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 ~~March 31,~~September 30, 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~~ ☒No ☐

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

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


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

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

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

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


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

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

Common Stock, $0.01 par value, ~~37,709,253~~43,716,713 shares outstanding as of ~~May 3,~~November 1, 2023

BYLINE BANCORP, INC.

FORM 10-Q

~~March 31,~~September 30, 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	4448
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	7783
Item 4.	Controls and Procedures	7884

PART II.	OTHER INFORMATION	7985
Item 1.	Legal Proceedings	7985
Item 1A.	Risk Factors	7985
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7985
Item 3.	Defaults Upon Senior Securities	7985
Item 4.	Mine Safety Disclosures	7985
Item 5.	Other Information	7985
Item 6.	Exhibits	8086

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)	March 31, 2023			December 31, 2022			September 30, 2023			December 31, 2022
ASSETS
Cash and due from banks	$	52,725		$	62,274		$	71,248		$	62,274
Interest bearing deposits with other banks		231,486			117,079			357,640			117,079
Cash and cash equivalents		284,211			179,353			428,888			179,353
Equity and other securities, at fair value		8,339			7,989			7,902			7,989
Securities available-for-sale, at fair value		1,164,387			1,174,431
Securities held-to-maturity, at amortized cost (fair value at March 31, 2023—$2,681, December 31, 2022 —$2,672)		2,704			2,705
Securities available-for-sale, at fair value (amortized cost at September 30, 2023—$1,480,394, December 31, 2022—$1,378,343)								1,239,929			1,174,431
Securities held-to-maturity, at amortized cost (fair value at September 30, 2023—$1,133, December 31, 2022 —$2,672)								1,157			2,705
Restricted stock, at cost		38,777			28,202			30,505			28,202
Loans held for sale		28,379			47,823			7,299			47,823
Loans and leases:
Loans and leases		5,515,332			5,421,258			6,613,303			5,421,258
Allowance for credit losses - loans and leases		(90,465	)		(81,924	)		(105,696	)		(81,924	)
Net loans and leases		5,424,867			5,339,334			6,507,607			5,339,334
Servicing assets, at fair value		20,944			19,172			19,743			19,172
Premises and equipment, net		56,098			56,798			67,121			56,798
Other real estate owned, net		3,712			4,717			1,671			4,717
Goodwill and other intangible assets, net		157,432			158,887			205,028			158,887
Bank-owned life insurance		82,693			82,093			96,268			82,093
Deferred tax assets, net		64,918			68,213			89,841			68,213
Accrued interest receivable and other assets		192,885			193,224			240,409			193,224
Total assets	$	7,530,346		$	7,362,941		$	8,943,368		$	7,362,941
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Non-interest-bearing demand deposits	$	1,952,045		$	2,138,645		$	1,959,855		$	2,138,645
Interest-bearing deposits		3,860,607			3,556,476			4,993,835			3,556,476
Total deposits		5,812,652			5,695,121			6,953,690			5,695,121
Other borrowings		662,810			640,399			713,233			640,399
Subordinated notes, net		73,735			73,691			73,822			73,691
Junior subordinated debentures issued to capital trusts, net		37,442			37,338			70,336			37,338
Accrued interest payable and other liabilities		148,057			150,576			212,342			150,576
Total liabilities		6,734,696			6,597,125			8,023,423			6,597,125
COMMITMENTS AND CONTINGENT LIABILITIES (Note 14)
STOCKHOLDERS’ EQUITY
Preferred stock		—			—			—			—
Common stock		390			389			450			389
Additional paid-in capital		598,103			598,297			708,615			598,297
Retained earnings		356,365			335,794			403,368			335,794
Treasury stock, at cost		(51,066	)		(51,114	)		(50,329	)		(51,114	)
Accumulated other comprehensive loss, net of tax		(108,142	)		(117,550	)		(142,159	)		(117,550	)
Total stockholders’ equity		795,650			765,816			919,945			765,816
Total liabilities and stockholders’ equity	$	7,530,346		$	7,362,941		$	8,943,368		$	7,362,941


	March 31, 2023				December 31, 2022				September 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		25,000,000		150,000,000		25,000,000		150,000,000		25,000,000		150,000,000		25,000,000		150,000,000
Shares issued		—		39,728,037		—		39,518,702		—		45,694,456		—		39,518,702
Shares outstanding		—		37,713,427		—		37,492,775		—		43,719,203		—		37,492,775
Treasury shares		—		2,014,610		—		2,025,927		—		1,975,253		—		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						Three Months Ended						Nine Months Ended
	March 31,						September 30,						September 30,
(dollars in thousands, except share and per share data)	2023			2022			2023			2022			2023			2022
INTEREST AND DIVIDEND INCOME
Interest and fees on loans and leases	$	92,343		$	55,426		$	125,465		$	72,824		$	316,942		$	187,924
Interest on securities		6,600			6,155			8,415			6,402			21,574			18,821
Other interest and dividend income		1,059			237			2,710			677			5,348			1,522
Total interest and dividend income		100,002			61,818			136,590			79,903			343,864			208,267
INTEREST EXPENSE
Deposits		16,298			1,087			37,163			5,971			78,184			9,186
Other borrowings		5,888			395			3,981			3,232			14,110			4,724
Subordinated notes and debentures		2,098			1,600			2,994			1,825			7,234			5,119
Total interest expense		24,284			3,082			44,138			11,028			99,528			19,029
Net interest income		75,718			58,736			92,452			68,875			244,336			189,238
PROVISION FOR CREDIT LOSSES		9,825			4,995			8,803			4,176			24,418			15,079
Net interest income after provision for credit losses		65,893			53,741			83,649			64,699			219,918			174,159
NON-INTEREST INCOME
Fees and service charges on deposits		2,120			1,884			2,372			2,128			6,725			6,071
Loan servicing revenue		3,380			3,380			3,369			3,422			10,126			10,186
Loan servicing asset revaluation		656			(1,231	)		(3,646	)		(2,342	)		(3,855	)		(8,209	)
ATM and interchange fees		1,063			1,049			1,205			1,007			3,380			3,187
Net realized gains (losses) on securities available-for-sale								—			(2	)		—			50
Change in fair value of equity securities, net		350			(151	)		(313	)		(581	)		230			(1,313	)
Net gains on sales of loans		5,148			10,827			6,473			5,580			17,325			26,390
Wealth management and trust income		924			1,048			939			995			2,902			2,943
Other non-interest income		1,504			2,620			1,977			1,785			4,979			6,274
Total non-interest income		15,145			19,426			12,376			11,992			41,812			45,579
NON-INTEREST EXPENSE
Salaries and employee benefits		30,394			28,959			34,969			29,587			95,005			86,243
Occupancy and equipment expense, net		4,444			5,128			5,314			3,919			14,162			13,456
Impairment charge on assets held for sale		20			—			—			—			20			—
Loan and lease related expenses		963			(891	)		836			530			2,287			581
Legal, audit and other professional fees		3,114			2,600			3,805			2,733			10,594			7,153
Data processing		3,783			3,186			6,472			3,370			14,527			9,952
Net (gain) loss recognized on other real estate owned and other related expenses		(103	)		54
Net loss recognized on other real estate owned and other related expenses								111			275			296			487
Other intangible assets amortization expense		1,455			1,596			1,551			1,611			4,461			5,075
Other non-interest expense		4,730			3,923			4,833			4,153			14,667			11,559
Total non-interest expense		48,800			44,555			57,891			46,178			156,019			134,506
INCOME BEFORE PROVISION FOR INCOME TAXES		32,238			28,612			38,134			30,513			105,711			85,232
PROVISION FOR INCOME TAXES		8,293			6,301			9,912			7,857			27,437			19,982
NET INCOME		23,945			22,311			28,222			22,656			78,274			65,250
Dividends on preferred shares		—			196			—			—			—			196
INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	23,945		$	22,115		$	28,222		$	22,656		$	78,274		$	65,054
EARNINGS PER COMMON SHARE
Basic	$	0.65		$	0.60		$	0.66		$	0.61		$	2.01		$	1.76
Diluted	$	0.64		$	0.58		$	0.65		$	0.61		$	1.98		$	1.73

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						Three Months Ended						Nine Months Ended
	March 31,						September 30,						September 30,
(dollars in thousands)	2023			2022			2023			2022			2023			2022
Net income	$	23,945		$	22,311		$	28,222		$	22,656		$	78,274		$	65,250
Securities available-for-sale
Unrealized holding gains (losses) arising during the period		14,599			(83,843	)
Unrealized holding losses arising during the period								(37,330	)		(66,365	)		(36,553	)		(205,036	)
Reclassification adjustments for net (gains) losses included in net income								—			2			—			(50	)
Tax effect		(3,900	)		22,747			9,970			18,004			9,763			55,640
Net of tax		10,699			(61,096	)		(27,360	)		(48,359	)		(26,790	)		(149,446	)
Cash flow hedges
Unrealized holding gains arising during the period		194			17,643			4,648			20,531			13,357			45,088
Reclassification adjustments for net (gains) losses included in net income		(1,956	)		210
Reclassification adjustments for net gains included in net income								(4,562	)		(327	)		(10,381	)		(8	)
Tax effect		471			(4,843	)		(23	)		(5,481	)		(795	)		(12,230	)
Net of tax		(1,291	)		13,010			63			14,723			2,181			32,850
Total other comprehensive income (loss)		9,408			(48,086	)
Total other comprehensive loss								(27,297	)		(33,636	)		(24,609	)		(116,596	)
Comprehensive income (loss)	$	33,353		$	(25,775	)	$	925		$	(10,980	)	$	53,665		$	(51,346	)

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)


										Additional									Accumulated Other			Total
(dollars in thousands,	Preferred Stock				Common Stock					Paid-In			Retained			Treasury			Comprehensive			Stockholders’
except share data)	Shares		Amount		Shares			Amount		Capital			Earnings			Stock			Income (Loss)			Equity
Balance, 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	)
Repurchases 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

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

—

—

—

—

—

22,311

—

—

22,311

Other comprehensive loss,
   net of tax

—

—

—

—

—

—

—

(48,086
)

(48,086
)
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
)
Issuance of common stock in
   connection with employee
   stock purchase plan

—

—

22,565

—

—

—

537

—

537

Cash dividends declared on
   common stock ($0.09 per
   share)

—

—

—

—

—

(3,402
)

—

—

(3,402
)
Repurchase of common stock

—

—

(232,000
)

—

—

—

(5,529
)

—

(5,529
)
Share-based compensation
   expense

—

—

—

—

1,553

—

—

—

1,553

Balance, June 30, 2022

—

$
—

37,669,102

$
388

$
595,938

$
307,278

$
(47,181
)

$
(91,262
)

$
765,161

Net income

—

—

—

—

—

22,656

—

—

22,656

Other comprehensive loss,
   net of tax

—

—

—

—

—

—

—

(33,636
)

(33,636
)
Restricted stock activity, net

—

—

(28,951
)

1

(88
)

—

(199
)

—

(286
)
Cash dividends declared on
   common stock ($0.09 per
   share)

—

—

—

—

—

(3,374
)

—

—

(3,374
)
Repurchase of common stock

—

—

(174,249
)

—

—

—

(4,155
)

—

(4,155
)
Share-based compensation
   expense

—

—

—

—

1,199

—

—

—

1,199

Balance, September 30, 2022

—

$
—

37,465,902

$
389

$
597,049

$
326,560

$
(51,535
)

$
(124,898
)

$
747,565

Cumulative-effect adjustment
  (ASU 2016-13)

—

—

—

—

—

(10,097
)

—

—

(10,097
)
Net income

—

—

—

—

—

22,704

—

—

22,704

Other comprehensive income,
   net of tax

—

—

—

—

—

—

—

7,348

7,348

Issuance of common stock upon
   exercise of stock options, net

—

—

21,385

—

7

—

(185
)

—

(178
)
Restricted stock activity, net

—

—

(20,159
)

—

(77
)

—

17

—

(60
)
Issuance of common stock in
   connection with employee
   stock purchase plan

—

—

25,647

—

—

—

589

—

589

Cash dividends declared on
   common stock ($0.09 per
   share)

—

—

—

—

—

(3,373
)

—

—

(3,373
)
Share-based compensation
   expense

—

—

—

—

1,318

—

—

—

1,318

Balance, December 31, 2022

—

$
—

37,492,775

$
389

$
598,297

$
335,794

$
(51,114
)

$
(117,550
)

$
765,816


												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		—			—			—			—		—			65,250			—			—			65,250
Other comprehensive loss, net of tax		—			—			—			—		—			—			—			(116,596	)		(116,596	)
Issuance of common stock upon exercise of stock options, net		—			—			203,255			—		(599	)		—			(1,811	)		—			(2,410	)
Restricted stock activity, net		—			—			215,286			2		(120	)		—			(1,417	)		—			(1,535	)
Redemption of Series B 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 ($0.27 per share)		—			—			—			—		—			(10,170	)		—			—			(10,170	)
Repurchases of common stock		—			—			(689,068	)		—		—			—			(17,274	)		—			(17,274	)
Share-based compensation expense		—			—			—			—		4,016			—			—			—			4,016
Balance, September 30, 2022		—		$	—			37,465,902		$	389	$	597,049		$	326,560		$	(51,535	)	$	(124,898	)	$	747,565

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)


					Additional									Accumulated Other			Total							Additional									Accumulated Other			Total
(dollars in thousands,	Common Stock				Paid-In			Retained			Treasury			Comprehensive			Stockholders’			Common Stock				Paid-In			Retained			Treasury			Comprehensive			Stockholders’
except share data)	Shares		Amount		Capital			Earnings			Stock			Income (Loss)			Equity			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
Balance, June 30, 2023																					37,752,002	$	391	$	599,718		$	379,078		$	(50,383	)	$	(114,862	)	$	813,942
Net income		—		—		—			23,945			—			—			23,945			—		—		—			28,222			—			—			28,222
Other comprehensive income, net of tax		—		—		—			—			—			9,408			9,408
Other comprehensive loss, net of tax																					—		—		—			—			—			(27,297	)		(27,297	)
Issuance of common stock upon exercise of stock options, net																					29,766		—		347			—			—			—			347
Restricted stock activity, net		220,652		1		(1,704	)		—			48			—			(1,655	)		5,112		—		(113	)		—			54			—			(59	)
Issuance of common stock due to business combination, net of issuance costs																					5,932,323		59		106,958			—			—			—			107,017
Cash dividends declared on common stock ($0.09 per share)		—		—		—			(3,374	)		—			—			(3,374	)		—		—		—			(3,932	)		—			—			(3,932	)
Share-based compensation expense		—		—		1,510			—			—			—			1,510			—		—		1,705			—			—			—			1,705
Balance, March 31, 2023		37,713,427	$	390	$	598,103		$	356,365		$	(51,066	)	$	(108,142	)	$	795,650
Balance, September 30, 2023																					43,719,203	$	450	$	708,615		$	403,368		$	(50,329	)	$	(142,159	)	$	919,945


					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		—		—		—			78,274			—			—			78,274
Other comprehensive loss, net of tax		—		—		—			—			—			(24,609	)		(24,609	)
Issuance of common stock upon exercise of stock options, net		29,766		—		347			—			—			—			347
Restricted stock activity, net		225,217		2		(1,909	)		—			77			—			(1,830	)
Issuance of common stock in connection with employee stock purchase plan		39,122		—		—			—			708			—			708
Issuance of common stock due to business combination, net of issuance costs		5,932,323		59		106,958			—			—			—			107,017
Cash dividends declared on common stock ($0.27 per share)		—		—		—			(10,700	)		—			—			(10,700	)
Share-based compensation expense		—		—		4,922			—			—			—			4,922
Balance, September 30, 2023		43,719,203	$	450	$	708,615		$	403,368		$	(50,329	)	$	(142,159	)	$	919,945

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Three Months Ended						Nine Months Ended
	March 31,						September 30,
(dollars in thousands)	2023			2022			2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	23,945		$	22,311		$	78,274		$	65,250
Adjustments to reconcile net income to net cash from operating activities:
Provision for credit losses		9,825			4,995			24,418			15,079
Impairment loss on operating lease right-of-use asset								395			—
Impairment loss on assets held for sale		20			—			20			—
Depreciation and amortization of premises and equipment		981			1,164			3,188			3,276
Net amortization of securities		856			1,254			1,497			3,360
Net change in fair value of equity securities, net		(350	)		151			(230	)		1,313
Net gains on sales and valuation adjustments of premises and equipment		—			(2	)
Net realized gains on securities available-for-sale								—			(50	)
Net losses (gains) on sales and valuation adjustments of premises and equipment								142			(93	)
Net gains on sales of loans		(5,148	)		(10,827	)		(17,325	)		(26,390	)
Originations of U.S. government guaranteed loans		(53,602	)		(78,643	)		(231,091	)		(269,505	)
Proceeds from U.S. government guaranteed loans sold		46,824			97,176			256,601			320,601
Accretion of premiums and discounts on acquired loans, net		(729	)		(1,476	)		(11,616	)		(4,418	)
Net change in servicing assets		(1,772	)		(753	)		(571	)		2,617
Net gains (losses) on sales and valuation adjustments of other real estate owned		296			(25	)
Net losses on sales and valuation adjustments of other real estate owned								444			191
Net amortization of other acquisition accounting adjustments		1,455			1,596			5,447			5,075
Amortization of subordinated debt issuance cost		44			43			131			131
Accretion of junior subordinated debentures discount		104			105			337			326
Share-based compensation expense		1,510			1,264			4,922			4,016
Deferred tax provision, net of valuation		(134	)		897
Deferred tax provision (benefit), net of valuation								(196	)		2,207
Increase in cash surrender value of bank owned life insurance		(588	)		(565	)		(1,712	)		(1,550	)
Changes in assets and liabilities:
Accrued interest receivable and other assets		10,214			19,106			8,452			(54,598	)
Accrued interest payable and other liabilities		15,384			34,997			49,506			118,791
Net cash provided by operating activities		49,135			92,768			171,033			185,629
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of securities available-for-sale		(1,280	)		(52,288	)		(121,166	)		(94,430	)
Proceeds from maturities and calls of securities available-for-sale		3,784			9,223			7,480			22,832
Proceeds from paydowns of securities available-for-sale		21,262			44,358			76,451			114,026
Proceeds from sales of securities available-for-sale								163,649			23,293
Proceeds from maturities and calls of securities held-to-maturity								1,545			—
Redemption (purchases) of Federal Home Loan Bank stock, net		(10,575	)		8,025			755			(5,075	)
Proceeds from other loans sold								6,750			—
Net change in loans and leases		(94,571	)		(251,446	)		(382,183	)		(742,449	)
Purchases of premises and equipment		(281	)		(926	)		(2,856	)		(3,329	)
Proceeds from sales of premises and equipment		—			26			—			28
Proceeds from sales of assets held for sale								1,359			2,903
Proceeds from sales of other real estate owned		764			225			3,173			356
Net cash received in acquisition of business								7,834			—
Net cash used in investing activities		(80,897	)		(242,803	)		(237,209	)		(681,845	)

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(UNAUDITED)


	Three Months Ended						Nine Months Ended
	March 31,						September 30,
(dollars in thousands)	2023			2022			2023			2022
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits	$	117,531		$	375,055		$	293,092		$	457,409
Proceeds from line of credit								15,000			—
Proceeds from term loan								20,000			—
Proceeds from short-term borrowings		6,100,100			4,159,000			15,643,200			16,555,400
Repayments of short-term borrowings		(6,100,100	)		(4,369,000	)		(15,668,200	)		(16,445,400	)
Net increase in securities sold under agreements to repurchase		22,411			1,727			22,379			24,231
Dividends paid on preferred stock		—			(196	)		—			(196	)
Dividends paid on common stock		(3,322	)		(3,345	)		(10,709	)		(10,084	)
Proceeds from issuance of common stock		—			470			949			927
Redemption of preferred stock		—			(10,438	)		—			(10,438	)
Repurchases of common stock		—			(7,590	)		—			(17,274	)
Net cash provided by financing activities		136,620			145,683			315,711			554,575
NET CHANGE IN CASH AND CASH EQUIVALENTS		104,858			(4,352	)		249,535			58,359
CASH AND CASH EQUIVALENTS, beginning of period		179,353			157,931			179,353			157,931
CASH AND CASH EQUIVALENTS, end of period	$	284,211		$	153,579		$	428,888		$	216,290
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest	$	19,483		$	1,584		$	82,310		$	15,780
Cash paid during the period for taxes	$	309		$	269		$	6,352		$	28,048
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Transfer of loans to other real estate owned	$	55		$	309		$	571		$	2,837
Total assets acquired from acquisition							$	1,160,491		$	—
Value ascribed to goodwill							$	33,352		$	—
Total liabilities assumed from acquisition							$	1,054,929		$	—
Common stock issued due to acquisition of business							$	107,017		$	—
Common dividend declared, not paid	$	52		$	49		$	(9	)	$	86

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 ~~March 31,~~September 30, 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, and 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. No subsequent events were identified that would have required a change to the condensed consolidated financial statements or disclosure in the notes to the condensed consolidated financial statements.

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

Note 2—Accounting Pronouncements Recently Adopted or Issued

The following reflect recent accounting pronouncements that have been adopted or are pending adoption by the Company.

Adopted Accounting Pronouncements

Financial Instruments—Credit Losses (Topic 326)—In June 2016, FASB issued Accounting Standards Update ("ASU") No. 2016‑13, Financial Instruments - Credit Losses (Topic 326) on the recognition of credit losses, otherwise known as the current expected credit loss model or "CECL", which replaces the incurred loss impairment methodology with a methodology that reflects current expected credit losses. We elected to delay the adoption of the standard in accordance with ASU No. 2019-10, Effective Dates, which delayed the effective date of the ASU for entities not classified as Public Business Entities. The Company’s EGC status expired December 31, 2022, requiring CECL adoption be reflected in our December 31, 2022 financial statements and Form 10-K. Results for reporting periods beginning after September 30, 2022 were presented under the new 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 our Annual Report on Form 10-K for the 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)

The following table presents select financial data for the first three quarters of 2022 as reported under the incurred loss 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 2022-02 - Financial Instruments – Credit Losses – Troubled Debt Restructurings and Vintage Disclosures (Topic 326) – The Company adopted this update effective March 31, 2023. This update eliminates the 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 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 amendments in this ASU require a public business entity to disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases in the existing vintage disclosures. Refer to Note 4—5—Loan and Lease Receivables and Allowance for 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, 2024. ~~Banking regulators~~The Company believes the adoption of this guidance on activities subsequent to September 30, 2023 will not have ~~provided guidance that prohibits new~~a material impact on the consolidated financial contracts from referencing LIBOR as the relevant index after December 31, 2021. The guidance goes on to indicate that beginning after June 2023, LIBOR can no longer be used for existing financial contracts. In December 2021, management approved the use of Term Secured Overnight Financing Rate ("SOFR") as an alternative reference rate to LIBOR. Other alternative reference rates may be considered in the future. At March 31, 2023, $statements.~~572.1~~ ~~million of loans, derivatives with a notional amount of $422.9~~

~~million, and securities available for sale with a fair value of $36.7~~ 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 $~~37.4~~ ~~million were also tied to LIBOR.~~Issued Accounting Pronouncements Pending Adoption

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

Business Combinations (Topic 805) - In August 2023, the FASB issued ASU 2023-05,Business Combinations—Joint Venture (JV) Formations: Recognition and Initial Measurement. The guidance requires newly-formed JVs to apply a new basis of accounting to all of its contributed net assets, which results in the JV initially measuring its contributed net assets under ASC 805-20, Business Combinations. The new guidance would be applied prospectively and is effective for all newly-formed joint venture entities with a formation date on or after January 1, 2025, with early adoption permitted. The Company is evaluating

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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 was merged with and into Byline. As a result of the merger, Inland’s wholly owned 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.

In 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 the payment of cash in the amount of $9.9 million.

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. In addition, the 2,408,992 shares of Inland common stock purchased on June 30, 2023 were canceled as of the effective time of the transaction. The value of the total merger consideration at closing was $138.9 million. Stock issuance costs were $299,000.

The transaction resulted in goodwill of $33.4 million, which is nondeductible for tax purposes, as this acquisition was a nontaxable transaction. Goodwill represents the premium paid over the fair value of the net tangible and intangible assets acquired and reflects related synergies expected from the combined operations. Merger-related expenses, including core system conversion expenses of $3.0 million, acquisition advisory expenses of $2.4 million, salaries and employee benefits of $2.4 million, and other non-interest expenses of $397,000 related to the Inland acquisition are reflected in non-interest expense on the Consolidated Statements of Operations for the nine months ended September 30, 2023.

The acquisition of Inland was accounted for using the acquisition method of accounting in accordance with ASC Topic 805. Assets acquired, liabilities assumed and consideration exchanged were 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 preliminary and 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.

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 a summary of the preliminary estimates of fair values of assets acquired and liabilities assumed as of the acquisition date:


Assets
Cash and cash equivalents	$	39,731
Securities available-for-sale		239,602
Restricted stock		3,058
Loans		808,000
Allowance for credit losses		(10,596	)
Premises and equipment		11,307
Operating lease right-of-use asset		3,813
Other intangible assets		17,250
Bank-owned life insurance		12,455
Deferred tax assets, net		14,848
Other assets		21,023
Total assets acquired		1,160,491
Liabilities
Deposits		964,491
Federal Home Loan Bank advances		40,000
Securities sold under agreements to repurchase		455
Junior subordinated debentures		32,661
Operating lease liability		4,034
Accrued expenses and other liabilities		13,288
Total liabilities assumed		1,054,929
Net assets acquired	$	105,562
Consideration paid
Common stock (5,932,323 shares issued at $18.09 per share)		107,017
Cash paid		31,897
Total consideration paid		138,914
Goodwill	$	33,352

The following table presents the fair value and gross contractual amounts receivable of acquired non-credit-deteriorated loans from the Inland acquisition, and their respective expected contractual cash flows as of the acquisition date:


Fair value	$	582,831
Gross contractual amounts receivable		699,918
Estimate of contractual cash flows not expected to be collected(1)		4,239
Estimate of contractual cash flows expected to be collected		695,679

(1) Includes interest payments not expected to be collected due to loan prepayments as well as principal and interest payments not expected to be collected due to customer default.

The following table provides the unaudited pro forma information for the results of operations for the three and nine months ended September 30, 2022 and the nine months ended September 30, 2023, as if the acquisition had occurred on January 1, 2022. The pro forma results combine the historical results of Inland into the Company’s Consolidated Statements of Operations, including the impact of certain acquisition accounting adjustments, which includes loan discount accretion, intangible assets amortization, deposit premium accretion, fixed assets amortization, and borrowing discount amortization. The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the results that would have been obtained had the acquisition actually occurred on January 1, 2022. No assumptions have been applied to the pro forma results of operations regarding possible revenue enhancements, provision for credit losses, expense efficiencies or asset dispositions. Recognized acquisition-related expenses and other adjustments related to the timing of expenses, are included in net income in the following table:

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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


	For the Three Months Ended		For the Nine Months Ended
	September 30,		September 30,
	2022		2023		2022
Total revenues (net interest income and non-interest income)	$	97,383	$	310,476	$	287,663
Net income	$	28,502	$	85,879	$	76,724
Earnings per share—basic	$	0.67	$	2.00	$	1.79
Earnings per share—diluted	$	0.66	$	1.98	$	1.76

The operating results of the Company include the operating results generated by the acquired assets and assumed liabilities of Inland for the period from July 1, 2023 through September 30, 2023. Revenues and earnings of the acquired company since the acquisition date have not been disclosed as it is not practicable as Inland was merged into the Company and separate financial information is not readily available.

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:


March 31, 2023	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
September 30, 2023										Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale
U.S. Treasury Notes	$	42,473	$	88	$	(1,366	)	$	41,195	$	105,792	$	8	$	(1,771	)	$	104,029
U.S. Government agencies		149,595		91		(18,820	)		130,866		147,889		49		(22,823	)		125,115
Obligations of states, municipalities, and political subdivisions		68,165		69		(4,656	)		63,578		89,370		—		(8,850	)		80,520
Residential mortgage-backed securities
Agency		690,793		—		(101,483	)		589,310		750,675		—		(128,699	)		621,976
Non-agency		128,738		—		(23,599	)		105,139		124,569		—		(27,638	)		96,931
Commercial mortgage-backed securities
Agency		189,871		—		(32,574	)		157,297		183,183		—		(43,318	)		139,865
Corporate securities		42,784		—		(5,294	)		37,490		40,696		—		(5,724	)		34,972
Asset-backed securities		41,281		—		(1,769	)		39,512		38,220		—		(1,699	)		36,521
Total	$	1,353,700	$	248	$	(189,561	)	$	1,164,387	$	1,480,394	$	57	$	(240,522	)	$	1,239,929


March 31, 2023	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
September 30, 2023										Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Held-to-maturity
Obligations of states, municipalities, and political subdivisions	$	2,704	$	—	$	(23	)	$	2,681	$	1,157	$	—	$	(24	)	$	1,133
Total	$	2,704	$	—	$	(23	)	$	2,681	$	1,157	$	—	$	(24	)	$	1,133


December 31, 2022	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale
U.S. Treasury Notes	$	42,430	$	2	$	(1,709	)	$	40,723
U.S. Government agencies		150,524		116		(20,276	)		130,364
Obligations of states, municipalities, and political subdivisions		68,019		9		(6,152	)		61,876
Residential mortgage-backed securities
Agency		707,157		—		(111,361	)		595,796
Non-agency		130,654		—		(24,405	)		106,249
Commercial mortgage-backed securities
Agency		191,172		—		(34,142	)		157,030
Corporate securities		45,302		—		(3,866	)		41,436
Asset-backed securities		43,085		—		(2,128	)		40,957
Total	$	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~~ no~~t classify securities as trading during the three months ended March 31, 2023 or during 2022.~~

1214

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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


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 nine months ended September 30, 2023 or during 2022.

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 ~~March 31,~~September 30, 2023 and December 31, 2022, are summarized as follows:

Less than 12 Months

12 Months or Longer

Total

March 31, 2023

Number of
Securities

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Available-for-sale

U.S. Treasury Notes

6

$
9,594

$
(279
)

$
21,832

$
(1,087
)

$
31,426

$
(1,366
)
U.S. Government agencies

17

7,778

(171
)

108,822

(18,649
)

116,600

(18,820
)
Obligations of states,
   municipalities and political
   subdivisions

48

16,319

(424
)

37,218

(4,232
)

53,537

(4,656
)
Residential mortgage-backed
   securities

Agency

99

26,323

(1,070
)

562,987

(100,413
)

589,310

(101,483
)
Non-agency

19

—

—

105,139

(23,599
)

105,139

(23,599
)
Commercial mortgage-backed
   securities

Agency

48

7,437

(1,532
)

149,860

(31,042
)

157,297

(32,574
)
Corporate securities

23

12,426

(571
)

25,064

(4,723
)

37,490

(5,294
)
Asset-backed securities

8

10,327

(176
)

29,186

(1,593
)

39,513

(1,769
)
Total

268

$
90,204

$
(4,223
)

$
1,040,108

$
(185,338
)

$
1,130,312

$
(189,561
)
Held-to-maturity

Obligations of states,
  municipalities, and
  political subdivisions

3

$
2,136

$
(23
)

$
—

$
—

$
2,136

$
(23
)
Total

3

$
2,136

$
(23
)

$
—

$
—

$
2,136

$
(23
)


			Less than 12 Months					12 Months or Longer					Total							Less than 12 Months					12 Months or Longer					Total
December 31, 2022	# of Securities		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
September 30, 2023																		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	)		10	$	28,974	$	(210	)	$	31,278	$	(1,561	)	$	60,252	$	(1,771	)
U.S. Government agencies		17		44,508		(4,782	)		70,609		(15,494	)		115,117		(20,276	)		18		564		(13	)		112,665		(22,810	)		113,229		(22,823	)
Obligations of states, municipalities and political subdivisions		58		50,216		(3,858	)		7,185		(2,294	)		57,401		(6,152	)		104		31,806		(1,400	)		48,214		(7,450	)		80,020		(8,850	)
Residential mortgage-backed securities
Agency		101		117,598		(11,045	)		478,198		(100,316	)		595,796		(111,361	)		130		93,545		(2,438	)		528,431		(126,261	)		621,976		(128,699	)
Non-agency		19		35,486		(7,569	)		70,763		(16,836	)		106,249		(24,405	)		20		629		(14	)		96,302		(27,624	)		96,931		(27,638	)
Commercial mortgage-backed securities
Agency		47		76,193		(11,840	)		74,315		(22,302	)		150,508		(34,142	)		48		6,671		(1,643	)		133,194		(41,675	)		139,865		(43,318	)
Corporate securities		24		37,130		(3,128	)		4,306		(738	)		41,436		(3,866	)		21		—		—			34,972		(5,724	)		34,972		(5,724	)
Asset-backed securities		8		25,455		(503	)		15,502		(1,625	)		40,957		(2,128	)		8		—		—			36,521		(1,699	)		36,521		(1,699	)
Total		280	$	408,306	$	(43,803	)	$	730,217	$	(160,236	)	$	1,138,523	$	(204,039	)		359	$	162,189	$	(5,718	)	$	1,021,577	$	(234,804	)	$	1,183,766	$	(240,522	)
Held-to-maturity
Obligations of states, municipalities and political subdivisions		4	$	2,672	$	(33	)	$	—	$	—		$	2,672	$	(33	)
Obligations of states, municipalities, and political subdivisions																			2	$	—	$	—		$	1,133	$	(24	)	$	1,133	$	(24	)
Total		4	$	2,672	$	(33	)	$	—	$	—		$	2,672	$	(33	)		2	$	—	$	—		$	1,133	$	(24	)	$	1,133	$	(24	)

1315

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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


			Less than 12 Months					12 Months or Longer					Total
December 31, 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	)

Certain securities have fair values less than amortized cost and, therefore, contain unrealized losses. The Company evaluated the securities which had unrealized losses for potential credit losses and determined there were none. There were ~~268~~359 securities available-for-sale with unrealized losses at ~~March 31,~~September 30, 2023. There were ~~three~~two securities held-to-maturity with unrealized losses at ~~March 31,~~September 30, 2023. There was no allowance for credit losses for held-to-maturity debt securities at ~~March 31,~~September 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 $4.4 million and $3.9 million at September 30, 2023 and December 31, 2022, respectively, 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 months ended September 30, 2023 and 2022 are listed below:


	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Proceeds	$	163,649	$	10,287	$	163,649	$	23,293
Gross gains		—		38		—		100
Gross losses		—		40		—		50

There were no$163.6 million of sales of acquired Inland securities during the three and nine months ended ~~March 31,~~September 30, 2023, respectively. The sales did not result in gains or ~~2022.~~losses given their close proximity to the acquisition date. There were

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

$2,000 in net losses and $50,000 in net gains reclassified from accumulated other comprehensive income (loss) into earnings for the three and nine months ended September 30, 2022, respectively.

Securities posted and pledged as collateral ~~had carrying amounts of $349.5~~were $431.2 million and $~~270.6~~$270.6 million at ~~March 31,~~September 30, 2023 and December 31, 2022. At ~~March 31,~~September 30, 2023 and December 31, 2022, of those pledged, the carrying amounts of securities pledged as collateral for public fund deposits were $~~278.2~~$349.3 million and $~~223.5~~$223.5 million, respectively, and for customer repurchase agreements of $~~46.2~~$43.1 million and $~~23.8~~$23.8 million, respectively. ~~There were $221.7~~ ~~million in securities posted for the Bank Term Funding Program ("BTFP") at March 31, 2023.~~ At ~~March 31,~~September 30, 2023 and December 31, 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 ~~March 31,~~September 30, 2023 and December 31, 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%10% of stockholders’ equity.

At ~~March 31,~~September 30, 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	$	2,556	$	2,527	$	68,353	$	68,299
Due from one to five years		115,122		108,432		124,265		116,033
Due from five to ten years		181,107		160,861		180,997		156,247
Due after ten years		45,513		40,821		48,352		40,578
Mortgage-backed securities		1,009,402		851,746		1,058,427		858,772
Total	$	1,353,700	$	1,164,387	$	1,480,394	$	1,239,929
Held-to-maturity
Due in one year or less	$	1,546	$	1,537	$	550	$	542
Due from one to five years		1,158		1,144		607		591
Total	$	2,704	$	2,681	$	1,157	$	1,133

Note 4—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:

March 31,

December 31,

2023

2022

Commercial real estate

$
1,925,731

$
1,905,909

Residential real estate

498,745

489,411

Construction, land development, and other land

448,459

440,016

Commercial and industrial

2,081,251

2,055,213

Installment and other

1,768

1,709

Lease financing receivables

548,407

518,654

Total loans and leases

5,504,361

5,410,912

Net unamortized deferred fees and costs

5,501

5,014

Initial direct costs

5,470

5,332

Allowance for credit losses - loans and leases

(90,465
)

(81,924
)
Net loans and leases

$
5,424,867

$
5,339,334


	September 30,			December 31,
	2023			2022
Commercial real estate	$	2,285,311		$	1,905,909
Residential real estate		721,287			489,411
Construction, land development, and other land		524,482			440,016
Commercial and industrial		2,431,001			2,055,213
Installment and other		3,188			1,709
Lease financing receivables		635,862			518,654
Total loans and leases		6,601,131			5,410,912
Net unamortized deferred fees and costs		6,102			5,014
Initial direct costs		6,070			5,332
Allowance for credit losses - loans and leases		(105,696	)		(81,924	)
Net loans and leases	$	6,507,607		$	5,339,334


	September 30,			December 31,
	2023			2022
Lease financing receivables
Net minimum lease payments	$	621,751		$	509,980
Unguaranteed residual values		84,890			54,118
Unearned income		(70,779	)		(45,444	)
Total lease financing receivables		635,862			518,654
Initial direct costs		6,070			5,332
Lease financial receivables before allowance for credits losses - loans and leases	$	641,932		$	523,986

1417

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

March 31,

December 31,

2023

2022

Lease financing receivables

Net minimum lease payments

$
539,508

$
509,980

Unguaranteed residual values

60,935

54,118

Unearned income

(52,036
)

(45,444
)
Total lease financing receivables

548,407

518,654

Initial direct costs

5,470

5,332

Lease financial receivables before allowance for
credits losses - loans and leases

$
553,877

$
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 ~~March 31,~~September 30, 2023 and December 31, 2022, total loans and leases included the guaranteed amount of U.S. government guaranteed loans of $~~122.7~~$110.3 million and $~~123.2~~$123.2 million, respectively. At ~~March 31,~~September 30, 2023 and December 31, 2022, the discount on the unguaranteed portion of U.S. government guaranteed loans was $~~26.4~~$26.1 million and $~~26.7~~$26.7 million, respectively, which ~~were~~are included in total loans and leases. At ~~March 31,~~September 30, 2023 and December 31, 2022, installment and other loans included overdraft deposits of $~~711,000~~$359,000 and $~~467,000~~,$467,000, respectively, which were reclassified as loans. At ~~March 31,~~September 30, 2023 and December 31, 2022, loans and leases and loans held for sale pledged as security for borrowings were $~~2.1~~$1.8 billion and $~~2.2~~$2.2 billion, respectively. Accrued interest on loans and leases were $34.6 million and $25.5 million as of September 30, 2023 and December 31, 2022, respectively, 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 ~~March 31,~~September 30, 2023 are summarized as follows:

Minimum Lease
Payments

2023

$
129,511

2024

158,889

2025

122,555

2026

81,555

2027

39,544

Thereafter

7,454

Total

$
539,508


	Minimum Lease Payments
2023	$	41,372
2024		202,216
2025		164,780
2026		119,404
2027		69,303
Thereafter		24,676
Total	$	621,751

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. PCD loans are those acquired from a business combination with evidence of credit quality deterioration and are accounted for under ASC Topic 326. Acquired non-credit-deteriorated loans and leases represent loans and leases acquired with an outstanding balance 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 ~~March 31,~~September 30, 2023 and December 31, 2022:

March 31, 2023

Originated

Purchased Credit Deteriorated

Acquired
Non-Credit-
Deteriorated

Total

Commercial real estate

$
1,749,808

$
39,000

$
140,576

$
1,929,384

Residential real estate

441,291

30,070

27,975

499,336

Construction, land development, and other land

446,763

345

—

447,108

Commercial and industrial

2,061,267

1,745

20,793

2,083,805

Installment and other

1,603

134

85

1,822

Lease financing receivables

552,174

—

1,703

553,877

Total loans and leases

$
5,252,906

$
71,294

$
191,132

$
5,515,332


September 30, 2023	Originated		Purchased Credit Deteriorated		Acquired Non-Credit- Deteriorated		Total
Commercial real estate	$	1,837,531	$	154,573	$	296,656	$	2,288,760
Residential real estate		454,456		47,485		220,091		722,032
Construction, land development, and other land		406,334		29,587		87,087		523,008
Commercial and industrial		2,286,058		21,014		127,253		2,434,325
Installment and other		2,968		125		153		3,246
Lease financing receivables		641,032		—		900		641,932
Total loans and leases	$	5,628,379	$	252,784	$	732,140	$	6,613,303


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

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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—~~loans—The unpaid principal balance and carrying amount of ~~all~~ PCD loans ~~are summarized below.~~excluding an ~~The balances do not include an~~ allowance for credit losses - loans and leases of $~~1.0~~$8.5 million and $~~1.9~~$1.9 million at ~~March 31,~~September 30, 2023 and December 31, 2022, ~~respectively.~~were as follows:

March 31, 2023

December 31, 2022

Unpaid
Principal
Balance

Carrying
Value

Unpaid
Principal
Balance

Carrying
Value

Commercial real estate

$
78,717

$
39,000

$
85,089

$
45,143

Residential real estate

74,072

30,070

76,270

32,228

Construction, land development, and other land

7,017

345

7,042

372

Commercial and industrial

3,449

1,745

3,902

2,192

Installment and other

798

134

807

140

Total purchased credit deteriorated loans

$
164,053

$
71,294

$
173,110

$
80,075


	September 30, 2023				December 31, 2022
	Unpaid Principal Balance		Carrying Value		Unpaid Principal Balance		Carrying Value
Commercial real estate	$	203,025	$	154,573	$	85,089	$	45,143
Residential real estate		93,180		47,485		76,270		32,228
Construction, land development, and other land		36,644		29,587		7,042		372
Commercial and industrial		23,401		21,014		3,902		2,192
Installment and other		789		125		807		140
Total purchased credit deteriorated loans	$	357,039	$	252,784	$	173,110	$	80,075

The following table is a reconciliation of acquired Inland PCD loans between their purchase price and their par value at the time of the acquisition. Refer to Note 3—Acquisition of a Business for further information.


Purchase price of loans at acquisition	$	214,573
Allowance for credit losses - loans and leases, at acquisition		10,596
Non-credit discount/premium at acquisition		17,909
Par value of acquired loans at acquisition	$	243,078

Acquired non-credit-deteriorated loans and ~~leases—~~leases—The unpaid principal balance and carrying value for acquired non-credit deteriorated loans and leases, excluding an allowance for credit losses of $6.7 million and $5.3 million at ~~March 31,~~September 30, 2023 and December 31, 2022, were as follows:

March 31, 2023

December 31, 2022

Unpaid
Principal
Balance

Carrying
Value

Unpaid
Principal
Balance

Carrying
Value

Commercial real estate

$
143,733

$
140,576

$
155,652

$
152,193

Residential real estate

28,325

27,975

31,863

31,508

Construction, land development, and other land

63

—

63

—

Commercial and industrial

21,516

20,793

25,022

24,266

Installment and other

91

85

216

209

Lease financing receivables

1,706

1,703

2,302

2,297

Total acquired non-credit-deteriorated
loans and leases

$
195,434

$
191,132

$
215,118

$
210,473


	September 30, 2023				December 31, 2022
	Unpaid Principal Balance		Carrying Value		Unpaid Principal Balance		Carrying Value
Commercial real estate	$	307,159	$	296,656	$	155,652	$	152,193
Residential real estate		236,123		220,091		31,863		31,508
Construction, land development, and other land		88,089		87,087		63		—
Commercial and industrial		133,886		127,253		25,022		24,266
Installment and other		168		153		216		209
Lease financing receivables		901		900		2,302		2,297
Total acquired non-credit-deteriorated loans and leases	$	766,326	$	732,140	$	215,118	$	210,473

The Company hedges interest rates on certain loans using interest rate swaps through which the Company pays variable amounts and receives fixed amounts. Refer to Note ~~15—~~16—Derivative Instruments and Hedging Activities for additional discussion.

Allowance for Credit Losses

Loans and leases considered for inclusion in the allowance for credit losses include acquired non-credit-deteriorated loans and 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 $~~1.0~~$1.0 million or more are reviewed annually. The risk rating categories are described by the following groupings:

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

~~Watch—~~Watch—5, credit exposure that presents higher than average risk and warrants greater than routine attention.

Special ~~Mention—~~Mention—6, potential weaknesses that if left uncorrected may result in deterioration of the repayment prospects.

Substandard ~~Accrual—~~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.~~

1619

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

~~The following tables summarize the risk rating categories~~Revolving loans that are converted to term loans are treated as new originations and are presented by year of ~~the~~origination. Generally, existing term loans ~~and leases considered for inclusion~~that are re-underwritten are reflected in the ~~allowance for credit losses - loans and leases calculation, as~~table in the year of ~~March 31, 2023 and December 31, 2022:~~

Term loans amortized cost by origination year

Revolving

Total

March 31, 2023

2023

2022

2021

2020

2019

Prior

Loans

Loans (1)

Commercial Real Estate

      Pass

$
51,778

$
472,957

$
503,266

$
198,583

$
107,555

$
400,942

$
22,196

$
1,757,277

      Watch

366

7,414

16,008

20,674

8,803

67,898

—

121,163

      Special Mention

—

—

—

—

2,267

4,268

—

6,535

      Substandard

—

—

1,731

1,212

14,926

31,576

—

49,445

         Total

$
52,144

$
480,371

$
521,005

$
220,469

$
133,551

$
504,684

$
22,196

$
1,934,420

Gross charge-offs for quarter ended March 31, 2023

$
—

$
—

$
60

$
90

$
353

$
463

$
—

$
966

Residential Real Estate

      Pass

$
18,097

$
67,825

$
58,693

$
41,474

$
31,970

$
214,222

$
50,365

$
482,646

      Watch

—

—

—

921

40

11,617

1,684

14,262

      Special Mention

—

—

—

318

26

615

—

959

      Substandard

—

—

—

434

374

2,600

689

4,097

         Total

$
18,097

$
67,825

$
58,693

$
43,147

$
32,410

$
229,054

$
52,738

$
501,964

Gross charge-offs for quarter ended March 31, 2023

$
—

$
—

$
—

$
—

$
—

$
9

$
—

$
9

Construction, Land Development,
  & Land

      Pass

$
9,354

$
63,757

$
224,564

$
68,081

$
26,544

$
38,548

$
797

$
431,645

      Watch

633

—

—

—

3,168

12

—

3,813

      Special Mention

—

—

—

1,907

—

4,199

—

6,106

      Substandard

—

—

—

—

1,530

4,014

—

5,544

         Total

$
9,987

$
63,757

$
224,564

$
69,988

$
31,242

$
46,773

$
797

$
447,108

Gross charge-offs for quarter ended March 31, 2023

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

Commercial & Industrial

      Pass

$
119,123

$
510,576

$
287,392

$
128,837

$
59,131

$
196,850

$
501,917

$
1,803,826

      Watch

446

19,132

24,296

14,418

33,691

28,951

56,371

177,305

      Special Mention

19,000

—

8,875

—

386

3,322

22,533

54,116

      Substandard

—

2,583

6,770

7,717

12,721

10,363

9,175

49,329

         Total

$
138,569

$
532,291

$
327,333

$
150,972

$
105,929

$
239,486

$
589,996

$
2,084,576

Gross charge-offs for quarter ended March 31, 2023

$
—

$
448

$
194

$
461

$
461

$
226

$
—

$
1,790

Installment and Other

      Pass

$
224

$
238

$
136

$
52

$
66

$
459

$
541

$
1,716

      Watch

—

32

—

—

—

74

—

106

      Special Mention

—

—

—

—

—

—

—

—

      Substandard

—

—

—

—

—

—

—

—

         Total

$
224

$
270

$
136

$
52

$
66

$
533

$
541

$
1,822

Gross charge-offs for quarter ended March 31, 2023

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

Lease Financing Receivables

      Pass

$
81,864

$
272,350

$
133,303

$
46,546

$
11,776

$
5,342

$
—

$
551,181

      Watch

—

89

1,481

25

—

—

—

1,595

      Special Mention

—

—

—

261

165

187

—

613

      Substandard

—

79

281

90

26

12

—

488

         Total

$
81,864

$
272,518

$
135,065

$
46,922

$
11,967

$
5,541

$
—

$
553,877

Gross charge-offs for quarter ended March 31, 2023

$
—

$
32

$
186

$
47

$
37

$
2

$
—

$
304

Total Loans and Leases

      Pass

$
280,440

$
1,387,703

$
1,207,354

$
483,573

$
237,042

$
856,363

$
575,816

$
5,028,291

      Watch

1,445

26,667

41,785

36,038

45,702

108,552

58,055

318,244

      Special Mention

19,000

—

8,875

2,486

2,844

12,591

22,533

68,329

      Substandard

—

2,662

8,782

9,453

29,577

48,565

9,864

108,903

         Total

$
300,885

$
1,417,032

$
1,266,796

$
531,550

$
315,165

$
1,026,071

$
666,268

$
5,523,767

Gross charge-offs for quarter ended March 31, 2023

$
—

$
480

$
440

$
598

$
851

$
700

$
—

$
3,069

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

~~BYLINE BANCORP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

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

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

1820

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The following tables summarize the risk rating categories of the loans and leases considered for inclusion in the allowance for credit losses - loans and leases calculation, as of September 30, 2023 and December 31, 2022:


	Term loans amortized cost by origination year												Revolving		Total
September 30, 2023	2023		2022		2021		2020		2019		Prior		Loans		Loans
Commercial Real Estate
Pass	$	182,440	$	463,022	$	531,822	$	230,286	$	130,489	$	413,552	$	16,867	$	1,968,478
Watch		862		24,096		38,106		36,454		21,379		83,326		—		204,223
Special Mention		—		1,100		3,419		2,645		7,581		20,539		—		35,284
Substandard		—		1,228		5,509		2,787		18,081		52,348		822		80,775
Total	$	183,302	$	489,446	$	578,856	$	272,172	$	177,530	$	569,765	$	17,689	$	2,288,760
Gross charge-offs for the nine months ended September 30, 2023	$	—	$	—	$	60	$	211	$	2,042	$	2,958	$	—	$	5,271
Residential Real Estate
Pass	$	46,819	$	140,026	$	90,326	$	68,315	$	37,126	$	229,323	$	57,802	$	669,737
Watch		—		1,374		14,450		4,710		8,354		15,131		2,683		46,702
Special Mention		—		—		108		3,610		14		526		24		4,282
Substandard		—		—		—		193		358		760		—		1,311
Total	$	46,819	$	141,400	$	104,884	$	76,828	$	45,852	$	245,740	$	60,509	$	722,032
Gross charge-offs for the nine months ended September 30, 2023	$	—	$	—	$	—	$	—	$	—	$	21	$	—	$	21
Construction, Land Development, & Land
Pass	$	46,456	$	126,737	$	186,112	$	53,507	$	23,459	$	26,763	$	11,557	$	474,591
Watch		1,466		6,585		12,395		18,421		3,139		—		—		42,006
Special Mention		—		—		6,411		—		—		—		—		6,411
Substandard		—		—		—		—		—		—		—		—
Total	$	47,922	$	133,322	$	204,918	$	71,928	$	26,598	$	26,763	$	11,557	$	523,008
Gross charge-offs for the nine months ended September 30, 2023	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial & Industrial
Pass	$	384,457	$	523,358	$	290,411	$	139,512	$	79,656	$	162,813	$	524,326	$	2,104,533
Watch		39,312		34,762		58,411		1,697		7,963		21,433		51,924		215,502
Special Mention		—		3,338		7,551		1,208		557		8,791		37,257		58,702
Substandard		999		4,441		7,853		8,582		11,016		10,279		12,418		55,588
Total	$	424,768	$	565,899	$	364,226	$	150,999	$	99,192	$	203,316	$	625,925	$	2,434,325
Gross charge-offs for the nine months ended September 30, 2023	$	510	$	1,598	$	1,772	$	2,581	$	807	$	819	$	—	$	8,087
Installment and Other
Pass	$	562	$	118	$	114	$	136	$	43	$	440	$	1,804	$	3,217
Watch		—		29		—		—		—		—		—		29
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Total	$	562	$	147	$	114	$	136	$	43	$	440	$	1,804	$	3,246
Gross charge-offs for the nine months ended September 30, 2023	$	—	$	—	$	—	$	—	$	—	$	3	$	—	$	3
Lease Financing Receivables
Pass	$	260,590	$	228,612	$	106,232	$	34,456	$	7,362	$	1,814	$	—	$	639,066
Watch		—		74		1,224		18		—		—		—		1,316
Special Mention		—		—		—		203		122		64		—		389
Substandard		—		567		508		86		—		—		—		1,161
Total	$	260,590	$	229,253	$	107,964	$	34,763	$	7,484	$	1,878	$	—	$	641,932
Gross charge-offs for the nine months ended September 30, 2023	$	—	$	676	$	446	$	119	$	75	$	54	$	—	$	1,370
Total Loans and Leases
Pass	$	921,324	$	1,481,873	$	1,205,017	$	526,212	$	278,135	$	834,705	$	612,356	$	5,859,622
Watch		41,640		66,920		124,586		61,300		40,835		119,890		54,607		509,778
Special Mention		—		4,438		17,489		7,666		8,274		29,920		37,281		105,068
Substandard		999		6,236		13,870		11,648		29,455		63,387		13,240		138,835
Total	$	963,963	$	1,559,467	$	1,360,962	$	606,826	$	356,699	$	1,047,902	$	717,484	$	6,613,303
Gross charge-offs for the nine months ended September 30, 2023	$	510	$	2,274	$	2,278	$	2,911	$	2,924	$	3,855	$	—	$	14,752

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

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

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The following tables summarize contractual delinquency information of the loans and leases considered for inclusion in the allowance for credit losses - loans and leases calculation at ~~March 31,~~September 30, 2023 and December 31, 2022:

March 31, 2023

2023

2022

2021

2020

2019

Prior

Revolving
Loans

Total
Loans(1)

Commercial Real Estate

      Current

$
52,144

$
479,222

$
520,951

$
220,048

$
125,896

$
489,914

$
22,196

$
1,910,371

      30-59 Days Past Due

—

1,149

54

—

459

2,387

—

4,049

      60-89 Days Past Due

—

—

—

—

—

—

—

—

      Greater than 90 Accruing

—

—

—

—

—

—

—

—

      Non-accrual

—

—

—

421

7,196

12,383

—

20,000

      Total Past Due

—

1,149

54

421

7,655

14,770

—

24,049

         Total

$
52,144

$
480,371

$
521,005

$
220,469

$
133,551

$
504,684

$
22,196

$
1,934,420

Residential Real Estate

      Current

$
18,097

$
67,825

$
58,693

$
42,713

$
32,036

$
226,061

$
50,909

$
496,334

      30-59 Days Past Due

—

—

—

—

—

393

1,140

1,533

      60-89 Days Past Due

—

—

—

—

—

—

—

—

      Greater than 90 Accruing

—

—

—

—

—

—

—

—

      Non-accrual

—

—

—

434

374

2,600

689

4,097

      Total Past Due

—

—

—

434

374

2,993

1,829

5,630

         Total

$
18,097

$
67,825

$
58,693

$
43,147

$
32,410

$
229,054

$
52,738

$
501,964

Construction, Land Development,
   & Land

      Current

$
9,987

$
63,757

$
224,564

$
69,988

$
29,712

$
42,759

$
797

$
441,564

      30-59 Days Past Due

—

—

—

—

—

—

—

—

      60-89 Days Past Due

—

—

—

—

—

—

—

—

      Greater than 90 Accruing

—

—

—

—

—

—

—

—

      Non-accrual

—

—

—

—

1,530

4,014

—

5,544

      Total Past Due

—

—

—

—

1,530

4,014

—

5,544

         Total

$
9,987

$
63,757

$
224,564

$
69,988

$
31,242

$
46,773

$
797

$
447,108

Commercial & Industrial

      Current

$
138,569

$
528,942

$
325,295

$
147,397

$
99,892

$
234,868

$
586,134

$
2,061,097

      30-59 Days Past Due

—

1,279

830

270

3,532

1,033

100

7,044

      60-89 Days Past Due

—

—

—

—

—

—

—

—

      Greater than 90 Accruing

—

—

—

—

—

—

—

—

      Non-accrual

—

2,070

1,208

3,305

2,505

3,585

3,762

16,435

      Total Past Due

—

3,349

2,038

3,575

6,037

4,618

3,862

23,479

         Total

$
138,569

$
532,291

$
327,333

$
150,972

$
105,929

$
239,486

$
589,996

$
2,084,576

Installment and Other

      Current

$
224

$
270

$
136

$
52

$
66

$
533

$
541

$
1,822

      30-59 Days Past Due

—

—

—

—

—

—

—

—

      60-89 Days Past Due

—

—

—

—

—

—

—

—

      Greater than 90 Accruing

—

—

—

—

—

—

—

—

      Non-accrual

—

—

—

—

—

—

—

—

      Total Past Due

—

—

—

—

—

—

—

—

         Total

$
224

$
270

$
136

$
52

$
66

$
533

$
541

$
1,822

Lease Financing Receivables

      Current

$
81,783

$
271,584

$
134,294

$
46,695

$
11,829

$
5,454

$
—

$
551,639

      30-59 Days Past Due

—

288

74

3

—

36

—

401

      60-89 Days Past Due

81

569

423

164

113

40

—

1,390

      Greater than 90 Accruing

—

—

—

—

—

—

—

—

      Non-accrual

—

77

274

60

25

11

—

447

      Total Past Due

81

934

771

227

138

87

—

2,238

         Total

$
81,864

$
272,518

$
135,065

$
46,922

$
11,967

$
5,541

$
—

$
553,877

Total Loans and Leases

      Current

$
300,804

$
1,411,600

$
1,263,933

$
526,893

$
299,431

$
999,589

$
660,577

$
5,462,827

      30-59 Days Past Due

—

2,716

958

273

3,991

3,849

1,240

13,027

      60-89 Days Past Due

81

569

423

164

113

40

—

1,390

      Greater than 90 Accruing

—

—

—

—

—

—

—

—

      Non-accrual

—

2,147

1,482

4,220

11,630

22,593

4,451

46,523

      Total Past Due

81

5,432

2,863

4,657

15,734

26,482

5,691

60,940

         Total

$
300,885

$
1,417,032

$
1,266,796

$
531,550

$
315,165

$
1,026,071

$
666,268

$
5,523,767

~~(1) - Includes $8.4~~


September 30, 2023	2023		2022		2021		2020		2019		Prior		Revolving Loans		Total Loans
Commercial Real Estate
Current	$	183,302	$	488,788	$	578,105	$	267,874	$	162,622	$	539,786	$	17,689	$	2,238,166
30-59 Days Past Due		—		—		—		4,175		2,748		4,376		—		11,299
60-89 Days Past Due		—		—		—		—		9,190		440		—		9,630
Greater than 90 Accruing		—		—		—		—		—		—		—		—
Non-accrual		—		658		751		123		2,970		25,163		—		29,665
Total Past Due		—		658		751		4,298		14,908		29,979		—		50,594
Total	$	183,302	$	489,446	$	578,856	$	272,172	$	177,530	$	569,765	$	17,689	$	2,288,760
Residential Real Estate
Current	$	46,819	$	141,217	$	104,776	$	76,635	$	45,494	$	242,113	$	59,628	$	716,682
30-59 Days Past Due		—		183		—		—		—		70		800		1,053
60-89 Days Past Due		—		—		108		—		—		2,799		81		2,988
Greater than 90 Accruing		—		—		—		—		—		—		—		—
Non-accrual		—		—		—		193		358		758		—		1,309
Total Past Due		—		183		108		193		358		3,627		881		5,350
Total	$	46,819	$	141,400	$	104,884	$	76,828	$	45,852	$	245,740	$	60,509	$	722,032
Construction, Land Development, & Land
Current	$	47,922	$	133,322	$	204,099	$	71,928	$	26,598	$	26,763	$	11,557	$	522,189
30-59 Days Past Due		—		—		—		—		—		—		—		—
60-89 Days Past Due		—		—		819		—		—		—		—		819
Greater than 90 Accruing		—		—		—		—		—		—		—		—
Non-accrual		—		—		—		—		—		—		—		—
Total Past Due		—		—		819		—		—		—		—		819
Total	$	47,922	$	133,322	$	204,918	$	71,928	$	26,598	$	26,763	$	11,557	$	523,008
Commercial & Industrial
Current	$	423,769	$	560,141	$	358,522	$	145,702	$	93,658	$	200,354	$	625,142	$	2,407,288
30-59 Days Past Due		—		1,815		2		25		960		9		—		2,811
60-89 Days Past Due		—		185		7		163		3,269		505		150		4,279
Greater than 90 Accruing		—		—		—		—		—		—		—		—
Non-accrual		999		3,758		5,695		5,109		1,305		2,448		633		19,947
Total Past Due		999		5,758		5,704		5,297		5,534		2,962		783		27,037
Total	$	424,768	$	565,899	$	364,226	$	150,999	$	99,192	$	203,316	$	625,925	$	2,434,325
Installment and Other
Current	$	562	$	147	$	114	$	136	$	43	$	440	$	1,804	$	3,246
30-59 Days Past Due		—		—		—		—		—		—		—		—
60-89 Days Past Due		—		—		—		—		—		—		—		—
Greater than 90 Accruing		—		—		—		—		—		—		—		—
Non-accrual		—		—		—		—		—		—		—		—
Total Past Due		—		—		—		—		—		—		—		—
Total	$	562	$	147	$	114	$	136	$	43	$	440	$	1,804	$	3,246
Lease Financing Receivables
Current	$	258,049	$	227,679	$	107,157	$	34,515	$	7,466	$	1,859	$	—	$	636,725
30-59 Days Past Due		1,872		781		177		166		16		18		—		3,030
60-89 Days Past Due		669		225		123		8		2		1		—		1,028
Greater than 90 Accruing		—		—		—		—		—		—		—		—
Non-accrual		—		568		507		74		—		—		—		1,149
Total Past Due		2,541		1,574		807		248		18		19		—		5,207
Total	$	260,590	$	229,253	$	107,964	$	34,763	$	7,484	$	1,878	$	—	$	641,932
Total Loans and Leases
Current	$	960,423	$	1,551,294	$	1,352,773	$	596,790	$	335,881	$	1,011,315	$	715,820	$	6,524,296
30-59 Days Past Due		1,872		2,779		179		4,366		3,724		4,473		800		18,193
60-89 Days Past Due		669		410		1,057		171		12,461		3,745		231		18,744
Greater than 90 Accruing		—		—		—		—		—		—		—		—
Non-accrual		999		4,984		6,953		5,499		4,633		28,369		633		52,070
Total Past Due		3,540		8,173		8,189		10,036		20,818		36,587		1,664		89,007
Total	$	963,963	$	1,559,467	$	1,360,962	$	606,826	$	356,699	$	1,047,902	$	717,484	$	6,613,303

~~million of non-accrual loans classified as held for sale.~~

1923

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 $~~8.4~~$2.2 million of commercial real estate loans $~~4.1~~ ~~million~~and $657,000 of commercial and industrial loans ~~and $2.6~~ ~~million of residential real estate loans,~~ as of ~~March 31,~~September 30, 2023. The Company recognized $~~970,000~~$2.8 million of interest income on non-accrual loans and leases for the ~~three~~nine months ended ~~March 31,~~September 30, 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~~$8.4 million of ~~non-accrual~~substandard loans classified as held for sale.

2024

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~~$10.8 million of commercial real estate loans, $~~4.3~~$4.3 million of commercial and industrial loans, and $~~2.6~~$2.6 million of residential real estate loans, as of December 31, 2022. The Company recognized $~~2.5~~$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 ~~in terms of~~by loans and leases individually and collectively evaluated for impairment, and corresponding loan and lease balances by type for the three and nine months ended ~~March 31,~~September 30, 2023 are as follows:


March 31, 2023	Commercial Real Estate			Residential Real Estate			Construction, Land Development, and Other Land		Commercial and Industrial			Installment and Other			Lease Financing Receivables			Total
September 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	$	26,061		$	3,140		$	3,134	$	41,889		$	24		$	7,676		$	81,924		$	26,377		$	2,544		$	1,935		$	53,640		$	43		$	8,126		$	92,665
Adjustment for acquired PCD loans																						8,230			660			97			1,609			—			—			10,596
Provision/(recapture)																						1,614			941			1,168			3,329			4			809			7,865
Charge-offs																						(1,360	)		(12	)		—			(4,200	)		(3	)		(604	)		(6,179	)
Recoveries																						124			18			—			460			—			147			749
Ending balance																					$	34,985		$	4,151		$	3,200		$	54,838		$	44		$	8,478		$	105,696
Nine months ended
Beginning balance																					$	26,061		$	3,140		$	3,134		$	41,889		$	24		$	7,676		$	81,924
Adjustment for acquired PCD loans																						8,230			660			97			1,609			—			—			10,596
Provision/(recapture)		(1,119	)		(453	)		364		10,803			(2	)		119			9,712			4,854			290			(31	)		17,293			19			1,619			24,044
Charge-offs		(966	)		(9	)		—		(1,790	)		—			(304	)		(3,069	)		(5,271	)		(21	)		—			(8,087	)		(3	)		(1,370	)		(14,752	)
Recoveries		762			1			—		947			3			185			1,898			1,111			82			—			2,134			4			553			3,884
Ending balance	$	24,738		$	2,679		$	3,498	$	51,849		$	25		$	7,676		$	90,465		$	34,985		$	4,151		$	3,200		$	54,838		$	44		$	8,478		$	105,696
Ending balance:
Individually evaluated for impairment	$	6,302		$	—		$	1,198	$	14,518		$	—		$	—		$	22,018		$	13,199		$	—		$	—		$	15,135		$	—		$	—		$	28,334
Collectively evaluated for impairment		18,436			2,679			2,300		37,331			25			7,676			68,447			21,786			4,151			3,200			39,703			44			8,478			77,362
Total allowance for credit losses - loans and leases	$	24,738		$	2,679		$	3,498	$	51,849		$	25		$	7,676		$	90,465		$	34,985		$	4,151		$	3,200		$	54,838		$	44		$	8,478		$	105,696

Loans and leases ending balance:
Individually evaluated for impairment	$	31,622		$	—		$	5,541	$	34,245		$	—		$	—		$	71,408		$	67,596		$	—		$	—		$	48,814		$	—		$	—		$	116,410
Collectively evaluated for impairment		1,897,762			499,336			441,567		2,049,560			1,822			553,877			5,443,924			2,221,164			722,032			523,008			2,385,511			3,246			641,932			6,496,893
Total loans and leases	$	1,929,384		$	499,336		$	447,108	$	2,083,805		$	1,822		$	553,877		$	5,515,332		$	2,288,760		$	722,032		$	523,008		$	2,434,325		$	3,246		$	641,932		$	6,613,303

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 in terms of 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 months ended March 31, 2022:

2125

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

March 31, 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

$
16,918

$
1,628

$
522

$
33,129

$
9

$
2,806

$
55,012

Provision

2,784

513

594

458

1

645

4,995

Charge-offs

(240
)

—

—

(463
)

—

(363
)

(1,066
)
Recoveries

244

4

—

120

—

149

517

Ending balance

$
19,706

$
2,145

$
1,116

$
33,244

$
10

$
3,237

$
59,458

Ending balance:

Individually evaluated
   for impairment

$
7,731

$
6

$
—

$
13,002

$
—

$
—

$
20,739

Collectively evaluated
   for impairment

10,320

1,138

1,115

19,855

8

3,237

35,673

Loans acquired with
   deteriorated credit
   quality

1,655

1,001

1

387

2

—

3,046

Total allowance for loan
   and lease losses

$
19,706

$
2,145

$
1,116

$
33,244

$
10

$
3,237

$
59,458

Loans and leases ending balance:

Individually evaluated for
   impairment

$
36,805

$
2,190

$
—

$
32,457

$
—

$
—

$
71,452

Collectively evaluated for
   impairment

1,675,468

445,183

351,715

1,739,622

1,193

384,684

4,597,865

Loans acquired with
   deteriorated
   credit quality

67,092

47,347

1,357

3,792

163

—

119,751

Total loans and leases

$
1,779,365

$
494,720

$
353,072

$
1,775,871

$
1,356

$
384,684

$
4,789,068

The allowance for credit losses increased $10.6 million for the three and nine months end September 30, 2023 due to an acquisition adjustment on PCD loans related to the Inland transaction. For the same periods, a provision for credit losses of $2.7 million was recorded for acquired non-credit deteriorated loans related to the Inland acquisition.

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 nine months ended September 30, 2022:


September 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	$	19,818		$	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

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		1,930,822			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	$	1,969,830		$	1,368		$	495,828		$	5,275,471

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 $~~8.5~~$13.0 million and $23.8 million for the three and nine months ended ~~March 31,~~September 30, 2023, respectively, and increased the allowance for loan and lease losses by $~~4.4~~$2.2 million and $9.6 million for the three and nine months ended ~~March 31, 2022.~~September 30, 2022, respectively. In 2023, a $10.6 million adjustment was made to the allowance for credit losses to account for acquired PCD loans. For loans individually evaluated for impairment, the Company increased allowance for credit losses - loans and leases by $~~6.7~~$2.4 million and $13.0 million for the three and nine months ended ~~March 31,~~September 30, 2023, respectively. The Company increased the allowance for loans individually evaluated by $1.3 million and ~~decreased~~recaptured $2.4 million of the allowance for loan and lease losses ~~by $299,000~~for the three and nine months ended ~~March 31, 2022. The increase in allowance for credit losses - loans and leases individually evaluated for impairment was mainly driven by increases to impaired loans.~~

September 30, 2022, respectively. For loans and leases collectively evaluated for impairment, the Company increased the allowance ~~for credit losses - loans~~by $10.7 million and ~~leases by $1.9~~$10.8 million for the three and nine months ended ~~March 31, 2023, and~~September 30, 2023. The Company increased the allowance for loan and lease losses by $~~4.9~~$992,000 and $12.8 million for the three and nine months ended ~~March 31, 2022.~~September 30, 2022, respectively. The ~~increase~~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.~~factors, as well as growth in the loan and lease portfolio and through acquisition.

The following table presents loans with modified terms as of ~~March 31,~~September 30, 2023:


March 31, 2023	Payment Delay		Term Modification		Combination Term Modification and Interest Rate Reduction		Total Modified by Class		% of Class of Loans and Leases
September 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 and industrial	$	9,405	$	40,420	$	395	$	50,220		2.4	%	$	383	$	62,394	$	374	$	63,151		2.6	%
Total modified loans	$	9,405	$	40,420	$	395	$	50,220		0.9	%	$	383	$	62,394	$	374	$	63,151		1.0	%

Loans reflected as having a payment delay included a general adjustment in loan terms similar to those of pass-rated credits. The weighted average term extension (in months) for the commercial and industrial loans identified above are four months and seventeen months for the three and nine months ended September 30, 2023, respectively. One commercial relationship in the amount of $383,000 has been designated non-accrual subsequent to its modification. In addition, there were no additional amounts committed to loans modified during 2023. 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~~%8.85% to ~~7.01~~%7.01%.

22Prior to 2023, TDRs were 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)

~~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

Specific
Reserves

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

Loans modified as troubled debt restructurings that occurred during the three and nine months ended ~~March 31,~~September 30, 2022 were:


	Three Months Ended			Three Months Ended			Nine Months Ended
	March 31,			September 30,			September 30,
	2022			2022			2022
Accruing:
Beginning balance	$	1,927		$	1,358		$	1,927
Additions		—			—			—
Net payments		(471	)		(621	)		(1,190	)
Net transfers from non-accrual		—			—			—
Ending balance		1,456			737			737
Non-accruing:
Beginning balance		1,506			1,134			1,506
Additions		—			756			756
Net payments		(163	)		(96	)		(468	)
Charge-offs		—			(4	)		(4	)
Net transfers to accrual		—			—			—
Ending balance		1,343			1,790			1,790
Total troubled debt restructurings	$	2,799		$	2,527		$	2,527

There wereno troubled debt restructurings that subsequently defaulted within twelve months of the restructure date during the ~~three~~nine months ended ~~March 31,~~September 30, 2022. In addition, there was no commitment outstanding on troubled debt restructurings at December 31, 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 ~~March 31,~~September 30, 2023 and December 31, 2022:


September 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	$	—	$	32,338	$	35,258	$	—	$	—	$	—	$	—	$	67,596
Commercial and industrial		—		—		—		—		—		—		48,814		48,814
Total	$	—	$	32,338	$	35,258	$	—	$	—	$	—	$	48,814	$	116,410

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 allowance for credit losses - unfunded commitments as of September 30, 2023 and 2022:


	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Beginning balance	$	3,639	$	2,191	$	4,203	$	1,403
Provision for unfunded commitments		937		136		373		924
Ending balance	$	4,576	$	2,327	$	4,576	$	2,327

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

March 31, 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

$
—

$
4,199

$
27,423

$
—

$
—

$
—

$
—

$
31,622

Residential real estate

—

—

—

—

—

—

—

—

Construction, land development,
and other land

5,541

—

—

—

—

—

—

5,541

Commercial and industrial

—

—

—

—

—

—

34,245

34,245

Total

$
5,541

$
4,199

$
27,423

$
—

$
—

$
—

$
34,245

$
71,408

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 March 31, 2023 and 2022. The three months ended March 31, 2022 were accounted for under the incurred loss model.

For the Three Months Ended

March 31,

2023

2022

Beginning balance

$
4,203

$
1,403

Provision for of unfunded commitments

113

599

Ending balance

$
4,316

$
2,002

Note 5—6—Servicing Assets

Activity for servicing assets and the related changes in fair value for the three and nine months ended ~~March 31,~~September 30, 2023 and 2022 was as follows:

Three Months Ended
March 31,

2023

2022

Beginning balance

$
19,172

$
23,744

Additions, net

1,116

1,984

Changes in fair value

656

(1,231
)
Ending balance

$
20,944

$
24,497


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Beginning balance	$	21,715		$	22,155		$	19,172		$	23,744
Additions, net		1,674			1,314			4,426			5,592
Changes in fair value		(3,646	)		(2,342	)		(3,855	)		(8,209	)
Ending balance	$	19,743		$	21,127		$	19,743		$	21,127

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 ~~March 31,~~September 30, 2023 and December 31, 2022 were as follows:

March 31,

December 31,

2023

2022

Loan portfolios serviced for:

SBA guaranteed loans

$
1,512,586

$
1,521,014

USDA guaranteed loans

210,002

211,150

Total

$
1,722,588

$
1,732,164


	September 30,		December 31,
	2023		2022
Loan portfolios serviced for:
SBA guaranteed loans	$	1,522,691	$	1,521,014
USDA guaranteed loans		191,382		211,150
Total	$	1,714,073	$	1,732,164

Loan servicing revenue totaled $~~3.4~~$3.4 million for each of the three months ended ~~March 31,~~September 30, 2023 and 2022. Loan servicing revenue totaled $10.1 million and $10.2 million for the nine months ended September 30, 2023 and 2022, ~~for each period.~~ respectively.

Loan servicing asset revaluation, which represents the changes in fair value of servicing assets, resulted in ~~an upward valuation adjustment of $656,000~~ ~~and~~ a downward valuation adjustment of $~~1.2~~$3.6 million and $2.3 million for the three months ended ~~March 31,~~September 30, 2023 and 2022, respectively. Loan servicing asset revaluation resulted in a downward valuation adjustment of $3.9 million and $8.2 million for the nine months ended September 30, 2023 and 2022, respectively.

The fair value of servicing rights is highly sensitive to changes in underlying assumptions. Changes in secondary market premiums and prepayment ~~speeds and discount rate~~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

~~BYLINE BANCORP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

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. ~~In addition, as loan sale premium pricing in the secondary market increases, the discount rate decreases which leads to a higher servicing asset valuation.~~ Refer to Note ~~14—~~15—Fair Value Measurement for further details.

Note 6—7—Other Real Estate Owned

The following table presents the change in other real estate owned (“OREO”) for the three and nine months ended ~~March 31,~~September 30, 2023 and 2022:

Three Months Ended
March 31,

2023

2022

Beginning balance

$
4,717

$
2,112

Net additions to OREO

55

309

Proceeds from sales of OREO

(764
)

(225
)
Gains on sales of OREO

35

76

Valuation adjustments

(331
)

(51
)
Ending balance

$
3,712

$
2,221


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Beginning balance	$	2,265		$	4,749		$	4,717		$	2,112
Net additions to OREO		72			—			571			2,837
Proceeds from sales of OREO		(614	)		(131	)		(3,173	)		(356	)
Gains (losses) on sales of OREO		(39	)		—			(88	)		76
Valuation adjustments		(13	)		(216	)		(356	)		(267	)
Ending balance	$	1,671		$	4,402		$	1,671		$	4,402

T29

BYLINE BANCORP, INC. AND SUBSIDIARIES

heNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

At September 30, 2023, the balance of real estate owned did not include any foreclosed residential real estate properties recorded as a result of obtaining physical possession of the property. At December 31, 2022, the balance included $~~2.2~~ ~~million and $2.3~~$2.3 million in foreclosed residential real estate properties recorded as a result of obtaining physical possession of the ~~property at March 31, 2023 and December 31, 2022, respectively.~~property.

At ~~March 31,~~September 30, 2023, ~~and~~there was $27,000 of consumer mortgage loans secured by residential real estate properties in foreclosure. At December 31, 2022, there were no recorded investments of consumer mortgage loans secured by residential real estate properties in foreclosure.

There were no internally financed sales of OREO for the three or nine months ended ~~March 31,~~September 30, 2023 or 2022.

Note 7—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~~2036, 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 the ~~dates~~periods indicated:

Balance Sheet Line Item

March 31, 2023

December 31, 2022

Operating lease right-of-use asset

Accrued interest receivable and other assets

$
10,880

$
11,352

Operating lease liability

Accrued interest payable and other liabilities

13,645

14,391

~~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	September 30, 2023		December 31, 2022
Operating lease right-of-use asset	Accrued interest receivable and other assets	$	13,265	$	11,352
Operating lease liability	Accrued interest payable and other liabilities		15,128		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 ~~March 31,~~September 30, 2023, the ~~weighted-average~~weighted average discount rate of operating leases was ~~2.08~~%2.87% and the weighted average remaining life of operating leases was ~~6.3~~6.2 years, compared to ~~1.95~~%1.95% and 6.2 years as of December 31, 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 March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022			2023			2022
Operating lease cost	$	623		$	858		$	770		$	682		$	2,014		$	2,260
Short-term lease cost		69			37			127			47			295			160
Variable lease cost		412			469			470			384			1,239			1,264
Less: Sublease income		(156	)		(127	)		(160	)		(158	)		(475	)		(434	)
Total lease cost, net	$	948		$	1,237		$	1,207		$	955		$	3,073		$	3,250

Operating cash flows paid for operating lease amounts included in the measure of lease liabilities were $~~855,000~~$1.4 million and $~~1.2~~ ~~million~~$927,000 for the three months ended ~~March 31,~~September 30, 2023 and 2022, respectively. For the quarter ended September 30, 2023, operating cash flows paid included early termination payments of $471,000 for two of the Company’s previously closed

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

branch facilities, resulting in a gain of $838,000. Operating cash flows paid for operating lease amounts included in the measure of lease liabilities were $3.1 million and $3.0 million for the nine months ended September 30, 2023 and 2022, respectively.

The Company recorded $~~313,000~~$3.8 million and $~~1.3~~ ~~million~~$114,000 of right-of-use lease assets in exchange for operating lease liabilities for the three months ended ~~March 31,~~September 30, 2023 and 2022, respectively. The Company recorded $4.8 million and $1.4 million of right-of-use lease assets in exchange for operating lease liabilities for the nine months ended September 30, 2023 and 2022, respectively. The additions recorded to right-of-use assets and operating lease liabilities included $3.8 million related to the acquisition of Inland. Refer to Note 3—Acquisition of a Business for further details.During the quarter ended September 30, 2023, the Company recorded $395,000 of impairment related to an acquired non-branch facility lease it intends to terminate by year end.

The future minimum lease payments for operating leases, subsequent to ~~March 31,~~September 30, 2023, as recorded on the Condensed Consolidated Statements of Financial Condition, are summarized as follows:


	Operating Lease Commitments			Operating Lease Commitments
2023	$	2,396		$	946
2024		3,185			3,807
2025		2,648			3,210
2026		2,047			2,488
2027		1,003			1,442
Thereafter		3,557			5,177
Total undiscounted lease payments		14,836			17,070
Less: Imputed interest		(1,191	)		(1,942	)
Net lease liabilities	$	13,645		$	15,128

~~The Company’s rental expenses for the three months ended March 31, 2023 and 2022 were $1.1~~ ~~million and $1.4~~ ~~million, respectively.~~

The total amount of minimum rentals to be received in the future on these subleases is approximately $~~1.3~~$1.3 million, and the leases have contractual lives extending through ~~2027~~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 8—9—Goodwill, Core Deposit Intangible and Other Intangible Assets

The following tables summarize the changes in the Company’s goodwill, core deposit intangible assets, and customer relationship intangible assets for the three and nine months ended ~~March 31,~~September 30, 2023 and 2022:


	For the Three Months Ended March 31,																For the Three Months Ended September 30,
	2023								2022								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	$	8,886		$	1,648		$	148,353	$	15,004		$	2,201		$	148,353	$	6,110		$	1,514		$	148,353	$	11,945		$	1,796
Additions																		33,352		17,250			—			—		—			—
Amortization		—		(1,388	)		(67	)		—		(1,529	)		(67	)		—		(1,484	)		(67	)		—		(1,529	)		(81	)
Ending balance	$	148,353	$	7,498		$	1,581		$	148,353	$	13,475		$	2,134		$	181,705	$	21,876		$	1,447		$	148,353	$	10,416		$	1,715
Accumulated amortization	N/A		$	47,968		$	1,635		N/A		$	41,991		$	1,082		N/A		$	50,840		$	1,769		N/A		$	45,050		$	1,501
Weighted average remaining amortization period	N/A		4.5 Years			5.9 Years			N/A		4.7 Years			8.0 Years			N/A		8.4 Years			5.4 Years			N/A		4.5 Years			6.4 Years

2631

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 Months Ended September 30,
	2023								2022
	Goodwill		Core Deposit Intangible			Customer Relationship Intangible			Goodwill		Core Deposit Intangible			Customer Relationship Intangible
Beginning balance	$	148,353	$	8,886		$	1,648		$	148,353	$	15,004		$	2,201
Additions		33,352		17,250			—			—		—			—
Amortization		—		(4,260	)		(201	)		—		(4,588	)		(486	)
Ending balance	$	181,705	$	21,876		$	1,447		$	148,353	$	10,416		$	1,715
Accumulated amortization	N/A		$	50,840		$	1,769		N/A		$	45,050		$	1,501
Weighted average remaining amortization period	N/A		8.4 Years			5.4 Years			N/A		4.5 Years			6.4 Years

The Company added additional goodwill and core deposit intangible assets in conjunction with the Inland acquisition. Please refer to Note 3—Acquisition of a Business for further details.

The following table presents the estimated amortization expense for core deposit intangible and customer relationship intangible assets remaining at ~~March 31,~~September 30, 2023:

Estimated
Amortization

2023

$
2,881

2024

2,286

2025

1,721

2026

1,157

2027

609

Thereafter

425

Total

$
9,079


	Estimated Amortization
2023	$	1,550
2024		5,380
2025		4,473
2026		3,566
2027		2,676
Thereafter		5,678
Total	$	23,323

Note 9—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 ~~three~~nine months ended ~~March 31,~~September 30, 2023 and 2022 was ~~25.7~~%26.0% and ~~22.0~~%23.4%, respectively. The Company recorded discrete income tax benefit of $~~134,000~~$196,000 and $~~1.1~~$2.1 million related to the exercise of stock options and vesting of restricted shares for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 and 2022, respectively.

Net deferred tax assets ~~decreased~~increased to $~~64.9~~$89.8 million at ~~March 31,~~September 30, 2023 compared to $~~68.2~~$68.2 million at December 31, 2022, primarily as a result of acquired deferred tax assets associated with the ~~change in unrealized losses on available-for-sale securities.~~Inland acquisition. Refer to Note 3—Acquisition of a Business for further details.

Note ~~10—~~11—Deposits

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

March 31,

December 31,

2023

2022

Non-interest-bearing demand deposits

$
1,952,045

$
2,138,645

Interest-bearing checking accounts

560,837

592,098

Money market demand accounts

1,453,688

1,415,653

Other savings

590,231

625,798

Time deposits (below $250,000)

1,089,785

762,250

Time deposits ($250,000 and above)

166,066

160,677

Total deposits

$
5,812,652

$
5,695,121

~~There were $537.6~~


	September 30,		December 31,
	2023		2022
Non-interest-bearing demand deposits	$	1,959,855	$	2,138,645
Interest-bearing checking accounts		592,771		592,098
Money market demand accounts		2,062,252		1,415,653
Other savings		581,073		625,798
Time deposits (below $250,000)		1,447,053		762,250
Time deposits ($250,000 and above)		310,686		160,677
Total deposits	$	6,953,690	$	5,695,121

~~million and $251.5~~ ~~million of brokered deposits included in time deposits below $250,000~~ ~~at March 31, 2023 and December 31, 2022, respectively.~~

~~At March 31, 2023, the scheduled maturities of time deposits were:~~

Scheduled Maturities

2023

$
905,863

2024

324,165

2025

13,798

2026

6,925

2027 and thereafter

5,100

Total

$
1,255,851

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 15—Derivative Instruments and Hedging Activities for additional discussion.

2732

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

There were $549.1 million and $251.5 million of brokered deposits included in time deposits below $250,000 at September 30, 2023 and December 31, 2022, respectively.

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


	Scheduled Maturities
2023	$	584,912
2024		1,125,546
2025		32,981
2026		8,432
2027		5,046
Thereafter		822
Total	$	1,757,739

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

Note ~~11—~~12—Other Borrowings

The following is a summary of the Company’s other borrowings as of ~~March 31, 2023 and December 31, 2022:~~the dates presented:


	March 31,		December 31,		September 30,		December 31,
	2023		2022		2023		2022
Federal Home Loan Bank advances	$	625,000	$	625,000	$	640,000	$	625,000
Securities sold under agreements to repurchase		37,810		15,399		38,233		15,399
Term Loan						20,000		—
Line of credit		—		—		15,000		—
Total	$	662,810	$	640,399	$	713,233	$	640,399

Byline Bank has the capacity to borrow funds from the discount window of the Federal Reserve System. As of ~~March 31,~~September 30, 2023 and December 31, 2022, there were no outstanding advances under the Federal Reserve Bank discount window line. ~~The Company pledges loans and leases as collateral for the FRB discount window borrowing. Refer to Note 4—Loan and Lease Receivables and Allowance for Credit Losses for additional discussion.~~

As of March 31, 2023, the Bank was participating in the BTFP with the Federal Reserve Bank, which provides liquidity to federally insured depository institutions. Under the terms of the BTFP, the Bank has posted certain securities with an aggregate value of $~~221.7~~ million to the Federal Reserve Bank of Chicago as collateral. Advances under the BTFP are limited to the value of eligible collateral posted. As of March 31, 2023, the Bank had all of the eligible collateral posted by the Bank remains eligible remaining for potential advances. The Bank did not borrow from the program during the three months ended March 31, 2023. Refer to Note 3 – Securities for additional discussion.

At ~~March 31,~~September 30, 2023, ~~the~~ fixed-rate Federal Home Loan Bank (“FHLB”) ~~advance~~advances totaled $~~25.0~~$190.0 million, with an interest rate of ~~4.86~~%5.46% and maturity ~~in April~~of October 2023. Total variable rate advances were $~~600.0~~$450.0 million at ~~March 31,~~September 30, 2023, with interest rates ranging from ~~4.70~~%5.51% to ~~5.05~~%5.55%, that may reset daily, with maturities between ~~May~~November 2023 and ~~June~~December 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%35% of total assets. Required investment in FHLB stock is $~~4.50~~$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~~$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~~.$15.0 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 $15.0 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, each subject to the existing Negative Pledge Agreement dated October 11, 2018, as amended. At ~~March 31,~~September 30, 2023, the term loan had an interest rate of 7.62%. At September 30, 2023 the line of credit had a $15.0 million outstanding balance and an interest rate of 7.38%. At December 31, 2022, the line of credit had no outstanding balance.

The following table presents short-term credit lines available for use as of the dates presented:


	September 30,		December 31,
	2023		2022
Federal Home Loan Bank line	$	1,984,390	$	1,903,549
Federal Reserve Bank of Chicago discount window line		734,774		804,578
Available federal funds lines		135,000		135,000

The Company hedges interest rates on ~~certain~~ borrowed funds using interest rate swaps through which the Company receives variable amounts and pays fixed amounts. Refer to Note ~~15—~~16—Derivative Instruments and Hedging Activities for additional discussion.

~~The following table presents short-term credit lines available for use as of March 31, 2023 and December 31, 2022:~~

March 31,

December 31,

2023

2022

Federal Home Loan Bank line

$
1,933,073

$
1,903,549

Federal Reserve Bank of Chicago discount window line

785,982

804,578

Bank Term Funding Program

221,726

N/A

Available federal funds lines

135,000

135,000

~~BYLINE BANCORP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

Note ~~12—~~13—Subordinated Notes and Junior Subordinated Debentures

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

As of ~~March 31,~~September 30, 2023, the net liability outstanding of the subordinated notes was $~~73.7~~$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 ~~March 31,~~September 30, 2023 and December 31, 2022, the Company’s junior subordinated debentures by issuance were as follows:

Name of Trust

Aggregate Principal Amount March 31, 2023

Aggregate
Principal Amount
December 31, 2022

Stated
Maturity

Contractual Rate at March 31, 2023

Interest Rate Spread
Metropolitan Statutory Trust 1

$
35,000

$
35,000

March 17, 2034

7.70
%

Three-month LIBOR + 2.79%
First Evanston Bancorp Trust I

10,000

10,000

March 15, 2035

6.65
%

Three-month LIBOR + 1.78%
Total liability, at par

45,000

45,000

Discount

(7,558
)

(7,662
)

Total liability, at carrying value

$
37,442

$
37,338


		Aggregate Principal Amount
Name of Trust	Stated Maturity	September 30, 2023			December 31, 2022			Contractual Rate September 30, 2023	Interest Rate Spread(1)
Metropolitan Statutory Trust I	March 17, 2034	$	35,000		$	35,000		8.46%	SOFR + spread adjustment + 2.79%
First Evanston Bancorp Trust I	March 15, 2035		10,000			10,000		7.45%	SOFR + spread adjustment + 1.78%
AmeriMark Capital Trust I	April 23, 2034		5,000			—		8.36%	SOFR + spread adjustment + 2.75%
Inland Bancorp Trust II	September 15, 2035		10,000			—		7.27%	SOFR + spread adjustment + 1.60%
Inland Bancorp Trust III	December 15, 2036		10,000			—		7.32%	SOFR + spread adjustment + 1.65%
Inland Bancorp Trust IV	June 6, 2037		7,000			—		7.28%	SOFR + spread adjustment + 1.62%
Inland Bancorp Trust V	September 15, 2037		10,000			—		7.09%	SOFR + spread adjustment + 1.42%
Total liability, at par			87,000			45,000
Discount			(16,664	)		(7,662	)
Total liability, at carrying value		$	70,336		$	37,338

(1) SOFR is three month SOFR and the spread adjustment is 0.26161%

In 2004, the Company’s predecessor, Metropolitan Bank Group, Inc., issued $~~35.0~~$35.0 million floating rate junior subordinated debentures to Metropolitan Statutory Trust 1,I, which was formed for the issuance of trust preferred securities. ~~The debentures bear~~Beginning on September 14, 2023, the interest rate reset to the three-month CME Secured Overnight Financing Rate ("SOFR") plus a tenor spread adjustment of 0.26161% plus 2.79% (8.46% and 7.53% at ~~three-month LIBOR plus~~ ~~2.79% (7.70% and~~ ~~7.53% at March 31,~~September 30, 2023 and December 31, 2022, respectively). Interest is paid on a quarterly basis. The Company has the right to redeem the debentures, in whole or in part, on

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

any interest payment date on or after March 2009. Accrued interest payable was $~~116,000~~$110,000 and $~~98,000~~$98,000 as of ~~March 31,~~September 30, 2023 and December 31, 2022, respectively.

As part of the First Evanston acquisition, the Company assumed the obligations to First Evanston Bancorp Trust I of $~~10.0~~$10.0 million in principal amount, which was formed for the issuance of trust preferred securities. Beginning on ~~March~~September 15, ~~2010,~~2023, the interest rate reset to the three-month ~~LIBOR~~CME SOFR plus ~~1.78% (6.65~~%a tenor spread adjustment of 0.26161% plus 1.78% (7.45% and ~~6.55~~%6.55% at ~~March 31,~~September 30, 2023 and December 31, 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 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 $~~30,000~~$32,000 and $30,000 as of ~~March 31,~~September 30, 2023 and December 31, ~~2022.~~2022, respectively.

As part of the Inland acquisition, the Company assumed the obligations to several trust preferred securities. Refer to Note 3—Acquisition of a Business for further details. Interest rates are calculated as the three-month CME SOFR plus a tenor spread adjustment of 0.26161% plus negotiated additional basis points. Refer to table above for contractual rates and interest rate spread calculation. Interest is paid on a quarterly basis. Accrued interest payable for the AmeriMark and Inland trusts was $214,000 as of September 30, 2023.

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 ~~13—~~14—Commitments and Contingent Liabilities

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

Operating lease ~~commitments—~~commitments—Refer to Note 7—8—Leases for discussion of operating lease commitments.

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

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

The following table summarizes the contract or notional amount of outstanding loan and lease commitments at ~~March 31,~~September 30, 2023 and December 31, 2022:

March 31, 2023

December 31, 2022

Fixed Rate

Variable Rate

Total

Fixed Rate

Variable Rate

Total

Commitments to extend credit

$
267,040

$
1,932,687

$
2,199,727

$
258,049

$
1,821,175

$
2,079,224

Letters of credit

521

61,004

61,525

536

61,328

61,864

Total

$
267,561

$
1,993,691

$
2,261,252

$
258,585

$
1,882,503

$
2,141,088


	September 30, 2023						December 31, 2022
	Fixed Rate		Variable Rate		Total		Fixed Rate		Variable Rate		Total
Commitments to extend credit	$	291,801	$	2,002,472	$	2,294,273	$	258,049	$	1,821,175	$	2,079,224
Letters of credit		695		65,781		66,476		536		61,328		61,864
Total	$	292,496	$	2,068,253	$	2,360,749	$	258,585	$	1,882,503	$	2,141,088

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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.

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~~%1.00% to ~~18.00~~%18.00% and maturities up to ~~2050~~2053. Variable rate loan commitments have interest rates ranging from ~~1.75~~%3.00% to ~~13.75~~%18.50% and maturities up to ~~2048~~2049.

Note ~~14—~~15—Fair Value Measurement

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

These types of inputs create the following fair value hierarchy:

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

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

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

~~BYLINE BANCORP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

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:

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

The Company’s methodology for pricing non-rated bonds focuses on three distinct inputs: equivalent rating, yield and other pricing terms. To determine the rating for a given non-rated municipal bond, the Company references a publicly issued bond by the same issuer if available as well as other additional key metrics to support the credit worthiness. Typically, pricing for these types of bonds would require a higher yield than a similar rated bond from the same issuer. A reduction in price is applied to the rating obtained from the comparable bond, as the Company believes if liquidated, a non-rated bond would be valued less than a similar bond with a verifiable rating. The reduction applied by the Company is one notch lower (i.e. a “AA” rating for a comparable bond would be reduced to “AA-” for the Company’s valuation). In 2023 and 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—~~securities—The Company utilizes the same fair value measurement methodology for equity and other securities as detailed in the securities available-sale portfolio above.

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

Derivative ~~instruments—~~instruments—Interest rate derivatives are valued by a third party, using models that primarily use market observable inputs, such as yield curves, and are validated by comparison with valuations provided by the respective counterparties. Derivative financial instruments are included in other assets and other liabilities in the Condensed Consolidated Statements of Financial Condition.

The following tables summarize the Company’s financial assets and liabilities that were measured at fair value on a recurring basis at September 30, 2023 and December 31, 2022:


			Fair Value Measurements Using
September 30, 2023	Fair Value		Level 1		Level 2		Level 3
Financial assets
Securities available-for-sale
U.S. Treasury Notes	$	104,029	$	104,029	$	—	$	—
U.S. Government agencies		125,115		—		125,115		—
Obligations of states, municipalities, and political subdivisions		80,520		—		80,520		—
Mortgage-backed securities; residential
Agency		621,976		—		621,976		—
Non-Agency		96,931		—		96,931		—
Mortgage-backed securities; commercial
Agency		139,865		—		139,865		—
Corporate securities		34,972		—		34,972		—
Asset-backed securities		36,521		—		36,521		—
Equity and other securities, at fair value
Mutual funds		2,415		2,415		—		—
Equity securities		5,487		—		5,206		281
Servicing assets		19,743		—		—		19,743
Derivative assets		77,002		—		77,002		—
Financial liabilities
Derivative liabilities		30,641		—		30,641		—

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

~~The following tables summarize the Company’s financial assets and liabilities that were measured at fair value on a recurring basis at March 31, 2023 and December 31, 2022:~~

Fair Value Measurements Using

March 31, 2023

Fair Value

Level 1

Level 2

Level 3

Financial assets

Securities available-for-sale

U.S. Treasury Notes

$
41,195

$
41,195

$
—

$
—

U.S. Government agencies

130,866

—

130,866

—

Obligations of states, municipalities, and political
subdivisions

63,578

—

63,578

—

Mortgage-backed securities; residential

Agency

589,310

—

589,310

—

Non-Agency

105,139

—

105,139

—

Mortgage-backed securities; commercial

Agency

157,297

—

157,297

—

Corporate securities

37,490

—

37,490

—

Asset-backed securities

39,512

—

39,512

—

Equity and other securities, at fair value

Mutual funds

2,555

2,555

—

—

Equity securities

5,784

—

5,154

630

Servicing assets

20,944

—

—

20,944

Derivative assets

55,491

—

55,491

—

Financial liabilities

Derivative liabilities

15,085

—

15,085

—


			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		—

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):

Three Months Ended March 31,

2023

2022

2023

2022

Investment Securities

Servicing Assets

Balance, beginning of period
$
666

$
686

$
19,172

$
23,744

Additions, net

—

—

1,116

1,984

Change in fair value

(36
)

(11
)

656

(1,231
)
Balance, end of period
$
630

$
675

$
20,944

$
24,497

~~BYLINE BANCORP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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


	Nine Months Ended September 30,
	2023			2022			2023			2022
	Investment Securities						Servicing Assets
Balance, beginning of period	$	666		$	686		$	19,172		$	23,744
Additions, net		—			—			4,426			5,592
Maturity		(400	)		—			—			—
Accretion of discount		82			—			—			—
Change in fair value		(67	)		(21	)		(3,855	)		(8,209	)
Balance, end of period	$	281		$	665		$	19,743		$	21,127

The Company did notnot have any transfers to or from Level 3 of the fair value hierarchy during the ~~three~~nine months ended ~~March 31,~~September 30, 2023 and 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 ~~March 31,~~September 30, 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~~

~~6.4% -~~ ~~8.2~~%

~~7.4~~

~~Decrease~~

~~Servicing assets~~

~~Discounted cash flow~~

~~Prepayment speeds~~

~~0.0% -~~ ~~33.0~~%

~~13.2~~

~~Decrease~~

~~Discount rate~~

~~4.8% -~~ ~~51.6~~%

~~11.8~~

~~Decrease~~

Expected weighted
average loan life

~~0.0~~ - ~~10.0~~ ~~years~~

~~4.1~~ ~~years~~

~~Increase~~

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

6.4%

6.4

Decrease

Servicing assets

Discounted cash flow

Prepayment speeds

(1.0)% - 31.7%

13.7

Decrease

Discount rate

0.0% - 57.2%

16.4

Decrease

Expected weighted
average loan life

0.0 - 9.5 years

3.8 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 no~~n-recurring~~non-recurring basis:

Individually Evaluated ~~Loans—~~Loans—The Company individually evaluates loans 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 ~~loan’s~~loan's original effective interest ~~rate,~~rat, or a calculation of the fair value of the underlying

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

collateral less estimated selling costs. Valuations of individually assessed loans that are collateral dependent are supported by third party appraisals in accordance with the ~~Bank’s~~Bank's credit policy. Accordingly, individually evaluated loans are classified as Level 3.

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

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

Adjustments to fair value based on such non-recurring transactions generally result from the application of lower-of-cost-or-market accounting or write-downs of individual assets due to impairment. The following tables summarize theCompany’s assets that were measured at fair value on a non-recurring basis, as of ~~March 31,~~September 30, 2023 and December 31, 2022:


			Fair Value Measurements Using								Fair Value Measurements Using
March 31, 2023	Fair Value		Level 1		Level 2		Level 3
September 30, 2023									Fair Value		Level 1		Level 2		Level 3
Non-recurring
Individually evaluated loans
Commercial real estate	$	25,321	$	—	$	—	$	25,321	$	54,397	$	—	$	—	$	54,397
Construction, land development, and other land		4,343						4,343
Commercial and industrial		19,727		—		—		19,727		33,679		—		—		33,679
Assets held for sale		8,653		—		—		8,653		7,627		—		—		7,627
Other real estate owned		3,712		—		—		3,712		1,671		—		—		1,671


			Fair Value Measurements Using
December 31, 2022	Fair Value		Level 1		Level 2		Level 3
Non-recurring
Individually evaluated loans
Commercial real estate	$	37,959	$	—	$	—	$	37,959
Residential real estate		879		—		—		879
Construction, land development, and other land		5,541		—		—		5,541
Commercial and industrial		47,846		—		—		47,846
Assets held for sale		8,673		—		—		8,673
Other real estate owned		4,717		—		—		4,717

~~BYLINE BANCORP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

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—~~banks—For these short-term instruments, the carrying amount is a reasonable estimate of fair value.

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

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

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

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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

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

Term Loan—The carrying amount approximates fair value.

Line of credit—The carrying amount approximates fair value.

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

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

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

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

~~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:

March 31,

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

$
52,725

$
52,725

$
62,274

$
62,274

Interest bearing deposits with other banks

2

231,486

231,486

117,079

117,079

Securities held-to-maturity

2

2,704

2,681

2,705

2,672

Restricted stock

2

38,777

38,777

28,202

28,202

Loans held for sale

3

28,379

29,024

47,823

40,657

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

3

5,375,477

5,359,678

5,262,447

5,259,991

Accrued interest receivable

3

28,960

28,960

29,815

29,815

Financial liabilities

Non-interest-bearing deposits

2

1,952,045

1,952,045

2,138,645

2,138,645

Interest-bearing deposits

2

3,860,607

3,859,473

3,556,476

3,554,318

Accrued interest payable

2

9,126

9,126

4,494

4,494

Federal Home Loan Bank advances

2

625,000

625,000

625,000

625,000

Securities sold under repurchase agreement

2

37,810

37,810

15,399

15,399

Subordinated notes

2

73,735

71,084

73,691

70,925

Junior subordinated debentures

3

37,442

37,811

37,338

40,131


			September 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	$	71,248	$	71,248	$	62,274	$	62,274
Interest bearing deposits with other banks		2		357,640		357,640		117,079		117,079
Securities held-to-maturity		2		1,157		1,133		2,705		2,672
Restricted stock		2		30,505		30,505		28,202		28,202
Loans held for sale		3		7,299		7,299		47,823		40,657
Loans and lease receivables, net (less impaired loans at fair value)		3		6,419,531		6,349,769		5,262,447		5,259,991
Accrued interest receivable		3		39,844		39,844		29,815		29,815
Financial liabilities
Non-interest-bearing deposits		2		1,959,855		1,959,855		2,138,645		2,138,645
Interest-bearing deposits		2		4,993,835		4,982,974		3,556,476		3,554,318
Accrued interest payable		2		20,376		20,376		4,494		4,494
Federal Home Loan Bank advances		2		640,000		640,000		625,000		625,000
Securities sold under repurchase agreement		2		38,233		38,233		15,399		15,399
Term Loan		2		20,000		20,000		—		—
Line of credit		2		15,000		15,000		—		—
Subordinated notes		2		73,822		72,870		73,691		70,925
Junior subordinated debentures		3		70,336		72,491		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 ~~15—~~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 ~~March 31,~~September 30, 2023 and December 31, 2022:


	March 31, 2023							December 31, 2022							September 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	$	40,438	$	—		$	550,000	$	47,249	$	—		$	650,000	$	47,488	$	(1,633	)	$	550,000	$	47,249	$	—
Derivatives not designated as hedging instruments
Other interest rate derivatives		577,363		15,053		(15,085	)		545,346		18,093		(17,817	)		703,876		29,514		(29,008	)		545,346		18,093		(17,817	)
Other credit derivatives		6,454		—		—			6,678		—		—			1,198		—		—			6,678		—		—
Total derivatives	$	1,133,817	$	55,491	$	(15,085	)	$	1,102,024	$	65,342	$	(17,817	)	$	1,355,074	$	77,002	$	(30,641	)	$	1,102,024	$	65,342	$	(17,817	)

As of the effective time of the transaction reported in Note 3—Acquisition of a Business, Byline acquired and assumed two types of derivative instruments. Interest rate swap agreements previously designated as cash flow hedges of certain junior subordinated debentures issued to capital trusts had notional amounts of $42.0 million and had a fair value of $3.5 million included in accrued interest receivable and other assets. In July 2023, the Company terminated the interest rate swap agreements resulting in a net gain of $6,000. Other interest rate swap agreements not designated as hedging instruments had notional amounts of $67.7 million and fair values of $6.2 million reported in accrued interest receivable and other assets and accrued interest payable and other liabilities.

Interest rate swaps designated as cash flow ~~hedges—~~hedges—Cash flow hedges of interest payments associated with certain financial instruments had notional amounts totaling $~~550.0~~$650.0 million as of ~~March 31,~~September 30, 2023, and $550.0 million at December 31, 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 ~~March 31,~~September 30, 2023, the cash flow hedges aggregating $~~550.0~~$650.0 million in notional amounts are comprised of $~~450.0~~$450.0 million pay-fixed interest rate swaps associated with certain deposits and other borrowings, and $~~100.0~~$200.0 million receive-fixed interest rate swaps associated with certain variable rate loans.

As of ~~March 31,~~September 30, 2023, ~~the $450.0~~ ~~million~~ pay-fixed interest rate swaps are comprised of ~~four~~six effective hedges. Receive-fixed interest rate swaps totaling $200.0 million are comprised of two effective hedges totaling $~~350.0~~ ~~million; $50.0~~$100.0 million, and two $50.0 million forward-starting ~~interest rate swap~~swaps that are effective in ~~May 2023;~~March and $~~50.0~~ ~~million forward-starting interest rate swap effective in September 2023. The two hedges comprising the $100.0~~ ~~million receive-fixed forward -starting interest rate swaps became effective on April 1, 2023.~~August of 2024.

For derivatives designated and that qualify as cash flow hedges of 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 interest payments are made on the hedged instruments. Interest recorded on these swap transactions ~~was $2.0~~included $4.6 million and $327,000 of interest income ~~and $210,000~~ ~~interest expense~~recorded during the three months ended ~~March 31,~~September 30, 2023, and 2022, respectively, and is reported as a component of interest expense on deposits and other borrowings. Interest recorded on these swap transactions was $10.4 million and $8,000 interest income during the nine months ended September 30, 2023, and 2022, respectively. As of ~~March 31,~~September 30, 2023, the Company estimates $~~15.5~~$18.6 million of the net unrealized gain to be reclassified as a net decrease to interest expense during the next twelve months.

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~~$100.0 million, of which $~~50.0~~$50.0 million ~~has an~~became effective ~~date of~~in May 2023 and $~~50.0~~$50.0 million ~~has an~~became effective ~~date of~~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 will begin amortizing on the effective dates. The gain will be amortized as a decrease to interest expense. The remaining balance related to previously terminated interest rate swaps designated as cash flow hedges was $~~15,000~~ ~~as of December 31, 2022.~~

3641

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

$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 $3.9 million and $15,000 as of September 30, 2023 and December 31, 2022, respectively.

The following table reflects the cash flow hedges as of ~~March 31,~~September 30, 2023:


Notional amounts	$	550,000	$	650,000
Derivative assets fair value		40,438		47,488
Derivative liabilities fair value		—		1,633
Weighted average maturity	3.7 years
Weighted average remaining maturity			3.2 years

Receive rates are determined at the time the swaps become effective. As of ~~March 31,~~September 30, 2023, the weighted average pay rates of the six effective pay-fixed ~~interest rate swaps~~hedges for $450.0 million were ~~1.04~~%1.04% and the weighted average receive rates ~~for the four effective hedges of $350.0~~ ~~million~~ were ~~4.64~~%5.32%. As of ~~March 31,~~September 30, 2023, the weighted average pay rates of the receive-fixed interest rate swaps of $100.0 million were ~~7.44~~%8.50% and the weighted average receive rates were 7.44%.

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 ~~three~~nine months ended:

March 31, 2023

March 31, 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

$
194

$
1,956

$
—

$
17,643

$
(210
)

$
—


	September 30, 2023						September 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 Gain Reclassified from OCI to Income as a Decrease to Interest Expense		Amount of Gain (Loss) Recognized in Other Non-Interest Income
Interest rate swaps	$	13,357	$	10,381	$	—	$	45,088	$	8	$	—

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

Other interest rate ~~derivatives—~~derivatives—The total combined notional amount was $~~577.4~~$703.9 million as of ~~March 31,~~September 30, 2023 with maturities ranging from ~~May 2023~~March 2024 to ~~May~~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 ~~months~~ ended ~~March 31,~~September 30, 2023 and 2022, there were $~~472,000~~$115,000 and $~~1.1~~$394,000 of net transaction fees, included in other non-interest income, related to these derivative instruments. During the nine months ended September 30, 2023 and 2022, there were $587,000 and $2.0 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.

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 other interest rate derivatives as of ~~March 31,~~September 30, 2023:


Notional amounts	$	577,363		$	703,876
Derivative assets fair value		15,053			29,514
Derivative liabilities fair value		15,085			29,008
Weighted average pay rates		4.29	%		4.28	%
Weighted average receive rates		5.45	%		6.55	%
Weighted average maturity	5.4 years
Weighted average remaining maturity				4.9 years

Other ~~derivatives—~~derivatives— The Company has entered into risk participation agreements with counterparty banks to assume a portion of the credit risk related to borrower transactions. The credit risk related to these other derivatives is managed through the Company’s loan underwriting process. The total notional amount was $~~6.5~~$1.2 million and $~~6.7~~$6.7 million as of ~~March 31,~~September 30, 2023 and December 31, 2022, respectively. Additionally, the Company enters into foreign currency contracts to manage foreign

~~BYLINE BANCORP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

exchange risk associated with certain customer foreign currency transactions. These transactions were not material to the consolidated financial statements as of ~~March 31,~~September 30, 2023 and December 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 as a well or adequately capitalized institution, then the counterparty could terminate the derivative positions and the Company would be required to settle its obligations resulted in a net asset position.

The following table reflects amounts included in non-interest income in the Condensed Consolidated Statements of Operations relating to derivative instruments that are not designated in a hedging relationship for the three and nine months ended ~~March 31,~~September 30, 2023 and 2022:


	Three Months Ended						Three Months Ended				Nine Months Ended
	March 31,						September 30,				September 30,
	2023			2022			2023		2022		2023		2022
Other interest rate derivatives	$	(308	)	$	(282	)	$	423	$	233	$	230	$	801
Other credit derivatives		—			(4	)		—		1		—		6
Total	$	(308	)	$	(286	)	$	423	$	234	$	230	$	807

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:


	March 31, 2023						December 31, 2022						September 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	$	55,491		$	(15,085	)	$	65,342		$	(17,817	)	$	77,002		$	(30,641	)	$	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	$	55,491		$	(15,085	)	$	65,342		$	(17,817	)	$	77,002		$	(30,641	)	$	65,342		$	(17,817	)
Gross amounts not offset in the Condensed Consolidated Statements of Financial Condition
Offsetting derivative positions		(1,281	)		1,281			(43	)		43			(1,639	)		1,639			(43	)		43
Collateral posted		(54,210	)		—			(64,370	)		0			(75,363	)		—			(64,370	)		—
Net credit exposure	$	—		$	(13,804	)	$	929		$	(17,774	)	$	—		$	(29,002	)	$	929		$	(17,774	)

As of ~~March 31,~~September 30, 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 $~~15.1~~$30.6 million. If the Company had breached any of these provisions at ~~March 31,~~September 30, 2023, it could have been required to settle its obligations under the agreements at their

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

termination value less offsetting positions of $~~1.3~~$1.6 million. For purposes of this disclosure, the amount of posted collateral by the Company and counterparties is limited to the amount offsetting the derivative asset and derivative liability.

~~BYLINE BANCORP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

Note 1617 – 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 ~~March 31,~~September 30, 2023, there were ~~143,578~~1,180,903 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 2023, the Company granted ~~273,152~~299,197 shares of restricted common stock, par value $~~0.01~~$0.01 per share. Of this total, 6,113 restricted shares will vest in ~~201,569~~one year, 206,414 restricted shares will vest ratably over three years on each anniversary of the grant date, ~~20,201~~and 35,288 restricted shares will cliff vest on the third anniversary of the grant date, all subject to continued employment. In addition, 51,382 performance-based shares were granted. The number of performance-based shares which may be earned under the award is dependent upon the Company's total stockholder return and return on average assets, weighted equally, over a three-year period ending December 31, 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 ~~three~~nine months ended ~~March 31,~~September 30, 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, 2023		581,337		$	22.93		581,337		$	22.93
Granted		273,152			24.90		299,197			24.42
Incremental performance shares vested		1,826					1,826
Vested		(160,720	)		21.64		(191,277	)		21.44
Forfeited		(2,491	)		24.04		(15,861	)		23.96
Ending balance outstanding at March 31, 2023		693,104		$	23.98
Ending balance outstanding at September 30, 2023							675,222		$	23.97

A total of ~~160,720~~191,277 restricted shares vested during the ~~three~~nine months ended ~~March 31,~~September 30, 2023. A total of ~~234,603~~243,603 restricted shares vested during the year ended December 31, 2022. The fair value of restricted shares that vested during the ~~three~~nine months ended ~~March 31,~~September 30, 2023 was $~~4.0~~$4.6 million. The fair value of restricted shares that vested during the year ended December 31, 2022 was $~~5.9~~$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~~%38.11% and ~~39.80~~%39.80%, a risk-free rate of ~~4.42~~%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~~$25.20 per share. Share-based compensation expense is included in non-interest expense in the Condensed Consolidated Statements of Operations.

3944

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 ~~three~~nine months ended ~~March 31,~~September 30, 2023 and 2022:

Three Months Ended March 31,

2023

2022

Total share-based compensation - restricted stock

$
1,510

$
1,264

Income tax benefit

406

343

Unrecognized compensation expense

14,416

13,525

Weighted-average amortization period remaining

2.5 years

2.9 years


	Nine Months Ended September 30,
	2023		2022
Total share-based compensation - restricted stock	$	4,922	$	4,016
Income tax benefit		1,322		1,139
Unrecognized compensation expense		11,189		10,479
Weighted average remaining amortization period	2.1 years		2.5 years

The fair value of the unvested restricted stock awards at ~~March 31,~~September 30, 2023 was $~~15.0~~$13.3 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~~ ~~768,564~~ ~~shares remain outstanding under the BYB Plan at March 31, 2023.~~

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 March 31, 2023.~~

~~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 three months ended March 31, 2023:~~

BYB Plan

Number of Shares

Weighted Average Exercise Price

Intrinsic
Value

Weighted Average Remaining Contractual Term (in Years)

Beginning balance, January 1, 2023

768,564

$
11.31

$
8,960

2.5

Exercised

—

Expired

—

Ending balance outstanding at March 31, 2023

768,564

$
11.31

$
7,922

2.2

Exercisable at March 31, 2023

768,564

$
11.31

$
7,922

$
2.2

No ~~stock options were exercised during the three months ended March 31, 2023. A total of~~ ~~568,484~~ ~~stock options were exercised during the year ended December 31, 2022, with proceeds of $470,000~~ ~~and a related tax benefit of $2.3~~ ~~million.~~ No ~~stock options vested during the three months ended March 31, 2023.~~

~~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 months ended March 31, 2023 or 2022. There was~~ no ~~unrecognized stock option compensation expenses as of March 31, 2023.~~

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 three months ended March 31, 2023:~~

FEB Plan

Number of Shares

Weighted Average Exercise Price

Intrinsic
Value

Weighted Average Remaining Contractual Term (in Years)

Beginning balance, January 1, 2023

162,288

$
11.66

$
1,836

2.5

Exercised

—

Expired

—

Ending balance outstanding at March 31, 2023

162,288

$
11.66

$
1,617

2.2

Exercisable at March 31, 2023

162,288

$
11.66

$
1,617

2.2

No ~~stock options were exercised during the three months ended March 31, 2023. A total of~~ ~~7,559~~ ~~stock options were exercised during the year ended December 31, 2022, proceeds of which were $80,000~~ ~~and a related tax benefit of $25,000~~. No ~~stock options vested during the three months ended March 31, 2023.~~

~~BYLINE BANCORP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

Note ~~17—~~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 ~~930,852~~901,086 and ~~1,251,251~~986,757 shares of common stock were outstanding as of ~~March 31,~~September 30, 2023 and 2022, respectively. There were ~~693,104~~675,222 and ~~756,457~~628,5423 restricted stock awards outstanding at ~~March 31,~~September 30, 2023 and 2022, respectively. For the three and nine months ended ~~March 31,~~September 30, 2023 and 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 March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022		2023		2022
Net income	$	23,945	$	22,311	$	28,222	$	22,656	$	78,274	$	65,250
Less: Dividends on preferred shares		—		196		—		—		—		196
Net income available to common stockholders	$	23,945	$	22,115	$	28,222	$	22,656	$	78,274	$	65,054
Weighted-average common stock outstanding:
Weighted-average common stock outstanding (basic)		36,955,085		37,123,161		43,025,927		36,851,973		39,027,450		37,012,316
Incremental shares		584,827		919,661		432,183		519,186		435,402		569,550
Weighted-average common stock outstanding (dilutive)		37,539,912		38,042,822		43,458,110		37,371,159		39,462,852		37,581,866
Basic earnings per common share	$	0.65	$	0.60	$	0.66	$	0.61	$	2.01	$	1.76
Diluted earnings per common share	$	0.64	$	0.58	$	0.65	$	0.61	$	1.98	$	1.73

Note ~~18—~~19—Stockholders’ Equity

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


	March 31,		December 31,		September 30,		December 31,
	2023		2022		2023		2022
Preferred stock
Par value	$	0.01	$	0.01	$	0.01	$	0.01
Shares authorized		25,000,000		25,000,000		25,000,000		25,000,000
Shares issued		—		—		—		—
Shares outstanding		—		—		—		—
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		39,728,037		39,518,702		45,694,456		39,518,702
Shares outstanding		37,713,427		37,492,775		43,719,203		37,492,775
Treasury shares		2,014,610		2,025,927		1,975,253		2,025,927

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

During 2016, the Company authorized and issued Series B ~~7.50~~%7.50% fixed-to-floating non-voting, noncumulative perpetual preferred stock with a liquidation preference of $1,000 per share, plus the amount of unpaid dividends, if any, which 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~~%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 Designations, the per share redemption price was the liquidation preference of $~~1,000~~$1,000 per share plus an amount equal to any declared and unpaid dividends thereon for any prior dividend period and totaled $~~10.6~~$10.6 million.

For the ~~three~~nine months ended ~~March 31,~~September 30, 2022, we declared and paid dividends on the Series B preferred stock of $~~196,000~~.

~~BYLINE BANCORP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

$196,000.

On December 10, 2020, we announced that our Board of Directors approved a stock repurchase program authorizing the purchase of up to an aggregate of 1,250,000 shares of our outstanding common stock, and on July 27, 2021, our Board of Directors authorized an expansion of the stock repurchase program. Under the extended program, we were authorized to repurchase an additional 1,250,000 shares of 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. 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 management at its discretion and will depend on a number of factors, including the market price of our stock, general market and economic conditions and applicable legal requirements.

We did notnot purchase any shares under the stock repurchase program during the three or nine months ended ~~March 31,~~September 30, 2023. We purchased ~~282,819~~174,249 shares at a cost of $~~7.6~~$4.2 million under this program during the three months ended ~~March 31,~~September 30, 2022. We purchased 689,068 shares at a cost of $17.3 million under this program during the nine months ended September 30, 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 ~~March 31,~~September 30, 2023 and 2022, cash dividends were declared and paid to stockholders of record of ~~the Company's~~our common stock of $~~0.09~~$0.09 per ~~share, respectively.~~share. For the nine months ended September 30, 2023 and 2022, cash dividends were declared and paid to stockholders of record of our common stock of $0.27 per share.

On ~~April 25,~~July 1, 2023, ~~the Company’s~~we issued 5,932,323 of shares of our common stock in connection with our acquisition of Inland. Please see Note 3—Acquisition of a Business for more information.

On October 24, 2023, our Board of Directors declared a cash dividend of $~~0.09~~$0.09 per share payable on~~May 23,~~ November 21, 2023 to stockholders of record of ~~the Company’s~~our common stock as of ~~May 9,~~November 7, 2023.

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Note ~~19—~~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 ~~three~~nine months ended ~~March 31,~~September 30, 2023 and 2022:


(dollars in thousands)	Unrealized Gains (Losses) on Cash Flow Hedges			Unrealized Gains (Losses) on Available-for-Sale Securities			Total Accumulated Other Comprehensive Loss			Unrealized Gains on Cash Flow Hedges		Unrealized Losses on Available-for-Sale Securities			Total Accumulated Other Comprehensive Income (Loss)
Balance, January 1, 2022	$	2,817		$	(11,119	)	$	(8,302	)	$	2,817	$	(11,119	)	$	(8,302	)
Other comprehensive income (loss), net of tax		13,010			(61,096	)		(48,086	)		32,850		(149,446	)		(116,596	)
Balance, March 31, 2022	$	15,827		$	(72,215	)	$	(56,388	)
Balance, September 30, 2022										$	35,667	$	(160,565	)	$	(124,898	)

Balance, January 1, 2023	$	34,315		$	(151,865	)	$	(117,550	)	$	34,315	$	(151,865	)	$	(117,550	)
Other comprehensive income (loss), net of tax		(1,291	)		10,699			9,408			2,181		(26,790	)		(24,609	)
Balance, March 31, 2023	$	33,024		$	(141,166	)	$	(108,142	)
Balance, September 30, 2023										$	36,496	$	(178,655	)	$	(142,159	)

4347

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 credit losses - loans and 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 credit losses - loans and 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 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;

•

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, 2022, that was filed with the SEC on March 7, 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, Michigan, New Jersey, and New York. We participate in U.S. government guaranteed lending programs and originate U.S. government guaranteed loans. Byline Bank is a leading originator of Small Business Administration (“SBA”) loans ~~as of March 31,~~and was the fifth most active SBA lender in the country and was the most active 7(a) and 504 lender in Illinois for the fiscal year ended September 30, 2023.

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 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 ~~$23.9~~$28.2 million and $78.3 million for the three and nine months ended ~~March 31,~~September 30, 2023, compared to net income of ~~$22.3~~$22.7 million and $65.2 million for the three and nine months ended ~~March 31,~~September 30, 2022, an increase of ~~$1.6 million.~~$5.6 million and $13.0 million, respectively, for each comparable period. The increase in net income was attributable to ~~higher~~a $23.6 million and $55.1 million increase in net interest ~~income, offset by higher non-interest expense and lower non-interest~~ income. The increase in net interest income during the three and nine months ended September 30, 2023 was primarily driven by higher yields on loans and leases, and growth in the loan and lease portfolio. The increase in non-interest expense was primarily driven by increase loan and lease related expenses and increases in salaries and employee benefits. The decrease in non-interest income was primarily driven by decreases in net gains on sales of loans, due to lower volume of loans sold.

Dividends declared and paid on preferred shares were $196,000 for the ~~three~~nine months ended ~~March 31,~~September 30, 2022. Dividends declared on common shares were $3.9 million and $3.4 million for ~~each of~~the three months ended ~~March 31,~~September 30, 2023 and 2022, respectively. Dividends paid on common shares were $4.1 million and $3.3 million for ~~each of~~the three months ended ~~March 31,~~September 30, 2023 and 2022, respectively. Dividends declared on common shares were $10.7 million and $10.2 million for the nine months ended September 30, 2023 and 2022, respectively.

Dividends paid on common shares were $10.7 million and $10.1 million for the nine months ended September 30, 2023 and 2022, respectively.

For the three months ended ~~March 31,~~September 30, 2023 and 2022, net income available to common stockholders was ~~$23.9~~$28.2 million, or ~~$0.65~~$0.66 per basic and ~~$0.64~~$0.65 per diluted common share, and ~~$22.1~~$22.7 million, or ~~$0.60~~$0.61 per basic and ~~$0.58~~diluted common share, respectively. For the nine months ended September 30, 2023 and 2022, net income available to common stockholders was $78.3 million, or $2.01 per basic and $1.98 per diluted common share, and $65.1 million, or $1.76 per basic and $1.73 per diluted common share, respectively.

Our results of operations for the three months ended ~~March 31,~~September 30, 2023 and 2022 yielded an annual return on average assets of ~~1.32%~~1.30% and ~~1.35%~~1.26% and a return on average stockholders’ equity of ~~12.38%~~12.11% and ~~10.87%~~11.74% respectively. Our results of operations for the nine months ended September 30, 2023 and 2022 yielded an annual return on average assets of 1.34% and 1.26% and a return on average stockholders’ equity of 12.48% and 10.96%, respectively.

As of ~~March 31,~~September 30, 2023, we had consolidated total assets of ~~$7.5~~$8.9 billion, total gross loans and leases outstanding of ~~$5.5~~$6.6 billion, total deposits of ~~$5.8~~$7.0 billion, and total stockholders’ equity of ~~$795.7~~$919.9 million.

Inland Bancorp, Inc. ~~Merger~~Acquisition

On ~~November 30, 2022~~July 1, 2023, we ~~announced the execution of an Agreement and Plan of Merger in connection with a proposed~~completed our acquisition of Inland Bancorp, Inc., ("Inland") under the terms of a ~~Maryland corporation ("Inland Bancorp"), and Inland Bancorp's~~definitive merger agreement. As a result of the merger, Inland's wholly owned bank subsidiary, Inland Bank and Trust, ~~an Illinois chartered bank. As~~was merged with and into Byline Bank. Refer to Note 3—Acquisition of ~~March 31,~~a Business of our Unaudited Interim Condensed Financial Statements as of September 30, 2023, ~~Inland Bancorp had $1.2 billion~~which is included in total assets, $881.8 million of loans, and $967.4 million of total deposits. The consideration to be paid by the Company will consist of approximately $22.9 million in cash with the remainder in shares of Byline common stock (currently estimated at approximately 6.4 million shares). We have received all required approvals and the merger is expected to close on or about June 1, 2023.this report, 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 judgments inherent in those policies, are critical in understanding our financial statements.

These critical accounting policies and estimates include (i) acquisition-related fair value computations, (ii) the carrying value of loans and leases, ~~(ii)~~(iii) determining the provision and allowance for credit losses, ~~(iii)~~(iv) the valuation of intangible assets such as goodwill, servicing assets and core deposit intangibles, ~~(iv)~~(v) the determination of fair value for financial instruments and ~~(v)~~(vi) the valuation of or recognition of deferred tax assets and liabilities.

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

46Business 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 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. 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 credit losses, unamortized deferred fees and costs, and unamortized premiums or discounts. The net amount of nonrefundable loan origination fees and certain direct costs associated with the 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 loan reaches its contractual maturity date, it is re-underwritten, and if renewed, it is classified as an originated loan.

Purchased credit deteriorated loans and 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, the difference between the fair value and unpaid principal balance of the loan at the acquisition 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 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 credit losses that must be recorded at the acquisition date. As a result, an allowance for credit losses is determined at the acquisition date using the same methodology as other loans held for investment and is recognized as a provision for credit losses in the consolidated statements of operations. Any subsequent deterioration (improvement) in credit quality is recognized by recording a provision (recapture) for credit losses.

Provision and allowance for credit losses

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

The ACL is maintained at a level that management believes is appropriate to provide for current expected credit losses as of the dates of the 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 relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. We increase our ACL by recording provisions for 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 ACL is maintained at a level management believes is sufficient to provide for current expected credit losses based upon an ongoing review of the loan and lease portfolios by portfolio category, which 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 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 45 of our Unaudited Interim Condensed Consolidated Financial Statements as of ~~March 31,~~September 30, 2023, included in this report.

For 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 applied to the amortized cost of the loan or lease. This methodology builds on default and loss probabilities by utilizing pool-specific historical loss rates to calculate expected 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 relevancy of historical loss information and considers any necessary adjustments to address any differences in asset-specific characteristics.

The lifetime loss rates are estimated by analyzing a combination of internal and 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 and leases and originated loans and leases of $500,000 or greater with an internal risk rating of substandard or below, or on nonaccrual, as well as loans classified as ~~TDR,~~Troubled Debt Restructurings, are reviewed individually for impairment on a quarterly basis.

The 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 56 and Note 1415 of our Unaudited Interim Condensed Consolidated Financial Statements as of ~~March 31,~~September 30, 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 1415 of our Unaudited Interim Condensed Consolidated Financial Statements as of ~~March 31,~~September 30, 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.

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.

4952

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 11 of the notes to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 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 ~~March 31,~~September 30, 2023, which ~~are~~is 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 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‑credit-deteriorated and purchased credit deteriorated loans.

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.

5053

Selected Financial Data


	As of or for the Three Months Ended						As of or for the Three Months Ended						As of or For the Nine Months Ended
	March 31,						September 30,						September 30,
(dollars in thousands, except share and per share data)	2023			2022			2023			2022			2023			2022
Summary of Operations
Common Share Data
Basic earnings per common share	$	0.65		$	0.60		$	0.66		$	0.61		$	2.01		$	1.76
Diluted earnings per common share	$	0.64		$	0.58		$	0.65		$	0.61		$	1.98		$	1.73
Adjusted diluted earnings per share(1)(3)	$	0.65		$	0.58		$	0.77		$	0.61		$	2.15		$	1.73
Weighted-average common shares outstanding (basic)		36,955,085			37,123,161			43,025,927			36,851,973			39,027,450			37,012,316
Weighted-average common shares outstanding (diluted)		37,539,912			38,042,822			43,458,110			37,371,159			39,462,852			37,581,866
Common shares outstanding		37,713,427			37,811,582			43,719,203			37,465,902			43,719,203			37,465,902
Cash dividends per common share	$	0.09		$	0.09		$	0.09		$	0.09		$	0.27		$	0.27
Dividend payout ratio on common stock		14.06	%		15.52	%		13.85	%		14.75	%		13.64	%		15.61	%
Book value per common share							$	21.04		$	19.95		$	21.04		$	19.95
Tangible book value per common share(1)	$	16.92		$	16.52		$	16.35		$	15.67		$	16.35		$	15.67
Key Ratios and Performance Metrics (annualized where applicable)
Net interest margin								4.46	%		4.04	%		4.39	%		3.87	%
Net interest margin, fully taxable equivalent (1)(4)		4.39	%		3.82	%		4.47	%		4.05	%		4.40	%		3.88	%
Average cost of deposits		1.15	%		0.08	%		2.13	%		0.43	%		1.70	%		0.22	%
Efficiency ratio(2)		52.10	%		54.96	%		53.75	%		55.11	%		52.96	%		55.12	%
Adjusted efficiency ratio(1)(2)(3)		51.54	%		54.96	%		47.35	%		55.11	%		49.96	%		55.12	%
Non-interest income to total revenues(1)								11.81	%		14.83	%		14.61	%		19.41	%
Non-interest expense to average assets		2.69	%		2.69	%		2.66	%		2.56	%		2.67	%		2.59	%
Adjusted non-interest expense to average assets(1)(3)		2.67	%		2.69	%		2.35	%		2.56	%		2.53	%		2.59	%
Return on average stockholders' equity		12.38	%		10.87	%		12.11	%		11.59	%		12.48	%		10.96	%
Adjusted return on average stockholders' equity(1)(3)		12.62	%		10.87	%		14.30	%		11.59	%		13.54	%		10.96	%
Return on average assets		1.32	%		1.35	%		1.30	%		1.26	%		1.34	%		1.26	%
Adjusted return on average assets(1)(3)		1.35	%		1.35	%		1.53	%		1.26	%		1.46	%		1.26	%
Non-interest income to total revenues(1)		16.67	%		24.85	%
Pre-tax pre-provision return on average assets(1)		2.32	%		2.03	%		2.16	%		1.93	%		2.23	%		1.93	%
Adjusted pre-tax pre-provision return on average assets(1)		2.35	%		2.03	%
Adjusted pre-tax pre-provision return on average assets(1)(3)								2.46	%		1.93	%		2.38	%		1.93	%
Return on average tangible common stockholders' equity(1)		16.20	%		14.36	%		16.15	%		15.40	%		16.37	%		14.60	%
Adjusted return on average tangible common stockholders' equity(1)(3)		16.49	%		14.36	%		18.95	%		15.40	%		17.72	%		14.60	%
Non-interest-bearing deposits to total deposits		33.58	%		41.26	%		28.18	%		38.17	%		28.18	%		38.17	%
Loans and leases held for sale and loans and leases held for investment to total deposits		95.37	%		87.31	%		95.21	%		94.60	%		95.21	%		94.60	%
Deposits to total liabilities		86.31	%		91.47	%		86.67	%		85.95	%		86.67	%		85.95	%
Deposits per branch	$	152,965		$	125,684		$	144,869		$	147,696		$	144,869		$	147,696
Asset Quality Ratios
Non-performing loans and leases to total loans and leases held for investment		0.84	%		0.42	%		0.79	%		0.67	%		0.79	%		0.67	%
ACL to total loans and leases held for investment, net before ACL		1.64	%		1.24	%		1.60	%		1.23	%		1.60	%		1.23	%
Net charge-offs to average total loans and leases held for investment, net before ACL - loans and leases		0.09	%		0.05	%		0.33	%		0.15	%		0.25	%		0.15	%
Capital Ratios
Common equity to total assets		10.57	%		11.54	%		10.29	%		10.27	%		10.29	%		10.27	%
Tangible common equity to tangible assets(1)		8.66	%		9.36	%		8.18	%		8.25	%		8.18	%		8.25	%
Leverage ratio		10.46	%		10.70	%		10.75	%		10.30	%		10.75	%		10.30	%
Common equity tier 1 capital ratio		10.27	%		10.75	%		10.08	%		10.24	%		10.08	%		10.24	%
Tier 1 capital ratio		10.90	%		11.49	%		11.12	%		10.91	%		11.12	%		10.91	%
Total capital ratio		13.19	%		13.72	%		13.17	%		13.02	%		13.17	%		13.02	%

(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 and ~~merger-related expenses.~~

ROU assets.

(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%.

5154

We reported consolidated net income of ~~$23.9~~$28.2 million for the three months ended ~~March 31,~~September 30, 2023 compared to net income of ~~$22.3~~$22.7 million for the three months ended ~~March 31,~~September 30, 2022, an increase of ~~$1.6~~$5.6 million. The increase in net income was primarily attributable to a ~~$17.0~~$23.6 million increase in net interest income, offset by ~~a $4.2 million~~an increase in non-interest expense of $11.7 million and ~~a $4.3 million decrease~~an increase in ~~non-interest income.~~the provision for credit losses of $4.6 million.

The increase in net interest income during the three months ended ~~March 31,~~September 30, 2023 was mainly a result of loans acquired and higher yields, partially offset by an increase in interest expense due to deposits assumed and higher rates on deposits. The increase in non-interest expense was primarily due to increases in salaries and employee benefits, legal, audit and other professional fees, and data processing. The increase in the provision for credit losses was due to acquired non-credit-deteriorated loans resulting from acquisition accounting.

Net income available to common stockholders was $28.2 million, or $0.66 per basic and $0.65 per diluted common share, for the three months ended September 30, 2023 compared to $22.7 million, or $0.61 per basic and diluted common share, for the three months ended September 30, 2022.

Our annualized return on average assets was 1.30% for the three months ended September 30, 2023 compared to 1.26% for the three months ended September 30, 2022. Our annualized return on average stockholders’ equity was 12.11% for the three months ended September 30, 2023 compared to 11.59% for the three months ended September 30, 2022. Our efficiency ratio was 53.75% for the three months ended September 30, 2023 compared to 55.11% for the three months ended September 30, 2022.

We reported consolidated net income of $78.3 million for the nine months ended September 30, 2023 compared to net income of $65.2 million for the nine months ended September 30, 2022, an increase of $13.0 million. The increase in net income was primarily attributable to a $55.1 million increase in net interest income, offset by a $21.5 million increase in non-interest expense, a $7.5 million increase in the provision for income taxes, a $9.4 million increase in the provision for credit losses, and a $4.2 million decrease in non-interest income.

The increase in net interest income during the nine months ended September 30, 2023 was mainly a result of higher yields on loans and leases and increased average ~~loan and leases~~ balances. The increase in non-interest expense was mostly due to an increase in salaries and employee benefits, data processing, and legal, audit and other professional fees. The increase in provision for credit losses was mainly ~~a result of increased~~attributable to acquired non-credit-deteriorated loans resulting from acquisition accounting, increases in specific reserves on individually evaluated loans, and loan and lease ~~related expenses, and~~portfolio growth. The increase in provision for income taxes was due to higher ~~salaries and employee benefits.~~income before taxes. The decrease in non-interest income was ~~principally driven by lower new~~primarily due to decrease in net gains on sales of loans due to lower volume ~~of loans sold.~~and average premiums.

Net income available to common stockholders was ~~$23.9~~$78.3 million, or ~~$0.65~~$2.01 per basic and ~~$0.64~~$1.98 per diluted common share, for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 compared to ~~$22.1~~$65.1 million, or ~~$0.60~~$1.76 per basic and ~~$0.58~~$1.73 per diluted common share, for the ~~three~~nine months ended ~~March 31,~~September 30, 2022. Dividends on preferred shares were $196,000 for the ~~three~~nine months ended ~~March 31,~~September 30, 2022.

Our annualized return on average assets was ~~1.32%~~1.34% for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 compared to ~~1.35%~~1.26% for the ~~three~~nine months ended ~~March 31,~~September 30, 2022. Our annualized return on average stockholders’ equity was ~~12.38%~~12.48% for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 compared to ~~10.87%~~10.96% for the ~~three~~nine months ended ~~March 31,~~September 30, 2022. Our efficiency ratio was ~~52.10%~~52.96% for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 compared to ~~54.96%~~55.12% for the ~~three~~nine months ended ~~March 31,~~September 30, 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 ~~notes,~~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 acquisitions, we derive a portion of our interest income from the accretable discounts on ~~purchased~~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 ~~March 31,~~September 30, 2023, purchased credit deteriorated loans accounted for under ASC Topic 326 represented ~~1.3%~~3.8% of our total loan and lease portfolio compared to 1.4% at December 31, 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.

5255

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 March 31,																Three Months Ended September 30,
	2023								2022								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	$	97,578		$	442		1.84	%	$	74,822		$	29		0.16	%	$	195,019		$	1,724		3.51	%	$	77,522		$	210		1.08	%
Loans and leases(1)		5,484,372			92,343		6.83	%		4,670,070			55,426		4.81	%		6,484,875			125,465		7.68	%		5,218,135			72,824		5.54	%
Taxable securities		1,275,377			6,431		2.04	%		1,339,345			5,475		1.66	%		1,371,979			8,465		2.45	%		1,302,375			6,014		1.83	%
Tax-exempt securities(2)		151,817			994		2.65	%		169,652			1,124		2.69	%		168,805			1,184		2.78	%		162,591			1,083		2.64	%
Total interest-earning assets	$	7,009,144		$	100,210		5.80	%	$	6,253,889		$	62,054		4.02	%	$	8,220,678		$	136,838		6.60	%	$	6,760,623		$	80,131		4.70	%
Allowance for credit losses - loans and leases		(84,321	)							(55,885	)							(108,315	)							(62,733	)
All other assets		420,328								507,982								521,982								447,299
TOTAL ASSETS	$	7,345,151							$	6,705,986							$	8,634,345							$	7,145,189
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits
Interest checking	$	606,008		$	2,494		1.67	%		579,297		$	178		0.12	%	$	579,917		$	2,208		1.51	%	$	583,777		$	1,077		0.73	%
Money market accounts		1,465,677			7,728		2.14	%		1,255,431			474		0.15	%		2,040,476			16,676		3.24	%		1,391,923			3,358		0.96	%
Savings		613,590			227		0.15	%		649,269			76		0.05	%		594,555			228		0.15	%		673,966			247		0.15	%
Time deposits		966,409			5,849		2.45	%		662,080			359		0.22	%		1,706,531			18,051		4.20	%		687,124			1,289		0.74	%
Total interest-bearing deposits		3,651,684			16,298		1.81	%		3,146,077			1,087		0.14	%		4,921,479			37,163		3.00	%		3,336,790			5,971		0.71	%
Other borrowings		573,433			5,852		4.14	%		290,545			395		0.55	%		463,561			3,981		3.41	%		607,471			3,232		2.11	%
Federal funds purchased		2,778			36		5.30	%		—			—		0.00	%
Subordinated notes and debentures		111,101			2,098		7.66	%		110,490			1,600		5.87	%		144,171			2,994		8.24	%		110,799			1,825		6.54	%
Total borrowings		687,312			7,986		4.71	%		401,035			1,995		2.02	%		607,732			6,975		4.55	%		718,270			5,057		2.79	%
Total interest-bearing liabilities	$	4,338,996		$	24,284		2.27	%	$	3,547,112		$	3,082		0.35	%	$	5,529,211		$	44,138		3.17	%	$	4,055,060		$	11,028		1.08	%
Non-interest-bearing demand deposits		2,076,613								2,248,035								1,987,996								2,198,095
Other liabilities		145,253								78,678								192,860								116,676
Total stockholders’ equity		784,289								832,161								924,278								775,358
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	7,345,151							$	6,705,986							$	8,634,345							$	7,145,189
Net interest spread(3)							3.53	%							3.67	%							3.43	%							3.62	%
Net interest income, fully taxable equivalent				$	75,926							$	58,972							$	92,700							$	69,103
Net interest margin, fully taxable equivalent(2)(4)							4.39	%							3.82	%							4.47	%							4.05	%
Reconciliation to reported net interest income:
Less: Tax-equivalent adjustment					208		0.01	%					236		0.01	%					248		0.01	%					228		0.01	%
Net interest income				$	75,718							$	58,736							$	92,452							$	68,875
Net interest margin(4)							4.38	%							3.81	%							4.46	%							4.04	%

Net loan accretion impact on margin				$	729		0.04	%				$	1,476		0.10	%				$	10,276		0.50	%				$	1,559		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)

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.

5356


	For the Nine Months Ended September 30,
	2023								2022
	Average Balance(5)			Interest Inc / Exp		Average Yield / Rate			Average Balance(5)			Interest Inc / Exp		Average Yield / Rate
ASSETS
Cash and cash equivalents	$	142,890		$	3,207		3.00	%	$	72,802		$	313		0.58	%
Loans and leases(1)		5,838,611			316,942		7.26	%		4,967,769			187,924		5.06	%
Taxable securities		1,299,732			21,220		2.18	%		1,323,838			17,393		1.76	%
Tax-exempt securities(2)		157,338			3,158		2.68	%		166,911			3,338		2.67	%
Total interest-earning assets	$	7,438,571		$	344,527		6.19	%	$	6,531,320		$	208,968		4.28	%
Allowance for credit losses - loans and leases		(95,234	)							(59,526	)
All other assets		455,850								472,115
TOTAL ASSETS	$	7,799,187							$	6,943,909
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits
Interest checking	$	575,558		$	6,877		1.60	%	$	592,985		$	1,670		0.38	%
Money market accounts		1,682,311			35,203		2.80	%		1,318,725			5,026		0.51	%
Savings		594,396			675		0.15	%		662,820			406		0.08	%
Time deposits		1,336,584			35,429		3.54	%		658,893			2,084		0.42	%
Total interest-bearing deposits		4,188,849			78,184		2.50	%		3,233,423			9,186		0.38	%
Other borrowings		515,068			14,074		3.65	%		466,194			4,710		1.35	%
Federal funds purchased		916			36		5.30	%		842			14		2.32	%
Subordinated notes and debentures		122,296			7,234		7.91	%		110,648			5,119		6.19	%
Total borrowings		638,280			21,344		4.47	%		577,684			9,843		2.28	%
Total interest-bearing liabilities	$	4,827,129		$	99,528		2.76	%	$	3,811,107		$	19,029		0.67	%
Non-interest-bearing demand deposits		1,970,724								2,237,002
Other liabilities		162,542								99,951
Total stockholders’ equity		838,792								795,849
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	7,799,187							$	6,943,909
Net interest spread(3)							3.43	%							3.61	%
Net interest income, fully taxable equivalent				$	244,999							$	189,939
Net interest margin, fully taxable equivalent(2)(4)							4.40	%							3.88	%
Reconciliation to reported net interest income:
Less: Tax-equivalent adjustment					663		0.01	%					701		0.01	%
Net interest income				$	244,336							$	189,238
Net interest margin(4)							4.39	%							3.87	%

Net loan accretion impact on margin				$	11,616		0.21	%				$	4,418		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.

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


										Three Months Ended September 30, 2023
	Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022									Compared to Three Months Ended September 30, 2022
	Increase (Decrease) Due to									Increase (Decrease) Due to
	Volume			Rate			Total			Volume			Rate		Total
Interest income
Cash and cash equivalents	$	103		$	310		$	413		$	1,039		$	475	$	1,514
Loans and leases(1)		13,656			23,261			36,917			24,495			28,146		52,641
Taxable securities		(299	)		1,255			956			416			2,035		2,451
Tax-exempt securities		(113	)		(17	)		(130	)		44			57		101
Total interest income	$	13,347		$	24,809		$	38,156		$	25,994		$	30,713	$	56,707
Interest expense
Deposits
Interest checking	$	102		$	2,214		$	2,316		$	(17	)	$	1,148	$	1,131
Money market accounts		1,094			6,160			7,254			5,319			7,999		13,318
Savings		(9	)		160			151			(19	)		—		(19	)
Time deposits		1,849			3,641			5,490			10,770			5,992		16,762
Total interest-bearing deposits		3,036			12,175			15,211			16,053			15,139		31,192
Other borrowings		2,885			2,572			5,457			(1,236	)		1,985		749
Federal funds purchased		36			—			36
Subordinated notes and debentures		10			488			498			693			476		1,169
Total borrowings		2,931			3,060			5,991			(543	)		2,461		1,918
Total interest expense	$	5,967		$	15,235		$	21,202		$	15,510		$	17,600	$	33,110
Net interest income, fully taxable equivalent	$	7,380		$	9,574		$	16,954		$	10,484		$	13,113	$	23,597

(1)

Includes loans and leases on non-accrual status.


	Nine Months Ended September 30, 2023
	Compared to Nine Months Ended September 30, 2022
	Increase (Decrease) Due to
	Volume			Rate		Total
Interest income
Cash and cash equivalents	$	1,576		$	1,318	$	2,894
Loans and leases(1)		47,274			81,744		129,018
Taxable securities		(332	)		4,159		3,827
Tax-exempt securities		(192	)		12		(180	)
Total interest income	$	48,326		$	87,233	$	135,559
Interest expense
Deposits
Interest checking	$	(204	)	$	5,411	$	5,207
Money market accounts		7,590			22,587		30,177
Savings		(78	)		347		269
Time deposits		17,969			15,376		33,345
Total interest-bearing deposits		25,277			43,721		68,998
Other borrowings		1,333			8,031		9,364
Federal funds purchased		3			19		22
Subordinated notes and debentures		693			1,422		2,115
Total borrowings		2,029			9,472		11,501
Total interest expense	$	27,306		$	53,193	$	80,499
Net interest income, fully taxable equivalent	$	21,020		$	34,040	$	55,060

(1)

Includes loans and leases on non-accrual status.

Net interest income for the three months ended ~~March 31,~~September 30, 2023 was ~~$75.7~~$92.5 million compared to ~~$58.7~~$68.9 million during the same period in 2022, an increase of ~~$17.0~~$23.6 million, or ~~28.9%~~34.2%. Interest income increased ~~$38.2~~$56.7 million ~~or 61.8%,~~ for the three months ended ~~March 31,~~September 30, 2023 compared to the same period in 2022 primarily a result of higher yields and increased average balances on loans and leases ~~and growth in the loan and lease portfolio.~~due to acquired loans. Interest expense increased by ~~$21.2~~$33.1 million for the three months ended ~~March 31,~~September 30, 2023 compared to the same period in 2022 mostly due to ~~higher~~increases in the average rates paid on ~~interest-bearing~~ deposits, change in deposit mix, and growth of deposits from assumed deposits.

Net interest income for the nine months ended September 30, 2023 was $244.3 million compared to $189.2 million during the same period in 2022, an increase of $55.1 million, or 29.1%. Interest income increased $135.6 million for nine months ended September 30, 2023 compared to the same period in 2022 primarily a result of higher yields and increased average balance on loans and leases from acquired loans. Interest expense increased by $80.5 million for the nine months ended September 30, 2023 compared to the same period in 2022 mostly due to increases in the average ~~balance~~rates paid on deposits, change in deposit mix, and growth of deposits ~~and other borrowings.~~from assumed deposits.

The net interest margin for the three months ended ~~March 31,~~September 30, 2023 was ~~4.38%~~4.46%, an increase of 5742 basis points compared to ~~3.81%~~4.04% for the three months ended ~~March 31,~~September 30, 2022. The net interest margin for the nine months ended September 30, 2023 and 2022 was 4.39% and 3.87%, respectively. The primary drivers of the ~~increase for the three month~~increases in each period was ~~increased~~the increase yields ~~on loans and leases~~ due to the rising interest rate environment, and ~~increases~~the increase in average interest earning assets driven by the ~~average balances of interest-earning assets.~~

acquisition.

Net loan accretion income was ~~$729,000 for the three months ended March 31, 2023 and $1.5~~$10.3 million for the three months ended ~~March 31,~~September 30, 2023 compared to $1.6 million for the three months ended September 30, 2022, ~~a decrease~~an increase of ~~$747,000,~~$8.7 million, or ~~50.6%~~559.1%. Net loan accretion income was $11.6 million for the nine months ended September 30, 2023 compared to $4.4 million for the nine months ended September 30, 2022, an increase of $7.2 million or 162.9%. Total net loan accretion on acquired loans contributed ~~four~~50 basis points to the net interest margin for the three months ended ~~March 31,~~September 30, 2023 compared to 10nine basis points for the three months ended ~~March 31,~~September 30, 2022. Total net loan accretion on acquired loans contributed 21 basis points to the net interest margin for the nine months ended September 30, 2023 compared to nine basis points for the nine months ended September 30, 2022. We expected loan accretion income to decline and projected accretion income as of September 30, 2023 is summarized as follows:


	Estimated Projected Accretion(1)(2)
2023	$	3,899
2024		10,674
2025		6,240
2026		4,586
2027		2,881
Thereafter		11,220
Total	$	39,500

(1) Estimated projected accretion excludes contractual interest income on ASC 326-20 loans.

(2) Projections are undated quarterly, assume no prepayments, and are subject to change.

Provision for Credit Losses

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

Provision for credit losses - loans and leases was ~~$9.8~~$7.9 million for the three months ended ~~March 31,~~September 30, 2023, compared to ~~$5.0 million~~$4.2 for the three months ended ~~March 31,~~September 30, 2022, an increase of ~~$4.8~~$3.7 million. ~~For~~Provision for credit losses was $24.0 million and $15.1 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 ~~the~~and 2022, respectively, an increase of $8.9 million. The increase in provision for credit losses ~~is comprised of a provision~~- loans and leases for ~~loan and lease losses of $9.7 million and a provision for unfunded commitments of $113,000. The change in provision~~the comparable periods was driven by ~~increases~~acquired non-credit-deteriorated loans resulting from acquisition accounting, an increase in ~~non-performing~~specific reserves related to loans ~~that were~~ individually evaluated for impairment, ~~changes in expected losses in the collectively assessed portfolio driven by macro-economic factors,~~ and ~~growth in the~~ loan and lease ~~portfolio.~~

growth. On July 1, 2023, a $2.7 million provision for credit losses was recorded on acquired non-credit-deteriorated loans related to the Inland transaction. The ~~ACL~~provision for credit losses - ~~loans~~unfunded commitments was $938,000 and ~~leases as a percentage of loans~~$373,000 for the three and ~~leases was 1.64% and 1.51% at March 31, 2023 and December 31, 2022, respectively.~~nine months ended September 30, 2023.

Non-Interest Income

~~Non-interest~~The following table presents the major components of non-interest income ~~was $15.1 million~~ for the three and nine months ended ~~March 31,~~September 30, 2023 ~~compared to $19.4 million for the three months ended March 31,~~and 2022, ~~a decrease of $4.3 million, or 22.0%. The decrease was primarily due to a decrease~~respectively (dollars in ~~net gains on sales of loans.~~thousands):


	Three Months Ended March 31,					QTD 2023 Compared to 2022						Three Months Ended September 30,						Nine Months Ended September 30,						QTD 2023 Compared to 2022						YTD 2023 Compared to 2022
	2023		2022			$ Change			% Change			2023			2022			2023			2022			$ Change			% Change			$ Change			% Change
Fees and service charges on deposits	$	2,120	$	1,884		$	236			12.5	%	$	2,372		$	2,128		$	6,725		$	6,071		$	244			11.5	%	$	654			10.8	%
Loan servicing revenue		3,380		3,380			—			0.00	%		3,369			3,422			10,126			10,186			(53	)		(1.5	)%		(60	)		(0.6	)%
Loan servicing asset revaluation		656		(1,231	)		1,887		NM				(3,646	)		(2,342	)		(3,855	)		(8,209	)		(1,304	)		55.6	%		4,354			(53.0	)%
ATM and interchange fees		1,063		1,049			14			1.3	%		1,205			1,007			3,380			3,187			198			19.6	%		193			6.1	%
Net realized gains on securities available-for-sale													—			(2	)		—			50			2			100.0	%		(50	)		(100.0	)%
Change in fair value of equity securities, net		350		(151	)		501		NM				(313	)		(581	)		230			(1,313	)		268			(46.1	)%		1,543		NM
Net gains on sales of loans		5,148		10,827			(5,679	)		(52.5	)%		6,473			5,580			17,325			26,390			893			16.0	%		(9,065	)		(34.4	)%
Wealth management and trust income		924		1,048			(124	)		(11.9	)%		939			995			2,902			2,943			(56	)		(5.7	)%		(41	)		(1.4	)%
Other non-interest income		1,504		2,620			(1,116	)		(42.6	)%		1,977			1,785			4,979			6,274			192			10.8	%		(1,295	)		(20.6	)%
Total non-interest income	$	15,145	$	19,426		$	(4,281	)		(22.0	)%	$	12,376		$	11,992		$	41,812		$	45,579		$	384			3.2	%	$	(3,767	)		(8.3	)%

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~~$2.4 million and ~~$1.9~~$2.1 million for the three months ended ~~March 31,~~September 30, 2023 and 2022, respectively. ~~The increase is~~Fees and service charges on deposits were $6.7 million and $6.1 million for the nine months ended September 30, 2023 and 2022, respectively. Increases are due to increases in ~~deposits~~deposit balances and changes ~~to the~~in fee structure.

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 in loan servicing revenue on the sold portion of the U.S. government guaranteed loans for the three months ended ~~March 31,~~September 30, 2023 and 2022. We generated $10.1 million and $10.2 million in loan servicing revenue on the sold portion of the U.S. government guaranteed loans for the nine months ended September 30, 2023 and 2022, respectively. At ~~March 31,~~September 30, 2023 and 2022, the outstanding balance of guaranteed loans serviced was $1.7 ~~billion for each period.~~billion.

Loan servicing asset revaluation represents net changes in the fair value of our servicing assets. Loan servicing asset revaluation had ~~an upward adjustment of $656,000 and~~ a downward adjustment of ~~$1.2~~$3.6 million and $2.3 million for the three months ended ~~March 31,~~September 30, 2023 and 2022, respectively, a change of ~~$1.9~~$1.3 million. Loan servicing asset revaluation had a downward adjustment of $3.9 million and $8.2 million for the nine months ended September 30, 2023 and 2022, respectively, a change of $4.4 million. Changes in the revaluations were mainly due to ~~improved secondary~~decreases in discount rates prompted by current market ~~conditions lowering the discount rate.~~interest rates and premiums, coupled with increased prepayments.

Net gains on sales of loans were ~~$5.1~~$6.5 million for the three months ended ~~March 31,~~September 30, 2023 compared to ~~$10.8~~$5.6 million for the three months ended ~~March 31,~~September 30, 2022, ~~a decrease~~an increase of ~~$5.7 million,~~$893,000, or ~~52.5%~~16.0%, driven by ~~lower~~higher volume, ~~of government guaranteed loans available for sale.~~partially offset by reduced premiums in the secondary market. We sold ~~$72.2~~$101.6 million of U.S. government guaranteed loans during the three months ended ~~March 31,~~September 30, 2023 compared to ~~$102.3~~$75.4 million during the three months ended ~~March 31,~~September 30, 2022. Net gains on sales of loans were $17.3 million for the nine months ended September 30, 2023 compared to $26.4 million for the nine months ended September 30, 2022, a decrease of $9.1 million or 34.4%, driven by reduced premiums in the secondary market and lower sales of guaranteed loan balances. We sold $253.4 million of U.S. government

guaranteed loans during the nine months ended September 30, 2023 compared to $296.2 million during the nine months ended September 30, 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 ~~$924,000~~$939,000 for the three months ended ~~March 31,~~September 30, 2023 compared to ~~$1.0 million~~$995,000 for the three months ended ~~March 31,~~September 30, 2022, a decrease of ~~$124,000~~$56,000 or ~~11.9%~~5.6%. Wealth management and trust income was $2.9 million for the nine months ended September 30, 2023 and 2022, a decrease of $41,000 or 1.4%. Assets under administration were ~~$573.7~~$742.6 million and ~~$589.1~~$501.2 million as of ~~March 31,~~September 30, 2023 and 2022, respectively.

Other non-interest income was ~~$1.5~~$2.0 million for the three months ended ~~March 31,~~September 30, 2023 compared to ~~$2.6~~$1.8 million for the three months ended ~~March 31,~~September 30, 2022, an increase of $192,000 or 10.8%. Other non-interest income was $5.0 million for the nine months ended September 30, 2023 compared to $6.3 million for the nine months ended September 30, 2022, a decrease of ~~$1.1~~$1.3 million or ~~42.6%~~20.6%. The primary driver ~~was a~~of the decrease in the nine month period was decreased interest rate swap fee income.

Non-Interest Expense

Non-interest expense was $48.8 million for the three months ended March 31, 2023 compared to $44.6 million for the three months ended March 31, 2022, an increase of $4.2 million, or 9.5%. The increase was primarily due to higher loan and lease related expenses and higher salaries and employee benefits.

The following table presents the major components of ~~our~~ non-interest expense for the ~~periods indicated~~three and nine months ended September 30, 2023 and 2022, respectively (dollars in thousands):


	Three Months Ended March 31,						QTD 2023 Compared to 2022						Three Months Ended September 30,				Nine Months Ended September 30,				QTD 2023 Compared to 2022						YTD 2023 Compared to 2022
	2023			2022			$ Change			% Change			2023		2022		2023		2022		$ Change			% Change			$ Change			% Change
Salaries and employee benefits	$	30,394		$	28,959		$	1,435			5.0	%	$	34,969	$	29,587	$	95,005	$	86,243	$	5,382			18.2	%	$	8,762			10.2	%
Occupancy and equipment expense, net		4,444			5,128			(684	)		(13.3	)%		5,314		3,919		14,162		13,456		1,395			35.6	%		706			5.3	%
Impairment charge on assets held for sale		20			—			20		NM				—		—		20		—		—			0.0	%		20			100.0	%
Loan and lease related expenses		963			(891	)		1,854		NM				836		530		2,287		581		306			57.4	%		1,706			293.6	%
Legal, audit and other professional fees		3,114			2,600			514			19.8	%		3,805		2,733		10,594		7,153		1,072			39.3	%		3,441			48.1	%
Data processing		3,783			3,186			597			18.7	%		6,472		3,370		14,527		9,952		3,102			92.0	%		4,575			46.0	%
Net (gain) loss recognized on other real estate owned and other related expenses		(103	)		54			(157	)	NM
Net loss recognized on other real estate owned and other related expenses														111		275		296		487		(164	)		(59.6	)%		(191	)		(39.3	)%
Other intangible assets amortization expense		1,455			1,596			(141	)		(8.8	)%		1,551		1,611		4,461		5,075		(60	)		(3.7	)%		(614	)		(12.1	)%
Other non-interest expense		4,730			3,923			807			20.6	%		4,833		4,153		14,667		11,559		680			16.4	%		3,108			26.9	%
Total non-interest expense	$	48,800		$	44,555		$	4,245			9.5	%	$	57,891	$	46,178	$	156,019	$	134,506	$	11,713			25.4	%	$	21,513			16.0	%

Salaries and employee benefits, the single largest component of our non-interest expense, totaled ~~$30.4~~$35.0 million for the three months ended ~~March 31,~~September 30, 2023 compared to ~~$29.0~~$29.6 million for the three months ended ~~March 31,~~September 30, 2022, an increase of $5.4 million, or 18.2%. Salaries and employee benefits totaled $95.0 million for the nine months ended September 30, 2023 compared to $86.2 million for the nine months ended September 30, 2022, an increase of $8.7 million, or 10.2%. The increases were primarily a result of merit increases, lower deferred costs, increased incentive compensation and increased compensation association with the acquisition. Our staffing increased from 972 full-time equivalent employees as of September 30, 2022 to 1,065 as of September 30, 2023.

Occupancy and equipment expense, net was $5.3 million for the three months ended September 30, 2023 compared to $3.9 million for the three months ended September 30, 2022, an increase of $1.4 million or ~~5.0%~~35.6%. ~~The increase was primarily a result of merit increases and lower deferred costs.~~

Occupancy and equipment expense, net was ~~$4.4~~$14.2 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2023, compared to ~~$5.1~~$13.5 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2022, ~~a decrease~~an increase of ~~$684,000~~$706,000, or ~~13.3%~~5.2%. The ~~decrease was a result of lower rent~~increase is primarily due to acquired branches, increased maintenance expense, and ~~building maintenance~~increased software depreciation expense.

Loan and lease related expenses were ~~$963,000~~$836,000 for the three months ended ~~March 31,~~September 30, 2023 compared to ~~credit of $891,000~~$530,000 for the three months ended ~~March 31,~~September 30, 2022, an increase of ~~$1.9 million.~~$306,000, or 57.7%. The increase was primarily driven by higher reimbursable expenses associated with government guaranteed loan originations. Loan and lease related expenses were $2.3 million for the nine months ended September 30, 2023 compared to $581,000 for the nine months ended September 30, 2022, an increase of $1.7 million, or 293.6%. The increase was mainly related to growth inof the loan and lease portfolio, and athe recapture of government guaranteed loan expenses during the first ~~quarter~~nine months of 2022.

Legal, audit, and other professional fees were $3.1 million for the three months ended March 31, 2023 compared to $2.6 million for the three months ended March 31, 2022, an increase of $514,000, or 19.8%. The increase was driven by increases in legal fees related to merger-related activity, other professional fees and outside services.

~~Data processing was~~ $3.8 million for the three months ended ~~March 31,~~September 30, 2023 compared to ~~$3.2~~$2.7 million for the three months ended ~~March 31,~~September 30, 2022, an increase of ~~$597,000~~$1.1 million, or ~~18.7%~~39.2%. Legal, audit, and other professional fees were $10.6 million for the nine months ended September 30, 2023 compared to $7.2 million for the nine months ended September 30, 2022, an increase of $3.4 million or 48.1%. The increase was driven by increased fees for merger-related expenses.

Data processing was $6.5 million for the three months ended September 30, 2023, compared to $3.4 million for the three months ended September 30, 2022, an increase of $3.1 million, or 92.0%. Data processing was $14.5 million for the nine months ended September 30, 2023, compared to $10.0 million for the nine months ended September 30, 2022, an increase of $4.6 million or 46.0%. The increases were driven by merger-related expenses and increased software licensing ~~costs and merger-related data processing expenses.~~costs.

Net ~~gain/~~loss recognized on other real estate owned and other related expenses was ~~a $103,000 gain~~$111,000 for the three months ended ~~March 31,~~September 30, 2023, compared to ~~a $54,000 loss~~$275,000 for the three months ended ~~March 31,~~September 30, 2022, a decrease of ~~$157,000.~~$164,000, or 59.6%. Net loss recognized on other real estate owned and other related expenses was $296,000 for the nine months ended September 30, 2023 compared to $487,000 for the nine months ended September 30, 2022, a decrease of $191,000, or 39.2%. These ~~decreases~~changes were primarily due to ~~lower real estate taxes~~sales and ~~property management expenses due to fewer OREO properties.~~transfers of certain properties from loans.

Other non-interest expense was ~~$4.7~~$4.8 million for the three months ended ~~March 31,~~September 30, 2023 compared to ~~$3.9~~$4.2 million for the three months ended ~~March 31,~~September 30, 2022, an increase of ~~$807,000~~$680,000 or ~~20.6%~~16.4%. ~~The~~Other non-interest expense was $14.7 million for the nine months ended September 30, 2023 compared to $11.6 million for the nine months ended September 30, 2022, an increase ~~was~~of $3.1 million or 26.9%. These increases were mostly due to increases in regulatory assessments, advertising and promotions, and other general ~~expenses in the first quarter of 2023.~~expenses.

Our efficiency ratio was ~~52.10%~~53.75% for the three months ended ~~March 31,~~September 30, 2023 compared to ~~54.96%~~55.11% for the three months ended ~~March 31,~~September 30, 2022. The change in our efficiency ratio for the three months ended ~~March 31,~~September 30, 2023 was driven by ~~higher revenues.~~an increase in our net interest income. Our adjusted efficiency ratio was ~~51.54%~~47.35% for the three months ended ~~March 31,~~September 30, 2023 compared to ~~54.96%~~55.11% for the three months ended ~~March 31,~~September 30, 2022. Our efficiency ratio was 52.96% for the nine months ended September 30, 2023, compared to 55.12% for the nine months ended September 30, 2022. The change in our efficiency ratio was due to higher net interest income. Our adjusted efficiency ratio was 49.96% for the nine months ended September 30, 2023, compared to 55.12% for the nine months ended September 30, 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 ~~March 31,~~September 30, 2023 totaled ~~$8.3~~$9.9 million compared to ~~$6.3~~$7.9 million for the three months ended ~~March 31,~~September 30, 2022, an increase of ~~$2.0~~$2.1 million, or ~~31.6%~~26.2%. The increase in income tax expense was principally due to ~~higher~~increases in net income before provision for income taxes. Our effective tax rate was 26.0% for the three months ended September 30, 2023 and 25.7% for the three months ended ~~March 31, 2023 and 22.0%~~September 30, 2022.

Our provision for income taxes for the ~~three~~nine months ended ~~March 31, 2022.~~September 30, 2023 totaled $27.4 million compared to $20.0 million for the nine months ended September 30, 2022, an increase of $7.5 million or 37.3%. The increase in ~~the~~income tax expense was principally due to increases in net income before provision for income taxes. Our effective tax rate was ~~due to tax benefits related to share-based compensation taken during~~26.0% for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 and 23.4% for the nine months ended September 30, 2022.

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

Financial Condition

Condensed Consolidated Statements of Financial Condition Analysis

Our total assets increased by ~~$167.4 million,~~$1.6 billion, or ~~2.3%~~21.5%, to ~~$7.5~~$8.9 billion at ~~March 31,~~September 30, 2023 compared to $7.4 billion at December 31, 2022. The increase in total assets includes an increase of ~~$94.1 million, or 1.7%,~~$1.2 billion in loans and leases, or 22.0%, from $5.4 billion at December 31, 2022 to ~~$5.5~~$6.6 billion at ~~March 31,~~September 30, 2023. Our originated loan and lease portfolio increased by ~~$122.2~~$497.7 million and our purchased credit deteriorated loans and acquired non-credit-deteriorated loans and leases portfolio ~~decreased~~increased by ~~$28.1~~$694.4 million. The increase in our originated portfolio was primarily attributed to growth in commercial and industrial loans, commercial real estate, ~~commercial~~ and ~~industrial, and leases.~~leasing financing receivables. The ~~decrease~~increase in our purchased credit deteriorated loans and acquired non-credit-deteriorated loans and leases portfolio was attributed to ~~decreases in commercial real estate.~~the Inland acquisition.

Total liabilities increased by ~~$137.6~~$1.4 million, or ~~2.1%~~21.6%, to ~~$6.7~~$8.0 billion at ~~March 31,~~September 30, 2023 compared to $6.6 billion at December 31, 2022. Total deposits increased by ~~$117.5 million,~~$1.3 billion, or ~~2.1%~~22.1%, driven by growth in time deposits and money market accounts, ~~partly~~ offset by a ~~decreases~~decrease in non-interest bearing deposits. Other borrowings increased by ~~$22.4~~$72.8 million, or ~~3.5%~~11.4%, mainly due to ~~increases to securities sold under agreements to repurchase.~~an increase in FHLB advances, as well as the new term loan and drawing on our revolving line of credit.

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 ~~March 31,~~September 30, 2023 or December 31, 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~~increased by ~~$10.0~~$65.5 million, or ~~0.9%~~5.6%, ~~and were~~from $1.2 billion at December 31, 2022 ~~and~~to $1.2 billion at ~~March 31,~~September 30, 2023. The ~~decrease~~increase was mainly attributed to ~~proceeds from paydowns and maturities offset by an increase in market value.~~the Inland acquisition.

At ~~March 31,~~September 30, 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 $1.2 million and $2.7 million at ~~March 31,~~September 30, 2023 and at December 31, 2022, respectively.

We had no securities that had evidence of material credit losses as of September 30, 2023 or December 31, 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):


	March 31, 2023				December 31, 2022				September 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	$	42,473	$	41,195	$	42,430	$	40,723	$	105,792	$	104,029	$	42,430	$	40,723
U.S. Government agencies		149,595		130,866		150,524		130,364		147,889		125,115		150,524		130,364
Obligations of states, municipalities, and political subdivisions		68,165		63,578		68,019		61,876		89,370		80,520		68,019		61,876
Residential mortgage-backed securities
Agency		690,793		589,310		707,157		595,796		750,675		621,976		707,157		595,796
Non-agency		128,738		105,139		130,654		106,249		124,569		96,931		130,654		106,249
Commercial mortgage-backed securities
Agency		189,871		157,297		191,172		157,030		183,183		139,865		191,172		157,030
Corporate securities		42,784		37,490		45,302		41,436		40,696		34,972		45,302		41,436
Asset-backed securities		41,281		39,512		43,085		40,957		38,220		36,521		43,085		40,957
Total available-for-sale	$	1,353,700	$	1,164,387	$	1,378,343	$	1,174,431	$	1,480,394	$	1,239,929	$	1,378,343	$	1,174,431
Held-to-maturity
Obligations of states, municipalities, and political subdivisions	$	2,704	$	2,681	$	2,705	$	2,672	$	1,157	$	1,133	$	2,705	$	2,672
Total held-to-maturity	$	2,704	$	2,681	$	2,705	$	2,672	$	1,157	$	1,133	$	2,705	$	2,672

5863

Certain securities have fair values less than amortized cost and, therefore, contain unrealized losses. At ~~March 31,~~September 30, 2023, we evaluated the securities which had an unrealized loss for credit losses and determined there were none. There were ~~268 available-for-sale~~361 investment securities with unrealized losses at ~~March 31, 2023. There were three securities held-to-maturity with unrealized losses at March 31,~~September 30, 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 ~~March 31,~~September 30, 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.


	Maturity as of March 31, 2023																				Maturity as of September 30, 2023
	Due in One Year or Less					Due from One to Five Years					Due from Five to Ten Years					Due after Ten Years					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)			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	%	$	42,473		2.35	%	$	—		0.00	%	$	—		0.00	%	$	63,232		5.38	%	$	42,560		2.35	%	$	—		0.00	%	$	—		0.00	%
U.S. government agencies		—		0.00	%		47,582		1.41	%		94,953		1.90	%		7,060		3.83	%		—		0.00	%		51,375		1.70	%		89,328		1.76	%		7,186		4.00	%
Obligations of states, municipalities, and political subdivisions		2,556		2.48	%		15,841		2.78	%		11,315		3.19	%		38,453		2.28	%		5,121		2.97	%		20,683		3.08	%		22,400		3.34	%		41,166		2.50	%
Residential mortgage- backed securities
Agency		65		1.38	%		16,752		1.66	%		78,324		1.56	%		595,652		1.47	%		—		0.00	%		30,700		1.65	%		59,886		1.63	%		660,089		2.02	%
Non-agency		—		0.00	%		—		0.00	%		—		0.00	%		128,738		2.14	%		—		0.00	%		—		0.00	%		—		0.00	%		124,569		2.16	%
Commercial mortgage- backed securities
Agency		—		0.00	%		—		0.00	%		13,531		1.63	%		176,340		2.05	%		—		0.00	%		—		0.00	%		13,734		1.64	%		169,449		2.05	%
Corporate securities		—		0.00	%		9,226		3.90	%		33,558		3.75	%		—		0.00	%		—		0.00	%		9,647		5.09	%		31,049		3.70	%		—		0.00	%
Asset-backed securities		—		0.00	%		—		0.00	%		41,281		4.97	%		—		0.00	%		—		0.00	%		—		0.00	%		38,220		5.50	%		—		0.00	%
Total available-for-sale	$	2,621		2.45	%	$	131,874		2.08	%	$	272,962		2.54	%	$	946,243		1.72	%	$	68,353		5.20	%	$	154,965		2.26	%	$	254,617		2.66	%	$	1,002,459		2.08	%
Held-to-maturity
Obligations of states, municipalities, and political subdivisions	$	1,546		2.62	%	$	1,158		2.75	%	$	—		0.00	%	$	—		0.00	%	$	550		2.75	%	$	607		2.75	%	$	—		0.00	%	$	—		0.00	%
Total held-to-maturity	$	1,546		2.62	%	$	1,158		2.75	%	$	—		0.00	%	$	—		0.00	%	$	550		2.75	%	$	607		2.75	%	$	—		0.00	%	$	—		0.00	%

(1)

The weighted average yields are based on amortized cost.

~~As of March 31, 2023, and December 31, 2022, investment securities indexed to LIBOR were $36.7 million and $43.5 million, respectively.~~

Total non-taxable securities classified as obligations of states, municipalities and political subdivisions were ~~$43.7~~$57.8 million at ~~March 31,~~September 30, 2023, ~~a decrease~~an increase of ~~$96,000~~$13.9 million from December 31, 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 ~~March 31,~~September 30, 2023 or December 31, 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 ~~March 31,~~September 30, 2023 and December 31, 2022, we held ~~$38.8~~$30.5 million and $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 ~~March 31,~~September 30, 2023 and December 31, 2022.

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 ~~March 31,~~September 30, 2023 and December 31, 2022 were ~~$5.5~~$6.6 billion and $5.4 billion, respectively, an increase of ~~$94.1 million,~~$1.2 billion, or ~~1.7%~~22.0%. Originated loans and leases were ~~$5.3~~$5.6 billion at ~~March 31,~~September 30, 2023, an increase of ~~$122.2~~$497.7 million, or ~~2.4%~~9.7%, compared to $5.1 billion at December 31, 2022. Purchased credit deteriorated loans and acquired non-credit-deteriorated loans and leases were ~~$262.4~~$984.9 million at ~~March 31,~~September 30, 2023, ~~a decrease~~an increase of ~~$28.1~~$694.4 million, or ~~9.7%~~239.0%, compared to $290.5 million at December 31, 2022. The increase in our originated portfolio was primarily attributed to organic loan and lease growth, and renewals of acquired ~~non-credit-deteriorate~~ loans and leases that are now reflected with originated loans. The ~~decrease~~increase in the purchased credit deteriorated and acquired non-credit-deteriorated loan and lease portfolio was driven by ~~renewals that are reflected within originated~~ loans ~~payoffs, and maturities during~~purchased in the ~~period.~~Inland acquisition.

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 ~~March 31,~~September 30, 2023, the loan portfolio included ~~$416.8~~$420.7 million of unguaranteed 7(a) SBA and USDA loans with exposure to the following top three industries: ~~16.6%~~17.4% retail trade, ~~14.0%~~14.4% accommodation and food services, and ~~12.1%~~11.3% manufacturing. The following table shows our allocation of originated, ~~purchased~~purchase credit deteriorated and acquired non-credit-deteriorated loans and leases as of the dates presented (dollars in thousands):


	March 31, 2023						December 31, 2022						September 30, 2023						December 31, 2022
	Amount			% of Total			Amount			% of Total			Amount			% of Total			Amount			% of Total
Originated loans and leases
Commercial real estate	$	1,749,808			31.7	%	$	1,712,152			31.6	%	$	1,837,531			27.8	%	$	1,712,152			31.6	%
Residential real estate		441,291			8.0	%		426,226			7.9	%		454,456			6.9	%		426,226			7.9	%
Construction, land development, and other land		446,763			8.1	%		438,617			8.1	%		406,334			6.1	%		438,617			8.1	%
Commercial and industrial		2,061,267			37.4	%		2,030,616			37.5	%		2,286,058			34.6	%		2,030,616			37.5	%
Installment and other		1,603			0.0	%		1,410			0.0	%		2,968			0.0	%		1,410			0.0	%
Leasing financing receivables		552,174			10.0	%		521,689			9.6	%		641,032			9.7	%		521,689			9.6	%
Total originated loans and leases	$	5,252,906			95.2	%	$	5,130,710			94.7	%	$	5,628,379			85.1	%	$	5,130,710			94.7	%
Purchased credit deteriorated loans
Commercial real estate	$	39,000			0.7	%	$	45,143			0.8	%	$	154,573			2.3	%	$	45,143			0.8	%
Residential real estate		30,070			0.6	%		32,228			0.6	%		47,485			0.7	%		32,228			0.6	%
Construction, land development, and other land		345			0.0	%		372			0.0	%		29,587			0.5	%		372			0.0	%
Commercial and industrial		1,745			0.0	%		2,192			0.0	%		21,014			0.3	%		2,192			0.0	%
Installment and other		134			0.0	%		140			0.0	%		125			0.0	%		140			0.0	%
Total purchased credit deteriorated loans	$	71,294			1.3	%	$	80,075			1.4	%	$	252,784			3.8	%	$	80,075			1.4	%
Acquired non-credit-deteriorated loans and leases
Commercial real estate	$	140,576			2.6	%	$	152,193			2.8	%	$	296,656			4.5	%	$	152,193			2.8	%
Residential real estate		27,975			0.5	%		31,508			0.6	%		220,091			3.4	%		31,508			0.6	%
Construction, land development, and other land														87,087			1.3	%		—			0.0	%
Commercial and industrial		20,793			0.4	%		24,266			0.5	%		127,253			1.9	%		24,266			0.5	%
Installment and other		85			0.0	%		209			0.0	%		153			0.0	%		209			0.0	%
Leasing financing receivables		1,703			0.0	%		2,297			0.0	%		900			0.0	%		2,297			0.0	%
Total acquired non-credit-deteriorated loans and leases	$	191,132			3.5	%	$	210,473			3.9	%	$	732,140			11.1	%	$	210,473			3.9	%
Total loans and leases	$	5,515,332			100.0	%	$	5,421,258			100.0	%	$	6,613,303			100.0	%	$	5,421,258			100.0	%
Allowance for credit losses - loans and leases		(90,465	)					(81,924	)					(105,696	)					(81,924	)
Total loans and leases, net of allowance for credit losses - loans and leases	$	5,424,867					$	5,339,334					$	6,507,607					$	5,339,334

Loans collateralized by real estate comprised ~~52.2%~~53.4% and 52.4% of the loan and lease portfolio at ~~March 31,~~September 30, 2023 and December 31, 2022, respectively. Commercial real estate loans comprised the largest portion of the real estate loan portfolio as of ~~March 31,~~September 30, 2023 and December 31, 2022 and totaled ~~$1.9~~$2.3 billion, or ~~67.1%~~64.8% of real estate loans and ~~35.0%~~34.6% of the total loan and lease portfolio at ~~March 31,~~September 30, 2023. At December 31, 2022, commercial real estate loans totaled $1.9 billion and comprised 67.3% of real estate loans and 35.2% of the total loan and lease portfolio. Purchased credit deteriorated commercial real estate loans ~~decreased~~increased from $45.1 million as of December 31, 2022 to ~~$39.0~~$154.6 million as of ~~March 31,~~September 30, 2023, ~~a decrease~~an increase of ~~$6.1~~$109.4 million, or ~~13.6%~~242.4%. At ~~March 31,~~September 30, 2023 and December 31, 2022, commercial real estate loans, including both owner-occupied and non-owner occupied, as a percentage of total capital were ~~306.9%~~301.5% and ~~313.9%~~313.4%, respectively. Non-owner occupied commercial real

estate loans were ~~$764.1 million~~$1.0 billion and $736.7 million, or ~~86.4%~~97.5% and ~~86.5%~~86.6% of total capital, at ~~March 31,~~September 30, 2023 and December 31, 2022, respectively.

Residential real estate loans totaled ~~$499.3~~$722.0 million at ~~March 31,~~September 30, 2023 compared to $490.0 million at December 31, 2022, an increase of ~~$9.3~~$232.1 million, or ~~1.9%~~47.4%. The residential real estate loan portfolio comprised ~~17.4%~~20.4% and ~~17.2%~~17.3% of real estate loans as of ~~March 31,~~September 30, 2023 and December 31, 2022, respectively, and ~~9.1%~~10.9% and 9.0% of total loans and leases at ~~March 31,~~September 30, 2023 and December 31, 2022, respectively. Purchased credit deteriorated residential real estate loans ~~decreased~~increased from $32.2 million at December 31, 2022 to ~~$30.1~~$47.5 million at ~~March 31,~~September 30, 2023, ~~a decrease~~an increase of ~~$2.2~~$15.3 million, or ~~6.7%~~47.3%. Multifamily real estate loans were $396.1 million at and $304.2 million, or 37.2% and 35.6% of total capital, at September 30, 2023 and December 31, 2022, respectively.

Construction, land development, and other land loans totaled ~~$447.1~~$523.0 million at ~~March 31,~~September 30, 2023 compared to $439.0 million at December 31, 2022, an increase of ~~$8.1~~$84.0 million, or ~~1.8%~~19.1%. The construction, land development and other land loan portfolio comprised 14.8% and 15.5% of real estate loans at ~~March 31,~~September 30, 2023 and December 31, 2022, respectively, and 7.9% and 8.1% of the total loan and lease portfolio at ~~March 31,~~September 30, 2023 and December 31, ~~2022.~~2022, respectively. The construction, land development and other land loan portfolio was 49.2% and 51.2% of total capital, at September 30, 2023 and December 31, 2022, respectively.

Commercial and industrial loans totaled ~~$2.1~~$2.4 billion at ~~March 31,~~September 30, 2023 and December 31, 2022, ~~respectively,~~ an increase of ~~$26.8~~$377.3 million, or ~~1.3%~~18.3%. The commercial and industrial loan portfolio comprised ~~37.8%~~36.8% and ~~38.0%~~37.9% of the total loan and lease portfolio at ~~March 31,~~September 30, 2023 and December 31, 2022, respectively.

Lease financing receivables comprised ~~10.0% and~~ 9.7% of the loan and lease portfolio at ~~March 31,~~September 30, 2023 and December 31, ~~2022, respectively.~~2022. Total lease financing receivables were ~~$553.9~~$641.9 million and $524.0 million at ~~March 31,~~September 30, 2023 and December 31, 2022, respectively, an increase of ~~$29.9~~$117.9 million, or ~~5.7%~~22.5%.

Loan and Lease Portfolio Maturities and Interest Rate Sensitivity

The following table shows our loan and lease portfolio by scheduled maturity at ~~March 31,~~September 30, 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						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		Fixed Rate		Floating Rate		Fixed Rate		Floating Rate		Fixed Rate		Floating Rate		Fixed Rate		Floating Rate		Total
Originated loans and leases
Commercial real estate	$	58,215	$	164,946	$	640,619	$	264,918	$	295,822	$	147,724	$	10,558	$	167,006	$	1,749,808	$	90,751	$	203,208	$	700,621	$	303,343	$	271,648	$	102,512	$	9,022	$	156,426	$	1,837,531
Residential real estate		10,774		16,070		104,022		85,551		47,277		109,795		64,357		3,445		441,291		10,285		34,124		131,670		70,078		43,107		101,081		61,315		2,796		454,456
Construction, land development, and other land		10,794		139,098		9,751		253,486		26,143		7,491		—		—		446,763		2,920		125,213		24,598		215,373		22,904		15,314		12		—		406,334
Commercial and industrial		28,551		374,331		278,368		922,759		148,279		267,575		32,786		8,618		2,061,267		35,634		411,439		333,181		1,044,061		158,795		253,452		32,460		17,036		2,286,058
Installment and other		332		—		667		383		221		—		—		—		1,603		249		—		878		1,633		208		—		—		—		2,968
Leasing financing receivables		15,800		—		481,558		—		54,816		—		—		—		552,174		16,826		—		562,643		—		61,563		—		—		—		641,032
Total originated loans and leases	$	124,466	$	694,445	$	1,514,985	$	1,527,097	$	572,558	$	532,585	$	107,701	$	179,069	$	5,252,906	$	156,665	$	773,984	$	1,753,591	$	1,634,488	$	558,225	$	472,359	$	102,809	$	176,258	$	5,628,379
Purchased credit deteriorated loans
Commercial real estate	$	17,754	$	—	$	17,330	$	2,174	$	740	$	565	$	143	$	294	$	39,000	$	39,533	$	20,718	$	46,625	$	27,530	$	4,662	$	15,099	$	133	$	273	$	154,573
Residential real estate		4,997		37		10,327		557		6,755		478		5,174		1,745		30,070		12,017		766		18,102		589		6,481		420		5,694		3,416		47,485
Construction, land development, and other land		289		—		56		—		—		—		—		—		345		—		29,560		27		—		—		—		—		—		29,587
Commercial and industrial		1		78		1,662		4		—		—		—		—		1,745		537		1,843		8,683		3,055		—		6,896		—		—		21,014
Installment and other		—		—		26		—		108		—		—		—		134		—		—		22		—		103		—		—		—		125
Total purchased credit deteriorated loans	$	23,041	$	115	$	29,401	$	2,735	$	7,603	$	1,043	$	5,317	$	2,039	$	71,294	$	52,087	$	52,887	$	73,459	$	31,174	$	11,246	$	22,415	$	5,827	$	3,689	$	252,784
Acquired non-credit-deteriorated loans and leases
Acquired non-credit- deteriorated loans and leases
Commercial real estate	$	13,222	$	1,802	$	63,516	$	13,493	$	17,060	$	8,702	$	2,558	$	20,223	$	140,576	$	17,123	$	16,321	$	167,777	$	35,130	$	16,401	$	24,456	$	2,512	$	16,936	$	296,656
Residential real estate		7,912		3,641		7,062		772		132		2,511		744		5,201		27,975		7,386		5,445		47,415		12,642		26,248		10,596		6,468		103,891		220,091
Construction, land development, and other land																				92		35,064		14,130		23,578		—		—		14,223		—		87,087
Commercial and industrial		2,416		136		6,969		9,472		291		1,134		—		375		20,793		2,359		9,961		32,919		13,089		62,805		4,146		—		1,974		127,253
Installment and other		20		57		8		—		—		—		—		—		85		30		—		123		—		—		—		—		—		153
Leasing financing receivables		594		—		1,109		—		—		—		—		—		1,703		275		—		625		—		—		—		—		—		900
Total acquired non-credit-deteriorated loans and leases	$	24,164	$	5,636	$	78,664	$	23,737	$	17,483	$	12,347	$	3,302	$	25,799	$	191,132
Total acquired non-credit- deteriorated loans and leases																			$	27,265	$	66,791	$	262,989	$	84,439	$	105,454	$	39,198	$	23,203	$	122,801	$	732,140
Total loans and leases	$	171,671	$	700,196	$	1,623,050	$	1,553,569	$	597,644	$	545,975	$	116,320	$	206,907	$	5,515,332	$	236,017	$	893,662	$	2,090,039	$	1,750,101	$	674,925	$	533,972	$	131,839	$	302,748	$	6,613,303

At ~~March 31,~~September 30, 2023, ~~45.5%~~47.4% of the loan and lease portfolio bears interest at fixed rates and ~~54.5%~~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 ~~326,~~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 March 31, 2023, we had $572.1 million in loans indexed to LIBOR and $1.1 billion in loans indexed to SOFR.~~

Allowance for Credit Losses - Loans and Leases

The 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 ACL reflects management’s estimate of current expected credit losses inherent in the loan and lease portfolios. The computation includes elements of 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 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 ACL based on three categories: (i) originated loans and leases, (ii) acquired non-credit-deteriorated loans and leases, and (iii) purchased credit deteriorated loans.

Total ACL was ~~$90.5~~$105.7 million at ~~March 31,~~September 30, 2023 compared to $81.9 million at December 31, 2022, an increase of ~~$8.5~~$23.8 million, or ~~10.4%~~29.0%. The increase was primarily due to ~~increases~~acquired loans and an increase in specific reserves related to loans individually evaluated for impairment. Total ACL to total loans and leases held for investment, net before ACL, was ~~1.64%~~1.60% and 1.51% of total loans and leases at ~~March 31,~~September 30, 2023 and December 31, 2022, respectively. As of ~~March 31,~~September 30, 2023, approximately ~~$38.5~~$33.4 million of the ACL was allocated to unguaranteed portion of SBA 7(a) and USDA loans.

6368

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			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	$	26,061		$	3,140		$	3,134		$	41,889		$	24		$	7,676		$	81,924
Balance at June 30, 2023																						$	26,377		$	2,544		$	1,935		$	53,640		$	43		$	8,126		$	92,665
Adjustment for acquired PCD loans																							8,230			660			97			1,609			—			—			10,596
Provision/(recapture) for PCD loans		(560	)		(278	)		(3	)		(10	)		—			—			(851	)		(2,904	)		(2	)		217			(543	)		—			—			(3,232	)
Provision/(recapture) for acquired non-credit-deteriorated loans		(865	)		(158	)		(1	)		(346	)		—			(10	)		(1,380	)		473			769			694			904			1			(14	)		2,827
Provision/(recapture) for originated loans		306			(17	)		368			11,159			(2	)		129			11,943			4,045			174			257			2,968			3			823			8,270
Total provision/(recapture)	$	(1,119	)	$	(453	)	$	364		$	10,803		$	(2	)	$	119		$	9,712		$	1,614		$	941		$	1,168		$	3,329		$	4		$	809		$	7,865
Charge-offs for PCD loans		—			—			—			—			—			—			—			—			—			—			—			—			—			—
Charge-offs for acquired non-credit deteriorated loans		—			—			—			—			—			—			—			—			—			—			—			—			—			—
Charge-offs for originated loans		(966	)		(9	)		—			(1,790	)		—			(304	)		(3,069	)		(1,360	)		(12	)		—			(4,200	)		(3	)		(604	)		(6,179	)
Total charge-offs	$	(966	)	$	(9	)	$	—		$	(1,790	)	$	—		$	(304	)	$	(3,069	)	$	(1,360	)	$	(12	)	$	—		$	(4,200	)	$	(3	)	$	(604	)	$	(6,179	)
Recoveries for PCD loans		—			—			—			—			—			—			—			—			—			—			—			—			—			—
Recoveries for acquired non-credit deteriorated loans		—			—			—						—			—			—			—			—			—						—			—			—
Recoveries for originated loans		762			1			—			947			3			185			1,898			124			18			—			460			—			147			749
Total recoveries	$	762		$	1		$	—		$	947		$	3		$	185		$	1,898		$	124		$	18		$	—		$	460		$	—		$	147		$	749
Net charge-offs (recoveries)		(204	)		(8	)		—			(843	)		3			(119	)		(1,171	)
Balance at March 31, 2023		24,738			2,679			3,498			51,849			25			7,676			90,465
Net (charge-offs) recoveries																							(1,236	)		6			—			(3,740	)		(3	)		(457	)		(5,430	)
Balance at September 30, 2023																						$	34,985		$	4,151		$	3,200		$	54,838		$	44		$	8,478		$	105,696
Ending ACL Balances
PCD loans		591			396			10			36			2			—			1,035		$	6,059		$	999		$	321		$	1,105		$	2		$	—		$	8,486
Acquired non-credit-deteriorated loans		2,871			138			—			883			1			24			3,917			3,534			865			694			1,588			2			3			6,686
Originated loans		21,276			2,145			3,488			50,930			22			7,652			85,513			25,392			2,287			2,185			52,145			40			8,475			90,524
Balance at March 31, 2023	$	24,738		$	2,679		$	3,498		$	51,849		$	25		$	7,676		$	90,465
Balance at September 30, 2023																						$	34,985		$	4,151		$	3,200		$	54,838		$	44		$	8,478		$	105,696
Loans individually evaluated for impairment	$	6,302		$	—		$	1,198		$	14,518		$	—		$	—		$	22,018		$	13,199		$	—		$	—		$	15,135		$	—		$	—		$	28,334
Loans collectively evaluated for impairment		18,436			2,679			2,300			37,331			25			7,676			68,447			21,786			4,151			3,200			39,703			44			8,478			77,362
Balance at March 31, 2023	$	24,738		$	2,679		$	3,498		$	51,849		$	25		$	7,676		$	90,465
Balance at September 30, 2023																						$	34,985		$	4,151		$	3,200		$	54,838		$	44		$	8,478		$	105,696
Loans and leases ending balance
Loans individually evaluated for impairment	$	31,622		$	—		$	5,541		$	34,245		$	—		$	—		$	71,408		$	67,596		$	—		$	—		$	48,814		$	—		$	—		$	116,410
Loans collectively evaluated for impairment		1,897,762			499,336			441,567			2,049,560			1,822			553,877			5,443,924			2,221,164			722,032			523,008			2,385,511			3,246			641,932			6,496,893
Total loans and leases at March 31, 2023, gross	$	1,929,384		$	499,336		$	447,108		$	2,083,805		$	1,822		$	553,877		$	5,515,332
Total loans and leases at September 30, 2023, gross																						$	2,288,760		$	722,032		$	523,008		$	2,434,325		$	3,246		$	641,932		$	6,613,303
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	%		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	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%
Originated loans		0.02	%		0.00	%		0.00	%		0.06	%		0.00	%		0.01	%		0.09	%		0.07	%		0.00	%		0.00	%		0.23	%		0.00	%		0.03	%		0.33	%
Loans ending balance as a percentage of total loans, gross
Loans individually evaluated for impairment		0.57	%		0.00	%		0.10	%		0.62	%		0.00	%		0.00	%		1.29	%		1.02	%		0.00	%		0.00	%		0.74	%		0.00	%		0.00	%		1.76	%
Loans collectively evaluated for impairment		34.41	%		9.05	%		8.01	%		37.16	%		0.03	%		10.04	%		98.70	%		33.59	%		10.92	%		7.91	%		36.06	%		0.05	%		9.71	%		98.24	%

6469

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

(155
)

(7
)

(2
)

(3
)

—

—

(167
)
Provision/(recapture) for acquired
  non-impaired loans and leases

(1,149
)

11

—

(962
)

—

(21
)

(2,121
)
Provision/(recapture) for
  originated loans

4,088

509

596

1,423

1

666

7,283

Total provision/(recapture)

$
2,784

$
513

$
594

$
458

$
1

$
645

$
4,995

Charge-offs for acquired
  impaired loans

—

—

—

-

—

—

—

Charge-offs for acquired
  non-impaired loans and leases

—

—

—

-

—

—

—

Charge-offs for originated loans
  and leases

(240
)

—

—

(463
)

—

(363
)

(1,066
)
Total charge-offs

$
(240
)

$
—

$
—

$
(463
)

$
—

$
(363
)

$
(1,066
)
Recoveries for acquired
  impaired loans

—

2

—

26

—

—

28

Recoveries for acquired
  non-impaired loans and leases

—

—

—

—

—

16

16

Recoveries for originated
  loans and leases

244

2

—

94

—

133

473

Total recoveries

$
244

$
4

$
—

$
120

$
—

$
149

$
517

Less: Net charge-offs

(4
)

(4
)

—

343

—

214

549

Acquired impaired loans

1,655

1,001

1

387

2

—

3,046

Acquired non-impaired
  loans and leases

2,201

36

-

1,861

1

43

4,142

Originated loans and leases

15,850

1,108

1,115

30,996

7

3,194

52,270

Balance at March 31, 2022

$
19,706

$
2,145

$
1,116

$
33,244

$
10

$
3,237

$
59,458

Ending ALLL balance

Acquired impaired loans

$
1,655

$
1,001

$
1

$
387

$
2

$
—

$
3,046

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

7,731

6

—

13,002

—

—

20,739

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

10,320

1,138

1,115

19,855

8

3,237

35,673

Balance at March 31, 2022

$
19,706

$
2,145

$
1,116

$
33,244

$
10

$
3,237

$
59,458

Loans and leases ending balance

Acquired impaired loans

$
67,092

$
47,347

$
1,357

$
3,792

$
163

$
—

$
119,751

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

36,805

2,190

—

32,457

—

—

71,452

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

1,675,468

445,183

351,715

1,739,622

1,193

384,684

4,597,865

Total loans and leases at
   March 31, 2022, gross

$
1,779,365

$
494,720

$
353,072

$
1,775,871

$
1,356

$
384,684

$
4,789,068

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

0.00
%

0.00
%

0.00
%

0.03
%

0.00
%

0.02
%

0.05
%
Loans and leases ending balance
  as a percentage of total loans
  and leases, gross

Acquired impaired loans

1.40
%

0.99
%

0.03
%

0.08
%

0.00
%

0.00
%

2.50
%
Acquired non-impaired loans
  and leases and originated loans
  individually evaluated for
  impairment

0.77
%

0.04
%

0.00
%

0.68
%

0.00
%

0.00
%

1.49
%
Acquired non-impaired loans
  and leases and originated loans
  and leases collectively evaluated
  for impairment

34.99
%

9.30
%

7.34
%

35.57
%

0.02
%

8.03
%

96.01
%


	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
Adjustment for acquired PCD loans		8,230			660			97			1,609			—			—			10,596
Provision/(recapture) for PCD loans		(3,322	)		(335	)		211			(550	)		—			—			(3,996	)
Provision/(recapture) for acquired non-credit-deteriorated loans		(202	)		569			693			359			1			(31	)		1,389
Provision/(recapture) for originated loans		8,378			56			(935	)		17,484			18			1,650			26,651
Total provision/(recapture)	$	4,854		$	290		$	(31	)	$	17,293		$	19		$	1,619		$	24,044
Charge-offs for PCD loans		—			—			—			—			—			—			—
Charge-offs for acquired non-credit deteriorated loans		—			—			—			—			—			—			—
Charge-offs for originated loans		(5,271	)		(21	)		—			(8,087	)		(3	)		(1,370	)		(14,752	)
Total charge-offs	$	(5,271	)	$	(21	)	$	—		$	(8,087	)	$	(3	)	$	(1,370	)	$	(14,752	)
Recoveries for PCD loans		—			—			—			—			—			—			—
Recoveries for acquired non-credit deteriorated loans		—			—			—			—			—			—			—
Recoveries for originated loans		1,111			82			—			2,134			4			553			3,884
Total recoveries	$	1,111		$	82		$	—		$	2,134		$	4		$	553		$	3,884
Net (charge-offs) recoveries		4,160			(61	)		—			5,953			(1	)		817			10,868
Balance at September 30, 2023	$	34,986		$	4,151		$	3,200		$	54,837		$	44		$	8,478		$	105,696
Ending ACL Balances																				—
PCD loans	$	6,059		$	999		$	321		$	1,105		$	2		$	—		$	8,486
Acquired non-credit-deteriorated loans		3,534			865			694			1,588			2			3			6,686
Originated loans		25,392			2,287			2,185			52,145			40			8,475			90,524
Balance at September 30, 2023	$	34,985		$	4,151		$	3,200		$	54,838		$	44		$	8,478		$	105,696
Loans individually evaluated for impairment	$	13,199		$	—		$	—		$	15,135		$	—		$	—		$	28,334
Loans collectively evaluated for impairment		21,786			4,151			3,200			39,703			44			8,478			77,362
Balance at September 30, 2023	$	34,985		$	4,151		$	3,200		$	54,838		$	44		$	8,478		$	105,696
Loans and leases ending balance
Loans individually evaluated for impairment	$	67,596		$	—		$	—		$	48,814		$	—		$	—		$	116,410
Loans collectively evaluated for impairment		2,221,164			722,032			523,008			2,385,511			3,246			641,932			6,496,893
Total loans and leases at September 30, 2023, gross	$	2,288,760		$	722,032		$	523,008		$	2,434,325		$	3,246		$	641,932		$	6,613,303
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		0.09	%		0.00	%		0.00	%		0.14	%		0.00	%		0.02	%		0.25	%
Loans ending balance as a percentage of total loans, gross
Loans individually evaluated for impairment		1.02	%		0.00	%		0.00	%		0.74	%		0.00	%		0.00	%		1.76	%
Loans collectively evaluated for impairment		33.59	%		10.92	%		7.91	%		36.06	%		0.05	%		9.71	%		98.24	%

6570


	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 (recoveries)		883			12			—			1,023			3			36			1,957
Balance at September30, 2022	$	20,050		$	2,681		$	2,345		$	35,752		$	10		$	3,817		$	64,655
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 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 (recoveries)		1,333			3			—			3,727			3			370			5,436
Balance at September30, 2022	$	20,050		$	2,681		$	2,345		$	35,752		$	10		$	3,817		$	64,655
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	%

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 ~~March 31,~~September 30, 2023 and December 31, 2022 totaled ~~$50.2~~$53.7 million and $40.7 million, with the ~~change~~increase driven mainly by increases to non-accrual loans and ~~leases due to higher volume of impaired loans.~~leases. The U.S. government guaranteed portion of non-performing loans totaled ~~$2.3~~$3.6 million at ~~March 31,~~September 30, 2023 and $2.2 million at December 31, 2022.

Total OREO decreased from $4.7 million at December 31, 2022 to ~~$3.7~~$1.7 million at ~~March 31,~~September 30, 2023. The ~~$1.0~~$3.0 million decrease in OREO resulted mostly from ~~sales of properties.~~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):


	March 31,			December 31,			September 30,			December 31,
	2023			2022			2023			2022
Non-performing assets:
Non-accrual loans and leases(1)(2)	$	46,536		$	36,027		$	52,070		$	36,027
Past due loans and leases 90 days or more and still accruing interest		—			—			—			—
Total non-performing loans and leases		46,536			36,027			52,070			36,027
Other real estate owned		3,712			4,717			1,671			4,717
Total non-performing assets	$	50,248		$	40,744		$	53,741		$	40,744
Total non-performing loans and leases as a percentage of total loans and leases		0.84	%		0.66	%		0.79	%		0.66	%
Total non-accrual loans and leases as a percentage of total loans and leases		0.84	%		0.66	%		0.79	%		0.66	%
Total non-performing assets as a percentage of total assets		0.67	%		0.55	%		0.60	%		0.55	%
Allowance for credit losses - loans and leases, as a percentage of non-performing loans and leases		194.40	%		227.40	%		202.99	%		227.40	%
Allowance for credit losses - loans and leases, as a percentage of non-accrual loans and leases		194.40	%		227.40	%		202.99	%		227.40	%

Non-performing assets guaranteed by U.S. government:
Non-accrual loans guaranteed	$	2,335		$	2,225		$	3,588		$	2,225
Past due loans 90 days or more and still accruing interest guaranteed		—			—			—			—
Total non-performing loans guaranteed	$	2,335		$	2,225		$	3,588		$	2,225
Total non-performing loans and leases not guaranteed as a percentage of total loans and leases		0.80	%		0.62	%		0.73	%		0.62	%
Total non-accrual loans and leases not guaranteed as a percentage of total loans and leases		0.80	%		0.62	%		0.73	%		0.62	%
Total non-performing assets not guaranteed as a percentage of total assets		0.64	%		0.52	%		0.56	%		0.52	%

(1)

Includes ~~$395,000~~$757,000 of non-accrual loan modifications at ~~March 31,~~September 30, 2023 and $1.6 million of non-accrual restructured loans at December 31, 2022, respectively.

(2)

For the ~~three~~nine months ended ~~March 31,~~September 30, 2023, ~~$975,000~~$3.1 million in interest income would have been recorded had non-accrual loans been current.

Deposits

Our loan and lease growth is funded primarily through core deposits. We gather deposits primarily through each of our 3747 branch locations in the Chicago metropolitan area and one branch in ~~Brookfield,~~Wauwatosa, 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.

6673

Total deposits at ~~March 31,~~September 30, 2023 were ~~$5.8~~$7.0 billion, representing an increase of ~~$117.5~~$1.3 million, or ~~2.1%~~22.1%, compared to $5.7 billion at December 31, 2022, driven by ~~increases to~~an increase in time deposits and money market demand accounts. Non-interest-bearing deposits were $2.0 billion, or ~~33.6%~~28.2% of total deposits, at ~~March 31,~~September 30, 2023, a decrease of ~~$186.6~~$178.8 million, or ~~8.7%~~8.4%, compared to $2.1 billion at December 31, 2022, or 37.6% of total deposits. Core deposits were ~~92.1%~~88.6% and 92.7% of total deposits at ~~March 31,~~September 30, 2023 and December 31, 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 March 31, 2023					For the Three Months Ended March 31, 2022					September 30, 2023					September 30, 2022
	Average Balance		Average Rate			Average Balance		Average Rate			Average Balance		Average Rate			Average Balance		Average Rate
Non-interest-bearing demand deposits	$	2,076,613		0.00	%	$	2,248,035		0.00	%	$	1,987,996		0.00	%	$	2,198,095		0.00	%
Interest checking		606,008		1.67	%		579,297		0.12	%		579,917		1.51	%		583,777		0.73	%
Money market accounts		1,465,677		2.14	%		1,255,431		0.15	%		2,040,476		3.24	%		1,391,923		0.96	%
Savings		613,590		0.15	%		649,269		0.05	%		594,555		0.15	%		673,966		0.15	%
Time deposits (below $100,000)		529,078		2.64	%		266,921		0.16	%		923,074		4.37	%		338,510		0.85	%
Time deposits ($100,000 and above)		437,331		2.24	%		395,159		0.26	%		783,457		4.00	%		348,614		0.64	%
Total	$	5,728,297		1.15	%	$	5,394,112		0.08	%	$	6,909,475		2.13	%	$	5,534,885		0.43	%


	For the Nine Months Ended					For the Nine Months Ended
	September 30, 2023					September 30, 2022
	Average Balance		Average Rate			Average Balance		Average Rate
Non-interest-bearing demand deposits	$	1,970,724		0.00	%	$	2,237,002		0.00	%
Interest checking		575,558		1.60	%		592,985		0.38	%
Money market accounts		1,682,311		2.80	%		1,318,725		0.51	%
Savings		594,396		0.15	%		662,820		0.08	%
Time deposits (below $100,000)		751,241		3.77	%		286,879		0.45	%
Time deposits ($100,000 and above)		585,343		3.25	%		372,014		0.40	%
Total	$	6,159,573		1.70	%	$	5,470,425		0.22	%

Our average cost of deposits was ~~1.15%~~2.13% during the three months ended ~~March 31,~~September 30, 2023, compared to ~~0.08% during~~0.43% for the three months ended ~~March 31,~~September 30, 2022. Our average cost of deposits was 1.70% during the nine months ended September 30, 2023 compared to 0.22% during the nine months ended September 30, 2022. This increase was principally attributed to higher rates on interest-bearing deposits as a result of the rising interest ~~rates. Our~~rate environment, an increase in interest bearing deposits and corresponding decrease in non-interest bearing deposits both related to deposit flows and the impact of the Inland acquisition. The ratio of our average non-interest bearing deposits to total average deposits ~~ratios were 36.3%~~was 28.8% during the three months ended ~~March 31,~~September 30, 2023, compared to ~~41.7%~~39.7% during the three months ended ~~March 31,~~September 30, 2022. The ratio of our average non-interest bearing deposits to total average deposits was 32.0% during the nine months ended September 30, 2023 compared to 40.9% during the nine months ended September 30, 2022. We had ~~$537.6~~$549.1 million in brokered time deposits at ~~March 31,~~September 30, 2023 and $251.5 million at December 31, ~~2022.~~2022, which represented 7.9% 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 ~~95.4%~~95.2% at ~~March 31,~~September 30, 2023 compared to 96.0% at December 31, 2022.

The following table shows time deposits and other time deposits of $250,000 or more by time remaining until maturity as of ~~March 31,~~September 30, 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	$	203,184	$	19,199	$	222,383	$	4,949	$	482,053	$	102,859	$	584,912	$	39,859
Over three months through six months		231,944		31,587		263,531		10,587		530,265		77,399		607,664		20,149
Over six months through 12 months		625,127		103,249		728,376		41,999		381,935		111,006		492,941		36,256
Over 12 months		29,530		12,031		41,561		6,532		52,800		19,422		72,222		9,171
Total	$	1,089,785	$	166,066	$	1,255,851	$	64,067	$	1,447,053	$	310,686	$	1,757,739	$	105,435

Total estimated uninsured deposits, were $1.8 billion and $1.6 billion as of ~~March 31,~~September 30, 2023 and December 31, ~~2022.~~2022, and represented 26.1% and 28.2% of total deposits, respectively.

Short Term and Long 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. ~~The Bank's maximum FHLB borrowing capacity is limited to 35% of total assets, subject to the availability of proper collateral.~~ At ~~March 31,~~September 30, 2023 and December 31, 2022, we had ~~maximum~~an available borrowing capacity from the FHLB of ~~$1.9~~$2.0 billion, subject to the availability of collateral.

At ~~March 31,~~September 30, 2023, ~~fixed-rate~~the Company had $640.0 million of FHLB advances ~~totaled $25.0 million,~~outstanding with ~~an interest rate of 4.86% and maturity in April 2023. Total variable rate FHLB advances were $600.0 million at March 31, 2023, with interest rates~~a maturities ranging from ~~4.70%~~November 2023 to ~~5.05% that may reset daily, and with maturities between May 2023 and June~~December 2023. The ~~Bank's required investment~~company also had $20.0 million a term loan outstanding maturing in ~~FHLB stock is $4.50 for every $100~~May 2026, and a $15.0 million revolving line of credit drawn, maturing in ~~advances. Refer to Note 3—Securities for additional discussion.~~May 2024.

~~We have~~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 ~~March 31,~~September 30, 2023 and December 31, 2022. The ~~Bank~~Company pledges loans as collateral for any borrowings under the Federal Reserve Bank discount window.

As of March 31, 2023, the Bank was participating in the Bank Term Funding Program ("BTFP") with the Federal Reserve Bank, a new lending program that provides liquidity to federally insured depository institutions. the BTFP offers loans of up to one year to banks, savings associations, credit unions, and other eligible depository institutions pledging U.S. Treasury securities, U.S. agency debt and mortgage-backed securities and other qualifying assets as collateral. These assets are valued at par. Under the terms of the BTFP, the Bank has pledged certain securities with an aggregate value of $221.7 million as

collateral. Advances under the BTFP are limited to the value of eligible collateral pledged. As of March 31, 2023, all of the eligible collateral pledged by the Bank remains eligible for potential advances. The Bank did not borrow from the program during the three months ended March 31, 2023. Refer to Note 3–Securities in our Unaudited Interim Condensed Consolidated Financial Statements include in this report for additional discussion.

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


	Three Months Ended March 31,						Nine Months Ended September 30,
	2023			2022			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	$	551,501		$	260,056		$	471,811		$	424,324
Maximum outstanding at any month-end period during the year		625,000			355,000			675,000			735,000
Balance outstanding at end of period		625,000			280,000			640,000			600,000
Weighted average interest rate during period		4.25	%		0.57	%		3.67	%		1.43	%
Weighted average interest rate at end of period		4.91	%		0.49	%		5.51	%		3.07	%
Federal funds purchased:
Average balance outstanding	$	2,778		$	—		$	916		$	842
Maximum outstanding at any month-end period during the year		—			—			—			45,000
Balance outstanding at end of period		—			—			—			—
Weighted average interest rate during period		5.30	%	N/A				5.30	%		2.32	%
Weighted average interest rate at end of period		0.00	%	N/A				0.00	%		0.00	%
Bank Term Funding Program:
Term Loan
Average balance outstanding	$	—		$	—		$	6,593		$	—
Maximum outstanding at any month-end period during the year		—			—			20,000			—
Balance outstanding at end of period		—			—			20,000			—
Weighted average interest rate during period	N/A			N/A				7.53	%	N/A
Weighted average interest rate at end of period	N/A			N/A				7.62	%	N/A
Revolving Line of Credit:
Average balance outstanding	$	—		$	—		$	4,945		$	—
Maximum outstanding at any month-end period during the year		—			—			15,000			—
Balance outstanding at end of period		—			—			15,000			—
Weighted average interest rate during period	N/A			N/A				7.88	%	N/A
Weighted average interest rate at end of period	N/A			N/A				7.38	%	N/A

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 ~~$22.4~~$22.8 million, from $15.4 million at December 31, 2022 to ~~$37.8~~$38.2 million at ~~March 31,~~September 30, 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 ~~March 31,~~September 30, 2023, Byline Bank had maximum borrowing capacity from the FHLB of ~~$1.9~~$2.6 billion and ~~$1.0 billion~~$734.8 million from the Federal Reserve Bank (“FRB”). As of ~~March 31,~~September 30, 2023, Byline Bank had open FHLB advances of ~~$625.0~~$640.0 million and open letters of credit of ~~$25.2~~$19.7 million, leaving us with available aggregate borrowing capacity of ~~$1.4~~$1.0 billion based on collateral pledged. In addition, Byline Bank had uncommitted federal funds lines available of $135.0 million ~~at March 31, 2023, $786.0~~and $734.8 million available under the FRB discount window ~~and $221.7 million under the BTFP~~line at ~~March 31,~~September 30, 2023. ~~Our cash and cash equivalents plus secured borrowing capacity to total estimated uninsured deposits was 121.4% at March 31, 2023.~~

As of December 31, 2022, Byline Bank had maximum borrowing capacity from the FHLB of $2.5 billion and $804.6 million from the FRB. As of December 31, 2022, Byline Bank had open ~~FHLB~~ advances of $625.0 million and open letters of credit of $13.5 million, leaving us with available aggregate borrowing capacity of $1.0 billion based on collateral pledged. In addition, Byline Bank had an uncommitted federal funds line available of $135.0 million and $804.6 million available under the FRB discount window line at December 31, 2022. ~~Our cash and cash equivalents plus secured borrowing capacity to total estimated uninsured deposits was 124.8% at December 31, 2022.~~

~~The~~On October 13, 2016, the Company ~~is currently party to~~entered into a $30.0 million revolving credit agreement with a correspondent ~~bank with availability of up~~bank. Through subsequent amendments, the revolving credit agreement was reduced to $15.0 ~~million that matures on October 6, 2023.~~million. The amended revolving line of credit bears interest at either SOFR plus 195 basis points or ~~the~~ Prime Rate minus 75 basis points, not to be less than 2.00%, based on the Company’s election, which is required to be communicated at least three business days prior to the commencement of an interest period. If the Company fails to provide timely notification, the interest rate will be Prime Rate minus 75 basis points. 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, each subject to the existing Negative Pledge Agreement dated October 11, 2018, as amended. At ~~March 31,~~September 30, 2023, the term loan had an interest rate of 7.62%. At September 30, 2023 the line of credit had a $15.0 million outstanding balance and an interest rate of 7.38%. At December 31, 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, 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.

During October 2023, Byline Bank pledged additional loan collateral from the merger of Inland Bank. Collateral was added to both the Federal Reserve Bank discount window and Federal Home Loan Bank of Chicago with borrowing capacity increasing by $146.8 million and $131.5 million, respectively. At November 1, 2023, our total borrowing capacity was $2.0 billion.

Capital Resources

Stockholders’ equity at ~~March 31,~~September 30, 2023 was ~~$795.7~~$919.9 million compared to $765.8 million at December 31, 2022, an increase of ~~$29.8~~$154.1 million, or ~~3.9%~~20.1%. The increase was primarily driven by ~~net income~~an increase in retained earnings and ~~unrealized gains~~Inland acquisition, offset by a decrease in accumulated other comprehensive ~~losses~~loss during the ~~three~~nine months ended ~~March~~September 30, 2023, reflecting the unrealized losses in our available-for-sale securities portfolio of $178.8 million compared to $151.9 million as of December 31, 2023.

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 ~~March 31,~~September 30, 2023, Byline Bank exceeded all applicable regulatory capital requirements and was considered “well-capitalized.” There have been no conditions or events since ~~March 31,~~September 30, 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
March 31, 2023	Amount		Ratio			Amount		Ratio			Amount		Ratio
September 30, 2023																Amount		Ratio			Amount		Ratio			Amount		Ratio
Total capital to risk weighted assets:
Company	$	931,827		13.19	%	$	565,374		8.00	%	N/A		N/A			$	1,096,646		13.17	%	$	666,327		8.00	%	N/A		N/A
Bank		884,077		12.55	%		563,335		8.00	%	$	704,168		10.00	%		1,063,902		12.81	%		664,655		8.00	%	$	830,819		10.00	%
Tier 1 capital to risk weighted assets:
Company	$	770,494		10.90	%	$	424,031		6.00	%	N/A		N/A			$	926,577		11.12	%	$	499,745		6.00	%	N/A		N/A
Bank		797,744		11.33	%		422,501		6.00	%	$	563,335		8.00	%		968,833		11.66	%		498,491		6.00	%	$	664,655		8.00	%
Common Equity Tier 1 (CET1) to risk weighted assets:
Company	$	725,494		10.27	%	$	318,023		4.50	%	N/A		N/A			$	839,577		10.08	%	$	374,809		4.50	%	N/A		N/A
Bank		797,744		11.33	%		316,876		4.50	%	$	457,709		6.50	%		968,833		11.66	%		373,868		4.50	%	$	540,032		6.50	%
Tier 1 capital to average assets:
Company	$	770,494		10.46	%	$	294,524		4.00	%	N/A		N/A			$	926,577		10.75	%	$	344,746		4.00	%	N/A		N/A
Bank		797,744		10.85	%		293,994		4.00	%	$	367,492		5.00	%		968,833		11.25	%		344,526		4.00	%	$	430,657		5.00	%


	Actual					Minimum Capital Required					Required to be Considered Well Capitalized
December 31, 2022	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total capital to risk weighted assets:
Company	$	900,806		13.00	%	$	554,436		8.00	%	N/A		N/A
Bank		852,047		12.34	%		552,507		8.00	%	$	690,633		10.00	%
Tier 1 capital to risk weighted assets:
Company	$	751,887		10.85	%	$	415,827		6.00	%	N/A		N/A
Bank		778,128		11.27	%		414,380		6.00	%	$	552,507		8.00	%
Common Equity Tier 1 (CET1) to risk weighted assets:
Company	$	706,887		10.20	%	$	311,870		4.50	%	N/A		N/A
Bank		778,128		11.27	%		310,785		4.50	%	$	448,912		6.50	%
Tier 1 capital to average assets:
Company	$	751,887		10.29	%	$	292,258		4.00	%	N/A		N/A
Bank		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 ~~March 31,~~September 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 ~~March 31,~~September 30, 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 ~~three~~nine months ended ~~March 31,~~September 30, 2023 the Company received ~~$6.0~~$23.5 million in cash dividends from Byline ~~Bank.~~Bank, in order to pay the required interest on its outstanding subordinated note, junior subordinated debentures in connection with its trust preferred securities interest, principal and interest payments related to its term note and revolving line of credit, and to fund other Company-related activities. For the year ended December 31, 2022, the Company received $24.0 million in cash dividends from Byline Bank, in order to pay the required interest on its outstanding subordinated note and junior subordinated debentures in connection with its trust preferred securities interest, ~~pay the required interest on its subordinated notes,~~ 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 ~~outstanding~~ common stock. The program is in effect from January 1, 2023 until December 31, 2023, unless terminated earlier. ~~Refer to Note 18—Stockholders’ Equity, contained in Item I of this report for additional information.~~

We did not purchase any shares under the stock repurchase program during the three and nine months ended September 30, 2023. We purchased 174,249 shares at a cost of $4.2 million under our previously authorized stock repurchase program during the three months ended ~~March 31, 2023. We purchased 282,819~~September 30, 2022, and repurchased 689,068 shares at a cost of ~~$7.6~~$17.3 million ~~under our stock repurchase program~~ during the ~~three~~nine months ended ~~March 31,~~September 30, 2022.

On ~~April 25,~~October 24, 2023, the Company's Board of Directors declared a cash dividend of $0.09 per share, payable on ~~May 23,~~November 21, 2023, to stockholders of record of the Company's common stock as of ~~May 9,~~November 7, 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% and maturities up to ~~2050.~~2053. Variable rate loan commitments have interest rates ranging from ~~1.75%~~3.00% to ~~13.75%~~18.00% and maturities up to ~~2048.~~2049.

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 and loans.~~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.

7178

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 ~~March 31,~~September 30, 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):


	March 31, 2023							September 30, 2023
			Fair Value							Fair Value
	Notional		Asset		Liability			Notional		Asset		Liability
Interest rate swaps designated as cash flow hedges	$	550,000	$	40,438	$	—		$	650,000	$	47,488	$	(1,633	)
Other interest rate derivatives		577,363		15,053		(15,085	)		703,876		29,514		(29,008	)
Other credit derivatives		6,454		—		—			1,198		—		—

See Note 1516 of our Unaudited Interim Condensed Consolidated Financial Statements as of ~~March 31,~~September 30, 2023, included in this report, and Note 21 of our Consolidated Financial Statements, included in our Annual Report on Form 10-K for the year ended December 31, 2022 for additional information on derivatives.

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") and~~ merger-related expenses, adjusted for applicable income tax. Management believes the significant items are not indicative of or useful to measure ~~our~~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, ~~and ROU asset~~ and 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 ~~our~~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 ~~our~~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 ~~our~~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 ~~our~~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 credit losses. ~~The~~Management believes this metric demonstrates income excluding the tax provision or benefit and the provision for credit losses, and enables investors and others to assess ~~our~~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 and~~ merger-related expenses. Management believes the metric is an important measure of ~~our~~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 credit losses, divided by average assets. ~~The~~Management believes this ratio demonstrates profitability excluding the tax provision or benefit and excludes the provision for credit losses.

•

~~“Adjusted~~ “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 and merger-related expenses.~~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.

•

"Net 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.

7379

•

~~"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.~~

•

“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 ~~our~~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 ~~our~~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 ~~our~~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 March 31,					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)	2023			2022		2023			2022		2023			2022
Net income and earnings per share excluding significant items
Reported Net Income	$	23,945		$	22,311	$	28,222		$	22,656	$	78,274		$	65,250
Significant items:
Impairment charges on assets held for sale		20			—
Impairment charges on assets held for sale and ROU asset							394			—		414			—
Merger-related expense		489			—		6,307			—		8,187			—
Tax benefit		(56	)		—		(1,617	)		—		(1,903	)		—
Adjusted Net Income	$	24,398		$	22,311	$	33,306		$	22,656	$	84,972		$	65,250
Reported Diluted Earnings per Share	$	0.64		$	0.58	$	0.65		$	0.61	$	1.98		$	1.73
Significant items:
Impairment charges on assets held for sale		—			—
Impairment charges on assets held for sale and ROU asset							0.01			—		0.01			—
Merger-related expense		0.01			—		0.15			—		0.21			—
Tax benefit		—			—		(0.04	)		—		(0.05	)		—
Adjusted Diluted Earnings per Share	$	0.65		$	0.58	$	0.77		$	0.61	$	2.15		$	1.73


	As of or For the Three Months Ended March 31,					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)	2023			2022		2023			2022		2023			2022
Adjusted non-interest expense:
Non-interest expense	$	48,800		$	44,555	$	57,891		$	46,178	$	156,019		$	134,506
Less significant items:
Impairment charges on assets held for sale		20			—
Merger-related expenses		489			—
Less: Impairment charges on assets held for sale and ROU asset							394			—		414			—
Less: Merger-related expenses							6,307			—		8,187			—
Adjusted non-interest expense	$	48,291		$	44,555	$	51,190		$	46,178	$	147,418		$	134,506
Adjusted non-interest expense excluding amortization of intangible assets
Adjusted non-interest expense excluding amortization of intangible assets:
Adjusted non-interest expense	$	48,291		$	44,555	$	51,190		$	46,178	$	147,418		$	134,506
Less: Amortization of intangible assets		1,455			1,596		1,551			1,611		4,461			5,075
Adjusted non-interest expense excluding amortization of intangible assets	$	46,836		$	42,959	$	49,639		$	44,567	$	142,957		$	129,431
Pre-tax pre-provision net income:
Pre-tax income	$	32,238		$	28,612	$	38,134		$	30,513	$	105,711		$	85,232
Add: Provision for credit losses		9,825			4,995		8,803			4,176		24,418			15,079
Pre-tax pre-provision net income	$	42,063		$	33,607	$	46,937		$	34,689	$	130,129		$	100,311
Adjusted pre-tax pre-provision net income:
Pre-tax pre-provision net income	$	42,063		$	33,607	$	46,937		$	34,689	$	130,129		$	100,311
Impairment charges on assets held for sale		20			—
Impairment charges on assets held for sale and ROU asset							394			—		414			—
Merger-related expenses		489			—		6,307			—		8,187			—
Adjusted pre-tax pre-provision net income	$	42,572		$	33,607	$	53,638		$	34,689	$	138,730		$	100,311
Tax Equivalent Net Interest Income
Taxable equivalent net interest income:
Net interest income	$	75,718		$	58,736	$	92,452		$	68,875	$	244,336		$	189,238
Add: Tax-equivalent adjustment		208			236		248			228		663			701
Net interest income, fully taxable equivalent	$	75,926		$	58,972	$	92,700		$	69,103	$	244,999		$	189,939
Total revenues:
Net interest income	$	75,718		$	58,736	$	92,452		$	68,875	$	244,336		$	189,238
Add: non-interest income		15,145			19,426		12,376			11,992		41,812			45,579
Total revenues	$	90,863		$	78,162	$	104,828		$	80,867	$	286,148		$	234,817
Tangible common stockholders' equity:
Total stockholders' equity	$	795,650		$	788,671	$	919,945		$	747,565	$	919,945		$	747,565
Less: Preferred stock		—			—		—			—		—			—
Less: Goodwill and other intangibles		157,432			163,962		205,028			160,484		205,028			160,484
Tangible common stockholders' equity	$	638,218		$	624,709	$	714,917		$	587,081	$	714,917		$	587,081
Tangible assets:
Total assets	$	7,530,346		$	6,834,636	$	8,943,368		$	7,277,587	$	8,943,368		$	7,277,587
Less: Goodwill and other intangibles		157,432			163,962		205,028			160,484		205,028			160,484
Tangible assets	$	7,372,914		$	6,670,674	$	8,738,340		$	7,117,103	$	8,738,340		$	7,117,103
Average tangible common stockholders' equity:
Average total stockholders' equity	$	784,289		$	832,161	$	924,278		$	775,358	$	838,792		$	795,849
Less: Average preferred stock		—			9,974		—			—		—			3,288
Less: Average goodwill and other intangibles		158,181			164,837		202,978			161,292		172,806			163,053
Average tangible common stockholders' equity	$	626,108		$	657,350	$	721,300		$	614,066	$	665,986		$	629,508
Average tangible assets:
Average total assets	$	7,345,151		$	6,705,986	$	8,634,345		$	7,145,189	$	7,799,187		$	6,943,909
Less: Average goodwill and other intangibles		158,181			164,837		202,978			161,292		172,806			163,053
Average tangible assets	$	7,186,970		$	6,541,149	$	8,431,367		$	6,983,897	$	7,626,381		$	6,780,856
Tangible net income available to common stockholders:
Net income available to common stockholders	$	23,945		$	22,115	$	28,222		$	22,656	$	78,274		$	65,054
Add: After-tax intangible asset amortization		1,066			1,163		1,137			1,174		3,270			3,698
Tangible net income available to common stockholders	$	25,011		$	23,278	$	29,359		$	23,830	$	81,544		$	68,752
Adjusted Tangible net income available to common stockholders:
Adjusted tangible net income available to common stockholders:
Tangible net income available to common stockholders	$	25,011		$	23,278	$	29,359		$	23,830	$	81,544		$	68,752
Impairment charges on assets held for sale		20			—
Impairment charges on assets held for sale and ROU asset							394			—		414			—
Merger-related expenses		489			—		6,307			—		8,187			—
Tax benefit on significant items		(56	)		—		(1,617	)		—		(1,903	)		—
Adjusted tangible net income available to common stockholders	$	25,464		$	23,278	$	34,443		$	23,830	$	88,242		$	68,752

7581


	As of or For the Three Months Ended March 31,						As of or For the Three Months Ended September 30,						As of or For the Nine Months Ended September 30,
(dollars in thousands, except share and per share data)	2023			2022			2023			2022			2023			2022
Pre-tax pre-provision return on average assets:
Pre-tax pre-provision net income	$	42,063		$	33,607		$	46,937		$	34,689		$	130,129		$	100,311
Average total assets		7,345,151			6,705,986			8,634,345			7,145,189			7,799,187			6,943,909
Pre-tax pre-provision return on average assets		2.32	%		2.03	%		2.16	%		1.93	%		2.23	%		1.93	%
Adjusted pre-tax pre-provision return on average assets:
Adjusted pre-tax pre-provision net income	$	42,572		$	33,607		$	53,638		$	34,689		$	138,730		$	100,311
Average total assets		7,345,151			6,705,986			8,634,345			7,145,189			7,799,187			6,943,909
Adjusted pre-tax pre-provision return on average assets:		2.35	%		2.03	%		2.46	%		1.93	%		2.38	%		1.93	%
Net interest margin, fully taxable equivalent
Net interest income, fully taxable equivalent	$	75,926		$	58,972		$	92,700		$	69,103		$	244,999		$	189,939
Total average interest-earning assets		7,009,144			6,253,889			8,220,678			6,760,623			7,438,571			6,531,320
Net interest margin, fully taxable equivalent		4.39	%		3.82	%		4.47	%		4.05	%		4.40	%		3.88	%
Non-interest income to total revenues:
Non-interest income	$	15,145		$	19,426		$	12,376		$	11,992		$	41,812		$	45,579
Total revenues		90,863			78,162			104,828			80,867			286,148			234,817
Non-interest income to total revenues		16.67	%		24.85	%		11.81	%		14.83	%		14.61	%		19.41	%
Adjusted non-interest expense to average assets:
Adjusted non-interest expense	$	48,291		$	44,555		$	51,190		$	46,178		$	147,418		$	134,506
Average total assets		7,345,151			6,705,986			8,634,345			7,145,189			7,799,187			6,943,909
Adjusted non-interest expense to average assets		2.67	%		2.69	%		2.35	%		2.56	%		2.53	%		2.59	%
Adjusted efficiency ratio:
Adjusted non-interest expense excluding amortization of intangible assets	$	46,836		$	42,959		$	49,639		$	44,567		$	142,957		$	129,431
Total revenues		90,863			78,162			104,828			80,867			286,148			234,817
Adjusted efficiency ratio		51.54	%		54.96	%		47.35	%		55.11	%		49.96	%		55.12	%
Adjusted return on average assets:
Adjusted net income	$	24,398		$	22,311		$	33,306		$	22,656		$	84,972		$	65,250
Average total assets		7,345,151			6,705,986			8,634,345			7,145,189			7,799,187			6,943,909
Adjusted return on average assets		1.35	%		1.35	%		1.53	%		1.26	%		1.46	%		1.26	%
Adjusted return on average stockholders' equity:
Adjusted net income	$	24,398		$	22,311		$	33,306		$	22,656		$	84,972		$	65,250
Average stockholders' equity		784,289			832,161			924,278			775,358			838,792			795,849
Adjusted return on average stockholders' equity		12.62	%		10.87	%		14.30	%		11.59	%		13.54	%		10.96	%
Tangible common equity to tangible assets:
Tangible common equity	$	638,218		$	624,709		$	714,917		$	587,081		$	714,917		$	587,081
Tangible assets		7,372,914			6,670,674			8,738,340			7,117,103			8,738,340			7,117,103
Tangible common equity to tangible assets		8.66	%		9.36	%		8.18	%		8.25	%		8.18	%		8.25	%
Return on average tangible common stockholders' equity:
Tangible net income available to common stockholders	$	25,011		$	23,278		$	29,359		$	23,830		$	81,544		$	68,752
Average tangible common stockholders' equity		626,108			657,350			721,300			614,066			665,986			629,508
Return on average tangible common stockholders' equity		16.20	%		14.36	%		16.15	%		15.40	%		16.37	%		14.60	%
Adjusted return on average tangible common stockholders' equity:
Adjusted tangible net income available to common stockholders	$	25,464		$	23,278		$	34,443		$	23,830		$	88,242		$	68,752
Average tangible common stockholders' equity		626,108			657,350			721,300			614,066			665,986			629,508
Adjusted return on average tangible common stockholders' equity		16.49	%		14.36	%		18.95	%		15.40	%		17.72	%		14.60	%
Tangible book value per share:
Tangible common equity	$	638,218		$	624,709		$	714,917		$	587,081		$	714,917		$	587,081
Common shares outstanding		37,713,427			37,811,582			43,719,203			37,465,902			43,719,203			37,465,902
Tangible book value per share	$	16.92		$	16.52		$	16.35		$	15.67		$	16.35		$	15.67

7682

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 ~~March 31,~~September 30, 2023, we had a notional amount of ~~$1.1~~$1.4 billion of interest rate ~~swaps~~derivatives outstanding, which ~~includes customer swaps~~include derivatives that are designated as hedging instruments and ~~those on Byline Bank’s balance sheet.~~derivatives that are not designated as hedging instruments. 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 ~~March 31,~~September 30, 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		19.0	%		13.0	%		6.5	%		(4.67	)%		(11.79	)%		(21.49	)%		14.5	%		10.2	%		5.1	%		(3.7	)%		(8.9	)%		(14.0	)%
Dollar amount	$	388,105		$	368,598		$	347,308		$	310,861		$	287,658		$	256,027		$	55,489		$	38,930		$	19,577		$	(13,491	)	$	(33,177	)	$	(52,645	)
Year 2
Percentage change		21.4	%		14.3	%		6.9	%		(4.99	)%		(12.82	)%		(24.03	)%		18.3	%		12.6	%		6.2	%		(5.1	)%		(12.2	)%		(19.3	)%
Dollar amount	$	442,237		$	416,383		$	389,534		$	346,236		$	317,690		$	276,866		$	76,552		$	52,814		$	26,330		$	(20,727	)	$	(50,404	)	$	(80,154	)

For dynamic balance sheet and rate shifts, a gradual shift downward of 100 basis points would result in a ~~3.2%~~1.3% decrease in net interest income, and a gradual shift upwards of 100 and 200 basis points would result in ~~3.6%~~2.4% and ~~7.2%~~4.7% 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 ~~March 31,~~September 30, 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 ~~March 31,~~September 30, 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.

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

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

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 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 us at our discretion and will depend on a number of factors, including the market price of our stock, general market and economic conditions and applicable legal requirements.

The table below includes information regarding purchases of our common stock during the quarter ended ~~March 31,~~September 30, 2023. We did not purchase any shares of our common stock during the ~~first~~third 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

January 1 - January 31, 2023

16,166

$
22.97

—

1,250,000

February 1 - February 28, 2023

33,004

24.83

—

1,250,000

March 1 - March 31, 2023

18,831

24.65

—

1,250,000

Total

68,001

$
24.34

—


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, 2023		1,091	$	22.15		—		1,250,000
August 1 - August 31, 2023		1,548		22.07		—		1,250,000
September 1 - September 30, 2023		—		—		—		1,250,000
Total		2,639	$	22.10		—

(1)

All shares acquired during the three months ended ~~March 31,~~September 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.

7985

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)
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~~		~~Form of Byline Bancorp, Inc 2017 Omnibus Incentive Compensation Plan Restricted Share Award Agreement (Performance Based Vesting)~~
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 ~~March 31,~~September 30, 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.

(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.

8086

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: ~~May 5,~~November 3, 2023	By:	/s/	Roberto R. Herencia
			Roberto R. Herencia
			Chief Executive Officer
			(Principal Executive Officer)

Date: ~~May 5,~~November 3, 2023	By:	/s/	Thomas J. Bell III
			Thomas J. Bell III
			Executive Vice President, Chief Financial Officer and Treasurer
			(Principal Financial Officer)

8187


	Minimum Lease Payments
2023	$	129,511
2024		158,889
2025		122,555
2026		81,555
2027		39,544
Thereafter		7,454
Total	$	539,508


	Scheduled Maturities
2023	$	905,863
2024		324,165
2025		13,798
2026		6,925
2027 and thereafter		5,100
Total	$	1,255,851


Name of Trust	Aggregate Principal Amount March 31, 2023			Aggregate Principal Amount December 31, 2022			Stated Maturity	Contractual Rate at March 31, 2023			Interest Rate Spread
Metropolitan Statutory Trust 1	$	35,000		$	35,000		March 17, 2034		7.70	%	Three-month LIBOR + 2.79%
First Evanston Bancorp Trust I		10,000			10,000		March 15, 2035		6.65	%	Three-month LIBOR + 1.78%
Total liability, at par		45,000			45,000
Discount		(7,558	)		(7,662	)
Total liability, at carrying value	$	37,442		$	37,338


	BYB Plan
	Number of Shares		Weighted Average Exercise Price		Intrinsic Value		Weighted Average Remaining Contractual Term (in Years)
Beginning balance, January 1, 2023		768,564	$	11.31	$	8,960		2.5
Exercised		—
Expired		—
Ending balance outstanding at March 31, 2023		768,564	$	11.31	$	7,922		2.2
Exercisable at March 31, 2023		768,564	$	11.31	$	7,922	$	2.2


	FEB Plan
	Number of Shares		Weighted Average Exercise Price		Intrinsic Value		Weighted Average Remaining Contractual Term (in Years)
Beginning balance, January 1, 2023		162,288	$	11.66	$	1,836		2.5
Exercised		—
Expired		—
Ending balance outstanding at March 31, 2023		162,288	$	11.66	$	1,617		2.2
Exercisable at March 31, 2023		162,288	$	11.66	$	1,617		2.2