Byline Bancorp 10Q 2021 Q3 Quarterly report

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

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

For the transition period from ______to ______

Commission File Number 001-38139

Byline Bancorp, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware

36-3012593

(State or Other Jurisdiction of

Incorporation or Organization)

(IRS Employer

Identification Number)

180 North LaSalle Street, Suite 300

Chicago, Illinois 60601

(Address of Principal Executive Offices)

(773) 244-7000

(Registrant’s telephone number, including area code)

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

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

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.

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.

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.

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.

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.

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.

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.

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.

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

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

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	)

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.

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

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

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

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 leases— The 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

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.

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

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

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

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.

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.

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

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.

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.

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,

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

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Byline Bancorp (BY) 10-Q2021 Q3 Quarterly report

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