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Byline Bancorp (BY)

Filed: 5 Nov 21, 4:32pm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______to ______

Commission File Number 001-38139

 

 

img59491673_0.jpg 

Byline Bancorp, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Delaware

 

36-3012593

(State or Other Jurisdiction of

Incorporation or Organization)

 

(IRS Employer

Identification Number)

 

180 North LaSalle Street, Suite 300

Chicago, Illinois 60601

(Address of Principal Executive Offices)

(773) 244-7000

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

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

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

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth company

 

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

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

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

 

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock

BY

New York Stock Exchange

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

Common Stock, $0.01 par value, 37,711,380 shares outstanding as of November 2, 2021

 

 

 


BYLINE BANCORP, INC.

FORM 10-Q

September 30, 2021

INDEX

 

 

 

 

 

Page

 

 

 

 

 

PART I.

 

FINANCIAL INFORMATION

 

3

Item 1.

 

Financial Statements. The Unaudited Interim Condensed Consolidated Financial Statements of Byline Bancorp, Inc. filed as part of the report:

 

3

 

 

Notes to Unaudited Interim Condensed Consolidated Financial Statements

 

10

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

43

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

 

78

Item 4.

 

Controls and Procedures

 

79

 

 

 

 

 

PART II.

 

OTHER INFORMATION

 

80

Item 1.

 

Legal Proceedings

 

80

Item 1A.

 

Risk Factors

 

80

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

80

Item 3.

 

Defaults Upon Senior Securities

 

80

Item 4.

 

Mine Safety Disclosures

 

80

Item 5.

 

Other Information

 

80

Item 6.

 

Exhibits

 

81

 

 

 

2


 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(UNAUDITED)

 

 

 

 

 

 

 

 

(dollars in thousands, except share data)

 

September 30, 2021

 

 

December 31, 2020

 

ASSETS

 

 

 

 

 

 

Cash and due from banks

 

$

46,900

 

 

$

41,432

 

Interest bearing deposits with other banks

 

 

95,978

 

 

 

41,988

 

Cash and cash equivalents

 

 

142,878

 

 

 

83,420

 

Equity and other securities, at fair value

 

 

10,299

 

 

 

8,764

 

Securities available-for-sale, at fair value

 

 

1,427,605

 

 

 

1,447,230

 

Securities held-to-maturity, at amortized cost (fair value at September 30, 2021—$4,033, December 31, 2020 —$4,573)

 

 

3,887

 

 

 

4,395

 

Restricted stock, at cost

 

 

15,927

 

 

 

10,507

 

Loans held for sale

 

 

48,372

 

 

 

7,924

 

Loans and leases:

 

 

 

 

 

 

Loans and leases

 

 

4,609,228

 

 

 

4,340,535

 

Allowance for loan and lease losses

 

 

(60,598

)

 

 

(66,347

)

Net loans and leases

 

 

4,548,630

 

 

 

4,274,188

 

Servicing assets, at fair value

 

 

23,597

 

 

 

22,042

 

Premises and equipment, net

 

 

76,995

 

 

 

86,728

 

Other real estate owned, net

 

 

3,033

 

 

 

6,350

 

Goodwill and other intangible assets, net

 

 

167,296

 

 

 

172,631

 

Bank-owned life insurance

 

 

60,992

 

 

 

10,009

 

Deferred tax assets, net

 

 

45,165

 

 

 

40,181

 

Accrued interest receivable and other assets

 

 

129,775

 

 

 

216,283

 

Total assets

 

$

6,704,451

 

 

$

6,390,652

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

Non-interest-bearing demand deposits

 

$

2,117,749

 

 

$

1,762,676

 

Interest-bearing deposits

 

 

3,040,529

 

 

 

2,989,355

 

Total deposits

 

 

5,158,278

 

 

 

4,752,031

 

Other borrowings

 

 

539,119

 

 

 

647,901

 

Subordinated notes, net

 

 

73,473

 

 

 

73,342

 

Junior subordinated debentures issued to capital trusts, net

 

 

36,796

 

 

 

36,451

 

Accrued interest payable and other liabilities

 

 

72,367

 

 

 

75,463

 

Total liabilities

 

 

5,880,033

 

 

 

5,585,188

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Preferred stock

 

 

10,438

 

 

 

10,438

 

Common stock

 

 

386

 

 

 

384

 

Additional paid-in capital

 

 

592,192

 

 

 

587,165

 

Retained earnings

 

 

258,077

 

 

 

191,098

 

Treasury stock, at cost

 

 

(31,161

)

 

 

(1,668

)

Accumulated other comprehensive income (loss), net of tax

 

 

(5,514

)

 

 

18,047

 

Total stockholders’ equity

 

 

824,418

 

 

 

805,464

 

Total liabilities and stockholders’ equity

 

$

6,704,451

 

 

$

6,390,652

 

 

 

 

September 30, 2021

 

 

December 31, 2020

 

 

 

Preferred
Shares

 

 

Common
Shares

 

 

Preferred
Shares

 

 

Common
Shares

 

Par value

 

$

0.01

 

 

$

0.01

 

 

$

0.01

 

 

$

0.01

 

Shares authorized

 

 

50,000

 

 

 

150,000,000

 

 

 

50,000

 

 

 

150,000,000

 

Shares issued

 

 

10,438

 

 

 

39,170,541

 

 

 

10,438

 

 

 

38,736,540

 

Shares outstanding

 

 

10,438

 

 

 

37,690,087

 

 

 

10,438

 

 

 

38,618,054

 

Treasury shares

 

 

 

 

 

1,480,454

 

 

 

 

 

 

118,486

 

 

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

3


 

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

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

 

2021

 

 

2020

 

 

2021

 

 

2020

 

INTEREST AND DIVIDEND INCOME

 

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans and leases

 

$

56,291

 

 

$

51,036

 

 

$

164,423

 

 

$

155,347

 

Interest on securities

 

 

5,534

 

 

 

7,070

 

 

 

17,982

 

 

 

22,616

 

Other interest and dividend income

 

 

947

 

 

 

128

 

 

 

1,837

 

 

 

1,342

 

Total interest and dividend income

 

 

62,772

 

 

 

58,234

 

 

 

184,242

 

 

 

179,305

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

986

 

 

 

2,760

 

 

 

3,465

 

 

 

14,810

 

Other borrowings

 

 

349

 

 

 

465

 

 

 

1,333

 

 

 

2,838

 

Subordinated notes and debentures

 

 

1,592

 

 

 

1,485

 

 

 

4,785

 

 

 

2,699

 

Total interest expense

 

 

2,927

 

 

 

4,710

 

 

 

9,583

 

 

 

20,347

 

Net interest income

 

 

59,845

 

 

 

53,524

 

 

 

174,659

 

 

 

158,958

 

PROVISION FOR LOAN AND LEASE LOSSES

 

 

352

 

 

 

15,740

 

 

 

2,750

 

 

 

45,713

 

Net interest income after provision for
   loan and lease losses

 

 

59,493

 

 

 

37,784

 

 

 

171,909

 

 

 

113,245

 

NON-INTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

Fees and service charges on deposits

 

 

1,867

 

 

 

1,603

 

 

 

5,299

 

 

 

4,731

 

Loan servicing revenue

 

 

3,344

 

 

 

2,936

 

 

 

9,301

 

 

 

8,674

 

Loan servicing asset revaluation

 

 

(2,650

)

 

 

1,122

 

 

 

(4,148

)

 

 

(2,653

)

ATM and interchange fees

 

 

1,201

 

 

 

1,028

 

 

 

3,257

 

 

 

3,089

 

Net realized gains on securities available-for-sale

 

 

130

 

 

 

1,037

 

 

 

1,456

 

 

 

2,412

 

Change in fair value of equity securities, net

 

 

(275

)

 

 

154

 

 

 

36

 

 

 

301

 

Net gains on sales of loans

 

 

12,761

 

 

 

12,671

 

 

 

33,350

 

 

 

23,900

 

Wealth management and trust income

 

 

815

 

 

 

693

 

 

 

2,305

 

 

 

1,970

 

Other non-interest income

 

 

1,302

 

 

 

990

 

 

 

4,383

 

 

 

1,946

 

Total non-interest income

 

 

18,495

 

 

 

22,234

 

 

 

55,239

 

 

 

44,370

 

NON-INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

25,978

 

 

 

23,126

 

 

 

72,372

 

 

 

67,197

 

Occupancy and equipment expense, net

 

 

4,982

 

 

 

5,220

 

 

 

15,617

 

 

 

16,103

 

Loan and lease related expenses

 

 

1,175

 

 

 

2,053

 

 

 

3,629

 

 

 

4,631

 

Legal, audit and other professional fees

 

 

2,710

 

 

 

2,390

 

 

 

7,822

 

 

 

6,802

 

Data processing

 

 

3,108

 

 

 

2,661

 

 

 

8,710

 

 

 

8,152

 

Net loss recognized on other real estate owned and other
   related expenses

 

 

42

 

 

 

349

 

 

 

1,052

 

 

 

1,324

 

Other intangible assets amortization expense

 

 

1,738

 

 

 

1,947

 

 

 

5,335

 

 

 

5,732

 

Other non-interest expense

 

 

4,447

 

 

 

3,941

 

 

 

11,466

 

 

 

12,460

 

Total non-interest expense

 

 

44,180

 

 

 

41,687

 

 

 

126,003

 

 

 

122,401

 

INCOME BEFORE PROVISION FOR INCOME TAXES

 

 

33,808

 

 

 

18,331

 

 

 

101,145

 

 

 

35,214

 

PROVISION FOR INCOME TAXES

 

 

8,502

 

 

 

5,260

 

 

 

25,549

 

 

 

10,038

 

NET INCOME

 

 

25,306

 

 

 

13,071

 

 

 

75,596

 

 

 

25,176

 

Dividends on preferred shares

 

 

196

 

 

 

196

 

 

 

587

 

 

 

587

 

INCOME AVAILABLE TO COMMON STOCKHOLDERS

 

$

25,110

 

 

$

12,875

 

 

$

75,009

 

 

$

24,589

 

EARNINGS PER COMMON SHARE

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.68

 

 

$

0.34

 

 

$

1.99

 

 

$

0.65

 

Diluted

 

$

0.66

 

 

$

0.34

 

 

$

1.95

 

 

$

0.64

 

 

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

4


 

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

(dollars in thousands)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net income

 

$

25,306

 

 

$

13,071

 

 

$

75,596

 

 

$

25,176

 

Securities available-for-sale

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains (losses) arising during the period

 

 

(8,439

)

 

 

33

 

 

 

(32,876

)

 

 

30,100

 

Reclassification adjustments for net gains included in net income

 

 

(130

)

 

 

(1,037

)

 

 

(1,456

)

 

 

(2,412

)

Tax effect

 

 

2,387

 

 

 

280

 

 

 

9,560

 

 

 

(7,710

)

Net of tax

 

 

(6,182

)

 

 

(724

)

 

 

(24,772

)

 

 

19,978

 

Cash flow hedges

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains arising during the period

 

 

651

 

 

 

 

 

 

1,606

 

 

 

 

Reclassification adjustments for net losses included in net income

 

 

29

 

 

 

22

 

 

 

71

 

 

 

64

 

Tax effect

 

 

(189

)

 

 

(7

)

 

 

(466

)

 

 

(18

)

Net of tax

 

 

491

 

 

 

15

 

 

 

1,211

 

 

 

46

 

Total other comprehensive income (loss)

 

 

(5,691

)

 

 

(709

)

 

 

(23,561

)

 

 

20,024

 

Comprehensive income

 

$

19,615

 

 

$

12,362

 

 

$

52,035

 

 

$

45,200

 

 

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

5


 

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

Accumulated
Other

 

 

Total

 

(dollars in thousands,

 

Preferred Stock

 

 

Common Stock

 

 

Paid-In

 

 

Retained

 

 

Treasury

 

 

 Comprehensive

 

 

Stockholders’

 

except share data)

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Stock

 

 

Income (Loss)

 

 

Equity

 

Balance, January 1, 2020

 

 

10,438

 

 

$

10,438

 

 

 

38,256,500

 

 

$

379

 

 

$

580,965

 

 

$

159,033

 

 

$

 

 

$

(700

)

 

$

750,115

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,966

 

 

 

 

 

 

 

 

 

2,966

 

Other comprehensive income,
   net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,048

 

 

 

11,048

 

Issuance of common stock
   upon exercise of stock options

 

 

 

 

 

 

 

 

55,402

 

 

 

1

 

 

 

676

 

 

 

 

 

 

 

 

 

 

 

 

677

 

Restricted stock activity

 

 

 

 

 

 

 

 

174,036

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock in
   connection with employee
   stock purchase plan

 

 

 

 

 

 

 

 

15,569

 

 

 

 

 

 

268

 

 

 

 

 

 

 

 

 

 

 

 

268

 

Cash dividends declared on
   preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(196

)

 

 

 

 

 

 

 

 

(196

)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,151

)

 

 

 

 

 

 

 

 

(1,151

)

Repurchase of common stock

 

 

 

 

 

 

 

 

(118,486

)

 

 

 

 

 

 

 

 

 

 

 

(1,668

)

 

 

 

 

 

(1,668

)

Share-based compensation
   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

608

 

 

 

 

 

 

 

 

 

 

 

 

608

 

Balance, March 31, 2020

 

 

10,438

 

 

$

10,438

 

 

 

38,383,021

 

 

$

380

 

 

$

582,517

 

 

$

160,652

 

 

$

(1,668

)

 

$

10,348

 

 

$

762,667

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,139

 

 

 

 

 

 

 

 

 

9,139

 

Other comprehensive income,
   net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,685

 

 

 

9,685

 

Issuance of common stock
   upon exercise of stock options

 

 

 

 

 

 

 

 

5,196

 

 

 

 

 

 

56

 

 

 

 

 

 

 

 

 

 

 

 

56

 

Restricted stock activity

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared on
   preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(195

)

 

 

 

 

 

 

 

 

(195

)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,152

)

 

 

 

 

 

 

 

 

(1,152

)

Share-based compensation
   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

735

 

 

 

 

 

 

 

 

 

 

 

 

735

 

Balance, June 30, 2020

 

 

10,438

 

 

$

10,438

 

 

 

38,388,217

 

 

$

381

 

 

$

583,307

 

 

$

168,444

 

 

$

(1,668

)

 

$

20,033

 

 

$

780,935

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,071

 

 

 

 

 

 

 

 

 

13,071

 

Other comprehensive loss,
   net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(709

)

 

 

(709

)

Issuance of common stock
   upon exercise of stock options

 

 

 

 

 

 

 

 

165,375

 

 

 

1

 

 

 

1,814

 

 

 

 

 

 

 

 

 

 

 

 

1,815

 

Restricted stock activity

 

 

 

 

 

 

 

 

(5,886

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock in
   connection with employee
   stock purchase plan

 

 

 

 

 

 

 

 

21,210

 

 

 

1

 

 

 

268

 

 

 

 

 

 

 

 

 

 

 

 

269

 

Cash dividends declared on
   preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(196

)

 

 

 

 

 

 

 

 

(196

)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,157

)

 

 

 

 

 

 

 

 

(1,157

)

Share-based compensation
   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

668

 

 

 

 

 

 

 

 

 

 

 

 

668

 

Balance, September 30, 2020

 

 

10,438

 

 

$

10,438

 

 

 

38,568,916

 

 

$

383

 

 

$

586,057

 

 

$

180,162

 

 

$

(1,668

)

 

$

19,324

 

 

$

794,696

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,291

 

 

 

 

 

 

 

 

 

12,291

 

Other comprehensive loss,
   net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,277

)

 

 

(1,277

)

Issuance of common stock
   upon exercise of stock options

 

 

 

 

 

 

 

 

49,138

 

 

 

1

 

 

 

540

 

 

 

 

 

 

 

 

 

 

 

 

541

 

Cash dividends declared on
   preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(196

)

 

 

 

 

 

 

 

 

(196

)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,159

)

 

 

 

 

 

 

 

 

(1,159

)

Share-based compensation
   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

568

 

 

 

 

 

 

 

 

 

 

 

 

568

 

Balance, December 31, 2020

 

 

10,438

 

 

$

10,438

 

 

 

38,618,054

 

 

$

384

 

 

$

587,165

 

 

$

191,098

 

 

$

(1,668

)

 

$

18,047

 

 

$

805,464

 

 

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

6


 

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

Accumulated
Other

 

 

Total

 

(dollars in thousands,

 

Preferred Stock

 

 

Common Stock

 

 

Paid-In

 

 

Retained

 

 

Treasury

 

 

 Comprehensive

 

 

Stockholders’

 

 except share data)

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Stock

 

 

Income (Loss)

 

 

Equity

 

Balance, January 1, 2021

 

 

10,438

 

 

$

10,438

 

 

 

38,618,054

 

 

$

384

 

 

$

587,165

 

 

$

191,098

 

 

$

(1,668

)

 

$

18,047

 

 

$

805,464

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

21,798

 

 

 

 

 

 

 

 

 

21,798

 

Other comprehensive loss,
   net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(26,394

)

 

 

(26,394

)

Issuance of common stock
   upon exercise of stock
   options

 

 

 

 

 

 

 

 

55,908

 

 

 

1

 

 

 

750

 

 

 

 

 

 

 

 

 

 

 

 

751

 

Restricted stock activity, net

 

 

 

 

 

 

 

 

274,739

 

 

 

 

 

 

 

 

 

 

 

 

(244

)

 

 

 

 

 

(244

)

Issuance of common stock in
   connection with employee
   stock purchase plan

 

 

 

 

 

 

 

 

25,894

 

 

 

 

 

 

515

 

 

 

 

 

 

 

 

 

 

 

 

515

 

Cash dividends declared on
   preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(196

)

 

 

 

 

 

 

 

 

(196

)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,315

)

 

 

 

 

 

 

 

 

(2,315

)

Repurchase of common stock

 

 

 

 

 

 

 

 

(332,744

)

 

 

 

 

 

 

 

 

 

 

 

(6,363

)

 

 

 

 

 

(6,363

)

Share-based compensation
   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

779

 

 

 

 

 

 

 

 

 

 

 

 

779

 

Balance, March 31, 2021

 

 

10,438

 

 

$

10,438

 

 

 

38,641,851

 

 

$

385

 

 

$

589,209

 

 

$

210,385

 

 

$

(8,275

)

 

$

(8,347

)

 

$

793,795

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

28,492

 

 

 

 

 

 

 

 

 

28,492

 

Other comprehensive income,
   net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,524

 

 

 

8,524

 

Issuance of common stock
   upon exercise of stock
   options

 

 

 

 

 

 

 

 

11,031

 

 

 

 

 

 

135

 

 

 

 

 

 

 

 

 

 

 

 

135

 

Restricted stock activity, net

 

 

 

 

 

 

 

 

(19,166

)

 

 

 

 

 

 

 

 

 

 

 

(344

)

 

 

 

 

 

(344

)

Cash dividends declared on
   preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(195

)

 

 

 

 

 

 

 

 

(195

)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,319

)

 

 

 

 

 

 

 

 

(2,319

)

Repurchase of common stock

 

 

 

 

 

 

 

 

(538,744

)

 

 

 

 

 

 

 

 

 

 

 

(12,093

)

 

 

 

 

 

(12,093

)

Share-based compensation
   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,078

 

 

 

 

 

 

 

 

 

 

 

 

1,078

 

Balance, June 30, 2021

 

 

10,438

 

 

$

10,438

 

 

 

38,094,972

 

 

$

385

 

 

$

590,422

 

 

$

236,363

 

 

$

(20,712

)

 

$

177

 

 

$

817,073

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

25,306

 

 

 

 

 

 

 

 

 

25,306

 

Other comprehensive loss,
   net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,691

)

 

 

(5,691

)

Issuance of common stock
   upon exercise of stock
   options

 

 

 

 

 

 

 

 

25,866

 

 

 

 

 

 

283

 

 

 

 

 

 

 

 

 

 

 

 

283

 

Restricted stock activity, net

 

 

 

 

 

 

 

 

12,879

 

 

 

1

 

 

 

(1

)

 

 

 

 

 

(38

)

 

 

 

 

 

(38

)

Issuance of common stock in
   connection with employee
   stock purchase plan

 

 

 

 

 

 

 

 

16,590

 

 

 

 

 

 

408

 

 

 

 

 

 

 

 

 

 

 

 

408

 

Cash dividends declared on
   preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(196

)

 

 

 

 

 

 

 

 

(196

)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,396

)

 

 

 

 

 

 

 

 

(3,396

)

Repurchase of common stock

 

 

 

 

 

 

 

 

(460,220

)

 

 

 

 

 

 

 

 

 

 

 

(10,411

)

 

 

 

 

 

(10,411

)

Share-based compensation
   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,080

 

 

 

 

 

 

 

 

 

 

 

 

1,080

 

Balance, September 30, 2021

 

 

10,438

 

 

$

10,438

 

 

 

37,690,087

 

 

$

386

 

 

$

592,192

 

 

$

258,077

 

 

$

(31,161

)

 

$

(5,514

)

 

$

824,418

 

 

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

7


 

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

Nine Months Ended

 

 

September 30,

 

(dollars in thousands)

2021

 

 

2020

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

Net income

$

75,596

 

 

$

25,176

 

Adjustments to reconcile net income to net cash from operating activities:

 

 

 

 

 

Provision for loan and lease losses

 

2,750

 

 

 

45,713

 

Impairment loss on assets held for sale

 

3,981

 

 

 

747

 

Depreciation and amortization of premises and equipment

 

4,603

 

 

 

4,849

 

Net amortization of securities

 

6,649

 

 

 

5,445

 

Net change in fair value of equity securities, net

 

(36

)

 

 

(301

)

Net realized gains on securities available-for-sale

 

(1,456

)

 

 

(2,412

)

Net losses (gains) on sales and valuation adjustments of premises
   and equipment

 

(497

)

 

 

156

 

Net gains on sales of loans

 

(33,350

)

 

 

(23,900

)

Originations of U.S. government guaranteed loans

 

(323,010

)

 

 

(301,177

)

Proceeds from U.S. government guaranteed loans sold

 

312,733

 

 

 

232,251

 

Accretion of premiums and discounts on acquired loans, net

 

(5,001

)

 

 

(10,754

)

Net change in servicing assets

 

(1,555

)

 

 

(1,796

)

Net losses on sales and valuation adjustments of other real estate
   owned

 

755

 

 

 

999

 

Net amortization of other acquisition accounting adjustments

 

5,261

 

 

 

5,676

 

Amortization of subordinated debt issuance cost

 

131

 

 

 

41

 

Accretion of junior subordinated debentures discount

 

345

 

 

 

385

 

Share-based compensation expense

 

2,937

 

 

 

2,011

 

Deferred tax provision, net of valuation

 

4,108

 

 

 

2,643

 

Increase in cash surrender value of bank owned life insurance

 

(983

)

 

 

(202

)

Loss on redemption of junior subordinated debentures

 

0

 

 

 

112

 

Changes in assets and liabilities:

 

 

 

 

 

Accrued interest receivable and other assets

 

9,706

 

 

 

(3,161

)

Accrued interest payable and other liabilities

 

(17,565

)

 

 

20,552

 

Net cash provided by operating activities

 

46,102

 

 

 

3,053

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

Purchases of securities available-for-sale

 

(514,506

)

 

 

(742,303

)

Proceeds from maturities and calls of securities available-for-sale

 

37,108

 

 

 

173,581

 

Proceeds from paydowns of securities available-for-sale

 

269,286

 

 

 

189,913

 

Proceeds from sales of securities available-for-sale

 

280,962

 

 

 

80,509

 

Proceeds from maturities and calls of securities held-to-maturity

 

500

 

 

 

0

 

Redemption (purchases) of Federal Home Loan Bank stock, net

 

(5,420

)

 

 

12,475

 

Net change in loans and leases

 

(272,913

)

 

 

(596,536

)

Purchases of premises and equipment

 

(1,762

)

 

 

(4,148

)

Proceeds from sales of premises and equipment

 

296

 

 

 

32

 

Proceeds from sales of assets held for sale

 

4,919

 

 

 

0

 

Proceeds from sales of other real estate owned

 

2,998

 

 

 

874

 

Investment in bank owned life insurance

 

(50,000

)

 

 

0

 

Proceeds from bank owned life insurance death benefit

 

0

 

 

 

69

 

Net cash used in investing activities

 

(248,532

)

 

 

(885,534

)

 

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

8


 

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(UNAUDITED)

 

 

Nine Months Ended

 

 

September 30,

 

(dollars in thousands)

2021

 

 

2020

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

Net increase in deposits

$

406,321

 

 

$

662,724

 

Proceeds from short-term borrowings

 

11,953,000

 

 

 

6,407,800

 

Repayments of short-term borrowings

 

(11,832,000

)

 

 

(6,682,800

)

Proceeds from Paycheck Protection Program Liquidity Facility (PPPLF)
   advances

 

196,679

 

 

 

449,889

 

Repayments of PPPLF advances

 

(412,182

)

 

 

(279

)

Proceeds from subordinated notes, net

 

0

 

 

 

73,258

 

Repayments of junior subordinated debentures

 

0

 

 

 

(1,500

)

Net decrease in securities sold under agreements to repurchase

 

(14,279

)

 

 

(3,688

)

Dividends paid on preferred stock

 

(587

)

 

 

(587

)

Dividends paid on common stock

 

(7,928

)

 

 

(3,412

)

Proceeds from issuance of common stock

 

1,731

 

 

 

3,085

 

Repurchases of common stock

 

(28,867

)

 

 

(1,668

)

Net cash provided by financing activities

 

261,888

 

 

 

902,822

 

NET INCREASE IN CASH AND CASH EQUIVALENTS

 

59,458

 

 

 

20,341

 

CASH AND CASH EQUIVALENTS, beginning of period

 

83,420

 

 

 

80,737

 

CASH AND CASH EQUIVALENTS, end of period

$

142,878

 

 

$

101,078

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

Cash paid during the period for interest

$

8,901

 

 

$

21,130

 

Cash paid during the period for taxes

$

25,525

 

 

$

7,697

 

SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND
   FINANCING ACTIVITIES:

 

 

 

 

 

Common dividend declared, not paid

$

102

 

 

$

1,196

 

 

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

9


BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

 

Note 1—Basis of Presentation

These unaudited interim condensed consolidated financial statements include the accounts of Byline Bancorp, Inc., a Delaware corporation (the “Company,” “Byline,” “we,” “us,” “our”), a bank holding company whose principal activity is the ownership and management of its Illinois state chartered subsidiary bank, Byline Bank (the “Bank”), based in Chicago, Illinois.

These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission (“SEC”). In preparing these financial statements, the Company has evaluated events and transactions subsequent to September 30, 2021 for potential recognition or disclosure. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position and results of operations for the periods presented have been included. Certain information in footnote disclosures normally included in financial statements prepared in accordance with GAAP has been condensed or omitted pursuant to the rules and regulations of the SEC and the accounting standards for interim financial statements. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Consolidated Financial Statements for the years ended December 31, 2020, 2019, and 2018.

In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 855, “Subsequent Events,” the Company’s management has evaluated subsequent events for potential recognition or disclosure through the date of the issuance of these condensed consolidated financial statements.

The Company has 1 reportable segment. The Company’s chief operating decision maker evaluates the operations of the Company using consolidated information for purposes of allocating resources and assessing performance. Therefore, segments disclosures are not required.

No subsequent events were identified that would have required a change to the condensed consolidated financial statements or disclosure in the notes to the condensed consolidated financial statements.

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

Note 2—Accounting Pronouncements Recently Adopted or Issued

The following reflect recent accounting pronouncements that have been adopted or are pending adoption by the Company. As the Company qualifies as an emerging growth company and has elected the extended transition period for complying with new or revised accounting pronouncements, it is not subject to new or revised accounting standards applicable to public companies during the extended transition period. The accounting pronouncements pending adoption below reflect effective dates for the Company as an emerging growth company with the extended transition period.

10


BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

 

Adopted Accounting Pronouncement

Leases (Topic 842) On January 1, 2021, the Company adopted ASU No. 2016-02 Leases and subsequent amendments thereto, which requires the Company to recognize most leases on the balance sheet. We adopted the standard under a modified retrospective approach as of the date of adoption and elected to apply several of the available practical expedients, including:

Carry over of historical lease determination and lease classification conclusions
Carry over of historical initial direct cost balances for existing leases
Option not to recognize right-of-use assets and lease liabilities that arise from short-term leases (i.e. lease terms of twelve months or less)
Use of hindsight in determining the lease term and right-of-use assets
Accounting for lease and non-lease components in contracts in which the Company is a lessee as a single lease component

Adoption of the leasing standard resulted in the recognition of operating right-of-use assets of $10.5 million and operating lease liabilities of $11.7 million as of January 1, 2021. These amounts were determined based on the present value of remaining minimum lease payments, discounted using the Company’s incremental borrowing rate as of the date of adoption. This guidance also applies to the Company’s investment in direct financing leases, which are included in loans, but did not have a material impact. There was no material impact to the timing of expense or income recognition in the Company’s Consolidated Statements of Operations. Prior periods were not restated and continue to be presented under legacy GAAP. Refer to Note 8—Leases for further details.

Issued Accounting Pronouncements Pending Adoption

Financial Instruments—Credit Losses (Topic 326)—In June 2016, FASB issued ASU No. 2016‑13, Measurement of Credit Losses on Financial Instruments. Current GAAP requires an “incurred loss” methodology for recognizing credit losses that delays recognition until it is probable a loss has been incurred. The main objective of this ASU is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The amendments in this ASU replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The amendments in this ASU require a financial asset (or group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. The measurement of expected credit losses will be based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The amendments in this ASU broaden the information that an entity must consider in developing its expected credit loss estimate for assets measured either collectively or individually. The use of forecasted information incorporates more timely information in the estimate of expected credit loss, which will be more useful to users of the financial statements. In November 2019, FASB issued ASU No. 2019-10, Effective Dates, which delays the effective date of the ASU for entities not classified as a public business entity. Assuming the Company remains an emerging growth company, the Company anticipates adopting the standard on December 31, 2022. The Company is in the process of implementation and determining the impact that this ASU will have on the Company’s Consolidated Financial Statements.

Income Taxes (Topic 740)—In December 2019, FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes. The amendments in the ASU simplify the accounting for income taxes by removing the following: the exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items; the exception to the requirement to or not to recognize a deferred tax liability for a foreign entity when it becomes an equity method investment or it becomes a subsidiary, respectively; and the exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. The amendments in the ASU changes current authoritative guidance by requiring the recognition of franchise tax that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax; requiring an evaluation when a step up in the tax basis of goodwill should be considered part the of business combination; specifying that it is not required to allocate the consolidated amount of current and deferred tax expense to a legal entity that is

11


BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

 

not subject to tax in its separate financial statements; and requiring that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The amendments are effective for annual periods beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022. Early adoption is permitted. Assuming the Company remains an emerging growth company, the new authoritative guidance will be effective for reporting periods after January 1, 2022. The Company is currently evaluating the provisions of ASU No. 2019-12 to determine the potential impact the new standard will have on the Company’s Consolidated Financial Statements.

Reference Rate Reform (Topic 848)—In March 2020, FASB issued ASU No. 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting and in January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform. The amendments in the ASU provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments in the ASU provide optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. The ASU is intended to help stakeholders during the global market-wide reference rate transition period. The amendments in the ASU will be in effect for all entities as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the impact of reference rate reform to determine the potential impact the new standard will have on the Company’s Consolidated Financial Statements.

Note 3—Securities

The following tables summarize the amortized cost and fair values of securities available-for-sale and securities held-to-maturity as of the dates shown and the corresponding amounts of gross unrealized gains and losses:

 

September 30, 2021

 

Amortized
Cost

 

 

Gross
Unrealized
Gains

 

 

Gross
Unrealized
Losses

 

 

Fair
Value

 

Available-for-sale

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury Notes

 

$

8,487

 

 

$

91

 

 

$

0

 

 

$

8,578

 

U.S. Government agencies

 

 

124,244

 

 

 

885

 

 

 

(1,865

)

 

 

123,264

 

Obligations of states, municipalities, and
   political subdivisions

 

 

101,499

 

 

 

3,725

 

 

 

(164

)

 

 

105,060

 

Residential mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

 

Agency

 

 

794,856

 

 

 

3,303

 

 

 

(12,986

)

 

 

785,173

 

Non-agency

 

 

64,645

 

 

 

86

 

 

 

(722

)

 

 

64,009

 

Commercial mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

 

Agency

 

 

237,376

 

 

 

3,179

 

 

 

(3,146

)

 

 

237,409

 

Corporate securities

 

 

64,842

 

 

 

2,002

 

 

 

(17

)

 

 

66,827

 

Asset-backed securities

 

 

37,203

 

 

 

83

 

 

 

(1

)

 

 

37,285

 

Total

 

$

1,433,152

 

 

$

13,354

 

 

$

(18,901

)

 

$

1,427,605

 

 

September 30, 2021

 

Amortized
Cost

 

 

Gross
Unrealized
Gains

 

 

Gross
Unrealized
Losses

 

 

Fair
Value

 

Held-to-maturity

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of states, municipalities, and
   political subdivisions

 

$

3,887

 

 

$

146

 

 

$

0

 

 

$

4,033

 

Total

 

$

3,887

 

 

$

146

 

 

$

0

 

 

$

4,033

 

 

12


BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

 

 

December 31, 2020

 

Amortized
Cost

 

 

Gross
Unrealized
Gains

 

 

Gross
Unrealized
Losses

 

 

Fair
Value

 

Available-for-sale

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury Notes

 

$

23,468

 

 

$

344

 

 

$

0

 

 

$

23,812

 

U.S. Government agencies

 

 

113,088

 

 

 

600

 

 

 

(137

)

 

 

113,551

 

Obligations of states, municipalities, and
   political subdivisions

 

 

135,513

 

 

 

6,991

 

 

 

(85

)

 

 

142,419

 

Residential mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

 

Agency

 

 

764,951

 

 

 

13,645

 

 

 

(205

)

 

 

778,391

 

Non-agency

 

 

32,654

 

 

 

332

 

 

 

(5

)

 

 

32,981

 

Commercial mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

 

Agency

 

 

244,496

 

 

 

6,046

 

 

 

(390

)

 

 

250,152

 

Corporate securities

 

 

59,020

 

 

 

1,850

 

 

 

(102

)

 

 

60,768

 

Asset-backed securities

 

 

45,255

 

 

 

26

 

 

 

(125

)

 

 

45,156

 

Total

 

$

1,418,445

 

 

$

29,834

 

 

$

(1,049

)

 

$

1,447,230

 

 

December 31, 2020

 

Amortized
Cost

 

 

Gross
Unrealized
Gains

 

 

Gross
Unrealized
Losses

 

 

Fair
Value

 

Held-to-maturity

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of states, municipalities, and political
   subdivisions

 

$

4,395

 

 

$

178

 

 

$

0

 

 

$

4,573

 

Total

 

$

4,395

 

 

$

178

 

 

$

0

 

 

$

4,573

 

 

The Company did 0t classify securities as trading during the nine months ended September 30, 2021 or during 2020.

Gross unrealized losses and fair values, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of September 30, 2021 and December 31, 2020, are summarized as follows:

 

 

 

 

 

 

Less than 12 Months

 

 

12 Months or Longer

 

 

Total

 

September 30, 2021

 

# of
Securities

 

 

Fair
Value

 

 

Unrealized
Losses

 

 

Fair
Value

 

 

Unrealized
Losses

 

 

Fair
Value

 

 

Unrealized
Losses

 

Available-for-sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government agencies

 

 

10

 

 

$

74,687

 

 

$

(1,506

)

 

$

9,641

 

 

$

(359

)

 

$

84,328

 

 

$

(1,865

)

Obligations of states,
   municipalities and political
   subdivisions

 

 

7

 

 

 

8,097

 

 

 

(164

)

 

 

0

 

 

 

0

 

 

 

8,097

 

 

 

(164

)

Residential mortgage-backed
   securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency

 

 

51

 

 

 

620,325

 

 

 

(12,626

)

 

 

11,805

 

 

 

(360

)

 

 

632,130

 

 

 

(12,986

)

Non-agency

 

 

5

 

 

 

34,310

 

 

 

(722

)

 

 

0

 

 

 

0

 

 

 

34,310

 

 

 

(722

)

Commercial mortgage-backed
   securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency

 

 

21

 

 

 

75,001

 

 

 

(2,369

)

 

 

26,823

 

 

 

(777

)

 

 

101,824

 

 

 

(3,146

)

Corporate securities

 

 

2

 

 

 

5,041

 

 

 

(17

)

 

 

0

 

 

 

0

 

 

 

5,041

 

 

 

(17

)

Asset-backed securities

 

 

1

 

 

 

4,997

 

 

 

(1

)

 

 

0

 

 

 

0

 

 

 

4,997

 

 

 

(1

)

Total

 

 

97

 

 

$

822,458

 

 

$

(17,405

)

 

$

48,269

 

 

$

(1,496

)

 

$

870,727

 

 

$

(18,901

)

 

13


BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

 

 

 

 

 

 

 

Less than 12 Months

 

 

12 Months or Longer

 

 

Total

 

December 31, 2020

 

# of
Securities

 

 

Fair
Value

 

 

Unrealized
Losses

 

 

Fair
Value

 

 

Unrealized
Losses

 

 

Fair
Value

 

 

Unrealized
Losses

 

Available-for-sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government agencies

 

 

5

 

 

$

30,639

 

 

$

(137

)

 

$

0

 

 

$

0

 

 

$

30,639

 

 

$

(137

)

Obligations of states,
   municipalities and political
   subdivisions

 

 

2

 

 

 

210

 

 

 

(85

)

 

 

0

 

 

 

0

 

 

 

210

 

 

 

(85

)

Residential mortgage-backed
   securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency

 

 

8

 

 

 

45,253

 

 

 

(198

)

 

 

472

 

 

 

(7

)

 

 

45,725

 

 

 

(205

)

Non-agency

 

 

2

 

 

 

3,963

 

 

 

(5

)

 

 

0

 

 

 

0

 

 

 

3,963

 

 

 

(5

)

Commercial mortgage-backed
   securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency

 

 

8

 

 

 

55,554

 

 

 

(390

)

 

 

0

 

 

 

0

 

 

 

55,554

 

 

 

(390

)

Corporate securities

 

 

6

 

 

 

10,916

 

 

 

(102

)

 

 

0

 

 

 

0

 

 

 

10,916

 

 

 

(102

)

Asset-backed securities

 

 

6

 

 

 

24,436

 

 

 

(99

)

 

 

4,952

 

 

 

(26

)

 

 

29,388

 

 

 

(125

)

Total

 

 

37

 

 

$

170,971

 

 

$

(1,016

)

 

$

5,424

 

 

$

(33

)

 

$

176,395

 

 

$

(1,049

)

 

 

Certain securities have fair values less than amortized cost and, therefore, contain unrealized losses. The Company evaluated the securities that had an unrealized loss for other than temporary impairment and determined all declines in value to be temporary. There were 97 securities available-for-sale with unrealized losses at September 30, 2021. There were 0 securities held-to-maturity with unrealized losses at September 30, 2021. The Company anticipates full recovery of amortized cost with respect to these securities by maturity, or sooner, in the event of a more favorable market interest rate environment. The Company does not intend to sell these securities and it is not more likely than not that the Company will be required to sell them before recovery of their amortized cost basis, which may be at maturity.

The proceeds from all sales of securities available-for-sale, and the associated gains and losses on sales and calls of securities, for the three and nine months ended September 30, 2021 and 2020 are listed below:

 

 

 

For the Three Months Ended

 

 

For the Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Proceeds

 

$

0

 

 

$

35,092

 

 

$

186,850

 

 

$

80,509

 

Gross gains

 

 

130

 

 

 

1,037

 

 

 

2,525

 

 

 

2,494

 

Gross losses

 

 

0

 

 

 

0

 

 

 

1,069

 

 

 

82

 

 

There were $130,000 and $1.5 million in net gains reclassified from accumulated other comprehensive income into earnings for the three and nine months ended September 30, 2021, respectively. There were $1.0 million and $2.4 million in net gains reclassified from accumulated other comprehensive income into earnings for the three and nine months ended September 30, 2020, respectively.

 

Securities posted as collateral were $361.0 million and $731.8 million at September 30, 2021 and December 31, 2020, respectively, of which carrying amounts of $361.0 million and $323.9 million were pledged at September 30, 2021 and December 31, 2020, respectively. At September 30, 2021 and December 31, 2020, of those pledged, the carrying amounts of securities pledged as collateral for public fund deposits were $311.3 million and $245.1 million, respectively, and for customer repurchase agreements of $38.7 million and $64.1 million, respectively. At September 30, 2021 and December 31, 2020, there were 0 securities pledged for advances from the Federal Home Loan Bank. Other securities were pledged for derivative positions, letters of credit and for purposes required or permitted by law. At September 30, 2021 and December 31, 2020, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’ equity.

14


BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

 

At September 30, 2021, the amortized cost and fair value of debt securities are shown by contractual maturity. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.

 

 

 

Amortized
Cost

 

 

Fair
Value

 

Available-for-sale

 

 

 

 

 

 

Due in one year or less

 

$

23,201

 

 

$

23,402

 

Due from one to five years

 

 

26,476

 

 

 

27,466

 

Due from five to ten years

 

 

209,435

 

 

 

211,691

 

Due after ten years

 

 

77,163

 

 

 

78,455

 

Mortgage-backed securities

 

 

1,096,877

 

 

 

1,086,591

 

Total

 

$

1,433,152

 

 

$

1,427,605

 

Held-to-maturity

 

 

 

 

 

 

Due from one to five years

 

 

3,887

 

 

 

4,033

 

Total

 

$

3,887

 

 

$

4,033

 

 

Note 4—Loan and Lease Receivables

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

 

 

 

September 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Commercial real estate

 

$

1,615,875

 

 

$

1,416,731

 

Residential real estate

 

 

507,226

 

 

 

569,387

 

Construction, land development, and other land

 

 

340,428

 

 

 

231,602

 

Commercial and industrial

 

 

1,535,412

 

 

 

1,372,452

 

Paycheck Protection Program ("PPP")

 

 

275,619

 

 

 

527,044

 

Installment and other

 

 

1,396

 

 

 

1,942

 

Lease financing receivables

 

 

334,484

 

 

 

223,295

 

Total loans and leases

 

 

4,610,440

 

 

 

4,342,453

 

Net unamortized deferred fees and costs

 

 

(5,484

)

 

 

(5,764

)

Initial direct costs

 

 

4,272

 

 

 

3,846

 

Allowance for loan and lease losses

 

 

(60,598

)

 

 

(66,347

)

Net loans and leases

 

$

4,548,630

 

 

$

4,274,188

 

 

 

 

September 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Lease financing receivables

 

 

 

 

 

 

Net minimum lease payments

 

$

337,512

 

 

$

234,472

 

Unguaranteed residual values

 

 

22,338

 

 

 

8,690

 

Unearned income

 

 

(25,366

)

 

 

(19,867

)

Total lease financing receivables

 

 

334,484

 

 

 

223,295

 

Initial direct costs

 

 

4,272

 

 

 

3,846

 

Lease financial receivables before allowance for
   lease losses

 

$

338,756

 

 

$

227,141

 

 

15


BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

 

Total loans and leases consist of originated loans and leases, acquired impaired loans and acquired non-impaired loans and leases. At September 30, 2021 and December 31, 2020, total loans and leases included the guaranteed amount of U.S. government guaranteed loans of $396.6 million and $635.0 million, respectively. At September 30, 2021 and December 31, 2020, the discount on the unguaranteed portion of U.S. government guaranteed loans was $27.9 million and $28.3 million, respectively, which are included in total loans and leases. At September 30, 2021 and December 31, 2020, installment and other loans included overdraft deposits of $477,000 and $496,000, respectively, which were reclassified as loans. At September 30, 2021 and December 31, 2020, loans and leases and loans held for sale pledged as security for borrowings were $2.0 billion and $2.3 billion, respectively.

The minimum annual lease payments for lease financing receivables as of September 30, 2021 are summarized as follows:

 

 

 

Minimum Lease
Payments

 

2021

 

$

27,875

 

2022

 

 

110,733

 

2023

 

 

85,005

 

2024

 

 

59,682

 

2025

 

 

39,328

 

Thereafter

 

 

14,889

 

Total

 

$

337,512

 

 

Originated loans and leases represent originations excluding loans initially acquired in a business combination. However, once an acquired non-impaired loan reaches its maturity date, and is re-underwritten and renewed, it is internally classified as an originated loan. Acquired impaired loans are loans acquired from a business combination with evidence of credit quality deterioration and are accounted for under ASC Topic 310-30. Acquired non-impaired loans and leases represent loans and leases acquired from a business combination without more than insignificant evidence of credit quality deterioration and are accounted for under ASC Topic 310-20. Acquired leases and revolving loans having evidence of credit quality deterioration do not qualify to be accounted for as acquired impaired loans and are accounted for under ASC Topic 310-20. The following tables summarize the balances for each respective loan and lease category as of September 30, 2021 and December 31, 2020:

 

September 30, 2021

 

Originated

 

 

Acquired
Impaired

 

 

Acquired
Non-Impaired

 

 

Total

 

Commercial real estate

 

$

1,298,454

 

 

$

84,821

 

 

$

235,103

 

 

$

1,618,378

 

Residential real estate

 

 

387,578

 

 

 

61,893

 

 

 

58,283

 

 

 

507,754

 

Construction, land development, and other land

 

 

336,460

 

 

 

1,746

 

 

 

206

 

 

 

338,412

 

Commercial and industrial

 

 

1,480,076

 

 

 

6,651

 

 

 

49,678

 

 

 

1,536,405

 

Paycheck Protection Program

 

 

268,081

 

 

 

0

 

 

 

0

 

 

 

268,081

 

Installment and other

 

 

998

 

 

 

169

 

 

 

275

 

 

 

1,442

 

Lease financing receivables

 

 

331,149

 

 

 

0

 

 

 

7,607

 

 

 

338,756

 

Total loans and leases

 

$

4,102,796

 

 

$

155,280

 

 

$

351,152

 

 

$

4,609,228

 

 

16


BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

 

 

December 31, 2020

 

Originated

 

 

Acquired
Impaired

 

 

Acquired
Non-Impaired

 

 

Total

 

Commercial real estate

 

$

1,017,587

 

 

$

108,484

 

 

$

295,599

 

 

$

1,421,670

 

Residential real estate

 

 

414,220

 

 

 

78,840

 

 

 

79,211

 

 

 

572,271

 

Construction, land development, and other land

 

 

226,408

 

 

 

4,113

 

 

 

212

 

 

 

230,733

 

Commercial and industrial

 

 

1,276,527

 

 

 

10,178

 

 

 

82,195

 

 

 

1,368,900

 

Paycheck Protection Program

 

 

517,815

 

 

 

0

 

 

 

0

 

 

 

517,815

 

Installment and other

 

 

1,267

 

 

 

202

 

 

 

536

 

 

 

2,005

 

Lease financing receivables

 

 

214,636

 

 

 

0

 

 

 

12,505

 

 

 

227,141

 

Total loans and leases

 

$

3,668,460

 

 

$

201,817

 

 

$

470,258

 

 

$

4,340,535

 

 

Acquired impaired loans—The unpaid principal balance and carrying amount of all acquired impaired loans are summarized below. The balances do not include an allowance for loan and lease losses of $4.3 million and $6.5 million, at September 30, 2021 and December 31, 2020, respectively.

 

 

 

September 30, 2021

 

 

December 31, 2020

 

 

 

Unpaid
Principal
Balance

 

 

Carrying
Value

 

 

Unpaid
Principal
Balance

 

 

Carrying
Value

 

Commercial real estate

 

$

126,738

 

 

$

84,821

 

 

$

154,233

 

 

$

108,484

 

Residential real estate

 

 

108,560

 

 

 

61,893

 

 

 

126,086

 

 

 

78,840

 

Construction, land development, and other land

 

 

9,301

 

 

 

1,746

 

 

 

12,677

 

 

 

4,113

 

Commercial and industrial

 

 

12,115

 

 

 

6,651

 

 

 

15,925

 

 

 

10,178

 

Installment and other

 

 

866

 

 

 

169

 

 

 

917

 

 

 

202

 

Total acquired impaired loans

 

$

257,580

 

 

$

155,280

 

 

$

309,838

 

 

$

201,817

 

 

The following table summarizes the changes in accretable yield for acquired impaired loans for the three and nine months ended September 30, 2021 and 2020:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Beginning balance

 

$

24,474

 

 

$

31,868

 

 

$

27,696

 

 

$

40,009

 

Accretion to interest income

 

 

(3,080

)

 

 

(5,763

)

 

 

(9,896

)

 

 

(15,420

)

Reclassification from nonaccretable difference, net

 

 

1,217

 

 

 

5,727

 

 

 

4,811

 

 

 

7,243

 

Ending balance

 

$

22,611

 

 

$

31,832

 

 

$

22,611

 

 

$

31,832

 

 

17


BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

 

Acquired non-impaired loans and leasesThe unpaid principal balance and carrying value for acquired non-impaired loans and leases at September 30, 2021 and December 31, 2020 were as follows:

 

 

 

September 30, 2021

 

 

December 31, 2020

 

 

 

Unpaid
Principal
Balance

 

 

Carrying
Value

 

 

Unpaid
Principal
Balance

 

 

Carrying
Value

 

Commercial real estate

 

$

240,271

 

 

$

235,103

 

 

$

302,091

 

 

$

295,599

 

Residential real estate

 

 

58,858

 

 

 

58,283

 

 

 

80,104

 

 

 

79,211

 

Construction, land development, and other land

 

 

271

 

 

 

206

 

 

 

278

 

 

 

212

 

Commercial and industrial

 

 

51,468

 

 

 

49,678

 

 

 

84,608

 

 

 

82,195

 

Installment and other

 

 

286

 

 

 

275

 

 

 

553

 

 

 

536

 

Lease financing receivables

 

 

7,638

 

 

 

7,607

 

 

 

13,978

 

 

 

12,505

 

Total acquired non-impaired loans and leases

 

$

358,792

 

 

$

351,152

 

 

$

481,612

 

 

$

470,258

 

 

 

Note 5—Allowance for Loan and Lease Losses and Reserve for Unfunded Commitments

Loans and leases considered for inclusion in the allowance for loan and lease losses include acquired non-impaired loans and leases, those acquired impaired loans with credit deterioration after acquisition, and originated loans and leases. Although all acquired loans and leases are included in the following table, only those with credit deterioration subsequent to acquisition date are included in the allowance for loan and lease losses.

The following tables summarize the balance and activity within the allowance for loan and lease losses, the components of the allowance for loan and lease losses in terms of loans and leases individually and collectively evaluated for impairment, and corresponding loan and lease balances by type for the three and nine months ended September 30, 2021 and 2020 are as follows:

 

September 30, 2021

 

Commercial
Real Estate

 

 

Residential
Real Estate

 

 

Construction,
Land
Development,
and
Other Land

 

 

Commercial
and
Industrial

 

 

Paycheck
Protection
Program

 

 

Installment
and Other

 

 

Lease
Financing
Receivables

 

 

Total

 

Allowance for loan and
   lease losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

19,541

 

 

$

1,364

 

 

$

619

 

 

$

38,284

 

 

$

0

 

 

$

9

 

 

$

1,902

 

 

$

61,719

 

Provision/(recapture)

 

 

1,108

 

 

 

(225

)

 

 

(61

)

 

 

(1,218

)

 

 

0

 

 

 

(2

)

 

 

750

 

 

 

352

 

Charge-offs

 

 

(564

)

 

 

(65

)

 

 

0

 

 

 

(1,456

)

 

 

0

 

 

 

0

 

 

 

(399

)

 

 

(2,484

)

Recoveries

 

 

287

 

 

 

2

 

 

 

0

 

 

 

380

 

 

 

0

 

 

 

0

 

 

 

342

 

 

 

1,011

 

Ending balance

 

$

20,372

 

 

$

1,076

 

 

$

558

 

 

$

35,990

 

 

$

0

 

 

$

7

 

 

$

2,595

 

 

$

60,598

 

Nine months ended

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

19,584

 

 

$

2,400

 

 

$

1,352

 

 

$

41,183

 

 

$

0

 

 

$

15

 

 

$

1,813

 

 

$

66,347

 

Provision/(recapture)

 

 

2,891

 

 

 

(1,257

)

 

 

(468

)

 

 

226

 

 

 

0

 

 

 

(8

)

 

 

1,366

 

 

 

2,750

 

Charge-offs

 

 

(2,644

)

 

 

(76

)

 

 

(326

)

 

 

(6,172

)

 

 

0

 

 

 

0

 

 

 

(1,148

)

 

 

(10,366

)

Recoveries

 

 

541

 

 

 

9

 

 

 

0

 

 

 

753

 

 

 

0

 

 

 

0

 

 

 

564

 

 

 

1,867

 

Ending balance

 

$

20,372

 

 

$

1,076

 

 

$

558

 

 

$

35,990

 

 

$

0

 

 

$

7

 

 

$

2,595

 

 

$

60,598

 

Ending balance:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated for
   impairment

 

$

8,420

 

 

$

0

 

 

$

0

 

 

$

16,142

 

 

$

0

 

 

$

0

 

 

$

0

 

 

$

24,562

 

Collectively evaluated for
   impairment

 

 

9,314

 

 

 

723

 

 

 

550

 

 

 

18,572

 

 

 

0

 

 

 

7

 

 

 

2,595

 

 

 

31,761

 

Loans acquired with
   deteriorated credit
   quality

 

 

2,638

 

 

 

353

 

 

 

8

 

 

 

1,276

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

4,275

 

Total allowance for loan
   and lease losses

 

$

20,372

 

 

$

1,076

 

 

$

558

 

 

$

35,990

 

 

$

0

 

 

$

7

 

 

$

2,595

 

 

$

60,598

 

 

18


BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

 

 

September 30, 2021

 

Commercial
Real Estate

 

 

Residential
Real Estate

 

 

Construction,
Land
Development,
and
Other Land

 

 

Commercial
and
Industrial

 

 

Paycheck
Protection
Program

 

 

Installment
and Other

 

 

Lease
Financing
Receivables

 

 

Total

 

Loans and leases ending balance:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated for
   impairment

 

$

45,563

 

 

$

3,946

 

 

$

0

 

 

$

37,689

 

 

$

0

 

 

$

0

 

 

$

0

 

 

$

87,198

 

Collectively evaluated for
   impairment

 

 

1,487,994

 

 

 

441,915

 

 

 

336,666

 

 

 

1,492,065

 

 

 

268,081

 

 

 

1,273

 

 

 

338,756

 

 

 

4,366,750

 

Loans acquired with
   deteriorated
   credit quality

 

 

84,821

 

 

 

61,893

 

 

 

1,746

 

 

 

6,651

 

 

 

0

 

 

 

169

 

 

 

0

 

 

 

155,280

 

Total loans and leases

 

$

1,618,378

 

 

$

507,754

 

 

$

338,412

 

 

$

1,536,405

 

 

$

268,081

 

 

$

1,442

 

 

$

338,756

 

 

$

4,609,228

 

 

September 30, 2020

 

Commercial
Real Estate

 

 

Residential
Real Estate

 

 

Construction,
Land
Development,
and
Other Land

 

 

Commercial
and
Industrial

 

 

Paycheck
Protection
Program

 

 

Installment
and Other

 

 

Lease
Financing
Receivables

 

 

Total

 

Allowance for loan and lease losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

14,110

 

 

$

3,741

 

 

$

1,491

 

 

$

30,108

 

 

$

0

 

 

$

36

 

 

$

1,814

 

 

$

51,300

 

Provision

 

 

6,421

 

 

 

291

 

 

 

1,029

 

 

 

7,603

 

 

 

0

 

 

 

1

 

 

 

395

 

 

 

15,740

 

Charge-offs

 

 

(1,566

)

 

 

(250

)

 

 

(701

)

 

 

(3,254

)

 

 

0

 

 

 

0

 

 

 

(374

)

 

 

(6,145

)

Recoveries

 

 

19

 

 

 

8

 

 

 

53

 

 

 

83

 

 

 

0

 

 

 

0

 

 

 

200

 

 

 

363

 

Ending balance

 

$

18,984

 

 

$

3,790

 

 

$

1,872

 

 

$

34,540

 

 

$

0

 

 

$

37

 

 

$

2,035

 

 

$

61,258

 

Nine months ended

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

7,965

 

 

$

1,990

 

 

$

610

 

 

$

19,377

 

 

$

0

 

 

$

50

 

 

$

1,944

 

 

$

31,936

 

Provision/(recapture)

 

 

14,149

 

 

 

2,031

 

 

 

1,910

 

 

 

26,844

 

 

 

0

 

 

 

(13

)

 

 

792

 

 

 

45,713

 

Charge-offs

 

 

(3,206

)

 

 

(259

)

 

 

(701

)

 

 

(12,057

)

 

 

0

 

 

 

0

 

 

 

(1,392

)

 

 

(17,615

)

Recoveries

 

 

76

 

 

 

28

 

 

 

53

 

 

 

376

 

 

 

0

 

 

 

0

 

 

 

691

 

 

 

1,224

 

Ending balance

 

$

18,984

 

 

$

3,790

 

 

$

1,872

 

 

$

34,540

 

 

$

0

 

 

$

37

 

 

$

2,035

 

 

$

61,258

 

Ending balance:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated for
   impairment

 

$

4,516

 

 

$

77

 

 

$

0

 

 

$

10,189

 

 

$

0

 

 

$

0

 

 

$

0

 

 

$

14,782

 

Collectively evaluated for
   impairment

 

 

11,825

 

 

 

3,413

 

 

 

1,685

 

 

 

22,450

 

 

 

0

 

 

 

37

 

 

 

2,035

 

 

 

41,445

 

Loans acquired with
   deteriorated
  credit quality

 

 

2,643

 

 

 

300

 

 

 

187

 

 

 

1,901

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

5,031

 

Total allowance for loan and
  lease losses

 

$

18,984

 

 

$

3,790

 

 

$

1,872

 

 

$

34,540

 

 

$

0

 

 

$

37

 

 

$

2,035

 

 

$

61,258

 

 

September 30, 2020

 

Commercial
Real Estate

 

 

Residential
Real Estate

 

 

Construction,
Land
Development,
and
Other Land

 

 

Commercial
and
Industrial

 

 

Paycheck
Protection
Program

 

 

Installment
and Other

 

 

Lease
Financing
Receivables

 

 

Total

 

Loans and leases ending balance:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated for
   impairment

 

$

39,001

 

 

$

1,636

 

 

$

0

 

 

$

37,253

 

 

$

0

 

 

$

0

 

 

$

0

 

 

$

77,890

 

Collectively evaluated for
   impairment

 

 

1,191,740

 

 

 

547,563

 

 

 

234,230

 

 

 

1,281,067

 

 

 

622,191

 

 

 

2,929

 

 

 

200,089

 

 

 

4,079,809

 

Loans acquired with
  deteriorated credit quality

 

 

117,114

 

 

 

84,197

 

 

 

4,804

 

 

 

10,489

 

 

 

0

 

 

 

214

 

 

 

0

 

 

 

216,818

 

Total loans and leases

 

$

1,347,855

 

 

$

633,396

 

 

$

239,034

 

 

$

1,328,809

 

 

$

622,191

 

 

$

3,143

 

 

$

200,089

 

 

$

4,374,517

 

 

The Company recaptured $1.1 million and $5.7 million of the allowance for loan and lease losses for the three and nine months ended September 30, 2021, respectively, and increased the allowance by $10.0 million and $29.3 million for the three and nine months ended September 30, 2020, respectively. For acquired impaired loans, the Company increased the allowance for loan and lease losses by $405,000 and recaptured $2.2 million of allowance for the three and nine months ended September 30, 2021, respectively. The Company increased the allowance for loan and lease losses by $295,000 and $2.3 million for the three and nine months ended September 30, 2020, respectively for acquired impaired loans.

 

19


BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

 

For loans individually evaluated for impairment, the Company recaptured $1.0 million of the allowance for loan and lease losses and increased the allowance by $602,000 for the three and nine months ended September 30, 2021, respectively. The Company increased the allowance on loans individually evaluated for impairment by $768,000 and $4.1 million for the three and nine months ended September 30, 2020, respectively. For loans collectively evaluated for impairment, the Company decreased the allowance for loan and lease losses by $498,000 and $4.2 million for the three and nine months ended September 30, 2021, and increased the allowance for loan and lease losses by $8.9 million and $23.0 million for the three and nine months ended September 30, 2020, respectively.

 

An allowance for loan and lease loss allocation has not been made for Paycheck Protection Program (“PPP”) loans as these loans are fully guaranteed by the Small Business Association ("SBA"). On a quarterly basis, the Company assesses the collectability of its government guarantee loan and lease portfolio using historical loss experience in its small business lending unit.

The following tables summarize the recorded investment, unpaid principal balance, and related allowance for loans and leases considered impaired as of September 30, 2021 and December 31, 2020, which exclude acquired impaired loans. For purposes of these tables, the unpaid principal balance represents the outstanding contractual balance. Impaired loans include loans that are individually evaluated for impairment as well as troubled debt restructurings for all loan categories. The sum of non-accrual loans and loans past due 90 days still on accrual will differ from the total impaired loan amount.

 

September 30, 2021

 

Recorded
Investment

 

 

Unpaid
Principal
Balance

 

 

Related
Allowance

 

With no related allowance recorded

 

 

 

 

 

 

 

 

 

Commercial real estate

 

$

20,432

 

 

$

25,512

 

 

$

 

Residential real estate

 

 

3,850

 

 

 

3,901

 

 

 

 

Commercial and industrial

 

 

14,212

 

 

 

15,999

 

 

 

 

With an allowance recorded

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

25,131

 

 

 

26,569

 

 

 

8,420

 

Residential real estate

 

 

96

 

 

 

152

 

 

 

0

 

Commercial and industrial

 

 

23,477

 

 

 

25,614

 

 

 

16,142

 

Total impaired loans

 

$

87,198

 

 

$

97,747

 

 

$

24,562

 

 

December 31, 2020

 

Recorded
Investment

 

 

Unpaid
Principal
Balance

 

 

Related
Allowance

 

With no related allowance recorded

 

 

 

 

 

 

 

 

 

Commercial real estate

 

$

32,473

 

 

$

34,792

 

 

$

 

Residential real estate

 

 

1,558

 

 

 

1,644

 

 

 

 

Commercial and industrial

 

 

17,944

 

 

 

19,917

 

 

 

 

With an allowance recorded

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

13,696

 

 

 

14,919

 

 

 

5,034

 

Residential real estate

 

 

272

 

 

 

274

 

 

 

78

 

Commercial and industrial

 

 

29,412

 

 

 

32,018

 

 

 

18,848

 

Total impaired loans

 

$

95,355

 

 

$

103,564

 

 

$

23,960

 

 

20


BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

 

The following tables summarize the average recorded investment and interest income recognized for loans and leases considered impaired, which excludes acquired impaired loans, for the nine months ended:

 

September 30, 2021

 

Average
Recorded
Investment

 

 

Interest
Income
Recognized

 

With no related allowance recorded

 

 

 

 

 

 

Commercial real estate

 

$

28,480

 

 

$

920

 

Residential real estate

 

 

2,788

 

 

 

109

 

Commercial and industrial

 

 

16,668

 

 

 

481

 

With an allowance recorded

 

 

 

 

 

 

Commercial real estate

 

 

27,620

 

 

 

1,185

 

Residential real estate

 

 

207

 

 

 

2

 

Commercial and industrial

 

 

28,785

 

 

 

1,666

 

Total impaired loans

 

$

104,548

 

 

$

4,363

 

 

September 30, 2020

 

Average
Recorded
Investment

 

 

Interest
Income
Recognized

 

With no related allowance recorded

 

 

 

 

 

 

Commercial real estate

 

$

22,511

 

 

$

927

 

Residential real estate

 

 

1,615

 

 

 

26

 

Construction, land development, and other land

 

 

2,984

 

 

 

220

 

Commercial and industrial

 

 

16,991

 

 

 

493

 

With an allowance recorded

 

 

 

 

 

 

Commercial real estate

 

 

13,329

 

 

 

526

 

Residential real estate

 

 

460

 

 

 

21

 

Commercial and industrial

 

 

21,352

 

 

 

1,078

 

Total impaired loans

 

$

79,242

 

 

$

3,291

 

 

The following tables summarize the risk rating categories of the loans and leases considered for inclusion in the allowance for loan and lease losses calculation, excluding acquired impaired loans, as of September 30, 2021 and December 31, 2020:

 

September 30, 2021

 

Commercial
Real Estate

 

 

Residential
Real Estate

 

 

Construction,
Land
Development,
and
Other Land

 

 

Commercial
and
Industrial

 

 

Paycheck
Protection
Program

 

 

Installment
and Other

 

 

Lease
Financing
Receivables

 

 

Total

 

Pass

 

$

1,297,981

 

 

$

422,843

 

 

$

291,496

 

 

$

1,261,335

 

 

$

268,081

 

 

$

1,190

 

 

$

335,475

 

 

$

3,878,401

 

Watch

 

 

143,047

 

 

 

16,862

 

 

 

37,795

 

 

 

196,288

 

 

 

0

 

 

 

83

 

 

 

264

 

 

 

394,339

 

Special Mention

 

 

48,605

 

 

 

3,036

 

 

 

7,375

 

 

 

30,841

 

 

 

0

 

 

 

0

 

 

 

1,934

 

 

 

91,791

 

Substandard

 

 

43,924

 

 

 

3,120

 

 

 

0

 

 

 

41,290

 

 

 

0

 

 

 

0

 

 

 

786

 

 

 

89,120

 

Doubtful

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

297

 

 

 

297

 

Loss

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

 

 

 

 

Total

 

$

1,533,557

 

 

$

445,861

 

 

$

336,666

 

 

$

1,529,754

 

 

$

268,081

 

 

$

1,273

 

 

$

338,756

 

 

$

4,453,948

 

 

December 31, 2020

 

Commercial
Real Estate

 

 

Residential
Real Estate

 

 

Construction,
Land
Development,
and
Other Land

 

 

Commercial
and
Industrial

 

 

Paycheck
Protection
Program

 

 

Installment
and Other

 

 

Lease
Financing
Receivables

 

 

Total

 

Pass

 

$

1,064,623

 

 

$

463,103

 

 

$

180,458

 

 

$

1,027,399

 

 

$

517,815

 

 

$

1,706

 

 

$

222,818

 

 

$

3,477,922

 

Watch

 

 

134,381

 

 

 

22,086

 

 

 

46,162

 

 

 

225,930

 

 

 

0

 

 

 

96

 

 

 

47

 

 

 

428,702

 

Special Mention

 

 

60,022

 

 

 

3,795

 

 

 

0

 

 

 

56,784

 

 

 

0

 

 

 

0

 

 

 

2,721

 

 

 

123,322

 

Substandard

 

 

54,160

 

 

 

4,447

 

 

 

0

 

 

 

48,609

 

 

 

0

 

 

 

1

 

 

 

955

 

 

 

108,172

 

Doubtful

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

600

 

 

 

600

 

Loss

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Total

 

$

1,313,186

 

 

$

493,431

 

 

$

226,620

 

 

$

1,358,722

 

 

$

517,815

 

 

$

1,803

 

 

$

227,141

 

 

$

4,138,718

 

 

21


BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

 

 

The following tables summarize contractual delinquency information for acquired non-impaired and originated loans and leases by category at September 30, 2021 and December 31, 2020:

 

September 30, 2021

 

30-59
Days
Past Due

 

 

60-89
Days
Past Due

 

 

Greater
than 90
Days and
Accruing

 

 

Non-
accrual

 

 

Total
Past Due

 

 

Current

 

 

Total

 

Commercial real estate

 

$

330

 

 

$

1,426

 

 

$

0

 

 

$

17,082

 

 

$

18,838

 

 

$

1,514,719

 

 

$

1,533,557

 

Residential real estate

 

 

1,087

 

 

 

0

 

 

 

0

 

 

 

2,127

 

 

 

3,214

 

 

 

442,647

 

 

 

445,861

 

Construction, land development,
   and other land

 

 

2,035

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

2,035

 

 

 

334,631

 

 

 

336,666

 

Commercial and industrial

 

 

1,653

 

 

 

594

 

 

 

0

 

 

 

14,272

 

 

 

16,519

 

 

 

1,513,235

 

 

 

1,529,754

 

Paycheck Protection Program

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

268,081

 

 

 

268,081

 

Installment and other

 

 

39

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

39

 

 

 

1,234

 

 

 

1,273

 

Lease financing receivables

 

 

973

 

 

 

98

 

 

 

0

 

 

 

984

 

 

 

2,055

 

 

 

336,701

 

 

 

338,756

 

Total

 

$

6,117

 

 

$

2,118

 

 

$

0

 

 

$

34,465

 

 

$

42,700

 

 

$

4,411,248

 

 

$

4,453,948

 

 

December 31, 2020

 

30-59
Days
Past Due

 

 

60-89
Days
Past Due

 

 

Greater
than 90
Days and
Accruing

 

 

Non-
accrual

 

 

Total
Past Due

 

 

Current

 

 

Total

 

Commercial real estate

 

$

1,544

 

 

$

4,194

 

 

$

0

 

 

$

15,969

 

 

$

21,707

 

 

$

1,291,479

 

 

$

1,313,186

 

Residential real estate

 

 

1,686

 

 

 

0

 

 

 

0

 

 

 

1,929

 

 

 

3,615

 

 

 

489,816

 

 

 

493,431

 

Construction, land development,
   and other land

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

226,620

 

 

 

226,620

 

Commercial and industrial

 

 

4,521

 

 

 

1,290

 

 

 

0

 

 

 

21,936

 

 

 

27,747

 

 

 

1,330,975

 

 

 

1,358,722

 

Paycheck Protection Program

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

517,815

 

 

 

517,815

 

Installment and other

 

 

6

 

 

 

0

 

 

 

0

 

 

 

1

 

 

 

7

 

 

 

1,796

 

 

 

1,803

 

Lease financing receivables

 

 

996

 

 

 

376

 

 

 

0

 

 

 

1,268

 

 

 

2,640

 

 

 

224,501

 

 

 

227,141

 

Total

 

$

8,753

 

 

$

5,860

 

 

$

0

 

 

$

41,103

 

 

$

55,716

 

 

$

4,083,002

 

 

$

4,138,718

 

 

Trouble debt restructurings (“TDRs”) are granted due to borrower financial difficulty and provide for a modification of loan repayment terms. TDRs are treated in the same manner as impaired loans for purposes of calculating the allowance for loan and lease losses. The tables below present TDRs by loan category as of September 30, 2021 and December 31, 2020:

 

September 30, 2021

 

Number
of
Loans

 

 

Pre-
Modification
Outstanding
Recorded
Investment

 

 

Post-
Modification
Outstanding
Recorded
Investment

 

 

Charge-offs

 

 

Specific
Reserves

 

Accruing:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

7

 

 

$

2,130

 

 

$

2,130

 

 

$

 

 

$

209

 

Commercial and industrial

 

 

1

 

 

 

63

 

 

 

63

 

 

 

 

 

 

63

 

Residential real estate

 

 

2

 

 

 

173

 

 

 

173

 

 

 

 

 

 

0

 

Total accruing

 

 

10

 

 

 

2,366

 

 

 

2,366

 

 

 

 

 

 

272

 

Non-accruing:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

3

 

 

 

856

 

 

 

740

 

 

 

116

 

 

 

311

 

Commercial and industrial

 

 

3

 

 

 

1,730

 

 

 

1,107

 

 

 

623

 

 

 

508

 

Total non-accruing

 

 

6

 

 

 

2,586

 

 

 

1,847

 

 

 

739

 

 

 

819

 

Total troubled debt restructurings

 

 

16

 

 

$

4,952

 

 

$

4,213

 

 

$

739

 

 

$

1,091

 

 

22


BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

 

 

December 31, 2020

 

Number
of
Loans

 

 

Pre-
Modification
Outstanding
Recorded
Investment

 

 

Post-
Modification
Outstanding
Recorded
Investment

 

 

Charge-offs

 

 

Specific
Reserves

 

Accruing:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

8

 

 

$

2,187

 

 

$

2,187

 

 

$

 

 

$

104

 

Commercial and industrial

 

 

1

 

 

 

78

 

 

 

78

 

 

 

 

 

 

78

 

Residential real estate

 

 

3

 

 

 

230

 

 

 

230

 

 

 

 

 

 

0

 

Total accruing

 

 

12

 

 

 

2,495

 

 

 

2,495

 

 

 

 

 

 

182

 

Non-accruing:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

4

 

 

 

1,609

 

 

 

1,362

 

 

 

247

 

 

 

102

 

Commercial and industrial

 

 

14

 

 

 

4,420

 

 

 

4,288

 

 

 

132

 

 

 

3,157

 

Total non-accruing

 

 

18

 

 

 

6,029

 

 

 

5,650

 

 

 

379

 

 

 

3,259

 

Total troubled debt restructurings

 

 

30

 

 

$

8,524

 

 

$

8,145

 

 

$

379

 

 

$

3,441

 

 

In addition, there was 0 commitment outstanding on troubled debt restructurings at September 30, 2021 or December 31, 2020.

Loans modified as troubled debt restructurings that occurred during the three and nine months ended September 30, 2021 and 2020 were:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Accruing:

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

2,395

 

 

$

3,151

 

 

$

2,495

 

 

$

1,771

 

Additions

 

 

0

 

 

 

604

 

 

 

281

 

 

 

604

 

Net payments

 

 

(29

)

 

 

(1,462

)

 

 

(410

)

 

 

(1,538

)

Net transfers from non-accrual

 

 

0

 

 

 

0

 

 

 

0

 

 

 

1,456

 

Ending balance

 

 

2,366

 

 

 

2,293

 

 

 

2,366

 

 

 

2,293

 

Non-accruing:

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

 

4,441

 

 

 

7,449

 

 

 

5,650

 

 

 

8,800

 

Additions

 

 

0

 

 

 

0

 

 

 

673

 

 

 

5,633

 

Net payments

 

 

(2,584

)

 

 

(302

)

 

 

(3,568

)

 

 

(1,688

)

Charge-offs

 

 

(10

)

 

 

(852

)

 

 

(908

)

 

 

(4,994

)

Net transfers to accrual

 

 

0

 

 

 

0

 

 

 

0

 

 

 

(1,456

)

Ending balance

 

 

1,847

 

 

 

6,295

 

 

 

1,847

 

 

 

6,295

 

Total troubled debt restructurings

 

$

4,213

 

 

$

8,588

 

 

$

4,213

 

 

$

8,588

 

 

There were 0 troubled debt restructurings that subsequently defaulted within twelve months of the restructure date during the three and nine months ended September 30, 2021 or 2020.

At September 30, 2021 and December 31, 2020, the reserve for unfunded commitments was $1.5 million and $1.9 million, respectively. During the three and nine months ended September 30, 2021, there was a recapture for unfunded commitments of $79,000 and $363,000, respectively. During the three and nine months ended September 30, 2020, the provision for unfunded commitments was $519,000 and $1.2 million, respectively. There were 0 charge-offs or recoveries related to the reserve for unfunded commitments during the periods.

23


BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

 

Note 6—Servicing Assets

Activity for servicing assets and the related changes in fair value for the three and nine months ended September 30, 2021 and 2020 was as follows:

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Beginning balance

 

$

24,683

 

 

$

18,351

 

 

$

22,042

 

 

$

19,471

 

Additions, net

 

 

1,564

 

 

 

1,794

 

 

 

5,703

 

 

 

4,449

 

Changes in fair value

 

 

(2,650

)

 

 

1,122

 

 

 

(4,148

)

 

 

(2,653

)

   Ending balance

 

$

23,597

 

 

$

21,267

 

 

$

23,597

 

 

$

21,267

 

 

Loans serviced for others are not included in the Consolidated Statements of Financial Condition. The unpaid principal balances of these loans serviced for others as of September 30, 2021 and December 31, 2020 were as follows:

 

 

 

September 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Loan portfolios serviced for:

 

 

 

 

 

 

SBA guaranteed loans

 

$

1,471,367

 

 

$

1,395,713

 

USDA guaranteed loans

 

 

143,847

 

 

 

135,543

 

Total

 

$

1,615,214

 

 

$

1,531,256

 

 

Loan servicing revenue totaled $3.3 million and $2.9 million for each of the three months ended September 30, 2021 and 2020, respectively. Loan servicing revenue totaled $9.3 million and $8.7 million for each of the nine months ended September 30, 2021 and 2020, respectively. Loan servicing asset revaluation, which represents the changes in fair value of servicing assets, resulted in a downward valuation adjustment of $2.7 million and an upward valuation adjustment of $1.1 million for three months ended September 30, 2021 and 2020, respectively. Loan servicing asset revaluations resulted in downward valuation adjustments of $4.1 million and $2.7 million for the nine months ended September 30, 2021 and 2020, respectively.

The fair value of servicing rights is highly sensitive to changes in underlying assumptions. Changes in secondary market premiums and prepayment speed assumptions have the most significant impact on the fair value of servicing rights.

Generally, as interest rates rise on variable rate loans, loan prepayments increase due to an increase in refinance activity, which may result in a decrease in the fair value of servicing assets. Measurement of fair value is limited to the conditions existing and the assumptions used as of a particular point in time, and those assumptions may change over time. Refer to Note 15—Fair Value Measurement for further details.

Note 7—Other Real Estate Owned

The following table presents the change in other real estate owned (“OREO”) for the three and nine months ended September 30, 2021 and 2020:

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Beginning balance

 

$

4,417

 

 

$

8,652

 

 

$

6,350

 

 

$

9,896

 

Net additions to OREO

 

 

0

 

 

 

41

 

 

 

436

 

 

 

127

 

Proceeds from sales of OREO

 

 

(1,498

)

 

 

(224

)

 

 

(2,998

)

 

 

(874

)

Gains (losses) on sales of OREO

 

 

114

 

 

 

(41

)

 

 

133

 

 

 

44

 

Valuation adjustments

 

 

0

 

 

 

(278

)

 

 

(888

)

 

 

(1,043

)

   Ending balance

 

$

3,033

 

 

$

8,150

 

 

$

3,033

 

 

$

8,150

 

 

At September 30, 2021 and December 31, 2020, the balance of real estate owned included 0 foreclosed residential real estate properties recorded as a result of obtaining physical possession of the property.

24


BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

 

At September 30, 2021 and December 31, 2020, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process was $3.1 million and $3.3 million, respectively.

There were 0 internally financed sales of OREO for the three and nine months ended September 30, 2021 or 2020.

 

Note 8—Leases

The Company enters into leases in the normal course of business primarily for its banking facilities and branches. The Company’s operating leases have varying maturity dates through year end 2042, some of which include renewal or termination options to extend the lease. In addition, the Company leases or subleases real estate to third parties. The Company includes lease extension and termination options in the lease term if, after considering relevant economic factors, it is reasonably certain the Company will exercise the option. In addition, the Company has elected to account for any non-lease components in its real estate leases as part of the associated lease component. The Company has also elected not to recognize leases with original lease terms of 12 months or less (short-term leases) on the Company’s balance sheet.

Leases are classified at the lease commencement date. Lease expense for operating leases and short-term leases is recognized on a straight-line basis over the lease term. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.

The following table summarizes the amount and balance sheet line item for our operating lease right-of-use asset and liability as of September 30, 2021:

 

 

Balance Sheet Line Item

 

September 30, 2021

 

Operating lease right-of-use asset

 

Accrued interest receivable and other assets

 

$

11,580

 

Operating lease liability

 

 Accrued interest payable and other liabilities

 

 

13,744

 

The Company uses its incremental borrowing rate at lease commencement to calculate the present value of lease payments when the rate implicit in a lease is not known. The Company’s incremental borrowing rate is based on the FHLB regular advance rate, adjusted for the lease term and other factors. At September 30, 2021, the weighted-average discount rate of operating leases was 0.85% and the weighted average remaining life of operating leases was 6.0 years.

The future minimum lease payments for operating leases, subsequent to September 30, 2021, as recorded on the balance sheet, are summarized as follows:

 

 

 

Operating Lease
Commitments

 

2021

 

$

1,515

 

2022

 

 

3,618

 

2023

 

 

2,412

 

2024

 

 

2,194

 

2025

 

 

1,505

 

Thereafter

 

 

3,108

 

   Total undiscounted lease payments

 

 

14,352

 

Less: imputed interest

 

 

(608

)

Net lease liabilities

 

$

13,744

 

 

The Company’s rental expenses for the three months ended September 30, 2021 and 2020 were $1.2 million and $1.6 million, respectively. The Company’s rental expenses for the nine months ended September 30, 2021 and 2020 were $4.0 million and $4.9 million, respectively. For the three months ended September 30, 2021 and 2020, the Company received $166,000 and $184,000, respectively, in sublease income. For the nine months ended September 30, 2021 and 2020, the Company received $479,000 and $549,000, respectively, in sublease income. The total amount of minimum rentals to be received in the future on these subleases is approximately $1.5 million, and the leases have contractual lives extending through

25


BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

 

2026. In addition to the above required lease payments, the Company has contractual obligations related primarily to information technology contracts and other maintenance contracts.

Note 9—Goodwill, Core Deposit Intangible and Other Intangible Assets

The following tables summarize the changes in the Company’s goodwill, core deposit intangible assets, and customer relationship intangible assets for the three and nine months ended September 30, 2021 and 2020:

 

 

 

For the Three Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

 

Goodwill
 

 

 

Core
Deposit
Intangible

 

 

Customer Relationship
Intangible

 

 

Goodwill
 

 

 

Core
Deposit
Intangible

 

 

Customer Relationship
Intangible

 

Beginning balance

 

$

148,353

 

 

$

18,346

 

 

$

2,335

 

 

$

148,353

 

 

$

25,459

 

 

$

2,658

 

Amortization

 

 

 

 

 

(1,672

)

 

 

(66

)

 

 

 

 

 

(1,825

)

 

 

(122

)

Ending balance

 

$

148,353

 

 

$

16,674

 

 

$

2,269

 

 

$

148,353

 

 

$

23,634

 

 

$

2,536

 

Accumulated amortization

 

N/A

 

 

$

38,792

 

 

$

947

 

 

N/A

 

 

$

31,832

 

 

$

680

 

Weighted average remaining
   amortization period

 

N/A

 

 

5.0 Years

 

 

8.5 Years

 

 

N/A

 

 

5.8 Years

 

 

9.7 Years

 

 

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

 

Goodwill
 

 

 

Core
Deposit
Intangible

 

 

Customer Relationship
Intangible

 

 

Goodwill
 

 

 

Core
Deposit
Intangible

 

 

Customer Relationship
Intangible

 

Beginning balance

 

$

148,353

 

 

$

21,809

 

 

$

2,469

 

 

$

148,353

 

 

$

29,111

 

 

$

2,791

 

Amortization

 

 

 

 

 

(5,135

)

 

 

(200

)

 

 

 

 

 

(5,477

)

 

 

(255

)

Ending balance

 

$

148,353

 

 

$

16,674

 

 

$

2,269

 

 

$

148,353

 

 

$

23,634

 

 

$

2,536

 

Accumulated amortization

 

N/A

 

 

$

38,792

 

 

$

947

 

 

N/A

 

 

$

31,832

 

 

$

680

 

Weighted average remaining
   amortization period

 

N/A

 

 

5.0 Years

 

 

8.5 Years

 

 

N/A

 

 

5.8 Years

 

 

9.7 Years

 

 

The following table presents the estimated amortization expense for core deposit intangible and customer relationship intangible assets remaining at September 30, 2021:

 

 

 

Estimated
Amortization

 

2021

 

$

1,737

 

2022

 

 

6,386

 

2023

 

 

4,336

 

2024

 

 

2,286

 

2025

 

 

1,721

 

Thereafter

 

 

2,477

 

Total

 

$

18,943

 

 

 

Note 10—Income Taxes

The Company uses an estimated annual effective tax rate method in computing its interim tax provision. This effective tax rate is based on forecasted annual pre-tax income, permanent tax differences and statutory tax rates.

The effective tax rate for the nine months ended September 30, 2021 and 2020 was 25.3% and 28.5%, respectively. The Company recorded discrete income tax benefit of $166,000 and a provision of $231,000 related to the exercise of stock options and vesting of restricted shares for the nine months ended September 30, 2021 and 2020, respectively.

Net deferred tax assets increased to $45.2 million at September 30, 2021 compared to $40.2 million at December 31, 2020 primarily a result of unrealized losses on available-for-sale securities.

26


BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

 

During the second quarter 2021, Illinois Senate Bill 2017 was passed which created a temporary limitation on Net Loss Deduction ("NLD") usage. For tax years 2021, 2022, and 2023, C Corporations are limited to applying a maximum of $100,000 of NLD to taxable income. NLDs that are limited during these years have an extended expiration date for the years in which they are limited. The extended expiration of the Company’s NLD carryforwards are from December 31, 2026 to December 31, 2033.

Note 11—Deposits

The composition of deposits was as follows as of September 30, 2021 and December 31, 2020:

 

 

 

September 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Non-interest-bearing demand deposits

 

$

2,117,749

 

 

$

1,762,676

 

Interest-bearing checking accounts

 

 

652,824

 

 

 

494,424

 

Money market demand accounts

 

 

1,057,419

 

 

 

1,142,709

 

Other savings

 

 

627,294

 

 

 

564,700

 

Time deposits (below $250,000)

 

 

553,364

 

 

 

600,810

 

Time deposits ($250,000 and above)

 

 

149,628

 

 

 

186,712

 

Total deposits

 

$

5,158,278

 

 

$

4,752,031

 

There were 0 brokered deposits included in Time deposits of $250,000 or more at September 30, 2021, and $35.0 million at December 31, 2020, respectively.

Note 12—Other Borrowings

The following is a summary of the Company’s other borrowings as of September 30, 2021 and December 31, 2020:

 

 

 

September 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Paycheck Protection Program Liquidity Facility

 

$

156,404

 

 

$

371,907

 

Federal Home Loan Bank advances

 

 

355,000

 

 

 

234,000

 

Securities sold under agreements to repurchase

 

 

27,715

 

 

 

41,994

 

Line of credit

 

 

 

 

 

 

Total

 

$

539,119

 

 

$

647,901

 

 

On April 21, 2020, the Bank entered into a Letter Agreement with the Federal Reserve Bank of Chicago that allows the Bank to access the Paycheck Protection Program Liquidity Facility (the “PPPLF”). Under the terms of the PPPLF, the Bank pledges loans originated under the PPP to the Federal Reserve Bank of Chicago as collateral for available advances under the PPPLF. Advances under the PPPLF are in an amount equal to the aggregate principal amount of PPP loans pledged by Byline Bank, carry an interest rate of 35 basis points and mature on the maturity date of the PPP loans pledged as collateral for the advance. As of September 30, 2021, the PPPLF balance was $156.4 million with an interest rate of 0.35% with various maturity dates from April 2022 to February 2026.

Byline Bank has the capacity to borrow funds from the discount window of the Federal Reserve System. As of September 30, 2021 and December 31, 2020, there were 0 outstanding advances under the Federal Reserve Bank discount window line.

At September 30, 2021, fixed-rate Federal Home Loan Bank (“FHLB”) advances totaled $355.0 million, with interest rates ranging from 0.00% to 0.22% and maturities ranging from November 2021 to May 2022. Advances from the FHLB are collateralized by residential real estate loans, commercial real estate loans, and securities. The Bank’s maximum borrowing capacity is limited to 35% of total assets. Required investment in FHLB stock is $4.50 for every $100 in advances.

Securities sold under agreements to repurchase represent a demand deposit product offered to customers that sweep balances in excess of the FDIC insurance limit into overnight repurchase agreements. The Company pledges securities as collateral for the repurchase agreements. Refer to Note 3—Securities for additional discussion.

27


BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

 

On October 13, 2016, the Company entered into a $30.0 million revolving credit agreement with a correspondent bank. Through subsequent amendments, the revolving credit agreement was reduced to $15.0 million and the maturity of the credit facility was extended to October 9, 2020. The amended revolving line of credit bears interest at either the London Interbank Offered Rate (“LIBOR”) plus 195 basis points or the Prime Rate minus 75 basis points, not to be less than 2.00%, based on the Company’s election, which is required to be communicated at least three business days prior to the commencement of an interest period. If the Company fails to provide timely notification, the interest rate will be Prime Rate minus 75 basis points. At September 30, 2021 and December 31, 2020, the line of credit had 0 outstanding balance. On October 8, 2021, the Company extended the maturity of the credit facility to October 7, 2022.

The following table presents short-term credit lines available for use as of September 30, 2021 and December 31, 2020:

 

 

 

September 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Federal Home Loan Bank line

 

$

1,910,295

 

 

$

2,016,212

 

Federal Reserve Bank of Chicago discount window line

 

 

622,306

 

 

 

874,677

 

Available federal funds lines

 

 

115,000

 

 

 

115,000

 

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

Note 13—Subordinated Notes and Junior Subordinated Debentures

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

As of September 30, 2021, the net liability outstanding of the subordinated notes was $73.5 million. The Company may, at its option, redeem the notes, in whole or in part, on a semi-annual basis beginning on July 1, 2025, subject to obtaining the prior approval of the Federal Reserve to the extent such approval is then required. The subordinated notes qualify as Tier 2 capital for regulatory capital purposes.

At September 30, 2021 and December 31, 2020, the Company’s junior subordinated debentures by issuance were as follows:

 

Name of Trust

 

Aggregate Principal Amount September 30, 2021

 

 

Aggregate
Principal Amount
December 31, 2020

 

 

Stated
Maturity

 

Contractual Rate at September 30, 2021

 

 

Interest Rate Spread

Metropolitan Statutory Trust 1

 

$

35,000

 

 

$

35,000

 

 

March 17, 2034

 

 

2.91

%

 

Three-month
LIBOR +
2.79%

First Evanston Bancorp Trust I

 

 

10,000

 

 

 

10,000

 

 

March 15, 2035

 

 

1.90

%

 

Three-month
LIBOR +
1.78%

Total liability, at par

 

 

45,000

 

 

 

45,000

 

 

 

 

 

 

 

 

Discount

 

 

(8,204

)

 

 

(8,549

)

 

 

 

 

 

 

 

Total liability, at carrying value

 

$

36,796

 

 

$

36,451

 

 

 

 

 

 

 

 

 

In 2004, the Company’s predecessor, Metropolitan Bank Group, Inc., issued $35.0 million floating rate junior subordinated debentures to Metropolitan Statutory Trust 1, which was formed for the issuance of trust preferred securities. The debentures bear interest at three-month LIBOR plus 2.79% (2.91% and 3.02% at September 30, 2021 and December 31, 2020, respectively). Interest is paid on a quarterly basis. The Company has the right to redeem the debentures, in whole or in part, on any interest payment date on or after March 2009. Accrued interest payable was $41,000 and $45,000 as of September 30, 2021 and December 31, 2020, respectively.

As part of the First Evanston acquisition, the Company assumed the obligations to First Evanston Bancorp Trust I of $10.0 million in principal amount, which was formed for the issuance of trust preferred securities. Beginning on March 15, 2010, the interest rate reset to the three-month LIBOR plus 1.78% (1.90% and 2.00% at September 30, 2021 and December 31,

28


BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

 

2020, respectively), which is in effect until the debentures mature in 2035. Interest is paid on a quarterly basis. The Company has the right to redeem the debentures, in whole or in part, on any interest payment date on or after March 2010. The Company has the option to defer interest payments on the debentures from time to time for a period not to exceed five consecutive years. Accrued interest payable was $8,000 and $9,000 as of September 30, 2021 and December 31, 2020, respectively.

The Trusts are not consolidated with the Company. Accordingly, the Company reports the subordinated debentures held by the Trusts as liabilities. The Company owns all of the common securities of each trust. The junior subordinated debentures qualify, and are treated as, Tier 1 regulatory capital of the Company subject to regulatory limitations. The trust preferred securities issued by each trus