BY - Earnings call transcript Q3 2019

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Operator

Good day, and welcome to the Byline Bancorp Third Quarter 2019 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]

I would now like to turn the conference over to Tony Rossi of Financial Profiles. Please, go ahead.

Tony Rossi

Andrew. you, Thank and the everyone, for us joining Good Bancorp thank third for Byline call. quarter today morning, you XXXX earnings

be Byline's Investor presentation slide website for this the using the of Relations and will presentation. to Events of discussion visit morning. as page Presentations access our Please We part a

results risks with factors like of These actual future the performance different financial Company's any condition I'd to discussed cause this begin, available to you we that Various call respect be to conference from Bancorp by the are future materially implied or on and that such results website. involve the Byline SEC in factors expressed Before could filings, which remind contains uncertainties. forward-looking forward-looking Company's statements and statements. are

forward-looking the the any the during measures, which The measures. disclaims obligation well made reconciliation Management refer GAAP but any supplement, most comparable for to discussed of to today update to the to non-GAAP not as contains to statements may press other Company as the substitute directly GAAP available are on quantitative non-GAAP call. information be measures. website, financial the The release intended and

over I'd And turn with CEO. to like Alberto and the that, President call Paracchini, to Alberto?

Alberto Paracchini

Good for CFO; call. Chief our me Tony. on our call call, and We you, the Officer. joining Corby, morning, our this first earnings to and With morning. Thank are Owen appreciate welcome Credit you third quarter everyone us all of his today Beacom, Lindsay

passing more will then walk our the open Lindsay, and highlights for for of our financial through call the an with remarks before of key and come start components results performance give the I'll practice, closing quarter to you you I call in who call the over our questions. detail. back with is As will the overview

the you Investor can section of comments a find can website. reminder, help our our Relations with a As the in you of follow deck that

rate We deck. $XX.X diluted Earnings by in delivered profitability at third strong the earnings and of earnings conversion-related share. $X.XX in a million X Slide in per and and at solid per or or for tougher merger came diluted Adjusting characterized quarter. another on $X.XX Starting environment quarter the a share. charges, million despite $XX.X came margin

fee Profitability X.X% and adjusted continued showed basis with its of trend despite TCE good and basis. on ratio basis ROAA and from increasing spread an XX.X% quarter second positive points points categories. basis year-over-year the and ROATCE revenue balance income on our increased XX Overall, by a XXX respectively, between

and increased growth offset yields, point a quarter, from income net from with and X.XX%. marginally XX by declined The points and second to in benefited XX prior interest consistent the higher driven quarter. assets the funding margin moderated expectations both further. accretion increase income in basis by our basis in The X% X.X% which Our guidance by the in margin, our earning at increased excluding costs, margin which came provided loan we

value charges on loans, revenue fair our asset. offset driven Non-interest on largely by from higher QX, income sale by X.X% from by servicing government-guaranteed partially gain higher increased

and for From standpoint, quarter flat a loans up a were business basis. on year-over-year the XX%

characteristics. cycle, million, saw and environment our chase in Total competitive opportunities across the and C&I remain of small and activity with our and reward to The This quarter, led businesses remains were important acquired margins, risk fair it's given market we stage a disciplined, lending poor originations manage rate of payoff portfolio. not and $XX amount business. by the

million forward. business response quarter-over-quarter grew development and of efforts to Deposits as the solid Pipelines and primarily to the $XX the low-cost costs and taken to talent in from coming additional billion core and we were of end that growth quarter accounts. will the contribute Deposit were added environment of quarter our $X.X rate ranks outlook. flat going at stood actions end with at reflective lending our

XX.X% from to will a that Adjusted and forward. professional improved quarter. of the not ratio fees efficiency the for result Our anticipate second projects efficiency to higher recur we increased ratio tied merger conversion going largely as expenses,

As we consolidating levels, better if our XXXX, traffic, branches maintaining evaluate we location. proximity since or have and behavior, done and our network to assess recap determine branch continually other activity in the we're customer to off

with This minimal and three convenience. can be service one levels be can consolidated branches quarter, that another overall customer identified we and that impact repurposed

We the of first quarter expect these during occur to activities XXXX.

anticipate to consolidation approximately $XXX,XXX, is in it in million annual $X.X of The expected cost to a one-time generate and savings. charge result we

look in done the those we've savings business. As of portion to the into will a past, reinvest we back

NPLs guaranteed excluding and basis partially an one by our over quarter, the of the quality downgrade standpoint, to points loans, XX of relationship due one loan. increased portions From asset government-guaranteed commercial second

XX resolution. to We increased basis with in basis taken gradually quarter increased moderate levels to for second due XX reserves quarter. allowance the expense points specific nearing Provision charge-offs the charge-off anticipate declined Net primarily the on points. loans fourth to and the from to quarter, charge-offs

I'd pass over like call to that, the With to Lindsay.

Lindsay Corby

morning, Thanks, review will with start I Slide on of X our portfolio. loan lease a everyone. Alberto. and Good

in of in decrease quarter. leases a and level primarily was Our total loans September loans $XX at payoffs $X.X The higher leases million the paydowns XX, and prior a billion from total decrease of to and were due quarter. net the

to million Payoff came at in second $XXX in quarter. the $XXX million compared

in portfolio a the commercial and slight We estate from increase portfolio see real commercial the payoffs the saw quarter. during continue to

portfolio originated million approximately Our increased loan net. $XXX

acquired in related a loan construction million portfolios. The growth on the not growth the decrease originated, natural business. offset $XXX remainder in our acquired commercial, portfolio. across our was spread movement of stems payoffs by estate, our Approximately paydowns relationships nicely originated in portfolio to was to real decrease half from commercial the and The core and considered to and and the portfolio the loans

X, Moving to lending government-guaranteed our Slide business.

more to disclosures our around this have and story to include others investors business. We listened following

to Small servicing loans. Capital is Our dedicated team Business government-guaranteed originating and

income. loan nationally be a lender a on is higher yield, business gain ranked SBA to and sale, and and SBA sell one the We a We currently and This unguaranteed We guaranteed market sheet and fee $X.X portion premium. number billion we retain portion that manage are for XX in USDA the average into top Illinois higher-return in on loans. balance Wisconsin. servicing produces higher-risk, continue the

money to attributed increases X, to our $XX.X our checking total by was our Moving On our billion on time increases market, in market growth and $X.X was deposits. from interest-bearing to interest-bearing and Slide deposits at accounts XX. money balances. driven million The primarily The September customer. growth in checking, commercial increased

offset these to in a non-interest-bearing of payments growth was estate during tax $XX quarter. demand due decline deposits million by partially The real areas the

and seen have in We rebound October date. balances currently million to $XX up are

increased due lower points, non-interest-bearing point balance the which costs deposit was to the increase Our average quarter. in the had increase basis is from of deposits total X the The down we primarily previous X third basis in quarter.

Our deposits management was which proactive of cost funding. of interest-bearing unchanged represents our at X.XX%, the

result duration our have maturities. on levels a shortening CDs current we deposit, to our the positioned time As of at below reprice their

condition, for expect in So deposits cost assuming these decline rates the deposits. see renew, to as and time our the change a no we of market in outlook

during benefit of first impact the in QX half see XXXX. and the seeing begin will we We will additional

X. and to Moving Net income interest margin. Slide

asset a result Our the of net higher of was $X.X higher or acquisition, earning and full income increased the quarter margin levels. interest million This the impact X.X%.

increased interest points last contributed to the points net the XX in quarter, Our basis to basis quarter. basis third XX to margin the quarter. Accretion in XX from third X.XX% points income margin up

was margin line net interest in at our Excluding accretion income, X%. our expectations with

cuts to average portfolio and The Approximately XX% XX decrease declining yield, since XXX decrease quarter average prime excluding loan from occurred that to basis yields, a the in loan was the rate the and of tied floating to X.XX% lease due point to due is loan income excluding basis was during the accretion accretion primarily our quarter. income previous X.XX%. point

certain during began maturing the with lower expectations promotional we time improve duration strategies on of with earnings rates. implemented rate our with rates CDs shortened CDs, products. quarter floating deposits, replacing market to reduced replacing particularly other by We the money and We deposits our

And third, to pay rising XXXX interest against were in $XXX were hedge entered fixed The in million we swaps rates. swaps unwound our and September. used

able were to rate securities the exposure. investment decrease variable portfolio to portion a we addition, In of our reposition

third quarter, and despite prior income non-interest X. non-interest our the Slide decline equity a or the gains to Turning the income securities fair In quarter, $X.X in security of increased on sales. from million by X.X% $XXX,XXX value on

government-guaranteed due $X.X with increase increase loan sales. to net The was the of loans of $XX.X the quarter compared prior on during quarter. gains sold government-guaranteed in We sold loans $XX.X million primarily in million third our million a

fair up million to Due XX assumptions, the Net additional was from asset, prior points speed average $X.X during an quarter servicing adjustment XX.XX%. premiums increased we which basis received increased prepayment on our recorded the to quarter. $XXX,XXX value

Slide X. to Moving

our Let's look non-interest at expense.

of Our these in significant quarter. including core for Adjusting on from merger-related third prior sale. both conversion system for charges held quarter expenses, our $X.X the and million items periods, assets million expense items impairment expenses included increased non-interest $X.X expenses,

professional the project-related and $X.X operations increase of expected In to addition by higher approximately fees. $X.X not to personnel Park that Bank fees Oak million of a quarter driven in reoccur. full included in the higher River the impact million was of expense are Community costs The professional Forest,

the expect projected in of to for the Park on the system while We improve reinvesting additional mentioned, remain conversion remainder complete, second should Forest improved of business. our the year. efficiencies to by And branch With Oak efficiencies beginning of in consolidation XXXX. continuing to the rebranding we River and Alberto half next also as contribute branch realize efficiency focused the our the

Turning quality. We'll look asset at take a to XX. Slide

prior Our a points basis downgrades end at quarter. assets relationship government-guaranteed basis non-performing of and the quarter, commercial points a the the XX assets primarily XX of U.S. from due loan of to total during the third increased to

$X.X XX, government-guaranteed included balances. September non-performing our of assets loans OREO As and of million

to was points points, total prior Excluding basis our quarter. XX up basis government-guaranteed at XX non-performing end loans NPLs, the the of from loans

or specific in Our and U.S. the $X.X of of loans charge-offs unguaranteed points loans XX basis net versus leases and net on quarter of the points a portion all XX year-ago. Virtually average government-guaranteed leases for basis to charge-offs million the and with loans basis the represent Year-to-date XX were of charge-offs reserves. were attributed points the quarter loans primarily quarter. during

charge-offs in allowance our and which was $X.X loan resulted Our cover an expense for in increase losses. million, provision

offset the $XX The third acquired loan. release loans million quarter leases for $X.X originated for of of allocations and included million provision partially by

that the as our increases portion as government-guaranteed the to the into of unguaranteed loans, year The portfolio we well migration originated portfolio higher have the reflects provision acquired reserves. portfolio, seen general of the particularly of level this our growth in

basis XX increased of points at third XX loan of lease allowance our coverage the portion our NPLs, loans quarter leases for points for was and to And XX%. basis quarter. provision of from end total prior the excluding government-guaranteed Our the and losses the

addition in and accounting portfolio. XXX as allowance the losses also of we impacting metric, for to the adjustments lease and basis with our September loan the acquisition allowance loan points acquisition our of In conjunction percent the leases. a analyze acquired accounting and total allowance adjustments XX, plus traditional represented At lease loans

pass With like to call to that, would back the I Alberto.

Alberto Paracchini

very like we seven work quarter a Forest less the to conversions integration the successful employees hard the I'd River acknowledge Thank transaction. in for had months. our you, in thank Lindsay. and of In than and all conversion of two Oak closing, Park with completing busy

deposits. market remains for said and loans previously, I the As very environment competitive both

late it's to the fair and think the respect particularly in to space. structure, cycle we're CRE seeing I rate that behavior say both in with

continue to customers opportunities and flow both of terms we deal said, see and talent. good That in

of feel add we on sides business quarter, bankers selectively our both This retail forward. talented will that the the growth commercial going continue to contribute we to and

call With that, to the open like for operator, I'd questions.

Operator

Stephens. begin question-and-answer ahead. question now comes Instructions] of Terry Please McEvoy The [Operator will session. We first from go the

Terry McEvoy

everyone. morning, Good

Alberto Paracchini

morning, Terry. Good

Lindsay Corby

morning, Terry. Good

Terry McEvoy

Slide for on guess Thanks I'll a X. start question that I with slide. adding

sectors food the are Within pie wondering industries any non-guaranteed have portion? in the chart. that in the just sector And that up restaurants services concentration, I'm industries? increase or that line been other in specific charge-offs there or within where any Is behind

Lindsay Corby

the come one particular food the We acquisition So particular more do of tend that, And it's loans. where just what's point business the really of But services, this to terms chart from the type of that's se see in of in no, than being show any terms per the unguaranteed really The to you diversity chart is uptick in the beyond in of portions are. charge-off, yes, originated. it's hasn't so pie then pretty piece of not terms of an been piece. diverse. one this really terms Terry, other. restaurants It

Terry McEvoy

deposits costs. a your what opportunities And trend just to quarter-over-quarter. like CD week, interest-bearing Thank got next I'm cuts to wondering as progressed? lower you. good Fed third flat the sounds really cost about lower And of ability thoughts the as then lower follow-up, just it quarter that are overall the your you've Did rates costs? are ongoing funding if

Lindsay Corby

Sure.

said decrease I really my going to you're the it the time in as So on going deposits of in terms here. see forward remarks,

that week, deposit with assuming rate do the help think you next us some side I will it occur, on will see So there. it the relief does cuts time and

Alberto Paracchini

just proactive just think Lindsay once outlook the what to Terry, we Yes. for addition add, proactive, If very said, in could probably I rates. changed I were

concerned the was gas to be the anticipating it Fed but it one-time we far was cut, took in was respect cuts would not in taking rates. action promotional – off rather the that as to with to rather cutting, we pricing foot it as going a going be So of several – anticipation

December, adding Lindsay think Fed think certainly that cut by potential and sure. if the see I followed to the in would rate we I another were for what said, week be on impact rates aggressive cutting So, in next more to

Terry McEvoy

great. you both. Thank Okay,

Alberto Paracchini

you. Thank

Operator

The go from KBW. next Michael Please question comes Perito of ahead.

Michael Perito

Hey. Good morning, guys.

Alberto Paracchini

Good Mike. morning,

Lindsay Corby

morning. Good

Michael Perito

the I to wanted guys out, to I trying you banking credit up that in commercial in of of business the here. losses kind kind charge-offs I'm elevated I on you expect relative business and lines. guess, traditional to obviously flush have mean, be transparent SBA very to been that what follow

company? a the of little your to, business piece But trying that get across a is look out, just charge-offs your as relative SBA so to trying at more be to insight I'm some peers flush country, such get to And because your I the seem as you sense is of overall lower. or think larger a

get have of your loss of And just there? comparative sense business? credit And about how for the have trying guys how a thoughts any some do compared you to your to you that in versus rates others is performance peers better

Alberto Paracchini

Sure.

So I'll take a stab Mike. at that,

to I your comparisons, business. pretty terms in question think run think I a peer diversified first we of

it officers – nature I loans. would development as meaning have view originating in general focused more are call SBA it we that Let's on business

Some pertains a have different. both verticals risk of particular the they on dynamics and in that our vertical as focus it are competitors certain or to maybe reward

of the It some charge-offs. relevant think I sure, to as kind of higher-risk So, is, business that our could for explain volatility. business some pertains banking variance. commercial a it to exhibits It higher also

you you quarters, gain on the So, side. credit certain in sale and both it on side on it see the see certainly

it quarter resolution charge-off activity. quarter to activity in think as an last relatively And I this respect being to the in think on to with second I saw I the resolution think quarter definitely levels, relative we commented previous moderate we quarters. uptick pertains

and resolution reserves with final to pointed assigned these closer loans think out lot fully charge-offs credits, pointed through were on I Lindsay get charge-offs And we I as occur. as on a do taken specific of them. charge-offs usually that's And when out,

think I charge-offs, higher your that are question do here. certainly to back So, going

this the I returns this look think relative adjusted tend here. at in originations to to risk at if our be business, competitors, Prime you and you our plus we look in can

make, well. as be last lower Some there think going probably the expect see and of charge-off would I fourth in I gradual bit our in tend lower point a would But and charge-offs you correspondingly to the think quarter levels to some see little forward. moderation competitors we I would

Michael Perito

clear the that then And some back very profitability was it the the deal the business Thanks. Ridgestone of I to as guys think the I you disclosures with think was provided, high. SBA on and helpful. just process Very IPO

but you of that's give And the trended could I'm us SBA how has ex well. kind and today, where on then it curious profitability as if over an profitability also the where couple trended and how maybe of today, that business bank the conversely last update the is, business years of is

Lindsay Corby

the We view one. don't segment we don't out We bank break Mike, two. as report. So the

a So, business, to think at at in We've and It's IPO I way simple through the the invested back way I most to process, people, continue process. technology, to invest it. look the is the look think Ridgestone go in good when we went profitability. obviously

ways we make efficient I day. every say So for look would continue to more to it

say, probably I'd that our that's not So we break best practice, do out.

And same in the of every terms day of remainder we the bank, continue the thing. doing

improve see bank to here we profitability we So, and it we entire as on as the continue look strategy. continue with at the our will

Alberto Paracchini

Yes.

there gain IPO. at we've premium – and to for I levels past, look acquired are we are a in And business given today, the – – would think you I as sale since us. since if that one frankly we – where been Mike business add don't said I prior thing is, the levels on have premium the it's

I think to portion. fact continue strong be premiums take to the to and guaranteed continue to advantage us, the will sell business of makes continue that sense the to

Lindsay business So owned things. said, consistent certainly add the we've been the to and since a couple it premiums since very IPO. of what on I'll Average very, have

that on for business. So of bodes the well the and model profitability the sale gain

floating from the The which acquired rates rise are to carry a rate loans, also you higher benefits portfolio we as given fact that on in business prime. those when getting you're the the tied know, relative to primarily

As business. continued the Lindsay said, in we've to invest

we here in origination don't can you look it look in – been historically have If you levels back but at think slide, what this think show I I business. that

point since that of you more in we've it the picture business terms owned since certainly IPO. performed importantly your clear pretty think I a give how has that So and to should

Michael Perito

guess capital opportunities, as you and kind where of a organic lastly, mentioned, obviously, my ago, there's closed question guys still think, And I pesky talent Got about just and of then repurchases adding debt River. are. And still and you quarterly just, it. I couple Oak quarters share just

capital some of opportunities but there's kind be than side, give more moderate organic the updated bit payoffs thought little potential the can of TCE for and with over back, nature, ratio is balance a if growth of sheet view strong stuff that broadening mean, I couple net the on years to you time? that of me seems a lots So still of an on or and curious that just and pretty

Alberto Paracchini

Yes.

obviously to think first – want the growth will organic we support the think I and capital company. of we foremost, to I utilize

for be to capital value that that ways look franchise to the deploy able doing further by and the done like Second, in in the past. of increase we've acquisitions

And in we to Board potentially that don't point. were look thirdly, to have the we an or if would then at see buyback certainly terms if look to a dividend ongoing establishing then we opportunities it's of we – shares our would with conversation outlook change, some

That think good we being said, this growth at we point, prospects. have

we the front if happy grow see on a later on and call path where I’m opportunities that. that. we've what has do we talk little done we in organically opportunities be respect we the We But about still support with in see the to capital want have sure well. that a to M&A somebody to question to that a to of have past the to and And continue make opportunities able level see to to we as acquisitions

Michael Perito

update Okay. as want to you well? environment, on up, you an then that M&A brought And there just since the give Albert, it any

Alberto Paracchini

conversations say that discussions I wouldn't and remained decreased. in I remains I I increased, it would say think the think wouldn't but activity it okay, environment that that has the it Yes. has I has front, usual also consistent. I mean, say meaning

privately know, smaller can primarily processes talking As particularly you're take that when about time. be to held, institutions these you tend

different patience of timing and that a And year past. be remained always course groups and that. the have for have in years' pretty place ownership has the would a conversations is long consideration you than consistent time. in say, have not of really been I with You that But to much level over the

Michael Perito

for you, guys it. Thank Appreciate Great. my taking questions.

Alberto Paracchini

Thank you, Mike.

Lindsay Corby

Thank you, Mike.

Operator

Liesch Andrew Sandler comes question ahead. of from next Please O'Neill. The go

Andrew Liesch

everyone. morning, Good

Alberto Paracchini

Good morning, Andrew.

Lindsay Corby

Andrew. morning, Good

Andrew Liesch

prime CD up clarity this Thanks it repricing for of of certainly you looks next based going coming offset help and the some year that into like on forward have quarter loans the amount that. reprice should on the and

But and the the that you you're if the on incredibly especially tough, side the have implemented to seeing in is lending that liability environment enough is pricing. I the knowing that look rate related market to challenging opportunities offset Is earning the on guys asset Chicago pressures and side? strategies there at

Lindsay Corby

Andrew, I ratio it's by don't Yes. a one-for-one think any means.

that there accretion thought there in cuts think if terms you're we feel Yes, this on down XX continuing do will predicted? income quarter do basis loan So going the compression yield we that be past to that go these have of in side are core the without you the points.

think compression we So going here But a one-for-one I slight forward. see don't it's ratio. will some

Andrew Liesch

And yes, Okay. other my step back. looks covered it – questions. you've I'll all like you've

Lindsay Corby

Thank you.

Alberto Paracchini

you. Thank

Operator

Please [Operator The ahead. Instructions] Nathan of go Race from comes Jaffray. question next Piper

Nathan Race

everyone. morning, Good

Alberto Paracchini

Good Nath. Hi, morning.

Lindsay Corby

Nath. morning, Good

Nathan Race

Just going XQ expected expecting you quarter, a about a on the in here that back fourth that the to given Andrew's for question. less basis is The margin Lindsay? than talked termination saw core we to swap little just compression that you're be

Lindsay Corby

say would will it depend. competitive deposit environment a It's with front. here dynamic I that the

with our be So in my margin consistent what you're seeing. pretty opinion, will

there some compression. However, be slight could

Nathan Race

the by a helpful. down Okay, little production And degree. understood. a year-over-year bit, gears decent That's loan Alberto, was changing

get standpoint maybe just just offset a of you made be to softer perhaps we the expect you're you've of growth of what to quarter more double-digit perhaps recently of traction and seeing the puts production hires low your kind So range? in more with just curious this in seeing and terms recent the maybe saw XQ the you're takes that some that to and if and from an

Alberto Paracchini

Yes.

So parts. I'll in take question two that

course higher portfolio quarter we was activity quarter, we remarks. the what certainly than prepared higher second this on over than the about seen in release as higher the on, far certainly growth talked of touched as we've and net First certainly year. the off, I and think, in as Payoff

terms the behavior. think, In late and we loans cases, request at we're are we're cycle real on think have look some – primarily This we and I offered is what estate books a and seeing we payoff we're taking customer. look the a I to people that's used at the the term the seeing or is, just structure I side being pass. on the

think and frankly Maybe simply too we on just don't rather liquidity just low the wait risk reward we'd for the think better We sit that is there. that is just and yield opportunities.

So your a hopefully bit that I of think question. answers

As important flow. far deal as I plenty and sake we margin. of being that And seeing, volume Deal Not think at-bats putting at stage deal good. looks for operate disciplined. volume get the we're that on putting has the protect profitably been this just to that flow is what's kind necessarily on of of getting flow at-bats. I the and trying mean, we're the

And you a wait can of them. to kind so that reward better opportunities take risk better that show of for advantage

off. after hires early as it pipelines do when, this I particularly the QX XXXX, expect really, to but what more to the see into call because that, non-solicitations is as added of very time. sometimes think far time hires, new of we bit – for being QX, just to they place, some of talented seeing build which a customers As the expect traction there's some more of takes number the of starting their we recently. and It little come a in in full That of we're a in see can't we've quarter, terms ranks will probably said, on of start in non-solicit bankers as through here period so to

hopefully gives that some that So you in regard. clarity

Nathan Race

appreciate I color. that. And lastly great expenses. on just That's then maybe Yes.

some As then you we the have look out and within the some but XXXX, relief also you professional yes, consolidation. on coming you hires have branch to also board, fees have

in it year, is guess, I to into expenses range $XX million the expect next $XX heading million operating So to fair Lindsay.

Lindsay Corby

Yes.

I fair. think that's

Nathan Race

Okay.

Lindsay Corby

Unless and hires Alberto goes more people.

Alberto Paracchini

I fair mean, number. think a that's I Yes.

to I pretty think add they Yes, but expenses, we has period of take advantage on certainly themselves was solid also the short-term an for to that. tend of well time. company, fair. opportunities short in When see it a bankers we will second comment impact pay Lindsay's relatively to

Lindsay Corby

Absolutely.

Nathan Race

opportunities Got are lines, bankers. it. to we Understood. guess this at I those commercial is where in kind just point disruption along a Is lenders steady quality the those and And slowing lastly that of that still state? are given cycle? Or add

Alberto Paracchini

still. when paid. slowdown people you year incentives And will probably the towards and end bonuses good know the usually as it because think usually and beginning here seeing that's of We're are I year well of the

through of are to we're a if But looking company. onto until year talking and they people wait So the we're happy still good the they’ll that compensation. time year make until end seeing their of the a we're of the getting change that, bringing that would still very to the people people get probably number we be

Nathan Race

Great the Okay. to hear. Thank all appreciate you. I color.

Operator

Janney question Martin of Montgomery next go The Scott. from comes Please Brian ahead.

Brian Martin

morning. good Hey,

Alberto Paracchini

morning, Good Brian.

Lindsay Corby

Good morning, Brian.

Brian Martin

activity more when couple marketplace XX kind activity fair today no next we of M&A months? doesn't there's versus at given look Hey, to I in feel lot the question quarters next just like or in least one difference, or people hiring say of follow-up than guess, Is today. it the a that the no pickup the talent over of you in Alberto are additions. confident on the last about, you've about talked transactions,

Alberto Paracchini

may to tough say would lot a conversation change That's you tough question be all I thing always something that of longer. always that, come long-term a a mean sudden question. I sometimes The take a that would because a can up seems one and it's what to thought

So on M&A it's to it's hard hard say the – always front. to

in your probably the would that talent, people talk you complex agree to comment sense be have relationships with tend I to In of with less conversations. and people, you terms those to tend

your company. to them get to trying You're join

good a story. have You

usually You opposed and a an home, a that's good conversation for have to to company. – of a the platform as looking sale they're easier

I So tend Brian. with comment to agree kind your first there would of

Brian Martin

of baseline the just that it of non-recurring kind but on Thank kind or or then to reset now others just are And even accretion, just lower, perfect. been resets there couple so pesky it normal there of me. it kind should Okay, something down Lindsay, has unusual with? you. was the a for be stair-step start just

Lindsay Corby

Yes. peak. million. a That's about definitely This there sizable question. view great a was $X.X our recovery of a In was

I it there, would Brian. So stair-step from

Brian Martin

I margin right. just a cuts, the next on to the more a back have All guys slows, impact maybe where the in points steps decline Okay. – three based it you I couple I comments what an one I to more not each – the lower, on drops kind basis it cuts have points on out And that it taken, about as then couldn't, appreciate XX it of the in of – the meetings. basis said couple guess if the just you mean in moderation scenario? scenario margin, and fair – but is that be how the the you mean, lower, what tying kind Lindsay, that less under have of does the necessarily but we far does margin XX more as be CDs is cut think throw wouldn't

Lindsay Corby

No. basis basis it. about margin. five points I about points, would it's three really of think We've every for about targeted XX to

level depend, to tie going wouldn't I given will that. but it out at any to it's again, So It point.

compress. I think it will

Brian Martin

in remind you loan the have guys Do portfolio? you just floors me, – guys do Okay.

a of is Or not that them. lot

Lindsay Corby

$XXX a about million. modest It's have We amount do floor. of

Brian Martin

look the execute Okay. then you've and in thing how you've I Alberto or whether there. how give guess of to last outlined? it of about, based thinking profitability XXXX just some about of as just year, All the kind start call context in on maybe unfolding talked you're it kind the with of you you kind seen your things be you to for the some your ability be Can efficiency pressures next improvement the ROA right. And you the just efficiency the – an as – see at level, of high whether revenue out

Alberto Paracchini

help revenue, talked we long environments changed. that certainly – Look I has at times general I in profitability pressure of Brian, also that it don't rate will favorable. rates, at interest put think turns change, more not that will you the times of if the interest the think and run in that business efficiencies of in guidance terms we've run about with kind like past. the and kind the

think the adapt financial thing right to run what a kind I as rates saying, I to at we'll more I point in If mind, to So all just continue to of us add with some long mean was challenging could were we accordingly for environment. the for environment decline, think I Lindsay it's and the run if one business institutions.

in So is I continue loans what's the deposits important we that just will both to business we fine. can people. reward balance be think think And add continue run that I the a for to continue and to we good can to run can degree play, with good grow risk long

Brian Martin

I appreciate the color guys. Okay. Thanks.

Operator

follow-up a go And we McEvoy from Terry have of Please ahead. Stephens.

Terry McEvoy

Thanks.

how just So acquired thinking I CECL? in loans your current of are reserve? current specifically, want just for follow-up. guess, And the I'm impact over mark your thoughts much come the to the of on would What about to reserve credit the

Lindsay Corby

Sure.

to recently just news are company, Terry emerging were from with CECL, the FASB. so out an regards that in came growth So we we thrilled

be won't at where we and delaying yet. be will we're disclosing we at this So time

So work. we running lot are of a We're doing parallel.

on our the to company an well way, delay however remain and emerging going implementation. we are growth to elect We’re

Terry McEvoy

you. Perfect. Thank

Alberto Paracchini

Terry. Thank you,

Operator

a we And go Michael follow-up Please Perito have KBW. from of ahead.

Michael Perito

actually I'm it. appreciate all so took guys. me, for the bullet Thanks, Thanks. set. Terry

Alberto Paracchini

problem. No

Operator

would like questions. any remarks. further over turn I back no see to conference the for management closing to I

Alberto Paracchini

take I today. year, have you to holiday Thank just the January. speaking season to that to next great we you. you. joining to to in We so you the Thank and in thank a don't end hope for after – speaking look forward look won't we And again, us you a we and actually I forward moment talk want case you quarter to again of to the you

Operator

Thank now presentation. attending for has conference today's concluded. you The

disconnect. now may You

Tony Rossi	Investor Relations at Financial Profiles, Inc.
Alberto Paracchini	President and Chief Executive Officer
Lindsay Corby	Executive Vice President and Chief Financial Officer
Owen Beacom	Chief Credit Officer
Terry McEvoy	Stephens Inc.
Michael Perito	Keefe, Bruyette & Woods, Inc.
Andrew Liesch	Sandler O'Neill & Partners L.P.
Nathan Race	Piper Jaffray and Company
Brian Martin	Janney Montgomery Scott LLC

Byline Bancorp (BY) 25 Oct 192019 Q3 Earnings call transcript