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~~June 30, ~~2022~~2023

☐ 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 ☐

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 ☒

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, ~~37,477,753~~43,692,755\shares outstanding as of ~~November 2, 2022~~August 1, 2023

BYLINE BANCORP, INC.

FORM 10-Q

~~September~~June 30, ~~2022~~2023

INDEX


		Page

PART I.	FINANCIAL INFORMATION	3
Item 1.	Financial Statements. The Unaudited Interim Condensed Consolidated Financial Statements of Byline Bancorp, Inc.	3
	Notes to Unaudited Interim Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4346
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	7680
Item 4.	Controls and Procedures	7781

PART II.	OTHER INFORMATION	7882
Item 1.	Legal Proceedings	7882
Item 1A.	Risk Factors	7882
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7882
Item 3.	Defaults Upon Senior Securities	7882
Item 4.	Mine Safety Disclosures	7882
Item 5.	Other Information	7882
Item 6.	Exhibits	7983

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, 2022			December 31, 2021			June 30, 2023			December 31, 2022
ASSETS
Cash and due from banks	$	56,546		$	35,247		$	59,564		$	62,274
Interest bearing deposits with other banks		159,744			122,684			260,621			117,079
Cash and cash equivalents		216,290			157,931			320,185			179,353
Equity and other securities, at fair value		7,279			10,578			18,473			7,989
Securities available-for-sale, at fair value		1,181,654			1,454,542
Securities held-to-maturity, at amortized cost (fair value at September 30, 2022—$3,825, December 31, 2021 —$3,992)		3,877			3,885
Securities available-for-sale, at fair value (amortized cost at June 30, 2023—$1,328,835, December 31, 2022—$1,378,343)								1,125,700			1,174,431
Securities held-to-maturity, at amortized cost (fair value at June 30, 2023—$2,132, December 31, 2022 —$2,672)								2,158			2,705
Restricted stock, at cost		27,077			22,002			24,377			28,202
Loans held for sale		33,975			64,460			25,995			47,823
Loans and leases:
Loans and leases		5,275,471			4,537,128			5,570,517			5,421,258
Allowance for loan and lease losses		(64,655	)		(55,012	)
Allowance for credit losses - loans and leases								(92,665	)		(81,924	)
Net loans and leases		5,210,816			4,482,116			5,477,852			5,339,334
Servicing assets, at fair value		21,127			23,744			21,715			19,172
Premises and equipment, net		59,049			62,548			56,304			56,798
Other real estate owned, net		4,402			2,112			2,265			4,717
Goodwill and other intangible assets, net		160,484			165,558			155,977			158,887
Bank-owned life insurance		81,592			80,039			83,222			82,093
Deferred tax assets, net		91,532			50,329			66,895			68,213
Accrued interest receivable and other assets		178,433			116,328			194,572			193,224
Total assets	$	7,277,587		$	6,696,172		$	7,575,690		$	7,362,941
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Non-interest-bearing demand deposits	$	2,142,183		$	2,158,420		$	1,793,749		$	2,138,645
Interest-bearing deposits		3,470,273			2,996,627			4,123,343			3,556,476
Total deposits		5,612,456			5,155,047			5,917,092			5,695,121
Other borrowings		653,954			519,723			574,922			640,399
Subordinated notes, net		73,648			73,517			73,778			73,691
Junior subordinated debentures issued to capital trusts, net		37,232			36,906			37,557			37,338
Accrued interest payable and other liabilities		152,732			74,597			158,399			150,576
Total liabilities		6,530,022			5,859,790			6,761,748			6,597,125
STOCKHOLDERS’ EQUITY
Preferred stock		—			10,438			—			—
Common stock		389			387			391			389
Additional paid-in capital		597,049			593,753			599,718			598,297
Retained earnings		326,560			271,676			379,078			335,794
Treasury stock, at cost		(51,535	)		(31,570	)		(50,383	)		(51,114	)
Accumulated other comprehensive loss, net of tax		(124,898	)		(8,302	)		(114,862	)		(117,550	)
Total stockholders’ equity		747,565			836,382			813,942			765,816
Total liabilities and stockholders’ equity	$	7,277,587		$	6,696,172		$	7,575,690		$	7,362,941


	September 30, 2022				December 31, 2021				June 30, 2023				December 31, 2022
	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		25,000,000		150,000,000		25,000,000		150,000,000
Shares issued		—		39,515,466		10,438		39,203,747		—		39,729,369		—		39,518,702
Shares outstanding		—		37,465,902		10,438		37,713,903		—		37,752,002		—		37,492,775
Treasury shares		—		2,049,564		—		1,489,844		—		1,977,367		—		2,025,927

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						Six Months Ended
	September 30,						September 30,						June 30,						June 30,
(dollars in thousands, except share and per share data)	2022			2021			2022			2021			2023			2022			2023			2022
INTEREST AND DIVIDEND INCOME
Interest and fees on loans and leases	$	72,824		$	56,291		$	187,924		$	164,423		$	99,134		$	59,674		$	191,477		$	115,100
Interest on securities		6,402			5,534			18,821			17,982			6,559			6,264			13,159			12,419
Other interest and dividend income		677			947			1,522			1,837			1,579			608			2,638			845
Total interest and dividend income		79,903			62,772			208,267			184,242			107,272			66,546			207,274			128,364
INTEREST EXPENSE
Deposits		5,971			986			9,186			3,465			24,723			2,128			41,021			3,215
Other borrowings		3,232			349			4,724			1,333			4,241			1,097			10,129			1,492
Subordinated notes and debentures		1,825			1,592			5,119			4,785			2,142			1,694			4,240			3,294
Total interest expense		11,028			2,927			19,029			9,583			31,106			4,919			55,390			8,001
Net interest income		68,875			59,845			189,238			174,659			76,166			61,627			151,884			120,363
PROVISION FOR LOAN AND LEASE LOSSES		4,176			352			15,079			2,750
Net interest income after provision for loan and lease losses		64,699			59,493			174,159			171,909
PROVISION FOR CREDIT LOSSES														5,790			5,908			15,615			10,903
Net interest income after provision for credit losses														70,376			55,719			136,269			109,460
NON-INTEREST INCOME
Fees and service charges on deposits		2,128			1,867			6,071			5,299			2,233			2,059			4,353			3,943
Loan servicing revenue		3,422			3,344			10,186			9,301			3,377			3,384			6,757			6,764
Loan servicing asset revaluation		(2,342	)		(2,650	)		(8,209	)		(4,148	)		(865	)		(4,636	)		(209	)		(5,867	)
ATM and interchange fees		1,007			1,201			3,187			3,257			1,112			1,131			2,175			2,180
Net realized gains (losses) on securities available-for-sale		(2	)		130			50			1,456
Net realized gains on securities available-for-sale														—			52			—			52
Change in fair value of equity securities, net		(581	)		(275	)		(1,313	)		36			193			(697	)		543			(732	)
Net gains on sales of loans		5,580			12,761			26,390			33,350			5,704			9,983			10,852			20,810
Wealth management and trust income		995			815			2,943			2,305			1,039			900			1,963			1,948
Other non-interest income		1,785			1,302			6,274			4,383			1,498			1,985			3,002			4,489
Total non-interest income		11,992			18,495			45,579			55,239			14,291			14,161			29,436			33,587
NON-INTEREST EXPENSE
Salaries and employee benefits		29,587			25,978			86,243			72,372			29,642			27,697			60,036			56,656
Occupancy and equipment expense, net		3,919			4,982			13,456			15,617			4,404			4,409			8,848			9,537
Impairment charge on assets held for sale		—			1,434			—			3,981			—			—			20			—
Loan and lease related expenses		530			1,175			581			3,629			488			942			1,451			51
Legal, audit and other professional fees		2,733			2,710			7,153			7,822			3,675			1,820			6,789			4,420
Data processing		3,370			3,108			9,952			8,710			4,272			3,396			8,055			6,582
Net loss recognized on other real estate owned and other related expenses		275			42			487			1,052			288			158			185			212
Other intangible assets amortization expense		1,611			1,738			5,075			5,335			1,455			1,868			2,910			3,464
Other non-interest expense		4,153			3,013			11,559			7,485			5,104			3,483			9,834			7,406
Total non-interest expense		46,178			44,180			134,506			126,003			49,328			43,773			98,128			88,328
INCOME BEFORE PROVISION FOR INCOME TAXES		30,513			33,808			85,232			101,145			35,339			26,107			67,577			54,719
PROVISION FOR INCOME TAXES		7,857			8,502			19,982			25,549			9,232			5,824			17,525			12,125
NET INCOME		22,656			25,306			65,250			75,596			26,107			20,283			50,052			42,594
Dividends on preferred shares		—			196			196			587			—			—			—			196
INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	22,656		$	25,110		$	65,054		$	75,009		$	26,107		$	20,283		$	50,052		$	42,398
EARNINGS PER COMMON SHARE
Basic	$	0.61		$	0.68		$	1.76		$	1.99		$	0.70		$	0.55		$	1.35		$	1.14
Diluted	$	0.61		$	0.66		$	1.73		$	1.95		$	0.70		$	0.54		$	1.34		$	1.12

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						Six Months Ended
	September 30,						September 30,						June 30,						June 30,
(dollars in thousands)	2022			2021			2022			2021			2023			2022			2023			2022
Net income	$	22,656		$	25,306		$	65,250		$	75,596		$	26,107		$	20,283		$	50,052		$	42,594
Securities available-for-sale
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	)
Unrealized holding gains (losses) arising during the period														(13,822	)		(54,828	)		777			(138,671	)
Reclassification adjustments for net gains included in net income														—			(52	)		—			(52	)
Tax effect		18,004			2,387			55,640			9,560			3,693			14,889			(207	)		37,636
Net of tax		(48,359	)		(6,182	)		(149,446	)		(24,772	)		(10,129	)		(39,991	)		570			(101,087	)
Cash flow hedges
Unrealized holding gains arising during the period		20,531			651			45,088			1,606			8,515			6,914			8,709			24,557
Reclassification adjustments for net (gains) losses included in net income		(327	)		29			(8	)		71			(3,863	)		109			(5,819	)		319
Tax effect		(5,481	)		(189	)		(12,230	)		(466	)		(1,243	)		(1,906	)		(772	)		(6,749	)
Net of tax		14,723			491			32,850			1,211			3,409			5,117			2,118			18,127
Total other comprehensive loss		(33,636	)		(5,691	)		(116,596	)		(23,561	)
Total other comprehensive income (loss)														(6,720	)		(34,874	)		2,688			(82,960	)
Comprehensive income (loss)	$	(10,980	)	$	19,615		$	(51,346	)	$	52,035		$	19,387		$	(14,591	)	$	52,740		$	(40,366	)

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, March 31, 2022																										—	$	—		37,811,582		$	388	$	595,006		$	290,397		$	(40,732	)	$	(56,388	)	$	788,671
Net income		—		—		—			—		—			21,798			—			—			21,798			—		—		—			—		—			20,283			—			—			20,283
Other comprehensive loss, net of tax		—		—		—			—		—			—			—			(26,394	)		(26,394	)		—		—		—			—		—			—			—			(34,874	)		(34,874	)
Issuance of common stock upon exercise of stock options		—		—		55,908			1		750			—			—			—			751
Issuance of common stock upon exercise of stock options, net																										—		—		86,001			—		(590	)		—			(939	)		—			(1,529	)
Restricted stock activity, net		—		—		274,739			—		—			—			(244	)		—			(244	)		—		—		(19,046	)		—		(31	)		—			(518	)		—			(549	)
Issuance of common stock in connection with employee stock purchase plan		—		—		25,894			—		515			—			—			—			515			—		—		22,565			—		—			—			537			—			537
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	)		—		—		—			—		—			(3,402	)		—			—			(3,402	)
Repurchase of common stock						(460,220	)		—		—			—			(10,411	)		—			(10,411	)		—		—		(232,000	)		—		—			—			(5,529	)		—			(5,529	)
Share-based compensation expense		—		—		—			—		1,080			—			—			—			1,080			—		—		—			—		1,553			—			—			—			1,553
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
Balance, June 30, 2022																										—	$	—		37,669,102		$	388	$	595,938		$	307,278		$	(47,181	)	$	(91,262	)	$	765,161


												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, 2022		10,438		$	10,438			37,713,903		$	387	$	593,753		$	271,676		$	(31,570	)	$	(8,302	)	$	836,382
Net income		—			—			—			—		—			42,594			—			—			42,594
Other comprehensive loss, net of tax		—			—			—			—		—			—			—			(82,960	)		(82,960	)
Issuance of common stock upon exercise of stock options, net		—			—			203,255			—		(599	)		—			(1,811	)		—			(2,410	)
Restricted stock activity, net		—			—			244,237			1		(32	)		—			(1,218	)		—			(1,249	)
Redemption of preferred stock		(10,438	)		(10,438	)		—			—		—			—			—			—			(10,438	)
Issuance of common stock in connection with employee stock purchase plan		—			—			22,526			—		(1	)		—			537			—			536
Cash dividends declared on preferred stock		—			—			—			—		—			(196	)		—			—			(196	)
Cash dividends declared on common stock ($0.18 per share)		—			—			—			—		—			(6,796	)		—			—			(6,796	)
Repurchase of common stock		—			—			(514,819	)		—		—			—			(13,119	)		—			(13,119	)
Share-based compensation expense		—			—			—			—		2,817			—			—			—			2,817
Balance, June 30, 2022		—			—			37,669,102			388		595,938			307,278			(47,181	)		(91,262	)		765,161

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’			Common Stock					Paid-In			Retained			Treasury			Comprehensive			Stockholders’
except share data)	Shares			Amount			Shares			Amount		Capital			Earnings			Stock			Income (Loss)			Equity			Shares			Amount		Capital			Earnings			Stock			Income (Loss)			Equity
Balance, January 1, 2022		10,438		$	10,438			37,713,903		$	387	$	593,753		$	271,676		$	(31,570	)	$	(8,302	)	$	836,382
Balance, March 31, 2023																												37,713,427		$	390	$	598,103		$	356,365		$	(51,066	)	$	(108,142	)	$	795,650
Net income		—			—			—			—		—			22,311			—			—			22,311			—			—		—			26,107			—			—			26,107
Other comprehensive loss, net of tax		—			—			—			—		—			—			—			(48,086	)		(48,086	)		—			—		—			—			—			(6,720	)		(6,720	)
Issuance of common stock upon exercise of stock options, net		—			—			117,254			—		(9	)		—			(872	)		—			(881	)
Restricted stock activity, net		—			—			263,283			1		(1	)		—			(700	)		—			(700	)
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	)
Cash dividends declared on common stock ($0.09 per share)		—			—			—			—		—			(3,394	)		—			—			(3,394	)
Repurchase of common stock		—			—			(282,819	)		—		—			—			(7,590	)		—			(7,590	)
Share-based compensation expense		—			—			—			—		1,264			—			—			—			1,264
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	)		(547	)		1		(92	)		—			(25	)		—			(116	)
Issuance of common stock in connection with employee stock purchase plan		—			—			22,565			—		—			—			537			—			537			39,122			—		—			—			708			—			708
Cash dividends declared on common stock ($0.09 per share)		—			—			—			—		—			(3,402	)		—			—			(3,402	)		—			—		—			(3,394	)		—			—			(3,394	)
Repurchase of common stock		—			—			(232,000	)		—		—			—			(5,529	)		—			(5,529	)
Share-based compensation expense		—			—			—			—		1,553			—			—			—			1,553			—			—		1,707			—			—			—			1,707
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
Balance, June 30, 2023																												37,752,002		$	391	$	599,718		$	379,078		$	(50,383	)	$	(114,862	)	$	813,942


					Additional									Accumulated Other			Total
(dollars in thousands,	Common Stock				Paid-In			Retained			Treasury			Comprehensive			Stockholders’
except share data)	Shares		Amount		Capital			Earnings			Stock			Income (Loss)			Equity
Balance, January 1, 2023		37,492,775	$	389	$	598,297		$	335,794		$	(51,114	)	$	(117,550	)	$	765,816
Net income		—		—		—			50,052			—			—			50,052
Other comprehensive income, net of tax		—		—		—			—			—			2,688			2,688
Restricted stock activity, net		220,105		2		(1,796	)		—			23			—			(1,771	)
Issuance of common stock in connection with employee stock purchase plan		39,122		—		—			—			708			—			708
Cash dividends declared on common stock ($0.18 per share)		—		—		—			(6,768	)		—			—			(6,768	)
Share-based compensation expense		—		—		3,217			—			—			—			3,217
Balance, June 30, 2023		37,752,002		391		599,718			379,078			(50,383	)		(114,862	)		813,942

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						Six Months Ended
	September 30,						June 30,
(dollars in thousands)	2022			2021			2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	65,250		$	75,596		$	50,052		$	42,594
Adjustments to reconcile net income to net cash from operating activities:
Provision for loan and lease losses		15,079			2,750
Provision for credit losses								15,615			10,903
Impairment loss on assets held for sale		—			3,981			20			—
Depreciation and amortization of premises and equipment		3,276			4,603			1,932			2,239
Net amortization of securities		3,360			6,649			1,678			2,396
Net change in fair value of equity securities, net		1,313			(36	)		(543	)		732
Net realized gains on securities available-for-sale		(50	)		(1,456	)		—			(52	)
Net gains on sales and valuation adjustments of premises and equipment		(93	)		(497	)		—			(16	)
Net gains on sales of loans		(26,390	)		(33,350	)		(10,852	)		(20,810	)
Originations of U.S. government guaranteed loans		(269,505	)		(323,010	)		(146,974	)		(176,380	)
Proceeds from U.S. government guaranteed loans sold		320,601			312,733			162,600			231,405
Accretion of premiums and discounts on acquired loans, net		(4,418	)		(5,001	)		(1,340	)		(2,859	)
Net change in servicing assets		2,617			(1,555	)		(2,543	)		1,589
Net losses on sales and valuation adjustments of other real estate owned		191			755
Net gains (losses) on sales and valuation adjustments of other real estate owned								392			(25	)
Net amortization of other acquisition accounting adjustments		5,075			5,261			2,910			3,464
Amortization of subordinated debt issuance cost		131			131			87			87
Accretion of junior subordinated debentures discount		326			345			219			217
Share-based compensation expense		4,016			2,937			3,217			2,817
Deferred tax provision, net of valuation		2,207			4,108
Deferred tax provision (benefit), net of valuation								(140	)		2,265
Increase in cash surrender value of bank owned life insurance		(1,550	)		(983	)		(1,118	)		(1,059	)
Changes in assets and liabilities:
Accrued interest receivable and other assets		(54,598	)		9,706			6,110			(12,177	)
Accrued interest payable and other liabilities		118,791			(17,565	)		11,149			65,560
Net cash provided by operating activities		185,629			46,102			92,471			152,890
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of securities available-for-sale		(94,430	)		(514,506	)		(11,221	)		(74,561	)
Proceeds from maturities and calls of securities available-for-sale		22,832			37,108			4,463			19,315
Proceeds from paydowns of securities available-for-sale		114,026			269,286			44,708			83,987
Proceeds from sales of securities available-for-sale		23,293			280,962			—			13,006
Proceeds from maturities and calls of securities held-to-maturity		—			500			545			—
Purchases of Federal Home Loan Bank stock, net		(5,075	)		(5,420	)
Redemption (purchases) of Federal Home Loan Bank stock, net								3,825			(8,000	)
Proceeds from other loans sold								6,750			—
Net change in loans and leases		(742,449	)		(272,913	)		(152,170	)		(634,619	)
Purchases of premises and equipment		(3,329	)		(1,762	)		(1,539	)		(2,673	)
Proceeds from sales of premises and equipment		28			296			—			28
Proceeds from sales of assets held for sale		2,903			4,919			—			2,268
Proceeds from sales of other real estate owned		356			2,998			2,559			225
Investment in bank owned life insurance		—			(50,000	)
Net cash used in investing activities		(681,845	)		(248,532	)		(102,080	)		(601,024	)

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						Six Months Ended
	September 30,						June 30,
(dollars in thousands)	2022			2021			2023			2022
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits	$	457,409		$	406,321		$	221,971			233,330
Proceeds from short-term borrowings		16,555,400			11,953,000			9,723,100			12,387,000
Repayments of short-term borrowings		(16,445,400	)		(11,832,000	)		(9,808,100	)		(12,182,000	)
Proceeds from Paycheck Protection Program Liquidity Facility ("PPPLF") advances		—			196,679
Repayments of PPPLF advances		—			(412,182	)
Net increase (decrease) in securities sold under agreements to repurchase		24,231			(14,279	)
Net increase in securities sold under agreements to repurchase								19,523			23,369
Dividends paid on preferred stock		(196	)		(587	)		—			(196	)
Dividends paid on common stock		(10,084	)		(7,928	)		(6,655	)		(6,769	)
Proceeds from issuance of common stock		927			1,731			602			927
Redemption of preferred stock		(10,438	)		—			—			(10,438	)
Repurchases of common stock		(17,274	)		(28,867	)		—			(13,119	)
Net cash provided by financing activities		554,575			261,888			150,441			432,104
NET CHANGE IN CASH AND CASH EQUIVALENTS		58,359			59,458			140,832			(16,030	)
CASH AND CASH EQUIVALENTS, beginning of period		157,931			83,420			179,353			157,931
CASH AND CASH EQUIVALENTS, end of period	$	216,290		$	142,878		$	320,185		$	141,901
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest	$	15,780		$	8,901		$	46,538		$	7,118
Cash paid during the period for taxes	$	28,048		$	25,525		$	3,031		$	15,156
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Transfer of loans to other real estate owned	$	2,837		$	436		$	499		$	2,837
Common dividend declared, not paid	$	86		$	102		$	113		$	27

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~~June 30, ~~2022~~2023 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, 2022, 2021, ~~2020,~~ and ~~2019.~~2020.

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. On July 1, 2023, we closed our acquisition of Inland Bancorp, Inc. and its subsidiaries (Inland") pursuant to an Agreement and Plan of Merger. Refer to Note 3 - Acquisition for further discussion of this transaction. No other 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.

~~Issued~~Adopted Accounting Pronouncements ~~Pending Adoption~~

Financial Instruments—Credit Losses (Topic 326)—In June 2016, ~~the Financial Accounting Standards Board ("FASB")~~FASB issued Accounting Standards Update ("ASU") No. 2016‑13, ~~Measurement of~~Financial Instruments - Credit Losses (Topic 326) on ~~Financial Instruments. Current GAAP requires an “incurred loss” methodology for recognizing~~the recognition of 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~~otherwise known as the current 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~~loss model or "CECL", which replaces the incurred loss impairment methodology ~~in current GAAP~~ with a methodology that reflects current expected credit ~~losses and requires consideration of a broader range of reasonable and supportable information~~losses. We elected 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~~delay the ~~net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis~~adoption of the ~~financial asset(s) to present~~standard in accordance with ASU No. 2019-10, Effective Dates, which delayed 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 collectabilityeffective date of the ~~reported amount. Upon~~ASU for entities not classified as Public Business Entities. The Company’s EGC status expired December 31, 2022, requiring CECL adoption ~~a banking organization must record a one-time adjustment to its credit loss allowances as of the~~be reflected in our December 31, 2022 financial statements and Form 10-K. Results for reporting periods 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~~after September 30, 2022 were presented under the new ~~standard. The amendments~~standard, while prior quarters were reported under, and continue to be reported under, the incurred loss method. For additional information on the new standard, see Note 1—Business and Summary of Significant Accounting Policies in ~~this ASU broaden~~our Annual Report on Form 10-K for the ~~information that an entity must consider in~~year ended December 31, 2022.

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~~The following table presents select financial data for the first three quarters of 2022 as reported under the incurred 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 method and as recast under CECL:


	For the three month period ended
	March 31, 2022							June 30, 2022							September 30, 2022
	As Reported		Adjustment			Recast		As Reported		Adjustment			Recast		As Reported		Adjustment			Recast
Interest and dividend income	$	61,818	$	(405	)	$	61,413	$	66,546	$	133		$	66,679	$	79,903	$	(240	)	$	79,663
Interest expense		3,082		—			3,082		4,919		—			4,919		11,028		—			11,028
Net interest income		58,736		(405	)		58,331		61,627		133			61,760		68,875		(240	)		68,635
Provision/(recapture) for credit losses		4,995		1,564			6,559		5,908		(1,622	)		4,286		4,176		3,032			7,208
Net interest income after provision/(recapture) for credit losses		53,741		(1,969	)		51,772		55,719		1,755			57,474		64,699		(3,272	)		61,427
Non-interest income		19,426		117			19,543		14,161		112			14,273		11,992		51			12,043
Non-interest expense		44,555		(599	)		43,956		43,773		(188	)		43,585		46,178		(137	)		46,041
Income before provision for income taxes		28,612		(1,253	)		27,359		26,107		2,055			28,162		30,513		(3,084	)		27,429
Provision for income taxes		6,301		(340	)		5,961		5,824		558			6,382		7,857		(837	)		7,020
Net income		22,311		(913	)		21,398		20,283		1,497			21,780		22,656		(2,247	)		20,409
Dividends on preferred shares		196		—			196		—		—			—		—		—			—
Income available to common stockholders	$	22,115	$	(913	)	$	21,202	$	20,283	$	1,497		$	21,780	$	22,656	$	(2,247	)	$	20,409
Basic earnings per common share	$	0.60	$	(0.03	)	$	0.57	$	0.55	$	0.04		$	0.59	$	0.61	$	(0.06	)	$	0.55
Diluted earnings per common share	$	0.58	$	(0.02	)	$	0.56	$	0.54	$	0.04		$	0.58	$	0.61	$	(0.06	)	$	0.55

ASU ~~No.~~ 2022-02 - Financial Instruments – Credit Losses – Troubled Debt Restructurings ~~(TDRs)~~ and Vintage Disclosures ~~which~~(Topic 326) – The Company adopted this update effective March 31, 2023. This update eliminates the ~~specific accounting~~recognition and measurement guidance for troubled debt restructurings (“TDRs”) by creditors in ASC 310-40. The update also enhances disclosure requirements for certain loan restructurings by creditors when a borrower is experiencing financial difficulty. Specifically, rather than applying the recognition and measurement guidance for TDRs, an entity will apply the loan refinancing and ~~updates~~restructuring guidance to determine whether a modification or other form of restructuring results in a new loan or a continuation of an existing loan. Additionally, the ~~vintage disclosure requirements~~amendments in this ASU require a public business entity to ~~require disclosure of current period charge-offs~~disclose current-period gross write-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~~origination for ~~entities not classified as Public Business Entities. The Company will adopt the standard on December 31, 2022. The new guidance will result~~financing receivables and net investments in ~~an increase~~leases in the ~~allowance~~existing vintage disclosures. Refer to Note 5—Loan and Lease Receivables and Allowance for loan losses, which will reflect the requirement to include expected losses on purchased credit-impaired loans. The extent of the increase will depend on the composition of the loan portfolio, as well as the economic conditions and forecasts as of the adoption date.Credit Losses for additional details regarding these disclosures.

Issued Accounting Pronouncements Pending Adoption

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.~~Reporting and in December 2022, FASB issued ASU 2022-06, Reference Rate Reform: Deferral of the Sunset Date of Topic 848. The amendments in ~~the ASU~~these ASUs 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~~these ASUs provide optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued. ~~The ASU is~~These ASUs are intended to help stakeholders during the global market-wide reference rate transition period. The amendments in ~~the ASU~~these ASUs will be in effect for all entities as of March 12, 2020 ~~through~~and sunset on December 31, ~~2022.~~2024. 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.~~considered. At ~~September~~June 30, ~~2022,~~2023, $~~822.4~~252.9 million of loans, derivatives with a notional amount of $~~457.5~~394.1 million, and securities available for sale with a fair value of $~~43.9~~36.1 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~~37.6 million were also tied to LIBOR. Those financial instruments with a LIBOR index at June 30, 2023 are anticipated to covert to an alternative reference rate at the next interest rate reset date.

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

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Company is evaluating the accounting and disclosure requirements of this update and does not expect them to have a material effect on the consolidated financial statements.

Note 3—Acquisition of a Business

On July 1, 2023 the Company acquired all of the outstanding common stock of Inland Bancorp, Inc. (“Inland”) and its subsidiaries pursuant to an Agreement and Plan of Merger, dated as of November 30, 2022 (the “Merger Agreement”). Inland operated a wholly owned subsidiary, Inland Bank and Trust. Inland was merged with and into Byline. As a result of the merger, Inland’s subsidiary bank, Inland Bank and Trust, was merged with and into Byline Bank, with Byline Bank as the surviving bank. The acquisition improves the Company’s footprint in the Chicagoland market, diversifies its commercial banking business, and strengthens the core deposit base.

At the effective time of the merger (the “Effective Time”), each share of Inland’s common stock was converted into the right to receive: (1) 0.19 shares of Byline’s common stock, par value $0.01 per share and (2) a cash payment in the amount of $0.68 per share, with cash paid in lieu of any fractional shares. The per share cash consideration was based on the total $21.2 million divided by the outstanding shares of Inland common stock. Based on the closing price of shares of the Company’s common stock of $18.09, as reported by the New York Stock Exchange, and 5,932,323 shares of common stock issued with respect to the outstanding shares of Inland common stock, the stock consideration was valued at $107.3 million. Options to acquire 288,200 shares of Inland common stock that were outstanding at the Effective Time were canceled, at the option holders' election, in exchange for a cash payment in accordance with the Merger Agreement of $424,000, to be paid after the closing date. The value of the total merger consideration at closing was $129.0 million.

Merger-related expenses of $1.9 million, including acquisition advisory expenses, are reflected in non-interest expense on the Consolidated Statements of Operations for the six months ended June 30, 2023.

The acquisition of Inland will be accounted for using the acquisition method of accounting in accordance with ASC Topic 805. Assets acquired, liabilities assumed and consideration exchanged will be recorded at their respective acquisition date fair values. Determining the fair value of assets and liabilities involves significant judgment regarding methods and assumptions used to calculate estimated fair values. Fair values are subject to refinement for up to one year after the closing date of the acquisition as additional information regarding the closing date fair values become available. The fair value of the acquired assets and liabilities is in process.

On a related but separate transaction, on March 31, 2023, Byline entered into a side letter agreement with the majority shareholder of Inland in which Byline agreed to purchase 2,408,992 shares of Inland common stock. The purchase price was calculated based on the terms of the Merger Agreement. The transaction was completed on June 30, 2023, which resulted in a cash consideration of $9.9 million.

Note 4—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, 2022	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2023										Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale
U.S. Treasury Notes	$	32,745	$	—	$	(1,828	)	$	30,917	$	42,516	$	—	$	(1,798	)	$	40,718
U.S. Government agencies		152,254		172		(21,525	)		130,901		148,297		68		(19,847	)		128,518
Obligations of states, municipalities, and political subdivisions		71,550		1		(7,986	)		63,565		67,922		11		(5,203	)		62,730
Residential mortgage-backed securities
Agency		726,035		—		(120,937	)		605,098		673,096		—		(107,416	)		565,680
Non-agency		132,847		—		(24,762	)		108,085		126,144		—		(24,264	)		101,880
Commercial mortgage-backed securities
Agency		194,347		—		(34,417	)		159,930		188,308		—		(36,068	)		152,240
Corporate securities		45,320		—		(3,704	)		41,616		42,767		—		(6,824	)		35,943
Asset-backed securities		43,582		—		(2,040	)		41,542		39,785		—		(1,794	)		37,991
Total	$	1,398,680	$	173	$	(217,199	)	$	1,181,654	$	1,328,835	$	79	$	(203,214	)	$	1,125,700

~~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~~ no~~t 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)

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, 2022 and December 31, 2021, are summarized as follows:

Less than 12 Months

12 Months or Longer

Total

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

17

44,100

(5,144
)

69,740

(16,381
)

113,840

(21,525
)
Obligations of states,
   municipalities and political
   subdivisions

71

59,633

(6,932
)

2,776

(1,054
)

62,409

(7,986
)
Residential mortgage-backed
   securities

Agency

101

154,271

(18,027
)

450,804

(102,910
)

605,075

(120,937
)
Non-agency

19

84,376

(18,943
)

23,709

(5,819
)

108,085

(24,762
)
Commercial mortgage-backed
   securities

Agency

47

87,638

(14,347
)

65,745

(20,070
)

153,383

(34,417
)
Corporate securities

24

39,806

(3,514
)

1,810

(190
)

41,616

(3,704
)
Asset-backed securities

7

30,838

(563
)

10,704

(1,477
)

41,542

(2,040
)
Total

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
)


June 30, 2023	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Held-to-maturity
Obligations of states, municipalities, and political subdivisions	$	2,158	$	—	$	(26	)	$	2,132
Total	$	2,158	$	—	$	(26	)	$	2,132


			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
December 31, 2022																		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale
U.S. Treasury Notes		1	$	9,946	$	(8	)	$	—	$	—		$	9,946	$	(8	)	$	42,430	$	2	$	(1,709	)	$	40,723
U.S. Government agencies		10		64,585		(1,590	)		19,223		(777	)		83,808		(2,367	)		150,524		116		(20,276	)		130,364
Obligations of states, municipalities and political subdivisions		3		9,507		(56	)		—		—			9,507		(56	)
Obligations of states, municipalities, and political subdivisions																			68,019		9		(6,152	)		61,876
Residential mortgage-backed securities
Agency		51		612,280		(13,894	)		25,412		(1,121	)		637,692		(15,015	)		707,157		—		(111,361	)		595,796
Non-agency		14		96,372		(1,257	)		761		(10	)		97,133		(1,267	)		130,654		—		(24,405	)		106,249
Commercial mortgage-backed securities
Agency		19		64,473		(1,994	)		37,063		(1,667	)		101,536		(3,661	)		191,172		—		(34,142	)		157,030
Corporate securities		3		7,502		(54	)		—		—			7,502		(54	)		45,302		—		(3,866	)		41,436
Asset-backed securities		3		15,978		(4	)		—		—			15,978		(4	)		43,085		—		(2,128	)		40,957
Total		104	$	880,643	$	(18,857	)	$	82,459	$	(3,575	)	$	963,102	$	(22,432	)	$	1,378,343	$	127	$	(204,039	)	$	1,174,431


December 31, 2022	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Held-to-maturity
Obligations of states, municipalities, and political subdivisions	$	2,705	$	—	$	(33	)	$	2,672
Total	$	2,705	$	—	$	(33	)	$	2,672

The Company did not classify securities as trading during the six months ended June 30, 2023 or during 2022.

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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 June 30, 2023 and December 31, 2022, are summarized as follows:


			Less than 12 Months					12 Months or Longer					Total
June 30, 2023	Number of Securities		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Available-for-sale
U.S. Treasury Notes		8		14,318		(340	)		26,400		(1,458	)	$	40,718	$	(1,798	)
U.S. Government agencies		17		4,771		(182	)		110,830		(19,665	)		115,601		(19,847	)
Obligations of states, municipalities and political subdivisions		61		14,969		(271	)		43,898		(4,932	)		58,867		(5,203	)
Residential mortgage-backed securities
Agency		99		24,706		(1,406	)		540,974		(106,010	)		565,680		(107,416	)
Non-agency		19		—		—			101,880		(24,264	)		101,880		(24,264	)
Commercial mortgage-backed securities
Agency		49		6,799		(1,549	)		145,441		(34,519	)		152,240		(36,068	)
Corporate securities		23		3,972		(516	)		31,971		(6,308	)		35,943		(6,824	)
Asset-backed securities		7		3,380		(49	)		34,611		(1,745	)		37,991		(1,794	)
Total		283	$	72,915	$	(4,313	)	$	1,036,005	$	(198,901	)	$	1,108,920	$	(203,214	)
Held-to-maturity
Obligations of states, municipalities, and political subdivisions		3	$	597	$	(10	)	$	1,535	$	(16	)	$	2,132	$	(26	)
Total		3	$	597	$	(10	)	$	1,535	$	(16	)	$	2,132	$	(26	)


			Less than 12 Months					12 Months or Longer					Total
December 31, 2022	Number of Securities		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Available-for-sale
U.S. Treasury Notes		6	$	21,720	$	(1,078	)	$	9,339	$	(631	)	$	31,059	$	(1,709	)
U.S. Government agencies		17		44,508		(4,782	)		70,609		(15,494	)		115,117		(20,276	)
Obligations of states, municipalities and political subdivisions		58		50,216		(3,858	)		7,185		(2,294	)		57,401		(6,152	)
Residential mortgage-backed securities
Agency		101		117,598		(11,045	)		478,198		(100,316	)		595,796		(111,361	)
Non-agency		19		35,486		(7,569	)		70,763		(16,836	)		106,249		(24,405	)
Commercial mortgage-backed securities
Agency		47		76,193		(11,840	)		74,315		(22,302	)		150,508		(34,142	)
Corporate securities		24		37,130		(3,128	)		4,306		(738	)		41,436		(3,866	)
Asset-backed securities		8		25,455		(503	)		15,502		(1,625	)		40,957		(2,128	)
Total		280	$	408,306	$	(43,803	)	$	730,217	$	(160,236	)	$	1,138,523	$	(204,039	)
Held-to-maturity
Obligations of states, municipalities and political subdivisions		4	$	2,672	$	(33	)	$	—	$	—		$	2,672	$	(33	)
Total		4	$	2,672	$	(33	)	$	—	$	—		$	2,672	$	(33	)

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Certain securities have fair values less than amortized cost and, therefore, contain unrealized losses. The Company evaluated the securities ~~that~~which had an unrealized ~~loss~~losses for ~~other than temporary impairment~~potential credit losses and determined ~~all declines in value to be temporary.~~there were none. There were ~~292~~283 securities available-for-sale with unrealized losses at ~~September~~June 30, ~~2022.~~2023. There were ~~five~~three securities held-to-maturity with unrealized losses at ~~September~~June 30, 2023. There was no allowance for credit losses for held-to-maturity debt securities at June 30, 2023 or December 31, 2022. The evaluation for potential credit losses is based upon factors such as the creditworthiness of the issuers/guarantors, the underlying collateral, if applicable, and the continuing payment performance of the securities.

Management measures expected credit losses on held-to-maturity debt securities on a collective basis by major security types. The Company’s held-to-maturity portfolio contains municipal bonds that are typically rated by major rating agencies as ‘Aa’ or better. The Company uses industry historical credit loss information adjusted for current conditions to establish an allowance for credit losses. Accrued interest receivable on securities available-for-sale and held-to-maturity totaled $3.9 million at both June 30, 2023 and December 31, 2022, and are excluded from the estimate of credit losses.

The Company anticipates full recovery of amortized cost with respect to these securities by 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~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 are listed below:


	For the Three Months Ended				For the Nine Months Ended				For the Three Months Ended				For the Six Months Ended
	September 30,				September 30,				June 30,				June 30,
	2022		2021		2022		2021		2023		2022		2023		2022
Proceeds	$	10,287	$	—	$	23,293	$	186,850	$	—	$	13,006	$	—	$	13,006
Gross gains		38		130		100		2,525		—		62		—		62
Gross losses		40		—		50		1,069		—		10		—		10

There were $~~2,000~~no ~~in net losses and $50,000~~ ~~in net gains on~~ sales of securities ~~reclassified from accumulated other comprehensive income into earnings~~ during the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively. There were $~~130,000~~52,000 ~~and $1.5~~ ~~million~~ in net gains reclassified from accumulated other comprehensive income into earnings for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, respectively.

Securities posted and pledged as collateral were $~~331.8~~351.1 million and $~~332.3~~270.6 million at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021.~~2022. At ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, of those pledged, the carrying amounts of securities pledged as collateral for public fund deposits were $~~242.7~~271.2 million and $~~277.1~~223.5 million, respectively, and for customer repurchase agreements of $~~64.9~~40.0 million and $~~38.8~~23.8 million, respectively. At ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, there were no securities pledged for advances from the Federal Home Loan Bank. Other securities were pledged for letters of credit and for purposes required or permitted by law. At ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, 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% of stockholders’ equity.

At ~~September~~June 30, ~~2022,~~2023, 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		Amortized Cost		Fair Value
Available-for-sale
Due in one year or less	$	3,479	$	3,472	$	2,954	$	2,924
Due from one to five years		91,916		85,381		118,502		110,541
Due from five to ten years		188,480		168,618		174,431		152,013
Due after ten years		61,576		51,070		45,400		40,422
Mortgage-backed securities		1,053,229		873,113		987,548		819,800
Total	$	1,398,680	$	1,181,654	$	1,328,835	$	1,125,700
Held-to-maturity
Due in one year or less	$	2,719	$	2,697	$	1,551	$	1,535
Due from one to five years		1,158		1,128		607		597
Total	$	3,877	$	3,825	$	2,158	$	2,132

~~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, 2022 and December 31, 2021, total loans and leases included the guaranteed amount of U.S. government guaranteed loans of $~~130.9~~ ~~million and $231.2~~ ~~million respectively. At September 30, 2022 and December 31, 2021, the discount on the unguaranteed portion of U.S. government guaranteed loans was $27.1~~ ~~million and $28.3~~ ~~million, respectively, which are included in total loans and leases. At September 30, 2022 and December 31, 2021, installment and other loans included overdraft deposits of $527,000~~ ~~and $445,000, respectively, which were reclassified as loans. At September 30, 2022 and December 31, 2021, loans and leases and loans held for sale pledged as security for borrowings were $2.1~~ ~~billion and $1.9~~ ~~billion, respectively.~~

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

Minimum Lease
Payments

2022

$
35,111

2023

154,438

2024

126,780

2025

91,453

2026

55,181

Thereafter

19,725

Total

$
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)

Note 5—Loan and Lease Receivables and Allowance for Credit Losses

Loan and Lease Receivables

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


	June 30,			December 31,
	2023			2022
Commercial real estate	$	1,959,721		$	1,905,909
Residential real estate		504,364			489,411
Construction, land development, and other land		389,216			440,016
Commercial and industrial		2,101,638			2,055,213
Installment and other		3,686			1,709
Lease financing receivables		599,818			518,654
Total loans and leases		5,558,443			5,410,912
Net unamortized deferred fees and costs		6,197			5,014
Initial direct costs		5,877			5,332
Allowance for credit losses - loans and leases		(92,665	)		(81,924	)
Net loans and leases	$	5,477,852		$	5,339,334


	June 30,			December 31,
	2023			2022
Lease financing receivables
Net minimum lease payments	$	587,296		$	509,980
Unguaranteed residual values		75,719			54,118
Unearned income		(63,197	)		(45,444	)
Total lease financing receivables		599,818			518,654
Initial direct costs		5,877			5,332
Lease financial receivables before allowance for credits losses - loans and leases	$	605,695		$	523,986

Total loans and leases consist of originated loans and leases, purchased credit deteriorated ("PCD") and acquired non-credit-deteriorated loans and leases. At June 30, 2023 and December 31, 2022, total loans and leases included the guaranteed amount of U.S. government guaranteed loans of $112.3 million and $123.2 million respectively. At June 30, 2023 and December 31, 2022, the discount on the unguaranteed portion of U.S. government guaranteed loans was $26.3 million and $26.7 million, respectively, which are included in total loans and leases. At June 30, 2023 and December 31, 2022, installment and other loans included overdraft deposits of $653,000 and $467,000, respectively, which were reclassified as loans. At June 30, 2023 and December 31, 2022, loans and leases and loans held for sale pledged as security for borrowings were $1.9 billion and $2.2 billion, respectively. Accrued interest on loans and leases were $25.5 million as of June 30, 2023 and December 31, 2022, and are included in the accrued interest receivable and other assets line item on the Condensed Consolidated Statement of Financial Condition.

The minimum annual lease payments for lease financing receivables as of June 30, 2023 are summarized as follows:


	Minimum Lease Payments
2023	$	88,841
2024		181,693
2025		144,991
2026		101,754
2027		55,379
Thereafter		14,638
Total	$	587,296

Originated loans and leases represent originations excluding loans initially acquired in a business combination. However, once an acquired non-credit-deteriorated loan reaches its maturity date, and is re-underwritten and renewed, it is internally classified as an originated loan. ~~Acquired impaired~~PCD loans are ~~loans~~those 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, 2022 and December 31, 2021:~~

September 30, 2022

Originated

Acquired
Impaired

Acquired
Non-Impaired

Total

Commercial real estate

$
1,652,890

$
56,974

$
159,130

$
1,868,994

Residential real estate

410,285

37,246

34,313

481,844

Construction, land development, and other land

456,463

1,144

—

457,607

Commercial and industrial

1,938,320

3,029

26,959

1,968,308

Paycheck Protection Program

1,522

—

—

1,522

Installment and other

1,016

153

199

1,368

Lease financing receivables

492,744

—

3,084

495,828

Total loans and leases

$
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)

quality deterioration and are accounted for under ASC Topic 326. Acquired non-credit-deteriorated 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. The following tables summarize the balances for each respective loan and lease category as of June 30, 2023 and December 31, 2022:


June 30, 2023	Originated		Purchased Credit Deteriorated		Acquired Non-Credit- Deteriorated		Total
Commercial real estate	$	1,806,531	$	30,724	$	126,191	$	1,963,446
Residential real estate		453,880		26,012		25,055		504,947
Construction, land development, and other land		387,623		320		—		387,943
Commercial and industrial		2,086,274		1,726		16,750		2,104,750
Installment and other		3,582		129		25		3,736
Lease financing receivables		604,437		—		1,258		605,695
Total loans and leases	$	5,342,327	$	58,911	$	169,279	$	5,570,517


December 31, 2022	Originated		Purchased Credit Deteriorated		Acquired Non-Credit- Deteriorated		Total
Commercial real estate	$	1,712,152	$	45,143	$	152,193	$	1,909,488
Residential real estate		426,226		32,228		31,508		489,962
Construction, land development, and other land		438,617		372		—		438,989
Commercial and industrial		2,030,616		2,192		24,266		2,057,074
Installment and other		1,410		140		209		1,759
Lease financing receivables		521,689		—		2,297		523,986
Total loans and leases	$	5,130,710	$	80,075	$	210,473	$	5,421,258

PCD loans—The unpaid principal balance and carrying amount of all PCD loans are summarized below. The balances do not include an allowance for credit losses - loans and leases of $1.1 million and $1.9 million at June 30, 2023 and December 31, 2022, respectively.


	June 30, 2023				December 31, 2022
	Unpaid Principal Balance		Carrying Value		Unpaid Principal Balance		Carrying Value
Commercial real estate	$	70,284	$	30,724	$	85,089	$	45,143
Residential real estate		69,803		26,012		76,270		32,228
Construction, land development, and other land		6,993		320		7,042		372
Commercial and industrial		3,427		1,726		3,902		2,192
Installment and other		793		129		807		140
Total purchased credit deteriorated loans	$	151,300	$	58,911	$	173,110	$	80,075

Acquired ~~non-impaired~~non-credit-deteriorated loans and leases—The unpaid principal balance and carrying value for acquired ~~non-impaired~~non-credit deteriorated loans and leases at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 were as follows:

September 30, 2022

December 31, 2021

Unpaid
Principal
Balance

Carrying
Value

Unpaid
Principal
Balance

Carrying
Value

Commercial real estate

$
162,716

$
159,130

$
219,277

$
214,588

Residential real estate

34,718

34,313

51,839

51,317

Construction, land development, and other land

63

—

265

201

Commercial and industrial

28,040

26,959

44,827

43,202

Installment and other

206

199

273

264

Lease financing receivables

3,091

3,084

6,199

6,179

Total acquired non-impaired loans and leases

$
228,834

$
223,685

$
322,680

$
315,751


	June 30, 2023				December 31, 2022
	Unpaid Principal Balance		Carrying Value		Unpaid Principal Balance		Carrying Value
Commercial real estate	$	129,186	$	126,191	$	155,652	$	152,193
Residential real estate		25,397		25,055		31,863		31,508
Construction, land development, and other land		63		—		63		—
Commercial and industrial		17,193		16,750		25,022		24,266
Installment and other		31		25		216		209
Lease financing receivables		1,260		1,258		2,302		2,297
Total acquired non-credit-deteriorated loans and leases	$	173,130	$	169,279	$	215,118	$	210,473

~~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, 2022 and 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

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

Allowance for Credit Losses

Loans and leases considered for inclusion in the allowance for ~~loan~~credit losses include acquired non-credit-deteriorated loans and ~~lease losses by~~leases, purchased credit deteriorated loans, and originated loans and leases.

The Bank’s credit risk rating methodology assigns risk ratings from 1 to 10, where a higher rating represents higher risk. Risk ratings for all loans of $~~2.2~~1.0 million or more are reviewed annually. The risk rating categories are described by the following groupings:

Pass—1‑4, risk levels of borrowers and $guarantors that offer a minimal to an acceptable level of risk.~~9.6~~

~~million for the three~~Watch—5, credit exposure that presents higher than average risk and ~~nine months ended September 30, 2022, respectively, and recaptured $~~warrants greater than routine attention.~~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~~Special Mention—6, potential weaknesses that if left uncorrected may result in deterioration 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.~~repayment prospects.

Substandard Accrual—7, weaknesses in cash flow and collateral coverage resulting in a distinct possibility of losses if not corrected. Used in limited cases, where the borrower is current on payments and an agreed plan for credit remediation.

Substandard Non‑Accrual—8, well‑defined weakness or weaknesses in cash flow and collateral coverage resulting in the distinct possibility of losses if not corrected.

Doubtful—9, weaknesses inherent in substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

Loss—10, is considered uncollectible and of such little value that its continuance as a realizable asset is not warranted.

Revolving loans that are converted to term loans are treated as new originations and are presented by year of origination. Generally, existing term loans that are re-underwritten are reflected in the table in the year of renewal.

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 $1.3~~ ~~million and recaptured $2.4~~ ~~million for the three and nine months ended September 30, 2022, respectively. The Company recaptured $1.0~~ ~~million of the allowance on loans and 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. The increase in allowance for loan and lease losses 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 loan and lease portfolio.

An allowance for loan and lease loss allocation has not been made for PPP loans as these loans are fully guaranteed by the Small Business 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~~risk rating categories of the loans and leases considered for inclusion in the allowance for credit losses ~~considered impaired~~- loans and leases calculation, as of ~~September~~June 30, ~~2022~~2023 and December 31, 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.2022:


	Term loans amortized cost by origination year												Revolving		Total
June 30, 2023	2023		2022		2021		2020		2019		Prior		Loans		Loans
Commercial Real Estate
Pass	$	102,875	$	463,129	$	522,071	$	192,889	$	106,593	$	391,004	$	9,980	$	1,788,541
Watch		366		8,439		19,755		22,068		16,249		53,949		—		120,826
Special Mention		—		—		—		1,875		1,066		8,057		—		10,998
Substandard		—		233		2,081		1,099		9,097		30,571		—		43,081
Total	$	103,241	$	471,801	$	543,907	$	217,931	$	133,005	$	483,581	$	9,980	$	1,963,446
Gross charge-offs for quarter ended June 30, 2023	$	—	$	—	$	60	$	203	$	2,039	$	1,608	$	—	$	3,910
Residential Real Estate
Pass	$	36,607	$	67,682	$	57,845	$	41,240	$	30,487	$	204,751	$	48,711	$	487,323
Watch		—		—		—		906		1,253		10,866		2,750		15,775
Special Mention		—		—		—		315		20		549		—		884
Substandard		—		—		—		197		366		402		—		965
Total	$	36,607	$	67,682	$	57,845	$	42,658	$	32,126	$	216,568	$	51,461	$	504,947
Gross charge-offs for quarter ended June 30, 2023	$	—	$	—	$	—	$	—	$	—	$	9	$	—	$	9
Construction, Land Development, & Land
Pass	$	29,694	$	65,849	$	181,279	$	65,679	$	16,057	$	24,953	$	1,208	$	384,719
Watch		63		—		—		—		3,153		8		—		3,224
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Total	$	29,757	$	65,849	$	181,279	$	65,679	$	19,210	$	24,961	$	1,208	$	387,943
Gross charge-offs for quarter ended June 30, 2023	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial & Industrial
Pass	$	245,662	$	488,522	$	251,286	$	127,415	$	52,016	$	151,605	$	455,930	$	1,772,436
Watch		12,698		25,957		46,723		12,278		35,047		28,157		58,238		219,098
Special Mention		19,000		—		7,847		—		289		10,016		21,508		58,660
Substandard		—		4,902		11,523		8,142		10,854		9,783		9,352		54,556
Total	$	277,360	$	519,381	$	317,379	$	147,835	$	98,206	$	199,561	$	545,028	$	2,104,750
Gross charge-offs for quarter ended June 30, 2023	$	—	$	942	$	1,077	$	581	$	664	$	623	$	—	$	3,887
Installment and Other
Pass	$	339	$	216	$	125	$	24	$	55	$	455	$	2,486	$	3,700
Watch		—		31		—		—		—		4		1		36
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Total	$	339	$	247	$	125	$	24	$	55	$	459	$	2,487	$	3,736
Gross charge-offs for quarter ended June 30, 2023	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Lease Financing Receivables
Pass	$	179,770	$	250,644	$	119,560	$	40,499	$	9,505	$	3,003	$	—	$	602,981
Watch		—		80		1,328		21		—		—		—		1,429
Special Mention		—		—		—		224		140		116		—		480
Substandard		—		350		307		102		22		24		—		805
Total	$	179,770	$	251,074	$	121,195	$	40,846	$	9,667	$	3,143	$	—	$	605,695
Gross charge-offs for quarter ended June 30, 2023	$	—	$	216	$	400	$	86	$	37	$	28	$	—	$	767
Total Loans and Leases
Pass	$	594,947	$	1,336,042	$	1,132,166	$	467,746	$	214,713	$	775,771	$	518,315	$	5,039,700
Watch		13,127		34,507		67,806		35,273		55,702		92,984		60,989		360,388
Special Mention		19,000		—		7,847		2,414		1,515		18,738		21,508		71,022
Substandard		—		5,485		13,911		9,540		20,339		40,780		9,352		99,407
Total	$	627,074	$	1,376,034	$	1,221,730	$	514,973	$	292,269	$	928,273	$	610,164	$	5,570,517
Gross charge-offs for quarter ended June 30, 2023	$	—	$	1,158	$	1,537	$	870	$	2,740	$	2,268	$	—	$	8,573

September 30, 2022

Recorded
Investment

Unpaid
Principal
Balance

Related
Allowance

With no related allowance recorded

Commercial real estate

$
24,339

$
26,728

$
—

Residential real estate

4,782

4,891

—

Construction, land development, and other land

5,541

5,541

—

Commercial and industrial

10,979

11,892

—

With an allowance recorded

Commercial real estate

20,638

22,198

6,094

Commercial and industrial

25,000

26,215

12,584

Total impaired loans

$
91,279

$
97,465

$
18,678

December 31, 2021

Recorded
Investment

Unpaid
Principal
Balance

Related
Allowance

With no related allowance recorded

Commercial real estate

$
17,233

$
19,252

$
—

Residential real estate

1,802

1,919

—

Commercial and industrial

16,624

19,148

—

With an allowance recorded

Commercial real estate

17,818

20,117

6,538

Commercial and industrial

19,446

21,198

14,500

Total impaired loans

$
72,923

$
81,634

$
21,038

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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


	Term loans amortized cost by origination year												Revolving		Total
December 31, 2022	2022		2021		2020		2019		2018		Prior		Loans		Loans (1)
Commercial Real Estate
Pass	$	471,009	$	510,529	$	207,765	$	111,792	$	84,382	$	324,271	$	28,343	$	1,738,091
Watch		6,422		12,723		20,583		11,004		17,269		44,462		—		112,463
Special Mention		—		—		121		1,075		1,232		10,075		—		12,503
Substandard		—		1,910		915		13,042		12,685		22,915		—		51,467
Total	$	477,431	$	525,162	$	229,384	$	136,913	$	115,568	$	401,723	$	28,343	$	1,914,524
Residential Real Estate
Pass	$	68,752	$	59,075	$	41,768	$	31,726	$	48,432	$	170,279	$	49,622	$	469,654
Watch		—		—		1,137		682		4,098		9,026		2,586		17,529
Special Mention		—		—		323		32		420		876		—		1,651
Substandard		—		—		234		381		296		2,185		660		3,756
Total	$	68,752	$	59,075	$	43,462	$	32,821	$	53,246	$	182,366	$	52,868	$	492,590
Construction, Land Development, & Land
Pass	$	62,310	$	203,672	$	61,895	$	27,189	$	26,489	$	38,186	$	185	$	419,926
Watch		—		—		—		4,409		—		3,064		—		7,473
Special Mention		—		—		1,845		—		4,199		—		—		6,044
Substandard		—		—		—		1,530		4,012		4		—		5,546
Total	$	62,310	$	203,672	$	63,740	$	33,128	$	34,700	$	41,254	$	185	$	438,989
Commercial & Industrial
Pass	$	508,664	$	305,056	$	137,335	$	72,486	$	96,304	$	113,965	$	549,431	$	1,783,241
Watch		16,657		20,856		15,857		32,282		19,362		9,809		47,119		161,942
Special Mention		—		13,056		697		1,162		2,958		7,831		22,320		48,024
Substandard		1,156		3,415		6,671		11,949		5,434		25,275		10,738		64,638
Total	$	526,477	$	342,383	$	160,560	$	117,879	$	124,058	$	156,880	$	629,608	$	2,057,845
Installment and Other
Pass	$	332	$	146	$	65	$	79	$	15	$	584	$	429	$	1,650
Watch		34		—		—		—		2		73		—		109
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Total	$	366	$	146	$	65	$	79	$	17	$	657	$	429	$	1,759
Lease Financing Receivables
Pass	$	296,395	$	148,588	$	53,642	$	14,478	$	7,245	$	934	$	—	$	521,282
Watch		93		1,560		26		—		—		—		—		1,679
Special Mention		—		—		290		182		250		23		—		745
Substandard		35		82		80		77		6		—		—		280
Total	$	296,523	$	150,230	$	54,038	$	14,737	$	7,501	$	957	$	—	$	523,986
Total Loans and Leases
Pass	$	1,407,462	$	1,227,066	$	502,470	$	257,750	$	262,867	$	648,219	$	628,010	$	4,933,844
Watch		23,206		35,139		37,603		48,377		40,731		66,434		49,705		301,195
Special Mention		—		13,056		3,276		2,451		9,059		18,805		22,320		68,967
Substandard		1,191		5,407		7,900		26,979		22,433		50,379		11,398		125,687
Total	$	1,431,859	$	1,280,668	$	551,249	$	335,557	$	335,090	$	783,837	$	711,433	$	5,429,693

~~The following tables summarize the average recorded investment and interest income recognized~~(1) - Includes $8.4 million of substandard loans classified as held for ~~loans and leases considered impaired, which exclude acquired impaired loans, for the three and nine months ended September 30, 2022 and 2021:~~sale.

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

$
23,362

$
424

$
23,900

$
304

Residential real estate

4,795

9

3,871

80

Construction, land development, and other land

5,541

75

—

—

Commercial and industrial

10,371

204

14,268

185

With an allowance recorded

Commercial real estate

23,698

327

30,980

632

Residential real estate

58

—

132

—

Commercial and industrial

21,354

731

25,901

675

Total impaired loans

$
89,179

$
1,770

$
99,052

$
1,876

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

$
20,462

$
1,053

$
28,480

$
920

Residential real estate

3,329

77

2,788

109

Construction, land development, and other land

3,079

276

-

-

Commercial and industrial

12,919

494

16,668

481

With an allowance recorded

Commercial real estate

22,783

1,074

27,620

1,185

Residential real estate

29

—

207

2

Commercial and industrial

20,782

1,337

28,785

1,666

Total impaired loans

$
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, 2022 and December 31, 2021:

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

$
1,669,578

$
424,124

$
423,076

$
1,752,765

$
1,522

$
1,138

$
492,624

$
4,764,827

Watch

80,609

13,597

21,754

135,377

—

77

1,784

253,198

Special Mention

16,800

1,750

6,092

39,123

—

—

902

64,667

Substandard

45,033

5,127

5,541

38,014

—

—

518

94,233

Doubtful

—

—

—

—

—

—

—

—

Loss

—

—

—

—

—

—

—

—

Total

$
1,812,020

$
444,598

$
456,463

$
1,965,279

$
1,522

$
1,215

$
495,828

$
5,176,925

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~~of the loans and leases ~~by category~~considered for inclusion in the allowance for credit losses - loans and leases calculation at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:

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


June 30, 2023	2023		2022		2021		2020		2019		Prior		Revolving Loans		Total Loans
Commercial Real Estate
Current	$	103,241	$	471,704	$	543,147	$	217,549	$	131,169	$	470,626	$	9,980	$	1,947,416
30-59 Days Past Due		—		—		—		—		—		41		—		41
60-89 Days Past Due		—		97		760		74		—		714		—		1,645
Greater than 90 Accruing		—		—		—		—		—		—		—		—
Non-accrual		—		—		—		308		1,836		12,200		—		14,344
Total Past Due		—		97		760		382		1,836		12,955		—		16,030
Total	$	103,241	$	471,801	$	543,907	$	217,931	$	133,005	$	483,581	$	9,980	$	1,963,446
Residential Real Estate
Current	$	36,607	$	64,797	$	57,845	$	42,461	$	31,760	$	216,055	$	51,226	$	500,751
30-59 Days Past Due		—		2,885		—		—		—		110		235		3,230
60-89 Days Past Due		—		—		—		—		—		—		—		—
Greater than 90 Accruing		—		—		—		—		—		—		—		—
Non-accrual		—		—		—		197		366		403		—		966
Total Past Due		—		2,885		—		197		366		513		235		4,196
Total	$	36,607	$	67,682	$	57,845	$	42,658	$	32,126	$	216,568	$	51,461	$	504,947
Construction, Land Development, & Land
Current	$	29,757	$	65,849	$	181,279	$	65,679	$	19,210	$	24,961	$	1,208	$	387,943
30-59 Days Past Due		—		—		—		—		—		—		—		—
60-89 Days Past Due		—		—		—		—		—		—		—		—
Greater than 90 Accruing		—		—		—		—		—		—		—		—
Non-accrual		—		—		—		—		—		—		—		—
Total Past Due		—		—		—		—		—		—		—		—
Total	$	29,757	$	65,849	$	181,279	$	65,679	$	19,210	$	24,961	$	1,208	$	387,943
Commercial & Industrial
Current	$	277,360	$	515,117	$	311,213	$	144,451	$	95,567	$	196,640	$	539,692	$	2,080,040
30-59 Days Past Due		—		4		—		—		—		—		275		279
60-89 Days Past Due		—		327		480		215		553		685		—		2,260
Greater than 90 Accruing		—		—		—		—		—		—		—		—
Non-accrual		—		3,933		5,686		3,169		2,086		2,236		5,061		22,171
Total Past Due		—		4,264		6,166		3,384		2,639		2,921		5,336		24,710
Total	$	277,360	$	519,381	$	317,379	$	147,835	$	98,206	$	199,561	$	545,028	$	2,104,750
Installment and Other
Current	$	339	$	247	$	125	$	24	$	55	$	458	$	2,487	$	3,735
30-59 Days Past Due		—		—		—		—		—		—		—		—
60-89 Days Past Due		—		—		—		—		—		1		—		1
Greater than 90 Accruing		—		—		—		—		—		—		—		—
Non-accrual		—		—		—		—		—		—		—		—
Total Past Due		—		—		—		—		—		1		—		1
Total	$	339	$	247	$	125	$	24	$	55	$	459	$	2,487	$	3,736
Lease Financing Receivables
Current	$	179,070	$	249,956	$	120,522	$	40,587	$	9,606	$	3,058	$	—	$	602,799
30-59 Days Past Due		571		415		366		153		39		44		—		1,588
60-89 Days Past Due		129		353		—		18		—		16		—		516
Greater than 90 Accruing		—		—		—		—		—		—		—		—
Non-accrual		—		350		307		88		22		25		—		792
Total Past Due		700		1,118		673		259		61		85		—		2,896
Total	$	179,770	$	251,074	$	121,195	$	40,846	$	9,667	$	3,143	$	—	$	605,695
Total Loans and Leases
Current	$	626,374	$	1,367,670	$	1,214,131	$	510,751	$	287,367	$	911,798	$	604,593	$	5,522,684
30-59 Days Past Due		571		3,304		366		153		39		195		510		5,138
60-89 Days Past Due		129		777		1,240		307		553		1,416		—		4,422
Greater than 90 Accruing		—		—		—		—		—		—		—		—
Non-accrual		—		4,283		5,993		3,762		4,310		14,864		5,061		38,273
Total Past Due		700		8,364		7,599		4,222		4,902		16,475		5,571		47,833
Total	$	627,074	$	1,376,034	$	1,221,730	$	514,973	$	292,269	$	928,273	$	610,164	$	5,570,517

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)

~~Troubled debt restructurings (“TDRs”) are granted due to borrower financial difficulty~~Total non-accrual loans without an allowance included $1.6 million of commercial real estate loans and ~~provide for a modification~~$2.9 million of ~~loan repayment terms. TDRs are treated in the same manner as impaired~~commercial and industrial loans ~~for purposes of calculating the allowance for loan and lease losses.~~ ~~The tables below present TDRs by loan category~~ as of ~~September~~June 30, ~~2022~~2023. The Company recognized $2.0 million of interest income on non-accrual loans and ~~December 31, 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~~leases for the ~~three and nine~~six months ended ~~September~~June 30, ~~2022 and 2021 were:~~2023.


December 31, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans		Total Loans(1)
Commercial Real Estate
Current	$	477,334	$	525,048	$	229,260	$	132,067	$	112,126	$	387,349	$	28,343	$	1,891,527
30-59 Days Past Due		97		54		—		—		471		2,060		—		2,682
60-89 Days Past Due		—		—		—		—		—		1,016		—		1,016
Greater than 90 Accruing		—		—		—		—		—		—		—		—
Non-accrual		—		60		124		4,846		2,971		11,298		—		19,299
Total Past Due		97		114		124		4,846		3,442		14,374		—		22,997
Total	$	477,431	$	525,162	$	229,384	$	136,913	$	115,568	$	401,723	$	28,343	$	1,914,524
Residential Real Estate
Current	$	68,752	$	59,075	$	40,731	$	32,440	$	52,950	$	180,128	$	52,146	$	486,222
30-59 Days Past Due		—		—		2,497		—		—		108		122		2,727
60-89 Days Past Due		—		—		—		—		—		—		—		—
Greater than 90 Accruing		—		—		—		—		—		—		—		—
Non-accrual		—		—		234		381		296		2,130		600		3,641
Total Past Due		—		—		2,731		381		296		2,238		722		6,368
Total	$	68,752	$	59,075	$	43,462	$	32,821	$	53,246	$	182,366	$	52,868	$	492,590
Construction, Land Development, & Land
Current	$	62,310	$	203,672	$	63,740	$	33,128	$	34,700	$	41,250	$	185	$	438,985
30-59 Days Past Due		—		—		—		—		—		—		—		—
60-89 Days Past Due		—		—		—		—		—		—		—		—
Greater than 90 Accruing		—		—		—		—		—		—		—		—
Non-accrual		—		—		—		—		—		4		—		4
Total Past Due		—		—		—		—		—		4		—		4
Total	$	62,310	$	203,672	$	63,740	$	33,128	$	34,700	$	41,254	$	185	$	438,989
Commercial & Industrial
Current	$	524,341	$	339,915	$	156,713	$	113,350	$	122,523	$	153,039	$	628,747	$	2,038,628
30-59 Days Past Due		980		1,371		391		1,717		368		922		—		5,749
60-89 Days Past Due		—		8		80		87		—		472		—		647
Greater than 90 Accruing		—		—		—		—		—		—		—		—
Non-accrual		1,156		1,089		3,376		2,725		1,167		2,447		861		12,821
Total Past Due		2,136		2,468		3,847		4,529		1,535		3,841		861		19,217
Total	$	526,477	$	342,383	$	160,560	$	117,879	$	124,058	$	156,880	$	629,608	$	2,057,845
Installment and Other
Current	$	366	$	146	$	65	$	79	$	17	$	657	$	429	$	1,759
30-59 Days Past Due		—		—		—		—		—		—		—		—
60-89 Days Past Due		—		—		—		—		—		—		—		—
Greater than 90 Accruing		—		—		—		—		—		—		—		—
Non-accrual		—		—		—		—		—		—		—		—
Total Past Due		—		—		—		—		—		—		—		—
Total	$	366	$	146	$	65	$	79	$	17	$	657	$	429	$	1,759
Lease Financing Receivables
Current	$	294,948	$	149,642	$	53,680	$	14,557	$	7,411	$	955	$	—	$	521,193
30-59 Days Past Due		1,461		467		295		104		77		2		—		2,406
60-89 Days Past Due		79		39		—		—		9		—		—		127
Greater than 90 Accruing		—		—		—		—		—		—		—		—
Non-accrual		35		82		63		76		4		—		—		260
Total Past Due		1,575		588		358		180		90		2		—		2,793
Total	$	296,523	$	150,230	$	54,038	$	14,737	$	7,501	$	957	$	—	$	523,986
Total Loans and Leases
Current	$	1,428,051	$	1,277,498	$	544,189	$	325,621	$	329,727	$	763,378	$	709,850	$	5,378,314
30-59 Days Past Due		2,538		1,892		3,183		1,821		916		3,092		122		13,564
60-89 Days Past Due		79		47		80		87		9		1,488		—		1,790
Greater than 90 Accruing		—		—		—		—		—		—		—		—
Non-accrual		1,191		1,231		3,797		8,028		4,438		15,879		1,461		36,025
Total Past Due		3,808		3,170		7,060		9,936		5,363		20,459		1,583		51,379
Total	$	1,431,859	$	1,280,668	$	551,249	$	335,557	$	335,090	$	783,837	$	711,433	$	5,429,693

(1) - Includes $8.4 million of substandard loans classified as held for sale.

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)

Total non-accrual loans without an allowance included $10.8 million of commercial real estate loans, $4.3 million of commercial and industrial loans, and $2.6 million of residential real estate loans, as of December 31, 2022. The Company recognized $2.5 million of interest income on non-accrual loans and leases for the year ended December 31, 2022.

The following table summarize the balance and activity within the allowance for credit losses - loans and leases, the components of the allowance for credit losses - loans and leases by loans and leases individually and collectively evaluated for impairment, and corresponding loan and lease balances by type for the three and six months ended June 30, 2023 are as follows:


June 30, 2023	Commercial Real Estate			Residential Real Estate			Construction, Land Development, and Other Land			Commercial and Industrial			Installment and Other		Lease Financing Receivables			Total
Allowance for credit losses - loans and leases
Three months ended
Beginning balance	$	24,738		$	2,679		$	3,498		$	51,849		$	25	$	7,676		$	90,465
Provision/(recapture)		4,359			(198	)		(1,563	)		3,161			17		691			6,467
Charge-offs		(2,945	)		—			—			(2,097	)		—		(462	)		(5,504	)
Recoveries		225			63			—			727			1		221			1,237
Ending balance	$	26,377		$	2,544		$	1,935		$	53,640		$	43	$	8,126		$	92,665
Six months ended
Beginning balance	$	26,061		$	3,140		$	3,134		$	41,889		$	24	$	7,676		$	81,924
Provision		3,240			(651	)		(1,199	)		13,964			15		810			16,179
Charge-offs		(3,911	)		(9	)		—			(3,887	)		—		(766	)		(8,573	)
Recoveries		987			64			—			1,674			4		406			3,135
Ending balance	$	26,377		$	2,544		$	1,935		$	53,640		$	43	$	8,126		$	92,665
Ending balance:
Individually evaluated for impairment	$	8,555		$	—		$	—		$	17,399		$	—	$	—		$	25,954
Collectively evaluated for impairment		17,822			2,544			1,935			36,241			43		8,126			66,711
Total allowance for credit losses - loans and leases	$	26,377		$	2,544		$	1,935		$	53,640		$	43	$	8,126		$	92,665

Loans and leases ending balance:
Individually evaluated for impairment	$	30,750		$	—		$	—		$	38,485		$	—	$	—		$	69,235
Collectively evaluated for impairment		1,932,696			504,947			387,943			2,066,265			3,736		605,695			5,501,282
Total loans and leases	$	1,963,446		$	504,947		$	387,943		$	2,104,750		$	3,736	$	605,695		$	5,570,517

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 summarize the balance and activity within the allowance for loan and lease losses, the components of the allowance for loan and lease losses by loans and leases individually and collectively evaluated for impairment, loans acquired with deteriorated credit quality, and corresponding loan and lease balances by type for the three and six months ended June 30, 2022:


June 30, 2022	Commercial Real Estate			Residential Real Estate		Construction, Land Development, and Other Land		Commercial and Industrial			Installment and Other		Lease Financing Receivables			Total
Allowance for loan and lease losses
Three months ended
Beginning balance	$	19,706		$	2,145	$	1,116	$	33,244		$	10	$	3,237		$	59,458
Provision		566			339		676		3,852			1		474			5,908
Charge-offs		(497	)		—		—		(2,654	)		—		(324	)		(3,475	)
Recoveries		43			5		—		293			—		204			545
Ending balance	$	19,818		$	2,489	$	1,792	$	34,735		$	11	$	3,591		$	62,436
Six months ended
Beginning balance	$	16,918		$	1,628	$	522	$	33,129		$	9	$	2,806		$	55,012
Provision/(recapture)		3,350			852		1,270		4,310			2		1,119			10,903
Charge-offs		(737	)		—		—		(3,117	)		—		(687	)		(4,541	)
Recoveries		287			9		—		413			—		353			1,062
Ending balance	$	19,818		$	2,489	$	1,792	$	34,735		$	11	$	3,591		$	62,436
Ending balance:
Individually evaluated for impairment	$	6,002		$	—	$	—	$	11,337		$	—	$	—		$	17,339
Collectively evaluated for impairment		12,576			1,680		1,764		23,012			8		3,591			42,631
Loans acquired with deteriorated credit quality		1,240			809		28		386			3		—			2,466
Total allowance for loan and lease losses	$	19,818		$	2,489	$	1,792	$	34,735		$	11	$	3,591		$	62,436

Loans and leases ending balance:
Individually evaluated for impairment	$	45,200		$	5,188	$	5,541	$	27,770		$	—	$	—		$	83,699
Collectively evaluated for impairment		1,794,663			436,081		428,782		1,876,772			1,153		442,371			4,979,822
Loans acquired with deteriorated credit quality		60,075			39,902		1,184		3,232			157		—			104,550
Total loans and leases	$	1,899,938		$	481,171	$	435,507	$	1,907,774		$	1,310	$	442,371		$	5,168,071

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The Company increased the allowance for credit losses - loans and leases by $2.2 million and $10.7 million for the three and six months ended June 30, 2023, respectively, and increased the allowance for loan and lease losses by $3.0 million and $7.4 million for the three and six months ended June 30, 2022, respectively. For loans evaluated for impairment, the Company increased allowance for credit losses - loans and leases by $3.9 million and $10.6 million for the three and six months ended June 30, 2023, respectively. The Company recaptured $3.4 million and $3.7 million of the allowance for loan and lease losses for the three and six months ended June 30, 2022, respectively. For loans and leases collectively evaluated for impairment, the Company recaptured $1.7 million of the allowance for credit losses - loans and leases for the three months ended June 30, 2023, and increased it by $124,000 for the six months ended June 30, 2023. The Company increased the allowance for loan and lease losses by $7.0 million and $11.8 million for the three and six months ended June 30, 2022, respectively. The change in allowance for credit losses - loans and leases collectively evaluated for impairment was mainly due to changes in expected losses driven by macro-economic factors.

The following table presents loans with modified terms as of June 30, 2023:


June 30, 2023	Payment Delay		Term Modification		Combination Term Modification and Interest Rate Reduction		Total Modified by Class		% of Class of Loans and Leases
Modified loans
Commercial real estate	$	110	$	—	$	—	$	110		0.00	%
Commercial and industrial		8,719		51,370		385		60,474		2.87	%
Total modified loans	$	8,829	$	51,370	$	385	$	60,584		1.1	%

Loans reflected as having a payment delay included a general adjustment in loan terms similar to those of pass-rated credits. Loans having term modifications included extension of term as a result of a new borrower structure and other miscellaneous term adjustments. Loans having a combination of term modification and interest rate reduction reflect a longer amortization period and a reduced weighted average contractual rate from 8.85% to 7.01%.

TDRs are granted due to borrower financial difficulty and provide for a modification of loan repayment terms. The tables below present TDRs by loan category as of December 31, 2022:


December 31, 2022	Number of Loans		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Charge-offs		Individually Evaluated
Accruing:
Commercial real estate		2	$	551	$	551	$	—	$	109
Commercial and industrial		1		24		24		—		34
Residential real estate		2		144		144		—		—
Total accruing		5		719		719		—		143
Non-accruing:
Commercial real estate		3		830		623		207		73
Commercial and industrial		6		2,017		982		1,035		38
Total non-accruing		9		2,847		1,605		1,242		111
Total troubled debt restructurings		14	$	3,566	$	2,324	$	1,242	$	254

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Loans modified as troubled debt restructurings that occurred during the three and six months ended June 30, 2022 were:


	Three Months Ended			Six Months Ended
	June 30,			June 30,
	2022			2022
Accruing:
Beginning balance	$	1,456		$	1,927
Additions		—			—
Net payments		(98	)		(569	)
Net transfers from non-accrual		—			—
Ending balance		1,358			1,358
Non-accruing:
Beginning balance		1,343			1,506
Additions		—			—
Net payments		(209	)		(372	)
Charge-offs		—			—
Net transfers to accrual		—			—
Ending balance		1,134			1,134
Total troubled debt restructurings	$	2,492		$	2,492

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

The following table presents the amortized cost basis of collateral-dependent loans and leases, which are individually evaluated to determine expected credit losses as of June 30, 2023 and December 31, 2022:


June 30, 2023	Commercial Construction		Non-owner Occupied Commercial		Owner-Occupied Commercial		Multi-Family		Single Family Residence (1st Lien)		Single Family Residence (2nd Lien)		Business Assets		Total
Commercial real estate	$	—	$	8,076	$	22,673	$	—	$	—	$	—	$	—	$	30,749
Commercial and industrial		—		—		—		—		—		—		38,486		38,486
Total	$	-	$	8,076	$	22,673	$	—	$	—	$	—	$	38,486	$	69,235

December 31, 2022	Commercial Construction		Non-owner Occupied Commercial		Owner-Occupied Commercial		Multi-Family		Single Family Residence (1st Lien)		Single Family Residence (2nd Lien)		Business Assets		Total
Commercial real estate	$	—	$	9,749	$	28,210	$	—	$	—	$	—	$	—	$	37,959
Residential real estate		—		—		—		237		422		220		—		879
Construction, land development, and other land		5,541		—		—		—		—		—		—		5,541
Commercial and industrial		—		—		—		—		—		—		26,034		26,034
Total	$	5,541	$	9,749	$	28,210	$	237	$	422	$	220	$	26,034	$	70,413

The following table presents the change in the balance of the reserve for unfunded commitments as of ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:


	For the Three Months Ended					For the Nine Months Ended					For the Three Months Ended					For the Six Months Ended
	September 30,					September 30,					June 30,					June 30,
	2022		2021			2022		2021			2023			2022		2023			2022
Beginning balance	$	2,191	$	1,604		$	1,403	$	1,887		$	4,316		$	2,003	$	4,203		$	1,403
Provision/(recapture) for of unfunded commitments		136		(79	)		924		(362	)
Provision for/(recapture) of unfunded commitments												(677	)		188		(564	)		788
Ending balance	$	2,327	$	1,525		$	2,327	$	1,525		$	3,639		$	2,191	$	3,639		$	2,191

~~There were~~ no

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

~~charge-offs or recoveries related to the reserve for unfunded commitments during the periods.~~

Note 6—Servicing Assets

Activity for servicing assets and the related changes in fair value for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 was as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021			2023			2022			2023			2022
Beginning balance	$	22,155		$	24,683		$	23,744		$	22,042		$	20,944		$	24,497		$	19,172		$	23,744
Additions, net		1,314			1,564			5,592			5,703			1,636			2,294			2,752			4,278
Changes in fair value		(2,342	)		(2,650	)		(8,209	)		(4,148	)		(865	)		(4,636	)		(209	)		(5,867	)
Ending balance	$	21,127		$	23,597		$	21,127		$	23,597		$	21,715		$	22,155		$	21,715		$	22,155

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~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 were as follows:


	September 30,		December 31,		June 30,		December 31,
	2022		2021		2023		2022
Loan portfolios serviced for:
SBA guaranteed loans	$	1,510,665	$	1,510,375	$	1,516,675	$	1,521,014
USDA guaranteed loans		193,169		183,026		195,969		211,150
Total	$	1,703,834	$	1,693,401	$	1,712,644	$	1,732,164

Loan servicing revenue totaled $3.4 million ~~and $3.3~~ ~~million~~ for each of the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021, respectively.~~2022. Loan servicing revenue totaled $~~10.2~~ ~~million and $9.3~~6.8 million for each of the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021, respectively.~~2022.

Loan servicing asset revaluation, which represents the changes in fair value of servicing assets, resulted in a downward valuation adjustment of $~~2.3~~865,000 ~~million~~ and $~~2.7~~4.6 million for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. Loan servicing asset revaluation resulted in a downward valuation adjustment of $~~8.2~~209,000 ~~million~~ and $~~4.1~~5.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, 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.

23Note 7—Other Real Estate Owned

The following table presents the change in other real estate owned (“OREO”) for the three and six months ended June 30, 2023 and 2022:


	Three Months Ended June 30,					Six Months Ended June 30,
	2023			2022		2023			2022
Beginning balance	$	3,712		$	2,221	$	4,717		$	2,112
Net additions to OREO		445			2,528		499			2,837
Proceeds from sales of OREO		(1,795	)		—		(2,559	)		(225	)
Gains (losses) on sales of OREO		(85	)		—		(49	)		76
Valuation adjustments		(12	)		—		(343	)		(51	)
Ending balance	$	2,265		$	4,749	$	2,265		$	4,749

At June 30, 2023, the balance of real estate owned included $566,000 and $2.3 million in foreclosed residential real estate properties recorded as a result of obtaining physical possession of the property as of June 30, 2023 and December 31, 2022, respectively.

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, 2022 and 2021:~~

Three Months Ended
September 30,

Nine Months Ended
September 30,

2022

2021

2022

2021

Beginning balance

$
4,749

$
4,417

$
2,112

$
6,350

Net additions to OREO

—

—

2,837

436

Proceeds from sales of OREO

(131
)

(1,498
)

(356
)

(2,998
)
Gains on sales of OREO

—

114

76

133

Valuation adjustments

(216
)

—

(267
)

(888
)
Ending balance

$
4,402

$
3,033

$
4,402

$
3,033

~~At September 30, 2022, the balance of real estate owned included $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~~ no ~~foreclosed residential real estate properties.~~

At ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021, the~~2022, there were no recorded investment of consumer mortgage loans secured by residential real estate properties ~~for which formal foreclosure proceedings were~~ in ~~process was $842,000~~ ~~and $2.5~~ ~~million, respectively.~~foreclosure.

There were no internally financed sales of OREO for the three or ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 or ~~2021.~~2022.

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") on the Company’s 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, 2022:~~the periods indicated:

Balance Sheet Line Item

September 30, 2022

December 31, 2021

Operating lease right-of-use asset

Accrued interest receivable and other assets

$
10,551

$
11,646

Operating lease liability

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)~~


	Balance Sheet Line Item	June 30, 2023		December 31, 2022
Operating lease right-of-use asset	Accrued interest receivable and other assets	$	10,849	$	11,352
Operating lease liability	Accrued interest payable and other liabilities		13,534		14,391

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~~Federal Home Loan Bank regular advance rate, adjusted for the lease term and other factors. At ~~September~~June 30, ~~2022,~~2023, the weighted-average discount rate of operating leases was ~~1.28~~2.20% and the weighted average remaining life of operating leases was ~~5.6~~6.2 years, compared to ~~0.99~~1.95% and ~~6.0~~6.2 years as of December 31, ~~2021.~~2022.

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,						Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021			2023			2022			2023			2022
Operating lease cost	$	682		$	625		$	2,260		$	2,563		$	621		$	720		$	1,244		$	1,578
Short-term lease cost		47			42			160			164			99			76			168			113
Variable lease cost		384			586			1,264			1,260			357			411			769			880
Less: Sublease income		(158	)		(166	)		(434	)		(479	)		(159	)		(149	)		(315	)		(276	)
Total lease cost, net	$	955		$	1,087		$	3,250		$	3,508		$	918		$	1,058		$	1,866		$	2,295

~~The future minimum lease payments~~Operating cash flows paid for operating ~~leases, subsequent to September 30, 2022, as recorded on~~lease amounts included in the ~~Condensed Consolidated Statements~~measure of ~~Financial Condition, are summarized as follows:~~lease liabilities were $

821,000 and $

Operating Lease
Commitments

2022

$
1,001

2023

3,530

2024

3,469

2025

2,487

2026

1,720

Thereafter

2,364

Total undiscounted lease payments

14,571

Less: imputed interest

(660
)
Net lease liabilities

$
13,911

962,000

~~The Company’s rental expenses~~ for the three months ended ~~September~~June 30, 2023 and 2022, ~~and 2021~~respectively. Operating cash flows paid for operating lease amounts included in the measure of lease liabilities were $~~1.1~~1.7 million and $~~1.2~~2.1 million ~~respectively. The Company’s rental expenses~~ for the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022, ~~and 2021 were~~respectively.

The Company recorded $~~3.7~~619,000 ~~million~~ and $~~4.0~~64,000 ~~million, respectively For~~of right-of-use lease assets in exchange for operating lease liabilities for the three months ended ~~September~~June 30, 2023 and 2022, ~~and 2021, the~~respectively. The Company ~~received~~recorded $~~158,000~~932,000 and $~~166,000~~1.3~~, respectively,~~ million of right-of-use lease assets in ~~sublease income. For~~exchange for operating lease liabilities for the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022, ~~and 2021, the Company received $434,000~~ ~~and $479,000, respectively, in sublease income.~~respectively.

~~The total amount of minimum rentals to be received in the future on these subleases is approximately $1.0~~ ~~million, and the leases have contractual lives extending through~~ ~~2026. In addition to the above required lease payments, the Company has contractual obligations related primarily to information technology contracts and other maintenance contracts.~~

2528

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The future minimum lease payments for operating leases, subsequent to June 30, 2023, as recorded on the Condensed Consolidated Statements of Financial Condition, are summarized as follows:


	Operating Lease Commitments
2023	$	1,677
2024		3,331
2025		2,759
2026		2,154
2027		1,112
Thereafter		3,691
Total undiscounted lease payments		14,724
Less: Imputed interest		(1,190	)
Net lease liabilities	$	13,534

The total amount of minimum rentals to be received in the future on these subleases is approximately $1.4 million, and the leases have contractual lives extending through 2028. 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~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:


	For the Three Months Ended September 30,																For the Three Months Ended June 30,
	2022								2021								2023								2022
	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	$	11,945		$	1,796		$	148,353	$	18,346		$	2,335		$	148,353	$	7,498		$	1,581		$	148,353	$	13,475		$	2,134
Amortization		—		(1,529	)		(81	)		—		(1,672	)		(66	)		—		(1,388	)		(67	)		—		(1,530	)		(338	)
Ending balance	$	148,353	$	10,416		$	1,715		$	148,353	$	16,674		$	2,269		$	148,353	$	6,110		$	1,514		$	148,353	$	11,945		$	1,796
Accumulated amortization	N/A		$	45,050		$	1,501		N/A		$	38,792		$	947		N/A		$	49,356		$	1,702		N/A		$	43,521		$	1,420
Weighted average remaining amortization period	N/A		4.5 Years			6.4 Years			N/A		5.0 Years			8.5 Years			N/A		4.8 Years			5.7 Years			N/A		4.5 Years			6.8 Years


	For the Nine Months Ended September 30,																For the Six Months Ended June 30,
	2022								2021								2023								2022
	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	$	15,004		$	2,201		$	148,353	$	21,809		$	2,469		$	148,353	$	8,886		$	1,648		$	148,353	$	15,004		$	2,201
Amortization		—		(4,588	)		(486	)		—		(5,135	)		(200	)		—		(2,776	)		(134	)		—		(3,059	)		(405	)
Ending balance	$	148,353	$	10,416		$	1,715		$	148,353	$	16,674		$	2,269		$	148,353	$	6,110		$	1,514		$	148,353	$	11,945		$	1,796
Accumulated amortization	N/A		$	45,050		$	1,501		N/A		$	38,792		$	947		N/A		$	49,356		$	1,702		N/A		$	43,521		$	1,420
Weighted average remaining amortization period	N/A		4.5 Years			6.4 Years			N/A		5.0 Years			8.5 Years			N/A		4.8 Years			5.7 Years			N/A		4.5 Years			6.8 Years

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 the estimated amortization expense for core deposit intangible and customer relationship intangible assets remaining at ~~September~~June 30, ~~2022:~~2023:


	Estimated Amortization		Estimated Amortization
2022	$	1,596
2023		4,336	$	1,426
2024		2,286		2,286
2025		1,721		1,721
2026		1,157		1,157
2027				609
Thereafter		1,035		425
Total	$	12,131	$	7,624

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~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 was ~~23.4~~25.9% and ~~25.3~~22.2%, respectively. The Company recorded discrete income tax benefit of $140,000 and $2.1 million ~~and $166,000~~ related to the exercise of stock options and vesting of restricted shares for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

Net deferred tax assets ~~increased~~decreased to $~~91.5~~66.9 million at ~~September~~June 30, ~~2022~~2023 compared to $~~50.3~~68.2 million at December 31, ~~2021~~2022 primarily as a result of the change in unrealized ~~losses~~gains on ~~available-for-sale securities.~~cash flow hedges.

~~BYLINE BANCORP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

Note 11—Deposits

The composition of deposits was as follows as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


	September 30,		December 31,		June 30,		December 31,
	2022		2021		2023		2022
Non-interest-bearing demand deposits	$	2,142,183	$	2,158,420	$	1,793,749	$	2,138,645
Interest-bearing checking accounts		616,139		572,426		530,775		592,098
Money market demand accounts		1,485,815		1,106,272		1,600,043		1,415,653
Other savings		669,734		638,218		562,706		625,798
Time deposits (below $250,000)		586,198		532,589		1,214,717		762,250
Time deposits ($250,000 and above)		112,387		147,122		215,102		160,677
Total deposits	$	5,612,456	$	5,155,047	$	5,917,092	$	5,695,121

There were $~~122.7~~551.4 million and $251.5 million of brokered deposits included in time deposits below $250,000 at ~~September~~June 30, ~~2022. There were~~ no ~~brokered deposits included in time deposits at~~2023 and December 31, ~~2021.~~2022, respectively.

At ~~September~~June 30, ~~2022,~~2023, the scheduled maturities of time deposits were:


	Scheduled Maturities		Scheduled Maturities
2022	$	160,645
2023		479,550	$	767,520
2024		29,339		633,946
2025		14,293		14,359
2026 and thereafter		14,758
2026				6,657
2027 and thereafter				7,337
Total	$	698,585	$	1,429,819

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.

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Note 12—Other Borrowings

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


	September 30,		December 31,		June 30,		December 31,
	2022		2021		2023		2022
Federal Home Loan Bank advances	$	600,000	$	490,000	$	540,000	$	625,000
Securities sold under agreements to repurchase		53,954		29,723		34,922		15,399
Line of credit		—		—		—		—
Total	$	653,954	$	519,723	$	574,922	$	640,399

Byline Bank has the capacity to borrow funds from the discount window of the Federal Reserve System. As of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, there were no outstanding advances under the Federal Reserve Bank discount window line.

At ~~September~~June 30, ~~2022,~~2023, fixed-rate Federal Home Loan Bank (“FHLB”) advances totaled $~~200.0~~40.0 million, with an interest rate of 5.18% and maturity of July 2023. Total variable rate advances were $500.0 million at June 30, 2023, with interest rates ranging from ~~3.28~~5.21% to ~~3.65% and maturities ranging from~~ ~~November 2022~~ to ~~December 2022. Total variable rate advances were $400.0~~ ~~million at September 30, 2022, with interest rates ranging from~~ ~~2.91% to~~ ~~3.00~~5.28%, that may reset daily, with maturities between August 2023 and ~~mature in November 2022.~~September 2023. 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% of total assets. Required investment in FHLB stock is $4.50 for every $100 in 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—4—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 million revolving credit agreement with a correspondent bank. Through subsequent amendments, the revolving credit agreement was reduced to $15.0 ~~million and the maturity of the credit facility was extended to~~ ~~October 6, 2023~~.million. The amended revolving line of credit bears interest at either SOFR plus 195 basis points or 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. On May 26, 2023, the Company amended the agreement with the lender, which provides for: i) the renewal of the revolving line-of-credit facility of up to $15,000,000, extending its maturity date to May 26, 2024; and ii) a new term loan facility in the principal amount of up to $20,000,000 with a maturity date of May 26, 2026, each subject to the existing Negative Pledge Agreement dated October 11, 2018, as amended. At ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the line of credit had no outstanding balance.

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


	September 30,		December 31,		June 30,		December 31,
	2022		2021		2023		2022
Federal Home Loan Bank line	$	1,877,936	$	1,883,349	$	2,076,310	$	1,903,549
Federal Reserve Bank of Chicago discount window line		797,131		602,962		760,627		804,578
Available federal funds lines		135,000		115,000		135,000		135,000

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.

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Note 13—Subordinated Notes and Junior Subordinated Debentures

In 2020, the Company issued $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% until July 1, 2025 and a floating interest rate equal to a benchmark rate, which is expected to be the three-month SOFR, plus 588 basis points thereafter until maturity. The transaction resulted in debt issuance costs of approximately $1.7 million that is being amortized over 10 years.

As of ~~September~~June 30, ~~2022,~~2023, the net liability outstanding of the subordinated notes was $~~73.6~~73.8 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~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company’s junior subordinated debentures by issuance were as follows:


Name of Trust	Aggregate Principal Amount September 30, 2022			Aggregate Principal Amount December 31, 2021			Stated Maturity	Contractual Rate at September 30, 2022			Interest Rate Spread	Aggregate Principal Amount June 30, 2023			Aggregate Principal Amount December 31, 2022			Stated Maturity	Contractual Rate at June 30, 2023			Interest Rate Spread
Metropolitan Statutory Trust 1	$	35,000		$	35,000		March 17, 2034		6.32	%	Three-month LIBOR + 2.79%
Metropolitan Statutory Trust I												$	35,000		$	35,000		March 17, 2034		8.30	%	Three-month LIBOR + 2.79%
First Evanston Bancorp Trust I		10,000			10,000		March 15, 2035		5.07	%	Three-month LIBOR + 1.78%		10,000			10,000		March 15, 2035		7.33	%	Three-month LIBOR + 1.78%
Total liability, at par		45,000			45,000								45,000			45,000
Discount		(7,768	)		(8,094	)							(7,443	)		(7,662	)
Total liability, at carrying value	$	37,232		$	36,906							$	37,557		$	37,338

In 2004, the Company’s predecessor, Metropolitan Bank Group, Inc., issued $35.0 million floating rate junior subordinated debentures to Metropolitan Statutory Trust 1,I, which was formed for the issuance of trust preferred securities. The debentures bear interest at three-month LIBOR plus 2.79% (~~6.32~~8.30% and ~~3.01~~7.53% at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, 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 $~~76,000~~92,000 and $~~45,000~~98,000 as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

As part of the First Evanston acquisition, the Company assumed the obligations to First Evanston Bancorp Trust I of $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% (~~5.07~~7.33% and ~~1.98~~6.55% at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, 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 $~~22,000~~31,000 and $~~9,000~~30,000 as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, 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.

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Note 14—Commitments and Contingent Liabilities

Legal 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—Refer to Note 8—Leases for discussion of operating lease commitments.

Commitments to extend 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~~June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


	September 30, 2022						December 31, 2021						June 30, 2023						December 31, 2022
	Fixed Rate		Variable Rate		Total		Fixed Rate		Variable Rate		Total		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	$	245,616	$	1,807,433	$	2,053,049	$	258,049	$	1,821,175	$	2,079,224
Letters of credit		536		58,144		58,680		599		58,543		59,142		521		66,036		66,557		536		61,328		61,864
Total	$	252,061	$	1,792,625	$	2,044,686	$	176,613	$	1,636,948	$	1,813,561	$	246,137	$	1,873,469	$	2,119,606	$	258,585	$	1,882,503	$	2,141,088

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 1.00% to ~~18.00~~18.25% and maturities up to ~~2048~~2050. Variable rate loan commitments have interest rates ranging from 1.75% to ~~10.25~~14.00% and maturities up to 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—Quoted prices in active markets for identical assets or liabilities.

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Level 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—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—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 ~~2022~~2023 and ~~2021,~~2022, all of the ratings derived by the Company were ~~“BBB”~~“BBB-” or better with and without comparable bond proxies. All of the ratings of non-Agency backed bonds derived by the Company were investment grade. 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—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—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—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 counterparties. Derivative financial instruments are included in other assets and other liabilities in the Condensed Consolidated Statements of Financial Condition.

3034

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~~June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


			Fair Value Measurements Using								Fair Value Measurements Using
September 30, 2022	Fair Value		Level 1		Level 2		Level 3
June 30, 2023									Fair Value		Level 1		Level 2		Level 3
Financial assets
Securities available-for-sale
U.S. Treasury Notes	$	30,917	$	30,917	$	—	$	—	$	40,718	$	40,718	$	—	$	—
U.S. Government agencies		130,901		—		130,901		—		128,518		—		128,518		—
Obligations of states, municipalities, and political subdivisions		63,565		—		63,565		—		62,730		—		62,730		—
Mortgage-backed securities; residential
Agency		605,098		—		605,098		—		565,680		—		565,680		—
Non-Agency		108,085		—		108,085		—		101,880		—		101,880		—
Mortgage-backed securities; commercial
Agency		159,930		—		159,930		—		152,240		—		152,240		—
Corporate securities		41,616		—		41,616		—		35,943		—		35,943		—
Asset-backed securities		41,542		—		41,542		—		37,991		—		37,991		—
Equity and other securities, at fair value
Mutual funds		2,505		2,505		—		—		2,518		2,518		—		—
Equity securities		4,774		—		4,109		665		15,955		—		15,316		639
Servicing assets		21,127		—		—		21,127		21,715		—		—		21,715
Derivative assets		68,072		—		68,072		—		64,159		—		64,159		—
Financial liabilities
Derivative liabilities		18,505		—		18,505		—		18,773		—		18,773		—

Fair Value Measurements Using

December 31, 2021

Fair Value

Level 1

Level 2

Level 3

Financial assets

Securities available-for-sale

U.S. Treasury Notes

$
18,476

$
18,476

$
—

$
—

U.S. Government agencies

139,390

—

139,390

—

Obligations of states, municipalities, and political
subdivisions

89,636

—

89,636

Mortgage-backed securities; residential

Agency

743,656

—

743,656

—

Non-Agency

145,236

—

145,236

—

Mortgage-backed securities; commercial

Agency

213,551

—

213,551

—

Corporate securities

67,346

—

67,346

—

Asset-backed securities

37,251

—

37,251

—

Equity and other securities, at fair value

Mutual funds

4,880

4,880

—

—

Equity securities

5,698

—

5,012

686

Servicing assets

23,744

—

—

23,744

Derivative assets

13,375

—

13,375

—

Financial liabilities

Derivative liabilities

9,665

—

9,665

—


			Fair Value Measurements Using
December 31, 2022	Fair Value		Level 1		Level 2		Level 3
Financial assets
Securities available-for-sale
U.S. Treasury Notes	$	40,723	$	40,723	$	—	$	—
U.S. Government agencies		130,364		—		130,364		—
Obligations of states, municipalities, and political subdivisions		61,876		—		61,876
Mortgage-backed securities; residential
Agency		595,796		—		595,796		—
Non-Agency		106,249		—		106,249		—
Mortgage-backed securities; commercial
Agency		157,030		—		157,030		—
Corporate securities		41,436		—		41,436		—
Asset-backed securities		40,957		—		40,957		—
Equity and other securities, at fair value
Mutual funds		2,518		2,518		—		—
Equity securities		5,471		—		4,805		666
Servicing assets		19,172		—		—		19,172
Derivative assets		65,342		—		65,342		—
Financial liabilities
Derivative liabilities		17,817		—		17,817		—

~~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,											Six Months Ended June 30,
	2022			2021		2022			2021			2023			2022			2023			2022
	Investment Securities					Servicing Assets						Investment Securities						Servicing Assets
Balance, beginning of period	$	686		$	685	$	23,744		$	22,042		$	666		$	686		$	19,172		$	23,744
Additions, net		—			—		5,592			5,703			—			—			2,752			4,278
Change in fair value		(21	)		1		(8,209	)		(4,148	)		(27	)		(23	)		(209	)		(5,867	)
Balance, end of period	$	665		$	686	$	21,127		$	23,597		$	639		$	663		$	21,715		$	22,155

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The Company did not have any transfers to or from Level 3 of the fair value hierarchy during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022.

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~~June 30, ~~2022:~~2023:

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% - ~~6.4~~8.2%

~~5.8~~7.4

Decrease

Servicing assets

Discounted cash flow

Prepayment speeds

~~0.0~~(1.0)% - ~~33.7~~30.9%

~~13.5~~12.7

Decrease

Discount rate

~~6.3~~6.2% - ~~55.7~~51.6%

~~11.7~~13.8

Decrease

Expected weighted
average loan life

0.0 - ~~9.0~~9.8 years

~~3.9~~4.1 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 non-recurring basis:

~~Impaired~~Individually Evaluated Loans—The Company individually evaluates loans ~~(excluding acquired impaired loans)—Impaired loans, other than those existing~~that do not share similar risk characteristics, including non-accrual loans. Specific allowance for credit losses is measured based on a discounted cash flow of ongoing operations, discounted at the ~~date~~loan's original effective interest rat, or a calculation 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.~~selling costs. Valuations of ~~impaired~~individually assessed loans that are collateral dependent are supported by third party appraisals in accordance with the ~~Bank’s~~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~~Accordingly, individually evaluated loans ~~that~~ are ~~not collateral dependent are not material.~~classified as Level 3.

Assets held for 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—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 theCompany’s assets that were measured at fair value on a non-recurring basis, as of June 30, 2023 and December 31, 2022:


			Fair Value Measurements Using
June 30, 2023	Fair Value		Level 1		Level 2		Level 3
Non-recurring
Individually evaluated loans
Commercial real estate	$	22,195	$	—	$	—	$	22,195
Commercial and industrial		21,086		—		—		21,086
Assets held for sale		8,653		—		—		8,653
Other real estate owned		2,265		—		—		2,265

3236

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, 2022 and December 31, 2021:~~

Fair Value Measurements Using

September 30, 2022

Fair Value

Level 1

Level 2

Level 3

Non-recurring

Impaired loans (excluding acquired impaired loans)

Commercial real estate

$
38,883

$
—

$
—

$
38,883

Residential real estate

4,782

—

—

4,782

Construction, land development, and other land

5,541

5,541

Commercial and industrial

23,395

—

—

23,395

Assets held for sale

8,391

—

—

8,391

Other real estate owned

4,402

—

—

4,402


			Fair Value Measurements Using								Fair Value Measurements Using
December 31, 2021	Fair Value		Level 1		Level 2		Level 3
December 31, 2022									Fair Value		Level 1		Level 2		Level 3
Non-recurring
Impaired loans (excluding acquired impaired loans)
Individually evaluated loans
Commercial real estate	$	28,513	$	—	$	—	$	28,513	$	37,959	$	—	$	—	$	37,959
Residential real estate		1,802		—		—		1,802		879		—		—		879
Construction, land development, and other land										5,541		—		—		5,541
Commercial and industrial		21,570		—		—		21,570		47,846		—		—		47,846
Assets held for sale		9,153		—		—		9,153		8,673		—		—		8,673
Other real estate owned		2,112		—		—		2,112		4,717		—		—		4,717

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—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—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—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—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.

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—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—The carrying amount approximates fair value due to maturities of less than ninety days.

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

Junior subordinated 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—The carrying amount approximates fair value.

Commitments to extend credit and letters of 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,

Fair Value

2022

2021

Hierarchy
Level

Carrying
Amount

Estimated
Fair Value

Carrying
Amount

Estimated
Fair Value

Financial assets

Cash and due from banks

1

$
56,546

$
56,546

$
35,247

$
35,247

Interest bearing deposits with other banks

2

159,744

159,744

122,684

122,684

Securities held-to-maturity

2

3,877

3,825

3,885

3,992

Restricted stock

2

27,077

27,077

22,002

22,002

Loans held for sale

3

33,975

34,879

64,460

69,081

Loans and lease receivables, net (less impaired
loans at fair value)

3

5,138,215

5,113,663

4,430,231

4,428,509

Accrued interest receivable

3

21,718

21,718

18,875

18,875

Financial liabilities

Non-interest-bearing deposits

2

2,142,183

2,142,183

2,158,420

2,158,420

Interest-bearing deposits

2

3,470,273

3,463,575

2,996,627

2,997,026

Accrued interest payable

2

2,844

2,844

262

262

Federal Home Loan Bank advances

2

600,000

600,000

490,000

490,000

Securities sold under repurchase agreement

2

53,954

53,954

29,723

29,723

Subordinated notes

2

73,648

74,645

73,517

81,744

Junior subordinated debentures

3

37,232

40,002

36,906

40,901

3437

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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


			June 30,				December 31,
	Fair Value		2023				2022
	Hierarchy Level		Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial assets
Cash and due from banks		1	$	59,564	$	59,564	$	62,274	$	62,274
Interest bearing deposits with other banks		2		260,621		260,621		117,079		117,079
Securities held-to-maturity		2		2,158		2,132		2,705		2,672
Restricted stock		2		24,377		24,377		28,202		28,202
Loans held for sale		3		25,995		26,803		47,823		40,657
Loans and lease receivables, net (less impaired loans at fair value)		3		5,434,571		5,335,289		5,262,447		5,259,991
Accrued interest receivable		3		29,882		29,882		29,815		29,815
Financial liabilities
Non-interest-bearing deposits		2		1,793,749		1,793,749		2,138,645		2,138,645
Interest-bearing deposits		2		4,123,343		4,122,535		3,556,476		3,554,318
Accrued interest payable		2		13,019		13,019		4,494		4,494
Federal Home Loan Bank advances		2		540,000		540,000		625,000		625,000
Securities sold under repurchase agreement		2		34,922		34,922		15,399		15,399
Subordinated notes		2		73,778		70,341		73,691		70,925
Junior subordinated debentures		3		37,557		38,479		37,338		40,131

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 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~~June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


	September 30, 2022							December 31, 2021							June 30, 2023							December 31, 2022
			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	$	550,000	$	49,191	$	—		$	400,000	$	4,140	$	—		$	550,000	$	45,303	$	—		$	550,000	$	47,249	$	—
Derivatives not designated as hedging instruments
Other interest rate derivatives		549,662		18,881		(18,505	)		439,876		9,235		(9,660	)		558,316		18,856		(18,773	)		545,346		18,093		(17,817	)
Other credit derivatives		6,902		—		—			7,571		—		(5	)		1,206		—		—			6,678		—		—
Total derivatives	$	1,106,564	$	68,072	$	(18,505	)	$	847,447	$	13,375	$	(9,665	)	$	1,109,522	$	64,159	$	(18,773	)	$	1,102,024	$	65,342	$	(17,817	)

Interest rate swaps designated as cash flow hedges—Cash flow hedges of interest payments associated with certain ~~other borrowings~~financial instruments had notional amounts totaling $550.0 million as of ~~September~~June 30, ~~2022,~~2023, and $~~400.0~~ ~~million as of~~ December 31, ~~2021.~~2022. 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~~June 30, ~~2022,~~2023, the cash flow hedges aggregating $550.0 million in notional amounts are comprised of ~~six forward starting pay fixed~~$450.0 million pay-fixed interest rate swaps associated with certain deposits and other borrowings, and $100.0 million receive-fixed interest rate swaps associated with certain variable rate loans. On July 11, 2023, the Company entered into a $50.0 million forward-starting receive-fixed interest rate swap with an effective date of March 2024.

As of June 30, 2023, pay-fixed interest rate swaps are comprised of five effective hedges totaling $400.0 million, and a $50.0 million forward-starting interest rate swap that is effective in September 2023. Receive-fixed interest rate swaps totaling $~~400.0~~ ~~million; two totaling $200.0~~ ~~million are effective in March 2023; two totaling $~~100.0 million are comprised of two effective ~~in May 2023; one for $~~hedges.~~50.0~~ ~~million is effective in June 2023; and one for $50.0~~ ~~million is effective in September 2023.~~

~~Included in other comprehensive income is the remaining balance related to previously terminated interest rate swaps~~For derivatives designated and that qualify as cash flow hedges of $~~32,000~~interest rate risk, the unrealized gain or loss on the derivatives is recorded in accumulated other comprehensive income (loss) and subsequently reclassified into interest income or expense in the same period during which the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to interest income or expense as ~~of September 30, 2022 and $199,000~~ ~~as of December 31, 2021. These~~interest payments are ~~amortized over~~made on the ~~original life of the cash flow hedge.~~hedged instruments. Interest recorded on these swap transactions ~~was~~included $3.9 million of interest income and $109,000of $~~327,000~~ ~~and an~~interest expense ~~of $29,000~~ during the three months ended ~~September~~June 30, ~~2022,~~2023, and ~~2021,~~2022, respectively, and is reported as a component of interest expense on deposits and other borrowings. Interest recorded on these swap transactions was $5.8 million interest income ofand $~~8,000~~319,000 ~~and an~~interest expense ~~of $71,000~~ during the ~~nine~~six months ended ~~September~~June 30, 2023, and 2022, ~~and 2021, respectively, and is reported as a component of interest expense on deposits and other borrowings.~~respectively. As of ~~September~~June 30, ~~2022,~~2023, the Company estimates $~~10.2~~18.4 million of the unrealized gain to be reclassified as a decrease to interest expense during the next twelve months.

~~The following table reflects~~Accumulated other comprehensive income also includes the amortization of the remaining balance related to terminated interest rate swaps designated as cash flow hedges, which are over the original life of the cash flow hedge. In March 2023, the Company terminated interest rate swaps designated as cash flow hedges totaling $100.0 million, of which $50.0 million became effective in May 2023 and $50.0 million became effective in June 2023. The transaction resulted in a gain of $4.2 million, net of tax, which was the clean value at termination date and began amortizing as a decrease to interest expense on the effective dates. The remaining unamortized balance was $4.1 million and $15,000 as of ~~September~~June 30, ~~2022:~~2023 and December 31, 2022, respectively.

Notional amounts

$
550,000

Derivative assets fair value

49,191

Derivative liabilities fair value

—

Weighted average maturity

4.5 years

~~The weighted average pay rates of the swaps are~~ ~~1.33% as of September 30, 2022, and receive rates 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.~~

3539

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 cash flow hedges as of June 30, 2023:


Notional amounts	$	550,000
Derivative assets fair value		45,303
Derivative liabilities fair value		—
Weighted average remaining maturity	3.4 years

Receive rates are determined at the time the swaps become effective. As of June 30, 2023, the weighted average pay rates of the five effective pay-fixed hedges for $400.0 million were 0.98% and the weighted average receive rates were 5.08%. As of June 30, 2023, the weighted average pay rates of the receive-fixed interest rate swaps of $100.0 million were 7.44% and the weighted average receive rates were 8.25%.

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~~six months ended:

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
)

$
—


	June 30, 2023						June 30, 2022
	Amount of Gain Recognized in AOCI		Amount of Gain Reclassified from AOCI to Income as a Decrease 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	$	8,709	$	5,819	$	—	$	24,557	$	(319	)	$	—

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—The total combined notional amount was $~~549.7~~558.3 million as of ~~September~~June 30, ~~2022~~2023 with maturities ranging from ~~January 2023~~March 2024 to ~~July 2032~~March 2033. 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~~six months ended ~~September~~June 30, ~~2022 and 2021,~~2023, there were $~~394,000~~ ~~and $134,000~~472,000 of net transaction fees, ~~respectively,~~ included in other non-interest income, related to these derivative instruments. There were no transaction fees during the three months ended June 30, 2023. During the ~~nine~~three and six months ended ~~September~~June 30, 2022, ~~and 2021,~~ there were $~~2.0~~533,000 ~~million~~ and $~~840,000~~1.6 million 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~~June 30, ~~2022:~~2023:


Notional amounts	$	549,662		$	558,316
Derivative assets fair value		18,881			18,856
Derivative liabilities fair value		18,505			18,773
Weighted average pay rates		4.14	%		4.29	%
Weighted average receive rates		5.79	%		5.98	%
Weighted average maturity	5.6 years
Weighted average remaining maturity				5.3 years

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Other 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 derivatives is managed through the Company’s loan underwriting process. The total notional amount was $~~6.9~~1.2 million and $~~7.6~~6.7 million as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, 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~~June 30, ~~2022~~2023 and December ~~21, 2021.~~31, 2022. The fair values of the credit derivatives 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

~~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~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:


	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
	2022		2021		2022		2021		2023		2022		2023			2022
Other interest rate derivatives	$	233	$	98	$	801	$	482	$	115	$	286	$	(193	)	$	568
Other credit derivatives		1		2		6		9		—		1		—			5
Total	$	234	$	100	$	807	$	491	$	115	$	287	$	(193	)	$	573

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, 2022						December 31, 2021						June 30, 2023						December 31, 2022
	Derivative Assets Fair Value			Derivative Liabilities Fair Value			Derivative Assets Fair Value			Derivative Liabilities Fair Value			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	)	$	64,159		$	(18,773	)	$	65,342		$	(17,817	)
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	)	$	64,159		$	(18,773	)	$	65,342		$	(17,817	)
Gross amounts not offset in the Condensed Consolidated Statements of Financial Condition
Offsetting derivative positions		(39	)		39			(3,253	)		3,253			(537	)		537			(43	)		43
Collateral posted		(64,273	)		18,466			(10,122	)		6,412			(60,520	)		—			(64,370	)		—
Net credit exposure	$	3,760		$	—		$	—		$	—		$	3,102		$	(18,236	)	$	929		$	(17,774	)

As of ~~September~~June 30, ~~2022,~~2023, 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 $~~18.5~~18.8 million. ~~The Company has posted $18.5~~ ~~million collateral related to these agreements as of September 30, 2022.~~ If the Company had breached any of these provisions at ~~September~~June 30, ~~2022,~~2023, it could have been required to settle its obligations under the agreements at their termination value less offsetting positions of $~~39,000~~537,000. 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.

3741

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's Board of Directors adopted, and the Company's stockholder approved, the 2017 Omnibus Incentive Compensation Plan (the “Omnibus Plan”). 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~~2,600,000 shares of our common stock have been reserved for issuance under the Omnibus Plan. As of ~~September~~June 30, ~~2022,~~2023, there were ~~414,791~~1,188,654 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 ~~2022,~~2023, the Company granted ~~298,452~~289,676 shares of restricted common stock, par value $0.01 per share. Of this total, ~~166,290~~3,627 restricted shares will vest ~~ratably over~~in ~~four years~~one year ~~on each anniversary of the grant date,~~, ~~73,018~~201,569 restricted shares will vest ratably over three years on each anniversary of the grant date, ~~12,661~~33,098 restricted shares will cliff vest on the third anniversary of the grant date, ~~2,776~~ ~~restricted shares will vest in~~ ~~one year, and~~ ~~1,219~~ ~~restricted shares vested immediately.~~all subject to continued employment. In addition, ~~42,488~~51,382 performance-based ~~restricted~~ shares were ~~included in~~granted. The number of performance-based shares which may be earned under the ~~2022 grant that have~~award is dependent upon the Company's total stockholder return and return on average assets, weighted equally, over a ~~three year~~three-year ~~performance~~ period ending December 31, ~~2024.~~2025, measured against the KBW Regional Bank Index. Results will be measured cumulatively at the end of the three years and any earned shares will vest on the third anniversary of the grant date.

The following table discloses the changes in restricted shares for the ~~nine~~six months ended ~~September~~June 30, ~~2022:~~2023:


	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, 2022		542,520		$	19.04
Beginning balance, January 1, 2023							581,337		$	22.93
Granted		298,452			26.90		289,676			24.62
Incremental performance shares vested		1,074					1,826
Vested		(188,672	)		19.07		(182,294	)		21.47
Forfeited		(24,832	)		21.89		(14,091	)		24.24
Ending balance outstanding at September 30, 2022		628,542		$	22.65
Ending balance outstanding at June 30, 2023							676,454		$	24.00

A total of ~~188,672~~182,294 restricted shares vested during the ~~nine~~six months ended ~~September~~June 30, ~~2022.~~2023. A total of ~~148,577~~243,603 restricted shares vested during the year ended December 31, ~~2021.~~2022. The fair value of restricted shares that vested during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 was $~~4.9~~4.4 million. The fair value of restricted shares that vested during the year ended December 31, ~~2021~~2022 was $~~3.4~~5.9 million.

The Company recognizes share-based compensation based on the estimated fair value of the restricted stock at the grant date. The fair value of the total stock return performance-based awards granted in 2023 were calculated based on a Monte Carlo simulation, using expected volatilities between 38.11% and 39.80%, a risk-free rate of 4.42%, and a simulation term of 2.85 years. Based on the equal weighing of total stock return and return on average assets, the grant date fair value of the performance based awards was $25.20 per share. Share-based compensation expense is included in non-interest expense in the Condensed Consolidated Statements of Operations.

3842

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~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:


	Nine Months Ended September 30,				Six Months Ended June 30,
	2022		2021		2023		2022
Total share-based compensation - restricted stock	$	4,016	$	2,966	$	3,217	$	2,798
Income tax benefit		1,139		826		866		761
Unrecognized compensation expense		10,479		7,840		12,757		12,050
Weighted-average amortization period remaining	2.5 years		2.4 years
Weighted average remaining amortization period					2.3 years		2.7 years

The fair value of the unvested restricted stock awards at ~~September~~June 30, ~~2022~~2023 was $~~12.7~~12.2 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. The Company granted~~ ~~1,846,968~~ ~~options to purchase shares under this plan. In June 2017, the Board of Directors terminated the BYB Plan and~~ no ~~future grants can be made under this plan. Options to purchase a total of~~ ~~816,060~~ ~~shares remain outstanding under the BYB Plan at September 30, 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, 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, 2022:~~

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~~ ~~520,988~~ ~~stock options were exercised during the nine months ended September 30, 2022 with proceeds of $470,000~~ ~~and a related tax benefit of $2.1~~ ~~million. A total of~~ ~~53,531~~ ~~stock options were exercised during the year ended December 31, 2021, with proceeds of $751,000~~ ~~and a related tax benefit of $121,000~~. No ~~stock options vested during the nine months ended September 30, 2022.~~

3943

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

~~The Company did not recognize any stock option compensation expense during three or nine months ended September 30, 2022 or 2021. There was~~ no ~~unrecognized stock option compensation expenses as of September 30, 2022.~~

Pursuant to the terms of the Agreement and Plan of Merger with First Evanston and its subsidiaries, dated as of November 27, 2017 (the "Merger Agreement"), each outstanding First Evanston 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 (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. 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, 2022:~~

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 ~~stock options were exercised during the nine months ended September 30, 2022. A total of~~ ~~62,366~~ ~~stock options were exercised during the year ended December 31, 2021, proceeds of which were $705,000~~ ~~and a related tax benefit of $153,000~~. No ~~stock options vested during the nine months ended 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)~~

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 ~~986,757~~930,852 and ~~1,531,404~~986,757 shares of common stock were outstanding as of ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. There were ~~628,542~~676,454 and ~~579,064~~687,213 restricted stock awards outstanding at ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, no stock options outstanding were excluded from the calculation of diluted earnings per common share.

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,				Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021		2023		2022		2023		2022
Net income	$	22,656	$	25,306	$	65,250	$	75,596	$	26,107	$	20,283	$	50,052	$	42,594
Less: Dividends on preferred shares		—		196		196		587		—		—		—		196
Net income available to common stockholders	$	22,656	$	25,110	$	65,054	$	75,009	$	26,107	$	20,283	$	50,052	$	42,398
Weighted-average common stock outstanding:
Weighted-average common stock outstanding (basic)		36,851,973		37,200,778		37,012,316		37,773,350		37,034,626		37,064,795		36,995,075		37,093,816
Incremental shares		519,186		817,523		569,550		749,762		303,280		547,473		449,306		646,866
Weighted-average common stock outstanding (dilutive)		37,371,159		38,018,301		37,581,866		38,523,112		37,337,906		37,612,268		37,444,381		37,740,682
Basic earnings per common share	$	0.61	$	0.68	$	1.76	$	1.99	$	0.70	$	0.55	$	1.35	$	1.14
Diluted earnings per common share	$	0.61	$	0.66	$	1.73	$	1.95	$	0.70	$	0.54	$	1.34	$	1.12

Note 19—Stockholders’ Equity

A summary of the Company’s preferred and common stock at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 is as follows:


	September 30,		December 31,		June 30,		December 31,
	2022		2021		2023		2022
Preferred stock
Par value	$	0.01	$	0.01	$	0.01	$	0.01
Shares authorized		50,000		50,000		25,000,000		25,000,000
Shares issued		—		10,438		—		—
Shares outstanding		—		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		39,515,466		39,203,747		39,729,369		39,518,702
Shares outstanding		37,465,902		37,713,903		37,752,002		37,492,775
Treasury shares		2,049,564		1,489,844		1,977,367		2,025,927

During 2016, the Company authorized and issued Series B 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 was redeemable at the Company’s option on or after March 31, 2022. Holders of Series B Preferred Stock did 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 were entitled to receive a fixed dividend of 7.50% per annum from the original issue date through December 30, 2021.

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)~~

Designations, the per share redemption price was the liquidation preference of $1,000 per share plus an amount equal to any declared and unpaid dividends thereon for any prior dividend period and totaled $10.6 million.

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

On December 10, 2020, ~~the Company~~we announced that ~~its~~our 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~~our outstanding common stock, and on July 27, 2021, ~~the Company's~~our Board of Directors authorized an expansion of ~~its current~~the stock repurchase program. Under the extended program, ~~the Company is~~we were authorized to repurchase an additional 1,250,000 shares of ~~the Company's~~our outstanding common stock. This repurchase program expired on December 31, 2022.

On December 12, 2022, we announced that our Board of Directors approved a new stock repurchase program authorizing the purchase of up to an aggregate of 1,250,000 shares of our outstanding common stock. The program is in effect from January 1, 2023 until December 31, 2023 unless terminated earlier. 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~~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~~management at its discretion and will depend on a number of factors, including the market price of ~~the Company’s~~our stock, general market and economic conditions and applicable legal requirements. ~~The program will be in effect until December 31, 2022 unless terminated earlier.~~

~~The Company purchased~~We did ~~174,249~~not purchase any shares ~~at a cost of $4.2~~ ~~million~~ under the stock repurchase program during the three or six months ended ~~September~~June 30, ~~2022. The Company~~2023. We purchased ~~460,220~~232,000 shares at a cost of $~~10.4~~5.5 million under this program during the three months ended ~~September~~June 30, ~~2021. The Company~~2022. We purchased ~~689,068~~514,819 shares at a cost of $~~17.3~~ ~~million under 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~~13.1 million under this program during ~~nine~~the six months ended ~~September~~June 30, ~~2021.~~2022.

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 Statements of Financial Condition.

For each of the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, cash dividends were declared and paid to stockholders of record of ~~the Company's~~our common stock of $0.09 per ~~share, respectively.~~share. For the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, cash dividends were declared and paid to stockholders of record of ~~the Company's~~our common stock of $~~0.27~~ ~~and $0.21~~0.18 per ~~share, respectively.~~share.

On ~~October~~July 25, ~~2022, the Company’s~~2023, our Board of Directors declared a cash dividend of $0.09 per share payable on ~~November~~August 22, ~~2022~~2023 to stockholders of record of ~~the Company’s~~our common stock as of ~~November~~August 8, ~~2022~~2023.

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~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:


(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 on Cash Flow Hedges		Unrealized Gains (Losses) on Available-for-Sale Securities			Total Accumulated Other Comprehensive Income (Loss)
Balance, January 1, 2021	$	(305	)	$	18,352		$	18,047
Other comprehensive income (loss), net of tax		1,211			(24,772	)		(23,561	)
Balance, September 30, 2021	$	906		$	(6,420	)	$	(5,514	)

Balance, January 1, 2022	$	2,817		$	(11,119	)	$	(8,302	)	$	2,817	$	(11,119	)	$	(8,302	)
Other comprehensive income (loss), net of tax		32,850			(149,446	)		(116,596	)		18,127		(101,087	)		(82,960	)
Balance, September 30, 2022	$	35,667		$	(160,565	)	$	(124,898	)
Balance, June 30, 2022										$	20,944	$	(112,206	)	$	(91,262	)

Balance, January 1, 2023										$	34,315	$	(151,865	)	$	(117,550	)
Other comprehensive income, net of tax											2,118		570			2,688
Balance, June 30, 2023										$	36,433	$	(151,295	)	$	(114,862	)

4245

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:

•

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, 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~~credit losses - loans and ~~lease losses,~~leases, 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~~credit losses - loans and ~~lease losses~~leases 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;

•

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;

•

demand for loan products and deposit flows;

•

unanticipated developments in pending or prospective loan and/or lease transactions or greater-than-expected ~~pay downs~~paydowns 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;

•

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;

4346

•

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;

•

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, 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 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 in our Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, that was filed with the SEC on March 7, ~~2022,~~2023 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~~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~~account 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~~is a leading 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~~of June 30, ~~2022.~~2023.

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~~credit 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~~$26.1 million and ~~$65.3~~$50.1 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, compared to net income of ~~$25.3~~$20.3 million and ~~$75.6~~$42.6 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021, a decrease~~2022, an increase of ~~$2.7~~$5.8 million and ~~$10.3~~$7.5 million, respectively, for each comparable period. The ~~decrease~~increase in net income was attributable to a ~~$3.8~~$14.5 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~~$31.5 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.~~income. The increase in net interest income during the three and six months ended June 30, 2023 was primarily driven by higher yields on loans and leases, and growth in the loan and lease portfolio.

Dividends declared and paid on preferred shares were $196,000 ~~and $587,000~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2022 and 2021, respectively.~~2022. Dividends declared ~~and paid on preferred shares were $196,000 for the three months ended September 30, 2021. Dividends declared and paid~~ on common shares were $3.4 million for each of the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021, respectively.~~2022. Dividends ~~declared and~~ paid on common shares were ~~$10.1~~$3.3 million and ~~$8.0~~$3.4 million for each of the ~~nine~~three months ended ~~September~~June 30, 2023 and 2022, respectively. Dividends declared on common shares were $6.8 million for each of the six months ended June 30, 2023 and ~~2021,~~2022. Dividends paid on common shares were $6.7 million and $6.8 million for each of the six months ended June 30, 2023 and 2022, respectively.

For the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, net income available to common stockholders was ~~$22.7~~$26.1 million, or ~~$0.61~~$0.70 per basic and diluted common share, and ~~$25.1~~$20.3 million, or ~~$0.68~~$0.55 per basic and ~~$0.66~~$0.54 per diluted common share, respectively. For the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, net income available to common stockholders was ~~$65.1~~$50.1 million, or ~~$1.76~~$1.35 per basic and ~~$1.73~~$1.34 per diluted common share, and ~~$75.0~~$42.4 million, or ~~$1.99~~$1.14 per basic and ~~$1.95~~$1.12 per diluted common share, respectively.

Our results of operations for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 yielded an annual return on average assets of ~~1.26%~~1.41% and ~~1.53%~~1.17% and a return on average stockholders’ equity of ~~11.59%~~12.99% and ~~12.19%,~~10.42% respectively. Our results of operations for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 yielded an annual return on average assets of ~~1.26%~~1.37% and ~~1.53%~~1.26% and a return on average stockholders’ equity of ~~10.96%~~12.69% and ~~12.42%~~10.65%, respectively.

As of ~~September~~June 30, ~~2022,~~2023, we had consolidated total assets of ~~$7.3~~$7.6 billion, total gross loans and leases outstanding of ~~$5.3~~$5.6 billion, total deposits of ~~$5.6~~$5.9 billion, and total stockholders’ equity of ~~$747.6~~$813.9 million.

Inland Bancorp, Inc. Acquisition

On July 1, 2023, we completed our acquisition of Inland Bancorp, Inc., ("Inland") under the terms of a definitive merger agreement. As a result of the merger, Inland's wholly owned bank subsidiary, Inland Bank and Trust, was merged with and into Byline Bank. As of June 30, 2023, Inland had approximately $1.2 billion in total assets, $861.5 million of loans, and $967.6 million of total deposits. Refer to Note 3—Acquisition of a Business for additional information.

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~~judgments inherent in those policies, are critical in understanding our financial statements.

These critical accounting policies and estimates include (i) ~~acquisition‑related~~acquisition-related fair value computations, (ii) the carrying value of loans and leases, (iii) determining the provision and allowance for ~~loan and lease~~credit 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,~~and (vi) ~~the valuation of real estate held for sale, and (vii)~~ the valuation of or recognition of deferred tax assets and liabilities.

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, ~~2021,~~2022, that we filed with the SEC on March 7, ~~2022.~~2023.

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~~judgments 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~~Newly originated 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~~credit losses, unamortized deferred fees and costs, and unamortized premiums or discounts. The net amount of ~~non-refundable~~nonrefundable loan origination fees and certain direct costs associated with the ~~lending~~loan origination 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~~Purchased credit deteriorated loans and ~~Leases~~leases

Purchased credit deteriorated ("PCD") loans are loans that have experienced more than insignificant credit deterioration since origination. PCD loans are recorded at the amount paid. An allowance for credit losses is determined using the same methodology as other loans held for investment. The initial allowance for credit losses determined on a collective basis is allocated to individual loans. The difference between the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through credit loss expense.

Acquired non-credit-deteriorated loans and leases

For acquired non‑credit-deteriorated loans and leases, ~~are recorded at~~the difference between the fair value asand unpaid principal balance of the loan at the acquisition ~~date. Credit~~date is amortized or accreted to interest income over the life of the loan. While credit discounts are included in the determination of the fair ~~value; therefore, an~~value for non-credit-deteriorated loans, since these discounts are expected to be accreted over the life of the loans, they cannot be used to offset the allowance for ~~loan and lease~~credit losses ~~is not~~that must be recorded at the acquisition date. ~~Acquired~~As a result, an allowance for credit losses is determined at the acquisition date using the same methodology as other loans ~~are evaluated upon acquisition~~held for investment and ~~classified~~is recognized as ~~either acquired impaired or acquired non‑impaired. Acquired impaired loans reflect evidence~~a provision for credit losses in the consolidated statements 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.operations. Any subsequent ~~decreases~~deterioration (improvement) in ~~expected cash flow attributable to~~ credit ~~deterioration are~~quality is 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(recapture) 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.losses.

Provision and ~~Allowance~~allowance for ~~Loan and Lease Losses~~credit losses

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

The ~~ALLL~~ACL is maintained at a level that management believes is appropriate to provide for ~~known and inherent incurred loan and lease~~current expected credit 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.~~relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. We increase our ~~ALLL~~ACL by ~~charging~~recording provisions for ~~probable~~current expected credit losses against our income and 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~~ACL is maintained at a level management believes is sufficient to provide for ~~probable~~current expected credit losses based upon an ongoing review of the ~~originated and acquired non‑impaired~~ loan and lease portfolios by portfolio category, which ~~include~~includes 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~~that may affect a borrower’s ability to repay, reasonable and supportable forecasts, and evaluation of prevailing economic conditions. We use risk ratings as credit indicators to classify loans and leases into pools and to estimate loss rates for each of the loan and lease pools. Additional information about these policies can be found in Note 4 of our Unaudited Interim Condensed Consolidated Financial Statements as of June 30, 2023, included in this report.

For ~~acquired impaired loans, a specific valuation allowance~~each portfolio, management estimates expected credit losses over the life of each loan and lease utilizing lifetime or cumulative loss rate methodology, which identifies macroeconomic factors and asset-specific characteristics that are correlated with credit loss experience including loan age, loan type, and leverage. The lifetime loss rate is ~~established when it is probable that we will be unable~~applied to ~~collect all~~the amortized cost of the ~~cash flows~~loan or lease. This methodology builds on default and loss probabilities by utilizing pool-specific historical loss rates to calculate expected ~~at acquisition, plus~~credit losses. These pool-specific historical loss rates may be adjusted for a forecast of certain macroeconomic variables, and other factors such as differences in underwriting standards, or portfolio mix. Each time we measure expected credit losses, management assesses the ~~additional cash flows expected~~relevancy of historical loss information and considers any necessary adjustments to ~~be collected arising from changes~~address any differences in ~~estimates after acquisition.~~asset-specific characteristics.

The ~~originated~~lifetime loss rates are estimated by analyzing a combination of internal and ~~non‑impaired~~external data related to historical performance of each loan and lease pool over a complete economic cycle. Loss rates are based on historical averages for each loan and lease pool, adjusted to reflect the impact of a forward-looking forecast of certain macroeconomic variables such as unemployment rates, gross domestic product, or commercial property values, which management considers to be both reasonable and supportable. Various economic scenarios are considered and weighted to arrive at the forecast that most reflects management’s expectation of future conditions. After a one-year forecast period, a one-year reversion period adjusts loss experience to the historical average on a straight-line basis.

Management also considers qualitative risk factor adjustments that are intended to capture internal and external trends not reflected in historical loss history. Each risk factor is assigned an allowance level based on management’s judgment as to the expected impact of each risk factor on each loan portfolio and is monitored quarterly. All 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~~leases 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~~leases 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~~$500,000 or greater with an internal risk rating of substandard or below, ~~and~~or on ~~non-accrual,~~nonaccrual, as well as loans classified as ~~troubled debt restructurings (“TDR”),~~Troubled Debt Restructurings, are reviewed individually for impairment on a quarterly basis.

46The Company also maintains an allowance for credit losses on off-balance sheet credit exposures for unfunded loan commitments. This allowance is reflected as a component of other liabilities that represents management’s current estimate of expected losses in the

unfunded loan commitments. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life based on management’s consideration of past events, current conditions, and reasonable and supportable economic forecasts. Management tracks the level and trends in unused commitments and takes into consideration the same factors as those considered for purposes of the allowance for credit losses on outstanding loans. The Company also evaluates its held-to-maturity debt securities for current expected credit losses.

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~~June 30, ~~2022,~~2023, 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 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~~June 30, ~~2022,~~2023, 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. 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 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 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 1211 of the notes to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, 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~~June 30, ~~2022,~~2023, 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~~financial statements 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~~credit-deteriorated and ~~acquired impaired~~purchased credit deteriorated 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~~credit losses, provision for income taxes, and non-interest expenses, such as salaries and employee benefits, occupancy and equipment expenses, and other miscellaneous operating costs.

4851

Selected Financial Data


	As of or for the Three Months Ended						As of or For the Nine Months Ended						As of or for the Three Months Ended						As of or For the Six Months Ended
	September 30,						September 30,						June 30,						June 30,
(dollars in thousands, except share and per share data)	2022			2021			2022			2021			2023			2022			2023			2022
Summary of Operations
Common Share Data
Basic earnings per common share	$	0.61		$	0.68		$	1.76		$	1.99		$	0.70		$	0.55		$	1.35		$	1.14
Diluted earnings per common share	$	0.61		$	0.66		$	1.73		$	1.95		$	0.70		$	0.54		$	1.34		$	1.12
Adjusted diluted earnings per share(1)(3)	$	0.61		$	0.69		$	1.73		$	2.02		$	0.73		$	0.54		$	1.38		$	1.12
Weighted-average common shares outstanding (basic)		36,851,973			37,200,778			37,012,316			37,773,350			37,034,626			37,064,795			36,995,075			37,093,816
Weighted-average common shares outstanding (diluted)		37,371,159			38,018,301			37,581,866			38,523,112			37,337,906			37,612,268			37,444,381			37,740,682
Common shares outstanding		37,465,902			37,690,087			37,465,902			37,690,087			37,752,002			37,669,102			37,752,002			37,669,102
Cash dividends per common share	$	0.09		$	0.09		$	0.27		$	0.21		$	0.09		$	0.09		$	0.18		$	0.18
Dividend payout ratio on common stock		14.75	%		13.64	%		15.61	%		10.77	%		12.86	%		16.67	%		13.43	%		16.07	%
Tangible book value per common share(1)	$	15.67		$	17.16		$	15.67		$	17.16		$	17.43		$	16.01		$	17.43		$	16.01
Key Ratios and Performance Metrics (annualized where applicable)
Net interest margin, fully taxable equivalent (1) (5)		4.05	%		3.92	%		3.88	%		3.82	%
Net interest margin, fully taxable equivalent (1)(4)														4.33	%		3.77	%		4.36	%		3.80	%
Average cost of deposits		0.43	%		0.08	%		0.22	%		0.09	%		1.70	%		0.16	%		1.43	%		0.12	%
Efficiency ratio(2)		55.11	%		54.18	%		55.12	%		52.49	%		52.92	%		55.29	%		52.51	%		55.12	%
Adjusted efficiency ratio(1)(2)(3)		55.11	%		52.35	%		55.12	%		50.76	%		51.39	%		55.29	%		51.47	%		55.12	%
Non-interest income to total revenues(1)														15.80	%		18.69	%		16.23	%		21.82	%
Non-interest expense to average assets		2.56	%		2.67	%		2.59	%		2.54	%		2.67	%		2.52	%		2.68	%		2.60	%
Adjusted non-interest expense to average assets(1)(3)		2.56	%		2.58	%		2.59	%		2.46	%		2.60	%		2.52	%		2.63	%		2.60	%
Return on average stockholders' equity		11.59	%		12.19	%		10.96	%		12.42	%		12.99	%		10.42	%		12.69	%		10.65	%
Adjusted return on average stockholders' equity(1)(3)		11.59	%		12.69	%		10.96	%		12.90	%		13.56	%		10.42	%		13.10	%		10.65	%
Return on average assets		1.26	%		1.53	%		1.26	%		1.53	%		1.41	%		1.17	%		1.37	%		1.26	%
Adjusted return on average assets(1)(3)		1.26	%		1.59	%		1.26	%		1.58	%		1.48	%		1.17	%		1.41	%		1.26	%
Non-interest income to total revenues(1)		14.83	%		23.61	%		19.41	%		24.03	%
Pre-tax pre-provision return on average assets(1)		1.93	%		2.07	%		1.93	%		2.10	%		2.23	%		1.84	%		2.27	%		1.93	%
Adjusted pre-tax pre-provision return on average assets~~(1)~~(3)		1.93	%		2.15	%		1.93	%		2.18	%		2.30	%		1.84	%		2.33	%		1.93	%
Return on average tangible common stockholders' equity(1)		15.40	%		16.22	%		14.60	%		16.66	%		16.78	%		14.06	%		16.50	%		14.21	%
Adjusted return on average tangible common stockholders' equity(1)(3)		15.40	%		16.86	%		14.60	%		17.27	%		17.50	%		14.06	%		17.01	%		14.21	%
Non-interest-bearing deposits to total deposits		38.17	%		41.06	%		38.17	%		41.06	%		30.31	%		40.47	%		30.31	%		40.47	%
Loans and leases held for sale and loans and leases held for investment to total deposits		94.60	%		90.29	%		94.60	%		90.29	%		94.58	%		96.23	%		94.58	%		96.23	%
Deposits to total liabilities		85.95	%		87.73	%		85.95	%		87.73	%		87.51	%		84.64	%		87.51	%		84.64	%
Deposits per branch	$	147,696		$	117,234		$	147,696		$	117,234		$	155,713		$	141,799		$	155,713		$	141,799
Asset Quality Ratios
Non-performing loans and leases to total loans and leases held for investment		0.67	%		0.75	%		0.67	%		0.75	%		0.69	%		0.66	%		0.69	%		0.66	%
ALLL to total loans and leases held for investment		1.23	%		1.31	%		1.23	%		1.31	%
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)	$	2,537		$	6,327		$	2,537		$	6,327
ACL to total loans and leases held for investment, net before ACL														1.66	%		1.21	%		1.66	%		1.21	%
Net charge-offs to average total loans and leases held for investment, net before ACL - loans and leases														0.31	%		0.24	%		0.20	%		0.15	%
Capital Ratios
Common equity to total assets		10.27	%		12.14	%		10.27	%		12.14	%		10.74	%		10.73	%		10.74	%		10.73	%
Tangible common equity to tangible assets(1)		8.25	%		9.89	%		8.25	%		9.89	%		8.87	%		8.65	%		8.87	%		8.65	%
Leverage ratio		10.30	%		11.21	%		10.30	%		11.21	%		10.74	%		10.34	%		10.74	%		10.34	%
Common equity tier 1 capital ratio		10.24	%		11.32	%		10.24	%		11.32	%		10.58	%		10.26	%		10.58	%		10.26	%
Tier 1 capital ratio		10.91	%		12.32	%		10.91	%		12.32	%		11.22	%		10.95	%		11.22	%		10.95	%
Total capital ratio		13.02	%		14.78	%		13.02	%		14.78	%		13.52	%		13.09	%		13.52	%		13.09	%

(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%.

4952

We reported consolidated net income of ~~$22.7~~$26.1 million for the three months ended ~~September~~June 30, ~~2022~~2023 compared to net income of ~~$25.3~~$20.3 million for the three months ended ~~September~~June 30, ~~2021, a decrease~~2022, an increase of ~~$2.7~~$5.8 million. The ~~decrease~~increase in net income was primarily attributable to a ~~$6.5 million decrease in non-interest income and a $3.8 million increase in the provision for loan and lease losses. These were offset by a $9.0~~$14.5 million increase in net interest ~~income.~~income, offset by an increase in non-interest expense of $5.6 million and an increase in the provision of income taxes of $3.4 million.

The increase in net interest income during the three months ended ~~September~~June 30, ~~2022~~2023 was mainly a result of higher yields and increased average loan and leases balances. The increase in non-interest expense was primarily due to increases in legal, audit and other professional fees due to merger-related activities, and other non-interest expenses due to increased general expenses. The increase in the provision for ~~loan and lease losses was mainly attributable~~income taxes is due to ~~loan and lease portfolio growth and increases in specific reserves on impaired loans. The decrease in non-interest~~higher income ~~was principally driven by lower net gains on sales of loans.~~before taxes.

Net income available to common stockholders was ~~$22.7~~$26.1 million, or ~~$0.61~~$0.70 per basic and diluted common share, for the three months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$25.1~~$20.3 million, or ~~$0.68~~$0.55 per basic and ~~$0.66~~$0.54 per diluted common share, for the three months ended ~~September~~June 30, ~~2021. Dividends on preferred shares were $196,000 for the three months ended September 30, 2021.~~2022.

Our annualized return on average assets was ~~1.26%~~1.41% for the three months ended ~~September~~June 30, ~~2022~~2023 compared to ~~1.53%~~1.17% for the three months ended ~~September~~June 30, ~~2021.~~2022. Our annualized return on average stockholders’ equity was ~~11.59%~~12.99% for the three months ended ~~September~~June 30, ~~2022~~2023 compared to ~~12.19%~~10.42% for the three months ended ~~September~~June 30, ~~2021.~~2022. Our efficiency ratio was ~~55.11%~~52.92% for the three months ended ~~September~~June 30, ~~2022~~2023 compared to ~~54.18%~~55.29% for the three months ended ~~September~~June 30, ~~2021.~~2022.

We reported consolidated net income of ~~$65.2~~$50.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to net income of ~~$75.6~~$42.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021, a decrease~~2022, an increase of ~~$10.3~~$7.5 million. The ~~decrease~~increase in net income was primarily attributable to a ~~$12.3~~$31.5 million increase in net interest income, offset by a $9.8 million increase in non-interest expense, a $5.4 million increase in the provision for ~~loan~~income taxes, a $4.7 million increase in the provision for credit losses, and ~~lease losses,~~ a ~~$9.7~~$4.2 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 $5.6 million decrease in the provision for income taxes.~~income.

The increase in net interest income during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 was mainly a result of ~~increased average balances and~~ higher yields on loans and leases ~~partially offset by decreased interest~~ and ~~fee income on PPP loans.~~increased average balances. The increase in non-interest expense was mostly due to an increase in salaries and employee benefits. The increase in provision for ~~loan and lease~~income taxes was due to higher income before taxes. The increase in provision for credit losses was mainly attributable to increases in specific reserves on ~~impaired~~individually evaluated loans, and loan and lease portfolio growth. The decrease in non-interest income was primarily due to decrease in net gains on sales of 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.~~

Net income available to common stockholders was ~~$65.1~~$50.1 million, or ~~$1.76~~$1.35 per basic and ~~$1.73~~$1.34 per diluted common share, for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$75.0~~$42.4 million, or ~~$1.99~~$1.14 per basic and ~~$1.95~~$1.12 per diluted common share, for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. Dividends on preferred shares were $196,000 ~~and $587,000~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2022 and 2021, respectively.~~2022.

Our annualized return on average assets was 1.37% for the six months ended June 30, 2023 compared to 1.26% for the ~~nine~~six months ended ~~September~~June 30, ~~2022 compared to 1.53% for the nine months ended September 30, 2021.~~2022. Our annualized return on average stockholders’ equity was ~~10.96%~~12.69% for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to ~~12.42%~~10.65% for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. Our efficiency ratio was 52.51% for the six months ended June 30, 2023 compared to 55.12% for the ~~nine~~six months ended ~~September~~June 30, ~~2022 compared to 52.49% for the nine months ended September 30, 2021.~~2022.

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, 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 purchase credit deteriorated and acquired non-credit-deteriorated 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~~June 30, ~~2022, acquired~~2023, purchased credit deteriorated loans ~~with evidence of credit deterioration~~ accounted for under ASC Topic ~~310-30, Accounting for Purchased Loans with Deteriorated Credit Quality,~~326 represented ~~1.9%~~1.1% of our total loan and lease portfolio compared to ~~2.8%~~1.4% at December 31, ~~2021.~~2022.

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.

5053

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 June 30,
	2022								2021								2023								2022
	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	$	77,522		$	210		1.08	%	$	40,088		$	19		0.19	%	$	135,003		$	1,041		3.09	%	$	66,034		$	74		0.45	%
Loans and leases(1)		5,218,135			72,824		5.54	%		4,539,111			56,291		4.92	%		5,535,593			99,134		7.18	%		5,009,077			59,674		4.78	%
Taxable securities		1,302,375			6,014		1.83	%		1,309,802			5,472		1.66	%		1,250,780			6,324		2.03	%		1,330,200			5,904		1.78	%
Tax-exempt securities(2)		162,591			1,083		2.64	%		187,064			1,254		2.66	%		151,205			980		2.60	%		168,567			1,131		2.69	%
Total interest-earning assets	$	6,760,623		$	80,131		4.70	%	$	6,076,065		$	63,036		4.12	%	$	7,072,581		$	107,479		6.10	%	$	6,573,878		$	66,783		4.07	%
Allowance for loan and lease losses		(62,733	)							(61,528	)
Allowance for credit losses - loans and leases																		(92,804	)							(59,883	)
All other assets		447,299								546,331								424,122								461,730
TOTAL ASSETS	$	7,145,189							$	6,560,868							$	7,403,899							$	6,975,725
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits
Interest checking		583,777		$	1,077		0.73	%		653,543		$	228		0.14	%	$	541,036		$	2,175		1.61	%		615,831		$	415		0.27	%
Money market accounts		1,391,923			3,358		0.96	%		1,031,009			280		0.11	%		1,534,463			10,799		2.82	%		1,307,320			1,194		0.37	%
Savings		673,966			247		0.15	%		625,037			75		0.05	%		575,254			220		0.15	%		664,954			83		0.05	%
Time deposits		687,124			1,289		0.74	%		709,805			403		0.23	%		1,328,679			11,529		3.48	%		627,199			436		0.28	%
Total interest-bearing deposits		3,336,790			5,971		0.71	%		3,019,394			986		0.13	%		3,979,432			24,723		2.49	%		3,215,304			2,128		0.27	%
Other borrowings		607,471			3,232		2.11	%		426,284			349		0.33	%		509,419			4,241		3.34	%		497,082			1,083		0.87	%
Federal funds purchased																		—			—		0.00	%		2,527			14		2.32	%
Subordinated notes and debentures		110,799			1,825		6.54	%		110,195			1,592		5.73	%		111,255			2,142		7.72	%		110,649			1,694		6.14	%
Total borrowings		718,270			5,057		2.79	%		536,479			1,941		1.44	%		620,674			6,383		4.12	%		610,258			2,791		1.83	%
Total interest-bearing liabilities	$	4,055,060		$	11,028		1.08	%	$	3,555,873		$	2,927		0.33	%	$	4,600,106		$	31,106		2.71	%	$	3,825,562		$	4,919		0.52	%
Non-interest-bearing demand deposits		2,198,095								2,106,189								1,848,538								2,265,426
Other liabilities		116,676								75,052								148,983								104,085
Total stockholders’ equity		775,358								823,754								806,272								780,652
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	7,145,189							$	6,560,868							$	7,403,899							$	6,975,725
Net interest spread(3)							3.62	%							3.79	%							3.39	%							3.55	%
Net interest income, fully taxable equivalent				$	69,103							$	60,109							$	76,373							$	61,864
Net interest margin, fully taxable equivalent(2)(4)							4.05	%							3.92	%							4.33	%							3.77	%
Reconciliation to reported net interest income:
Less: Tax-equivalent adjustment					228		0.01	%					264		0.01	%					207		0.01	%					237		0.01	%
Net interest income				$	68,875							$	59,845							$	76,166							$	61,627
Net interest margin(4)							4.04	%							3.91	%							4.32	%							3.76	%

Net loan accretion impact on margin				$	1,559		0.09	%				$	1,638		0.11	%				$	611		0.03	%				$	1,383		0.08	%

(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.

5154


	For the Nine Months Ended September 30,																For the Six Months Ended June 30,
	2022								2021								2023								2022
	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	$	72,802		$	313		0.58	%	$	56,926		$	75		0.18	%	$	116,394		$	1,483		2.57	%	$	70,404		$	103		0.29	%
Loans and leases(1)		4,967,769			187,924		5.06	%		4,487,909			164,423		4.90	%		5,510,124			191,477		7.01	%		4,840,510			115,100		4.80	%
Taxable securities		1,323,838			17,393		1.76	%		1,405,390			16,798		1.60	%		1,263,010			12,755		2.04	%		1,334,747			11,379		1.72	%
Tax-exempt securities(2)		166,911			3,338		2.67	%		184,826			3,729		2.70	%		151,509			1,974		2.63	%		169,107			2,255		2.69	%
Total interest-earning assets	$	6,531,320		$	208,968		4.28	%	$	6,135,051		$	185,025		4.03	%	$	7,041,037		$	207,689		5.95	%	$	6,414,768		$	128,837		4.05	%
Allowance for loan and lease losses		(59,526	)							(64,768	)
Allowance for credit losses - loans and leases																		(88,586	)							(57,895	)
All other assets		472,115								552,660								422,236								484,728
TOTAL ASSETS	$	6,943,909							$	6,622,943							$	7,374,687							$	6,841,601
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits
Interest checking	$	592,985		$	1,670		0.38	%	$	609,444		$	647		0.14	%	$	573,342		$	4,669		1.64	%	$	597,665		$	593		0.20	%
Money market accounts		1,318,725			5,026		0.51	%		1,068,770			940		0.12	%		1,500,260			18,527		2.49	%		1,281,519			1,668		0.26	%
Savings		662,820			406		0.08	%		603,366			214		0.05	%		594,316			447		0.15	%		657,155			159		0.05	%
Time deposits		658,893			2,084		0.42	%		734,708			1,664		0.30	%		1,148,545			17,378		3.05	%		644,543			795		0.25	%
Total interest-bearing deposits		3,233,423			9,186		0.38	%		3,016,288			3,465		0.15	%		3,816,463			41,021		2.17	%		3,180,882			3,215		0.20	%
Other borrowings		466,194			4,710		1.35	%		572,018			1,333		0.31	%		541,249			10,093		3.76	%		394,385			1,478		0.76	%
Federal funds purchased		842			14		2.32	%		—			—		0.00	%		1,381			36		5.30	%		1,271			14		2.32	%
Subordinated notes and debentures		110,648			5,119		6.19	%		110,029			4,785		5.81	%		111,178			4,240		7.69	%		110,570			3,294		6.01	%
Total borrowings		577,684			9,843		2.28	%		682,047			6,118		1.20	%		653,808			14,369		4.43	%		506,226			4,786		1.91	%
Total interest-bearing liabilities	$	3,811,107		$	19,029		0.67	%	$	3,698,335		$	9,583		0.35	%	$	4,470,271		$	55,390		2.50	%	$	3,687,108		$	8,001		0.44	%
Non-interest-bearing demand deposits		2,237,002								2,039,242								1,961,945								2,256,778
Other liabilities		99,951								71,737								147,130								91,451
Total stockholders’ equity		795,849								813,629								795,341								806,264
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	6,943,909							$	6,622,943							$	7,374,687							$	6,841,601
Net interest spread(3)							3.61	%							3.68	%							3.45	%							3.61	%
Net interest income, fully taxable equivalent				$	189,939							$	175,442							$	152,299							$	120,836
Net interest margin, fully taxable equivalent(2)(4)							3.88	%							3.82	%							4.36	%							3.80	%
Reconciliation to reported net interest income:
Less: Tax-equivalent adjustment					701		0.01	%					783		0.01	%					415		0.01	%					473		0.02	%
Net interest income				$	189,238							$	174,659							$	151,884							$	120,363
Net interest margin(4)							3.87	%							3.81	%							4.35	%							3.78	%

Net loan accretion impact on margin				$	4,418		0.09	%				$	5,001		0.11	%				$	1,340		0.04	%				$	2,859		0.09	%

(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.

5255

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 June 30, 2023
	Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021									Compared to Three Months Ended June 30, 2022
	Increase (Decrease) Due to									Increase (Decrease) Due to
	Volume			Rate			Total			Volume			Rate			Total
Interest income
Cash and cash equivalents	$	101		$	90		$	191		$	532		$	435		$	967
Loans and leases(1)		9,440			7,093			16,533			9,488			29,972			39,460
Taxable securities		(19	)		561			542			(409	)		829			420
Tax-exempt securities		(162	)		(9	)		(171	)		(113	)		(38	)		(151	)
Total interest income	$	9,360		$	7,735		$	17,095		$	9,498		$	31,198		$	40,696
Interest expense
Deposits
Interest checking	$	(123	)	$	972		$	849		$	(297	)	$	2,057		$	1,760
Money market accounts		869			2,209			3,078			1,620			7,985			9,605
Savings		14			158			172			(29	)		166			137
Time deposits		(26	)		912			886			6,089			5,004			11,093
Total interest-bearing deposits		734			4,251			4,985			7,383			15,212			22,595
Other borrowings		970			1,913			2,883			98			3,060			3,158
Federal funds purchased											1			(15	)		(14	)
Subordinated notes and debentures		10			223			233			12			436			448
Total borrowings		980			2,136			3,116			111			3,481			3,592
Total interest expense	$	1,714		$	6,387		$	8,101		$	7,494		$	18,693		$	26,187
Net interest income, fully taxable equivalent	$	7,646		$	1,348		$	8,994		$	2,004		$	12,505		$	14,509

(1)

Includes loans and leases on non-accrual status.


										Six Months Ended June 30, 2023
	Nine Months Ended September 30, 2022 compared to Nine Months Ended September 30, 2021									Compared to Six Months Ended June 30, 2022
	Increase (Decrease) Due to									Increase (Decrease) Due to
	Volume			Rate			Total			Volume			Rate			Total
Interest income
Cash and cash equivalents	$	68		$	170		$	238		$	584		$	796		$	1,380
Loans and leases(1)		18,130			5,371			23,501			23,329			53,048			76,377
Taxable securities		(1,087	)		1,682			595			(742	)		2,118			1,376
Tax-exempt securities		(350	)		(41	)		(391	)		(231	)		(50	)		(281	)
Total interest income	$	16,761		$	7,182		$	23,943		$	22,940		$	55,912		$	78,852
Interest expense
Deposits
Interest checking	$	(71	)	$	1,094		$	1,023		$	(192	)	$	4,268		$	4,076
Money market accounts		968			3,118			4,086			2,688			14,171			16,859
Savings		57			135			192			(38	)		326			288
Time deposits		(239	)		659			420			7,634			8,949			16,583
Total interest-bearing deposits		715			5,006			5,721			10,092			27,714			37,806
Other borrowings		(1,073	)		4,450			3,377			2,747			5,868			8,615
Federal funds purchased		14			—			14			3			19			22
Subordinated notes and debentures		21			313			334			25			921			946
Total borrowings		(1,038	)		4,763			3,725			2,775			6,808			9,583
Total interest expense	$	(323	)	$	9,769		$	9,446		$	12,867		$	34,522		$	47,389
Net interest income, fully taxable equivalent	$	17,084		$	(2,587	)	$	14,497		$	10,073		$	21,390		$	31,463

(1)

Includes loans and leases on non-accrual status.

Net interest income for the three months ended ~~September~~June 30, ~~2022~~2023 was ~~$68.9~~$76.2 million compared to ~~$59.8~~$61.6 million during the same period in ~~2021,~~2022, an increase of ~~$9.0~~$14.5 million, or ~~15.1%~~23.6%. Interest income increased ~~$17.1~~$40.7 million for the three months ended ~~September~~June 30, ~~2022~~2023 compared to the same period in ~~2021~~2022 primarily a result of higher yields and increased average balances on loans and ~~leases, offset by a decrease in PPP interest and fee income.~~leases. Interest expense increased

by ~~$8.1~~$26.2 million for the three months ended ~~September~~June 30, ~~2022~~2023 compared to the same period in ~~2021~~2022 mostly due to increases in the average rates paid on deposits, change in deposit mix, and ~~increases in other borrowings.~~growth of deposits.

Net interest income for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 was ~~$189.2~~$151.9 million compared to ~~$174.7~~$120.4 million during the same period in ~~2021,~~2022, an increase of ~~$14.6~~$31.5 million, or ~~8.3%~~26.2%. Interest income increased ~~$24.0~~$78.9 million for ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to the same period in ~~2021~~2022 primarily a result of higher yields and increased average balance on loans and ~~leases, offset by a decrease in PPP interest and fee income.~~leases. Interest expense increased by ~~$9.4~~$47.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to the same period in ~~2021~~2022 mostly due to increases in the average rates paid on deposits, change in deposit mix, and ~~other borrowings.~~growth of deposits.

The net interest margin for the three months ended ~~September~~June 30, ~~2022~~2023 was ~~4.04%~~4.32%, an increase of 1356 basis points compared to ~~3.91%~~3.76% for the three months ended ~~September~~June 30, ~~2021.~~2022. The primary drivers of the increase for the three month period was an increase yields due to the rising interest rate environment, and the increase in average interest earning assets was driven by organic loan and lease growth. The net interest margin for the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022 was 4.35% and ~~2021 was 3.87% and 3.81%~~3.78%, respectively.

Net loan accretion income was $1.6 million for the three months ended September 30, 2022 and 2021, a decrease of $79,000, or 4.8%. Total net loan accretion on acquired loans contributed nine basis points to the net interest margin for the three months ended September 30, 2022 compared to 11 basis points for the three months ended September 30, 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 nine basis points to the net interest margin for the nine months ended September 30, 2022 compared to 11 basis points for the nine months ended September 30, 2021.

Provision for ~~Loan and Lease~~Credit Losses

The provision for ~~loan~~credit losses reflects the amount required to maintain the allowance for credit losses at an appropriate level based upon management’s evaluation of the adequacy of collectively and ~~lease~~individually evaluated loss reserves. The provision for credit losses represents a charge to earnings necessary to establish an allowance for ~~loan and lease~~credit losses that, in management’s evaluation, is appropriate to provide coverage for ~~probable~~current expected credit losses ~~incurred~~ in the loan and lease portfolio. The ~~allowance for loan and lease losses~~ACL is increased by the provision for ~~loan and lease~~credit losses and is decreased by charge-offs, net of recoveries on prior charge-offs.

Provision for ~~loan~~credit losses - loans and ~~lease losses~~leases was ~~$4.2~~$5.8 million for the three months ended ~~September~~June 30, ~~2022,~~2023, compared to ~~$352,000~~$5.9 for the three months ended ~~September~~June 30, ~~2021, an increase~~2022, a decrease of ~~$3.8 million.~~$118,000. Provision for ~~loan~~credit losses - loans and ~~lease losses~~leases was ~~$15.1~~$15.6 million and ~~$2.8~~$10.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, an increase of ~~$12.3~~$4.7 million. The ~~increases~~increase in provision ~~were~~for the comparable six month periods was driven by ~~increases~~an increase in specific reserves ~~on impaired~~related to loans individually evaluated for impairment and loan and lease growth.

~~The ALLL as a percentage of loans and leases was 1.23% and 1.21% at September 30, 2022 and December 31, 2021, respectively.~~

Non-Interest Income

Non-interest income was ~~$12.0~~$14.3 million for the three months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$18.5~~$14.2 million for the three months ended ~~September~~June 30, ~~2021,~~2022, an increase of $130,000, or 0.9%. The increase was primarily due to the change in the loan servicing asset revaluation and in the fair value of equity securities, offset by decrease in net gains on sales of loans. Non-interest income was $29.4 million for the six months ended June 30, 2023 compared to $33.6 million for the six months ended June 30, 2022, a decrease of ~~$6.5~~$4.2 million or ~~35.2%~~12.4%. The decrease was primarily due to ~~a decrease~~decreases in net gains on sales of loans.


	Three Months Ended September 30,						Nine Months Ended September 30,						QTD 2022 Compared to 2021						YTD 2022 Compared to 2021						Three Months Ended June 30,						Six Months Ended June 30,						QTD 2023 Compared to 2022						YTD 2023 Compared to 2022
	2022			2021			2022			2021			$ Change			% Change			$ Change			% Change			2023			2022			2023			2022			$ Change			% Change			$ Change			% Change
Fees and service charges on deposits	$	2,128		$	1,867		$	6,071		$	5,299		$	261			14.0	%	$	772			14.6	%	$	2,233		$	2,059		$	4,353		$	3,943		$	174			8.5	%	$	410			10.4	%
Loan servicing revenue		3,422			3,344			10,186			9,301			78			2.4	%		885			9.5	%		3,377			3,384			6,757			6,764			(7	)		(0.2	)%		(7	)		(0.1	)%
Loan servicing asset revaluation		(2,342	)		(2,650	)		(8,209	)		(4,148	)		308			(11.6	)%		(4,061	)		97.9	%		(865	)		(4,636	)		(209	)		(5,867	)		3,771			(81.3	)%		5,658			(96.4	)%
ATM and interchange fees		1,007			1,201			3,187			3,257			(194	)		(16.1	)%		(70	)		(2.1	)%		1,112			1,131			2,175			2,180			(19	)		(1.7	)%		(5	)		(0.2	)%
Net realized gains on securities available-for-sale		(2	)		130			50			1,456			(132	)	NM				(1,406	)		(96.5	)%		—			52			—			52			(52	)		0.0	%		(52	)		(100.0	)%
Change in fair value of equity securities, net		(581	)		(275	)		(1,313	)		36			(306	)		111.0	%		(1,349	)	NM				193			(697	)		543			(732	)		890		NM				1,275		NM
Net gains on sales of loans		5,580			12,761			26,390			33,350			(7,181	)		(56.3	)%		(6,960	)		(20.9	)%		5,704			9,983			10,852			20,810			(4,279	)		(42.9	)%		(9,958	)		(47.9	)%
Wealth management and trust income		995			815			2,943			2,305			180			22.2	%		638			27.7	%		1,039			900			1,963			1,948			139			15.4	%		15			0.8	%
Other non-interest income		1,785			1,302			6,274			4,383			483			37.0	%		1,891			43.1	%		1,498			1,985			3,002			4,489			(487	)		(24.5	)%		(1,487	)		(33.1	)%
Total non-interest income	$	11,992		$	18,495		$	45,579		$	55,239		$	(6,503	)		(35.2	)%	$	(9,660	)		(17.5	)%	$	14,291		$	14,161		$	29,436		$	33,587		$	130			0.9	%	$	(4,151	)		(12.4	)%

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 ~~$2.1~~$2.2 million and ~~$1.9~~$2.1 million for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. Fees and service charges on deposits were ~~$6.1~~$4.4 million and ~~$5.3~~$3.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. Increases are due to increases in ~~deposits.~~deposit balances and changes in fee structure.

5457

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 $3.4 million ~~and $3.3 million~~ in loan servicing revenue on the sold portion of the U.S. government guaranteed loans for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021, respectively.~~2022. We generated ~~$10.2 million and $9.3~~$6.8 million in loan servicing revenue on the sold portion of the U.S. government guaranteed loans for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021, respectively.~~2022. At ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, the outstanding balance of guaranteed loans serviced was $1.7 ~~billion and $1.6 billion, respectively.~~billion.

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~~$865,000 and ~~$2.7~~$4.6 million for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, a change of ~~$308,000.~~$3.8 million. Loan servicing asset revaluation had a downward adjustment of ~~$8.2 million,~~$209,000, and ~~$4.1~~$5.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, a change of ~~$4.1~~$5.7 million. Changes in the revaluations were mainly due to ~~increases~~decreases in discount rates prompted by current market interest rates and premiums.

Net gains on sales of loans were ~~$5.6~~$5.7 million for the three months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$12.8~~$10.0 million for the three months ended ~~September~~June 30, ~~2021,~~2022, a decrease of ~~$7.2~~$4.3 million, or ~~56.3%~~42.9%, driven by lower volume and reduced premiums in the secondary market. We sold ~~$75.4~~$85.9 million of U.S. government guaranteed loans during the three months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$104.2~~$118.5 million during the three months ended ~~September~~June 30, ~~2021.~~2022. Net gains on sales of loans were ~~$26.4~~$10.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$33.4~~$20.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, a decrease of ~~$7.0~~$10.0 million or ~~20.9%~~47.9%, driven by reduced premiums in the secondary market. We sold ~~$296.2~~$158.1 million of U.S. government guaranteed loans during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$278.7~~$220.8 million during the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022.

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 administration. Wealth management and trust income was ~~$995,000~~$1.0 million for the three months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$815,000~~$900,000 for the three months ended ~~September~~June 30, ~~2021,~~2022, an increase of ~~$180,000~~$139,000 or ~~22.2%~~15.4%. Wealth management and trust income was ~~$2.9~~$2.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$2.3~~$1.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, an increase of ~~$638,000~~$15,000 or ~~27.7%~~0.8%. Assets under administration were ~~$501.2~~$636.0 million and ~~$626.0~~$502.6 million as of ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

Other non-interest income was ~~$1.8~~$1.5 million for the three months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$1.3~~$2.0 million for the three months ended ~~September~~June 30, ~~2021, an increase~~2022, a decrease of ~~$483,000~~$487,000 or ~~37.0%~~24.5%. Other non-interest income was ~~$6.3~~$3.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$4.4~~$4.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021, an increase~~2022, a decrease of ~~$1.9~~$1.5 million or ~~43.1%~~33.1%. The primary driver of the ~~increase~~decrease was ~~increased customer derivative products income due to volume and bank-owned life insurance~~decreased interest rate swap fee income.

Non-Interest Expense

Non-interest expense was ~~$46.2~~$49.3 million for the three months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$44.2~~$43.8 million for the three months ended ~~September~~June 30, ~~2021,~~2022, an increase of ~~$2.0~~$5.6 million, or ~~4.5%~~12.7%. Non-interest expense was ~~$134.5~~$98.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$126.0~~$88.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, an increase of ~~$8.5~~$9.8 million, or ~~6.7%~~11.1%. These increases were primarily due to an increase in salaries and employee ~~benefits.~~benefits, legal, audit and other professional fees, and other non-interest expense.

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 2022 Compared to 2021						YTD 2022 Compared to 2021						Three Months Ended June 30,				Six Months Ended June 30,				QTD 2023 Compared to 2022						YTD 2023 Compared to 2022
	2022		2021		2022		2021		$ Change			% Change			$ Change			% Change			2023		2022		2023		2022		$ Change			% Change			$ Change			% Change
Salaries and employee benefits	$	29,587	$	25,978	$	86,243	$	72,372	$	3,609			13.9	%	$	13,871			19.2	%	$	29,642	$	27,697	$	60,036	$	56,656	$	1,945			7.0	%	$	3,380			6.0	%
Occupancy and equipment expense, net		3,919		4,982		13,456		15,617		(1,063	)		(21.3	)%		(2,161	)		(13.8	)%		4,404		4,409		8,848		9,537		(5	)		(0.1	)%		(689	)		(7.2	)%
Impairment charge on assets held for sale		—		1,434		—		3,981		(1,434	)	NM				(3,981	)	NM				—		—		20		—		—			0.0	%		20		NM
Loan and lease related expenses		530		1,175		581		3,629		(645	)		(54.8	)%		(3,048	)		(84.0	)%		488		942		1,451		51		(454	)		(48.2	)%		1,400		NM
Legal, audit and other professional fees		2,733		2,710		7,153		7,822		23			0.8	%		(669	)		(8.6	)%		3,675		1,820		6,789		4,420		1,855			101.9	%		2,369			53.6	%
Data processing		3,370		3,108		9,952		8,710		262			8.4	%		1,242			14.3	%		4,272		3,396		8,055		6,582		876			25.8	%		1,473			22.4	%
Net loss recognized on other real estate owned and other related expenses		275		42		487		1,052		233		NM				(565	)		(53.7	)%		288		158		185		212		130			82.3	%		(27	)		(12.7	)%
Other intangible assets amortization expense		1,611		1,738		5,075		5,335		(127	)		(7.3	)%		(260	)		(4.9	)%		1,455		1,868		2,910		3,464		(413	)		(22.1	)%		(554	)		(16.0	)%
Other non-interest expense		4,153		3,013		11,559		7,485		1,140			37.9	%		4,074			54.5	%		5,104		3,483		9,834		7,406		1,621			46.5	%		2,428			32.8	%
Total non-interest expense	$	46,178	$	44,180	$	134,506	$	126,003	$	1,998			4.5	%	$	8,503			6.7	%	$	49,328	$	43,773	$	98,128	$	88,328	$	5,555			12.7	%	$	9,800			11.1	%

Salaries and employee benefits, the single largest component of our non-interest expense, totaled $29.6 million for the three months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$26.0~~$27.7 million for the three months ended ~~September~~June 30, ~~2021,~~2022, an increase of ~~$3.6~~$1.9 million, or ~~13.9%~~7.0%. Salaries and employee benefits, totaled ~~$86.2~~$60.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$72.4~~$56.7 million for the ~~nine~~

six months ended ~~September~~June 30, ~~2021,~~2022, an increase of ~~$13.9~~$3.4 million, or ~~19.2%~~6.0%. The increases were primarily a result of ~~increased headcount,~~merit increases, 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, 2022 compared to $5.0 million for the three months ended September 30, 2021, a decrease of $1.1 million or 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, a decrease of $2.2 million, or 13.8%. The decreases were a result of lower real estate tax, depreciation expenses, lease, and maintenance expenses, as a result of our branch consolidation and real estate strategy actions.

Loan and lease related expenses were ~~$530,000~~$488,000 for the three months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$1.2 million~~$942,000 for the three months ended ~~September~~June 30, ~~2021,~~2022, a decrease of ~~$645,000,~~$454,000, or ~~54.8%~~48.2%. 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~~$1.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021, a decrease~~2023, compared to $51,000 for the six months ended June 30, 2022, an increase of ~~$3.0 million, or 84.0%.~~$1.4 million. The ~~decrease~~increase was mainly related to the recapture of government guaranteed loan expenses during the first ~~quarter~~six months of 2022.

Legal, audit, and other professional fees were ~~$2.7~~$3.7 million for the three months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$2.7~~$1.8 million for the three months ended ~~September~~June 30, ~~2021,~~2022, an increase of ~~$23,000,~~$1.9 million, or ~~0.8%~~101.9%. Legal, audit, and other professional fees were ~~$7.2~~$6.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$7.8~~$4.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021, a decrease~~2022, an increase of ~~$669,000~~$2.4 million or ~~8.6%~~53.6%. The ~~decrease~~increase was driven by ~~recapture of~~increased legal fees ~~during the second quarter of 2022.~~for merger-related expenses.

Data processing was $4.3 million for the three months ended June 30, 2023, compared to $3.4 million for the three months ended ~~September~~June 30, 2022, ~~compared to $3.1 million for the three months ended September 30, 2021,~~ an increase of ~~$262,000~~$876,000 or ~~8.4%~~25.8%. Data processing was ~~$10.0~~$8.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, compared to ~~$8.7~~$6.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, an increase of ~~$1.2~~$1.5 million or ~~14.3%~~22.4%. The increases were driven by increased software licensing costs and ~~higher outside services.~~merger-related expenses.

Net loss recognized on other real estate owned and other related expenses was ~~$275,000~~$288,000 for the three months ended ~~September~~June 30, ~~2022,~~2023, compared to ~~$42,000~~$158,000 for the three months ended ~~September~~June 30, ~~2021,~~2022, an increase of ~~$233,000.~~$130,000. Net loss recognized on other real estate owned and other related expenses was ~~$487,000~~$185,000 for the ~~nine~~six months ended ~~September~~June 30, 2023, compared to $212,000 for the six months ended June 30, 2022, ~~compared to $1.1 million for the nine months ended September 30, 2021, a decrease~~an increase of ~~$565,000,~~$27,000, or ~~53.7%~~12.7%. These ~~decreases~~changes were primarily due to ~~decreased valuation adjustments on other real estate owned assets.~~sales and transfers of certain properties.

Other non-interest expense was ~~$4.2~~$5.1 million for the three months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$3.0~~$3.5 million for the three months ended ~~September~~June 30, ~~2021,~~2022, an increase of ~~$1.1~~$1.6 million or ~~37.9%~~46.5%. Other non-interest expense was ~~$11.6~~$9.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$7.5~~$7.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, an increase of ~~$4.1~~$2.4 million or ~~54.4%~~32.8%. These increases were mostly due to ~~higher provision for unfunded commitments, FDIC insurance assessments and marketing~~increases in other general expenses.

Our efficiency ratio was ~~55.11%~~52.92% for the three months ended ~~September~~June 30, ~~2022~~2023 compared to ~~54.18%~~55.29% for the three months ended ~~September~~June 30, ~~2021.~~2022. The change in our efficiency ratio for the three months ended ~~September~~June 30, ~~2022~~2023 was driven by ~~a decrease~~an increase in our ~~non-interest~~net interest income. Our adjusted efficiency ratio was ~~55.11%~~51.39% for the three months ended ~~September~~June 30, ~~2022~~2023 compared to ~~52.35%~~55.29% for the three months ended ~~September~~June 30, ~~2021.~~2022. Our efficiency ratio was 52.51% for the six months ended June 30, 2023, compared to 55.12% for the ~~nine~~six months ended ~~September~~June 30, ~~2022, compared to 52.49% for the nine months ended September 30, 2021.~~2022. The change in our efficiency ratio was due to higher ~~non-interest expense.~~net interest income. Our adjusted efficiency ratio was 51.47% for the six months ended June 30, 2023, compared to 55.12% for the ~~nine~~six months ended ~~September~~June 30, ~~2022, compared to 50.76% for the nine months ended September 30, 2021.~~2022.

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~~June 30, ~~2022~~2023 totaled ~~$7.9~~$9.2 million compared to ~~$8.5~~$5.8 million for the three months ended ~~September~~June 30, ~~2021, a decrease~~2022, an increase of ~~$645,000,~~$3.4 million, or ~~7.6%~~58.5%. The ~~decrease~~increase in income tax expense was principally due to ~~decreases~~increases in net income before provision for income taxes. Our effective tax rate was ~~25.7%~~26.1% for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~25.1%~~22.3% for the three months ended ~~September~~June 30, ~~2021.~~2022.

Our provision for income taxes for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 totaled ~~$20.0~~$17.5 million compared to ~~$25.5~~$12.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021, a decrease~~2022, an increase of ~~$5.6~~$5.4 million or ~~21.8%~~44.5%. The ~~decrease~~increase in income tax expense was principally due to ~~decreases~~increases in net income before provision for income taxes. Our effective tax rate was ~~23.4%~~25.9% for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~25.3%~~22.2% for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022.

We expect our effective tax rate for ~~2022~~2023 to be approximately 25-27%.

5659

Financial Condition

Condensed Consolidated Statements of Financial Condition Analysis

Our total assets increased by ~~$581.4~~$212.7 million, or ~~8.7%~~2.9%, to ~~$7.3~~$7.6 billion at ~~September~~June 30, ~~2022~~2023 compared to ~~$6.7~~$7.4 billion at December 31, ~~2021.~~2022. The increase in total assets includes an increase of ~~$738.3~~$149.3 million ~~or 16.3%,~~ in loans and leases, or 2.8%, from ~~$4.5~~$5.4 billion at December 31, ~~2021~~2022 to ~~$5.3~~$5.6 billion at ~~September~~June 30, ~~2022.~~2023. Our originated loan and lease portfolio increased by ~~$858.9~~$211.6 million and our our purchased credit deteriorated loans and acquired ~~loan~~non-credit-deteriorated loans and ~~lease~~leases portfolio decreased by ~~$120.6~~$62.4 million. The increase in our originated portfolio was primarily attributed to ~~organic loan~~growth in commercial real estate, leasing financing receivables and ~~lease growth,~~commercial and ~~renewals of acquired non-impaired loans that are now reflected with originated loans, offset by a decrease in PPP~~industrial loans. The decrease in our purchased credit deteriorated loans and acquired non-credit-deteriorated loans and leases portfolio was attributed to ~~renewals reflected~~decreases in ~~originated loans, payoffs, and pay downs during the period.~~commercial real estate.

Total liabilities increased by ~~$670.2~~$164.6 million, or ~~11.4%~~2.5%, to ~~$6.5~~$6.8 billion at ~~September~~June 30, ~~2022~~2023 compared to ~~$5.9~~$6.6 billion at December 31, ~~2021.~~2022. Total deposits increased by ~~$457.4~~$222.0 million, or ~~8.9%~~3.9%, driven by growth in time deposits and money market accounts, ~~partly~~ offset by a decrease in ~~interest~~non-interest bearing deposits. Other borrowings ~~increased~~decreased by ~~$134.2~~$65.5 million, or ~~25.8%~~10.2%, mainly due to ~~an increase~~a decrease in 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~~June 30, ~~2022~~2023 or December 31, ~~2021.~~2022. 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 ~~$272.9~~$48.7 million, or ~~18.8%~~4.1%, from ~~$1.5~~$1.2 billion at December 31, ~~2021~~2022 to ~~$1.2~~$1.1 billion at ~~September~~June 30, ~~2022.~~2023. The decrease was mainly attributed to decreases in the fair value of available-for-sale ~~securities.~~securities and paydowns made during the six months ended June 30, 2023.

At ~~September~~June 30, ~~2022,~~2023, 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~~$2.2 million and $2.7 million at ~~September~~June 30, ~~2022~~2023 and at December 31, ~~2021.~~2022, respectively.

We had no securities that ~~were classified as having other-than-temporary-impairment (“OTTI”)~~had evidence of material credit losses as of ~~September~~June 30, ~~2022~~2023 or December 31, ~~2021.~~2022.

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, 2022				December 31, 2021				June 30, 2023				December 31, 2022
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Available-for-sale
U.S. Treasury Notes	$	32,745	$	30,917	$	18,447	$	18,476	$	42,516	$	40,718	$	42,430	$	40,723
U.S. Government agencies		152,254		130,901		141,096		139,390		148,297		128,518		150,524		130,364
Obligations of states, municipalities, and political subdivisions		71,550		63,565		86,454		89,636		67,922		62,730		68,019		61,876
Residential mortgage-backed securities
Agency		726,035		605,098		756,549		743,656		673,096		565,680		707,157		595,796
Non-agency		132,847		108,085		146,499		145,236		126,144		101,880		130,654		106,249
Commercial mortgage-backed securities
Agency		194,347		159,930		214,417		213,551		188,308		152,240		191,172		157,030
Corporate securities		45,320		41,616		65,814		67,346		42,767		35,943		45,302		41,436
Asset-backed securities		43,582		41,542		37,206		37,251		39,785		37,991		43,085		40,957
Total	$	1,398,680	$	1,181,654	$	1,466,482	$	1,454,542
Total available-for-sale									$	1,328,835	$	1,125,700	$	1,378,343	$	1,174,431
Held-to-maturity
Obligations of states, municipalities, and political subdivisions									$	2,158	$	2,132	$	2,705	$	2,672
Total held-to-maturity									$	2,158	$	2,132	$	2,705	$	2,672

September 30, 2022

December 31, 2021

Amortized
Cost

Fair
Value

Amortized
Cost

Fair
Value

Held-to-maturity

Obligations of states, municipalities, and
political subdivisions

$
3,877

$
3,825

$
3,885

$
3,992

Total

$
3,877

$
3,825

$
3,885

$
3,992

5760

Certain securities have fair values less than amortized cost and, therefore, contain unrealized losses. At ~~September~~June 30, ~~2022,~~2023, we evaluated the securities which had an unrealized loss for ~~OTTI~~credit losses and determined ~~all declines in value to be temporary.~~there were none. There were ~~297~~286 investment securities with unrealized losses at ~~September~~June 30, ~~2022.~~2023. 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 table (dollars in thousands) set forth certain information regarding contractual maturities and the weighted average yields of our investment securities as of ~~September~~June 30, ~~2022.~~2023. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

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.~~


	Due in One Year or Less					Due from One to Five Years					Due from Five to Ten Years					Due after Ten Years					Maturity as of June 30, 2023
	Amortized Cost		Weighted Average Yield(1)			Amortized Cost		Weighted Average Yield(1)			Amortized Cost		Weighted Average Yield(1)			Amortized Cost		Weighted Average Yield(1)			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	%	$	42,516		2.35	%	$	—		0.00	%	$	—		0.00	%
U.S. government agencies																						—		0.00	%		47,623		1.41	%		93,627		1.91	%		7,047		3.97	%
Obligations of states, municipalities, and political subdivisions																						2,954		2.55	%		16,650		2.85	%		9,965		3.17	%		38,353		2.28	%
Residential mortgage- backed securities
Agency																						18		1.35	%		18,422		1.78	%		72,937		1.54	%		581,719		1.48	%
Non-agency																						—		0.00	%		—		0.00	%		—		0.00	%		126,144		2.14	%
Commercial mortgage- backed securities
Agency																						—		0.00	%		—		0.00	%		13,515		1.63	%		174,793		2.07	%
Corporate securities																						—		0.00	%		11,713		4.60	%		31,054		3.70	%		—		0.00	%
Asset-backed securities																						—		0.00	%		—		0.00	%		39,785		5.29	%		—		0.00	%
Total available-for-sale																					$	2,972		2.54	%	$	136,924		2.20	%	$	260,883		2.57	%	$	928,056		1.73	%
Held-to-maturity
Obligations of states, municipalities, and political subdivisions	$	2,719		2.57	%	$	1,158		2.75	%	$	—		0.00	%	$	—		0.00	%	$	1,551		2.67	%	$	607		2.75	%	$	—		0.00	%	$	—		0.00	%
Total	$	2,719		2.57	%	$	1,158		2.75	%	$	—		0.00	%	$	—		0.00	%
Total held-to-maturity																					$	1,551		2.67	%	$	607		2.75	%	$	—		0.00	%	$	—		0.00	%

(1)

The weighted average yields are based on amortized cost.

As of ~~September~~June 30, ~~2022,~~2023, and December 31, ~~2021,~~2022, investment securities indexed to LIBOR were ~~$43.9~~$36.1 million and ~~$58.2~~$43.5 million, respectively.

Total non-taxable securities classified as obligations of states, municipalities and political subdivisions were ~~$48.3~~$43.7 million at ~~September~~June 30, ~~2022,~~2023, a decrease of ~~$13.3 million~~$190,000 from December 31, ~~2021.~~2022.

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~~June 30, ~~2022~~2023 or December 31, ~~2021.~~2022.

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~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, we held ~~$27.1~~$24.4 million and ~~$22.0~~$28.2 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~~June 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

5861

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~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 were ~~$5.3~~$5.6 billion and ~~$4.5~~$5.4 billion, respectively, an increase of ~~$738.3~~$149.3 million, or ~~16.3%~~2.8%. Originated loans and leases were ~~$5.0~~$5.3 billion at ~~September~~June 30, ~~2022,~~2023, an increase of ~~$858.9~~$211.6 million, or ~~21.0%~~4.1%, compared to ~~$4.1~~$5.1 billion at December 31, ~~2021. Acquired impaired~~2022. Purchased credit deteriorated loans and acquired ~~non-impaired~~non-credit-deteriorated loans and leases were ~~$322.2~~$228.2 million at ~~September~~June 30, ~~2022,~~2023, a decrease of ~~$120.6~~$62.4 million, or ~~27.2%~~21.5%, compared to ~~$442.8~~$290.5 million at December 31, ~~2021.~~2022. The increase in our originated portfolio was primarily attributed to organic loan and lease growth, and renewals of acquired ~~non-impaired~~non-credit-deteriorate loans and leases that are now reflected with originated loans. The decrease in ~~our~~the purchased credit deteriorated and acquired non-credit-deteriorated loan and lease portfolio ~~is attributed to~~was driven by renewals that are reflected inwithin originated loans, payoffs, and ~~pay downs~~maturities during the period. ~~PPP loans 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. As of ~~September~~June 30, ~~2022,~~2023, the loan portfolio included ~~$404.2~~$420.7 million of unguaranteed 7(a) SBA and USDA loans with exposure to the following top three industries: ~~15.0%~~17.1% retail trade, 15.4% accommodation and food services, ~~14.5% retail trade,~~ and ~~12.9%~~11.4% manufacturing. The following table shows our allocation of originated, ~~acquired impaired~~purchase credit deteriorated and acquired ~~non-impaired~~non-credit-deteriorated loans and leases as of the dates presented (dollars in thousands):


	September 30, 2022						December 31, 2021						June 30, 2023						December 31, 2022
	Amount			% of Total			Amount			% of Total			Amount			% of Total			Amount			% of Total
Originated loans and leases
Commercial real estate	$	1,652,890			31.3	%	$	1,379,000			30.4	%	$	1,806,531			32.4	%	$	1,712,152			31.6	%
Residential real estate		410,285			7.8	%		379,796			8.4	%		453,880			8.1	%		426,226			7.9	%
Construction, land development, and other land		456,463			8.7	%		323,886			7.1	%		387,623			7.0	%		438,617			8.1	%
Commercial and industrial		1,938,320			36.7	%		1,534,745			33.8	%		2,086,274			37.5	%		2,030,616			37.5	%
Paycheck Protection Program		1,522			0.0	%		123,712			2.7	%
Installment and other		1,016			0.0	%		940			0.0	%		3,582			0.1	%		1,410			0.0	%
Leasing financing receivables		492,744			9.3	%		352,247			7.8	%		604,437			10.9	%		521,689			9.6	%
Total originated loans and leases	$	4,953,240			93.8	%	$	4,094,326			90.2	%	$	5,342,327			95.9	%	$	5,130,710			94.7	%
Acquired impaired loans
Purchased credit deteriorated loans
Commercial real estate	$	56,974			1.1	%	$	72,160			1.6	%	$	30,724			0.6	%	$	45,143			0.8	%
Residential real estate		37,246			0.7	%		49,401			1.1	%		26,012			0.5	%		32,228			0.6	%
Construction, land development, and other land		1,144			0.0	%		1,312			0.0	%		320			0.0	%		372			0.0	%
Commercial and industrial		3,029			0.1	%		4,014			0.1	%		1,726			0.0	%		2,192			0.0	%
Installment and other		153			0.0	%		164			0.0	%		129			0.0	%		140			0.0	%
Total acquired impaired loans	$	98,546			1.9	%	$	127,051			2.8	%
Acquired non-impaired loans and leases
Total purchased credit deteriorated loans													$	58,911			1.1	%	$	80,075			1.4	%
Acquired non-credit-deteriorated loans and leases
Commercial real estate	$	159,130			3.0	%	$	214,588			4.7	%	$	126,191			2.4	%	$	152,193			2.8	%
Residential real estate		34,313			0.7	%		51,317			1.1	%		25,055			0.4	%		31,508			0.6	%
Construction, land development, and other land		—			0.0	%		201			0.1	%
Commercial and industrial		26,959			0.5	%		43,202			1.0	%		16,750			0.3	%		24,266			0.5	%
Installment and other		199			0.0	%		264			0.0	%		25			0.0	%		209			0.0	%
Leasing financing receivables		3,084			0.1	%		6,179			0.1	%		1,258			0.0	%		2,297			0.0	%
Total acquired non-impaired loans and leases	$	223,685			4.3	%	$	315,751			7.0	%
Total acquired non-credit-deteriorated loans and leases													$	169,279			3.0	%	$	210,473			3.9	%
Total loans and leases	$	5,275,471			100.0	%	$	4,537,128			100.0	%	$	5,570,517			100.0	%	$	5,421,258			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
Allowance for credit losses - loans and leases														(92,665	)					(81,924	)
Total loans and leases, net of allowance for credit losses - loans and leases													$	5,477,852					$	5,339,334

Loans collateralized by real estate comprised ~~53.3%~~51.3% and ~~54.5%~~52.4% of the loan and lease portfolio at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. Commercial real estate loans comprised the largest portion of the real estate loan portfolio as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 and totaled ~~$1.9~~$2.0 billion, or ~~66.5%~~68.7% of real estate loans and ~~35.4%~~35.2% of the total loan and lease portfolio at ~~September~~June 30, ~~2022.~~2023. At December 31, ~~2021,~~2022, commercial real estate loans totaled ~~$1.7~~$1.9 billion and comprised ~~67.4%~~67.3% of real estate loans and ~~36.7%~~35.2% of the total loan and lease portfolio. ~~Acquired impaired~~Purchased credit deteriorated commercial real estate loans decreased from ~~$72.2~~$45.1 million as of December 31, ~~2021~~2022 to ~~$57.0~~$30.7 million as of ~~September~~June 30, ~~2022,~~2023, a decrease of ~~$15.2~~$14.4 million, or ~~21.0%~~31.9%. At ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, commercial real estate loans, including both owner-occupied and non-owner occupied, as a percentage of total capital were ~~318.9%~~293.3% and ~~302.5%~~313.4%, respectively. Non-owner occupied commercial real estate loans were ~~$717.6~~$791.2 million and ~~$637.1~~$736.7 million, or ~~86.9%~~86.8% and ~~84.6%~~86.6% of total capital, at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

Residential real estate loans totaled ~~$481.8~~$504.9 million at ~~September~~June 30, ~~2022~~2023 compared to ~~$480.5~~$490.0 million at December 31, ~~2021,~~2022, an increase of ~~$1.3~~$14.9 million, or ~~0.3%~~3.1%. The residential real estate loan portfolio comprised ~~17.2%~~17.7% and ~~19.4%~~17.3% of real estate loans as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, and ~~9.2%~~9.1% and ~~10.6%~~9.0% of total loans and leases at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~

2022, respectively. ~~Acquired impaired~~Purchased credit deteriorated residential real estate loans decreased from ~~$49.4~~$32.2 million at December 31, ~~2021~~2022 to ~~$37.2~~$26.0 million at ~~September~~June 30, ~~2022,~~2023, a decrease of ~~$12.2~~$6.2 million, or ~~24.6%~~19.3%. Multifamily real estate loans were $321.5 million at and $304.2 million, or 33.5% and 35.6% of total capital, at June 30, 2023 and December 31, 2022, respectively.

Construction, land development, and other land loans totaled ~~$457.6~~$387.9 million at ~~September~~June 30, ~~2022~~2023 compared to ~~$325.4~~$439.0 million at December 31, ~~2021,~~2022, an ~~increase~~decrease of ~~$132.2~~$51.0 million, or ~~40.6%~~11.6%. The construction, land development and other land loan portfolio comprised ~~16.3%~~13.6% and ~~13.2%~~15.5% of real estate loans at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, and ~~8.7%~~7.0% and ~~7.2%~~8.1% of the total loan and lease portfolio at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. The construction, land development and other land loan portfolio was 40.3% and 51.2% of total capital, at June 30, 2023 and December 31, 2022, respectively.

Commercial and industrial loans totaled ~~$2.0 billion and $1.6~~$2.1 billion at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021, respectively,~~2022, an increase of ~~$386.3~~$47.7 million, or ~~24.4%~~2.3%. The commercial and industrial loan portfolio comprised ~~37.3%~~37.8% and ~~34.9%~~37.9% of the total loan and lease portfolio at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, 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 ~~9.4%~~10.9% and ~~7.9%~~9.7% of the loan and lease portfolio at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. Total lease financing receivables were ~~$495.8~~$605.7 million and ~~$358.4~~$524.0 million at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, an increase of ~~$137.4~~$81.7 million, or ~~38.3%~~15.6%.

Loan and Lease Portfolio Maturities and Interest Rate Sensitivity

The following table shows our loan and lease portfolio by scheduled maturity at ~~September~~June 30, ~~2022~~2023 (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 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	$	73,329	$	194,422	$	670,514	$	265,646	$	301,569	$	122,356	$	10,288	$	168,407	$	1,806,531
Residential real estate		13,732		34,940		122,653		69,208		42,010		105,293		63,219		2,825		453,880
Construction, land development, and other land		3,639		132,172		11,389		205,970		28,755		5,698		—		—		387,623
Commercial and industrial		30,728		380,616		312,624		908,941		155,714		256,706		32,674		8,271		2,086,274
Installment and other		304		700		730		1,633		215		—		—		—		3,582
Leasing financing receivables		15,570		—		522,488		—		66,379		—		—		—		604,437
Total originated loans and leases	$	137,302	$	742,850	$	1,640,398	$	1,451,398	$	594,642	$	490,053	$	106,181	$	179,503	$	5,342,327
Purchased credit deteriorated loans
Commercial real estate	$	11,524	$	-	$	15,350	$	2,156	$	721	$	563	$	135	$	275	$	30,724
Residential real estate		3,323		48		9,939		548		5,933		470		4,329		1,422		26,012
Construction, land development, and other land		283		—		37		—		—		—		—		—		320
Commercial and industrial		—		78		1,644		4		—		—		—		—		1,726
Installment and other		—		—		24		—		105		—		—		—		129
Total purchased credit deteriorated loans	$	15,130	$	126	$	26,994	$	2,708	$	6,759	$	1,033	$	4,464	$	1,697	$	58,911
Acquired non-credit-deteriorated loans and leases
Commercial real estate		5,763		279		65,118		13,168		12,422		8,916		2,496		18,029	$	126,191
Residential real estate		6,261		2,044		6,967		737		128		4,376		729		3,813		25,055
Commercial and industrial		882		107		6,025		8,315		288		817		—		316		16,750
Installment and other		18		—		7		—		—		—		—		—		25
Leasing financing receivables		406		—		852		—		—		—		—		—		1,258
Total acquired non-credit-deteriorated loans and leases	$	13,330	$	2,430	$	78,969	$	22,220	$	12,838	$	14,109	$	3,225	$	22,158	$	169,279
Total loans and leases	$	165,762	$	745,406	$	1,746,361	$	1,476,326	$	614,239	$	505,195	$	113,870	$	203,358	$	5,570,517

At ~~September~~June 30, ~~2022, 44.6%~~2023, 47.4% of the loan and lease portfolio bears interest at fixed rates and ~~55.4%~~52.6% at floating rates. 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~~June 30, ~~2022~~2023, we had ~~$822.4~~$252.9 million in loans indexed to ~~LIBOR.~~LIBOR and $1.4 billion in loans indexed to SOFR.

Allowance for ~~Loan~~Credit Losses - Loans and ~~Lease Losses~~Leases

The ~~ALLL~~ACL 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~~ACL reflects management’s estimate of ~~probable incurred~~current expected credit losses inherent in the loan and lease portfolios. The computation includes elements of ~~judgement~~judgment 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~~that may affect a borrower’s ability to repay, application of a reasonable and supportable forecast, and evaluation of the prevailing economic conditions. Changes in conditions may necessitate revision of the estimate in future periods.

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

Total ~~ALLL~~ACL was ~~$64.7~~$92.7 million at ~~September~~June 30, ~~2022~~2023 compared to ~~$55.0~~$81.9 million at December 31, ~~2021,~~2022, an increase of ~~$9.6~~$10.7 million, or ~~17.5%~~13.1%. The increase was primarily due to an increase in ~~general~~specific reserves ~~driven by loan and lease growth and increase in non-performing loans.~~related to loans individually evaluated for impairment. Total ~~ALLL~~ACL to total loans and leases held for investment, net before ~~ALLL,~~ACL, was ~~1.23%~~1.66% and ~~1.21%~~1.51% of total loans and leases at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. As of ~~September~~June 30, ~~2022,~~2023, approximately ~~$27.2~~$38.0 million of the ~~ALLL~~ACL was allocated to unguaranteed portion of SBA 7(a) and USDA loans.

6165

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

Installment
and Other

Lease
Financing
Receivables

Total

Balance at June 30, 2022

$
19,818

$
2,489

$
1,792

$
34,735

$
11

$
3,591

$
62,436

Provision/(recapture) for acquired
  impaired loans

79

39

70

(343
)

(1
)

—

(156
)
Provision/(recapture) for acquired
  non-impaired loans and leases

(409
)

(2
)

—

(220
)

—

(144
)

(775
)
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

—

—

—

(1
)

—

—

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

—

—

—

—

—

(28
)

(28
)
Charge-offs for originated loans
  and leases

(1,102
)

(17
)

—

(1,183
)

(3
)

(388
)

(2,693
)
Total charge-offs

$
(1,102
)

$
(17
)

$
—

$
(1,184
)

$
(3
)

$
(416
)

$
(2,722
)
Recoveries for acquired
  impaired loans

6

2

—

37

—

—

45

Recoveries for acquired
  non-impaired loans and leases

—

—

—

—

—

164

164

Recoveries for originated
  loans and leases

213

3

—

124

—

216

556

Total recoveries

$
219

$
5

$
—

$
161

$
—

$
380

$
765

Less: Net charge-offs

883

12

—

1,023

3

36

1,957

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
%

(0.01
)%

(0.01
)%
Originated loans and leases

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

1.08
%

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			Installment and Other			Lease Financing Receivables			Total
Balance at March 31, 2023	$	24,738		$	2,679		$	3,498		$	51,849		$	25		$	7,676		$	90,465
Provision/(recapture) for PCD loans		142			(55	)		(3	)		3			—			—			87
Provision/(recapture) for acquired non-credit-deteriorated loans		190			(42	)		—			(199	)		—			(7	)		(58	)
Provision/(recapture) for originated loans		4,027			(101	)		(1,560	)		3,357			17			698			6,438
Total provision/(recapture)	$	4,359		$	(198	)	$	(1,563	)	$	3,161		$	17		$	691		$	6,467
Charge-offs for PCD loans		—			—			—			—			—			—			—
Charge-offs for acquired non-credit deteriorated loans		—			—			—			—			—			—			—
Charge-offs for originated loans		(2,945	)		—			—			(2,097	)		—			(462	)		(5,504	)
Total charge-offs	$	(2,945	)	$	—		$	—		$	(2,097	)	$	—		$	(462	)	$	(5,504	)
Recoveries for PCD loans		—			—			—			—			—			—			—
Recoveries for acquired non-credit deteriorated loans		—			—			—						—			—			—
Recoveries for originated loans		225			63			—			727			1			221			1,237
Total recoveries	$	225		$	63		$	—		$	727		$	1		$	221		$	1,237
Net (charge-offs) recoveries		(2,720	)		63			—			(1,370	)		1			(241	)		(4,267	)
Balance at June 30, 2023		26,377			2,544			1,935			53,640			43			8,126			92,665
Ending ACL Balances
PCD loans		733			341			7			39			2			—			1,122
Acquired non-credit-deteriorated loans		3,061			96			—			684			1			17			3,859
Originated loans		22,583			2,107			1,928			52,917			40			8,109			87,684
Balance at June 30, 2023	$	26,377		$	2,544		$	1,935		$	53,640		$	43		$	8,126		$	92,665
Loans individually evaluated for impairment	$	8,555		$	—		$	—		$	17,399		$	—		$	—		$	25,954
Loans collectively evaluated for impairment		17,822			2,544			1,935			36,241			43			8,126			66,711
Balance at June 30, 2023	$	26,377		$	2,544		$	1,935		$	53,640		$	43		$	8,126		$	92,665
Loans and leases ending balance
Loans individually evaluated for impairment	$	30,750		$	—		$	—		$	38,485		$	—		$	—		$	69,235
Loans collectively evaluated for impairment		1,932,696			504,947			387,943			2,066,265			3,736			605,695			5,501,282
Total loans and leases at June 30, 2023, gross	$	1,963,446		$	504,947		$	387,943		$	2,104,750		$	3,736		$	605,695		$	5,570,517
Ratio of net charge-offs to average loans outstanding during the year
PCD loans		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%
Acquired non-credit-deteriorated loans		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%
Originated loans		0.19	%		0.00	%		0.00	%		0.10	%		0.00	%		0.02	%		0.31	%
Loans ending balance as a percentage of total loans, gross
Loans individually evaluated for impairment		0.55	%		0.00	%		0.00	%		0.69	%		0.00	%		0.00	%		1.24	%
Loans collectively evaluated for impairment		34.70	%		9.06	%		6.96	%		37.09	%		0.07	%		10.87	%		98.76	%

6266

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			Installment and Other			Lease Financing Receivables			Total
Balance at December 31, 2022	$	26,062		$	3,140		$	3,134		$	41,888		$	24		$	7,676		$	81,924
Provision/(recapture) for PCD loans		(418	)		(333	)		(6	)		(7	)		—			—			(764	)
Provision/(recapture) for acquired non-credit-deteriorated loans and leases		(675	)		(200	)		(1	)		(545	)		—			(17	)		(1,438	)
Provision/(recapture) for originated loans		4,331			(118	)		(1,192	)		14,518			14			828			18,381
Total provision/(recapture)	$	3,238		$	(651	)	$	(1,199	)	$	13,966		$	14		$	811		$	16,179
Charge-offs for PCD loans		—			—			—			—			—			—			—
Charge-offs for acquired non-credit deteriorated loans		—			—			—			—			—			—			—
Charge-offs for originated loans		(3,910	)		(9	)		—			(3,887	)		—			(767	)		(8,573	)
Total charge-offs	$	(3,910	)	$	(9	)	$	—		$	(3,887	)	$	—		$	(767	)	$	(8,573	)
Recoveries for PCD loans		—			—			—			—			—			—			—
Recoveries for acquired non-credit deteriorated loans		—			—			—			—			—			—			—
Recoveries for originated loans		987			64			—			1,673			5			406			3,135
Total recoveries	$	987		$	64		$	—		$	1,673		$	5		$	406		$	3,135
Net (charge-offs) recoveries		2,923			(55	)		—			2,214			(5	)		361			5,438
Balance at June 30, 2023		26,377			2,544			1,935			53,640			43			8,126			92,665
Ending ACL Balances
PCD loans		733			341			7			39			2			—			1,122
Acquired non-credit-deteriorated loans		3,061			96			—			684			1			17			3,859
Originated loans		22,583			2,107			1,928			52,917			40			8,109			87,684
Balance at June 30, 2023	$	26,377		$	2,544		$	1,935		$	53,640		$	43		$	8,126		$	92,665
Loans individually evaluated for impairment		8,555			—			—			17,399			—			—			25,954
Loans collectively evaluated for impairment		17,822			2,544			1,935			36,241			43			8,126			66,711
Balance at June 30, 2023	$	26,377		$	2,544		$	1,935		$	53,640		$	43		$	8,126		$	92,665
Loans and leases ending balance
Loans individually evaluated for impairment	$	30,750		$	—		$	—		$	38,485		$	—		$	—		$	69,235
Loans collectively evaluated for impairment		1,932,696			504,947			387,943			2,066,265			3,736			605,695			5,501,282
Total loans and leases at June 30, 2023, gross	$	1,963,446		$	504,947		$	387,943		$	2,104,750		$	3,736		$	605,695		$	5,570,517
Ratio of net charge-offs to average loans outstanding during the year
PCD loans		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%
Acquired non-credit-deteriorated loans		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%
Originated loans		0.11	%		0.00	%		0.00	%		0.08	%		0.00	%		0.01	%		0.20	%
Loans ending balance as a percentage of total loans, gross
Loans individually evaluated for impairment		0.55	%		0.00	%		0.00	%		0.69	%		0.00	%		0.00	%		1.24	%
Loans collectively evaluated for impairment		34.70	%		9.06	%		6.96	%		37.09	%		0.07	%		10.87	%		98.76	%

6367


	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 March 31, 2022																										$	19,706		$	2,145		$	1,116		$	33,244		$	10		$	3,237		$	59,458
Provision/(recapture) for acquired impaired loans		414			18				—			(63	)		—			—			—			369			(382	)		(196	)		27			(18	)		1			—			(568	)
Provision/(recapture) for acquired non-impaired loans and leases		(932	)		(65	)	��		—			(564	)		—			(1	)		(38	)		(1,600	)		(740	)		14			—			(514	)		—			(32	)		(1,272	)
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																											1,688			521			649			4,384			—			506			7,748
Total provision																										$	566		$	339		$	676		$	3,852		$	1		$	474		$	5,908
Charge-offs for acquired impaired loans		(4	)		—				—			—			—			—			—			(4	)		(34	)		—			—			(1	)		—			—			(35	)
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	)		(463	)		—			—			(2,653	)		—			(324	)		(3,440	)
Total charge-offs	$	(564	)	$	(65	)		$	—		$	(1,456	)	$	—		$	—		$	(399	)	$	(2,484	)	$	(497	)	$	—		$	—		$	(2,654	)	$	—		$	(324	)	$	(3,475	)
Recoveries for acquired impaired loans		37			1				—			1			—			—			—			39			1			4			—			18			—			—			23
Recoveries for acquired non-impaired loans and leases		25			1				—			234			—			—			44			304			—			—			—			—			—			21			21
Recoveries for originated loans and leases		225			—				—			145			—			—			298			668			42			1			—			275			—			183			501
Total recoveries	$	287		$	2			$	—		$	380		$	—		$	—		$	342		$	1,011		$	43		$	5		$	—		$	293		$	—		$	204		$	545
Less: Net charge-offs (recoveries)		277			63				—			1,076			—			—			57			1,473			454			(5	)		—			2,361			—			120			2,930
Balance at June 30, 2022
Acquired impaired loans		2,638			353				8			1,276			—			—			—			4,275			1,240			809			28			386			3			—			2,466
Acquired non-impaired loans and leases		3,333			27				—			2,772			—			1			58			6,191			1,461			50			-			1,347			1			32			2,891
Originated loans and leases		14,401			696				550			31,942			—			6			2,537			50,132			17,117			1,630			1,764			33,002			7			3,559			57,079
Balance at September 30, 2021	$	20,372		$	1,076			$	558		$	35,990		$	—		$	7		$	2,595		$	60,598
Balance at June 30, 2022																										$	19,818		$	2,489		$	1,792		$	34,735		$	11		$	3,591		$	62,436
Ending ALLL balance
Acquired impaired loans	$	2,638		$	353			$	8		$	1,276		$	—		$	—		$	—		$	4,275		$	1,240		$	809		$	28		$	386		$	3		$	—		$	2,466
Acquired non-impaired loans and leases and originated loans individually evaluated for impairment		8,420			—				—			16,142			—			—			—			24,562			6,002			—			—			11,337			—			—			17,339
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			12,576			1,680			1,764			23,012			8			3,591			42,631
Balance at June 30, 2021	$	20,372		$	1,076			$	558		$	35,990		$	—		$	7		$	2,595		$	60,598
Balance at June 30, 2022																										$	19,818		$	2,489		$	1,792		$	34,735		$	11		$	3,591		$	62,436
Loans and leases ending balance
Acquired impaired loans	$	84,821		$	61,893			$	1,746		$	6,651		$	—		$	169		$	—		$	155,280		$	60,075		$	39,902		$	1,184		$	3,232		$	157		$	—		$	104,550
Acquired non-impaired loans and leases and originated loans individually evaluated for impairment		45,563			3,946				—			37,689			—			—			—			87,198			45,200			5,188			5,541			27,770			—			—			83,699
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			1,794,663			436,081			428,782			1,876,772			1,153			442,371			4,979,822
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 June 30, 2022, gross																										$	1,899,938		$	481,171		$	435,507		$	1,907,774		$	1,310		$	442,371		$	5,168,071
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	%		0.00	%		0.00	%
Originated loans and leases		0.02	%		0.01	%			0.00	%		0.11	%		0.00	%		0.00	%		0.01	%		0.14	%		0.03	%		0.00	%		0.00	%		0.19	%		0.00	%		0.01	%		0.24	%
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	%		1.16	%		0.77	%		0.02	%		0.06	%		0.01	%		0.00	%		2.02	%
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	%		0.87	%		0.10	%		0.11	%		0.54	%		0.00	%		0.00	%		1.62	%
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	%		34.73	%		8.44	%		8.30	%		36.31	%		0.02	%		8.56	%		96.36	%

6468


	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 December 31, 2020	$	19,584		$	2,400		$	1,352		$	41,183		$	—		$	15		$	1,813		$	66,347
Balance at December 31, 2021																									$	16,918		$	1,628		$	522		$	33,129		$	9		$	2,806		$	55,012
Provision/(recapture) for acquired impaired loans		(24	)		(127	)		(31	)		(398	)		—			—			—			(580	)		(537	)		(203	)		25			(21	)		1			—			(735	)
Provision/(recapture) for acquired non-impaired loans and leases		(69	)		(79	)		—			849			—			(2	)		(86	)		613			(1,889	)		25			—			(1,476	)		—			(53	)		(3,393	)
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
Provision for originated loans																										5,776			1,030			1,245			5,807			1			1,172			15,031
Total provision																									$	3,350		$	852		$	1,270		$	4,310		$	2		$	1,119		$	10,903
Charge-offs for acquired impaired loans		(1,259	)		(11	)		(326	)		(88	)		—			—			—			(1,684	)		(34	)		—			—			(1	)		—			—			(35	)
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	)		(703	)		—			—			(3,116	)		—			(687	)		(4,506	)
Total charge-offs	$	(2,644	)	$	(76	)	$	(326	)	$	(6,172	)	$	—		$	—		$	(1,148	)	$	(10,366	)	$	(737	)	$	—		$	—		$	(3,117	)	$	—		$	(687	)	$	(4,541	)
Recoveries for acquired impaired loans		47			5			—			24			—			—			—			76			1			6			—			44			—			-			51
Recoveries for acquired non-impaired loans and leases		144			3			—			369			—			—			113			629			—			—			—			—			—			37			37
Recoveries for originated loans and leases		350			1			—			360			—			—			451			1,162			286			3			—			369			—			316			974
Total recoveries	$	541		$	9		$	—		$	753		$	—		$	—		$	564		$	1,867		$	287		$	9		$	—		$	413		$	—		$	353		$	1,062
Less: Net charge-offs		2,103			67			326			5,419			—			—			584			8,499
Less: Net charge-offs (recoveries)																										450			(9	)		—			2,704			—			334			3,479
Acquired impaired loans		2,638			353			8			1,276			—			—			—			4,275			1,240			809			28			386			3			—			2,466
Acquired non-impaired loans and leases		3,333			27			—			2,772			—			1			58			6,191			1,461			50			—			1,347			1			32			2,891
Originated loans and leases		14,401			696			550			31,942			—			6			2,537			50,132			17,117			1,630			1,764			33,002			7			3,559			57,079
Balance at September 30, 2021	$	20,372		$	1,076		$	558		$	35,990		$	—		$	7		$	2,595		$	60,598
Balance at June 30, 2022																									$	19,818		$	2,489		$	1,792		$	34,735		$	11		$	3,591		$	62,436
Ending ALLL balance
Acquired impaired loans	$	2,638		$	353		$	8		$	1,276		$	—		$	—		$	—		$	4,275		$	1,240		$	809		$	28		$	386		$	3		$	—		$	2,466
Acquired non-impaired loans and leases and originated loans individually evaluated for impairment		8,420			—			—			16,142			—			—			—			24,562			6,002			—			—			11,337			—			—			17,339
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			12,576			1,680			1,764			23,012			8			3,591			42,631
Balance at September 30, 2021	$	20,372		$	1,076		$	558		$	35,990		$	—		$	7		$	2,595		$	60,598
Balance at June 30, 2022																									$	19,818		$	2,489		$	1,792		$	34,735		$	11		$	3,591		$	62,436
Loans and leases ending balance
Acquired impaired loans	$	84,821		$	61,893		$	1,746		$	6,651		$	—		$	169		$	—		$	155,280		$	60,075		$	39,902		$	1,184		$	3,232		$	157		$	—		$	104,550
Acquired non-impaired loans and leases and originated loans individually evaluated for impairment		45,563			3,946			—			37,689			—			—			—			87,198			45,200			5,188			5,541			27,770			—			—			83,699
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			1,794,663			436,081			428,782			1,876,772			1,153			442,371			4,979,822
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 June 30, 2022, gross																									$	1,899,938		$	481,171		$	435,507		$	1,907,774		$	1,310		$	442,371		$	5,168,071
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	%		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	%		0.04	%		0.00	%		0.00	%		0.00	%		0.04	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%
Originated loans and leases		0.02	%		0.00	%		0.00	%		0.12	%		0.00	%		0.00	%		0.02	%		0.16	%		0.02	%		0.00	%		0.00	%		0.11	%		0.00	%		0.02	%		0.15	%
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	%		1.16	%		0.77	%		0.02	%		0.06	%		0.01	%		0.00	%		2.02	%
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	%		0.87	%		0.10	%		0.11	%		0.54	%		0.00	%		0.00	%		1.62	%
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	%		34.73	%		8.44	%		8.30	%		36.31	%		0.02	%		8.56	%		96.36	%

6569

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~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 totaled ~~$39.6~~$40.5 million and ~~$25.2~~$40.7 million, with the ~~increase~~decrease driven mainly by ~~two conventional non-performing relationship.~~decreases to other real estate owned. The U.S. government guaranteed portion of non-performing loans totaled ~~$1.7~~$2.4 million at ~~September~~June 30, ~~2022~~2023 and ~~$3.3~~$2.2 million at December 31, ~~2021.~~2022.

Total OREO ~~increased~~decreased from ~~$2.1~~$4.7 million at December 31, ~~2021~~2022 to ~~$4.4~~$2.3 million at ~~September~~June 30, ~~2022.~~2023. The ~~$2.3~~$2.4 million ~~increase~~decrease in OREO resulted mostly from ~~one property transferred to OREO.~~sales.

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,			June 30,			December 31,
	2022			2021			2023			2022
Non-performing assets:
Non-accrual loans and leases~~(3)~~(2)	$	35,165		$	23,130		$	38,273		$	36,027
Past due loans and leases 90 days or more and still accruing interest		—			—			—			—
Total non-performing loans and leases		35,165			23,130			38,273			36,027
Other real estate owned		4,402			2,112			2,265			4,717
Total non-performing assets	$	39,567		$	25,242		$	40,538		$	40,744
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	%		0.69	%		0.66	%
Total non-accrual loans and leases as a percentage of total loans and leases		0.67	%		0.51	%		0.69	%		0.66	%
Total non-performing assets as a percentage of total assets		0.54	%		0.38	%		0.54	%		0.55	%
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	%
Allowance for credit losses - loans and leases, as a percentage of non-performing loans and leases								242.12	%		227.40	%
Allowance for credit losses - loans and leases, as a percentage of non-accrual loans and leases								242.12	%		227.40	%

Non-performing assets guaranteed by U.S. government:
Non-accrual loans guaranteed	$	1,676		$	3,270		$	2,472		$	2,225
Past due loans 90 days or more and still accruing interest guaranteed		—			—			—			—
Total non-performing loans guaranteed	$	1,676		$	3,270		$	2,472		$	2,225
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	%		0.64	%		0.62	%
Total non-accrual loans and leases not guaranteed as a percentage of total loans and leases		0.63	%		0.44	%		0.64	%		0.62	%
Total non-performing assets not guaranteed as a percentage of total assets		0.52	%		0.33	%		0.50	%		0.52	%

(1)

Includes ~~$1.8~~$4.0 million of non-accrual loan modifications at June 30, 2023 and ~~$1.5~~$1.6 million of non-accrual restructured loans at ~~September 30, 2022 and~~ December 31, ~~2021,~~2022, respectively.

(2)

For the ~~nine~~six months ended ~~September~~June 30, ~~2022, $1.4~~2023, $1.9 million in interest income would have been recorded had non-accrual loans been current.

~~(3)~~

~~For the nine months ended September 30, 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 37 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~~June 30, ~~2022~~2023 were ~~$5.6~~$5.9 billion, representing an increase of ~~$457.4~~$222.0 million, or ~~8.9%~~3.9%, compared to ~~$5.2~~$5.7 billion at December 31, ~~2021,~~2022, driven by an increase in time deposits and money market demand accounts. Non-interest-bearing deposits were ~~$2.1~~$1.8 billion, or ~~38.2%~~30.3% of total deposits, at ~~September~~June 30, ~~2022,~~2023, a decrease of ~~$16.2~~$344.9 million, or ~~0.8%~~16.1%, compared to ~~$2.2~~$2.1 billion at December 31, ~~2021,~~2022, or ~~41.9%~~37.6% of total deposits. Core deposits were ~~93.4%~~90.3% and ~~91.9%~~92.7% of total deposits at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, 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 Three Months Ended					For Three Months Ended
	For the Three Months Ended September 30, 2022					For the Three Months Ended September 30, 2021					June 30, 2023					June 30, 2022
	Average Balance		Average Rate			Average Balance		Average Rate			Average Balance		Average Rate			Average Balance		Average Rate
Non-interest-bearing demand deposits	$	2,198,095		0.00	%	$	2,106,189		0.00	%	$	1,848,538		0.00	%	$	2,265,426		0.00	%
Interest checking		583,777		0.73	%		653,543		0.14	%		541,036		1.61	%		615,831		0.27	%
Money market accounts		1,391,923		0.96	%		1,031,009		0.11	%		1,534,463		2.82	%		1,307,320		0.37	%
Savings		673,966		0.15	%		625,037		0.05	%		575,254		0.15	%		664,954		0.05	%
Time deposits (below $100,000)		338,510		0.85	%		276,486		0.17	%		797,241		3.82	%		254,419		0.21	%
Time deposits ($100,000 and above)		348,614		0.64	%		433,319		0.26	%		531,438		2.96	%		372,780		0.32	%
Total	$	5,534,885		0.43	%	$	5,125,583		0.08	%	$	5,827,970		1.70	%	$	5,480,730		0.16	%


											For the Six Months Ended					For the Six Months Ended
	For the Nine Months Ended September 30, 2022					For the Nine Months Ended September 30, 2021					June 30, 2023					June 30, 2022
	Average Balance		Average Rate			Average Balance		Average Rate			Average Balance		Average Rate			Average Balance		Average Rate
Non-interest-bearing demand deposits	$	2,237,002		0.00	%	$	2,039,242		0.00	%	$	1,961,945		0.00	%	$	2,256,778		0.00	%
Interest checking		592,985		0.38	%		609,444		0.14	%		573,342		1.64	%		597,665		0.20	%
Money market accounts		1,318,725		0.51	%		1,068,770		0.12	%		1,500,260		2.49	%		1,281,519		0.26	%
Savings		662,820		0.08	%		603,366		0.05	%		594,316		0.15	%		657,155		0.05	%
Time deposits (below $100,000)		286,879		0.45	%		288,622		0.20	%		663,900		3.35	%		260,635		0.19	%
Time deposits ($100,000 and above)		372,014		0.40	%		446,086		0.37	%		484,645		2.64	%		383,908		0.29	%
Total	$	5,470,425		0.22	%	$	5,055,530		0.09	%	$	5,778,408		1.43	%	$	5,437,660		0.12	%

Our average cost of deposits was ~~0.43%~~1.70% during the three months ended ~~September~~June 30, ~~2022,~~2023, compared to ~~0.08%~~0.16% for the three months ended ~~September~~June 30, ~~2021.~~2022. Our average cost of deposits was ~~0.22%~~1.43% during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to ~~0.09%~~0.12% during the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. This increase ~~were~~was principally attributed to higher rates on interest-bearing deposits as a result of the rising interest rate ~~environment. Our~~environment and an increase in interest bearing deposits and corresponding decrease in non-interest bearing deposits. The ratio of our average non-interest bearing deposits to total average deposits ratios ~~were 39.7%~~was 31.7% during the three months ended ~~September~~June 30, ~~2022,~~2023, compared to ~~41.1%~~41.3% during the three months ended ~~September~~June 30, ~~2021. Our~~2022. The ratio of our average non-interest bearing deposits to total average deposits ratios ~~were 40.9%~~was 34.0% during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to ~~40.3%~~41.55% during the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. We had ~~$122.8~~$551.4 million in brokered time deposits at ~~September~~June 30, ~~2022~~2023 and ~~none~~$251.5 million at December 31, ~~2021.~~2022, which represented 9.3% and 4.4% of total deposits, respectively. The increase in brokered deposits was due to increases in funding requirements. Our loan and lease to deposit ratio was 94.6% at ~~September~~June 30, ~~2022~~2023 compared to ~~89.3%~~96.0% at December 31, ~~2021.~~2022.

The following table shows time deposits and other time deposits of $250,000 or more by time remaining until maturity as of ~~September~~June 30, ~~2022~~2023 (dollars in thousands):


	Less than $250,000		$250,000 or Greater		Total		Uninsured Portion		Less than $250,000		$250,000 or Greater		Total		Uninsured Portion
Three months or less	$	137,105	$	23,540	$	160,645	$	7,790	$	228,848	$	25,904	$	254,752	$	5,903
Over three months through six months		95,441		28,170		123,611		15,420		430,216		82,552		512,768		34,552
Over six months through 12 months		296,897		42,597		339,494		13,347		529,140		94,771		623,911		27,021
Over 12 months		56,755		18,080		74,835		7,580		26,513		11,875		38,388		7,875
Total	$	586,198	$	112,387	$	698,585	$	44,137	$	1,214,717	$	215,102	$	1,429,819	$	75,351

6771

Total estimated uninsured deposits, were $1.5 billion and $1.6 billion as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021.~~

~~Borrowed Funds~~2022, and represented 25.9% and 28.2% of total deposits, respectively.

During 2020, the Company issued $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% 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. The transaction resulted in debt issuance costs of approximately $1.7 million that are currently amortized over 10 years.Short Term Borrowings

In addition to deposits, we also utilize FHLB advances as a supplementary funding source to finance our operations. The Bank’s advances from the FHLB are collateralized by commercial, residential and multi-family real estate loans and securities. At ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, we had an available borrowing capacity from the FHLB of $1.9 billion, ~~and $1.8 billion, respectively,~~ subject to the availability of collateral.

At ~~September~~June 30, ~~2022,~~2023, the Company had ~~$600.0~~$540.0 million of FHLB advances outstanding with a maturities ranging from ~~November 2022~~July 2023 to ~~December 2022.~~September 2023.

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 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 December 31, 2021, the amounts outstanding during 2021 under the PPPLF had been repaid and there was 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~~June 30, ~~2022~~2023 and December 31, ~~2021.~~2022. 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,						Six Months Ended June 30,
	2022			2021			2023			2022
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			N/A			N/A
Weighted average interest rate at end of period	N/A			N/A			N/A			N/A
Federal Home Loan Bank advances:
Average balance outstanding	$	424,324		$	216,088		$	511,929		$	358,083
Maximum outstanding at any month-end period during the year		735,000			356,000			675,000			735,000
Balance outstanding at end of period		600,000			355,000			540,000			650,000
Weighted average interest rate during period		1.43	%		0.21	%		3.87	%		0.80	%
Weighted average interest rate at end of period		3.07	%		0.22	%		5.24	%		1.59	%
Federal funds purchased:
Average balance outstanding	$	842		$	—		$	1,381		$	1,271
Maximum outstanding at any month-end period during the year		45,000			—			—			45,000
Balance outstanding at end of period		—			—			—			45,000
Weighted average interest rate during period		2.32	%	N/A				5.30	%		2.32	%
Weighted average interest rate at end of period		0.00	%	N/A				0.00	%		2.07	%
Paycheck Protection Program Liquidity Facility
Bank Term Funding Program:
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	%	N/A			N/A
Weighted average interest rate at end of period	N/A				0.35	%	N/A			N/A
Line of credit:
Revolving 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			N/A			N/A
Weighted average interest rate at end of period	N/A			N/A			N/A			N/A

6872

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 increased by ~~$24.2~~$19.5 million, from ~~$29.7~~$15.4 million at December 31, ~~2021~~2022 to ~~$54.0~~$34.9 million at ~~September~~June 30, ~~2022.~~2023.

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~~June 30, ~~2022,~~2023, Byline Bank had maximum borrowing capacity from the FHLB of ~~$2.5~~$2.6 billion and ~~$797.1~~$760.6 million from the Federal Reserve Bank (“FRB”). As of ~~September~~June 30, ~~2022,~~2023, Byline Bank had open FHLB advances of ~~$600.0~~$540.0 million and open letters of credit of ~~$13.4~~$13.5 million, leaving us with available aggregate borrowing capacity of ~~$283.9 million~~$1.0 billion based on collateral pledged. In addition, Byline Bank had uncommitted federal funds lines available of $135.0 million and $760.6 million available under the FRB discount window line at ~~September~~June 30, ~~2022.~~2023.

As of December 31, ~~2021,~~2022, Byline Bank had maximum borrowing capacity from the FHLB of ~~$2.3~~$2.5 billion and ~~$603.0~~$804.6 million from the FRB. As of December 31, ~~2021,~~2022, Byline Bank had open advances of ~~$490.0~~$625.0 million and open letters of credit of ~~$19.7~~$13.5 million, leaving us with available aggregate borrowing capacity of ~~$715.4 million~~$1.0 billion based on collateral pledged. In addition, Byline Bank had an uncommitted federal funds line available of ~~$115.0~~$135.0 million and $804.6 million available under the FRB discount window line at December 31, ~~2021.~~2022.

On October 13, 2016, 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 6, 2023.~~million. The amended revolving line of credit bears interest at either the SOFR plus 195 basis points or the Prime Rate minus 75 basis points, based on our election, which is required to be communicated 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. On May 26, 2023, the Company amended the agreement with the lender, which provides for: i) the renewal of the revolving line-of-credit facility of up to $15.0 million extending its maturity date to May 26, 2024; and ii) a new term loan facility in the principal amount of up to $20.0 million with a maturity date of May 26, 2026. At ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, 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 21 of our Consolidated Financial Statements, included in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 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~~June 30, ~~2022~~2023 was ~~$747.6~~$813.9 million compared to ~~$836.4~~$765.8 million at December 31, ~~2021, a decrease~~2022, an increase of ~~$88.8~~$48.1 million, or ~~10.6%~~6.3%. The decrease was primarily driven by the increase in accumulated other comprehensive loss during the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, reflecting the unrealized losses in our available-for-sale securities 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, 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.

As of ~~September~~June 30, ~~2022,~~2023, Byline Bank exceeded all applicable regulatory capital requirements and was considered “well-capitalized.” There have been no conditions or events since ~~September~~June 30, ~~2022~~2023 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, 2022	Amount		Ratio			Amount		Ratio			Amount		Ratio
June 30, 2023																Amount		Ratio			Amount		Ratio			Amount		Ratio
Total capital to risk weighted assets:
Company	$	873,588		13.02	%	$	536,609		8.00	%	N/A		N/A			$	959,688		13.52	%	$	567,924		8.00	%	N/A		N/A
Bank		825,499		12.35	%		534,820		8.00	%	$	668,525		10.00	%		911,331		12.89	%		565,528		8.00	%	$	706,910		10.00	%
Tier 1 capital to risk weighted assets:
Company	$	731,606		10.91	%	$	402,457		6.00	%	N/A		N/A			$	796,359		11.22	%	$	425,943		6.00	%	N/A		N/A
Bank		758,517		11.35	%		401,115		6.00	%	$	534,820		8.00	%		823,002		11.64	%		424,146		6.00	%	$	565,528		8.00	%
Common Equity Tier 1 (CET1) to risk weighted assets:
Company	$	686,606		10.24	%	$	301,842		4.50	%	N/A		N/A			$	751,359		10.58	%	$	319,457		4.50	%	N/A		N/A
Bank		758,517		11.35	%		300,836		4.50	%	$	434,541		6.50	%		823,002		11.64	%		318,110		4.50	%	$	459,492		6.50	%
Tier 1 capital to average assets:
Company	$	731,606		10.30	%	$	284,252		4.00	%	N/A		N/A			$	796,359		10.74	%	$	296,702		4.00	%	N/A		N/A
Bank		758,517		10.69	%		283,789		4.00	%	$	354,736		5.00	%		823,002		11.12	%		296,100		4.00	%	$	370,125		5.00	%


	Actual					Minimum Capital Required					Required to be Considered Well Capitalized					Actual					Minimum Capital Required					Required to be Considered Well Capitalized
December 31, 2021	Amount		Ratio			Amount		Ratio			Amount		Ratio
December 31, 2022																Amount		Ratio			Amount		Ratio			Amount		Ratio
Total capital to risk weighted assets:
Company	$	830,262		14.70	%	$	451,903		8.00	%	N/A		N/A			$	900,806		13.00	%	$	554,436		8.00	%	N/A		N/A
Bank		753,480		13.38	%		450,470		8.00	%	$	563,087		10.00	%		852,047		12.34	%		552,507		8.00	%	$	690,633		10.00	%
Tier 1 capital to risk weighted assets:
Company	$	698,846		12.37	%	$	338,927		6.00	%	N/A		N/A			$	751,887		10.85	%	$	415,827		6.00	%	N/A		N/A
Bank		697,064		12.38	%		337,852		6.00	%	$	450,470		8.00	%		778,128		11.27	%		414,380		6.00	%	$	552,507		8.00	%
Common Equity Tier 1 (CET1) to risk weighted assets:
Company	$	643,408		11.39	%	$	254,195		4.50	%	N/A		N/A			$	706,887		10.20	%	$	311,870		4.50	%	N/A		N/A
Bank		697,064		12.38	%		253,389		4.50	%	$	366,007		6.50	%		778,128		11.27	%		310,785		4.50	%	$	448,912		6.50	%
Tier 1 capital to average assets:
Company	$	698,846		10.89	%	$	256,657		4.00	%	N/A		N/A			$	751,887		10.29	%	$	292,258		4.00	%	N/A		N/A
Bank		697,064		10.87	%		256,478		4.00	%	$	320,597		5.00	%		778,128		10.67	%		291,741		4.00	%	$	364,676		5.00	%

The ratios above reflect the Company’s election to opt into the regulators’ joint CECL transition provision, which allows the Company to phase in the capital impact of the adoption of CECL over the next three years beginning January 1, 2022. Accordingly, capital ratios as of June 30, 2023 reflect 50% of the CECL impact and December 31, 2022 reflect 25% of the CECL impact.

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~~June 30, ~~2022.~~2023.

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~~six months ended ~~September~~June 30, ~~2022~~2023 the Company received ~~$18.0~~$12.0 million in cash dividends from Byline Bank. For the year ended December 31, ~~2021,~~2022, the Company received $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, redemption of the Series B preferred stock outstanding, and to fund other Company-related activities.

On March 31, 2022, the 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.

On December 12, 2022, we announced that our Board of Directors approved a new stock repurchase program authorizing the purchase of up to an aggregate of 1,250,000 shares of our common stock. The program is in effect from January 1, 2023 until December 31, 2023, unless terminated earlier. We did not purchase any shares under the stock repurchase program during the three and six months ended June 30, 2023. We purchased ~~174,249~~232,000 shares at a cost of ~~$4.2~~$5.5 million under our previously authorized stock repurchase program during the three months ended ~~September~~June 30, ~~2022. We purchased 689,068~~2022, and repurchased 514,819 shares at a cost of ~~$17.3~~$13.1 million ~~under our stock repurchase program~~ during the ~~nine~~six months ended ~~September~~June 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. We purchased 1,331,708 shares at a cost of $28.9 million under our stock repurchase program during the nine months ended September 30, 2021. The program is in effect until December 31, 2022, unless terminated earlier.

On ~~October~~July 25, ~~2022,~~2023, the Company's Board of Directors declared a cash dividend of $0.09 per share, payable on ~~November~~August 22, ~~2022,~~2023, to stockholders of record of the Company's common stock as of ~~November~~August 8, ~~2022.~~2023.

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 1.00% to ~~18.00%~~18.25% and maturities up to ~~2048.~~2050. Variable rate loan commitments have interest rates ranging from 1.75% to ~~10.25%~~14.00% and maturities up to 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 variable rate loans, 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~~June 30, ~~2022~~2023 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

—

—


	June 30, 2023
			Fair Value
	Notional		Asset		Liability
Interest rate swaps designated as cash flow hedges	$	550,000	$	45,303	$	—
Other interest rate derivatives		558,316		18,856		(18,773	)
Other credit derivatives		1,206		—		—

See Note 16 of our Unaudited Interim Condensed Consolidated Financial Statements as of ~~September~~June 30, ~~2022,~~2023, included in this report, and Note 2221 of our Consolidated Financial Statements, included in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 for additional information on derivatives.

7175

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 impairment charges on assets held for sale and ~~right-of-use asset ("ROU")~~merger-related expenses, 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~~merger-related 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~~credit losses. Management believes this metric demonstrates income excluding the tax provision or benefit and the provision for ~~loan and lease~~credit 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, and ~~ROU asset.~~merger-related expenses. 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~~credit losses, divided by average assets. Management believes this ratio demonstrates profitability excluding the tax provision or benefit and excludes the provision for ~~loan and lease~~credit losses. “Adjusted pre-tax pre-provision return on average assets” excludes certain significant items, which include impairment charges on assets held for ~~sale, and ROU asset.~~sale.

•

“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.

7276

•

“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 June 30,					As of or For the Six Months Ended June 30,
(dollars in thousands, except per share data)	2022		2021			2022		2021			2023			2022		2023			2022
Net income and earnings per share excluding significant items
Reported Net Income	$	22,656	$	25,306		$	65,250	$	75,596		$	26,107		$	20,283	$	50,052		$	42,594
Significant items:
Impairment charges on assets held for sale		—		1,434			—		3,981			—			—		20			—
Merger-related expense												1,391			—		1,880			—
Tax benefit		—		(390	)		—		(1,085	)		(230	)		—		(286	)		—
Adjusted Net Income	$	22,656	$	26,350		$	65,250	$	78,492		$	27,268		$	20,283	$	51,666		$	42,594
Reported Diluted Earnings per Share	$	0.61	$	0.66		$	1.73	$	1.95		$	0.70		$	0.54	$	1.34		$	1.12
Significant items:
Impairment charges on assets held for sale		—		0.04			—		0.10			—			—		—			—
Merger-related expense												0.04			—		0.05			—
Tax benefit		—		(0.01	)		—		(0.03	)		(0.01	)		—		(0.01	)		—
Adjusted Diluted Earnings per Share	$	0.61	$	0.69		$	1.73	$	2.02		$	0.73		$	0.54	$	1.38		$	1.12


	As of or For the Three Months Ended June 30,					As of or For the Six Months Ended June 30,
(dollars in thousands, except per share data)	2023			2022		2023			2022
Adjusted non-interest expense:
Non-interest expense	$	49,328		$	43,773	$	98,128		$	88,328
Less: Impairment charges on assets held for sale		—			—		20			—
Less: Merger-related expenses		1,391			—		1,880			—
Adjusted non-interest expense	$	47,937		$	43,773	$	96,228		$	88,328
Adjusted non-interest expense excluding amortization of intangible assets:
Adjusted non-interest expense	$	47,937		$	43,773	$	96,228		$	88,328
Less: Amortization of intangible assets		1,455			1,868		2,910			3,464
Adjusted non-interest expense excluding amortization of intangible assets	$	46,482		$	41,905	$	93,318		$	84,864
Pre-tax pre-provision net income:
Pre-tax income	$	35,339		$	26,107	$	67,577		$	54,719
Add: Provision for credit losses		5,790			5,908		15,615			10,903
Pre-tax pre-provision net income	$	41,129		$	32,015	$	83,192		$	65,622
Adjusted pre-tax pre-provision net income:
Pre-tax pre-provision net income	$	41,129		$	32,015	$	83,192		$	65,622
Impairment charges on assets held for sale		—			—		20			—
Merger-related expenses		1,391			—		1,880			—
Adjusted pre-tax pre-provision net income	$	42,520		$	32,015	$	85,092		$	65,622
Taxable equivalent net interest income:
Net interest income	$	76,166		$	61,627	$	151,884		$	120,363
Add: Tax-equivalent adjustment		207			237		415			473
Net interest income, fully taxable equivalent	$	76,373		$	61,864	$	152,299		$	120,836
Total revenues:
Net interest income	$	76,166		$	61,627	$	151,884		$	120,363
Add: non-interest income		14,291			14,161		29,436			33,587
Total revenues	$	90,457		$	75,788	$	181,320		$	153,950
Tangible common stockholders' equity:
Total stockholders' equity	$	813,942		$	765,161	$	813,942		$	765,161
Less: Preferred stock		—			—		—			—
Less: Goodwill and other intangibles		155,977			162,094		155,977			162,094
Tangible common stockholders' equity	$	657,965		$	603,067	$	657,965		$	603,067
Tangible assets:
Total assets	$	7,575,690		$	7,131,717	$	7,575,690		$	7,131,717
Less: Goodwill and other intangibles		155,977			162,094		155,977			162,094
Tangible assets	$	7,419,713		$	6,969,623	$	7,419,713		$	6,969,623
Average tangible common stockholders' equity:
Average total stockholders' equity	$	806,272		$	780,652	$	795,341		$	806,264
Less: Average preferred stock		—			—		—			4,959
Less: Average goodwill and other intangibles		156,766			163,068		157,469			163,948
Average tangible common stockholders' equity	$	649,506		$	617,584	$	637,872		$	637,357
Average tangible assets:
Average total assets	$	7,403,899		$	6,975,725	$	7,374,687		$	6,841,601
Less: Average goodwill and other intangibles		156,766			163,068		157,469			163,948
Average tangible assets	$	7,247,133		$	6,812,657	$	7,217,218		$	6,677,653
Tangible net income available to common stockholders:
Net income available to common stockholders	$	26,107		$	20,283	$	50,052		$	42,398
Add: After-tax intangible asset amortization		1,067			1,361		2,133			2,524
Tangible net income available to common stockholders	$	27,174		$	21,644	$	52,185		$	44,922
Adjusted tangible net income available to common stockholders:
Tangible net income available to common stockholders	$	27,174		$	21,644	$	52,185		$	44,922
Impairment charges on assets held for sale		—			—		20			—
Merger-related expenses		1,391			—		1,880			—
Tax benefit on significant items		(230	)		—		(286	)		—
Adjusted tangible net income available to common stockholders	$	28,335		$	21,644	$	53,799		$	44,922

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

7478


	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 June 30,						As of or For the Six Months Ended June 30,
(dollars in thousands, except share and per share data)	2022			2021			2022			2021			2023			2022			2023			2022
Pre-tax pre-provision return on average assets:
Pre-tax pre-provision net income	$	34,689		$	34,160		$	100,311		$	103,895		$	41,129		$	32,015		$	83,192		$	65,622
Average total assets		7,145,189			6,560,868			6,943,909			6,622,943			7,403,899			6,975,725			7,374,687			6,841,601
Pre-tax pre-provision return on average assets		1.93	%		2.07	%		1.93	%		2.10	%		2.23	%		1.84	%		2.27	%		1.93	%
Adjusted pre-tax pre-provision return on average assets:
Adjusted pre-tax pre-provision net income	$	34,689		$	35,594		$	100,311		$	107,876		$	42,520		$	32,015		$	85,092		$	65,622
Average total assets		7,145,189			6,560,868			6,943,909			6,622,943			7,403,899			6,975,725			7,374,687			6,841,601
Adjusted pre-tax pre-provision return on average assets:		1.93	%		2.15	%		1.93	%		2.18	%		2.30	%		1.84	%		2.33	%		1.93	%
Net interest margin, fully taxable equivalent
Net interest income, fully taxable equivalent	$	69,103		$	60,109		$	189,939		$	175,442		$	76,373		$	61,864		$	152,299		$	120,836
Total average interest-earning assets		6,760,623			6,076,065			6,531,320			6,135,051			7,072,581			6,573,878			7,041,037			6,414,768
Net interest margin, fully taxable equivalent		4.05	%		3.92	%		3.88	%		3.82	%		4.33	%		3.77	%		4.36	%		3.80	%
Non-interest income to total revenues:
Non-interest income	$	11,992		$	18,495		$	45,579		$	55,239		$	14,291		$	14,161		$	29,436		$	33,587
Total revenues		80,867			78,340			234,817			229,898			90,457			75,788			181,320			153,950
Non-interest income to total revenues		14.83	%		23.61	%		19.41	%		24.03	%		15.80	%		18.69	%		16.23	%		21.82	%
Adjusted non-interest expense to average assets:
Adjusted non-interest expense	$	46,178		$	42,746		$	134,506		$	122,022		$	47,937		$	43,773		$	96,228		$	88,328
Average total assets		7,145,189			6,560,868			6,943,909			6,622,943			7,403,899			6,975,725			7,374,687			6,841,601
Adjusted non-interest expense to average assets		2.56	%		2.58	%		2.59	%		2.46	%		2.60	%		2.52	%		2.63	%		2.60	%
Adjusted efficiency ratio:
Adjusted non-interest expense excluding amortization of intangible assets	$	44,567		$	41,008		$	129,431		$	116,687		$	46,482		$	41,905		$	93,318		$	84,864
Total revenues		80,867			78,340			234,817			229,898			90,457			75,788			181,320			153,950
Adjusted efficiency ratio		55.11	%		52.35	%		55.12	%		50.76	%		51.39	%		55.29	%		51.47	%		55.12	%
Adjusted return on average assets:
Adjusted net income	$	22,656		$	26,350		$	65,250		$	78,492		$	27,268		$	20,283		$	51,666		$	42,594
Average total assets		7,145,189			6,560,868			6,943,909			6,622,943			7,403,899			6,975,725			7,374,687			6,841,601
Adjusted return on average assets		1.26	%		1.59	%		1.26	%		1.58	%		1.48	%		1.17	%		1.41	%		1.26	%
Adjusted return on average stockholders' equity:
Adjusted net income	$	22,656		$	26,350		$	65,250		$	78,492		$	27,268		$	20,283		$	51,666		$	42,594
Average stockholders' equity		775,358			823,754			795,849			813,629			806,272			780,652			795,341			806,264
Adjusted return on average stockholders' equity		11.59	%		12.69	%		10.96	%		12.90	%		13.56	%		10.42	%		13.10	%		10.65	%
Tangible common equity to tangible assets:
Tangible common equity	$	587,081		$	646,684		$	587,081		$	646,684		$	657,965		$	603,067		$	657,965		$	603,067
Tangible assets		7,117,103			6,537,155			7,117,103			6,537,155			7,419,713			6,969,623			7,419,713			6,969,623
Tangible common equity to tangible assets		8.25	%		9.89	%		8.25	%		9.89	%		8.87	%		8.65	%		8.87	%		8.65	%
Return on average tangible common stockholders' equity:
Tangible net income available to common stockholders	$	23,830		$	26,375		$	68,752		$	78,890		$	27,174		$	21,644		$	52,185		$	44,922
Average tangible common stockholders' equity		614,066			645,176			629,508			633,257			649,506			617,584			637,872			637,357
Return on average tangible common stockholders' equity		15.40	%		16.22	%		14.60	%		16.66	%		16.78	%		14.06	%		16.50	%		14.21	%
Adjusted return on average tangible common stockholders' equity:
Adjusted tangible net income available to common stockholders	$	23,830		$	27,419		$	68,752		$	81,786		$	28,335		$	21,644		$	53,799		$	44,922
Average tangible common stockholders' equity		614,066			645,176			629,508			633,257			649,506			617,584			637,872			637,357
Adjusted return on average tangible common stockholders' equity		15.40	%		16.86	%		14.60	%		17.27	%		17.50	%		14.06	%		17.01	%		14.21	%
Tangible book value per share:
Tangible common equity	$	587,081		$	646,684		$	587,081		$	646,684		$	657,965		$	603,067		$	657,965		$	603,067
Common shares outstanding		37,465,902			37,690,087			37,465,902			37,690,087			37,752,002			37,669,102			37,752,002			37,669,102
Tangible book value per share	$	15.67		$	17.16		$	15.67		$	17.16		$	17.43		$	16.01		$	17.43		$	16.01

7579

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.

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 Board of Directors and management asset liability committees based on a risk management infrastructure approved by our Board of Directors that outlines reporting and measurement requirements. 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 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 deposits from our customers that we rely on for funding. 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~~June 30, ~~2022,~~2023, we had a notional amount of $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.

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 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 in 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~~June 30, ~~2022~~2023 is presented below (dollars in thousands). In the current interest rate environment, a downward shift of the yield curve of 200, and 300 basis points does not provide 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 12 months.


	Immediate Shifts																		Immediate Shifts
Twelve Months Ending	+300 basis points			+200 basis points			+100 basis points			-100 basis points			-200 basis points			-300 basis points			+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	)%		16.9	%		11.7	%		5.8	%		(4.1	)%		(10.4	)%		(16.9	)%
Dollar amount	$	358,883		$	339,596		$	318,221		$	280,292		$	251,183		$	227,727		$	395,733		$	377,986		$	358,154		$	324,617		$	303,178		$	281,213
Year 2
Percentage change		28.7	%		19.4	%		9.6	%		(8.20	)%		(21.00	)%		(31.90	)%		19.9	%		13.6	%		6.7	%		(5.2	)%		(13.2	)%		(21.2	)%
Dollar amount	$	414,454		$	384,666		$	353,085		$	295,692		$	254,571		$	219,454		$	447,307		$	423,624		$	398,025		$	353,439		$	323,721		$	293,754

7680

For dynamic balance sheet and rate shifts, a gradual shift downward of 100 basis points would result in a ~~2.9%~~3.0% decrease in net interest income, and a gradual shift upwards of 100 and 200 basis points would result in ~~3.8%~~3.3% and ~~7.5%~~6.5% 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 including the timing, magnitude, and frequency of interest rate changes as well as changes in market conditions and management 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~~June 30, ~~2022,~~2023, 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~~June 30, ~~2022,~~2023, 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.

7781

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, ~~2021~~2022 that was filed with the SEC on March 7, ~~2022.~~2023.

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

On December ~~10, 2020,~~12, 2022, we announced that our Board of Directors approved a new 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, our Board of Directors authorized an expansion of its current stock repurchase program. Under the extended~~The program ~~we are authorized to repurchase an additional 1,250,000 shares of the Company's outstanding common stock.~~will be in effect from January 1, 2023 until December 31, 2023 unless terminated earlier. 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~~us at ~~its~~our discretion and will depend on a number of factors, including the market price of ~~the Company’s~~our 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~~June 30, ~~2022.~~2023. We did not purchase any shares of our common stock during the second quarter of 2023 under our stock repurchase program.

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


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
April 1 - April 30, 2023		5,471	$	21.46		—		1,250,000
May 1 - May 31, 2023		—		—		—		1,250,000
June 1 - June 30, 2023		—		—		—		1,250,000
Total		5,471	$	21.46		—

(1)

~~Also includes 12,297~~All shares acquired during the three months ended June 30, 2023 were acquired pursuant to the Company’s 2017 Omnibus Incentive Compensation Plan. Under the terms of the compensation plan, 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 upon vesting and/or exercise.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

7882

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.
10.1		Employment agreement with Thomas J. Bell III (filed as exhibit 10.1 to the Company's Current Report on Form 8-K (File No. 001-38139) filed on April 11, 2023 and incorporated herein by reference) †
10.2		Second Amendment and Restated Term Loan and Revolving Credit Agreement dated as of May 26, 2023 between Byline Bancorp, Inc. and CIBC Bank USA (filed as exhibit 10.1 to the Company's Current Report on Form 8-K (File No. 001-38139) filed May 26, 2023 and incorporated herein by reference)
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~~June 30, ~~2022,~~2023, 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.

† Indicates a management contract or compensatory plan.

(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.

7983

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 4, 2022~~August 3, 2023	By:	/s/	Roberto R. Herencia
			Roberto R. Herencia
			Chief Executive Officer
			(Principal Executive Officer)

Date: ~~November 4, 2022~~August 3, 2023	By:	/s/	Thomas J. Bell III
			Thomas J. Bell III
			Executive Vice President, Chief Financial Officer and Treasurer
			(Principal Financial Officer)

8084


	Minimum Lease Payments
2022	$	35,111
2023		154,438
2024		126,780
2025		91,453
2026		55,181
Thereafter		19,725
Total	$	482,688


September 30, 2022	Originated		Acquired Impaired		Acquired Non-Impaired		Total
Commercial real estate	$	1,652,890	$	56,974	$	159,130	$	1,868,994
Residential real estate		410,285		37,246		34,313		481,844
Construction, land development, and other land		456,463		1,144		—		457,607
Commercial and industrial		1,938,320		3,029		26,959		1,968,308
Paycheck Protection Program		1,522		—		—		1,522
Installment and other		1,016		153		199		1,368
Lease financing receivables		492,744		—		3,084		495,828
Total loans and leases	$	4,953,240	$	98,546	$	223,685	$	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, 2022	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded
Commercial real estate	$	24,339	$	26,728	$	—
Residential real estate		4,782		4,891		—
Construction, land development, and other land		5,541		5,541		—
Commercial and industrial		10,979		11,892		—
With an allowance recorded
Commercial real estate		20,638		22,198		6,094
Commercial and industrial		25,000		26,215		12,584
Total impaired loans	$	91,279	$	97,465	$	18,678


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


	Operating Lease Commitments
2022	$	1,001
2023		3,530
2024		3,469
2025		2,487
2026		1,720
Thereafter		2,364
Total undiscounted lease payments		14,571
Less: imputed interest		(660	)
Net lease liabilities	$	13,911


	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


	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