Earnings call transcript Q1 2023

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Operator

Good morning, and welcome to Byline Bancorp First Quarter 2023 Earnings Call. My name is Glenn, and I will be your conference operator today. [Operator Instructions] Please note, the conference call is being recorded.

At this time, I would like to introduce Brooks Rennie, Head of Investor Relations for Byline Bancorp to begin the conference call.

Brooks Rennie

Thank you, Glenn. thank First joining Quarter and the today everyone, Bancorp Byline XXXX morning, you us for for Good Earnings Call. Regulation via Investor with and the corresponding our accordance FD, is and call In slides. being earnings is release available website, webcast Relations our presentation on along with this recorded,

subject such that We to financial future on events the statements future today's caution risks, forward-looking to call that materially company's certain are filings. could cause would like and from The certain factors other statements and other SEC regarding Management disclosed to involve of statements uncertainties company. discussed. the performance that in are remind everyone made actual projections differ risk or its discussed or results factors those

slides measures, within and of to comparable but contain release. to supplement, GAAP refer may numbers which found the these substitute for intended can certain for most non-GAAP not we be measures. appendix In the directly earnings are addition, the Reconciliation

about risks provided excludes see in Inland Please guidance any additional financial the note the impact earnings For of disclosures non-GAAP and and Bancorp the the measures information statement release. forward-looking please transaction. uncertainties,

like I over Alberto conference President the With would to Bancorp. to of call Byline that, Paracchini, now turn

Alberto Paracchini

to Brooks, time call listen good for you in. We results. you, review Thank our quarter the joining everyone. this you Thank and morning, the first to of morning appreciate taking all

as website. the You please front. And our find deck to can always, on the referencing we be at morning refer will the disclaimer this

Credit Fucinato. and Treasurer, Bell; our and the on Tom Mark CEO, are call Chief Roberto our me this Herencia; Chairman Joining morning and CFO Officer,

other want recent over Roberto? on Roberto into took in events the to month few results comment items. industry I to the pass call the get to past a our Before that place and on the for the we quarter,

Roberto Herencia

Alberto, retirement by to of May on X. Ed first and start his Wintrust good all. effective and acknowledging to you, Founder morning would like I Wehmer, CEO Thank

being Ed Wintrust leadership, is [loan] highly market genuine under we and the a years, recognize human and and and institution, XX-plus and very his behalf to past in has supporter. wish had and Ed's want philanthropy. of during And well leading renowned that a He is Chicago grown the a in Wintrust, active also generous very been time has Over with has impact in into time has positive his him hearted appreciation a extend warm profound we the banking been Ed to who the friend his retirement. on our Board,

his new We also wish assignment. Crane well in Tim

acknowledge to We like express this with former affected and has and tragic Jim National how the sympathy can Equally Louisville, Byline of this We recent act our thoughts CEO on senseless in Kentucky, friends individuals, Scudder difficult imagine been. and Mike devastation would behalf families of month. also important, want well our to at and Ryan, prayers Old Mark know entire are the Old violence, everyone National. I their loss our and team, earlier only that suffered at Sander, and

to dedicate time call. during we us Alberto said, quarterly you As appreciate the this

Our results we're early discuss frankly, team bank month point fine exchange. and at from What not market it preparing some operations, of outlook it past good no And this naive. experiencing nonevent. events. because we time business and bank, March deposit to That's this do touch of us spends was say a best not Hearing executives whether as lightly for were outflows. amount another to gives or for the as a described way weeks those our was a April usual and transpired industry, we

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serving of in We live community and businesses and relationship-based consumers the within medium-sized branches who bank, Chicago our small- and are and areas a Milwaukee.

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most XX a and alone diversified governance these a run let by talented bank anchored our by this time industry, strong by Board ago, of by base. was in and period in group below done base, of time all call we proud banks Since people granular have loan formation deposit Directors, of are a the with All short a Byliners. diversified of years to a Byline community well the $XX books strong the we capital a X of billion, of

total to and group. peer industry below Our our ratio of the well deposits the for deposits is median uninsured

back rest Alberto, to actual quarter. view tell as we to as we such Alberto we a So the of how unexpected results. you. than proud believe for than nonevent, was usual, events opt team very you business prepare give was strong of the we one, show results I and share the it it you this Rather to are say rather a to a prefer and you of first what was

Alberto Paracchini

Thank you, our And moving on now to the quarter. results for Roberto.

you to the As walking will through Tom, before who the you detail over start usual, I'll our highlights by with provide on for the more results. call quarter passing

the Moving Page challenging optimistic X about rate on on of higher driven last a we deck. by outlook more call, spoke At XXXX, environment about economy. persistently more cautiously inflation being quarter's to cautious earnings the a notwithstanding and

expect organically, We add to to organization talent Bancorp. with it Inland complete our to grow merger continue and the

with in its mentioned fairly analogy, of communicating with being core own of the its with X the proactively Roberto business customers the our Madness. system gave responded As in basketball idiosyncratic version to remarks, out aside March employees lookout and the and the industry banks grounded we environment. Putting confidence by opportunities shook models, the his failure on arising accordingly for staying facts, and of

In the pleased business. of to and our business were operating resiliency notwithstanding model results environment, summary, our for the the with the and reflect quarter approach they we as

For basis on at quarter, quarter basis. up both was XX.X%. points, our ROTCE basis preprovision a XXX million across a income ROA put for of quarter, when was at slight Pretax a XX we which $XX.X year-over-year. on the share. decrease strong in came $X.XX but This the the linked and quarter, points up reported preprovision metrics compared of income and XX% the basis a previous XXX was pretax board. net EPS million to while Profitability $XX.X were points, strong ROA return per diluted and year-over-year

$XX record company income. assets in at rebound for solid X% noninterest came revenue reflective a in income the Revenues a quarter. was earning of linked by in million, growth The and up level and driven increase interest in

saw loan our annualized consistent We guidance increased sheet. balance continued eighth both solid quarter. quarter and or consecutive the end. stood billion and was to of X% quarter and last $X.X at loans with deposits. as of Loans This On growth million growth $XX in the by

to loans first slower environment, tends quarter notwithstanding our we solid in activity. continue we loans sold, primarily $XXX Net approximately million and of businesses. be see The originated the for coming of leasing and us from levels business commercial to seasonally

the and XXXX additional Payoff you to of at line XX% essentially utilization added material utilization quarter. we've context for, provide experience line we trends and result up on stress. recently draws We a market with as experienced note, a not prepared side in customer going did recent any On remained the flat activity or increased outbreak this the prior to of since back quarter from line utilization detail of what changes pandemic. some but

business than lending finished commitments, loan $XX the government-guaranteed quarter fourth the million Our lower in closed was with as expected, quarter. which,

slide without in particular As want to our the portfolio focus to an and added that X, highlighting additional XX appendix. Slides you the deck, on to deposit our on disclosures office and portfolio aside, on XX CRE I Slide we some point

Moving on to the side. liability

the customers, coupled was effects commercial the What competitive in business for quarter of see of million $XXX atypical and no portfolio created deposits. normally quarter and was quarter expected, matter media our billion during to deposits driven the most during of annualized would taxes a to the a as with first outflows, of end. of we environment $X.X that are Total to banks, by respect of and was stood different. part, with amplifying owners changed distributions the The typical First, X the was, failure year. by and this days. volatility the or with Seasonal be particularly of deposit at quarter by X% behavior grew what the

deal days happening, X, we to Fortunately, and we as out time, differences was basis. and as what between task. fact we our that point to those Roberto support in reaching the stood reinforce do explain customers after of on the the a of middle bank ready bankers, to as usual, a the the were spent material day-to-day crisis, great up them to our In March normally out noted, to the

expand customers new inquiries open wanting and We relationships prospects both also from to received or accounts. existing

we Some will relationships, result new and others on accounts of passed. in or these resulted

but points quarter basis quarter. betas shift customer environment, cycle-to-date is in deposits market-related and basis, XX in seasonality On cost in and interest-bearing came discuss at deposit for Tom an a behavior competition mix, During the deposit at in XXX total see addition increases deposit both respectively. prior will Deposit the stress, deposits with saw the points, more what rate of to -- our you for increase and changes. the rising when detail, for a XX%, quarter, to basis XX% consistent from which we expect which would and stood

profitability. to Turning

in of basis stood quarter both single and and quarter. of remain a point nominal absolute XXX margin to strong, relative end, Our prior from at as reflecting peers the to basis terms points a continues decline

at which, you fair previously strip value by meaning negative value out an marks On came impacted fair quarter. $XX.X consistent basis, up if between mark operating remained asset. income last income been in in XX% servicing of asset, noninterest reported, Noninterest our impact on our had a from million, the as we servicing quarters.

pressures stemming came in cost despite million. managed $XX.X from higher well inflation were Expenses and at

efficiency on ratio both at the stood down quarter against previous XX.X%, Our and basis. year-on-year a

be uncertainty quality stable to quarter, respect with proactive remained given for environment. the relatively Asset in continue the vigilant we to credit and the and

Credit resulting basis points. economic assumptions portfolio. of of for in and was quarters included at $X.X primarily growth exposures, in or net million costs X ACL X and million the single provision expense the changes by terms came in $X.X driven charge-offs The net build name in

TCE XX levels ratio and to with basis and a of remained credit loans. quarter and ended basis of to CET capital points capital targeted basis NPLs strong for X%. points, consistent X.X% losses TCE increased as a points X% end, XX.X%, at with of our of of the XX.X% the XX total total XXX strong, range quarter of allowance Liquidity

base, remain a core In on we strategy. executing strong liquidity capital profile our growing and maintaining our summary, focused

the With with that, I'd you provide detail will over like Tom, to call more to on turn our results. who

Thomas Bell

with lease everyone. start and will good loan Slide our and morning, Alberto, information on you, some X. Thank I on additional portfolio

$XX we quarter, an had $X.X and quarter, were in XX, quarter. elevated first quarter. in from $XXX fourth billion were growth million Payoffs at in loan total of the at as the prior coming to first million the During $XXX leases million the March loans solid increase compared

goals is loan for digits guidance our ahead, year. the mid-single Looking

X, Slide lending government-guaranteed to on Turning business. our touching

end U.S. sorry, I'm which million the $XX million is $X the down sheet on-balance -- on X(a) $XXX guaranteed. $XXX part was being balance the March million, sheet XX, the million by -- our exposure million guaranteed down was As from exposure of $X approximately quarter, with at $XX -- Mark The prior quarter, as SBA SBA. million, of approximately prior from

to assessed increased allowance X.X%. of credit Our as driven X.X% specific balances losses percentage for loan a The by was primarily to loans. for compared unguaranteed the reserves increase individually

XX% prior good of quarter. from XX% total of Turning deposits bank of to X. deposit trends all Total a account prior to billion, for deposits. of stood noninterest-earning end represents $X.X XX% Noninterest-bearing the represents We and Slide experienced increasing the total healthy deposits DDA deposits deposits. at failures. X% the Commercial

seasonal from During the business owners higher-than-normal were saw that tax we a balances well by carrying from the of quarter, to handful payments prior as distributions outflows customers liquidity as outflows event.

than our base and cover and XX%, of we knowing current lower and available industry uninsured deposit can Given that base. deposit peer comfortably diversified deposit capacity borrowing feel uninsured liquidity our confident ratio our

balance retail our sits $XXX,XXX $XX,XXX per customer Furthermore, at approximately commercial and clients. average for

anticipated, we As rates, higher deposit deposit our some betas Total changes competition mix to alternatives. moved quarter market as the and in experienced higher-yielding during expected. prevailing

last experienced betas XX% quarter the at current Our during the level stood XX%, below cycle.

the competition within for experience deposit environments in That mentioned growing leading rising to on As said, defending changing rate mix remain increased customer we base. to expect deposits we and in calls, shift our portfolio. behavior, deposits focused prior is earnings our our

X. between consumer We granularity and of deposits our of down categories. of commercial in the deposits XX% insured which being consumer FDIC. show broken Slide commercial FDIC XX% deposit total to insured, results deposits by XX% and our franchise, Turning of are

Slide Turning X. to

to and rate a was our reduction was deposit for interest program quarter. in lower the floating decline X% With by driven rate expectations several rates down index we mix risk interest came $XX million than income Day reduce net the sensitivity. our prior QX, from for factors. [resets] and the future, quarter The asset-sensitive to average Our market changes. prior profile, started in count

million $XXX fixed $X.X gain pay of at starting terminated First, swaps forward pretax of a we million.

the P&L will in recognize through the second starting gain We the quarter.

received $XXX X. million fixed in April executed we Second, effective swaps

the an loan XX X.XX%. asset yields of quarter. points a a net from On at margin of prior GAAP interest by our increase X.XX%, driven X-basis-point basis, increased Earning XX basis was healthy down yields basis points,

the our of Inland income transaction, interest impact will QX net that be anticipate quarter-over-quarter. the Excluding flat we for

higher linked Turning increased our income in loan quarter, million fee valuation. to We $X.X net for government-guaranteed income to in first XX% to or asset in fourth noninterest due premium during sold a X.X% $XX as loans income Noninterest QX, million most than was average quarter. improvement well quarter the million the as on the Slide quarter. growth $XX of X. The compared fourth servicing primarily categories $XXX,XXX

be Our consistent pipeline and QX fully results. forecasted funded with is government guaranteed to loans

consistent on sale QX gain We to in expect premiums be with QX.

Slide on trends XX. expense noninterest to Turning

first decrease The decrease Our noninterest expenses quarter. from to X quarter, attributable the X.X% was factors. $XX.X prior million in was a the

due First, salary million we saw incentive to a decrease of $X.X lower in and employee benefits, mainly compensation.

noninterest improvement a in Second, offset an partially to increase we due to merger. in occupancy $XXX,XXX and This was and Bancorp quarter. other related in equipment by costs a expenses saw taken decrease charge an previous in expense leasehold Inland increase the

and and $XX to QX remain We achieved despite environment, we of disciplined expense positive million in the $XX management continue on leverage inflationary our guidance million. operating to maintain

in million assessed million, quarter, end for of QX $XX up the a prior the driven the In the $XX.X reserve was build was first quarter. portfolio collectively Slide as to we for from as provision The increase million loan lease portfolio recorded $X by of million in compared the XX% credit Turning largely credit The at losses a portfolios. well losses macroeconomic XX. allowance end the to in quarter. growth factors $X and the in individually and fourth assessed

previous $X.X were quarter. to charge-offs quarter in Net first million $X.X in compared million the the

a to assets March decrease Our linked XX $X QX. points quarter. points on delinquencies nonperforming total in $XX.X from increased million And XX in were million QX -- basis total assets basis XX,

with available the capacity cash borrowing in equivalents, approximately our billion. liquidity to $X.X stood strong. cash million $XXX our Turning We believe Slide and ended at quarter and remains We XX.

peer well maturities. deposits. we million of mid-March, and position averages, our measure, uninsured add deposit Our as we to In XXX% on have all uninsured XX% ratio trends future XXXX below coverage added prefund bank brokered liquidity CDs in our cautionary to and $XXX a

new Term we performed securities as proactively events, the borrowing a window discount test our lines liquidity day. for made Program efforts. given fund single to We Funding of addition, $X,XXX $XXX the management of our best In Bank part recent available for a million tested and

Turning to XX. Slide

remains position strong. capital Our

-- For the will capital previous first quarter, were quarter. the ratios to compared up

XX.X% at X.XX%. stood and TCE CETX Our our was

In still bank portfolio, by investment entire addition, if well capital the all would monetize capitalized we the measurements. be regulatory

are above strong capital typically and levels Our requirements. regulatory

customers. As of we look we forward to rest the we are new to the support and believe well existing positioned year, our relationships customer grow

Alberto, back that, With to you.

Alberto Paracchini

Tom. you, Thank

Slide to on XX. Moving

talent. and strategy relationships take to get our much, change of can does Moments centered As not to disruption and we market executing grade hire new you share, see, on it. opportunities present remain

and bankers On the and approvals lending close regulatory respect top we complete to several transition businesses. the have remainder priority point, the last transaction, expect June. the of requisite Completing colleagues beginning our of With the ensuring Inland we the the a smooth customers of to all transaction at added X year. merger and the a integration for recently for to the received is to

In employees closing, on take do want to basis to thank they to and I support up our our daily stepping business. a for all moment a customers our for and

With up open call questions. the for operator, that, let's

Operator

question [Operator from first Instructions] from Gerlinger Our Group. Ben Hovde comes

Ben Gerlinger

and the it's so compliments lot really great First helpful. team Brooks a of the deck, information adds for slide to

for and GAAP roughly quick cleanup -- the to revaluation Just flat fee spreads? the is the income. that of on bigger that Guidance fee inclusive i.e., before had X get linked I picture. perspective, the was for Was quarter asset

Alberto Paracchini

issue that Ben, question, up. glad this and you brought So good

the does, it part at business the asset And that. I fair So on of know component, very I some we not value do we but servicing tend kind that we discount tend to -- really mean as not. know, mark is the you we to servicing people the operating asset. include of run large looking prepayments volatility rates as with results, tend it. ignore to associated change, change, a

look of the kind we at So excluding that volatility. business

'XX, negative the in about had depressed a fair know, of GAAP noninterest a value you quarter pretty negative income As we It figures. was million, $X.X fourth mark. which

mark, had This quarter, $XXX,XXX. by it fairly about a we was benign positive

we run business, of the So when we that. kind ignore

you ignoring if that an remained X for income So basis, number, mark, strip on noninterest has pretty the value steady. out last that fair quarters, operating that

quarterly mark-to-market And when have residential of it's looking you think fair that it, as, if portfolio, a going speeds the rates results. like we kind on this Discount talk of a would I at of change, out we're kind noise prepayment to change. about you more value had mark So look, around you MSR to basis. strip that large

So hopefully, that answers your question.

Ben Gerlinger

it. Got mitigate No, here, it's can of Yes. make forward or think up going down. about think against margin good you When actions guys -- I to volatility it does. kind the you correct

Just I rate or a on that's had if that you're that towards -- end a very like towards, quarter know might of spot balance but curious static anything sensitive, asset little a you guide that you the the sheet.

kind for a here. in is clarity the because we're days next, XX any unique of helpful I know, So don't environment

Thomas Bell

it's to right But be what we don't given quarter. net interest where and going to coming now, we always we're Obviously, given net for just into interest example, are, given lot the grow on the depending but give do focus. in being lot is grow income production bank. interest do, to new income, rates there's to our forecast our NIM, continuing we to rates we've the to is on And of for guidance net a interest that Ben, Fed our income, think flat interest income going the on a volatility Normally, net guidance there's guidance Tom. give flat. trying and we're

Alberto Paracchini

a well pretty at Yes. absolute that. basis, a When look on I Ben, I margin add could margin, as on relative level. you our healthy know, it's terms, if to mean, obviously, we

think Tom the you there year that that the it's to, the guidance into giving. point part at between I at the the out out looking between latter this between as differences are is alluded kind Fed of look the really hard market, the when forward of expectations

volatility of too. when and there's So said a uncertainty said feel lot that, you think with I and it that, well you we

interest for -- it's or preparing some rates think But and said like on on. trying some action income at to coming Tom at we're in as took down, spot we ourselves. anticipation rates on obviously is I in We're -- going up really being did So for remarks, a protect Tom's of we're point cautious. some basis, point for to general we his point protect net

Ben Gerlinger

-- I growth just more could that also the in. be more syntax of CECL In a anything, said said the than and outlook. sneak If it individual provision couple economic X press for might was it it loans but release,

X a latter through the when to it And are coming loan makes at credit, pipe So sense like here. X seems then me. look or I the

think maybe of kind provision Or for you're So might when the economic do more cautious just in of any kind be little reserved fully it then bit you think potentially about growth clarity forward, going on? those? more is you on outlook? that a And types loan

Alberto Paracchini

Yes.

So first all of all, be of adequate are times. going at our reserves as to always

the all of on X what as We were so we is, we're working mentioned, you business. names, this in -- to to And the name think from terms proactive. out them years were and have single I case, going we they exposures paying. as them these normal know single stated, be in just aggressive in guys be names maturity classifying have course in to super going are proceeding of nonperformers the the were over we're and I approach to anticipating our that trouble So that mean, bank I as going at some of X

of -- different particular the unique to pertaining here. I I -- credit action. potential sentiment think slowdown, like X and that first systemic is anything a in we are about were again, in, these. surrounding we I there's want remain. business. not a the of that But will already you that always are parts ahead portfolio, taking the These X in the and there's think, course, X recession. in of We particularly we proactive and came surveyed foremost, stay cases be credits actively it's still can environment don't of going portfolio And the the normal be, so an these in any to events to related out, in type the deterioration tell potential each we're always

simply think going proceed course, I just this we're view and is to normal accordingly. So we as this

to your in think second I point, the areas of terms portfolio. in

hopefully, on So to some detail and office portfolio additional Ben. reviews. we exposure gave you categories helpful. updating. some general, We're accordingly, find disclosure that I you our that guys internal But, CRE in and within hope our exposure. do going actively look we're We constantly always

is surveying Chief on top regularly. of Our Credit Officer very much portfolio the

And good at can pretty Mark? where quarter. But we this as stands this end of Mark comment he at this point, the point, credit feel further. of is on about here, the

Mark Fucinato

of refer spend loan to looking it. a lot mean, time asset as our targeted portfolio I I reviews We at we do specific inventory and classes.

a and payment We -- upcoming whether book, it's is our continue schedules, have that. day, from practice, it And literally, something looking we're delinquencies, every maturities. we'll as loan information do at have we to

on. any and we're These to Are to that very that at appropriate unique same specific the going cautious classes or going of downward more to But first move on what's the are singular we reserves. things? up are of we given assets performing not at arose moving type the decided situations during time. this that Absolutely, set quarter time, certain trends any not be seeing

Alberto Paracchini

I that, these, quality in business better looking for periods et times that particularly open to add Ben, structure, to yields at we and remain of the thing opportunities, pricing, cetera. like last is usually stress And sponsors, it higher better would and

that So your I answers think, hopefully, question. broadly that answers --

Operator

comes KBW. from DelMonte from question next Our Damon

Damon DelMonte

outlook the off loan start to wanted Just on with growth.

to digit. kind factors expect And that just after quarter's originations wondering, slow how to I kind do mid-single-digit expect and payoff bit you slower, activity net-net little growth? growth? like of to going that be to there? the was of you origination you commented mid-single-digit net-net, activity, you that Do you are get still so get strong this the mid-single remain to think elevated, be I payoffs and a into and Or

Alberto Paracchini

Yes.

me things of break in a that So couple Damon. let on ways, question X --

start we call. alluded of at as First, the to the

you of kind the excluding So giving the the the we're that is guidance Inland view transaction. and

we'll to that here we're at So of there. going beginning the and go then from June, close transaction

a going second call. we'll on to forward that in for consolidated our basis going see during So you're quarter. that then results end kind at the the quarter first of our the reflected And on second time of talk

But your is no. to seeing what -- the answer the think activity we're pretty at that board. year? short the seeing pipelines this we're at our question, healthy. last good Are call I time are were still they they would I levels still pretty But business across

we So the it, of, general call originations. terms in good feel of level

parts are slower Some than of business the others.

payoff activity. origination commented I little well on side for on as the So this real we've think example, in the past, the new estate is a slower, as on both

think higher you the rates. And higher think seeing an environment you're of on effect expect. both I rates, adjusting would as to sponsors are I cap sides

So payoffs. that an will have on impact

our in the past single terms what of guidance, with know, saying think of digits. to has kind been guidance I we're in you high the mid- as

simply that because on what just the we're it's think of with we're that's around guess idea say probably to going to or mid-level kind the ultimate clarifying probably of going that at to this end so. comfortable towards of I think But lower X% number hard think is of always the to payoffs. kind point, a be is really on mix What we it's range. I net that between of basis, -- be

Damon DelMonte

it. Got

might that come bringing over? what you have any Or you still good attractive helpful. there feel the of that of depositor to then you're it the qualities market, this about Is deal, with concern side when Okay. base. when customers accelerated on just kind respect one transaction closes, of those That's the kind frenzy in do And Inland was the of the guys given some over? attrition

Alberto Paracchini

be rather able We about is feel so still you -- the comment We to after good transaction company, the on good is we on comment we'd the the today Inland that quarter. as coming private this Damon. close feel specifics, we'll not about a know, base, transaction. but customer I mean,

Operator

Piper Nate comes next Race Our from Sandler. question from

Nate Race

want Just margin bit. on zoom little the maybe to out outlook a

longer rate you get thereafter, you Fed to higher maintain we for I quarters? in guys a the But guys do Assuming specific maybe the over environment X% guidance think it's guys the rate few give a margin May, next appreciate don't hike think it's around NIM. possible -- and above do and you

Alberto Paracchini

Nate, assumptions I to theoretical -- we're some a don't I around mean, don't asking you're I -- with I think forth. rates question so going think and

theoretical once of done start just going getting get you you going to to to peak the of you going I Higher a there's upcoming to, general, rate Fed going the the for And halt processes, cycle relative a or to to obviously, stated. know, repricing will I and cycles, reasons you're industry be hard for the what's a you where get maybe hikes of I for get the -- with be smaller to the kind lag it's longer, come we like it's in to and been tightening have to cumulatively, are a is the to right? previous interest that. to the in seen you answer think point think think give we'll that as

liability, have have are CDs time. repricing You over that you

that's margin, going going that's And point, some question. lag. a to the into at So be to, eat no

I everybody. for statement think a broad that's

Fed rates -- that's the when you discrepancy I it a that And That are the what difference. has think you're kind of look immune Fed think from forward not I I also that to today, would between particularly be said, think would markets, at vis-a-vis being we silly where implied point, market be seeing of and the some think big for it that. what kind it. at us

know that rates giving lot in caveats of around are -- institutions the don't going to a assuming decline the other pressures I enough kind going subside. later they're and some comment of I we're are that. year are on to correspondingly, funding good not to then on maybe

precautions at you think I what say and ourselves what is. think is, well to point, to Tom prepare don't his environment is if we to... of comments, taking turn, I think know alluded I as irrespective want that. going the to for we're in And some the cycle we're would I Tom, positioned,

Thomas Bell

a was down. We've well We more that do we'll still protect probably few think would us said, hedges in balance future, see. rates to here the sheet on Alberto. I done but

then that Inland and risk to look bring have profile. at We in

income have still whatever or We're we're I strong to quartile. we net to and remind protect top we to a margin but interest to stability think do that around very good on how need And got try is. we those -- going we're can And margin. think -- really margin. our we numbers. I growth So focused to And more continue ourselves

Nate Race

come? how of That's Obviously, unchanged to support loan mix what how yet shift kind the And of outlook helpful. do much guess willing more of is of a be grow think growth guys that outlook? more at in deposit just from least about seems, kind I this some you quarter. outflows can thinking much Understood. we in as change you And at the had deposits growth to you guys from noninterest it expect here. point in continue CDs to that

Alberto Paracchini

Nate. I think so,

higher was a change was rate were in back et on lot facility, of a -- that And everybody repo drained a as And down result because our -- excess in going think the banks there liquidity we've focused reserve and of to system. industry think artificially in simply and liquidity started look, as a environment. tighter. the commented get the I as cetera, of a get it it's betas keeping we to I previous result seems QT, lot quarters, started to so costs that of the on fact think -- holding I

to in have I now pointed hey, that not -- And rates have levels it's higher that, customers that attention And we're a think has if have we up out reaction close that going basis woken keep to of to we in I responsive that rates to more, want going offer to that points, is at I fact base, here to And and is alternatives. XXX finally, to want the think, lot said, be to XXX really being of you're everybody think circumstances compared are banking of offered our to more keep at us, I to the we with seeing paying keep the are March, I kind people to return. the depositors products think, ways, look are finally if hard deposit interest industry to fact. think market

I and back going banks Otherwise, have you I And rates to How mix to at you to are are up? we in different. where -- to are of been be if going the I going they're periods outlook prior compositions stay -- crisis, the alternatives. funds walk in another kind further like here fact that rates higher now, rates? the the -- what do financial out to think of bank of likely or are products higher-yielding going back to the for look of long they interest great deposit compositions historically deposit to you to How going is reflect go think, think go go for are the terms other

broadly seen. that that But point, how to will portfolios. there's I to to I before changes to think in dictate think -- I kind going of think going were, financial some do are of the somewhere realistic that Or be right we we to going say, and recently changes remains fact probably revert think be the crisis? have we that between be were and way to where in deposit mix I things to occur we it's in of settle the that mix are let's the kind back

Nate Race

-- the portfolio book, chunk first kind or trends SBA the of classified like just But looks makes towards metrics portfolio. criticized conventional of as to across a kind more sense. credit the maybe charge-offs perhaps as it of earlier in that terms And see appreciate at those we going That geared of portfolio guys do the seemed look within here credit, contributed large in I specifically? broadly you Understood. -- the guys comments the you that What more quarter. back that and

credit earnings upticks another in major across Are earlier guys saw season, some in We issues. negative seeing the larger delinquencies you migration prominent that? SBA or any lender has

Mark Fucinato

up We regular basis work -- week. seen and book. during them every have the on myself. the deals the loans. quarter, literally SBC to did some And of in during that in resolved they No meetings had jumps they also quarter them in those have new got a I'm but some they that They not that continue charged-off deals popped monitoring were recoveries that delinquencies. monitor major previously

that any continue. that their causing I I'm particular trend not problems. a is asset class a again, seeing, anticipate or in book So to

Nate Race

the I that, additional rate appreciate Or just appeared last are If X course I some planned guys commercial of this are quarter last strong have mean, was guys anticipating provided ask I projects what over some up opportunities Great. XQ? that could X in quarter. maintaining be the in expenses. that you terms on you RM for you drivers in guess a guidance new the the would cost to year? of from hires pretty do drive I here run

Alberto Paracchini

consolidated is consolidated And are that probably like you that That sense should of like. but our that post we should able better in hire going we've guidance able to -- an we given. I ranks, of as probably will on we what kind the -- was so we'll we done Nate, terms then, the that obviously, opportunistic will just earlier, be some Tom mentioned be a absorb basis with forward, going within Inland, and guidance -- impact, So, once give to bankers in look several think past. I to have we've a to added

Nate Race

Okay.

Sounds good. hires some I catch earlier that apologize. didn't recently. I comment about

Alberto Paracchini

Yes.

Operator

comes question next McEvoy Our from from Stephens. Terry

Terry McEvoy

friends and small and I of this out our appreciate on symbols and nice personal. comments spreadsheets set Chicago Roberto, your off, in to now first make it's banking then the circle. guess ticker I and our really It's world, back every

And So analyst what the yields in X I ask you loan they moving because If Maybe, question, I'll a do the on that quarters? the that over question. loan that the did are Tom, I think securities growth going an see fund from marketplace think new fall appreciate portfolio, you cash that. to million, into next not, $XXX will quarter-over-quarter?

Thomas Bell

loan flows growth. a that's question. Terry, we've security support risk-adjusted mean, the are loans higher returns than run to good much cash purchases. on The currently, Yes. the been I letting certainly

little So obviously balance plan that of yes, and and be to Inland acquisition sheet flows still run bit Bancorp, bigger select is subject a the off different. the will and the cash

flows to So those -- fund but yes, cash use loan the plan to is growth.

and loan quarter the different yields kind loans on cetera, a still during depending et yields, maturing, just into I those seeing yields, on loan Again, it's think we're good really pricing category. brought which of are that's

Alberto Paracchini

Tom, have reset. on quarterly lag a little you the also you to Still add, comment can Terry, and maybe bit. the the of effect

Thomas Bell

Yes. That's right.

Alberto Paracchini

So on mind just the keep in SBA that side.

Terry McEvoy

you your of the maybe then overall activity in And and any deposit cooling Okay. on side, deposit seeing in down terms March competitive are promotional markets? from pricing

A –Alberto Paracchini

No.

A –Thomas Bell

Yes. It’s very competitive.

A –Alberto Paracchini

competitive. Very

Operator

next [Operator Instructions] from Brian Janney. We comes our question have Martin from

Brian Martin

question on, I Mark. X maybe Just guess, for

the -- real color the Just us broadly on added Inland office. the in was where I the estate? on Can the their of what just general, remind that disclosures appreciate on kind exposure you just on exposure is -- office

Mark Fucinato

asset this allowed not kind in at classes We're discuss the point Inland to Yes. of time.

been in they're you at tell them, know, with this but we've you and anything time. private, working As closely I can't point

Alberto Paracchini

that looks a results. into be it -- our be give quarter of We'll end on you what we'd -- happy at second consolidated we the better Yes. the have to once like them

Brian Martin

-- entire broadly trends Okay. they but relative And had where was come just trend criticized the how about been? we to on just about see criticized the there I quarter how SBA, a the question portfolio, did the Mark, when think the this trends, numbers for just out,

Mark Fucinato

assets The those during the year-end. that this as went we deals down X quarter. Again, criticized we had the mentioned singular before, quarter-over-quarter. some some that was, specific dropped impacted Criticized occurred resolutions overall, But ratio quarter of NPL the uptick actually criticized NPLs. from

Brian Martin

biggest size in as circumstances is small mean, given level more you're you and -- mindful mean, guess, I relative biggest you of a where Okay. I the as And relatively your see I office of are exposure, kind today like But certainly can view area of far the the where looks just the is kind of the today seeing kind risk, it assessment portfolio diversified. in in risk give where market? high you of of today, of the

Mark Fucinato

being asset collateral on issue particular on loans? our focused We're business step the there's cautious about up we're in else real commercial of more point, of like a also an maturities. in doing what With real see their don't What's class. we business with what any we're it's of ability than who at estate the We're upcoming whether in ever I capability or property? we the their this their on -- values. estate if sponsors, with, what's commercial Again, or focused here, Yes. anything do. see, just We're market anybody mindful to

We've have kind of again, is, just underwriting good great to been we're our and our got lucky metrics. not credit That's customers. focus relationships with

if the know or we that to near early. we're going So something road in them future about is down happen talking with the

key to success. I think our the of part that's

Brian Martin

Okay. And just X. last

Just with a to the I little looks this mean, SBA ticked business, up the regard quarter. have it like margins bit

other? about X change-wise significantly the consequence a bit of think But general, that number lower. numbers little -- just was next I either or way think should that those couple volume anything of the moves in moves over we quarters the

Thomas Bell

Brian. No,

going -- quarter-over-quarter happens rates obviously, are and be mean, with and that the think guidance have can they just to there's given lag that then in XX%. we we've to flat the see be towards we'll what a But think I Fed. interest And higher here. repricing I

trending -- than which at, have is we're at but So would probably normally what the probably we we're lower at. pace still trended

So for stable but -- now.

Brian Martin

perspectively? was Okay. the about buyback And how you I guess X comment on you're thinking then just just capital here the and just buyback. can last about

Alberto Paracchini

Yes.

in So been shares of Brian. Inland really to issue haven't market. a with we as as result you obviously know, that, We're going a have so we transaction the

foremost, terms think will there. still be the in and continue priorities, a franchise, of to transaction. first the obviously, growth We opportunities we're that the think there really, it's capital So in M&A., dividend. support I still, doing

we the we capital back have depending as on And can kind immediate that buyback then ways or shareholders. that up capital valve kind the of past, we've as stated or we uses have in excess of it and to down, if that there's can a kind like tune used return of we of

change no really So that regard. in

Operator

Hovde from We have from a question Ben follow-up Group. Gerlinger

Ben Gerlinger

follow-up. quick A

of the a that Inland kind with oriented you month see fall of think, when you or been cost always said, opportunities least expect at hire to forma, also think remark there defense, opportunistic we savings? my tech rather the think kind them you bottom a of basically integration, so savings focus, I kind fall With Just any like about guys line. and have about Or away from you closing, still when the that now leading to but is reinvestment could notes pro than playing strategy in we that to of and the bottom should a both Byline line?

Alberto Paracchini

still I on think think of don't we're stated kind on there's camp, any what change previously. we I the that. Ben, of

would we at I I we in was as now, in right transaction obviously announced to think same thing the the viewing only we're future. it. would as same we did appropriate of a it time the this we if speak at way think think the I change, say the -- there when But that point, think I

Operator

to Alberto any for back remarks. all call questions I will Paracchini your Mr. closing turn today. you the Thank for now

Alberto Paracchini

Thank Great. Okay. operator. you,

from us, here, to call speaking to look you for I'm to thank for the of the today Brooks, my your morning, all pass going your for again, all this reminders forward But to again Brooks? colleague Byline. and joining you time thank because call he's So for and you. we next over quarter. you interest of in got some

Brooks Rennie

Thank you, Yes. Alberto.

on then what attending on we here is week, Conference business, the we believe on in quarter, Bank This report we probably provides ESG information And Chicago. as as located we our May XX, report. this inaugural how earlier operate addition, investors, our Stephens which in do. Chicago plan this For released important we

efforts ESG I we excited the future, into As to our see look am evolve. how

in guiding Byline's can report culture. ESG our looks forward detailed our and continue a on this of the website and each Relations be and customer Byline's you to section. seeing valuable engaging found of bylinebancorp.com leadership to at be to employee-centric values light a and with part in the priorities Byline's ESG report Investor

today. to talk that, you. next with concludes our call that quarter. you And We'll Thank

Operator

this Thank you today's for concludes joining. gentlemen, Ladies call. you. Thank and

lines. may You disconnect your now

Byline Bancorp (BY) 28 Apr 232023 Q1 Earnings call transcript