BYLINE BANCORP, INC. BY

Byline Bancorp reported record net income of $40.2 million, or $0.90 per diluted share, with adjusted EPS reaching $0.91, up 10% sequentially and 21% year-on-year. Return on average assets (ROAA) increased to 1.63%, and return on average tangible common equity (ROTCE) rose to 14.5%. The bank achieved significant efficiency improvements, with its adjusted efficiency ratio dropping to 46.5%, the best since its 2017 IPO, driven by 4.7% revenue growth against declining non-interest expenses, demonstrating positive operating leverage.

Management anticipates a 'higher for longer' interest rate environment for the remainder of 2026. Against this backdrop, demand for credit remains solid, particularly in the C&I book, though price competition has intensified in commercial real estate. Deposit competition also remains elevated as banks vie to fund loan growth. The bank's strategy emphasizes discipline over volume, focusing on high-quality, relationship-oriented business that is accretive to earnings, even if it means accepting a somewhat lower spread in certain instances.

Total assets ended the quarter at $9.9 billion. Deposits increased 3.5% annualized to $7.9 billion, primarily driven by growth in interest-bearing checking balances, partially offset by lower money market balances. Loans grew 4.2% annualized to $7.6 billion. The loan-to-deposit ratio stood at 96%. Management noted that the increase in interest-bearing checking accounts suggests commercial clients are anticipating uses for capital, preferring the flexibility over money market restrictions.

Net interest income (NII) was $101 million, consistent with prior guidance. The net interest margin (NIM) remained healthy at 4.28% but declined 5 basis points from the previous quarter. This decrease was attributed to higher funding costs, including a maturing balance sheet hedge, and changes in earning asset mix. Management reiterated its focus on growing NII in dollar terms, as it directly drives profitability, rather than managing to a specific margin level.

Credit costs for the quarter totaled $7.2 million, comprising $4.4 million in net charge-offs (24 basis points) and a $2.8 million reserve build. The allowance for credit losses now stands at 1.48% of total loans. Criticized loans declined to 3.9% of total loans, down from 4.5% sequentially and year-over-year, largely due to successful workout resolutions. Capital levels remain robust, with tangible common equity (TCE) at 11.4% and CET1 at 12.9%, providing significant flexibility for growth and capital deployment.

Byline Bancorp repurchased approximately 275,000 shares totaling $9.1 million during the quarter. The total payout ratio to shareholders, including dividends and repurchases, was 36%. The board also approved a 16.7% increase in the quarterly dividend to $0.14 per share. Management emphasized a disciplined approach to capital allocation, prioritizing building capital and returning it thoughtfully, while maintaining flexibility for strategic opportunities like M&A.

The M&A environment is described as active and constructive, particularly for transactions under $10 billion. The bank's M&A criteria include an earn-back period of less than three years and reasonable tangible book value accretion. While organic growth is the primary focus, the bank remains open to selective strategic opportunities. Full-year loan growth is expected to be in the mid-single digits, assuming a normalization of payoff activity in the second half of the year.