements. The ~~shares authorized to be repurchased represent approximately 3.0% of the Company’s outstanding common stock at September 30, 2021. The~~ program will be in effect until December 31, 2022 unless terminated earlier.

The Company purchased ~~460,220~~174,249 shares at a cost of ~~$10.4~~$4.2 million under the stock repurchase program during the three months ended September 30, 2022. The Company purchased 460,220 shares at a cost of $10.4 million under this program during the three months ended September 30, 2021. The Company purchased ~~1,331,708~~689,068 shares at a cost of ~~$28.9~~$17.3 million under ~~this~~the stock repurchase program during the nine months ended September 30, 2022. The Company purchased 1,331,708 shares at a cost of $28.9 million under this program during nine months ended September 30, 2021.

Repurchased shares are recorded as treasury shares on the trade date using the treasury stock method, and the cash paid is recorded as treasury stock. Treasury stock acquired is recorded at cost and is carried as a reduction of stockholders’ equity in the Condensed Consolidated ~~Statement~~Statements of Financial Condition.

For the three ~~and nine~~ months ended September 30, 2022 and 2021, cash dividends were declared and paid to stockholders of record of the Company's common stock of ~~$0.09 per share and $0.21~~$0.09 per share, respectively. For the ~~three and~~ nine months ended September 30, ~~2020,~~2022 and 2021, cash dividends were declared and paid to stockholders of record of the Company's common stock of ~~$0.03 per share~~$0.27 and ~~$0.09~~$0.21 per share, respectively.

On October ~~26, 2021,~~25, 2022, the Company’s Board of Directors declared a cash dividend of ~~$0.09~~$0.09 per share payable on November ~~23, 2021~~22, 2022 to stockholders of record of the Company’s common stock as of November ~~9, 2021~~8, 2022.

Note 20—Consolidated Statements of Changes in Accumulated Other Comprehensive Income (Loss)

The following table summarizes the changes in accumulated other comprehensive income (loss) for the nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


(dollars in thousands)	Unrealized Gains (Losses) on Cash Flow Hedges			Unrealized Gains (Losses) on Available-for -Sale Securities			Total Accumulated Other Comprehensive Income (Loss)			Unrealized Gains (Losses) on Cash Flow Hedges			Unrealized Gains (Losses) on Available-for -Sale Securities			Total Accumulated Other Comprehensive Income (Loss)
Balance, January 1, 2020	$	(366	)	$	(334	)	$	(700	)
Other comprehensive income, net of tax		46			19,978			20,024
Balance, September 30, 2020	$	(320	)	$	19,644		$	19,324

Balance, January 1, 2021	$	(305	)	$	18,352		$	18,047		$	(305	)	$	18,352		$	18,047
Other comprehensive income (loss), net of tax		1,211			(24,772	)		(23,561	)		1,211			(24,772	)		(23,561	)
Balance, September 30, 2021	$	906		$	(6,420	)	$	(5,514	)	$	906		$	(6,420	)	$	(5,514	)

Balance, January 1, 2022										$	2,817		$	(11,119	)	$	(8,302	)
Other comprehensive income (loss), net of tax											32,850			(149,446	)		(116,596	)
Balance, September 30, 2022										$	35,667		$	(160,565	)	$	(124,898	)

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion and analysis of Byline Bancorp, Inc.’s financial condition and results of operations and should be read in conjunction with our Unaudited Interim Condensed Consolidated Financial Statements and notes thereto included elsewhere in this report. The words “the Company,” “we,” “Byline,” “management,” “our” and “us” refer to Byline Bancorp, Inc. and its consolidated subsidiaries, unless we indicate otherwise. In addition to historical information, this discussion contains forward looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management’s expectations. Factors that could cause such differences are discussed in the sections entitled “Special Note Regarding Forward Looking Statements” and “Risk Factors”. Byline assumes no obligation to update any of these forward looking statements.

Forward-Looking Statements

Statements contained in this report and in other documents we file with or furnish to the Securities and Exchange Commission (“SEC”) that are not historical facts may constitute “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Any statements about our expectations, beliefs, plans, strategies, predictions, forecasts, objectives or assumptions of future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “anticipates,” “believes,” “expects,” “can,” “could,” “may,” “predicts,” “potential,” “opportunity,” “should,” “will,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” “seeks,” “intends” and similar words or phrases. Accordingly, these statements involve estimates, known and unknown risks, assumptions and uncertainties that could cause actual strategies, actions or results to differ materially from those expressed in such statements, and are not guarantees of future results or other events or performance. Because forward-looking statements are necessarily only estimates of future strategies, actions or results, based on management’s current expectations, assumptions and estimates on the date hereof, and there can be no assurance that actual strategies, actions or results will not differ materially from expectations, readers are cautioned not to place undue reliance on such statements.

Our ability to predict results or the actual effects of future plans, strategies or events is inherently uncertain. Factors which could cause actual results or conditions to differ materially from those reflected in forward-looking statements include:



the current and potential disruption to and impact on our business, capital, employees, financial condition, liquidity, operations, prospects and results of operations, including a decrease in revenue and an increase in expenses, as well as the trading price of our common stock as a result of the economic and other consequences, including the severity and duration, of the COVID-19 pandemic;

•

uncertainty regarding domestic, foreign, and geopolitical developments and the United States and global economic outlook that may impact market conditions or affect demand for certain banking products and services, ~~including as a result of the disruption of global, national, state and local economies associated with the COVID-19 pandemic, as well as federal, state and local government responses thereto,~~ and the impact on our customers, which could impair the ability of our borrowers to repay outstanding loans and leases, impair collateral values and further increase our allowance for loan and lease losses, as well as result in possible asset impairment charges;

•

unforeseen credit quality problems or changing economic conditions that could result in charge-offs greater than we have anticipated in our allowance for loan and lease losses or changes in the value of our investments;

•

commercial real estate market conditions in the Chicago metropolitan area and southern Wisconsin;

•

deterioration in the financial condition of our borrowers resulting in significant increases in our loan and lease losses and provisions for those losses and other related adverse impacts to our results of operations and financial ~~condition, including as a result of the COVID-19 pandemic;~~condition;

•

estimates of fair value of certain of our assets and liabilities, which could change in value significantly from period to period;

•

competitive pressures in the financial services industry in our market areas relating to both pricing and loan and lease structures, which may impact our growth rate;

•

unanticipated developments in pending or prospective loan and/or lease transactions or greater-than-expected pay downs or payoffs of existing loans and leases;

•

inaccurate information and assumptions in our analytical and forecasting models used to manage our balance sheet;

•

unanticipated changes in monetary policies of the Federal Reserve or significant adjustments in the pace of, or market expectations for, future interest rate ~~changes, including changes in response to the COVID-19 pandemic or otherwise;~~changes;

•

availability of sufficient and cost-effective sources of liquidity, funding, and capital as and when needed;

•

our ability to attract, retain or the loss of key personnel or an inability to recruit appropriate talent cost-effectively;

•

adverse effects on our information technology systems resulting from failures, human error or cyberattack, including the potential impact of disruptions or security breaches at our third-party service providers, any of which could result in an information or security breach, the disclosure or misuse of confidential or proprietary information, significant legal and financial losses and reputational harm;

•

greater-than-anticipated costs to support the growth of our business, including investments in new lines of business, products and services, or technology, process improvements or other infrastructure enhancements, or greater-than-anticipated compliance or regulatory costs and burdens;

•

the impact of possible future acquisitions, if any, including the costs and burdens of integration efforts;

•

the ability of the Company to receive dividends from Byline Bank;

•

legislative or regulatory changes, particularly changes in regulation of financial services companies and/or the products and services offered by financial services companies, including those changes that are in response to the COVID-19 pandemic, including without limitation the CARES Act and the rules and regulations that have been and may be promulgated thereunder;companies;

•

changes in Small Business Administration (“SBA”) and U.S. Department of Agriculture (“USDA”) U.S. government guaranteed lending rules, regulations, loan and lease products and funding limits, including specifically the SBA Section 7(a) program, ~~including as a result of the COVID-19 pandemic,~~ as well as changes in SBA or USDA standard operating procedures or changes to the status of Byline Bank as an SBA Preferred Lender;

•

changes in accounting principles, policies and guidelines applicable to bank holding companies and banking generally;

•

the impact of a possible change in the federal or state income tax ~~rate~~rates on our deferred tax assets and provision for income tax expense;

•

our ability to implement our growth strategy, including via acquisitions;

•

the possibility that any of the anticipated benefits of acquisitions will not be realized or will not be realized within the expected time period;

•

the risk that the integration of acquisition operations will be materially delayed or will be more costly or difficult than expected;

•

the effect of mergers on customer relationships and operating results; and

•

other risks detailed from time to time in filings we make with the SEC.

These risks and uncertainties should be considered in evaluating any forward-looking statements, and undue reliance should not be placed on such statements. Forward looking statements speak only as of the date they are made. You should also consider the risks, assumptions and uncertainties set forth in the “Risk Factors” section ~~of this Form 10-Q,~~ in our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, that was filed with the SEC on March ~~4, 2021,~~7, 2022, as well as those set forth in the reports we file with the SEC. We assume no obligation to update any of these statements in light of new information, future events or otherwise unless required under the federal securities laws.

Overview

Our business

We are a bank holding company headquartered in Chicago, Illinois, and conduct all our business activities through our subsidiary, Byline Bank, a full service commercial bank, and Byline Bank’s subsidiaries. Through Byline Bank, we offer a broad range of banking products and services to small and medium sized businesses, commercial real estate and financial sponsors and to consumers who generally live or work near our branches. We also offer online accounting opening to consumer and business customers through our website and provide trust and wealth management services to our customers. In addition to our traditional commercial banking business, we provide small ticket equipment leasing solutions through Byline Financial Group, a wholly-owned subsidiary of Byline Bank, headquartered in Bannockburn, Illinois, with sales offices in Illinois, and sales representatives in Illinois, Florida, Michigan, New Jersey, and New York. We also participate in U.S. government guaranteed lending programs and originate U.S. government guaranteed loans. Byline Bank was the fifth most active originator of Small Business Administration (“SBA”) loans in the country and the most active SBA lender in Illinois and Wisconsin, as reported by the SBA for the quarter ended September 30, 2022.

Our results of operations depend substantially on net interest income, which is the difference between interest income on interest-earning assets, consisting primarily of interest income on loans and lease receivables, including accretion income on loans, investment securities and other short-term investments, and interest expense on interest-bearing liabilities, consisting primarily of deposits and borrowings. Our results of operations are also dependent upon our generation of non-interest income, consisting primarily of income from fees and service charges on deposits, loan servicing revenue, wealth management and trust income, ATM and interchange fees, and net gains on sales of investment securities and loans. Other factors contributing to our results of operations include our provision for loan and lease losses, provision for income taxes, and non-interest expenses, such as salaries and employee benefits, occupancy and equipment expenses, and other miscellaneous operating costs.

We reported consolidated net income of $22.7 million and $65.3 million for the three and nine months ended September 30, 2022, compared to net income of $25.3 million and $75.6 million for the three and nine months ended September 30, 2021, a decrease of $2.7 million and $10.3 million, respectively, for each comparable period. The decrease in net income was attributable to a $3.8 million and $12.3 million increase in provision for loan and lease losses, and a $6.5 million and $9.7 million decrease in non-interest income; offset by a $9.0 million and $14.6 million increase in net interest income, for each comparable three and nine month period. The increase in provision for loan and leases losses during the three and nine months ended September 30, 2022 was primarily a result of increased specific reserves on

impaired loans, and loan and lease growth. The decrease in non-interest income was primarily driven by decreased net gains on sales of loans. The increase in net interest income was driven by growth in the loan and lease portfolio.

Dividends declared and paid on preferred shares were $196,000 and $587,000 for the nine months ended September 30, 2022 and 2021, respectively. Dividends declared and paid on preferred shares were $196,000 for the three months ended September 30, 2021. ~~During~~Dividends declared and paid on common shares were $3.4 million for each of the ~~third quarter~~three months ended September 30, 2022 and 2021, respectively. Dividends declared and paid on common shares were $10.1 million and $8.0 million for the nine months ended September 30, 2022 and 2021, respectively.

For the three months ended September 30, 2022 and 2021, net income available to common stockholders was $22.7 million, or $0.61 per basic and diluted common share, and $25.1 million, or $0.68 per basic and $0.66 per diluted common share, respectively. For the nine months ended September 30, 2022 and 2021, net income available to common stockholders was $65.1 million, or $1.76 per basic and $1.73 per diluted common share, and $75.0 million, or $1.99 per basic and $1.95 per diluted common share, respectively.

Our results of operations for the three months ended September 30, 2022 and 2021 ~~we began offering online account opening to consumer customers through our website.~~ yielded an annual return on average assets of 1.26% and 1.53% and a return on average stockholders’ equity of 11.59% and 12.19%, respectively. Our results of operations for the nine months ended September 30, 2022 and 2021 yielded an annual return on average assets of 1.26% and 1.53% and a return on average stockholders’ equity of 10.96% and 12.42%, respectively.

As of September 30, ~~2021,~~2022, we had consolidated total assets of ~~$6.7~~$7.3 billion, total gross loans and leases outstanding of ~~$4.6~~$5.3 billion, total deposits of ~~$5.2~~$5.6 billion, and total stockholders’ equity of ~~$824.4~~$747.6 million.

~~Response to COVID-19 Pandemic~~

The coronavirus (“COVID-19”) pandemic has caused health and economic concerns in the United States and globally. In response to this economic disruption, federal and state governments enacted laws intending to stimulate the economy during this time, including the $2.0 trillion Coronavirus Relief and Economic Security Act (the “CARES Act”), from which the PPP under the SBA was created. PPP loans

originated before June 5, 2020 have a two-year term and bear an interest rate of 1.0%, however borrowers can request an extension to five years. PPP loans originated after June 5, 2020 have a five-year term and bear an interest rate of 1.0%.

~~The following table presents net PPP loans as of September 30, 2021:~~

PPP Loan Size

(dollars in thousands)

First Round

Second Round

Total

Principal outstanding

$
12,561

$
263,058

$
275,619

Unearned processing fee

(176
)

(9,503
)

(9,679
)
Deferred cost

47

2,094

2,141

PPP loans, net

$
12,432

$
255,649

$
268,081

Number of loans outstanding

$
128

$
1,624

$
1,752

Forgiven

95.9
%

22.3
%

70.7
%
In review or submission process

0.9
%

10.9
%

4.3
%
Not applied for forgiveness

3.2
%

66.8
%

25.0
%

The CARES Act also temporarily eases the guidance applicable to loan modifications and the effect on assessing TDRs related to the COVID-19 pandemic. Modifications within the scope of this relief include arrangements that defer or delay payments of principal and/or interest and extend until the earlier of the following: 1) 60 days after the date on which the national emergency related to the COVID-19 outbreak is terminated; or 2) January 1, 2022. At September 30, 2021, we had $2.0 million in active COVID-19 related payment deferrals, or 0.05% of loans and leases, excluding PPP loans.

Critical Accounting Policies and Significant Estimates

Our accounting and reporting policies conform to accounting principles generally accepted in the United States of America (“GAAP”) and to general practices within the Banking industry. To prepare financial statements and interim financial statements in conformity with GAAP, management makes estimates, assumptions and judgments based on available information. These estimates, assumptions and judgments affect the amounts reported in the financial statements and accompanying notes; and are based on information available as of the date of the financial statements. As this information changes, actual results could differ from the estimates, assumptions and judgments reflected in the financial statements. In particular, management has identified several accounting policies that, due to the estimates, assumptions and judgements inherent in those policies, are critical in understanding our financial statements.

These critical accounting policies and estimates include (i) acquisition‑related fair value computations, (ii) the carrying value of loans and leases, (iii) determining the provision and allowance for loan and lease losses, (iv) the valuation of intangible assets such as goodwill, servicing assets and core deposit intangibles, (v) the determination of fair value for financial instruments, including other-than-temporary-impairment losses, (vi) the valuation of real estate held for sale, and (vii) the valuation of or recognition of deferred tax assets and liabilities. ~~An increase was made to the provision for loan and lease losses as a result of increases in qualitative factors relative to the COVID-19 pandemic.~~

The Jumpstart Our Business Startups Act of 2012, or the JOBS Act, permits us an extended transition period for complying with new or revised accounting standards affecting public companies. We have elected to take advantage of this extended transition period, which means that the financial statements included in this report, as well as any financial statements that we file in the future, will not be subject to all new or revised accounting standards generally applicable to public companies for the transition period for so long as we remain an emerging growth company or until we affirmatively and irrevocably opt out of the extended transition period provided for under the JOBS Act. We will remain an emerging growth company until the end of the fiscal year following the fifth anniversary of the completion of our initial public offering, which is December 31, 2022.

The following is a discussion of the critical accounting policies and significant estimates that require us to make complex and subjective judgments. Additional information about these policies can be found in Note 1 of our audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, that we filed with the ~~Securities and Exchange Commission (“SEC”)~~SEC on March ~~4, 2021.~~7, 2022.

Business Combinations

We account for business combinations under the acquisition method of accounting in accordance with ASC 805. We recognize the fair value of the assets acquired and liabilities assumed as of the date of acquisition, with any excess of the fair value of consideration provided over the fair value of the identifiable net tangible and intangible assets acquired recorded as goodwill. Transaction costs are expensed as incurred. Application of the acquisition method requires extensive use of accounting estimates and judgements to determine the fair values of the identifiable assets acquired and liabilities assumed at the acquisition date.

In accordance with ASC 805, the acquiring company retains the right to make appropriate adjustments to the assets and liabilities of the acquired entity for information obtained during the measurement period about facts and circumstances that existed as of the acquisition date. The measurement period ends as of the earlier of (i) one year from the acquisition date or (ii) the date when the acquirer receives the information necessary to complete the business combination accounting.

Carrying Value of Loans and Leases

Our accounting methods for loans and leases differ depending on whether they are new or acquired loans and leases; and for acquired loans, whether the loans were acquired at a discount as a result of credit deterioration since the date of origination.

Originated Loans and Leases

We account for originated loans and leases and purchased loans and leases not acquired through business combinations as originated loans and leases. The new loans that management has the intent and ability to hold for the foreseeable future are reported at their outstanding principal balances net of any allowance for loan and lease losses, unamortized deferred fees and costs and unamortized premiums or discounts. The net amount of non-refundable loan origination fees and certain direct costs associated with the lending process are deferred and amortized to interest income over the contractual lives of the new loans using methods that approximate the level yield method. Discounts and premiums are amortized or accreted to interest income over the estimated term of the new loans using methods that approximate the effective yield method. Interest income on new loans is accrued based on the unpaid principal balance outstanding. Additionally, once an acquired non-impaired loan reaches its contractual maturity date, it is re-underwritten, and if renewed, it is classified as an originated loan.

Acquired Loans and Leases

Acquired loans and leases are recorded at fair value as of the acquisition date. Credit discounts are included in the determination of fair value; therefore, an allowance for loan and lease losses is not recorded at the acquisition date. Acquired loans are evaluated upon acquisition and classified as either acquired impaired or acquired non‑impaired. Acquired impaired loans reflect evidence of credit deterioration since origination for which it is probable that all contractually required principal and interest will not be collected by us. Subsequent to acquisition, we periodically update for changes in cash flow expectations, which are reflected in interest income over the life of the loan as accretable yield. Any subsequent decreases in expected cash flow attributable to credit deterioration are recognized by recording a provision for loan losses.

For acquired non‑impaired loans and leases, the excess or deficit of the loan and lease principal balance over the fair value is recorded as a discount or premium at acquisition and is accreted through interest income over the life of the loan or lease. Subsequent to acquisition, these loans and leases are evaluated for credit deterioration and a provision for loan and lease losses would be recorded when probable loss is incurred. These loans and leases are evaluated for impairment consistent with originated loans and leases.

Provision and Allowance for Loan and Lease Losses

The provision for loan and lease losses reflects the amount required to maintain the allowance for loan and lease losses (“ALLL”) at an appropriate level based upon management’s evaluation of the adequacy of general and specific loss reserves.

The ALLL is maintained at a level that management believes is appropriate to provide for known and inherent incurred loan and lease losses as of the dates of the Condensed Consolidated Statements of Financial Condition, and we have established methodologies for the determination of its adequacy. The methodologies are set forth in a formal policy and take into consideration the need for an overall general valuation allowance as well as specific allowances that are determined on an individual loan basis. We increase our ALLL by charging provisions for probable losses against our income and ~~decreased~~decrease by charge‑offs, net of recoveries.

The evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. While management uses available information to recognize losses on loans and leases, changes in economic or other conditions may necessitate revision of the estimate in future periods.

The ALLL is maintained at a level management believes is sufficient to provide for probable losses based upon an ongoing review of the originated and acquired non‑impaired loan and lease portfolios by portfolio category, which include consideration of actual loss experience, peer loss experience, changes in the size and risk profile of the portfolio, identification of individual problem loan and lease situations, which may affect a borrower’s ability to repay, and evaluation of prevailing economic conditions.

For acquired impaired loans, a specific valuation allowance is established when it is probable that we will be unable to collect all of the cash flows expected at acquisition, plus the additional cash flows expected to be collected arising from changes in estimates after acquisition.

The originated and non‑impaired acquired loans have limited delinquency and credit loss history and have not yet exhibited an observable loss trend. The credit quality of loans in these loan portfolios are impacted by delinquency status and debt service coverage generated by the borrowers’ businesses and fluctuations in the value of real estate collateral.

Acquired non‑impaired loans and originated loans are considered impaired when, based on current information and events, it is probable that we will be unable to collect the scheduled payments of principal or interest when due, according to the contractual terms of the loan agreements. All acquired non‑impaired loans and originated loans of $100,000 or greater with an internal risk rating of substandard or below and on non-accrual, as well as loans classified as troubled debt restructurings (“TDR”), are reviewed individually for impairment on a quarterly basis.

In March 2020, CARES Act was signed into law. Section 4013 of the CARES Act temporarily eases the guidance applicable to loan modifications and the effect on assessing TDRs related to the COVID-19 pandemic. Modifications within the scope of this relief include

arrangements that defer or delay payments of principal or interest and extend until the earlier of the following: 1) 60 days after the date on which the national emergency related to the COVID-19 outbreak is terminated; or 2) January 1, 2022.

Goodwill and Other Intangible Assets

Goodwill. Goodwill represents the excess of the purchase consideration over the fair value of net assets acquired in connection with our recapitalization and acquisitions using the acquisition method of accounting. Goodwill is not amortized but is periodically evaluated for impairment under the provisions of ASC Topic 350, Intangibles—Goodwill and Other (“ASC 350”).

Impairment testing is performed using either a qualitative or quantitative approach at the reporting unit level. Our goodwill is allocated to Byline Bank, which is our only applicable reporting unit for the purposes of testing goodwill for impairment. We have selected November 30 as the date to perform the annual goodwill impairment test. Additionally, we perform a goodwill impairment evaluation on an interim basis when events or circumstances indicate impairment potentially exists.

Servicing Assets. Servicing assets are recognized separately when they are acquired through sales of loans or when the rights to service loans are purchased. When loans are sold with servicing rights retained, servicing assets are recorded at fair value in accordance with ASC Topic 860, Transfers and Servicing (“ASC 860”). Fair value is based on market prices for comparable servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. The fair value of servicing rights is highly sensitive to changes in underlying assumptions. Changes in secondary market premiums and prepayment speed assumptions have the most significant impact on the fair value of servicing rights. See Note 6 and Note 15 of our Unaudited Interim Condensed Consolidated Financial Statements as of September 30, ~~2021,~~2022, included in this report, for additional information.

Core Deposit Intangible Assets. Other intangible assets primarily consist of core deposit intangible assets. In valuing core deposit intangibles, we consider variables such as deposit servicing costs, attrition rates and market discount rates. Core deposit intangibles are reviewed annually, or more frequently when events or changes in circumstances occur that indicate that their carrying values may not be recoverable. If the recoverable amount of the core deposit intangibles is determined to be less than its carrying value, we would then measure the amount of impairment based on an estimate of the fair value at that time. We also evaluate whether the events or circumstances have occurred that warrant a revision to the remaining useful lives of intangible assets. In cases where a revision is deemed appropriate, the remaining carrying amounts of the intangible assets are amortized over the revised remaining useful life. Core deposit intangibles are currently amortized over an approximate ten-year period.

Customer Relationship Intangible. Other intangible assets also include our customer relationship intangible asset. In valuing our customer relationship intangibles, we consider variables such as assets under ~~management,~~administration, attrition rates, and fee structure. Customer relationship intangibles are currently amortized over a 12-year period.

Fair value of Financial Instruments

ASC Topic 820, Fair Value Measurement defines fair value as the price that would be received to sell a financial asset or paid to transfer a financial liability in an orderly transaction between market participants at the measurement date.

The degree of management judgment involved in determining the fair value of assets and liabilities is dependent upon the availability of quoted market prices or observable market parameters. For financial instruments that trade actively and have quoted market prices or observable market parameters, there is minimal subjectivity involved in measuring fair value. When observable market prices and parameters are not available, management judgment is necessary to estimate fair value. In addition, changes in market conditions may reduce the availability of quoted prices or observable data. For example, reduced liquidity in the capital markets or changes in secondary market activities could result in observable market inputs becoming unavailable. Therefore, when market data is not available, we would use valuation techniques requiring more management judgment to estimate the appropriate fair value measurement.

See Note 15 of our Unaudited Interim Condensed Consolidated Financial Statements as of September 30, ~~2021,~~2022, included in this report, for a complete discussion of our use of fair value of financial assets and liabilities and their related measurement practices.

Valuation of Real Estate Held for Sale

Other Real Estate Owned (“OREO”). OREO includes real estate assets that have been acquired through, or in lieu of, loan foreclosure or repossession and are to be sold. OREO assets are initially recorded at fair value, less estimated costs to sell, of the collateral of the loan, on the date of foreclosure or repossession, establishing a new cost basis. Adjustments that reduce loan balances to fair value at the time of foreclosure or repossession are recognized as charge‑offs in the allowance for loan and lease losses. Positive adjustments, if any, at the time of foreclosure or repossession are recognized in non‑interest expense. After foreclosure or repossession, management periodically obtains new valuations and real estate or other assets may be adjusted to a lower carrying amount, determined by the fair value of the asset, less estimated costs to sell. Any subsequent write‑downs are recorded as a decrease in the asset and charged against other real estate owned valuation adjustments, included within non-interest expense. Operating expenses of such properties, net of related income, are included in non‑interest expense, and gains and losses on their disposition are included in non‑interest expense. ~~Gains on internally financed other real estate owned sales are accounted for in accordance with the methods stated in ASC Topic 360‑20, Real Estate Sales (“ASC 360‑20”).~~ Any losses on the sales of other real estate owned properties are recognized immediately. OREO is recorded net of participating interests sold.

Assets Held for Sale. Assets held for sale consist of former branch locations and real estate purchased for expansion. Assets are considered held for sale when management has approved a plan to sell the assets following a branch closure or other events. The properties are being actively marketed and transferred to assets held for sale based at the lower of its carrying value or its fair value, less estimated costs

to sell. Adjustments to reduce the asset balances to fair value are recorded at the time of transfer and are recognized through a charge against

income. An assessment of the recoverability of other long-lived assets associated with all branches is periodically performed, resulting in impairment losses ~~which~~that are reflected in other non-interest expense.

Income Taxes

We use the asset and liability method to account for income taxes. The objective of the asset and liability method is to establish deferred tax assets and liabilities for the temporary differences between the financial reporting basis and the income tax basis of our assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. Our annual tax rate is based on our income, statutory tax rates and available tax planning opportunities. Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities. Significant judgment is required in determining tax expense and in evaluating tax positions, including evaluating uncertainties.

Deferred income tax assets represent amounts available to reduce income taxes payable on taxable income in future years. Such assets arise because of temporary differences between the financial reporting and tax bases of assets and liabilities, as well as from net operating loss carryforwards. We review our deferred tax positions quarterly for changes ~~which~~that may impact realizability. We evaluate the recoverability of these future tax deductions by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. We use short and long‑range business forecasts to provide additional information for its evaluation of the recoverability of deferred tax assets. It is our policy to recognize interest and penalties associated with uncertain tax positions, if applicable, as components of non‑interest expense.

A deferred tax valuation allowance is established to reduce the net carrying amount of deferred tax assets if it is determined to be more likely than not that all or some of the deferred tax asset will not be realized. See Note 1112 of the notes to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, for further information on income taxes.

Recently Issued Accounting Pronouncements

Refer to Note 2 of our Unaudited Interim Condensed Consolidated Financial Statements as of September 30, ~~2021,~~2022, which are included in this report, for a description of recent accounting pronouncements, including the effective dates of adoption and anticipated effects on our results of operations and financial condition.

Primary Factors Used to Evaluate Our Business

As a financial institution, we manage and evaluate various aspects of both our results of operations and our financial condition. We evaluate the levels and trends of the line items included in our consolidated balance sheet and income statement as well as various financial ratios that are commonly used in our industry. We analyze these ratios and financial trends against our own historical performance, our budgeted performance and the final condition and performance of comparable financial institutions in our region. Comparison of our financial performance against other financial institutions is impacted by the accounting for acquired non‑impaired and acquired impaired loans.

These factors and metrics described in this report may not provide an appropriate basis to compare our results or financial condition to the results or financial condition of other financial services companies, given our limited operating history and strategic acquisitions since our recapitalization.

Results of Operations

Overview

Our results of operations depend substantially on net interest income, which is the difference between interest income on interest-earning assets, consisting primarily of interest income on loans and lease receivables, including accretion income on loans, investment securities and other short-term investments, and interest expense on interest-bearing liabilities, consisting primarily of deposits and borrowings. Our results of operations are also dependent upon our generation of non-interest income, consisting primarily of income from fees and service charges on deposits, loan servicing revenue, wealth management and trust income, ATM and interchange fees, and net gains on sales of investment securities and loans. Other factors contributing to our results of operations include our provisions for loan and lease losses, provision for income taxes, and non-interest expenses, such as salaries and employee benefits, occupancy and equipment expenses, and other miscellaneous operating costs.

~~Selected Financial Data~~

As of or For the Three Months Ended

As of or For the Nine Months Ended

September 30,

September 30,

(dollars in thousands, except share and per share data)

2021

2020

2021

2020

Summary of Operations

Net interest income

$
59,845

$
53,524

$
174,659

$
158,958

Provision for loan and lease losses

352

15,740

2,750

45,713

Non-interest income

18,495

22,234

55,239

44,370

Non-interest expense

44,180

41,687

126,003

122,401

Income before provision for income taxes

33,808

18,331

101,145

35,214

Provision for income taxes

8,502

5,260

25,549

10,038

Selected Financial Data


Net income		25,306			13,071			75,596			25,176
Dividends on preferred shares		196			196			587			587
Income available to common stockholders	$	25,110		$	12,875		$	75,009		$	24,589
													As of or for the Three Months Ended						As of or For the Nine Months Ended
													September 30,						September 30,
(dollars in thousands, except share and per share data)													2022			2021			2022			2021
Summary of Operations
Common Share Data
Basic earnings per common share	$	0.68		$	0.34		$	1.99		$	0.65		$	0.61		$	0.68		$	1.76		$	1.99
Diluted earnings per common share	$	0.66		$	0.34		$	1.95		$	0.64		$	0.61		$	0.66		$	1.73		$	1.95
Adjusted diluted earnings per share(1)(3)	$	0.69		$	0.34		$	2.02		$	0.65		$	0.61		$	0.69		$	1.73		$	2.02
Weighted-average common shares outstanding (basic)		37,200,778			38,057,350			37,773,350			37,973,694			36,851,973			37,200,778			37,012,316			37,773,350
Weighted-average common shares outstanding (diluted)		38,018,301			38,249,335			38,523,112			38,251,963			37,371,159			38,018,301			37,581,866			38,523,112
Common shares outstanding		37,690,087			38,568,916			37,690,087			38,568,916			37,465,902			37,690,087			37,465,902			37,690,087
Cash dividends per common share	$	0.09		$	0.03		$	0.21		$	0.09		$	0.09		$	0.09		$	0.27		$	0.21
Dividend payout ratio on common stock		13.64	%		8.82	%		10.77	%		14.06	%		14.75	%		13.64	%		15.61	%		10.77	%
Tangible book value per common share(1)	$	17.16		$	15.81		$	17.16		$	15.81		$	15.67		$	17.16		$	15.67		$	17.16
Key Ratios and Performance Metrics (annualized where applicable)
Net interest margin, fully taxable equivalent (1) (5)		3.92	%		3.61	%		3.82	%		3.82	%		4.05	%		3.92	%		3.88	%		3.82	%
Average cost of deposits		0.08	%		0.22	%		0.09	%		0.43	%		0.43	%		0.08	%		0.22	%		0.09	%
Efficiency ratio(2)		54.18	%		52.46	%		52.49	%		57.38	%		55.11	%		54.18	%		55.12	%		52.49	%
Adjusted efficiency ratio(1)(2)(3)		52.35	%		52.42	%		50.76	%		57.01	%		55.11	%		52.35	%		55.12	%		50.76	%
Non-interest expense to average assets		2.67	%		2.59	%		2.54	%		2.70	%		2.56	%		2.67	%		2.59	%		2.54	%
Adjusted non-interest expense to average assets(1)(3)		2.58	%		2.59	%		2.46	%		2.68	%		2.56	%		2.58	%		2.59	%		2.46	%
Return on average stockholders' equity		12.19	%		6.57	%		12.42	%		4.33	%		11.59	%		12.19	%		10.96	%		12.42	%
Adjusted return on average stockholders' equity(1)(3)		12.69	%		6.58	%		12.90	%		4.42	%		11.59	%		12.69	%		10.96	%		12.90	%
Return on average assets		1.53	%		0.81	%		1.53	%		0.56	%		1.26	%		1.53	%		1.26	%		1.53	%
Adjusted return on average assets(1)(3)		1.59	%		0.81	%		1.58	%		0.57	%		1.26	%		1.59	%		1.26	%		1.58	%
Non-interest income to total revenues(1)		23.61	%		29.35	%		24.03	%		21.82	%		14.83	%		23.61	%		19.41	%		24.03	%
Pre-tax pre-provision return on average assets(1)		2.07	%		2.12	%		2.10	%		1.79	%		1.93	%		2.07	%		1.93	%		2.10	%
Adjusted pre-tax pre-provision return on average assets(1)		2.15	%		2.12	%		2.18	%		1.80	%		1.93	%		2.15	%		1.93	%		2.18	%
Return on average tangible common stockholders' equity(1)		16.22	%		9.39	%		16.66	%		6.51	%		15.40	%		16.22	%		14.60	%		16.66	%
Adjusted return on average tangible common stockholders' equity(1)(3)		16.86	%		9.40	%		17.27	%		6.63	%		15.40	%		16.86	%		14.60	%		17.27	%
Non-interest-bearing deposits to total deposits		41.06	%		35.73	%		41.06	%		35.73	%		38.17	%		41.06	%		38.17	%		41.06	%
Loans and leases held for sale and loans and leases held for investment to total deposits		90.29	%		91.96	%		90.29	%		91.96	%		94.60	%		90.29	%		94.60	%		90.29	%
Deposits to total liabilities		87.73	%		84.36	%		87.73	%		84.36	%		85.95	%		87.73	%		85.95	%		87.73	%
Deposits per branch	$	117,234		$	84,390		$	117,234		$	84,390		$	147,696		$	117,234		$	147,696		$	117,234
Asset Quality Ratios
Non-performing loans and leases to total loans and leases held for investment		0.75	%		0.99	%		0.75	%		0.99	%		0.67	%		0.75	%		0.67	%		0.75	%
ALLL to total loans and leases held for investment		1.31	%		1.40	%		1.31	%		1.40	%		1.23	%		1.31	%		1.23	%		1.31	%
Net charge-offs to average total loans and leases held for investment		0.13	%		0.53	%		0.32	%		0.53	%
Net charge-offs to average total loans and leases held for investment, net before ALLL														0.15	%		0.13	%		0.15	%		0.25	%
Acquisition accounting adjustments(4)	$	6,327		$	17,133		$	6,327		$	17,133		$	2,537		$	6,327		$	2,537		$	6,327
Capital Ratios
Common equity to total assets		12.14	%		12.07	%		12.14	%		12.07	%		10.27	%		12.14	%		10.27	%		12.14	%
Tangible common equity to tangible assets(1)		9.89	%		9.64	%		9.89	%		9.64	%		8.25	%		9.89	%		8.25	%		9.89	%
Leverage ratio		11.21	%		10.93	%		11.21	%		10.93	%		10.30	%		11.21	%		10.30	%		11.21	%
Common equity tier 1 capital ratio		11.32	%		12.55	%		11.32	%		12.55	%		10.24	%		11.32	%		10.24	%		11.32	%
Tier 1 capital ratio		12.32	%		13.77	%		12.32	%		13.77	%		10.91	%		12.32	%		10.91	%		12.32	%
Total capital ratio		14.78	%		16.67	%		14.78	%		16.67	%		13.02	%		14.78	%		13.02	%		14.78	%

(1) Represents a non-GAAP financial measure. See “Reconciliations of non-GAAP Financial Measures” for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure.

(2) Represents non-interest expense less amortization of intangible assets divided by net interest income and non-interest income.

(3) Calculation excludes impairment charges on assets held for sale.

(4) Represents the remaining net unaccreted discount as a result of applying the fair value acquisition accounting adjustment at the time of the business combination on acquired loans.

(5) Interest income and rates include the effects of a tax equivalent adjustment to adjust tax-exempt investment income on tax-exempt investment securities to a fully taxable basis, assuming a federal income tax rate of 21%.

We reported consolidated net income of $22.7 million for the three months ended September 30, 2022 compared to net income of $25.3 million for the three months ended September 30, 2021, ~~compared to net income~~a decrease of ~~$13.1 million for the three months ended September 30, 2020, an increase of $12.2~~$2.7 million. The ~~increase~~decrease in net income was primarily attributable to a ~~$15.4~~$6.5 million decrease in non-interest income and a $3.8 million increase in the provision for loan and lease ~~losses and~~losses. These were offset by a ~~$6.3~~$9.0 million increase in net interest income. ~~These were offset by a $3.7 million decrease in non-interest income, a $2.5 million increase in non-interest expense, and a $3.2 million increase in provision for income taxes.~~

The increase in net interest income during the three months ended September 30, ~~2021~~2022 was mainly a result of higher yields and increased average loan and leases ~~balances and decreased cost of funds.~~balances. The ~~decrease~~increase in provision for loan and lease losses ~~reflects improving qualitative factors from the continued recovery from the COVID-19 pandemic.~~was mainly attributable to loan and lease portfolio growth and increases in specific reserves on impaired loans. The decrease in non-interest income was principally driven by a downward revaluation adjustments to the servicing asset. The increase in non-interest expense was mostly due to an increase in salaries and employee benefits. The increase in provision for income taxes was driven by an increase inlower net ~~income before provision for income taxes during the period.~~gains on sales of loans.

Net income available to common stockholders was $22.7 million, or $0.61 per basic and diluted common share, for the three months ended September 30, 2022 compared to $25.1 million, or $0.68 per basic and $0.66 per diluted common share, for the three months ended September 30, ~~2021 compared to $12.9 million, or $0.34 per basic and diluted common share, for the three months ended September 30, 2020.~~2021. Dividends on preferred shares were $196,000 for the three months ended September 30, ~~2021 and 2020.~~2021.

Our annualized return on average assets was 1.26% for the three months ended September 30, 2022 compared to 1.53% for the three months ended September 30, ~~2021 compared to 0.81% for the three months ended September 30, 2020.~~2021. Our annualized return on average stockholders’ equity was 11.59% for the three months ended September 30, 2022 compared to 12.19% for the three months ended September 30, ~~2021 compared to 6.57%~~2021. Our efficiency ratio was 55.11% for the three months ended September 30, ~~2020. Our efficiency ratio was~~2022 compared to 54.18% for the three months ended September 30, ~~2021 compared to 52.46%~~2021.

We reported consolidated net income of $65.2 million for the ~~three~~nine months ended September 30, ~~2020.~~

~~We reported consolidated~~2022 compared to net income of $75.6 million for the nine months ended September 30, 2021, ~~compared to net income~~a decrease of ~~$25.2 million for the nine months ended September 30, 2020, an increase of $50.4~~$10.3 million. The ~~increase~~decrease in net income was primarily attributable to a ~~$43.0~~$12.3 million ~~decrease~~increase in the provision for loan and lease losses, a ~~$15.7~~$9.7 million decrease in non-interest income, and an $8.5 million increase in non-interest expense. These were offset by a $14.6 million increase to net interest income, and a ~~$10.9~~$5.6 million ~~increase~~decrease in ~~non-interest income. These increases were offset by a $3.6 million increase in non-interest expense, and a $15.5 million increase in~~the provision for income taxes.

The increase in net interest income during the nine months ended September 30, ~~2021~~2022 was mainly a result of increased average ~~loan~~balances and higher yields on loans and leases, ~~balances~~partially offset by decreased interest and ~~decreased cost of funds.~~fee income on PPP loans. The ~~decrease~~increase in provision for loan and lease losses ~~reflects improving qualitative factors from the continued recovery from the COVID-19 pandemic.~~was mainly attributable to increases in specific reserves on impaired loans, and loan and lease portfolio growth. The ~~increase~~decrease in non-interest income was ~~principally driven by an increase~~primarily due to decrease in net gains on ~~sale~~sales of ~~loans.~~loans due to lower volume and average premiums. The increase in non-interest expense was mostly due to an increase in salaries and employee benefits. ~~The increase in provision for income taxes was driven by an increase in net income before provision for income taxes during the period.~~

Net income available to common stockholders was $65.1 million, or $1.76 per basic and $1.73 per diluted common share, for the nine months ended September 30, 2022 compared to $75.0 million, or $1.99 per basic ~~common share~~ and $1.95 per diluted common share, for the nine months ended September 30, ~~2021 compared to $24.6 million, or $0.65 per basic and $0.64 per diluted common share, for the nine months ended September 30, 2020.~~2021. Dividends on preferred shares were $196,000 and $587,000 for the nine months ended September 30, 2022 and 2021, ~~and 2020.~~respectively.

Our annualized return on average assets was 1.26% for the nine months ended September 30, 2022 compared to 1.53% for the nine months ended September 30, ~~2021 compared to 0.56% for the nine months ended September 30, 2020.~~2021. Our annualized return on average stockholders’ equity was 10.96% for the nine months ended September 30, 2022 compared to 12.42% for the nine months ended September 30, ~~2021 compared to 4.33%~~2021. Our efficiency ratio was 55.12% for the nine months ended September 30, ~~2020. Our efficiency ratio was~~2022 compared to 52.49% for the nine months ended September 30, ~~2021 compared to 57.38% for the nine months ended September 30, 2020~~2021.

Net Interest Income

Net interest income, representing interest income less interest expense, is a significant contributor to our revenues and earnings. We generate interest income from interest and dividends on interest-earning assets, which include loans, leases and investment securities we own. We incur interest expense from interest paid on interest-bearing liabilities, which include interest-bearing deposits, subordinated debt, Federal Home Loan Bank advances, ~~Paycheck Protection Program Liquidity Facility,~~ junior subordinated debentures and other borrowings. To evaluate net interest income, we measure and monitor (i) yields on our loans and other interest-earning assets, (ii) the costs of our deposits and other funding sources, (iii) our net interest spread, and (iv) our net interest margin. Net interest spread is the difference between rates earned on interest-earning assets and rates paid on interest-bearing liabilities. Net interest margin is calculated as the annualized net interest income divided by average interest-earning assets. Because non-interest-bearing sources of funds, such as non-interest-bearing deposits and stockholders’ equity, also fund interest-earning assets, net interest margin includes the benefit of these non-interest-bearing sources.

We also recognize income from the accretable discounts associated with the purchase of interest-earning assets. Because of our recapitalization and bank acquisitions, we derive a portion of our interest income from the accretable discounts on acquired loans. The accretion is generally recognized over the life of the loan and is impacted by changes in expected cash flows on the loan. This accretion will continue to have an impact on our net interest income as long as loans acquired with a discount at acquisition represent a meaningful portion of our interest-earning assets. As of September 30, ~~2021,~~2022, acquired loans with evidence of credit deterioration accounted for under ASC Topic 310-30, Accounting for Purchased Loans with Deteriorated Credit Quality, represented ~~3.3%~~1.9% of our total loan portfolio compared to ~~4.7%~~2.8% at December 31, ~~2020.~~

2021.

Changes in the market interest rates we earn on interest-earning assets or pay on interest-bearing liabilities, as well as the volume and types of interest-earning assets, interest-bearing and non-interest-bearing liabilities, are usually the largest drivers of periodic changes in net interest spread, net interest margin and net interest income. In addition, our interest income includes the accretion of the discounts on our acquired loans, which will also affect our net interest spread, net interest margin and net interest income.

The following tables present, for the periods indicated, information about (i) average balances, the total dollar amount of interest income from interest-earning assets and the resultant average yields; (ii) average balances, the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rates; (iii) net interest income; (iv) the interest rate spread; and (v) the net interest margin. Yields have been calculated on a pre-tax basis (dollars in thousands).


	Three Months Ended September 30,																		Three Months Ended September 30,
	2021									2020									2022								2021
	Average Balance(5)			Interest Inc / Exp			Average Yield / Rate			Average Balance(5)			Interest Inc / Exp			Average Yield / Rate			Average Balance(5)			Interest Inc / Exp		Average Yield / Rate			Average Balance(5)			Interest Inc / Exp		Average Yield / Rate
ASSETS
Cash and cash equivalents	$	40,088		$	19			0.19	%	$	48,678		$	25			0.20	%	$	77,522		$	210		1.08	%	$	40,088		$	19		0.19	%
Loans and leases(1)		4,539,111			56,291			4.92	%		4,360,203			51,036			4.66	%		5,218,135			72,824		5.54	%		4,539,111			56,291		4.92	%
Taxable securities		1,309,802			5,472			1.66	%		1,364,516			6,341			1.85	%		1,302,375			6,014		1.83	%		1,309,802			5,472		1.66	%
Tax-exempt securities(2)		187,064			1,254			2.66	%		143,157			1,054			2.93	%		162,591			1,083		2.64	%		187,064			1,254		2.66	%
Total interest-earning assets	$	6,076,065		$	63,036			4.12	%	$	5,916,554		$	58,456			3.93	%	$	6,760,623		$	80,131		4.70	%	$	6,076,065		$	63,036		4.12	%
Allowance for loan and lease losses		(61,528	)								(53,964	)								(62,733	)							(61,528	)
All other assets		546,331									538,700									447,299								546,331
TOTAL ASSETS	$	6,560,868								$	6,401,290								$	7,145,189							$	6,560,868
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits
Interest checking	$	653,543		$	228			0.14	%		565,917		$	226			0.16	%		583,777		$	1,077		0.73	%		653,543		$	228		0.14	%
Money market accounts		1,031,009			280			0.11	%		1,202,016			634			0.21	%		1,391,923			3,358		0.96	%		1,031,009			280		0.11	%
Savings		625,037			75			0.05	%		535,396			64			0.05	%		673,966			247		0.15	%		625,037			75		0.05	%
Time deposits		709,805			403			0.23	%		870,227			1,836			0.84	%		687,124			1,289		0.74	%		709,805			403		0.23	%
Total interest-bearing deposits		3,019,394			986			0.13	%		3,173,556			2,760			0.35	%		3,336,790			5,971		0.71	%		3,019,394			986		0.13	%
Other borrowings		426,284			349			0.33	%		538,237			465			0.34	%		607,471			3,232		2.11	%		426,284			349		0.33	%
Subordinated notes and debentures		110,195			1,592			5.73	%		100,756			1,485			5.86	%		110,799			1,825		6.54	%		110,195			1,592		5.73	%
Total borrowings		536,479			1,941			1.44	%		638,993			1,950			1.21	%		718,270			5,057		2.79	%		536,479			1,941		1.44	%
Total interest-bearing liabilities	$	3,555,873		$	2,927			0.33	%	$	3,812,549		$	4,710			0.49	%	$	4,055,060		$	11,028		1.08	%	$	3,555,873		$	2,927		0.33	%
Non-interest-bearing demand deposits		2,106,189									1,742,787									2,198,095								2,106,189
Other liabilities		75,052									54,843									116,676								75,052
Total stockholders’ equity		823,754									791,111									775,358								823,754
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	6,560,868								$	6,401,290								$	7,145,189							$	6,560,868
Net interest spread(3)								3.79	%								3.44	%							3.62	%							3.79	%
Net interest income, fully taxable equivalent				$	60,109								$	53,746								$	69,103							$	60,109
Net interest margin, fully taxable equivalent(2)(4)								3.92	%								3.61	%							4.05	%							3.92	%
Tax-equivalent adjustment					(264	)		0.01	%					(222	)		0.01	%
Reconciliation to reported net interest income:
Less: Tax-equivalent adjustment																							228		0.01	%					264		0.01	%
Net interest income				$	59,845								$	53,524								$	68,875							$	59,845
Net interest margin(4)								3.91	%								3.60	%							4.04	%							3.91	%

Net loan accretion impact on margin				$	1,638			0.11	%				$	3,911			0.26	%				$	1,559		0.09	%				$	1,638		0.11	%

(1)

Loan and lease balances are net of deferred origination fees and costs and initial direct costs. Non-accrual loans and leases are included in total loan and lease balances.

(2)

Interest income and rates include the effects of a tax equivalent adjustment to adjust tax-exempt investment income on tax-exempt investment securities to a fully taxable basis, assuming a federal income tax rate of 21%.

(3)

Represents the average rate earned on interest-earning assets minus the average rate paid on interest-bearing liabilities.

(4)

Represents net interest income (annualized) divided by total average interest-earning assets.

(5)

Average balances are average daily balances.

Nine Months Ended September 30,

2021

2020

Average
Balance(5)

Interest
Inc / Exp

Average
Yield /
Rate

Average
Balance(5)

Interest
Inc / Exp

Average
Yield /
Rate

ASSETS

Cash and cash equivalents

$
56,926

$
75

0.18
%

$
48,861

$
207

0.57
%
Loans and leases(1)

4,487,909

164,423

4.90
%

4,148,465

155,347

5.00
%
Taxable securities

1,405,390

16,798

1.60
%

1,261,458

21,678

2.30
%
Tax-exempt securities(2)

184,826

3,729

2.70
%

115,161

2,625

3.04
%
Total interest-earning assets

$
6,135,051

$
185,025

4.03
%

$
5,573,945

$
179,857

4.31
%
Allowance for loan and lease losses

(64,768
)

(43,584
)

All other assets

552,660

522,321

TOTAL ASSETS

$
6,622,943

$
6,052,682

LIABILITIES AND STOCKHOLDERS’
EQUITY

Deposits

Interest checking

$
609,444

$
647

0.14
%

$
432,785

$
651

0.20
%
Money market accounts

1,068,770

940

0.12
%

1,126,588

3,794

0.45
%
Savings

603,366

214

0.05
%

509,001

186

0.05
%
Time deposits

734,708

1,664

0.30
%

986,419

10,179

1.38
%
Total interest-bearing deposits

3,016,288

3,465

0.15
%

3,054,793

14,810

0.81
%
Other borrowings

572,018

1,333

0.31
%

531,395

2,838

0.71
%
Subordinated notes and debentures

110,029

4,785

5.81
%

59,591

2,699

6.05
%
Total borrowings

682,047

6,118

1.20
%

590,986

5,537

1.25
%
Total interest-bearing liabilities

$
3,698,335

$
9,583

0.35
%

$
3,645,779

$
20,347

0.75
%
Non-interest-bearing demand deposits

2,039,242

1,578,704

Other liabilities

71,737

50,677

Total stockholders’ equity

813,629

777,522

TOTAL LIABILITIES AND STOCKHOLDERS’
EQUITY

$
6,622,943

$
6,052,682

Net interest spread(3)

3.68
%

3.56
%
Net interest income, fully taxable equivalent

$
175,442

$
159,510

Net interest margin, fully taxable equivalent(2)(4)

3.82
%

3.82
%
Tax-equivalent adjustment

(783
)

0.01
%

(552
)

0.01
%
Net interest income

$
174,659

$
158,958

Net interest margin(4)

3.81
%

3.81
%

Net loan accretion impact on margin

$
5,001

0.11
%

$
10,754

0.26
%


	For the Nine Months Ended September 30,
	2022								2021
	Average Balance(5)			Interest Inc / Exp		Average Yield / Rate			Average Balance(5)			Interest Inc / Exp		Average Yield / Rate
ASSETS
Cash and cash equivalents	$	72,802		$	313		0.58	%	$	56,926		$	75		0.18	%
Loans and leases(1)		4,967,769			187,924		5.06	%		4,487,909			164,423		4.90	%
Taxable securities		1,323,838			17,393		1.76	%		1,405,390			16,798		1.60	%
Tax-exempt securities(2)		166,911			3,338		2.67	%		184,826			3,729		2.70	%
Total interest-earning assets	$	6,531,320		$	208,968		4.28	%	$	6,135,051		$	185,025		4.03	%
Allowance for loan and lease losses		(59,526	)							(64,768	)
All other assets		472,115								552,660
TOTAL ASSETS	$	6,943,909							$	6,622,943
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits
Interest checking	$	592,985		$	1,670		0.38	%	$	609,444		$	647		0.14	%
Money market accounts		1,318,725			5,026		0.51	%		1,068,770			940		0.12	%
Savings		662,820			406		0.08	%		603,366			214		0.05	%
Time deposits		658,893			2,084		0.42	%		734,708			1,664		0.30	%
Total interest-bearing deposits		3,233,423			9,186		0.38	%		3,016,288			3,465		0.15	%
Other borrowings		466,194			4,710		1.35	%		572,018			1,333		0.31	%
Federal funds purchased		842			14		2.32	%		—			—		0.00	%
Subordinated notes and debentures		110,648			5,119		6.19	%		110,029			4,785		5.81	%
Total borrowings		577,684			9,843		2.28	%		682,047			6,118		1.20	%
Total interest-bearing liabilities	$	3,811,107		$	19,029		0.67	%	$	3,698,335		$	9,583		0.35	%
Non-interest-bearing demand deposits		2,237,002								2,039,242
Other liabilities		99,951								71,737
Total stockholders’ equity		795,849								813,629
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	6,943,909							$	6,622,943
Net interest spread(3)							3.61	%							3.68	%
Net interest income, fully taxable equivalent				$	189,939							$	175,442
Net interest margin, fully taxable equivalent(2)(4)							3.88	%							3.82	%
Reconciliation to reported net interest income:
Less: Tax-equivalent adjustment					701		0.01	%					783		0.01	%
Net interest income				$	189,238							$	174,659
Net interest margin(4)							3.87	%							3.81	%

Net loan accretion impact on margin				$	4,418		0.09	%				$	5,001		0.11	%

(1)

Loan and lease balances are net of deferred origination fees and costs and initial direct costs. Non-accrual loans and leases are included in total loan and lease balances.

(2)

(3)

Represents the average rate earned on interest-earning assets minus the average rate paid on interest-bearing liabilities.

(4)

Represents net interest income (annualized) divided by total average interest-earning assets.

(5)

Average balances are average daily balances.

Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates. The following table sets forth the effects of changing rates and volumes on our net interest income during the periods shown. Information is provided with respect to (i) effects on interest income attributable to changes in volume (changes in volume multiplied by prior rate) and (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume). Changes applicable to both volume and rate have been allocated to volume. Yields have been calculated on a pre-tax basis. The table below is a summary of increases and decreases in interest income and interest expense resulting from changes in average balances (volume) and changes in average interest rates (dollars in thousands):


	Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021
	Increase (Decrease) Due to
	Volume			Rate			Total
Interest income
Cash and cash equivalents	$	101		$	90		$	191
Loans and leases(1)		9,440			7,093			16,533
Taxable securities		(19	)		561			542
Tax-exempt securities		(162	)		(9	)		(171	)
Total interest income	$	9,360		$	7,735		$	17,095
Interest expense
Deposits
Interest checking	$	(123	)	$	972		$	849
Money market accounts		869			2,209			3,078
Savings		14			158			172
Time deposits		(26	)		912			886
Total interest-bearing deposits		734			4,251			4,985
Other borrowings		970			1,913			2,883
Subordinated notes and debentures		10			223			233
Total borrowings		980			2,136			3,116
Total interest expense	$	1,714		$	6,387		$	8,101
Net interest income, fully taxable equivalent	$	7,646		$	1,348		$	8,994

(1)

Includes loans and leases on non-accrual status.

Three Months Ended September 30, 2021
compared to Three Months Ended September 30, 2020

Increase (Decrease) Due to

Volume

Rate

Total

Interest income

Cash and cash equivalents

$
(5
)

$
(1
)

$
(6
)
Loans and leases(1)

2,398

2,857

5,255

Taxable securities

(216
)

(653
)

(869
)
Tax-exempt securities

297

(97
)

200

Total interest income

$
2,474

$
2,106

$
4,580

Interest expense

Deposits

Interest checking

$
31

$
(29
)

$
2

Money market accounts

(51
)

(303
)

(354
)
Savings

11

—

11

Time deposits

(95
)

(1,338
)

(1,433
)
Total interest-bearing deposits

(104
)

(1,670
)

(1,774
)
Other borrowings

(153
)

37

(116
)
Subordinated notes and debentures

152

(45
)

107

Total borrowings

(1
)

(8
)

(9
)
Total interest expense

$
(105
)

$
(1,678
)

$
(1,783
)
Net interest income, fully taxable equivalent

$
2,579

$
3,784

$
6,363


	Nine Months Ended September 30, 2022 compared to Nine Months Ended September 30, 2021
	Increase (Decrease) Due to
	Volume			Rate			Total
Interest income
Cash and cash equivalents	$	68		$	170		$	238
Loans and leases(1)		18,130			5,371			23,501
Taxable securities		(1,087	)		1,682			595
Tax-exempt securities		(350	)		(41	)		(391	)
Total interest income	$	16,761		$	7,182		$	23,943
Interest expense
Deposits
Interest checking	$	(71	)	$	1,094		$	1,023
Money market accounts		968			3,118			4,086
Savings		57			135			192
Time deposits		(239	)		659			420
Total interest-bearing deposits		715			5,006			5,721
Other borrowings		(1,073	)		4,450			3,377
Federal funds purchased		14			—			14
Subordinated notes and debentures		21			313			334
Total borrowings		(1,038	)		4,763			3,725
Total interest expense	$	(323	)	$	9,769		$	9,446
Net interest income, fully taxable equivalent	$	17,084		$	(2,587	)	$	14,497

(1)

Includes loans and leases on non-accrual status.

Net interest income for the three months ended September 30, ~~2021~~2022 was ~~$59.8~~$68.9 million compared to ~~$53.5~~$59.8 million during the same period in ~~2020,~~2021, an increase of ~~$6.3~~$9.0 million, or ~~11.8%~~15.1%. Interest income increased ~~$4.5~~$17.1 million for the three months ended September 30, ~~2021~~2022 compared to the same period in ~~2020~~2021 primarily a result of higher yields and increased average ~~balance~~balances on loans and leases, ~~higher market~~offset by a decrease in PPP interest ~~rates,~~ and ~~higher fees related to PPP loan forgiveness.~~fee income. Interest expense ~~decreased~~increased by ~~$1.8~~$8.1 million for the three months ended September 30, ~~2021~~2022 compared to the same period in ~~2020~~2021 mostly due to ~~decreases~~increases in the average rates paid on deposits and increases in other borrowings.

Nine Months Ended September 30, 2021
compared to Nine Months Ended September 30, 2020

Increase (Decrease) Due to

Volume

Rate

Total

Interest income

Cash and cash equivalents

$
11

$
(143
)

$
(132
)
Loans and leases(1)

12,179

(3,103
)

9,076

Taxable securities

1,725

(6,605
)

(4,880
)
Tax-exempt securities

1,397

(293
)

1,104

Total interest income

$
15,312

$
(10,144
)

$
5,168

Interest expense

Deposits

Interest checking

$
190

$
(194
)

$
(4
)
Money market accounts

(73
)

(2,781
)

(2,854
)
Savings

28

—

28

Time deposits

(547
)

(7,968
)

(8,515
)
Total interest-bearing deposits

(402
)

(10,943
)

(11,345
)
Other borrowings

395

(1,900
)

(1,505
)
Subordinated notes and debentures

2,412

(326
)

2,086

Total borrowings

2,807

(2,226
)

581

Total interest expense

$
2,405

$
(13,169
)

$
(10,764
)
Net interest income, fully taxable equivalent

$
12,907

$
3,025

$
15,932

~~(1)~~

~~Includes loans and leases on non-accrual status.~~

Net interest income for the nine months ended September 30, ~~2021~~2022 was ~~$174.7~~$189.2 million compared to ~~$159.0~~$174.7 million during the same period in ~~2020,~~2021, an increase of ~~$15.7~~$14.6 million, or ~~9.9%~~8.3%. Interest income increased ~~$4.9~~$24.0 million for nine months ended September 30, 2022 compared to the same period in 2021 primarily a result of higher yields and increased average balance on loans and leases, offset by a decrease in PPP interest and fee income. Interest expense increased by $9.4 million for the nine months ended September 30, ~~2021~~2022 compared to the same period in ~~2020 primarily a result of loan and lease growth through originations. Interest expense decreased by $10.8 million for the nine months ended September 30,~~ 2021 ~~compared to the same period in 2020~~ mostly due to ~~decreases~~increases in the average rates paid on deposits and other ~~borrowings as well as a change in deposit mix.~~borrowings.

The net interest margin for the three months ended September 30, ~~2021~~2022 was ~~3.91%~~4.04%, an increase of 3113 basis points compared to ~~3.60%~~3.91% for the three months ended September 30, ~~2020.~~2021. The primary drivers of the increase for the three month period was an increase yields due to the rising interest rate environment, and in average interest earning assets driven by organic loan and lease ~~yields.~~

growth. The net interest margin for the nine months ended September 30, 2022 and 2021 was 3.87% and ~~2020 was~~ 3.81%, ~~driven by an increase in average interest earning assets and decreases in cost of funds, offset by lower average yields on loans and leases.~~

respectively.

Net loan accretion income was $1.6 million for the three months ended September 30, 2022 and 2021, ~~compared to $3.9 million for the three months ended September 30, 2020,~~ a decrease of ~~$2.3 million,~~$79,000, or 58.1%. Net loan accretion income was $5.0 million for the nine months ended September 30, 2021 compared to $10.8 million for the nine months ended September 30, 2020, a decrease of $5.8 million or 53.5%4.8%. Total net loan accretion on acquired loans contributed 11nine basis points to the net interest margin for the three months ended September 30, ~~2021~~2022 compared to 2611 basis points for the three months ended September 30, ~~2020.~~2021. Net loan accretion income was $4.4 million for the nine months ended September 30, 2022 compared to $5.0 million for the nine months ended September 30, 2021, a decrease of $583,000, or 11.7%. Total net loan accretion on acquired loans contributed 11nine basis points to the net interest margin for the nine months ended September 30, ~~2021~~2022 compared to 2611 basis points for the nine months ended September 30, ~~2020. Projected accretion income as of September 30, 2021 is summarized as follows:~~2021.

Estimated
Projected
Accretion(1)(2)

Last three months of 2021

$
553

2022

2,105

2023

1,410

2024

633

2025

383

Thereafter

819

Total

$
5,903

~~(1)~~

~~Estimated projected accretion excludes contractual interest income on ASC 310-30 loans.~~

~~(2)~~

Projections are updated quarterly, assume no prepayments, and are subject to change; including as a result of the Company’s expected adoption of ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments on December 31, 2022.

Provision for Loan and Lease Losses

The provision for loan and lease losses represents a charge to earnings necessary to establish an allowance for loan and lease losses that, in management’s evaluation, is appropriate to provide coverage for probable losses incurred in the loan and lease portfolio. The allowance for loan and lease losses is increased by the provision for loan and lease losses and is decreased by charge-offs, net of recoveries on prior charge-offs.

~~Provisions~~Provision for loan and lease losses was ~~$352,000 and $15.7~~$4.2 million for the three months ended September 30, 2022, compared to $352,000 for the three months ended September 30, 2021, ~~and 2020, respectively, a decrease~~an increase of ~~$15.4 million, or 97.8%. Provisions~~$3.8 million. Provision for loan and lease losses was ~~$2.8~~$15.1 million and ~~$45.7~~$2.8 million for the nine months ended September 30, 2022 and 2021, respectively, an increase of $12.3 million. The increases in provision were driven by increases in specific reserves on impaired loans, and ~~2020, respectively, a decrease of $42.9 million, or 94.0%.~~loan and lease growth.

The ALLL as a percentage of loans and leases ~~decreased from 1.53% at December 31, 2020 to 1.31%~~was 1.23% and 1.21% at September 30, ~~2021. The ALLL as a percentage of loans and leases excluding PPP loans was 1.40% and 1.74% at September 30, 2021~~2022 and December 31, ~~2020,~~2021, respectively.

Non-Interest Income

Non-interest income was $12.0 million for the three months ended September 30, 2022 compared to $18.5 million for the three months ended September 30, 2021, ~~compared to $22.2 million for the three months ended September 30, 2020,~~ a decrease of ~~$3.7~~$6.5 million, or ~~16.8%~~35.2%. The decrease was primarily due to a ~~downward revaluation~~decrease in net gains on sales of ~~loan servicing assets.~~loans.

Three Months Ended September 30,

Nine Months Ended September 30,

QTD 2021
Compared to 2020

YTD 2021
Compared to 2020

2021

2020

2021

2020

$ Change

% Change

$ Change

% Change

Fees and service charges on
   deposits
$
1,867

$
1,603

$
5,299

$
4,731

$
264

16.4
%

$
568

12.0
%
Loan servicing revenue

3,344

2,936

9,301

8,674

408

13.9
%

627

7.2
%
Loan servicing asset
   revaluation

(2,650
)

1,122

(4,148
)

(2,653
)

(3,772
)

NM

(1,495
)

56.4
%
ATM and interchange fees

1,201

1,028

3,257

3,089

173

16.7
%

168

5.4
%
Net realized gains on
   securities available-for-sale

130

1,037

1,456

2,412

(907
)

(87.4
)%

(956
)

(39.6
)%
Change in fair value of equity
   securities, net

(275
)

154

36

301

(429
)

NM

(265
)

(88.0
)%
Net gains on sales of loans

12,761

12,671

33,350

23,900

90

0.7
%

9,450

39.5
%
Wealth management and
   trust income

815

693

2,305

1,970

122

17.7
%

335

17.0
%
Other non-interest income

1,302

990

4,383

1,946

312

31.7
%

2,437

125.3
%
Total non-interest income
$
18,495

$
22,234

$
55,239

$
44,370

$
(3,739
)

(16.8
)%

$
10,869

24.5
%


	Three Months Ended September 30,						Nine Months Ended September 30,						QTD 2022 Compared to 2021						YTD 2022 Compared to 2021
	2022			2021			2022			2021			$ Change			% Change			$ Change			% Change
Fees and service charges on deposits	$	2,128		$	1,867		$	6,071		$	5,299		$	261			14.0	%	$	772			14.6	%
Loan servicing revenue		3,422			3,344			10,186			9,301			78			2.4	%		885			9.5	%
Loan servicing asset revaluation		(2,342	)		(2,650	)		(8,209	)		(4,148	)		308			(11.6	)%		(4,061	)		97.9	%
ATM and interchange fees		1,007			1,201			3,187			3,257			(194	)		(16.1	)%		(70	)		(2.1	)%
Net realized gains on securities available-for-sale		(2	)		130			50			1,456			(132	)	NM				(1,406	)		(96.5	)%
Change in fair value of equity securities, net		(581	)		(275	)		(1,313	)		36			(306	)		111.0	%		(1,349	)	NM
Net gains on sales of loans		5,580			12,761			26,390			33,350			(7,181	)		(56.3	)%		(6,960	)		(20.9	)%
Wealth management and trust income		995			815			2,943			2,305			180			22.2	%		638			27.7	%
Other non-interest income		1,785			1,302			6,274			4,383			483			37.0	%		1,891			43.1	%
Total non-interest income	$	11,992		$	18,495		$	45,579		$	55,239		$	(6,503	)		(35.2	)%	$	(9,660	)		(17.5	)%

Fees and service charges on deposits represent amounts charged to customers for banking services, such as fees on deposit accounts, and include, but are not limited to, maintenance fees, insufficient fund fees, overdraft protection fees, wire transfer fees, and other charges. Fees and service charges on deposits were ~~$1.9~~$2.1 million and ~~$1.6~~$1.9 million for the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. Fees and service charges on deposits were ~~$5.3~~$6.1 million and ~~$4.7~~$5.3 million for the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. Increases ~~in both periods~~ are due to increases in deposits.

While portions of the loans that we originate are sold and generate gains on sale revenue, servicing rights for the majority of loans that we sell are retained by us. In exchange for continuing to service loans that have been sold, we receive servicing revenue from a portion of the interest cash flow of the loan. We generated ~~$3.3~~$3.4 million and ~~$2.9~~$3.3 million in loan servicing revenue on the sold portion of the U.S. government guaranteed loans for the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. We generated ~~$9.3~~$10.2 million and ~~$8.7~~$9.3 million in loan servicing revenue on the sold portion of the U.S. government guaranteed loans for the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. At September 30, ~~2021~~2022 and ~~2020,~~2021, the outstanding balance of guaranteed loans serviced was ~~$1.6~~$1.7 billion and ~~$1.5~~$1.6 billion, respectively.

Loan servicing asset revaluation represents net changes in the fair value of our servicing assets. Loan servicing asset revaluation had a downward adjustment of $2.3 million and $2.7 million for the three months ended September 30, 2022 and 2021, ~~compared to an upward adjustment of $1.1 million for the three months ended September 30, 2020,~~respectively, a change of ~~$3.8 million due to changes in the fair value of the servicing asset.~~$308,000. Loan servicing asset revaluation had a downward adjustment of $8.2 million, and $4.1 million for the nine months ended September 30, 2022 and 2021, ~~compared to~~respectively, a ~~downward adjustment~~change of ~~$2.7 million for~~$4.1 million. Changes in the ~~nine months ended September 30, 2020, an increase of $1.5 million, or 56.4%,~~revaluations were mainly due to ~~changes~~increases in discount rates prompted by current market ~~premiums~~interest rates and ~~prepayment speeds.~~premiums.

~~ATM and interchange fees~~Net gains on sales of loans were ~~$1.2~~$5.6 million for the three months ended September 30, ~~2021~~2022 compared to $1.0 million for the three months ended September 30, 2020, an increase of $173,000, or 16.7%. The increase was primarily driven by increased transactional account volume and higher interchange income.

Change in fair value of equity securities, net, were a decrease of $275,000 compared to an increase of $154,000 for the three months ended September 30, 2021 and 2020, respectively. Changes in fair value of equity securities, net, were increases of $36,000 and $301,000 for the nine months ended September 30, 2021 and 2020, respectively. The amounts recorded during the periods were driven by market conditions.

~~Net gains on sales of loans were~~ $12.8 million for the three months ended September 30, 2021, ~~compared to $12.7~~a decrease of $7.2 million, ~~for~~or 56.3%, driven by lower volume and reduced premiums in the ~~three months ended September 30, 2020, an increase of $90,000, or 0.7%.~~secondary market. We sold ~~$104.2~~$75.4 million of U.S. government guaranteed loans during the three months ended September 30, ~~2021~~2022 compared to ~~$121.2~~$104.2 million during the three months ended September 30, ~~2020.~~2021. Net gains on sales of loans were ~~$33.4~~$26.4 million for the nine months ended September 30, ~~2021~~2022 compared to ~~$23.9~~$33.4 million ~~for~~ the nine months ended September 30, ~~2020, an increase~~2021, a decrease of ~~$9.5~~$7.0 million or ~~39.5%.~~20.9%, driven by reduced premiums in the secondary market. We sold ~~$278.7~~$296.2 million of U.S. government guaranteed loans during the nine months ended September 30, ~~2021~~2022 compared to ~~$260.9~~$278.7 million during the nine months ended September 30, ~~2020.~~2021.

Wealth management and trust income represents fees charged to customers for investment, trust, or wealth management services and are primarily determined by total assets under ~~management.~~administration. Wealth management and trust income was $995,000 for the three months ended September 30, 2022 compared to $815,000 for the three months ended September 30, 2021, ~~compared to $693,000 for the three months ended September 30, 2020.~~an increase of $180,000 or 22.2%. Wealth management and trust income was $2.9 million for the nine months ended September 30, 2022 compared to $2.3 million for the nine months ended September 30, 2021, ~~compared to $2.0 million for the nine months ended September 30, 2020. The variances were mostly driven by market conditions.~~an increase of $638,000 or 27.7%. Assets under ~~management~~administration were ~~$626.0~~$501.2 million and ~~$557.9~~$626.0 million as of September 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

Other non-interest income was $1.8 million for the three months ended September 30, 2022 compared to $1.3 million for the three months ended September 30, 2021, ~~compared to $990,000~~an increase of $483,000 or 37.0%. Other non-interest income was $6.3 million for the ~~three~~nine months ended September 30, ~~2020, an increase of $312,000 or 31.7%. Other non-interest income was~~2022 compared to $4.4 million for the nine months ended September 30, 2021, ~~compared to $1.9 million for the nine months ended September 30, 2020,~~ an increase of ~~$2.4~~$1.9 million or ~~125.2%~~43.1%. The primary driver of the increase ~~in both periods~~ was increased customer derivative products income due to volume and bank-owned life insurance income.

Non-Interest Expense

Non-interest expense was $46.2 million for the three months ended September 30, 2022 compared to $44.2 million for the three months ended September 30, 2021, ~~compared to $41.7~~an increase of $2.0 million, or 4.5%. Non-interest expense was $134.5 million for the ~~three~~nine months ended September 30, ~~2020,~~2022 compared to $126.0 million for the nine months ended September 30, 2021, an increase of ~~$2.5~~$8.5 million, or ~~6.0%~~6.7%. ~~The increase was~~These increases were primarily due to an increase in salaries and employee benefits.

Non-interest expense was $126.0 million for the nine months ended September 30, 2021 compared to $122.4 million for the nine months ended September 30, 2020, an increase of $3.6 million, or 2.9%. The increase was primarily due to an increase in salaries and employee benefits.

The following table presents the major components of our non-interest expense for the periods indicated (dollars in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

QTD 2021
Compared to 2020

YTD 2021
Compared to 2020

2021

2020

2021

2020

$ Change

% Change

$ Change

% Change

Salaries and employee benefits

$
25,978

$
23,126

$
72,372

$
67,197

$
2,852

12.3
%

$
5,175

7.7
%
Occupancy and equipment
   expense, net

4,982

5,220

15,617

16,103

(238
)

(4.6
)%

(486
)

(3.0
)%
Loan and lease related
  expenses

1,175

2,053

3,629

4,631

(878
)

(42.7
)%

(1,002
)

(21.6
)%
Legal, audit and other
   professional fees

2,710

2,390

7,822

6,802

320

13.4
%

1,020

15.0
%
Data processing

3,108

2,661

8,710

8,152

447

16.8
%

558

6.8
%
Net loss recognized on other
   real estate owned and
   other related expenses

42

349

1,052

1,324

(307
)

(87.8
)%

(272
)

(20.5
)%
Other intangible assets
   amortization expense

1,738

1,947

5,335

5,732

(209
)

(10.7
)%

(397
)

(6.9
)%
Other non-interest expense

4,447

3,941

11,466

12,460

506

12.8
%

(994
)

(8.0
)%
Total non-interest expense

$
44,180

$
41,687

$
126,003

$
122,401

$
2,493

6.0
%

$
3,602

2.9
%


	Three Months Ended September 30,				Nine Months Ended September 30,				QTD 2022 Compared to 2021						YTD 2022 Compared to 2021
	2022		2021		2022		2021		$ Change			% Change			$ Change			% Change
Salaries and employee benefits	$	29,587	$	25,978	$	86,243	$	72,372	$	3,609			13.9	%	$	13,871			19.2	%
Occupancy and equipment expense, net		3,919		4,982		13,456		15,617		(1,063	)		(21.3	)%		(2,161	)		(13.8	)%
Impairment charge on assets held for sale		—		1,434		—		3,981		(1,434	)	NM				(3,981	)	NM
Loan and lease related expenses		530		1,175		581		3,629		(645	)		(54.8	)%		(3,048	)		(84.0	)%
Legal, audit and other professional fees		2,733		2,710		7,153		7,822		23			0.8	%		(669	)		(8.6	)%
Data processing		3,370		3,108		9,952		8,710		262			8.4	%		1,242			14.3	%
Net loss recognized on other real estate owned and other related expenses		275		42		487		1,052		233		NM				(565	)		(53.7	)%
Other intangible assets amortization expense		1,611		1,738		5,075		5,335		(127	)		(7.3	)%		(260	)		(4.9	)%
Other non-interest expense		4,153		3,013		11,559		7,485		1,140			37.9	%		4,074			54.5	%
Total non-interest expense	$	46,178	$	44,180	$	134,506	$	126,003	$	1,998			4.5	%	$	8,503			6.7	%

Salaries and employee benefits, the single largest component of our non-interest expense, totaled $29.6 million for the three months ended September 30, 2022 compared to $26.0 million for the three months ended September 30, 2021, an increase of $3.6 million, or 13.9%. Salaries and employee benefits, totaled $86.2 million for the nine months ended September 30, 2022 compared to ~~$23.1~~$72.4 million for the nine

months ended September 30, 2021, an increase of $13.9 million, or 19.2%. The increases were primarily a result of increased headcount, lower deferred costs as prior year reflects PPP loan originations, and increased incentive compensation.

Occupancy and equipment expense was $3.9 million for the three months ended September 30, ~~2020, an increase of $2.9 million, or 12.3%. The increase was primarily a result of new hires. Salaries and employee benefits, totaled $72.4 million for the nine months ended September 30, 2021,~~2022 compared to ~~$67.2 million for the nine months ended September 30, 2020, an increase of $5.2 million, or 7.7%. The increase resulted from an increase in incentive compensation.~~

~~Occupancy and equipment expense was~~ $5.0 million for the three months ended September 30, 2021, ~~compared to $5.2 million for the three months ended September 30, 2020,~~ a decrease of ~~$238,000,~~$1.1 million or ~~4.6%~~21.3%. Occupancy and equipment expense was $13.5 million for the nine months ended September 30, 2022 compared to $15.6 million for the nine months ended September 30, 2021, ~~compared to $16.1 million for the nine months ended September 30, 2020,~~ a decrease of ~~$486,000,~~$2.2 million, or ~~3.0%~~13.8%. The decreases were a result of lower real estate tax, depreciation expenses, lease, ~~obligation expense due to~~and maintenance expenses, as a result of our branch ~~consolidations.~~consolidation and real estate strategy actions.

Loan and lease related expenses were $530,000 for the three months ended September 30, 2022 compared to $1.2 million for the three months ended September 30, 2021, ~~compared to $2.1 million for the three months ended September 30, 2020,~~ a decrease of ~~$878,000,~~$645,000, or ~~42.7%~~54.8%. The decrease was primarily driven by lower reimbursable expenses associated with government guaranteed loan originations. Loan and lease related expenses were $581,000 for the nine months ended September 30, 2022, compared to $3.6 million for the nine months ended September 30, 2021, ~~compared to $4.6 million for the nine months ended September 30, 2020,~~ a decrease of ~~$1.0~~$3.0 million, or ~~21.6%~~84.0%. The ~~decreases were principally driven by lower broker fees.~~decrease was mainly related to the recapture of government guaranteed loan expenses during the first quarter of 2022.

Legal, audit, and other professional fees were $2.7 million for the three months ended September 30, ~~2021~~2022 compared to ~~$2.4~~$2.7 million for the three months ended September 30, ~~2020,~~2021, an increase of ~~$320,000,~~$23,000, or ~~13.4%~~0.8%. Legal, audit, and other professional fees were $7.2 million for the nine months ended September 30, 2022 compared to $7.8 million for the nine months ended September 30, 2021, a decrease of $669,000 or 8.6%. The decrease was driven by recapture of legal fees during the second quarter of 2022.

Data processing was $3.4 million for the three months ended September 30, 2022, compared to ~~$6.8~~$3.1 million for the three months ended September 30, 2021, an increase of $262,000 or 8.4%. Data processing was $10.0 million for the nine months ended September 30, ~~2020,~~2022, compared to $8.7 million for the nine months ended September 30, 2021, an increase of ~~$1.0~~$1.2 million or ~~15.0%~~14.3%. The ~~increase in both periods was~~increases were driven by ~~increases in consulting fees.~~increased software licensing costs and higher outside services.

Net loss recognized on other real estate owned and other related expenses was $275,000 for the three months ended September 30, 2022, compared to $42,000 for the three months ended September 30, 2021, ~~compared to $349,000 for the three months ended September 30, 2020, a decrease~~an increase of ~~$307,000, or 87.8%.~~$233,000. Net loss recognized on other real estate owned and other related expenses was $487,000 for the nine months ended September 30, 2022, compared to $1.1 million for the nine months ended September 30, 2021, ~~compared to $1.3 million for the nine months ended September 30, 2020,~~ a decrease of ~~$272,000,~~$565,000, or ~~20.5%~~53.7%. These decreases were primarily due to ~~impairments of~~decreased valuation adjustments on other real estate owned ~~made during the prior year.~~assets.

Other ~~intangible assets amortization~~non-interest expense was ~~$1.7~~$4.2 million for the three months ended September 30, 2022 compared to $3.0 million for the three months ended September 30, 2021, ~~compared to $1.9~~an increase of $1.1 million or 37.9%. Other non-interest expense was $11.6 million for the ~~three~~nine months ended September 30, ~~2020, a decrease of $209,000, or 10.7%. Other intangible assets amortization expense was $5.3~~2022 compared to $7.5 million for the nine months ended September 30, 2021, ~~compared~~an increase of $4.1 million or 54.4%. These increases were mostly due to ~~$5.7 million~~higher provision for ~~the nine months ended September 30, 2020, a decrease of $397,000, or 6.9%.~~unfunded commitments, FDIC insurance assessments and marketing expenses.

~~Other non-interest expense~~Our efficiency ratio was ~~$4.4 million~~55.11% for the three months ended September 30, ~~2021~~2022 compared to $3.9 million for the three months ended September 30, 2020, an increase of $506,000 or 12.8%. The increase was mostly due to higher impairment charges on assets held for sale. Other non-interest expense was $11.5 million for the nine months ended September 30, 2021 compared to $12.5 million for the

nine months ended September 30, 2020, a decrease of $994,000 or 8.0%. The decrease was driven by lower provision for unfunded commitments and lower regulatory and director expenses, offset by higher impairment charges on assets held for sale.

~~Our efficiency ratio was~~ 54.18% for the three months ended September 30, ~~2021 compared to 52.46% for the three months ended September 30, 2020.~~2021. The change in our efficiency ratio for the three months ended September 30, ~~2021~~2022 was driven by ~~both an increase in our non-interest expense and~~ a decrease in our non-interest income. Our adjusted efficiency ratio was 55.11% for the three months ended September 30, 2022 compared to 52.35% for the three months ended September 30, ~~2021 compared to 52.42%~~2021. Our efficiency ratio was 55.12% for the ~~three~~nine months ended September 30, ~~2020.~~

~~Our efficiency ratio was~~2022, compared to 52.49% for the nine months ended September 30, ~~2021 compared~~2021. The change in our efficiency ratio was due to ~~57.38%~~higher non-interest expense. Our adjusted efficiency ratio was 55.12% for the nine months ended September 30, 2020. The change in our efficiency ratio for the nine months ended September 30, 2021 was driven by both an increase in our net interest income and an increase in our non-interest income. Our adjusted efficiency ratio was2022, compared to 50.76% for the nine months ended September 30, ~~2021 compared to 57.01% for the nine months ended September 30, 2020.~~2021.

Please refer to the “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure.

Income Taxes

Our provision for income taxes for the three months ended September 30, ~~2021~~2022 totaled ~~$8.5~~$7.9 million compared to ~~$5.3~~$8.5 million for the three months ended September 30, ~~2020.~~2021, a decrease of $645,000, or 7.6%. The ~~increase~~decrease in income tax expense was principally due to ~~increased~~decreases in net income before provision for income ~~taxes during the period.~~taxes. Our effective tax rate was 25.7% for the three months ended September 30, 2022 and 25.1% for the three months ended September 30, ~~2021 and 28.7% for the three months ended September 30, 2020.~~2021.

Our provision for income taxes for the nine months ended September 30, ~~2021~~2022 totaled ~~$25.5~~$20.0 million compared to ~~$10.0~~$25.5 million for the nine months ended September 30, ~~2020.~~2021, a decrease of $5.6 million or 21.8%. The ~~increase~~decrease in income tax expense was principally due to ~~increased~~decreases in net income before provision for income ~~taxes during the period.~~taxes. Our effective tax rate was 23.4% for the nine months ended September 30, 2022 and 25.3% for the nine months ended September 30, ~~2021 and 28.5%~~2021.

We expect our effective tax rate for ~~the nine months ended September 30, 2020.~~2022 to be approximately 25-27%.

Financial Condition

~~Balance Sheet~~Condensed Consolidated Statements of Financial Condition Analysis

Our total assets increased by ~~$313.8~~$581.4 million, or ~~4.9%~~8.7%, to $7.3 billion at September 30, 2022 compared to $6.7 billion at ~~September 30, 2021 compared to $6.4 billion at~~ December 31, ~~2020.~~2021. The increase in total assets includes an increase of ~~$268.7~~$738.3 million, or ~~6.2%~~16.3%, in loans and leases from ~~$4.3~~$4.5 billion at December 31, ~~2020~~2021 to ~~$4.6~~$5.3 billion at September 30, ~~2021.~~2022. Our originated loan and lease portfolio increased by ~~$434.3~~$858.9 million and our acquired loan and lease portfolio decreased by ~~$165.6~~$120.6 million. The increase in our originated portfolio was primarily attributed to organic loan and lease growth, and renewals of acquired non-impaired loans that are now reflected with originated loans, offset by a decrease in PPP loans. The decrease in our acquired portfolio was attributed to renewals reflected in originated loans, payoffs, and pay downs during the period.

Total liabilities increased by ~~$294.8~~$670.2 million, or ~~5.3%~~11.4%, to $6.5 billion at September 30, 2022 compared to $5.9 billion at ~~September 30, 2021 compared to $5.6 billion at~~ December 31, ~~2020.~~2021. Total deposits increased by ~~$406.2~~$457.4 million, or ~~8.5%~~8.9%, driven by growth in ~~non-interest-bearing deposits and interest-bearing checking~~money market accounts, partly offset by a decrease in ~~time~~interest bearing deposits. Other borrowings ~~decreased~~increased by ~~$108.8~~$134.2 million, or ~~16.8%~~25.8%, mainly due to ~~a decrease~~an increase in ~~PPPLF~~FHLB advances.

Investment Portfolio

Our investment securities portfolio consists of securities classified as available-for-sale and held-to-maturity. There were no securities classified as trading in our investment portfolio as of September 30, ~~2021~~2022 or December 31, ~~2020.~~2021. All available-for sale securities are carried at fair value and may be used for liquidity purposes should management consider it to be in our best interest. Securities available-for-sale consist primarily of residential mortgage-backed securities, commercial mortgage-backed securities and U.S. government agencies securities.

Securities available-for-sale decreased by ~~$19.6~~$272.9 million, or ~~1.4%~~18.8%, from ~~$1.4~~$1.5 billion at December 31, ~~2020~~2021 to ~~$1.4~~$1.2 billion at September 30, ~~2021.~~2022. The decrease was mainly attributed to decreases in the fair value of available-for-sale securities.

At September 30, ~~2021,~~2022, our held-to-maturity securities portfolio consists of obligations of states, municipalities and political subdivisions. We carry these securities at amortized cost. Securities held-to-maturity were $3.9 million at September 30, ~~2021~~2022 and ~~$4.4 million~~ at December 31, ~~2020.~~2021.

We had no securities that were classified as having other-than-temporary-impairment (“OTTI”) as of September 30, ~~2021~~2022 or December 31, ~~2020.~~2021.

The following table summarizes the fair value of the available-for-sale and held-to-maturity securities portfolio as of the dates presented (dollars in thousands):


	September 30, 2021				December 31, 2020				September 30, 2022				December 31, 2021
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Available-for-sale
U.S. Treasury Notes	$	8,487	$	8,578	$	23,468	$	23,812	$	32,745	$	30,917	$	18,447	$	18,476
U.S. Government agencies		124,244		123,264		113,088		113,551		152,254		130,901		141,096		139,390
Obligations of states, municipalities, and political subdivisions		101,499		105,060		135,513		142,419		71,550		63,565		86,454		89,636
Residential mortgage-backed securities
Agency		794,856		785,173		764,951		778,391		726,035		605,098		756,549		743,656
Non-agency		64,645		64,009		32,654		32,981		132,847		108,085		146,499		145,236
Commercial mortgage-backed securities
Agency		237,376		237,409		244,496		250,152		194,347		159,930		214,417		213,551
Corporate securities		64,842		66,827		59,020		60,768		45,320		41,616		65,814		67,346
Asset-backed securities		37,203		37,285		45,255		45,156		43,582		41,542		37,206		37,251
Total	$	1,433,152	$	1,427,605	$	1,418,445	$	1,447,230	$	1,398,680	$	1,181,654	$	1,466,482	$	1,454,542


	September 30, 2021				December 31, 2020				September 30, 2022				December 31, 2021
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Held-to-maturity
Obligations of states, municipalities, and political subdivisions	$	3,887	$	4,033	$	4,395	$	4,573	$	3,877	$	3,825	$	3,885	$	3,992
Total	$	3,887	$	4,033	$	4,395	$	4,573	$	3,877	$	3,825	$	3,885	$	3,992

Certain securities have fair values less than amortized cost and, therefore, contain unrealized losses. At September 30, ~~2021,~~2022, we evaluated the securities which had an unrealized loss for OTTI and determined all declines in value to be temporary. There were 97297 investment securities with unrealized losses at September 30, ~~2021.~~2022. We anticipate full recovery of amortized cost with respect to these securities by maturity, or sooner in the event of a more favorable market interest rate environment. We do not intend to sell these securities and it is not more likely than not that we will be required to sell them before recovery of their amortized cost basis, which may be at maturity.

The following ~~tables~~table (dollars in thousands) set forth certain information regarding contractual maturities and the weighted average yields of our investment securities as of ~~the dates presented.~~September 30, 2022. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

Maturity as of September 30, 2021

Due in One Year or Less

Due from One to
Five Years

Due from Five to
Ten Years

Due after Ten Years

Amortized
Cost

Weighted
Average
Yield(1)

Amortized
Cost

Weighted
Average
Yield(1)

Amortized
Cost

Weighted
Average
Yield(1)

Amortized
Cost

Weighted
Average
Yield(1)

Available-for-sale

U.S. Treasury Notes
$
8,487

2.51
%

$
—

0.00
%

$
—

0.00
%

$
—

0.00
%
U.S. government agencies

1,991

2.80
%

—

0.00
%

103,215

1.16
%

19,038

1.32
%
Obligations of states,
   municipalities, and
   political subdivisions

10,720

2.37
%

19,518

2.47
%

19,716

2.88
%

51,545

2.34
%
Residential mortgage-
  backed securities

Agency

—

0.00
%

562

1.32
%

100,635

1.47
%

693,659

1.15
%
Non-agency

—

0.00
%

—

0.00
%

—

0.00
%

64,645

1.90
%
Commercial mortgage-
   backed securities

Agency

—

0.00
%

7,560

2.06
%

13,172

1.58
%

216,644

2.01
%
Corporate securities

2,003

3.53
%

6,958

2.18
%

55,881

4.04
%

—

0.00
%
Asset-backed securities

—

0.00
%

—

0.00
%

30,622

1.60
%

6,581

1.59
%
Total
$
23,201

2.56
%

$
34,598

2.30
%

$
323,241

1.92
%

$
1,052,112

1.44
%


	Due in One Year or Less					Due from One to Five Years					Due from Five to Ten Years					Due after Ten Years
	Amortized Cost		Weighted Average Yield(1)			Amortized Cost		Weighted Average Yield(1)			Amortized Cost		Weighted Average Yield(1)			Amortized Cost		Weighted Average Yield(1)
Available-for-sale
U.S. Treasury Notes	$	—		0.00	%	$	32,745		1.80	%	$	—		0.00	%	$	—		0.00	%
U.S. government agencies		—		0.00	%		37,501		1.55	%		92,019		1.44	%		22,734		2.30	%
Obligations of states, municipalities, and political subdivisions		3,479		2.82	%		17,004		2.64	%		12,225		3.16	%		38,842		2.25	%
Residential mortgage- backed securities
Agency		—		0.00	%		10,254		1.69	%		93,470		1.58	%		622,311		1.47	%
Non-agency		—		0.00	%		—		0.00	%		—		0.00	%		132,847		2.14	%
Commercial mortgage- backed securities
Agency		—		0.00	%		—		0.00	%		13,313		1.63	%		181,034		2.04	%
Corporate securities		—		0.00	%		4,666		3.05	%		40,654		3.76	%		—		0.00	%
Asset-backed securities		—		0.00	%		—		0.00	%		43,582		3.32	%		—		0.00	%
Total	$	3,479		2.82	%	$	102,170		1.90	%	$	295,263		2.16	%	$	997,768		1.71	%

(1)

The weighted average yields are based on amortized cost.

Maturity as of December 31, 2020

Due in One Year or Less

Due from One to
Five Years

Due from Five to
Ten Years

Due after Ten Years

Amortized
Cost

Weighted
Average
Yield(1)

Amortized
Cost

Weighted
Average
Yield(1)

Amortized
Cost

Weighted
Average
Yield(1)

Amortized
Cost

Weighted
Average
Yield(1)

Available-for-sale

U.S. Treasury Notes

$
14,998

2.52
%

$
8,470

2.51
%

$
—

0.00
%

$
—

0.00
%
U.S. government agencies

498

2.42
%

1,977

2.80
%

91,430

1.26
%

19,183

1.32
%
Obligations of states,
   municipalities, and
  political subdivisions

8,944

2.47
%

22,208

2.45
%

22,101

2.79
%

82,260

2.39
%
Residential mortgage-
  backed securities

Agency

—

0.00
%

975

1.35
%

85,519

1.37
%

678,457

1.40
%
Non-agency

—

0.00
%

—

0.00
%

—

0.00
%

32,654

2.72
%
Commercial mortgage-
   backed securities

Agency

—

0.00
%

7,504

3.35
%

13,198

1.56
%

223,794

2.02
%
Corporate securities

2,500

3.25
%

8,703

3.08
%

47,817

4.05
%

—

0.00
%
Asset-backed securities

—

0.00
%

—

0.00
%

10,753

2.28
%

34,502

1.42
%
Total

$
26,940

2.57
%

$
49,837

2.70
%

$
270,818

1.97
%

$
1,070,850

1.64
%


	Due in One Year or Less					Due from One to Five Years					Due from Five to Ten Years					Due after Ten Years
	Amortized Cost		Weighted Average Yield(1)			Amortized Cost		Weighted Average Yield(1)			Amortized Cost		Weighted Average Yield(1)			Amortized Cost		Weighted Average Yield(1)
Held-to-maturity
Obligations of states, municipalities, and political subdivisions	$	2,719		2.57	%	$	1,158		2.75	%	$	—		0.00	%	$	—		0.00	%
Total	$	2,719		2.57	%	$	1,158		2.75	%	$	—		0.00	%	$	—		0.00	%

(1)

The weighted average yields are based on amortized cost.

As of September 30, 2022, and December 31, 2021, investment securities indexed to LIBOR were ~~$60.7 million.~~$43.9 million and $58.2 million, respectively.

Total non-taxable securities classified as obligations of states, municipalities and political subdivisions were ~~$76.2~~$48.3 million at September 30, ~~2021,~~2022, a decrease of ~~$1.2~~$13.3 million from December 31, ~~2020.~~2021.

There were no holdings of securities of any one issuer, other than U.S. government-sponsored entities and agencies, with total outstanding balances greater than 10% of our stockholders’ equity as of September 30, ~~2021~~2022 or December 31, ~~2020.~~2021.

Restricted Stock

As a member of the Federal Home Loan Bank system, Byline Bank is required to maintain an investment in the capital stock of the FHLB. No market exists for this stock, and it has no quoted market value. The stock is redeemable at par by the FHLB and is, therefore, carried at cost. In addition, Byline Bank owns stock of Bankers’ Bank that was acquired as part of a bank acquisition. The stock is redeemable at par and carried at cost. As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, we held ~~$15.9~~$27.1 million and ~~$10.5~~$22.0 million, respectively, in FHLB

and Bankers’ Bank stock. We evaluate impairment of our investment in FHLB and Bankers’ Bank based on the ultimate recoverability of the par value rather than by recognizing temporary declines in value. We did not identify any indicators of impairment of FHLB and Bankers’ Bank stock as of September 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

Loan and Lease Portfolio

Lending-related income is the most important component of our net interest income and is the main driver of the results of our operations. Total loans and leases at September 30, ~~2021~~2022 and December 31, ~~2020~~2021 were ~~$4.6~~$5.3 billion and ~~$4.3~~$4.5 billion, respectively, an increase of ~~$268.7~~$738.3 million, or ~~6.2%~~16.3%. Originated loans and leases were ~~$4.1~~$5.0 billion at September 30, ~~2021,~~2022, an increase of ~~$434.3~~$858.9 million, or ~~11.8%~~21.0%, compared to ~~$3.7~~$4.1 billion at December 31, ~~2020.~~2021. Acquired impaired loans and acquired non-impaired loans and leases were ~~$506.4~~$322.2 million at September 30, ~~2021,~~2022, a decrease of ~~$165.6~~$120.6 million, or ~~24.6%~~27.2%, compared to ~~$672.1~~$442.8 million at December 31, ~~2020.~~2021. The increase in our originated portfolio was primarily attributed to organic loan and lease growth, and renewals of acquired non-impaired loans that are now reflected with originated loans. The decrease in our acquired portfolio is attributed to renewals reflected in originated loans, payoffs, and pay downs during the ~~period, offset by a decrease in~~period. PPP loans ~~of $249.7 million.~~decreased by $122.2 million during the nine months ended September 30, 2022.

We strive to maintain a relatively diversified loan portfolio to help reduce the risk inherent in concentration in certain types of collateral. Loans, excluding leases, are typically made to real estate, manufacturing, wholesale, retail and service businesses for working capital needs, business expansions and operations. The Company's exposure to certain industries as of September 30, 2021 represents the following percentages of the portfolio: 32.3% real estate, 14.5% manufacturing, 7.4% wholesale trade, 6.6% retail trade, 5.0% accommodation and food service, 5.0% consumer, and all other industries individually represent less than 5% of the portfolio or 23.7% of the total loan portfolio. As of September 30, ~~2021,~~2022, the loan portfolio included ~~$426.5~~$404.2 million of unguaranteed 7(a) SBA and USDA loans with exposure to the following top three industries: ~~14.1%~~15.0% accommodation and food services, ~~14.0%~~14.5% retail trade, and ~~13.3%~~12.9% manufacturing. The following table shows our allocation of originated, acquired impaired and acquired non-impaired loans and leases as of the dates presented (dollars in thousands):

September 30, 2021

December 31, 2020

Amount

% of Total

Amount

% of Total

Originated loans and leases

Commercial real estate

$
1,298,454

28.2
%

$
1,017,587

23.5
%
Residential real estate

387,578

8.4
%

414,220

9.6
%
Construction, land development, and other land

336,460

7.3
%

226,408

5.2
%
Commercial and industrial

1,480,076

32.1
%

1,276,527

29.4
%
Paycheck Protection Program

268,081

5.8
%

517,815

11.9
%
Installment and other

998

0.0
%

1,267

0.0
%
Leasing financing receivables

331,149

7.2
%

214,636

4.9
%
Total originated loans and leases

$
4,102,796

89.0
%

$
3,668,460

84.5
%
Acquired impaired loans

Commercial real estate

$
84,821

1.8
%

$
108,484

2.5
%
Residential real estate

61,893

1.3
%

78,840

1.9
%
Construction, land development, and other land

1,746

0.1
%

4,113

0.1
%
Commercial and industrial

6,651

0.1
%

10,178

0.2
%
Installment and other

169

0.0
%

202

0.0
%
Total acquired impaired loans

$
155,280

3.3
%

$
201,817

4.7
%
Acquired non-impaired loans and leases

Commercial real estate

$
235,103

5.1
%

$
295,599

6.8
%
Residential real estate

58,283

1.3
%

79,211

1.8
%
Construction, land development, and other land

206

0.0
%

212

0.0
%
Commercial and industrial

49,678

1.1
%

82,195

1.9
%
Installment and other

275

0.0
%

536

0.0
%
Leasing financing receivables

7,607

0.2
%

12,505

0.3
%
Total acquired non-impaired loans and leases

$
351,152

7.7
%

$
470,258

10.8
%
Total loans and leases

$
4,609,228

100.0
%

$
4,340,535

100.0
%
Allowance for loan and lease losses

(60,598
)

(66,347
)

Total loans and leases, net of allowance for loan and lease
losses

$
4,548,630

$
4,274,188


	September 30, 2022						December 31, 2021
	Amount			% of Total			Amount			% of Total
Originated loans and leases
Commercial real estate	$	1,652,890			31.3	%	$	1,379,000			30.4	%
Residential real estate		410,285			7.8	%		379,796			8.4	%
Construction, land development, and other land		456,463			8.7	%		323,886			7.1	%
Commercial and industrial		1,938,320			36.7	%		1,534,745			33.8	%
Paycheck Protection Program		1,522			0.0	%		123,712			2.7	%
Installment and other		1,016			0.0	%		940			0.0	%
Leasing financing receivables		492,744			9.3	%		352,247			7.8	%
Total originated loans and leases	$	4,953,240			93.8	%	$	4,094,326			90.2	%
Acquired impaired loans
Commercial real estate	$	56,974			1.1	%	$	72,160			1.6	%
Residential real estate		37,246			0.7	%		49,401			1.1	%
Construction, land development, and other land		1,144			0.0	%		1,312			0.0	%
Commercial and industrial		3,029			0.1	%		4,014			0.1	%
Installment and other		153			0.0	%		164			0.0	%
Total acquired impaired loans	$	98,546			1.9	%	$	127,051			2.8	%
Acquired non-impaired loans and leases
Commercial real estate	$	159,130			3.0	%	$	214,588			4.7	%
Residential real estate		34,313			0.7	%		51,317			1.1	%
Construction, land development, and other land		—			0.0	%		201			0.1	%
Commercial and industrial		26,959			0.5	%		43,202			1.0	%
Installment and other		199			0.0	%		264			0.0	%
Leasing financing receivables		3,084			0.1	%		6,179			0.1	%
Total acquired non-impaired loans and leases	$	223,685			4.3	%	$	315,751			7.0	%
Total loans and leases	$	5,275,471			100.0	%	$	4,537,128			100.0	%
Allowance for loan and lease losses		(64,655	)					(55,012	)
Total loans and leases, net of allowance for loan and lease losses	$	5,210,816					$	4,482,116

Loans collateralized by real estate comprised ~~53.5%~~53.3% and ~~51.4%~~54.5% of the loan and lease portfolio at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. Commercial real estate loans comprised the largest portion of the real estate loan portfolio as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021 and totaled ~~$1.6~~$1.9 billion, or ~~65.7%~~66.5% of real estate loans and ~~35.1%~~35.4% of the total loan and lease portfolio at September 30, ~~2021.~~2022. At December 31, ~~2020,~~2021, commercial real estate loans totaled ~~$1.4~~$1.7 billion and comprised ~~63.9%~~67.4% of real estate loans and ~~32.8%~~36.7% of the total loan and lease portfolio. Acquired impaired commercial real estate loans decreased from ~~$108.5~~$72.2 million as of December 31, ~~2020~~2021 to ~~$84.8~~$57.0 million as of September 30, ~~2021,~~2022, a decrease of $15.2 million, or ~~21.8%~~21.0%. At September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, commercial real estate loans, including both owner-occupied and non-owner occupied, as a percentage of total capital were ~~302.3%~~318.9% and ~~282.5%~~302.5%, respectively. Non-owner occupied commercial real estate loans were ~~$623.9~~$717.6 million and ~~$533.9~~$637.1 million, or ~~83.6%~~86.9% and ~~79.0%~~84.6% of total capital, at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

Residential real estate loans totaled ~~$507.8~~$481.8 million at September 30, ~~2021~~2022 compared to ~~$572.3~~$480.5 million at December 31, ~~2020, a decrease~~2021, an increase of ~~$64.5~~$1.3 million, or ~~11.3%~~0.3%. The residential real estate loan portfolio comprised ~~20.6%~~17.2% and ~~25.7%~~19.4% of real estate loans as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, and ~~11.0%~~9.2% and ~~13.3%~~10.6% of total loans and leases at September 30, ~~2021~~2022 and December 31, ~~2020,~~ 2021,

respectively. Acquired impaired residential real estate loans decreased from ~~$78.8~~$49.4 million at December 31, ~~2020~~2021 to ~~$61.9~~$37.2 million at September 30, ~~2021,~~2022, a decrease of $12.2 million, or ~~21.5%~~24.6%.

Construction, land development, and other land loans totaled ~~$338.4~~$457.6 million at September 30, ~~2021~~2022 compared to ~~$230.7~~$325.4 million at December 31, ~~2020,~~2021, an increase of ~~$107.7~~$132.2 million, or ~~46.7%~~40.6%. The construction, land development and other land loan portfolio comprised ~~13.7%~~16.3% and ~~10.4%~~13.2% of real estate loans at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, and ~~7.4%~~8.7% and ~~5.3%~~7.2% of the total loan and lease portfolio at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

Commercial and industrial loans totaled ~~$1.5~~$2.0 billion and ~~$1.4~~$1.6 billion at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, an increase of ~~$167.5~~$386.3 million, or ~~12.2%~~24.4%. The commercial and industrial loan portfolio comprised ~~33.3%~~37.3% and ~~31.5%~~34.9% of the total loan and lease portfolio at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

PPP loans totaled $1.5 million at September 30, 2022, compared to $123.7 million at December 31, 2021, a decrease of $122.2 million, primarily as a result of SBA loan forgiveness.

Lease financing receivables comprised ~~7.4%~~9.4% and ~~5.2%~~7.9% of the loan and lease portfolio at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. Total lease financing receivables were ~~$338.8~~$495.8 million and ~~$227.1~~$358.4 million at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, an increase of ~~$111.6~~$137.4 million, or ~~49.1%~~38.3%.

In support of our customers impacted by the COVID-19 pandemic and keeping with regulatory guidance, we began offering relief through payment deferrals during the first quarter of 2020. As of September 30, 2021, we had $2.0 million in active deferrals, or 0.05% of loans and leases excluding PPP loans.

Loan and Lease Portfolio Maturities and Interest Rate Sensitivity

The following table shows our loan and lease portfolio by scheduled maturity at September 30, ~~2021~~2022 (dollars in thousands):


	Due in One Year or Less				Due after One Year Through Five Years				Due after Five Years Through Fifteen Years				Due after Fifteen Years
	Fixed Rate		Floating Rate		Fixed Rate		Floating Rate		Fixed Rate		Floating Rate		Fixed Rate		Floating Rate		Total
Originated loans and leases
Commercial real estate	$	43,617	$	114,951	$	560,065	$	294,297	$	315,980	$	142,152	$	10,098	$	171,730	$	1,652,890
Residential real estate		11,268		16,987		101,411		65,452		46,459		97,333		66,939		4,436		410,285
Construction, land development, and other land		10,992		83,301		14,545		317,891		25,115		4,619		—		—		456,463
Commercial and industrial		26,072		406,240		215,293		840,759		144,802		264,628		33,243		7,283		1,938,320
Paycheck Protection Program		—		—		1,522		—		—		—		—		—		1,522
Installment and other		197		—		584		—		235		—		—		—		1,016
Leasing financing receivables		10,828		—		435,386		—		46,530		—		—		—		492,744
Total originated loans and leases	$	102,974	$	621,479	$	1,328,806	$	1,518,399	$	579,121	$	508,732	$	110,280	$	183,449	$	4,953,240
Acquired impaired loans
Commercial real estate	$	23,835	$	—	$	26,938	$	348	$	2,472	$	2,572	$	550	$	259	$	56,974
Residential real estate		7,726		285		11,532		483		8,451		757		5,918		2,094		37,246
Construction, land development, and other land		1,059		—		85		—		—		—		—		—		1,144
Commercial and industrial		1,279		79		1,671		—		—		—		—		—		3,029
Installment and other		6		—		30		—		117		—		—		—		153
Total acquired impaired loans	$	33,905	$	364	$	40,256	$	831	$	11,040	$	3,329	$	6,468	$	2,353	$	98,546
Acquired non-impaired loans and leases
Commercial real estate	$	14,439	$	133	$	65,557	$	20,440	$	22,594	$	7,383	$	2,212	$	26,372	$	159,130
Residential real estate		6,530		6,206		8,810		2,468		1,693		2,158		775		5,673		34,313
Commercial and industrial		3,736		280		7,126		12,842		1,646		882		—		447		26,959
Installment and other		119		64		16		—		—		—		—		—		199
Leasing financing receivables		840		—		2,244		—		—		—		—		—		3,084
Total acquired non-impaired loans and leases	$	25,664	$	6,683	$	83,753	$	35,750	$	25,933	$	10,423	$	2,987	$	32,492	$	223,685
Total loans and leases	$	162,543	$	628,526	$	1,452,815	$	1,554,980	$	616,094	$	522,484	$	119,735	$	218,294	$	5,275,471

Due in One Year or Less

Due after One Year
Through Five Years

Due after Five Years

Fixed Rate

Floating
Rate

Fixed
Rate

Floating
Rate

Fixed Rate

Floating
Rate

Total

Originated loans and leases

Commercial real estate

$
66,603

$
107,306

$
387,802

$
219,452

$
215,323

$
301,968

$
1,298,454

Residential real estate

13,146

15,590

69,192

68,563

131,097

89,990

387,578

Construction, land development,
   and other land

1,999

95,753

20,292

205,285

6,987

6,144

336,460

Commercial and industrial

26,753

261,748

142,937

619,128

118,416

311,094

1,480,076

Paycheck Protection Program

—

—

268,081

—

—

—

268,081

Installment and other

110

13

596

—

279

—

998

Leasing financing receivables

14,727

—

281,935

—

34,487

—

331,149

Total originated loans and
   leases

$
123,338

$
480,410

$
1,170,835

$
1,112,428

$
506,589

$
709,196

$
4,102,796

Acquired impaired loans

Commercial real estate

$
30,939

$
2,354

$
43,352

$
1,157

$
3,644

$
3,375

$
84,821

Residential real estate

20,871

1,491

23,343

104

12,775

3,309

61,893

Construction, land development,
   and other land

588

117

1,041

—

—

—

1,746

Commercial and industrial

2,159

105

2,828

85

1,077

397

6,651

Installment and other

—

—

43

—

126

—

169

Total acquired impaired loans

$
54,557

$
4,067

$
70,607

$
1,346

$
17,622

$
7,081

$
155,280

Acquired non-impaired loans and
   leases

Commercial real estate

$
26,659

$
20,361

$
88,725

$
10,154

$
32,768

$
56,436

$
235,103

Residential real estate

5,542

12,097

16,077

13,219

2,969

8,379

58,283

Construction, land development,
   and other land

206

—

—

—

—

—

206

Commercial and industrial

4,551

634

15,873

19,640

1,953

7,027

49,678

Installment and other

17

11

169

78

—

—

275

Leasing financing receivables

647

—

6,960

—

—

—

7,607

Total acquired non-impaired
   loans and leases

$
37,622

$
33,103

$
127,804

$
43,091

$
37,690

$
71,842

$
351,152

Total loans and leases

$
215,517

$
517,580

$
1,369,246

$
1,156,865

$
561,901

$
788,119

$
4,609,228

At September 30, ~~2021, 46.6%~~2022, 44.6% of the loan and lease portfolio bears interest at fixed rates and ~~53.4%~~55.4% at floating rates. ~~In addition, $1.5 billion, or 32.7%, of the loan and lease portfolio has interest rate floors of which $1.3 billion were at the interest rate floor as of September 30, 2021.~~ The expected life of our loan portfolio will differ from contractual maturities because borrowers may have the right to curtail or prepay their loans with or without penalties. Because a portion of the portfolio is accounted for under ASC 310-30, the carrying value is significantly affected by estimates and it is impracticable to allocate scheduled payments for those loans based on those estimates. Consequently, the tables presented include information limited to contractual maturities of the underlying loans. As of September 30, ~~2021~~2022 we had ~~$1.4 billion~~$822.4 million in loans indexed to LIBOR.

Allowance for Loan and Lease Losses

The ALLL is determined by us on a quarterly basis, although we are engaged in monitoring the appropriate level of the allowance on a more frequent basis. The ALLL reflects management’s estimate of probable incurred credit losses inherent in the loan and lease portfolios. The computation includes elements of judgement and high levels of subjectivity.

Factors considered by us include, but are not limited to, actual loss experience, peer loss experience, changes in size and risk profile of the portfolio, identification of individual problem loan and lease situations which may affect a borrower’s ability to repay, and evaluation of the prevailing economic conditions. Changes in conditions may necessitate revision of the estimate in future periods.

We assess the ALLL based on three categories: (i) originated loans and leases, (ii) acquired non-impaired loans and leases, and (iii) acquired impaired loans with further credit deterioration after the acquisitions or our recapitalization.

Total ALLL was ~~$60.6~~$64.7 million at September 30, ~~2021~~2022 compared to ~~$66.3~~$55.0 million at December 31, ~~2020, a decrease~~2021, an increase of ~~$5.7,~~$9.6 million, or ~~8.7%~~17.5%. The ~~decrease~~increase was primarily due to ~~net charge-offs during the year.~~

an increase in general reserves driven by loan and lease growth and increase in non-performing loans. Total ALLL to total loans and leases held for investment, net before ALLL, was ~~1.31%~~1.23% and ~~1.53%~~1.21% of total loans and leases at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. ~~The decrease~~As of September 30, 2022, approximately $27.2 million of the ALLL was ~~primarily driven by an increase in loans~~allocated to unguaranteed portion of SBA 7(a) and ~~leases, and net charge-offs exceeding provision during the year.~~USDA loans.

6361

The following tables present an analysis of the allowance of the loan and lease losses for the periods presented (dollars in thousands):


	Commercial Real Estate			Residential Real Estate			Construction, Land Development, and Other Land			Commercial and Industrial			Paycheck Protection Program			Installment and Other			Lease Financing Receivables			Total			Commercial Real Estate			Residential Real Estate			Construction, Land Development, and Other Land			Commercial and Industrial			Installment and Other			Lease Financing Receivables			Total
Balance at June 30, 2021	$	19,541		$	1,364		$	619		$	38,284		$	—		$	9		$	1,902		$	61,719
Balance at June 30, 2022																									$	19,818		$	2,489		$	1,792		$	34,735		$	11		$	3,591		$	62,436
Provision/(recapture) for acquired impaired loans		414			18			—			(63	)		—			—			—			369			79			39			70			(343	)		(1	)		—			(156	)
Provision/(recapture) for acquired non-impaired loans and leases		(932	)		(65	)		—			(564	)		—			(1	)		(38	)		(1,600	)		(409	)		(2	)		—			(220	)		—			(144	)		(775	)
Provision/(recapture) for originated loans		1,626			(178	)		(61	)		(591	)		—			(1	)		788			1,583
Total provision/(recapture)	$	1,108		$	(225	)	$	(61	)	$	(1,218	)	$	—		$	(2	)	$	750		$	352
Provision for originated loans																										1,445			167			483			2,603			3			406			5,107
Total provision																									$	1,115		$	204		$	553		$	2,040		$	2		$	262		$	4,176
Charge-offs for acquired impaired loans		(4	)		—			—			—			—			—			—			(4	)		—			—			—			(1	)		—			—			(1	)
Charge-offs for acquired non-impaired loans and leases		(50	)		—			—			(98	)		—			—			(10	)		(158	)		—			—			—			—			—			(28	)		(28	)
Charge-offs for originated loans and leases		(510	)		(65	)		—			(1,358	)		—			—			(389	)		(2,322	)		(1,102	)		(17	)		—			(1,183	)		(3	)		(388	)		(2,693	)
Total charge-offs	$	(564	)	$	(65	)	$	—		$	(1,456	)	$	—		$	—		$	(399	)	$	(2,484	)	$	(1,102	)	$	(17	)	$	—		$	(1,184	)	$	(3	)	$	(416	)	$	(2,722	)
Recoveries for acquired impaired loans		37			1			—			1			—			—			—			39			6			2			—			37			—			—			45
Recoveries for acquired non-impaired loans and leases		25			1			—			234			—			—			44			304			—			—			—			—			—			164			164
Recoveries for originated loans and leases		225			—			—			145			—			—			298			668			213			3			—			124			—			216			556
Total recoveries	$	287		$	2		$	—		$	380		$	—		$	—		$	342		$	1,011		$	219		$	5		$	—		$	161		$	—		$	380		$	765
Less: Net charge-offs		277			63			—			1,076			—			—			57			1,473			883			12			—			1,023			3			36			1,957
Acquired impaired loans		2,638			353			8			1,276			—			—			—			4,275			1,325			850			98			79			2			—			2,354
Acquired non-impaired loans and leases		3,333			27			—			2,772			—			1			58			6,191			1,052			48			—			1,127			1			24			2,252
Originated loans and leases		14,401			696			550			31,942			—			6			2,537			50,132			17,673			1,783			2,247			34,546			7			3,793			60,049
Balance at September 30, 2021	$	20,372		$	1,076		$	558		$	35,990		$	—		$	7		$	2,595		$	60,598
Balance at September 30, 2022																									$	20,050		$	2,681		$	2,345		$	35,752		$	10		$	3,817		$	64,655
Ending ALLL balance
Acquired impaired loans	$	2,638		$	353		$	8		$	1,276		$	—		$	—		$	—		$	4,275		$	1,325		$	850		$	98		$	79		$	2		$	—		$	2,354
Acquired non-impaired loans and leases and originated loans individually evaluated for impairment		8,420			—			—			16,142			—			—			—			24,562			6,094			—			—			12,584			—			—			18,678
Acquired non-impaired loans and leases and originated loans and leases collectively evaluated for impairment		9,314			723			550			18,572			—			7			2,595			31,761			12,631			1,831			2,247			23,089			8			3,817			43,623
Balance at September 30, 2021	$	20,372		$	1,076		$	558		$	35,990		$	—		$	7		$	2,595		$	60,598
Balance at September 30, 2022																									$	20,050		$	2,681		$	2,345		$	35,752		$	10		$	3,817		$	64,655
Loans and leases ending balance
Acquired impaired loans	$	84,821		$	61,893		$	1,746		$	6,651		$	—		$	169		$	—		$	155,280		$	56,974		$	37,246		$	1,144		$	3,029		$	153		$	—		$	98,546
Acquired non-impaired loans and leases and originated loans individually evaluated for impairment		45,563			3,946			—			37,689			—			—			—			87,198			44,977			4,782			5,541			35,979			—			—			91,279
Acquired non-impaired loans and leases and originated loans and leases collectively evaluated for impairment		1,487,994			441,915			336,666			1,492,065			268,081			1,273			338,756			4,366,750			1,767,043			439,816			450,922			1,930,822			1,215			495,828			5,085,646
Total loans and leases at September 30, 2021, gross	$	1,618,378		$	507,754		$	338,412		$	1,536,405		$	268,081		$	1,442		$	338,756		$	4,609,228
Total loans and leases at September 30, 2022, gross																									$	1,868,994		$	481,844		$	457,607		$	1,969,830		$	1,368		$	495,828		$	5,275,471
Ratio of net charge-offs to average loans and leases outstanding during the period (annualized)
Acquired impaired loans		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%
Acquired non-impaired loans and leases		0.00	%		0.00	%		0.00	%		(0.01	)%		0.00	%		0.00	%		0.00	%		(0.01	)%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		(0.01	)%		(0.01	)%
Originated loans and leases		0.02	%		0.01	%		0.00	%		0.11	%		0.00	%		0.00	%		0.00	%		0.14	%		0.07	%		0.00	%		0.00	%		0.08	%		0.00	%		0.01	%		0.16	%
Loans and leases ending balance as a percentage of total loans and leases, gross
Acquired impaired loans		1.84	%		1.34	%		0.04	%		0.14	%		0.00	%		0.00	%		0.00	%		3.37	%		1.08	%		0.71	%		0.02	%		0.06	%		0.00	%		0.00	%		1.87	%
Acquired non-impaired loans and leases and originated loans individually evaluated for impairment		0.99	%		0.09	%		0.00	%		0.82	%		0.00	%		0.00	%		0.00	%		1.89	%		0.85	%		0.09	%		0.11	%		0.68	%		0.00	%		0.00	%		1.73	%
Acquired non-impaired loans and leases and originated loans and leases collectively evaluated for impairment		32.28	%		9.59	%		7.30	%		32.37	%		5.82	%		0.03	%		7.35	%		94.74	%		33.50	%		8.33	%		8.55	%		36.60	%		0.02	%		9.40	%		96.40	%


	Commercial Real Estate			Residential Real Estate			Construction, Land Development, and Other Land			Commercial and Industrial			Installment and Other			Lease Financing Receivables			Total
Balance at December 31, 2021	$	16,918		$	1,628		$	522		$	33,129		$	9		$	2,806		$	55,012
Provision/(recapture) for acquired impaired loans		(458	)		(164	)		95			(364	)		—			—			(891	)
Provision/(recapture) for acquired non-impaired loans and leases		(2,298	)		23			—			(1,696	)		—			(197	)		(4,168	)
Provision for originated loans		7,221			1,197			1,728			8,410			4			1,578			20,138
Total provision	$	4,465		$	1,056		$	1,823		$	6,350		$	4		$	1,381		$	15,079
Charge-offs for acquired impaired loans		(34	)		—			—			(2	)		—			—			(36	)
Charge-offs for acquired non-impaired loans and leases		—			—			—			—			—			(28	)		(28	)
Charge-offs for originated loans and leases		(1,805	)		(17	)		—			(4,299	)		(3	)		(1,075	)		(7,199	)
Total charge-offs	$	(1,839	)	$	(17	)	$	—		$	(4,301	)	$	(3	)	$	(1,103	)	$	(7,263	)
Recoveries for acquired impaired loans		7			8			—			81			—			—			96
Recoveries for acquired non-impaired loans and leases		—			—			—			—			—			201			201
Recoveries for originated loans and leases		499			6			—			493			—			532			1,530
Total recoveries	$	506		$	14		$	—		$	574		$	—		$	733		$	1,827
Less: Net charge-offs		1,333			3			—			3,727			3			370			5,436
Acquired impaired loans		1,325			850			98			79			2			—			2,354
Acquired non-impaired loans and leases		1,052			48			—			1,127			1			24			2,252
Originated loans and leases		17,673			1,783			2,247			34,546			7			3,793			60,049
Balance at September 30, 2022	$	20,050		$	2,681		$	2,345		$	35,752		$	10		$	3,817		$	64,655
Ending ALLL balance
Acquired impaired loans	$	1,325		$	850		$	98		$	79		$	2		$	—		$	2,354
Acquired non-impaired loans and leases and originated loans individually evaluated for impairment		6,094			—			—			12,584			—			—			18,678
Acquired non-impaired loans and leases and originated loans and leases collectively evaluated for impairment		12,631			1,831			2,247			23,089			8			3,817			43,623
Balance at September 30, 2022	$	20,050		$	2,681		$	2,345		$	35,752		$	10		$	3,817		$	64,655
Loans and leases ending balance
Acquired impaired loans	$	56,974		$	37,246		$	1,144		$	3,029		$	153		$	—		$	98,546
Acquired non-impaired loans and leases and originated loans individually evaluated for impairment		44,977			4,782			5,541			35,979			—			—			91,279
Acquired non-impaired loans and leases and originated loans and leases collectively evaluated for impairment		1,767,043			439,816			450,922			1,930,822			1,215			495,828			5,085,646
Total loans and leases at September 30, 2022, gross	$	1,868,994		$	481,844		$	457,607		$	1,969,830		$	1,368		$	495,828		$	5,275,471
Ratio of net charge-offs to average loans and leases outstanding during the period (annualized)
Acquired impaired loans		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%
Acquired non-impaired loans and leases		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%
Originated loans and leases		0.04	%		0.00	%		0.00	%		0.10	%		0.00	%		0.01	%		0.15	%
Loans and leases ending balance as a percentage of total loans and leases, gross
Acquired impaired loans		1.08	%		0.71	%		0.02	%		0.06	%		0.00	%		0.00	%		1.87	%
Acquired non-impaired loans and leases and originated loans individually evaluated for impairment		0.85	%		0.09	%		0.11	%		0.68	%		0.00	%		0.00	%		1.73	%
Acquired non-impaired loans and leases and originated loans and leases collectively evaluated for impairment		33.50	%		8.33	%		8.55	%		36.60	%		0.02	%		9.40	%		96.40	%


	Commercial Real Estate			Residential Real Estate				Construction, Land Development, and Other Land			Commercial and Industrial			Paycheck Protection Program			Installment and Other			Lease Financing Receivables			Total
Balance at June 30, 2021	$	19,541		$	1,364			$	619		$	38,284		$	—		$	9		$	1,902		$	61,719
Provision/(recapture) for acquired impaired loans		414			18				—			(63	)		—			—			—			369
Provision/(recapture) for acquired non-impaired loans and leases		(932	)		(65	)	��		—			(564	)		—			(1	)		(38	)		(1,600	)
Provision/(recapture) for originated loans		1,626			(178	)			(61	)		(591	)		—			(1	)		788			1,583
Total provision/(recapture)	$	1,108		$	(225	)		$	(61	)	$	(1,218	)	$	—		$	(2	)	$	750		$	352
Charge-offs for acquired impaired loans		(4	)		—				—			—			—			—			—			(4	)
Charge-offs for acquired non-impaired loans and leases		(50	)		—				—			(98	)		—			—			(10	)		(158	)
Charge-offs for originated loans and leases		(510	)		(65	)			—			(1,358	)		—			—			(389	)		(2,322	)
Total charge-offs	$	(564	)	$	(65	)		$	—		$	(1,456	)	$	—		$	—		$	(399	)	$	(2,484	)
Recoveries for acquired impaired loans		37			1				—			1			—			—			—			39
Recoveries for acquired non-impaired loans and leases		25			1				—			234			—			—			44			304
Recoveries for originated loans and leases		225			—				—			145			—			—			298			668
Total recoveries	$	287		$	2			$	—		$	380		$	—		$	—		$	342		$	1,011
Less: Net charge-offs (recoveries)		277			63				—			1,076			—			—			57			1,473
Acquired impaired loans		2,638			353				8			1,276			—			—			—			4,275
Acquired non-impaired loans and leases		3,333			27				—			2,772			—			1			58			6,191
Originated loans and leases		14,401			696				550			31,942			—			6			2,537			50,132
Balance at September 30, 2021	$	20,372		$	1,076			$	558		$	35,990		$	—		$	7		$	2,595		$	60,598
Ending ALLL balance
Acquired impaired loans	$	2,638		$	353			$	8		$	1,276		$	—		$	—		$	—		$	4,275
Acquired non-impaired loans and leases and originated loans individually evaluated for impairment		8,420			—				—			16,142			—			—			—			24,562
Acquired non-impaired loans and leases and originated loans and leases collectively evaluated for impairment		9,314			723				550			18,572			—			7			2,595			31,761
Balance at June 30, 2021	$	20,372		$	1,076			$	558		$	35,990		$	—		$	7		$	2,595		$	60,598
Loans and leases ending balance
Acquired impaired loans	$	84,821		$	61,893			$	1,746		$	6,651		$	—		$	169		$	—		$	155,280
Acquired non-impaired loans and leases and originated loans individually evaluated for impairment		45,563			3,946				—			37,689			—			—			—			87,198
Acquired non-impaired loans and leases and originated loans and leases collectively evaluated for impairment		1,487,994			441,915				336,666			1,492,065			268,081			1,273			338,756			4,366,750
Total loans and leases at September 30, 2021, gross	$	1,618,378		$	507,754			$	338,412		$	1,536,405		$	268,081		$	1,442		$	338,756		$	4,609,228
Ratio of net charge-offs to average loans and leases outstanding during the period (annualized)
Acquired impaired loans		0.00	%		0.00	%			0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%
Acquired non-impaired loans and leases		0.00	%		0.00	%			0.00	%		(0.01	)%		0.00	%		0.00	%		0.00	%		(0.01	)%
Originated loans and leases		0.02	%		0.01	%			0.00	%		0.11	%		0.00	%		0.00	%		0.01	%		0.14	%
Loans and leases ending balance as a percentage of total loans and leases, gross
Acquired impaired loans		1.84	%		1.34	%			0.04	%		0.14	%		0.00	%		0.00	%		0.00	%		3.36	%
Acquired non-impaired loans and leases and originated loans individually evaluated for impairment		0.99	%		0.09	%			0.00	%		0.82	%		0.00	%		0.00	%		0.00	%		1.90	%
Acquired non-impaired loans and leases and originated loans and leases collectively evaluated for impairment		32.28	%		9.59	%			7.30	%		32.37	%		5.82	%		0.03	%		7.35	%		94.74	%


	Commercial Real Estate			Residential Real Estate			Construction, Land Development, and Other Land			Commercial and Industrial			Paycheck Protection Program			Installment and Other			Lease Financing Receivables			Total
Balance at December 31, 2020	$	19,584		$	2,400		$	1,352		$	41,183		$	—		$	15		$	1,813		$	66,347
Provision/(recapture) for acquired impaired loans		(24	)		(127	)		(31	)		(398	)		—			—			—			(580	)
Provision/(recapture) for acquired non-impaired loans and leases		(69	)		(79	)		—			849			—			(2	)		(86	)		613
Provision/(recapture) for originated loans		2,984			(1,051	)		(437	)		(225	)		—			(6	)		1,452			2,717
Total provision/(recapture)	$	2,891		$	(1,257	)	$	(468	)	$	226		$	—		$	(8	)	$	1,366		$	2,750
Charge-offs for acquired impaired loans		(1,259	)		(11	)		(326	)		(88	)		—			—			—			(1,684	)
Charge-offs for acquired non-impaired loans and leases		(130	)		—			—			(1,846	)		—			—			(69	)		(2,045	)
Charge-offs for originated loans and leases		(1,255	)		(65	)		—			(4,238	)		—			—			(1,079	)		(6,637	)
Total charge-offs	$	(2,644	)	$	(76	)	$	(326	)	$	(6,172	)	$	—		$	—		$	(1,148	)	$	(10,366	)
Recoveries for acquired impaired loans		47			5			—			24			—			—			—			76
Recoveries for acquired non-impaired loans and leases		144			3			—			369			—			—			113			629
Recoveries for originated loans and leases		350			1			—			360			—			—			451			1,162
Total recoveries	$	541		$	9		$	—		$	753		$	—		$	—		$	564		$	1,867
Less: Net charge-offs		2,103			67			326			5,419			—			—			584			8,499
Acquired impaired loans		2,638			353			8			1,276			—			—			—			4,275
Acquired non-impaired loans and leases		3,333			27			—			2,772			—			1			58			6,191
Originated loans and leases		14,401			696			550			31,942			—			6			2,537			50,132
Balance at September 30, 2021	$	20,372		$	1,076		$	558		$	35,990		$	—		$	7		$	2,595		$	60,598
Ending ALLL balance
Acquired impaired loans	$	2,638		$	353		$	8		$	1,276		$	—		$	—		$	—		$	4,275
Acquired non-impaired loans and leases and originated loans individually evaluated for impairment		8,420			—			—			16,142			—			—			—			24,562
Acquired non-impaired loans and leases and originated loans and leases collectively evaluated for impairment		9,314			723			550			18,572			—			7			2,595			31,761
Balance at September 30, 2021	$	20,372		$	1,076		$	558		$	35,990		$	—		$	7		$	2,595		$	60,598
Loans and leases ending balance
Acquired impaired loans	$	84,821		$	61,893		$	1,746		$	6,651		$	—		$	169		$	—		$	155,280
Acquired non-impaired loans and leases and originated loans individually evaluated for impairment		45,563			3,946			—			37,689			—			—			—			87,198
Acquired non-impaired loans and leases and originated loans and leases collectively evaluated for impairment		1,487,994			441,915			336,666			1,492,065			268,081			1,273			338,756			4,366,750
Total loans and leases at September 30, 2021, gross	$	1,618,378		$	507,754		$	338,412		$	1,536,405		$	268,081		$	1,442		$	338,756		$	4,609,228
Ratio of net charge-offs to average loans and leases outstanding during the period (annualized)
Acquired impaired loans		0.04	%		0.00	%		0.01	%		0.00	%		0.00	%		0.00	%		0.00	%		0.05	%
Acquired non-impaired loans and leases		0.00	%		0.00	%		0.00	%		0.04	%		0.00	%		0.00	%		0.00	%		0.04	%
Originated loans and leases		0.02	%		0.00	%		0.00	%		0.12	%		0.00	%		0.00	%		0.02	%		0.16	%
Loans and leases ending balance as a percentage of total loans and leases, gross
Acquired impaired loans		1.84	%		1.34	%		0.04	%		0.14	%		0.00	%		0.00	%		0.00	%		3.36	%
Acquired non-impaired loans and leases and originated loans individually evaluated for impairment		0.99	%		0.09	%		0.00	%		0.82	%		0.00	%		0.00	%		0.00	%		1.90	%
Acquired non-impaired loans and leases and originated loans and leases collectively evaluated for impairment		32.28	%		9.59	%		7.30	%		32.37	%		5.82	%		0.03	%		7.35	%		94.74	%

Commercial
Real Estate

Residential
Real
Estate

Construction,
Land
Development,
and Other
Land

Commercial
and
Industrial

Paycheck
Protection
Program

Installment
and Other

Lease
Financing
Receivables

Total

Balance at December 31, 2020

$
19,584

$
2,400

$
1,352

$
41,183

$
—

$
15

$
1,813

$
66,347

Provision/(recapture) for acquired
  impaired loans

(24
)

(127
)

(31
)

(398
)

—

—

—

(580
)
Provision/(recapture) for acquired
  non-impaired loans and leases

(69
)

(79
)

—

849

—

(2
)

(86
)

613

Provision/(recapture) for
  originated loans

2,984

(1,051
)

(437
)

(225
)

—

(6
)

1,452

2,717

Total provision/(recapture)

$
2,891

$
(1,257
)

$
(468
)

$
226

$
—

$
(8
)

$
1,366

$
2,750

Charge-offs for acquired
  impaired loans

(1,259
)

(11
)

(326
)

(88
)

—

—

—

(1,684
)
Charge-offs for acquired
  non-impaired loans and leases

(130
)

—

—

(1,846
)

—

—

(69
)

(2,045
)
Charge-offs for originated loans
  and leases

(1,255
)

(65
)

—

(4,238
)

—

—

(1,079
)

(6,637
)
Total charge-offs

$
(2,644
)

$
(76
)

$
(326
)

$
(6,172
)

$
—

$
—

$
(1,148
)

$
(10,366
)
Recoveries for acquired
  impaired loans

47

5

—

24

—

—

-

76

Recoveries for acquired
  non-impaired loans and leases

144

3

—

369

—

—

113

629

Recoveries for originated
  loans and leases

350

1

—

360

—

—

451

1,162

Total recoveries

$
541

$
9

$
—

$
753

$
—

$
—

$
564

$
1,867

Less: Net charge-offs

2,103

67

326

5,419

—

—

584

8,499

Acquired impaired loans

2,638

353

8

1,276

—

—

—

4,275

Acquired non-impaired
  loans and leases

3,333

27

—

2,772

—

1

58

6,191

Originated loans and leases

14,401

696

550

31,942

—

6

2,537

50,132

Balance at September 30, 2021

$
20,372

$
1,076

$
558

$
35,990

$
—

$
7

$
2,595

$
60,598

Ending ALLL balance

Acquired impaired loans

$
2,638

$
353

$
8

$
1,276

$
—

$
—

$
—

$
4,275

Acquired non-impaired loans
  and leases and originated
  loans individually evaluated
  for impairment

8,420

—

—

16,142

—

—

—

24,562

Acquired non-impaired loans
  and leases and originated loans
  and leases collectively evaluated
  for impairment

9,314

723

550

18,572

—

7

2,595

31,761

Balance at September 30, 2021

$
20,372

$
1,076

$
558

$
35,990

$
—

$
7

$
2,595

$
60,598

Loans and leases ending balance

Acquired impaired loans

$
84,821

$
61,893

$
1,746

$
6,651

$
—

$
169

$
—

$
155,280

Acquired non-impaired loans
  and leases and originated loans
  individually evaluated for
  impairment

45,563

3,946

—

37,689

—

—

—

87,198

Acquired non-impaired loans
  and leases and originated loans
  and leases collectively evaluated
  for impairment

1,487,994

441,915

336,666

1,492,065

268,081

1,273

338,756

4,366,750

Total loans and leases at
   September 30, 2021, gross

$
1,618,378

$
507,754

$
338,412

$
1,536,405

$
268,081

$
1,442

$
338,756

$
4,609,228

Ratio of net charge-offs
  to average loans and leases
  outstanding during the
  period (annualized)

Acquired impaired loans

0.04
%

0.00
%

0.01
%

0.00
%

0.00
%

0.00
%

0.00
%

0.05
%
Acquired non-impaired loans
  and leases

0.00
%

0.00
%

0.00
%

0.04
%

0.00
%

0.00
%

0.00
%

0.04
%
Originated loans and leases

0.03
%

0.00
%

0.00
%

0.12
%

0.00
%

0.00
%

0.02
%

0.16
%
Loans and leases ending balance
  as a percentage of total loans
  and leases, gross

Acquired impaired loans

1.84
%

1.34
%

0.04
%

0.14
%

0.00
%

0.00
%

0.00
%

3.37
%
Acquired non-impaired loans
  and leases and originated loans
  individually evaluated for
  impairment

0.99
%

0.09
%

0.00
%

0.82
%

0.00
%

0.00
%

0.00
%

1.89
%
Acquired non-impaired loans
  and leases and originated loans
  and leases collectively evaluated
  for impairment

32.28
%

9.59
%

7.30
%

32.37
%

5.82
%

0.03
%

7.35
%

94.74
%

Commercial
Real Estate

Residential
Real
Estate

Construction,
Land
Development,
and Other
Land

Commercial
and
Industrial

Paycheck
Protection
Program

Installment
and Other

Lease
Financing
Receivables

Total

Balance at June 30, 2020

$
14,110

$
3,741

$
1,491

$
30,108

$
—

$
36

$
1,814

$
51,300

Provision/(recapture) for acquired
  impaired loans

947

(465
)

100

472

—

—

—

1,054

Provision/(recapture) for acquired
  non-impaired loans and leases

1,170

20

(43
)

(1,214
)

—

—

(51
)

(118
)
Provision for originated loans

4,304

736

972

8,345

—

1

446

14,804

Total provision

$
6,421

$
291

$
1,029

$
7,603

$
—

$
1

$
395

$
15,740

Charge-offs for acquired
  impaired loans

(314
)

—

—

(460
)

—

—

—

(774
)
Charge-offs for acquired
  non-impaired loans and leases

(32
)

—

—

(169
)

—

—

(82
)

(283
)
Charge-offs for originated loans
  and leases

(1,220
)

(250
)

(701
)

(2,625
)

—

—

(292
)

(5,088
)
Total charge-offs

$
(1,566
)

$
(250
)

$
(701
)

$
(3,254
)

$
—

$
—

$
(374
)

$
(6,145
)
Recoveries for acquired
  impaired loans

1

2

—

12

—

—

—

15

Recoveries for acquired
  non-impaired loans and leases

—

—

—

—

—

—

114

114

Recoveries for originated
  loans and leases

18

6

53

71

—

—

86

234

Total recoveries

$
19

$
8

$
53

$
83

$
—

$
—

$
200

$
363

Less: Net charge-offs

1,547

242

648

3,171

—

—

174

5,782

Acquired impaired loans

2,009

763

87

1,877

—

—

—

4,736

Acquired non-impaired
  loans and leases

2,411

106

43

3,902

—

3

165

6,630

Originated loans and leases

9,690

2,872

1,361

24,329

—

33

1,649

39,934

Balance at September 30, 2020

$
14,110

$
3,741

$
1,491

$
30,108

$
—

$
36

$
1,814

$
51,300

Ending ALLL balance

Acquired impaired loans

$
2,643

$
300

$
187

$
1,901

$
—

$
—

$
—

$
5,031

Acquired non-impaired loans
  and leases and originated
  loans individually evaluated
  for impairment

4,516

77

—

10,189

—

—

—

14,782

Acquired non-impaired loans
  and leases and originated loans
  and leases collectively evaluated
  for impairment

11,825

3,413

1,685

22,450

—

37

2,035

41,445

Balance at September 30, 2020

$
18,984

$
3,790

$
1,872

$
34,540

$
—

$
37

$
2,035

$
61,258

Loans and leases ending balance

Acquired impaired loans

$
117,114

$
84,197

$
4,804

$
10,489

$
—

$
214

$
—

$
216,818

Acquired non-impaired loans
  and leases and originated loans
  individually evaluated for
  impairment

39,001

1,636

—

37,253

—

—

—

77,890

Acquired non-impaired loans
  and leases and originated loans
  and leases collectively evaluated
  for impairment

1,191,740

547,563

234,230

1,281,067

622,191

2,929

200,089

4,079,809

Total loans and leases at
  September 30, 2020, gross

$
1,347,855

$
633,396

$
239,034

$
1,328,809

$
622,191

$
3,143

$
200,089

$
4,374,517

Ratio of net charge-offs
  to average loans and leases
  outstanding during the
  period (annualized)

Acquired impaired loans

0.03
%

0.00
%

0.00
%

0.04
%

0.00
%

0.00
%

0.00
%

0.07
%
Acquired non-impaired loans
  and leases

0.00
%

0.00
%

0.00
%

0.02
%

0.00
%

0.00
%

0.00
%

0.02
%
Originated loans and leases

0.11
%

0.02
%

0.06
%

0.23
%

0.00
%

0.00
%

0.02
%

0.45
%
Loans and leases ending balance
  as a percentage of total loans
  and leases, gross

Acquired impaired loans

2.68
%

1.92
%

0.11
%

0.24
%

0.00
%

0.00
%

0.00
%

4.96
%
Acquired non-impaired loans
  and leases and originated loans
  individually evaluated for
  impairment

0.89
%

0.04
%

0.00
%

0.85
%

0.00
%

0.00
%

0.00
%

1.78
%
Acquired non-impaired loans
  and leases and originated loans
  and leases collectively evaluated
  for impairment

27.24
%

12.52
%

5.35
%

29.28
%

14.22
%

0.07
%

4.57
%

93.26
%

Commercial
Real Estate

Residential
Real
Estate

Construction,
Land
Development,
and Other
Land

Commercial
and
Industrial

Paycheck
Protection
Program

Installment
and Other

Lease
Financing
Receivables

Total

Balance at December 31, 2019

$
7,965

$
1,990

$
610

$
19,377

$
—

$
50

$
1,944

$
31,936

Provision/(recapture) for acquired
  impaired loans

2,013

(382
)

161

1,255

—

—

—

3,047

Provision/(recapture) for acquired
  non-impaired loans and leases

2,662

111

(16
)

563

—

1

(194
)

3,127

Provision/(recapture) for originated loans

9,474

2,302

1,765

25,026

—

(14
)

986

39,539

Total provision/(recapture)

$
14,149

$
2,031

$
1,910

$
26,844

$
—

$
(13
)

$
792

$
45,713

Charge-offs for acquired
  impaired loans

(328
)

—

—

(539
)

—

—

—

(867
)
Charge-offs for acquired
  non-impaired loans and leases

(1,059
)

—

—

(714
)

—

—

(145
)

(1,918
)
Charge-offs for originated loans
  and leases

(1,819
)

(259
)

(701
)

(10,804
)

—

—

(1,247
)

(14,830
)
Total charge-offs

$
(3,206
)

$
(259
)

$
(701
)

$
(12,057
)

$
—

$
—

$
(1,392
)

$
(17,615
)
Recoveries for acquired
  impaired loans

21

7

—

47

—

—

—

75

Recoveries for acquired
  non-impaired loans and leases

22

—

—

10

—

—

145

177

Recoveries for originated
  loans and leases

33

21

53

319

—

—

546

972

Total recoveries

$
76

$
28

$
53

$
376

$
—

$
—

$
691

$
1,224

Less: Net charge-offs

3,130

231

648

11,681

—

—

701

16,391

Acquired impaired loans

2,643

300

187

1,901

—

—

—

5,031

Acquired non-impaired
  loans and leases

3,549

126

—

2,519

—

3

146

6,343

Originated loans and leases

12,792

3,364

1,685

30,120

—

34

1,889

49,884

Balance at September 30, 2020

$
18,984

$
3,790

$
1,872

$
34,540

$
—

$
37

$
2,035

$
61,258

Ending ALLL balance

Acquired impaired loans

$
2,643

$
300

$
187

$
1,901

$
—

$
—

$
—

$
5,031

Acquired non-impaired loans
  and leases and originated
  loans individually evaluated
  for impairment

4,516

77

—

10,189

—

—

—

14,782

Acquired non-impaired loans
  and leases and originated loans
  and leases collectively evaluated
  for impairment

11,825

3,413

1,685

22,450

—

37

2,035

41,445

Balance at September 30, 2020

$
18,984

$
3,790

$
1,872

$
34,540

$
—

$
37

$
2,035

$
61,258

Loans and leases ending balance

Acquired impaired loans

$
117,114

$
84,197

$
4,804

$
10,489

$
—

$
214

$
—

$
216,818

Acquired non-impaired loans
  and leases and originated loans
  individually evaluated for
  impairment

39,001

1,636

—

37,253

—

—

—

77,890

Acquired non-impaired loans
  and leases and originated loans
  and leases collectively evaluated
  for impairment

1,191,740

547,563

234,230

1,281,067

622,191

2,929

200,089

4,079,809

Total loans and leases at
  September 30,2020, gross

$
1,347,855

$
633,396

$
239,034

$
1,328,809

$
622,191

$
3,143

$
200,089

$
4,374,517

Ratio of net charge-offs
  to average loans and leases
  outstanding during the
  period (annualized)

Acquired impaired loans

0.01
%

0.00
%

0.00
%

0.02
%

0.00
%

0.00
%

0.00
%

0.04
%
Acquired non-impaired loans
  and leases

0.03
%

0.00
%

0.00
%

0.02
%

0.00
%

0.00
%

0.00
%

0.09
%
Originated loans and leases

0.06
%

0.01
%

0.02
%

0.35
%

0.00
%

0.00
%

0.02
%

0.69
%
Loans and leases ending balance
  as a percentage of total loans
  and leases, gross

Acquired impaired loans

2.68
%

1.92
%

0.11
%

0.24
%

0.00
%

0.00
%

0.00
%

4.96
%
Acquired non-impaired loans
  and leases and originated loans
  individually evaluated for
  impairment

0.89
%

0.04
%

0.00
%

0.85
%

0.00
%

0.00
%

0.00
%

1.78
%
Acquired non-impaired loans
  and leases and originated loans
  and leases collectively evaluated
  for impairment

27.24
%

12.52
%

5.35
%

29.28
%

14.22
%

0.07
%

4.57
%

93.26
%

Non-Performing Assets

Non-performing loans and leases include loans and leases 90 days past due and still accruing and loans and leases accounted for on a non-accrual basis. Non-performing assets consist of non-performing loans and leases plus other real estate owned. Non-performing assets at September 30, ~~2021~~2022 and December 31, ~~2020~~2021 totaled ~~$37.5~~$39.6 million and ~~$47.5~~$25.2 million, ~~respectively, a decrease of $10.0 million, or 21.0%, due to~~with the ~~decrease in non-accrual loans and a decrease in other real estate owned of $3.3 million. Total non-accrual loans and leases decreased~~increase driven mainly by ~~$6.6 million, or 16.1%, between December 31, 2020 and September 30, 2021.~~two conventional non-performing relationship. The U.S. government guaranteed portion of non-performing loans totaled ~~$6.3~~$1.7 million at September 30, ~~2021~~2022 and ~~$3.6~~$3.3 million at December 31, ~~2020.~~2021.

Total OREO ~~decreased~~increased from ~~$6.3~~$2.1 million at December 31, ~~2020~~2021 to ~~$3.0~~$4.4 million at September 30, ~~2021.~~2022. The ~~$3.3 decrease~~$2.3 million increase in OREO resulted mostly from ~~sales and valuation adjustments.~~

~~Total accruing loans past due decreased from $14.6 million at December 31, 2020~~one property transferred to $8.2 million at September 30, 2021. This represents a decrease of $6.4 million, or 43.6%, and can be attributed to decreases in commercial and industrial loans. See Note 5 of our Unaudited Interim Condensed Consolidated Financial Statements, included in this report, for further information.OREO.

The following table sets forth the amounts of non-performing loans and leases, non-performing assets, and OREO at the dates indicated (dollars in thousands):


	September 30,			December 31,
	2022			2021
Non-performing assets:
Non-accrual loans and leases(1)(2)(3)	$	35,165		$	23,130
Past due loans and leases 90 days or more and still accruing interest		—			—
Total non-performing loans and leases		35,165			23,130
Other real estate owned		4,402			2,112
Total non-performing assets	$	39,567		$	25,242
Accruing troubled debt restructured loans	$	737		$	1,927
Total non-performing loans and leases as a percentage of total loans and leases		0.67	%		0.51	%
Total non-accrual loans and leases as a percentage of total loans and leases		0.67	%		0.51	%
Total non-performing assets as a percentage of total assets		0.54	%		0.38	%
Allowance for loan and lease losses as a percentage of non-performing loans and leases		183.86	%		237.84	%
Allowance for loan and lease losses as a percentage of non-accrual loans and leases		183.86	%		237.84	%

Non-performing assets guaranteed by U.S. government:
Non-accrual loans guaranteed	$	1,676		$	3,270
Past due loans 90 days or more and still accruing interest guaranteed		—			—
Total non-performing loans guaranteed	$	1,676		$	3,270
Accruing troubled debt restructured loans guaranteed	$	—		$	—
Total non-performing loans and leases not guaranteed as a percentage of total loans and leases		0.63	%		0.44	%
Total non-accrual loans and leases not guaranteed as a percentage of total loans and leases		0.63	%		0.44	%
Total non-performing assets not guaranteed as a percentage of total assets		0.52	%		0.33	%

September 30,

December 31,

2021

2020

Non-performing assets:

Non-accrual loans and leases(1)(2)(3)

$
34,465

$
41,103

Past due loans and leases 90 days or more and still accruing interest

—

—

Total non-performing loans and leases

34,465

41,103

Other real estate owned

3,033

6,350

Total non-performing assets

$
37,498

$
47,453

Accruing troubled debt restructured loans

2,366

2,495

Total non-performing loans and leases as a percentage of total loans and
   leases

0.75
%

0.95
%
Total non-performing assets as a percentage of total assets

0.56
%

0.74
%
Allowance for loan and lease losses as a percentage of non-performing
   loans and leases

175.82
%

161.42
%

Non-performing assets guaranteed by U.S. government:

Non-accrual loans guaranteed

$
6,326

$
3,645

Past due loans 90 days or more and still accruing interest guaranteed

—

—

Total non-performing loans guaranteed

$
6,326

$
3,645

Accruing troubled debt restructured loans guaranteed

—

—

Total non-performing loans and leases not guaranteed as a percentage of
   total loans and leases

0.61
%

0.86
%
Total non-performing assets not guaranteed as a percentage of total assets

0.46
%

0.69
%

(1)

Includes $1.8 million and ~~$5.6~~$1.5 million of non-accrual restructured loans at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

(2)

For the nine months ended September 30, ~~2021, $1.5~~2022, $1.4 million in interest income would have been recorded had non-accrual loans been current.

(3)

For the nine months ended September 30, ~~2021, $170,000~~2022, $48,000 in interest income would have been recorded had troubled debt restructurings included within non-accrual loans been current.

Acquired impaired loans (accounted for under ASC 310-30) that are delinquent and/or on non-accrual status continue to accrue income provided the respective pool in which those assets reside maintains a discount and recognizes accretion income. The aforementioned loans are characterized as performing loans based on contractual delinquency. If the pool no longer has a discount and accretion income can no longer be recognized, any loan within that pool on non-accrual status will be classified as non-accrual for presentation purposes.

Total non-accrual loans increased by $12.0 million between December 31, 2021 and September 30, 2022 primarily due to two commercial relationship.

Total accruing loans past due decreased from $34.1 million at December 31, 2021 to $5.6 million at September 30, 2022. This represents a decrease of $28.5 million, or 83.5%, and can be attributed to decreases in residential real estate. See Note 5 of our Unaudited Interim Condensed Consolidated Financial Statements, included in this report, for further information.

Deposits

Our loan and lease growth is funded primarily through core deposits. We gather deposits primarily through each of our 4537 branch locations in the Chicago metropolitan area and one branch in Brookfield, Wisconsin. Through our branch network, online, mobile and direct

banking channels, we offer a variety of deposit products including demand deposit accounts, interest-bearing products, savings accounts, and certificates of deposit. We offer competitive online, mobile, and direct banking channels. Small businesses are a significant source of low cost deposits as they value convenience, flexibility, and access to local decision makers that are responsive to their needs.

Total deposits at September 30, ~~2021~~2022 were ~~$5.2~~$5.6 billion, representing an increase of ~~$406.2~~$457.4 million, or ~~8.5%~~8.9%, compared to ~~$4.8~~$5.2 billion at December 31, ~~2020,~~2021, driven by an increase in ~~non-interest bearing deposits.~~money market demand accounts. Non-interest-bearing deposits were $2.1 billion, or ~~41.1%~~38.2% of total deposits, at September 30, ~~2021, an increase~~2022, a decrease of ~~$355.1~~$16.2 million, or ~~20.1%~~0.8%, compared to ~~$1.8~~$2.2 billion at December 31, ~~2020,~~2021, or ~~37.1%~~41.9% of total deposits. Core deposits were ~~91.6%~~93.4% and ~~89.9%~~91.9% of total deposits at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

The following table shows the average balance amounts and the average contractual rates paid on our deposits for the periods indicated (dollars in thousands):


	For the Three Months Ended September 30, 2022					For the Three Months Ended September 30, 2021
	Average Balance		Average Rate			Average Balance		Average Rate
Non-interest-bearing demand deposits	$	2,198,095		0.00	%	$	2,106,189		0.00	%
Interest checking		583,777		0.73	%		653,543		0.14	%
Money market accounts		1,391,923		0.96	%		1,031,009		0.11	%
Savings		673,966		0.15	%		625,037		0.05	%
Time deposits (below $100,000)		338,510		0.85	%		276,486		0.17	%
Time deposits ($100,000 and above)		348,614		0.64	%		433,319		0.26	%
Total	$	5,534,885		0.43	%	$	5,125,583		0.08	%

For the Three Months
Ended September 30, 2021

For the Three Months
Ended September 30, 2020

Average
Balance

Average
Rate

Average
Balance

Average
Rate

Non-interest-bearing demand deposits

$
2,106,189

0.00
%

$
1,742,787

0.00
%
Interest checking

653,543

0.14
%

565,917

0.16
%
Money market accounts

1,031,009

0.11
%

1,202,016

0.21
%
Savings

625,037

0.05
%

535,396

0.05
%
Time deposits (below $100,000)

276,486

0.17
%

363,956

0.62
%
Time deposits ($100,000 and above)

433,319

0.26
%

506,271

1.00
%
Total

$
5,125,583

0.08
%

$
4,916,343

0.22
%

For the Nine Months
Ended September 30, 2021

For the Nine Months
Ended September 30, 2020

Average
Balance

Average
Rate

Average
Balance

Average
Rate

Non-interest-bearing demand deposits

$
2,039,242

0.00
%

$
1,578,704

0.00
%
Interest checking

609,444

0.14
%

432,785

0.20
%
Money market accounts

1,068,770

0.12
%

1,126,588

0.45
%
Savings

603,366

0.05
%

509,001

0.05
%
Time deposits (below $100,000)

288,622

0.20
%

405,889

1.17
%
Time deposits ($100,000 and above)

446,086

0.37
%

580,530

1.53
%
Total

$
5,055,530

0.09
%

$
4,633,497

0.43
%


	For the Nine Months Ended September 30, 2022					For the Nine Months Ended September 30, 2021
	Average Balance		Average Rate			Average Balance		Average Rate
Non-interest-bearing demand deposits	$	2,237,002		0.00	%	$	2,039,242		0.00	%
Interest checking		592,985		0.38	%		609,444		0.14	%
Money market accounts		1,318,725		0.51	%		1,068,770		0.12	%
Savings		662,820		0.08	%		603,366		0.05	%
Time deposits (below $100,000)		286,879		0.45	%		288,622		0.20	%
Time deposits ($100,000 and above)		372,014		0.40	%		446,086		0.37	%
Total	$	5,470,425		0.22	%	$	5,055,530		0.09	%

Our average cost of deposits was ~~0.08%~~0.43% during the three months ended September 30, ~~2021~~2022, compared to ~~0.22% during the~~0.08% three months ended September 30, ~~2020.~~2021. Our average cost of deposits was 0.22% during the nine months ended September 30, 2022 compared to 0.09% during the nine months ended September 30, ~~2021~~2021. This increase were principally attributed to higher rates on interest-bearing deposits as a result of the rising interest rate environment. Our average non-interest bearing deposits to total average deposits ratios were 39.7% during the three months ended September 30, 2022, compared to ~~0.43%~~41.1% during the three months ended September 30, 2021. Our average non-interest bearing deposits to total average deposits ratios were 40.9% during the nine months ended September 30, 2020. These decreases were principally attributed to lower rates on interest-bearing deposits as a result the interest rate environment and an improved deposit mix. Our average non-interest bearing deposits to total deposits ratios were 41.1% during the third quarter of 20212022 compared to ~~35.4% during the third quarter of 2020. Our average non-interest bearing deposits to total deposits ratios were~~ 40.3% during the nine months ended September 30, ~~2021 compared to 34.1% during the nine months ended September 30, 2020.~~2021. We had ~~no brokered time deposits and $35.0~~$122.8 million ofin brokered time deposits at September 30, ~~2021~~2022 and none at December 31, ~~2020, respectively.~~2021. Our loan and lease to deposit ratio was ~~90.29%~~94.6% at September 30, ~~2021~~2022 compared to ~~91.51%~~89.3% at December 31, ~~2020.~~2021.

The following table shows time deposits and other time deposits of ~~$100,000~~$250,000 or more by time remaining until maturity as of September 30, 2022 (dollars in thousands):


	Less than $250,000		$250,000 or Greater		Total		Uninsured Portion
Three months or less	$	137,105	$	23,540	$	160,645	$	7,790
Over three months through six months		95,441		28,170		123,611		15,420
Over six months through 12 months		296,897		42,597		339,494		13,347
Over 12 months		56,755		18,080		74,835		7,580
Total	$	586,198	$	112,387	$	698,585	$	44,137

At September 30,
2021

Time Deposits

Three months or less

$
142,218

Over three months through six months

140,180

Over six months through 12 months

98,946

Over 12 months

50,398

Total

$
431,742

6967

Total estimated uninsured deposits, were $1.6 billion as of September 30, 2022 and December 31, 2021.

Borrowed Funds

InDuring 2020, the Company issued $75.0 million in ~~6.00%~~ fixed-to-floating subordinated notes that mature on July 1, 2030. The subordinated notes bear a fixed interest rate of 6.00% until July 1, 2025 and a floating interest rate equal to a benchmark rate, which is expected to be three-month Secured Overnight Financing Rate plus 588 basis points thereafter until ~~maturity (or earlier redemption).~~maturity. The transaction resulted in debt issuance costs of approximately $1.7 million that are currently amortized over 10 years.

In addition to deposits, we also utilize FHLB advances as a supplementary funding source to finance our operations. The ~~bank’s~~Bank’s advances from the FHLB are collateralized by commercial, residential and multi-family real estate loans and securities. At September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, we had ~~maximum~~an available borrowing capacity from the FHLB of $1.9 billion and ~~$2.0~~$1.8 billion, respectively, subject to the availability of ~~collateral, respectively.~~collateral. At September 30, ~~2021,~~2022, the Company had ~~$355.0~~$600.0 million of FHLB advances outstanding with a maturities ranging from November ~~2021~~2022 to ~~May~~December 2022.

On April 21, 2020, the Bank entered into a Letter Agreement with the Federal Reserve Bank of Chicago that allows the Bank to access the ~~PPPLF.~~Paycheck Protection Program Liquidity Facility (the “PPPLF”). Under the terms of the PPPLF, the Bank ~~will pledge~~pledges loans originated under the PPP to the Federal Reserve Bank of Chicago as collateral for available advances under the PPPLF. Advances under the PPPLF ~~will be~~are an amount equal to the aggregate principal amount of PPP loans pledged by Byline Bank, carry an interest rate of 35 basis points and mature on the maturity date of the PPP loans pledged as collateral for the advance. As of ~~September 30,~~December 31, 2021, the amounts outstanding during 2021 under the PPPLF ~~balance~~had been repaid and there was ~~$156.4 million with an interest rate of 0.35% with various maturity dates from April 2022 to February 2026.~~no amount outstanding under the facility.

The Company has the capacity to borrow funds from the discount window of the Federal Reserve System. There were no borrowings outstanding under the Federal Reserve Bank discount window line as of September 30, ~~2021~~2022 and December 31, ~~2020.~~2021. The Company pledges loans as collateral for any borrowings under the Federal Reserve Bank discount window.

The following table sets forth certain information regarding our short-term borrowings at the dates and for the periods indicated (dollars in thousands):


	Nine Months Ended September 30,
	2022			2021
Federal Reserve Bank discount window borrowing:
Average balance outstanding	$	—		$	—
Maximum outstanding at any month-end period during the year		—			—
Balance outstanding at end of period		—			—
Weighted average interest rate during period	N/A			N/A
Weighted average interest rate at end of period	N/A			N/A
Federal Home Loan Bank advances:
Average balance outstanding	$	424,324		$	216,088
Maximum outstanding at any month-end period during the year		735,000			356,000
Balance outstanding at end of period		600,000			355,000
Weighted average interest rate during period		1.43	%		0.21	%
Weighted average interest rate at end of period		3.07	%		0.22	%
Federal funds purchased:
Average balance outstanding	$	842		$	—
Maximum outstanding at any month-end period during the year		45,000			—
Balance outstanding at end of period		—			—
Weighted average interest rate during period		2.32	%	N/A
Weighted average interest rate at end of period		0.00	%	N/A
Paycheck Protection Program Liquidity Facility
Average balance outstanding	$	—		$	323,063
Maximum outstanding at any month-end period during the year		—			439,066
Balance outstanding at end of period		—			156,404
Weighted average interest rate during period	N/A				0.38	%
Weighted average interest rate at end of period	N/A				0.35	%
Line of credit:
Average balance outstanding	$	—		$	—
Maximum outstanding at any month-end period during the year		—			—
Balance outstanding at end of period		—			—
Weighted average interest rate during period	N/A			N/A
Weighted average interest rate at end of period	N/A			N/A

Nine Months Ended September 30,

2021

2020

Federal Reserve Bank discount window borrowing:

Average balance outstanding

$
—

$
65,839

Maximum outstanding at any month-end period during the year

—

350,000

Balance outstanding at end of period

—

—

Weighted average interest rate during period

N/A

0.25
%
Weighted average interest rate at end of period

N/A

N/A

Federal Home Loan Bank advances:

Average balance outstanding

$
216,088

$
244,518

Maximum outstanding at any month-end period during the year

356,000

499,000

Balance outstanding at end of period

355,000

215,000

Weighted average interest rate during period

0.21
%

1.16
%
Weighted average interest rate at end of period

0.22
%

0.23
%
Paycheck Protection Program Liquidity Facility

Average balance outstanding

$
323,063

$
167,227

Maximum outstanding at any month-end period during the year

439,066

449,889

Balance outstanding at end of period

156,404

449,610

Weighted average interest rate during period

0.38
%

0.37
%
Weighted average interest rate at end of period

0.35
%

0.35
%
Line of credit:

Average balance outstanding

$
—

$
55

Maximum outstanding at any month-end period during the year

—

1,550

Balance outstanding at end of period

—

—

Weighted average interest rate during period

0.00
%

51.11
%
Weighted average interest rate at end of period(1)

N/A

N/A

~~(1)~~

Our credit agreement with a third-party lender matures in October 2022. The line of credit bears interest at either the LIBOR Rate plus 195 basis points or the Prime Rate minus 75 basis points, not to be less than 2.00%, based on our election, which is required to be communicate to the lender at least three business days prior to the commencement of an interest period. If we fail to provide timely notification, the interest rate will be Prime Rate minus 75 basis points.

Customer Repurchase Agreements (Sweeps)

Securities sold under agreements to repurchase represent a demand deposit product offered to customers that sweep balances in excess of the FDIC insurance limit into overnight repurchase agreements. We pledge securities as collateral for the repurchase agreements.

Securities sold under agreements to repurchase ~~decreased~~increased by ~~$14.3~~$24.2 million, from ~~$42.0~~$29.7 million at December 31, ~~2020~~2021 to ~~$27.7~~$54.0 million at September 30, ~~2021.~~2022.

Liquidity

We manage liquidity based upon factors that include the amount of core deposits as a percentage of total deposits, the level of diversification of our funding sources, the amount of non-deposit funding used to fund assets, the availability of unused funding sources, off-balance sheet obligations, the availability of assets to be readily converted into cash without undue loss, the amount of cash and liquid securities we hold and the re-pricing characteristics and maturities of our assets when compared to the re-pricing characteristics of our liabilities, the ability to securitize and sell certain pools of assets and other factors.

Our liquidity needs are primarily met by cash and investment securities positions, growth in deposits, cash flow from amortizing loan portfolios, and borrowings from the FHLB. For additional information regarding our operating, investing, and financing cash flows, see Consolidated Statements of Cash Flows in our Unaudited Interim Condensed Consolidated Financial Statements included elsewhere in this report.

As of September 30, ~~2021,~~2022, Byline Bank had maximum borrowing capacity from the FHLB of ~~$1.9~~$2.5 billion and ~~$622.3~~$797.1 million from the Federal Reserve Bank (“FRB”). As of September 30, ~~2021,~~2022, Byline Bank had open FHLB advances of ~~$355.0~~$600.0 million and open letters of credit of ~~$20.6~~$13.4 million, leaving us with available aggregate borrowing capacity of ~~$232.8 million.~~$283.9 million based on collateral pledged. In addition, Byline Bank had uncommitted federal funds lines available of ~~$115.0~~$135.0 million at September 30, ~~2021.~~2022.

As of December 31, ~~2020,~~2021, Byline Bank had maximum borrowing capacity from the FHLB of ~~$2.0~~$2.3 billion and ~~$874.7~~$603.0 million from the FRB. As of December 31, ~~2020,~~2021, Byline Bank had open advances of ~~$234.0~~$490.0 million and open letters of credit of ~~$21.3~~$19.7 million, leaving us with available aggregate borrowing capacity of ~~$751.9~~$715.4 million based on collateral pledged. In addition, Byline Bank had an uncommitted federal funds line available of $115.0 million at December 31, ~~2020.~~2021.

On October 13, 2016, ~~the Company~~we entered into a $30.0 million revolving credit agreement with a correspondent bank. Through subsequent amendments, the revolving credit agreement was reduced to $15.0 million and the maturity was extended to October ~~7, 2022.~~6, 2023. The amended revolving line of credit bears interest at either the ~~London Interbank Offered Rate (“LIBOR”)~~SOFR plus 195 basis points or the Prime Rate minus 75 basis points, based on ~~the Company’s~~our election, which is required to be communicated at least three business days prior to the commencement of an interest period. If ~~the Company fails~~we fail to provide timely notification, the interest rate will be Prime Rate minus 75 basis points. At September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the line of credit had no outstanding balance.

There are regulatory limitations that affect the ability of Byline Bank to pay dividends to the Company. See Note 2021 of our Consolidated Financial Statements, included in our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 for additional information. Management believes that such limitations will not impact our ability to meet our ongoing short-term cash obligations.

We expect that our cash and liquidity resources will be generated by the operations of Byline Bank, which we expect to be sufficient to satisfy our liquidity and capital requirements for at least the next twelve months.

Capital Resources

Stockholders’ equity at September 30, ~~2021~~2022 was ~~$824.4~~$747.6 million compared to ~~$805.5~~$836.4 million at December 31, ~~2020, an increase~~2021, a decrease of ~~$19.0~~$88.8 million, or ~~2.4%~~10.6%. The ~~increase~~decrease was primarily driven by the increase in ~~net income generated~~accumulated other comprehensive loss during the nine months ended September 30, ~~2021, offset by a decrease in accumulated other comprehensive income~~2022, reflecting the unrealized losses in our available-for-sale securities ~~portfolio~~portfolio; the redemption of preferred stock; and the increase of treasury shares under the share repurchase program. These were offset by an increase in retained earnings.

The Company and Byline Bank are subject to various regulatory capital requirements administered by federal banking regulators. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by federal banking regulators that, if undertaken, could have a direct material effect on our financial statements.

Under applicable bank regulatory capital requirements, each of the Company and Byline Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. Byline Bank must also meet certain specific capital guidelines under the prompt corrective action framework. The capital amounts and classification are subject to qualitative judgments by the federal banking regulators about components, risk weightings and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Company and Byline Bank to maintain minimum amounts and ratios of CET1 ~~Capital,~~capital, Tier 1 capital and total capital to risk-weighted assets and of Tier 1 capital to average consolidated assets, (referred to as the “leverage ratio”), as defined under these capital requirements.

7169

As of September 30, ~~2021,~~2022, Byline Bank exceeded all applicable regulatory capital requirements and was considered “well-capitalized.” There have been no conditions or events since September 30, ~~2021~~2022 that management believes have changed Byline Bank’s classifications.

The regulatory capital ratios for the Company and Byline Bank to meet the minimum capital adequacy standards and for Byline Bank to be considered well capitalized under the prompt corrective action framework and the Company’s and Byline Bank’s actual capital amounts and ratios are set forth in the following tables as of the periods indicated (dollars in thousands):


	Actual					Minimum Capital Required					Required to be Considered Well Capitalized					Actual					Minimum Capital Required					Required to be Considered Well Capitalized
September 30, 2021	Amount		Ratio			Amount		Ratio			Amount		Ratio
September 30, 2022																Amount		Ratio			Amount		Ratio			Amount		Ratio
Total capital to risk weighted assets:
Company	$	821,646		14.78	%	$	444,596		8.00	%	N/A		N/A			$	873,588		13.02	%	$	536,609		8.00	%	N/A		N/A
Bank		747,862		13.50	%		443,176		8.00	%	$	553,971		10.00	%		825,499		12.35	%		534,820		8.00	%	$	668,525		10.00	%
Tier 1 capital to risk weighted assets:
Company	$	684,523		12.32	%	$	333,447		6.00	%	N/A		N/A			$	731,606		10.91	%	$	402,457		6.00	%	N/A		N/A
Bank		685,739		12.38	%		332,382		6.00	%	$	443,176		8.00	%		758,517		11.35	%		401,115		6.00	%	$	534,820		8.00	%
Common Equity Tier 1 (CET1) to risk weighted assets:
Company	$	629,085		11.32	%	$	250,085		4.50	%	N/A		N/A			$	686,606		10.24	%	$	301,842		4.50	%	N/A		N/A
Bank		685,739		12.38	%		249,287		4.50	%	$	360,081		6.50	%		758,517		11.35	%		300,836		4.50	%	$	434,541		6.50	%
Tier 1 capital to average assets:
Company	$	684,523		11.21	%	$	244,268		4.00	%	N/A		N/A			$	731,606		10.30	%	$	284,252		4.00	%	N/A		N/A
Bank		685,739		11.24	%		244,138		4.00	%	$	305,173		5.00	%		758,517		10.69	%		283,789		4.00	%	$	354,736		5.00	%


	Actual					Minimum Capital Required					Required to be Considered Well Capitalized					Actual					Minimum Capital Required					Required to be Considered Well Capitalized
December 31, 2020	Amount		Ratio			Amount		Ratio			Amount		Ratio
December 31, 2021																Amount		Ratio			Amount		Ratio			Amount		Ratio
Total capital to risk weighted assets:
Company	$	774,522		16.18	%	$	383,069		8.00	%	N/A		N/A			$	830,262		14.70	%	$	451,903		8.00	%	N/A		N/A
Bank		675,977		14.16	%		381,775		8.00	%	$	477,219		10.00	%		753,480		13.38	%		450,470		8.00	%	$	563,087		10.00	%
Tier 1 capital to risk weighted assets:
Company	$	639,564		13.36	%	$	287,302		6.00	%	N/A		N/A			$	698,846		12.37	%	$	338,927		6.00	%	N/A		N/A
Bank		616,219		12.91	%		286,331		6.00	%	$	381,775		8.00	%		697,064		12.38	%		337,852		6.00	%	$	450,470		8.00	%
Common Equity Tier 1 (CET1) to risk weighted assets:
Company	$	584,126		12.20	%	$	215,476		4.50	%	N/A		N/A			$	643,408		11.39	%	$	254,195		4.50	%	N/A		N/A
Bank		616,219		12.91	%		214,748		4.50	%	$	310,192		6.50	%		697,064		12.38	%		253,389		4.50	%	$	366,007		6.50	%
Tier 1 capital to average assets:
Company	$	639,564		11.12	%	$	230,056		4.00	%	N/A		N/A			$	698,846		10.89	%	$	256,657		4.00	%	N/A		N/A
Bank		616,219		10.72	%		229,870		4.00	%	$	287,337		5.00	%		697,064		10.87	%		256,478		4.00	%	$	320,597		5.00	%

The Company and Byline Bank must maintain a capital conservation buffer consisting of CET1 capital greater than 2.5% of risk-weighted assets above the required minimum risk-based capital levels in order to avoid limitations on paying dividends, repurchasing shares, and paying discretionary bonuses. The conservation buffers for the Company and Byline Bank exceed the minimum capital requirement as of September 30, ~~2021.~~2022.

Provisions of state and federal banking regulations may limit, by statute, the amount of dividends that may be paid to the Company by Byline Bank without prior approval of Byline Bank’s regulatory agencies. The Company is economically dependent on the cash dividends received from Byline Bank. These dividends represent the primary cash flow from operating activities used to service obligations. For the nine months ended September 30, ~~2021~~2022 the Company received ~~$16.0~~$18.0 million in cash dividends from Byline Bank. For the year ended December 31, ~~2020,~~2021, the Company received ~~$7.5~~$24.0 million in cash dividends from Byline Bank in order to pay the required interest on its outstanding junior subordinated debentures in connection with its trust preferred securities interest, ~~dividends on~~redemption of the Series B preferred stock outstanding, and to fund other Company-related activities.

~~Under~~On March 31, 2022, the ~~Company’s board approved~~Company redeemed all 10,438 outstanding shares of its 7.5% fixed-to-floating noncumulative perpetual preferred stock, Series B. The redemption totaled $10.6 million, including the quarterly dividend payment.

We purchased 174,249 shares at a cost of $4.2 million under our stock repurchase program ~~the Company repurchased an aggregate of 460,220 shares at an average price per share of $22.62 for~~during the three months ended September 30, ~~2021 and 1,331,708~~2022. We purchased 689,068 shares at ~~an average price per share~~a cost of ~~$21.68 for~~$17.3 million under our stock repurchase program during the nine months ended September 30, 2022. We purchased 460,200 shares at a cost of $10.4 million under this program during the three months ended

September 30, 2021. ~~The Company is authorized to purchase up to an aggregate~~We purchased 1,331,708 shares at a cost of ~~2.5~~$28.9 million ~~shares of~~under our stock repurchase program during the ~~Company’s outstanding common stock.~~nine months ended September 30, 2021. The program is in effect until December 31, 2022, unless terminated earlier.

On October ~~28, 2021,~~25, 2022, the ~~Company announced that its~~Company's Board of Directors declared a cash dividend ~~on its common stock~~ of $0.09 per ~~share. The dividend will paid~~share, payable on November ~~23, 2021~~22, 2022, to stockholders of record onof the Company's common stock as of November ~~9, 2021.~~

~~Contractual Obligations~~

FHLB and PPPLF advances are fully described in Note 12 of our Unaudited Interim Condensed Consolidated Financial Statements, included elsewhere in this report. Operating lease obligations are in place for facilities and land on which banking facilities are located. See Note 8, ~~of our Unaudited Interim Condensed Consolidated Financial Statements, included elsewhere in this report for additional information.~~2022.

Off-Balance Sheet Items and Other Financing Arrangements

We are a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers. These financial instruments include commitments to extend credit, commercial letters of credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Condensed Consolidated Statements of Financial Condition. The contractual or notional amounts of those instruments reflect the extent of involvement we have in particular classes of financial instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. We evaluate each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by Byline Bank upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral is primarily obtained in the form of commercial and residential real estate (including income producing commercial properties).

Letters of credit are conditional commitments issued by Byline Bank to guarantee the performance of a customer to a third-party. Those guarantees are primarily issued to support public and private borrowing arrangements, bond financing and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

Commitments to make loans are generally made for periods of 90 days or less. The fixed rate loan commitments have interest rates ranging from ~~1.25%~~1.00% to 18.00% and maturities up to ~~2050.~~2048. Variable rate loan commitments have interest rates ranging from ~~1.25%~~1.75% to ~~8.25%~~10.25% and maturities up to ~~2044.~~2048.

Our exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments. We use the same credit policies in making commitments and conditional obligations as for funded instruments. We do not anticipate any material losses as a result of the commitments and standby letters of credit.

We enter into interest rate swaps that are used to manage differences in the amount, timing, and duration of our known or expected cash receipts and its known or expected cash payments principally related to certain money market accounts and variable rate borrowings. We also enter into interest rate swaps with certain qualified borrowers to facilitate the borrowers’ risk management strategies and concurrently entered into mirror-image derivatives with a third party counterparty.

We recognize derivative financial instruments at fair value regardless of the purpose or intent for holding the instrument. We record derivative assets and derivative liabilities on the Condensed Consolidated Statements of Financial Condition within other assets and other liabilities, respectively. Because the derivative assets and liabilities recorded on the balance sheet at September 30, ~~2021~~2022 do not represent the amounts that may ultimately be paid under these contracts, these assets and liabilities are listed in the table below (dollars in thousands):


	September 30, 2022
			Fair Value
	Notional		Asset		Liability
Interest rate swaps designated as cash flow hedges—pay fixed, receive floating	$	550,000	$	49,191	$	—
Other interest rate derivatives—pay fixed, receive floating		549,662		18,881		(18,505	)
Other credit derivatives		6,902		—		—

See Note 16 of our Unaudited Interim Condensed Consolidated Financial Statements as of September 30, 2022, included in this report, and Note 22 of our Consolidated Financial Statements, included in our Annual Report on Form 10-K for the year ended December 31, 2021 for additional information on derivatives.

September 30, 2021

Fair Value

Notional

Asset

Liability

Interest rate swaps designated as cash flow hedges—pay fixed, receive
floating

$
400,000

$
1,799

$
(192
)
Other interest rate swaps—pay fixed, receive floating

458,698

11,664

(12,148
)
Other credit derivatives

7,788

—

(8
)

7371

GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures

Some of the financial measures included in our “Selected Financial Data” are not measures of financial performance in accordance with GAAP. Our management uses the non‑GAAP financial measures set forth below in its analysis of our performance:

•

“Adjusted net income” and “adjusted diluted earnings per share” exclude certain significant items, which include incremental income tax benefit related to the reversal of the valuation allowance on our net deferred tax assets, incremental income tax benefit related to Illinois corporate income tax rate increases, incremental income tax expense or benefit related to federal corporate income tax reductions, impairment charges on assets held for sale, ~~merger-related expenses,~~ and ~~core system conversion expenses~~right-of-use asset ("ROU") adjusted for applicable income tax. Management believes the significant items are not indicative of or useful to measure the Company’s operating performance on an ongoing basis.

•

“Net interest income, fully taxable-equivalent” and “net interest margin, fully taxable-equivalent” are adjusted to reflect tax-exempt interest income on an equivalent before-tax basis using tax rates effective as of the end of the period. Management believes the metric provides useful comparable information to investors and that these measures may be useful for peer comparison.

•

“Total revenue” is the combination of net interest income and non-interest income. Management believes the metric is an important measure of the Company's operating performance on an ongoing basis.

•

“Adjusted non-interest expense” is non-interest expense excluding certain significant items, which include impairment charges on assets held for sale, merger-related expenses, and core system conversion expenses.

•

“Adjusted efficiency ratio” is adjusted non-interest expense less amortization of intangible assets divided by net interest income and non-interest income. Management believes the metric is an important measure of the Company’s operating performance on an ongoing basis.

•

“Adjusted non-interest expense to average assets” is adjusted non-interest expense divided by average assets. Management believes the metric is an important measure of the Company’s operating performance on an ongoing basis.

•

“Adjusted return on average stockholders’ equity” is adjusted net income divided by average stockholders’ equity. Management believes the metric is an important measure of the Company’s operating performance on an ongoing basis.

•

“Adjusted return on average assets” is adjusted net income divided by average assets. Management believes the metric is an important measure of the Company’s operating performance on an ongoing basis.

•

“Non-interest income to total revenues” is non-interest income divided by net interest income plus non-interest income. Management believes that it is standard practice in the industry to present non-interest income as a percentage of total revenue. Accordingly, management believes providing these measures may be useful for peer comparison.

•

“Pre‑tax pre‑provision net income” is pre‑tax income plus the provision for loan and lease losses. Management believes this metric is important due to the tax benefit resulting from the reversal of the net deferred tax asset valuation allowance, the decrease in the federal corporate income tax rate, and the increase in the Illinois state corporate income tax rate. The metric demonstrates income excluding the tax provision or benefit and the provision for loan and lease losses, and enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle.

•

“Adjusted pre-tax pre-provision net income” is pre-tax pre-provision net income excluding certain significant items, which include impairment charges on assets held for sale, ~~merger-related expenses,~~ and ~~core system conversion expenses.~~ROU asset. Management believes the metric is an important measure of the Company’s operating performance on an ongoing basis.

•

“Pre‑tax pre‑provision return on average assets” is pre-tax income plus the provision for loan and lease losses, divided by average assets. Management believes this metric is important due to the change in tax expense or benefit resulting from the recent decrease in the federal corporate income tax rate and the recent increase in the Illinois state income tax rate. The ratio demonstrates profitability excluding the tax provision or benefit and excludes the provision for loan and lease losses. “Adjusted pre-tax pre-provision return on average assets” excludes certain significant items, which include impairment charges on assets held for sale, ~~merger-related expenses,~~ and ~~core system conversion expenses.~~ROU asset.

•

“Tangible common equity” is defined as total stockholders’ equity reduced by preferred stock and goodwill and other intangible assets. Management does not consider servicing assets as an intangible asset for purposes of this calculation.

•

“Tangible assets” is defined as total assets reduced by goodwill and other intangible assets. Management does not consider servicing assets as an intangible asset for purposes of this calculation.

7472

•

“Tangible book value per common share” is calculated as tangible common equity, which is stockholders’ equity reduced by preferred stock and goodwill and other intangible assets, divided by total shares of common stock outstanding. Management believes this metric is important due to the relative changes in the book value per share exclusive of changes in intangible assets.

•

“Tangible common equity to tangible assets” is calculated as tangible common equity divided by tangible assets, which is total assets reduced by goodwill and other intangible assets. Management believes this metric is important to investors and analysts interested in relative changes in the ratio of total stockholders’ equity to total assets, each exclusive of changes in intangible assets.

•

“Tangible net income available to common stockholders” is net income available to common stockholders excluding after-tax intangible asset amortization.

•

“Adjusted tangible net income available to common stockholders” is tangible net income available to common stockholders excluding certain significant items. Management believes the metric is an important measure of the Company’s operating performance on an ongoing basis.

•

“Return on average tangible common stockholders’ equity” is tangible net income available to common stockholders divided by average tangible common stockholders’ equity. Management believes the metric is an important measure of the Company’s operating performance on an ongoing basis.

•

“Adjusted return on average tangible common stockholders’ equity” is adjusted tangible net income available to common stockholders divided by average tangible common stockholders’ equity. Management believes the metric is an important measure of the Company’s operating performance on an ongoing basis.

We believe that these non‑GAAP financial measures provide useful information to its management and investors that is supplementary to our financial condition, results of operations and cash flows computed in accordance with GAAP; however, we acknowledge that our non‑GAAP financial measures have a number of limitations. As such, you should not view these disclosures as a substitute for results determined in accordance with GAAP financial measures that we and other companies use. Management also uses these measures for peer comparison.

Reconciliations of Non-GAAP Financial Measures


	As of or For the Three Months Ended September 30,						As of or For the Nine Months Ended September 30,						As of or For the Three Months Ended September 30,					As of or For the Nine Months Ended September 30,
(dollars in thousands, except per share data)	2021			2020			2021			2020			2022		2021			2022		2021
Net income and earnings per share excluding significant items
Reported Net Income	$	25,306		$	13,071		$	75,596		$	25,176		$	22,656	$	25,306		$	65,250	$	75,596
Significant items:
Impairment charges on assets held for sale		1,435			32			3,981			747			—		1,434			—		3,981
Tax benefit		(391	)		(9	)		(1,085	)		(208	)		—		(390	)		—		(1,085	)
Adjusted Net Income	$	26,350		$	13,094		$	78,492		$	25,715		$	22,656	$	26,350		$	65,250	$	78,492
Reported Diluted Earnings per Share	$	0.66		$	0.34		$	1.95		$	0.64		$	0.61	$	0.66		$	1.73	$	1.95
Significant items:
Impairment charges on assets held for sale		0.04			—			0.10			0.02			—		0.04			—		0.10
Tax benefit		(0.01	)		—			(0.03	)		(0.01	)		—		(0.01	)		—		(0.03	)
Adjusted Diluted Earnings per Share	$	0.69		$	0.34		$	2.02		$	0.65		$	0.61	$	0.69		$	1.73	$	2.02


	As of or For the Three Months Ended September 30,					As of or For the Nine Months Ended September 30,
(dollars in thousands, except per share data)	2022		2021			2022		2021
Adjusted non-interest expense:
Non-interest expense	$	46,178	$	44,180		$	134,506	$	126,003
Less significant items:
Impairment charges on assets held for sale		—		1,434			—		3,981
Adjusted non-interest expense	$	46,178	$	42,746		$	134,506	$	122,022
Adjusted non-interest expense excluding amortization of intangible assets
Adjusted non-interest expense	$	46,178	$	42,746		$	134,506	$	122,022
Less: Amortization of intangible assets		1,611		1,738			5,075		5,335
Adjusted non-interest expense excluding amortization of intangible assets	$	44,567	$	41,008		$	129,431	$	116,687
Pre-tax pre-provision net income:
Pre-tax income	$	30,513	$	33,808		$	85,232	$	101,145
Add: Provision (recapture) for loan and lease losses		4,176		352			15,079		2,750
Pre-tax pre-provision net income	$	34,689	$	34,160		$	100,311	$	103,895
Adjusted pre-tax pre-provision net income:
Pre-tax pre-provision net income	$	34,689	$	34,160		$	100,311	$	103,895
Impairment charges on assets held for sale		—		1,434			—		3,981
Adjusted pre-tax pre-provision net income	$	34,689	$	35,594		$	100,311	$	107,876
Tax Equivalent Net Interest Income
Net interest income	$	68,875	$	59,845		$	189,238	$	174,659
Add: Tax-equivalent adjustment		228		264			701		783
Net interest income, fully taxable equivalent	$	69,103	$	60,109		$	189,939	$	175,442
Total revenues:
Net interest income	$	68,875	$	59,845		$	189,238	$	174,659
Add: non-interest income		11,992		18,495			45,579		55,239
Total revenues	$	80,867	$	78,340		$	234,817	$	229,898
Tangible common stockholders' equity:
Total stockholders' equity	$	747,565	$	824,418		$	747,565	$	824,418
Less: Preferred stock		—		10,438			—		10,438
Less: Goodwill and other intangibles		160,484		167,296			160,484		167,296
Tangible common stockholders' equity	$	587,081	$	646,684		$	587,081	$	646,684
Tangible assets:
Total assets	$	7,277,587	$	6,704,451		$	7,277,587	$	6,704,451
Less: Goodwill and other intangibles		160,484		167,296			160,484		167,296
Tangible assets	$	7,117,103	$	6,537,155		$	7,117,103	$	6,537,155
Average tangible common stockholders' equity:
Average total stockholders' equity	$	775,358	$	823,754		$	795,849	$	813,629
Less: Average preferred stock		—		10,438			3,288		10,438
Less: Average goodwill and other intangibles		161,292		168,140			163,053		169,934
Average tangible common stockholders' equity	$	614,066	$	645,176		$	629,508	$	633,257
Average tangible assets:
Average total assets	$	7,145,189	$	6,560,868		$	6,943,909	$	6,622,943
Less: Average goodwill and other intangibles		161,292		168,140			163,053		169,934
Average tangible assets	$	6,983,897	$	6,392,728		$	6,780,856	$	6,453,009
Tangible net income available to common stockholders:
Net income available to common stockholders	$	22,656	$	25,110		$	65,054	$	75,009
Add: After-tax intangible asset amortization		1,174		1,265			3,698		3,881
Tangible net income available to common stockholders	$	23,830	$	26,375		$	68,752	$	78,890
Adjusted Tangible net income available to common stockholders:
Tangible net income available to common stockholders	$	23,830	$	26,375		$	68,752	$	78,890
Impairment charges on assets held for sale		—		1,434			—		3,981
Tax benefit on significant items		—		(390	)		—		(1,085	)
Adjusted tangible net income available to common stockholders	$	23,830	$	27,419		$	68,752	$	81,786


	As of or For the Three Months Ended September 30,						As of or For the Nine Months Ended September 30,
(dollars in thousands, except share and per share data)	2022			2021			2022			2021
Pre-tax pre-provision return on average assets:
Pre-tax pre-provision net income	$	34,689		$	34,160		$	100,311		$	103,895
Average total assets		7,145,189			6,560,868			6,943,909			6,622,943
Pre-tax pre-provision return on average assets		1.93	%		2.07	%		1.93	%		2.10	%
Adjusted pre-tax pre-provision return on average assets:
Adjusted pre-tax pre-provision net income	$	34,689		$	35,594		$	100,311		$	107,876
Average total assets		7,145,189			6,560,868			6,943,909			6,622,943
Adjusted pre-tax pre-provision return on average assets:		1.93	%		2.15	%		1.93	%		2.18	%
Net interest margin, fully taxable equivalent
Net interest income, fully taxable equivalent	$	69,103		$	60,109		$	189,939		$	175,442
Total average interest-earning assets		6,760,623			6,076,065			6,531,320			6,135,051
Net interest margin, fully taxable equivalent		4.05	%		3.92	%		3.88	%		3.82	%
Non-interest income to total revenues:
Non-interest income	$	11,992		$	18,495		$	45,579		$	55,239
Total revenues		80,867			78,340			234,817			229,898
Non-interest income to total revenues		14.83	%		23.61	%		19.41	%		24.03	%
Adjusted non-interest expense to average assets:
Adjusted non-interest expense	$	46,178		$	42,746		$	134,506		$	122,022
Average total assets		7,145,189			6,560,868			6,943,909			6,622,943
Adjusted non-interest expense to average assets		2.56	%		2.58	%		2.59	%		2.46	%
Adjusted efficiency ratio:
Adjusted non-interest expense excluding amortization of intangible assets	$	44,567		$	41,008		$	129,431		$	116,687
Total revenues		80,867			78,340			234,817			229,898
Adjusted efficiency ratio		55.11	%		52.35	%		55.12	%		50.76	%
Adjusted return on average assets:
Adjusted net income	$	22,656		$	26,350		$	65,250		$	78,492
Average total assets		7,145,189			6,560,868			6,943,909			6,622,943
Adjusted return on average assets		1.26	%		1.59	%		1.26	%		1.58	%
Adjusted return on average stockholders' equity:
Adjusted net income	$	22,656		$	26,350		$	65,250		$	78,492
Average stockholders' equity		775,358			823,754			795,849			813,629
Adjusted return on average stockholders' equity		11.59	%		12.69	%		10.96	%		12.90	%
Tangible common equity to tangible assets:
Tangible common equity	$	587,081		$	646,684		$	587,081		$	646,684
Tangible assets		7,117,103			6,537,155			7,117,103			6,537,155
Tangible common equity to tangible assets		8.25	%		9.89	%		8.25	%		9.89	%
Return on average tangible common stockholders' equity:
Tangible net income available to common stockholders	$	23,830		$	26,375		$	68,752		$	78,890
Average tangible common stockholders' equity		614,066			645,176			629,508			633,257
Return on average tangible common stockholders' equity		15.40	%		16.22	%		14.60	%		16.66	%
Adjusted return on average tangible common stockholders' equity:
Adjusted tangible net income available to common stockholders	$	23,830		$	27,419		$	68,752		$	81,786
Average tangible common stockholders' equity		614,066			645,176			629,508			633,257
Adjusted return on average tangible common stockholders' equity		15.40	%		16.86	%		14.60	%		17.27	%
Tangible book value per share:
Tangible common equity	$	587,081		$	646,684		$	587,081		$	646,684
Common shares outstanding		37,465,902			37,690,087			37,465,902			37,690,087
Tangible book value per share	$	15.67		$	17.16		$	15.67		$	17.16

As of or For the Three Months Ended
September 30,

As of or For the Nine Months Ended
September 30,

(dollars in thousands, except per share data)
2021

2020

2021

2020

Adjusted non-interest expense:

Non-interest expense
$
44,180

$
41,687

$
126,003

$
122,401

Less significant items:

Impairment charges on assets held for sale

1,435

32

3,981

747

Adjusted non-interest expense
$
42,745

$
41,655

$
122,022

$
121,654

Adjusted non-interest expense excluding
  amortization of intangible assets

Adjusted non-interest expense
$
42,745

$
41,655

$
122,022

$
121,654

Less: Amortization of intangible assets

1,738

1,947

5,335

5,732

Adjusted non-interest expense excluding
  amortization of intangible assets
$
41,007

$
39,708

$
116,687

$
115,922

Pre-tax pre-provision net income:

Pre-tax income
$
33,808

$
18,331

$
101,145

$
35,214

Add: Provision for loan and lease losses

352

15,740

2,750

45,713

Pre-tax pre-provision net income
$
34,160

$
34,071

$
103,895

$
80,927

Adjusted pre-tax pre-provision net income:

Pre-tax pre-provision net income
$
34,160

$
34,071

$
103,895

$
80,927

Impairment charges on assets held for sale

1,435

32

3,981

747

Adjusted pre-tax pre-provision net income
$
35,595

$
34,103

$
107,876

$
81,674

Tax Equivalent Net Interest Income

Net interest income
$
59,845

$
53,524

$
174,659

$
158,958

Add: Tax-equivalent adjustment

264

222

783

552

Net interest income, fully taxable equivalent
$
60,109

$
53,746

$
175,442

$
159,510

Total revenues:

Net interest income
$
59,845

$
53,524

$
174,659

$
158,958

Add: non-interest income

18,495

22,234

55,239

44,370

Total revenues
$
78,340

$
75,758

$
229,898

$
203,328

Tangible common stockholders' equity:

Total stockholders' equity
$
824,418

794,696

$
824,418

$
794,696

Less: Preferred stock

10,438

10,438

10,438

10,438

Less: Goodwill and other intangibles

167,296

174,523

167,296

174,523

Tangible common stockholders' equity
$
646,684

$
609,735

$
646,684

$
609,735

Tangible assets:

Total assets
$
6,704,451

$
6,496,513

$
6,704,451

$
6,496,513

Less: Goodwill and other intangibles

167,296

174,523

167,296

174,523

Tangible assets
$
6,537,155

$
6,321,990

$
6,537,155

$
6,321,990

Average tangible common stockholders' equity:

Average total stockholders' equity
$
823,754

$
791,111

$
813,629

$
777,522

Less: Average preferred stock

10,438

10,438

10,438

10,438

Less: Average goodwill and other intangibles

168,140

175,443

169,934

177,426

Average tangible common stockholders' equity
$
645,176

$
605,230

$
633,257

$
589,658

Average tangible assets:

Average total assets
$
6,560,868

$
6,401,290

$
6,622,943

$
6,052,682

Less: Average goodwill and other intangibles

168,140

175,443

169,934

177,426

Average tangible assets
$
6,392,728

$
6,225,847

$
6,453,009

$
5,875,256

Tangible net income available to common stockholders:

Net income available to common stockholders
$
25,110

$
12,875

$
75,009

$
24,589

Add: After-tax intangible asset amortization

1,265

1,405

3,881

4,136

Tangible net income available to common
  stockholders
$
26,375

$
14,280

$
78,890

$
28,725

Adjusted Tangible net income available to
  common stockholders:

Tangible net income available to common
  stockholders
$
26,375

$
14,280

$
78,890

$
28,725

Impairment charges on assets held for sale

1,435

32

3,981

747

Tax benefit on significant items

(391
)

(9
)

(1,085
)

(208
)
Adjusted tangible net income available to
  common stockholders
$
27,419

$
14,303

$
81,786

$
29,264

As of or For the Three Months Ended
September 30,

As of or For the Nine Months Ended
September 30,

(dollars in thousands, except share and per share data)
2021

2020

2021

2020

Pre-tax pre-provision return on average assets:

Pre-tax pre-provision net income
$
34,160

$
34,071

$
103,895

$
80,927

Average total assets

6,560,868

6,401,290

6,622,943

6,052,682

Pre-tax pre-provision return on
  average assets

2.07
%

2.12
%

2.10
%

1.79
%
Adjusted pre-tax pre-provision return on average assets:

Adjusted pre-tax pre-provision net income
$
35,595

$
34,103

$
107,876

$
81,674

Average total assets

6,560,868

6,401,290

6,622,943

6,052,682

Adjusted pre-tax pre-provision return on
  average assets:

2.15
%

2.12
%

2.18
%

1.80
%
Net interest margin, fully taxable equivalent

Net interest income, fully taxable equivalent
$
60,109

$
53,746

$
175,442

$
159,510

Total average interest-earning assets

6,076,065

5,916,554

6,135,051

5,573,945

Net interest margin, fully taxable equivalent

3.92
%

3.61
%

3.82
%

3.82
%
Non-interest income to total revenues:

Non-interest income
$
18,495

$
22,234

$
55,239

$
44,370

Total revenues

78,340

75,758

229,898

203,328

Non-interest income to total revenues

23.61
%

29.35
%

24.03
%

21.82
%
Adjusted non-interest expense to average assets:

Adjusted non-interest expense
$
42,745

$
41,655

$
122,022

$
121,654

Average total assets

6,560,868

6,401,290

6,622,943

6,052,682

Adjusted non-interest expense to average assets

2.58
%

2.59
%

2.46
%

2.68
%
Adjusted efficiency ratio:

Adjusted non-interest expense excluding
  amortization of intangible assets
$
41,007

$
39,708

$
116,687

$
115,922

Total revenues

78,340

75,758

229,898

203,328

Adjusted efficiency ratio

52.35
%

52.42
%

50.76
%

57.01
%
Adjusted return on average assets:

Adjusted net income
$
26,350

$
13,094

$
78,492

$
25,715

Average total assets

6,560,868

6,401,290

6,622,943

6,052,682

Adjusted return on average assets

1.59
%

0.81
%

1.58
%

0.57
%
Adjusted return on average stockholders' equity:

Adjusted net income
$
26,350

$
13,094

$
78,492

$
25,715

Average stockholders' equity

823,754

791,111

813,629

777,522

Adjusted return on average stockholders' equity

12.69
%

6.58
%

12.90
%

4.42
%
Tangible common equity to tangible assets:

Tangible common equity
$
646,684

$
609,735

$
646,684

$
609,735

Tangible assets

6,537,155

6,321,990

6,537,155

6,321,990

Tangible common equity to tangible assets

9.89
%

9.64
%

9.89
%

9.64
%
Return on average tangible common
  stockholders' equity:

Tangible net income available to
  common stockholders
$
26,375

$
14,280

$
78,890

$
28,725

Average tangible common stockholders' equity

645,176

605,230

633,257

589,658

Return on average tangible common
  stockholders' equity

16.22
%

9.39
%

16.66
%

6.51
%
Adjusted return on average tangible common
  stockholders' equity:

Adjusted tangible net income available to
  common stockholders
$
27,419

$
14,303

$
81,786

$
29,264

Average tangible common stockholders' equity

645,176

605,230

633,257

589,658

Adjusted return on average tangible common
  stockholders' equity

16.86
%

9.40
%

17.27
%

6.63
%
Tangible book value per share:

Tangible common equity
$
646,684

$
609,735

$
646,684

$
609,735

Common shares outstanding

37,690,087

38,568,916

37,690,087

38,568,916

Tangible book value per share
$
17.16

$
15.81

$
17.16

$
15.81

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Our primary market risk is interest rate risk, which is defined as the risk of loss of net interest income or net interest margin because of changes in interest rates.

We seek to measure and manage the potential impact of interest rate risk. Interest rate risk occurs when interest-earning assets and interest-bearing liabilities mature or re-price at different times, on a different basis or in unequal amounts. Interest rate risk also arises when our assets, liabilities and off-balance sheet contracts each respond differently to changes in interest rates, including as a result of explicit and implicit provisions in agreements related to such assets and liabilities and in off-balance sheet contracts that alter the applicable interest rate and cash flow characteristics as interest rates change. The two primary examples of such provisions that we are exposed to are the duration and rate sensitivity associated with indeterminate-maturity deposits (e.g., non-interest-bearing checking accounts, negotiable order of withdrawal accounts, savings accounts and money market deposits accounts) and the rate of prepayment associated with fixed-rate lending and mortgage-backed securities. Interest rates may also affect loan demand, credit losses, and other items affecting earnings.

We are also exposed to interest rate risk through the retained portion of the U.S. government guaranteed loans we make and the related servicing rights. Our U.S. government guaranteed loan portfolio is comprised primarily of SBA 7(a) loans, virtually all of which are quarterly or monthly adjustable with the prime rate. The SBA portfolio reacts differently in a rising rate environment than our other non-guaranteed portfolios. Generally, when interest rates rise, the prepayments in the SBA portfolio tend to increase.

Our management of interest rate risk is overseen by our ~~bank’s~~Board of Directors and management asset liability ~~committee~~committees based on a risk management infrastructure approved by our ~~board~~Board of ~~directors~~Directors that outlines reporting and measurement requirements. In particular, this infrastructure sets limits and management targets, calculated monthly, for various metrics, including our economic value sensitivity, our economic value of equity and net interest income simulations involving parallel shifts in interest rate curves, steepening and flattening yield curves, and various prepayment and deposit duration assumptions. Our risk management infrastructure also requires a periodic review of all key assumptions used, such as identifying appropriate interest rate scenarios, setting loan prepayment rates based on historical analysis, non-interest-bearing and interest-bearing demand deposit ~~durations~~lives based on historical analysis and the targeted investment term of capital. The committees closely monitor our interest sensitivity exposure, asset and liability allocation decisions, liquidity and capital positions, and local and national economic conditions and attempts to structure the loan and investment portfolios and funding sources to maximize earnings within acceptable risk tolerances.

We manage the interest rate risk associated with our interest-bearing liabilities by managing the interest rates and tenors associated with our borrowings from the FHLB, and ~~PPPLF sources and~~ deposits from our customers that we rely on for funding. ~~In particular, from time to time we use special offers on deposits to alter the interest rates and tenors associated with our interest-bearing liabilities.~~ We manage the interest rate risk associated with our interest-earning assets by managing the interest rates and tenors associated with our investment and loan portfolios, from time to time purchasing and selling investment securities.

We utilize interest rate derivatives to hedge our interest rate exposure on commercial loans when it meets our clients’ and Byline Bank’s needs. Typically, customer interest rate swaps are for terms of more than five years. As of September 30, ~~2021,~~2022, we had a notional amount of ~~$858.7 million~~$1.1 billion of interest rate swaps outstanding, which includes customer swaps and those on Byline Bank’s balance sheet. The overall effectiveness of our hedging strategies is subject to market conditions, the quality of our execution, the accuracy of our valuation assumptions, the associated counterparty credit risk and changes in interest rates.

We do not engage in speculative trading activities relating to interest rates, foreign exchange rates, commodity prices, equities or credit.

We are also subject to credit risk. Credit risk is the risk that borrowers or counterparties will be unable or unwilling to repay their obligations in accordance with the underlying contractual terms. We manage and control credit risk in the loan and lease portfolio by adhering to well-defined underwriting criteria and account administration standards established by management. Written credit policies document underwriting standards, approval levels, exposure limits and other limits or standards deemed necessary and prudent. Portfolio diversification at the obligor, industry, product and/or geographic location levels is actively managed to mitigate concentration risk. In addition, credit risk management also includes an independent credit review process that assesses compliance with commercial, real estate and other credit policies, risk ratings, and other critical credit information. In addition to implementing risk management practices that are based upon established and sound lending practices, we adhere to sound credit principles. We understand and evaluate our customers’ borrowing needs and capacity to repay, in conjunction with their character and history.

Evaluation of Interest Rate Risk

We use a net interest income simulation model to measure and evaluate potential changes in our net interest income. We run various hypothetical interest rate scenarios at least ~~monthly~~quarterly and compare these results against a scenario with no changes in interest rates. Our net interest income simulation model incorporates various assumptions, which we believe are reasonable but which may have a significant impact on results such as: (1) the timing of changes in interest rates, (2) shifts or rotations in the yield curve, (3) re-pricing characteristics for market-rate-sensitive instruments on and off balance sheet, (4) differing sensitivities of financial instruments due to differing underlying rate indices, (5) the effect of interest rate limitations onin our assets, such as floors and caps, (6) the effect of our interest rate swaps and (7) overall growth and repayment rates and product mix of assets and liabilities. Because of limitations inherent in any approach used to measure interest rate risk, simulation results are not intended as a forecast of the actual effect of a change in market interest rates on our results but rather as a means to better plan and execute appropriate asset-liability management strategies and manage our interest rate risk.

Potential changes to our net interest income in hypothetical rising and declining rate scenarios calculated as of September 30, ~~2021~~2022 is presented below (dollars in the following table. The projections assume (1) immediate, parallel shifts downward of the yield curve of 100 basis points and immediate, parallel shifts upward of the yield curve of 100, 200 and 300 basis points and (2) gradual shift downward of 100 basis points over 12 months and gradual shifts upward of 100 and 200 basis points over 12 months.thousands). In the current interest rate environment, a downward shift of the yield curve of 200, and 300 basis points does not provide ~~us with~~ meaningful results. In a downward parallel shift of the yield curve, interest rates at the short-end of the yield curve are not modeled to decline any further than 0%. For the dynamic balance sheet and rate shift scenarios, we assume interest rates follow a forward yield curve and then increase it by 1/12th of the total change in rates each month for ~~twelve~~12 months.


	Immediate Shifts
Twelve Months Ending	+300 basis points			+200 basis points			+100 basis points			-100 basis points			-200 basis points			-300 basis points
Year 1
Percentage change		20.9	%		14.4	%		7.2	%		(5.60	)%		(15.40	)%		(23.30	)%
Dollar amount	$	358,883		$	339,596		$	318,221		$	280,292		$	251,183		$	227,727
Year 2
Percentage change		28.7	%		19.4	%		9.6	%		(8.20	)%		(21.00	)%		(31.90	)%
Dollar amount	$	414,454		$	384,666		$	353,085		$	295,692		$	254,571		$	219,454

Immediate Shifts

Twelve Months Ending

+300 basis points

+200 basis points

+100 basis points

-100 basis points

As of September 30, 2022

Percentage change

23.7
%

15.1
%

5.7
%

-3.2
%
Dollar amount

$
250,614

$
233,319

$
214,164

$
196,190

As of September 30, 2023

Percentage change

34.7
%

22.8
%

9.7
%

-6.8
%
Dollar amount

$
276,160

$
251,626

$
224,746

$
191,116

For dynamic balance sheet and rate shifts, a gradual shift downward of 100 basis points would result in a ~~1.8%~~2.9% decrease in net interest income, and a gradual shift upwards of 100 and 200 basis points would result in ~~2.9%~~3.8% and 7.5% increases to net interest income, respectively, over the next 12 months.

The Bank's aggregate interest rate risk exposure is monitored and managed within board-approved policy limits. The results of this simulation analysis are hypothetical, and a variety of factors might cause actual results to differ substantially from what is ~~depicted. For example, if~~depicted including the timing, magnitude, and ~~magnitude~~frequency of interest rate changes ~~differ from those projected, our net interest income might vary significantly. Non-parallel yield curve shifts such~~ as ~~a flattening or steepening of the yield curve or~~well as changes in ~~interest rate spreads, would also cause our net interest income to be different from that depicted. An increasing interest rate environment could reduce projected net interest income if deposits~~market conditions and other short-term liabilities re-price faster than expected or faster than our assets re-price. Actual results could differ from those projected if we grow assets and liabilities faster or slower than estimated, if we experience substantially different repayment speeds in our loan portfolio than those assumed in the simulation model, if we experience a net outflow of deposit liabilities or if our mix of assets and liabilities otherwise changes.management strategies.

These simulation results do not contemplate all the actions that we may undertake in response to potential or actual changes in interest rates, such as changes to our loan, investment, deposit, funding or hedging strategies.

Item 4. Controls and Procedures.

The Company’s management, including our Chief Executive Officer and our Chief Financial Officer, have evaluated the effectiveness of our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)), as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of September 30, ~~2021,~~2022, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and is accumulated and communicated to the Company’s management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting during the quarter ended September 30, ~~2021,~~2022, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

The design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

7977

PART II-OTHER INFORMATION

Item 1. Legal Proceedings.

We operate in a highly regulated environment. From time to time we are a party to various litigation matters incidental to the conduct of our business. We are not presently party to any legal proceedings the resolution of which we believe would have a material adverse effect on our business, prospects, financial condition, liquidity, results of operation, cash flows or capital levels.

Item 1A. Risk Factors.

There have been no material changes to the risk factors previously disclosed in the “Risk Factors” section included in our Form 10-K for our fiscal year ended December 31, ~~2020~~2021 that was filed with the SEC on March ~~4, 2021.~~7, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

On December 10, 2020, we announced that our Board of Directors approved a stock repurchase program authorizing the purchase of up to an aggregate of 1,250,000 shares of our outstanding common stock. On July 27, 2021, ~~the Company's~~our Board of Directors authorized an expansion of its current stock repurchase program. Under the extended program, ~~the Company is~~we are authorized to repurchase an additional 1,250,000 shares of the Company's outstanding common stock. The shares may, at the discretion of management, be repurchased from time to time in open market purchases as market conditions warrant or in privately negotiated transactions. We are not obligated to purchase any shares under the program, and the program may be discontinued at any time. The actual timing, number and share price of shares purchased under the repurchase program will be determined by the Company at its discretion and will depend on a number of factors, including the market price of the Company’s stock, general market and economic conditions and applicable legal requirements. The program will be in effect until December 31, 2022 unless terminated earlier. The table below includes information regarding purchases of our common stock pursuant to the repurchase program during the quarter ended September 30, ~~2021.~~2022.

Issuer Purchases of Equity Securities

��

Maximum Number of

Total

Average

Total Number of Shares

Shares that

Number of

Price

Purchased as Part of a

May Yet Be

Shares

Paid per

Publicly Announced

Purchased Under the

Purchased(1)

Share

Plan or Program

Plan or Program

July 1 - July 31, 2021

378,512

$
22.56

378,512

1,250,000

August 1 - August 31, 2021

1,268

25.17

—

1,250,000

September 1 - September 30, 2021

81,948

22.92

81,708

1,168,292

Total

461,728

$
22.63

460,220


Issuer Purchases of Equity Securities
							Maximum Number of
	Total		Average		Total Number of Shares		Shares that
	Number of		Price		Purchased as Part of a		May Yet Be
	Shares		Paid per		Publicly Announced		Purchased Under the
	Purchased(1)		Share		Plan or Program		Plan or Program
July 1 - July 31, 2022		164,149	$	23.93		164,149		489,324
August 1 - August 31, 2022		22,397		22.89		10,100		479,224
September 1 - September 30, 2022		—		—		—		479,224
Total		186,546	$	23.81		174,249

(1)

Also includes ~~1,508~~12,297 shares acquired pursuant to the Company’s 2017 Omnibus Incentive Compensation Plan. Under the terms of the compensation plan, ~~the Company~~we can accept previously owned shares of common stock to be surrendered to satisfy the exercise price of stock options, the settlement of restricted stock awards and tax withholding obligations ~~associated with the~~upon vesting ~~of restricted stock.~~and/or exercise.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

8078

Item 6. Exhibits.


		EXHIBIT
Number		Description
3.1		Amended and Restated Certificate of Incorporation (filed as Exhibit 3.1 to the Company’s Registration Statement on Form S-1, as amended (File No. 333-218362) filed on June 19, 2017 and incorporated herein by reference)
3.2		Amended and Restated Bylaws (filed as Exhibit 3.2 to the Company’s Registration Statement on Form S-1, as amended (File No. 333-218362) filed on June 19, 2017 and incorporated herein by reference)
3.3		Certificate of Designations of 7.50% Fixed-to-Floating Noncumulative Perpetual Preferred Stock, Series B (filed as Exhibit 3.4 to the Company’s Registration Statement on Form S-1, as amended (File No. 333-218362) filed on June 19, 2017 and incorporated herein by reference)
3.5		Certificate of Elimination of 7.50% Fixed-to-Floating Noncumulative Perpetual Preferred Stock Series B (filed as Exhibit 3.5 to the Company's Quarterly Report on Form 10-Q (file No. 001-38139) filed on August 4, 2022 and incorporated herein by reference).
4.1		Certain instruments defining the rights of holders of long-term debt securities of the registrant and its subsidiaries are omitted pursuant to Item 601(b)(4)(iii) of Regulation S-K. The registrant hereby undertakes to furnish to the SEC, upon request, copies of any such instruments.
31.1		Certification of the Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, and Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of the Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, and Section 302 of the Sarbanes-Oxley Act of 2002
32.1(a)		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101		Financial information from the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, ~~2021,~~2022, formatted in Inline XBRL interactive data files pursuant to Rule 405 of Regulation S-T: (i) Condensed Consolidated Statements of Condition; (ii) Condensed Consolidated Statements of Operations; (iii) Condensed Consolidated Statements of Comprehensive Income (Loss); (iv) Condensed Consolidated Statements of Changes in Stockholders’ Equity; (v) Condensed Consolidated Statements of Cash Flows; and (vi) Notes to Condensed Consolidated Financial Statements
104		Cover Page Interactive Data File – the cover page XBRL tags are embedded with the Inline XBRL document.

(a)

This exhibit shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act.

8179

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	Byline Bancorp, Inc.
Date: November ~~5, 2021~~4, 2022	By:	/s/	Roberto R. Herencia
			Roberto R. Herencia
			Chief Executive Officer
			(Principal Executive Officer)

Date: November ~~5, 2021~~4, 2022	By:	/s/	~~Lindsay Corby~~Thomas J. Bell III
			~~Lindsay Corby~~Thomas J. Bell III
			Executive Vice President, ~~and~~ Chief Financial Officer and Treasurer
			(Principal Financial ~~and Accounting~~ Officer)

8280


	September 30, 2021							September 30, 2020
	Amount of Loss Recognized in OCI		Amount of Loss Reclassified from OCI to Income as an Increase to Interest Expense			Amount of Gain (Loss) Recognized in Other Non-Interest Income		Amount of Loss Recognized in OCI		Amount of Loss Reclassified from OCI to Income as an Increase to Interest Expense			Amount of Gain (Loss) Recognized in Other Non-Interest Income
Interest rate swaps	$	1,606	$	(71	)	$	—	$	—	$	(64	)	$	—


	PPP Loan Size
(dollars in thousands)	First Round			Second Round			Total
Principal outstanding	$	12,561		$	263,058		$	275,619
Unearned processing fee		(176	)		(9,503	)		(9,679	)
Deferred cost		47			2,094			2,141
PPP loans, net	$	12,432		$	255,649		$	268,081
Number of loans outstanding	$	128		$	1,624		$	1,752

Forgiven		95.9	%		22.3	%		70.7	%
In review or submission process		0.9	%		10.9	%		4.3	%
Not applied for forgiveness		3.2	%		66.8	%		25.0	%


	Estimated Projected Accretion(1)(2)
Last three months of 2021	$	553
2022		2,105
2023		1,410
2024		633
2025		383
Thereafter		819
Total	$	5,903


	Three Months Ended September 30,					Nine Months Ended September 30,						QTD 2021 Compared to 2020						YTD 2021 Compared to 2020
	2021			2020		2021			2020			$ Change			% Change			$ Change			% Change
Fees and service charges on deposits	$	1,867		$	1,603	$	5,299		$	4,731		$	264			16.4	%	$	568			12.0	%
Loan servicing revenue		3,344			2,936		9,301			8,674			408			13.9	%		627			7.2	%
Loan servicing asset revaluation		(2,650	)		1,122		(4,148	)		(2,653	)		(3,772	)	NM				(1,495	)		56.4	%
ATM and interchange fees		1,201			1,028		3,257			3,089			173			16.7	%		168			5.4	%
Net realized gains on securities available-for-sale		130			1,037		1,456			2,412			(907	)		(87.4	)%		(956	)		(39.6	)%
Change in fair value of equity securities, net		(275	)		154		36			301			(429	)	NM				(265	)		(88.0	)%
Net gains on sales of loans		12,761			12,671		33,350			23,900			90			0.7	%		9,450			39.5	%
Wealth management and trust income		815			693		2,305			1,970			122			17.7	%		335			17.0	%
Other non-interest income		1,302			990		4,383			1,946			312			31.7	%		2,437			125.3	%
Total non-interest income	$	18,495		$	22,234	$	55,239		$	44,370		$	(3,739	)		(16.8	)%	$	10,869			24.5	%


	Maturity as of September 30, 2021
	Due in One Year or Less					Due from One to Five Years					Due from Five to Ten Years					Due after Ten Years
	Amortized Cost		Weighted Average Yield(1)			Amortized Cost		Weighted Average Yield(1)			Amortized Cost		Weighted Average Yield(1)			Amortized Cost		Weighted Average Yield(1)
Available-for-sale
U.S. Treasury Notes	$	8,487		2.51	%	$	—		0.00	%	$	—		0.00	%	$	—		0.00	%
U.S. government agencies		1,991		2.80	%		—		0.00	%		103,215		1.16	%		19,038		1.32	%
Obligations of states, municipalities, and political subdivisions		10,720		2.37	%		19,518		2.47	%		19,716		2.88	%		51,545		2.34	%
Residential mortgage- backed securities
Agency		—		0.00	%		562		1.32	%		100,635		1.47	%		693,659		1.15	%
Non-agency		—		0.00	%		—		0.00	%		—		0.00	%		64,645		1.90	%
Commercial mortgage- backed securities
Agency		—		0.00	%		7,560		2.06	%		13,172		1.58	%		216,644		2.01	%
Corporate securities		2,003		3.53	%		6,958		2.18	%		55,881		4.04	%		—		0.00	%
Asset-backed securities		—		0.00	%		—		0.00	%		30,622		1.60	%		6,581		1.59	%
Total	$	23,201		2.56	%	$	34,598		2.30	%	$	323,241		1.92	%	$	1,052,112		1.44	%


	Maturity as of December 31, 2020
	Due in One Year or Less					Due from One to Five Years					Due from Five to Ten Years					Due after Ten Years
	Amortized Cost		Weighted Average Yield(1)			Amortized Cost		Weighted Average Yield(1)			Amortized Cost		Weighted Average Yield(1)			Amortized Cost		Weighted Average Yield(1)
Available-for-sale
U.S. Treasury Notes	$	14,998		2.52	%	$	8,470		2.51	%	$	—		0.00	%	$	—		0.00	%
U.S. government agencies		498		2.42	%		1,977		2.80	%		91,430		1.26	%		19,183		1.32	%
Obligations of states, municipalities, and political subdivisions		8,944		2.47	%		22,208		2.45	%		22,101		2.79	%		82,260		2.39	%
Residential mortgage- backed securities
Agency		—		0.00	%		975		1.35	%		85,519		1.37	%		678,457		1.40	%
Non-agency		—		0.00	%		—		0.00	%		—		0.00	%		32,654		2.72	%
Commercial mortgage- backed securities
Agency		—		0.00	%		7,504		3.35	%		13,198		1.56	%		223,794		2.02	%
Corporate securities		2,500		3.25	%		8,703		3.08	%		47,817		4.05	%		—		0.00	%
Asset-backed securities		—		0.00	%		—		0.00	%		10,753		2.28	%		34,502		1.42	%
Total	$	26,940		2.57	%	$	49,837		2.70	%	$	270,818		1.97	%	$	1,070,850		1.64	%


	Due in One Year or Less				Due after One Year Through Five Years				Due after Five Years
	Fixed Rate		Floating Rate		Fixed Rate		Floating Rate		Fixed Rate		Floating Rate		Total
Originated loans and leases
Commercial real estate	$	66,603	$	107,306	$	387,802	$	219,452	$	215,323	$	301,968	$	1,298,454
Residential real estate		13,146		15,590		69,192		68,563		131,097		89,990		387,578
Construction, land development, and other land		1,999		95,753		20,292		205,285		6,987		6,144		336,460
Commercial and industrial		26,753		261,748		142,937		619,128		118,416		311,094		1,480,076
Paycheck Protection Program		—		—		268,081		—		—		—		268,081
Installment and other		110		13		596		—		279		—		998
Leasing financing receivables		14,727		—		281,935		—		34,487		—		331,149
Total originated loans and leases	$	123,338	$	480,410	$	1,170,835	$	1,112,428	$	506,589	$	709,196	$	4,102,796
Acquired impaired loans
Commercial real estate	$	30,939	$	2,354	$	43,352	$	1,157	$	3,644	$	3,375	$	84,821
Residential real estate		20,871		1,491		23,343		104		12,775		3,309		61,893
Construction, land development, and other land		588		117		1,041		—		—		—		1,746
Commercial and industrial		2,159		105		2,828		85		1,077		397		6,651
Installment and other		—		—		43		—		126		—		169
Total acquired impaired loans	$	54,557	$	4,067	$	70,607	$	1,346	$	17,622	$	7,081	$	155,280
Acquired non-impaired loans and leases
Commercial real estate	$	26,659	$	20,361	$	88,725	$	10,154	$	32,768	$	56,436	$	235,103
Residential real estate		5,542		12,097		16,077		13,219		2,969		8,379		58,283
Construction, land development, and other land		206		—		—		—		—		—		206
Commercial and industrial		4,551		634		15,873		19,640		1,953		7,027		49,678
Installment and other		17		11		169		78		—		—		275
Leasing financing receivables		647		—		6,960		—		—		—		7,607
Total acquired non-impaired loans and leases	$	37,622	$	33,103	$	127,804	$	43,091	$	37,690	$	71,842	$	351,152
Total loans and leases	$	215,517	$	517,580	$	1,369,246	$	1,156,865	$	561,901	$	788,119	$	4,609,228


	At September 30, 2021
	Time Deposits
Three months or less	$	142,218
Over three months through six months		140,180
Over six months through 12 months		98,946
Over 12 months		50,398
Total	$	431,742