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Section 1: 8-K (8-K)

by-8k_20190124.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): January 24, 2019

 

BYLINE BANCORP, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware

(State or Other Jurisdiction

of Incorporation)

 

 

 

 

001-38139

 

36-3012593

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

 

 

180 North LaSalle Street, Suite 300

 

 

Chicago, Illinois

 

60601

(Address of Principal Executive Offices)

 

(Zip Code)

(773) 244-7000

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter)

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.  

 

 


 

 

Item 2.02.

Results of Operations and Financial Condition.

On January 24, 2019, Byline Bancorp, Inc. (the “Company”) issued a press release announcing its financial results for the fourth quarter ended December 31, 2018. A copy of the press release is attached as Exhibit 99.1 and is incorporated herein by reference.

The information included under this Item 2.02 of Form 8-K and the attached exhibit are being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in any such filing.

 

Item 9.01.

Financial Statements and Exhibits.

(d) Exhibits.

 

 

 

 

Exhibit

No.

  

Description

 

 

99.1

  

Fourth Quarter 2018 Financial Results Press Release, dated January 24, 2019

 

 

Forward-Looking Statements

This communication contains forward-looking statements within the meaning of the U.S. federal securities laws. Forward-looking statements include, without limitation, statements concerning plans, estimates, calculations, forecasts and projections with respect to the anticipated future performance of the Company. These statements are often, but not always, made through the use of words or phrases such as ‘‘may’’, ‘‘might’’, ‘‘should’’, ‘‘could’’, ‘‘predict’’, ‘‘potential’’, ‘‘believe’’, ‘‘expect’’, ‘‘continue’’, ‘‘will’’, ‘‘anticipate’’, ‘‘seek’’, ‘‘estimate’’, ‘‘intend’’, ‘‘plan’’, ‘‘projection’’, ‘‘would’’, ‘‘annualized’’, “target” and ‘‘outlook’’, or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. Forward-looking statements involve estimates and known and unknown risks, and reflect various assumptions and involve elements of subjective judgement and analysis, which may or may not prove to be correct, and which are subject to uncertainties and contingencies outside the control of Byline and its respective affiliates, directors, employees and other representatives, which could cause actual results to differ materially from those presented in this communication. No representations, warranties or guarantees are or will be made by Byline as to the reliability, accuracy or completeness of any forward-looking statements contained in this communication or that such forward-looking statements are or will remain based on reasonable assumptions. You should not place undue reliance on any forward-looking statements contained in this communication.

 

In addition, this communication contains forward-looking statements related to the pending merger of Byline and Oak Park River Forest Bankshares, Inc., including, but not limited to, with respect to the expected completion date, financial benefits and other effects of the transaction. Factors that could cause actual results to differ materially from those presented in this communication regarding the pending merger may include, but are not limited to, the reaction to the transaction of the companies’ customers, employees, and counterparties; customer disintermediation; inflation; expected synergies, costs savings, and other financial benefits of the proposed transaction that might not be realized within the expected timeframes or might be less than projected; the requisite Oak Park River Forest Bankshares, Inc. stockholder approval for the proposed transaction might not be obtained; credit and interest rate risks associated with Byline’s and Oak Park River Forest Bankshares, Inc.’s respective businesses, customers, borrowings, repayment, investment, and deposit practices; general economic conditions, either nationally or in the market areas in which Byline and Oak Park River Forest Bankshares, Inc. operate or anticipate doing business, are less favorable than expected; new regulatory or legal requirements or obligations, and other risks.

 

Certain risks and important factors that could affect Byline’s future results are identified in its Annual Report on Form 10-K and other reports filed with the Securities and Exchange Commission, including among other things under the heading “Risk Factors” in such Annual Report on Form 10-K.  Any forward-looking statement speaks only as of the date on which it is made, and Byline undertakes no obligation to update any forward-looking statement, whether to reflect events or circumstances after the date on which the statement is made, to reflect new information or the occurrence of unanticipated events, or otherwise unless required under the federal securities laws.

 

 

2


 

 

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

 

 

 

 

 

 

 

 

BYLINE BANCORP, INC.

 

 

 

 

Date: January 24, 2019

 

 

 

By:

/s/ Alberto J. Paracchini

 

 

 

 

Name:

Alberto J. Paracchini

 

 

 

 

Title:

President and Chief Executive Officer

 

 

 

3

(Back To Top)

Section 2: EX-99.1 (EX-99.1)

by-ex991_6.htm

EX-99.1

 

                                      

 

Byline Bancorp, Inc. Reports Fourth Quarter 2018 Financial Results

 

Fourth Quarter 2018 Highlights

 

Net income of $17.1 million, or $0.46 per diluted share, a record high since our initial public offering

 

 

Net interest margin of 4.69% for the fourth quarter of 2018, compared to 4.73% for the third quarter of 2018, and 4.26% for the fourth quarter of 2017

 

o

Net interest margin excluding accretion income1 improves to 4.13% for the fourth quarter of 2018, compared to 3.99% for the third quarter of 2018, and 3.96% for the fourth quarter of 2017

 

 

 

Originated loans and leases grew to $2.2 billion at December 31, 2018, an increase of $171.6 million, or 8.3%, from September 30, 2018

 

 

 

Efficiency ratio of 56.81% for the fourth quarter of 2018, compared to 56.57% for the third quarter of 2018, and 66.06% for the fourth quarter of 2017

 

o

Adjusted efficiency ratio1 improves to 54.95% for the fourth quarter of 2018, compared to 55.78% for the third quarter of 2018, and 63.23% for the fourth quarter of 2017

 

Return on average assets improves to 1.39% for the fourth quarter of 2018, compared to 1.20% for the third quarter of 2018, and (0.09)% for the fourth quarter of 2017

 

Return on average stockholders’ equity improves to 10.61% for the fourth quarter of 2018, compared to 9.22% for the third quarter of 2018, and (0.66)% for the fourth quarter of 2017

 

 

Full Year 2018 Highlights

 

2018 net income of $41.2 million, or $1.18 per diluted share, compared to 2017 net income of $21.7 million, or $0.38 per diluted share

 

Net interest margin improves to 4.60% for 2018, compared to 4.11% for 2017

 

o

Net interest margin excluding accretion income1 improves to 4.07% for 2018, compared to 3.82% for 2017

 

Originated loans and leases grew to $2.2 billion at December 31, 2018, an increase of $664.4 million, or 42.2%, from December 31, 2017

 

Efficiency ratio improves to 65.31% for 2018, compared to 67.32% for 2017

 

o

Adjusted efficiency ratio1 improves to 59.87% for 2018, compared to 66.04% for 2017

 

Return on average assets improves to 0.97% for 2018, compared to 0.66% for 2017

 

Return on average stockholders’ equity improves to 7.34% for 2018, compared to 5.08% for 2017

 

Chicago, IL, January 24, 2019 – Byline Bancorp, Inc. (the “Company” or “Byline”)(NYSE: BY), the parent company of Byline Bank (the “Bank”), today reported net income of $17.1 million, or $0.46 per diluted share, for the fourth quarter of 2018, compared with net income of $14.5 million, or $0.39 per diluted share, for the third quarter of 2018, and a net loss of $766,000, or $0.03 per diluted share, for the fourth quarter of 2017. The Company’s financial results during 2018 include certain costs associated with its

 

(1)

Represents a non-GAAP financial measure.  See “Reconciliation of non-GAAP Financial Measures” for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure.

 

 


Byline Bancorp, Inc.

Page 2 of 23

acquisition and integration of First Evanston Bancorp, Inc. (“First Evanston”) and its bank subsidiary First Bank & Trust, which closed on May 31, 2018, as well as its previously announced pending acquisition of Oak Park River Forest Bankshares, Inc. Excluding these merger-related expenses, planned core system conversion expenses, and impairment charges on assets held for sale, adjusted net income1 was $18.1 million, or $0.49 per adjusted diluted share, for the fourth quarter of 2018, compared with $14.9 million, or $0.40 per adjusted diluted share, for the third quarter of 2018, and $7.3 million, or $0.24 per adjusted diluted share, for the fourth quarter of 2017. A reconciliation of adjusted net income and adjusted diluted earnings per share to net income and diluted earnings per share, respectively, according to accounting principles generally accepted in the United States of America (“GAAP”) is provided in the financial tables at the end of this release.

Alberto J. Paracchini, President and Chief Executive Officer of Byline, commented, “We delivered a very strong quarter, characterized by a strong net interest margin, improved operating performance, lower credit costs and solid organic growth, with contributions coming from our diversified commercial lending platform, branch network and government guaranteed lending business. Earnings for the quarter were the highest since our IPO, and reflect the hard work of our employees in serving customers and the successful integration of First Evanston.

“We remain focused on executing our strategy of pursuing disciplined organic growth and improving operating efficiencies in 2019. We believe our pending acquisition of Oak Park River Forest Bankshares, Inc. will enhance our position in an attractive Chicago metropolitan market, provide an important source of low-cost deposits, and further enhance the value of the Byline franchise. Completing the acquisition and ensuring a smooth transition for customers and colleagues is a top priority for 2019,” said Mr. Paracchini.

STATEMENTS OF OPERATIONS

Net Interest Income

The following table presents net interest income for the periods indicated:

 

Three Months Ended

 

 

Year Ended

 

 

 

December 31,

 

 

September 30,

 

 

June 30,

 

 

March 31,

 

 

December 31,

 

 

December 31,

 

 

December 31,

 

(dollars in thousands)

 

2018

 

 

2018

 

 

2018

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

INTEREST AND DIVIDEND

   INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans

   and leases

 

$

56,646

 

 

$

55,045

 

 

$

39,627

 

 

$

33,654

 

 

$

31,896

 

 

$

184,972

 

 

$

120,406

 

Interest on taxable securities

 

 

5,334

 

 

 

5,076

 

 

 

4,572

 

 

 

4,055

 

 

 

3,679

 

 

 

19,037

 

 

 

14,892

 

Interest on tax-exempt

   securities

 

 

355

 

 

 

337

 

 

 

229

 

 

 

174

 

 

 

176

 

 

 

1,095

 

 

 

634

 

Other interest and dividend

   income

 

 

560

 

 

 

615

 

 

 

413

 

 

 

259

 

 

 

205

 

 

 

1,847

 

 

 

871

 

Total interest and

   dividend income

 

 

62,895

 

 

 

61,073

 

 

 

44,841

 

 

 

38,142

 

 

 

35,956

 

 

 

206,951

 

 

 

136,803

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

7,115

 

 

 

5,971

 

 

 

3,745

 

 

 

2,498

 

 

 

2,218

 

 

 

19,329

 

 

 

7,736

 

Federal Home Loan Bank

   advances

 

 

1,719

 

 

 

1,723

 

 

 

1,360

 

 

 

1,358

 

 

 

1,009

 

 

 

6,160

 

 

 

3,291

 

Subordinated debentures

   and other borrowings

 

 

800

 

 

 

786

 

 

 

680

 

 

 

591

 

 

 

578

 

 

 

2,857

 

 

 

2,864

 

Total interest expense

 

 

9,634

 

 

 

8,480

 

 

 

5,785

 

 

 

4,447

 

 

 

3,805

 

 

 

28,346

 

 

 

13,891

 

Net interest income

 

$

53,261

 

 

$

52,593

 

 

$

39,056

 

 

$

33,695

 

 

$

32,151

 

 

$

178,605

 

 

$

122,912

 

 

(1)

Represents a non-GAAP financial measure.  See “Reconciliation of non-GAAP Financial Measures” for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure.

 


Byline Bancorp, Inc.

Page 3 of 23

The following table presents the quarter-to-date schedule of average interest-earning assets and average interest-bearing liabilities for the periods indicated:

 

For the Three Months Ended

 

 

 

 

 

 

 

December 31,

 

 

 

 

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

 

2018

 

 

2018

 

(dollars in thousands)

 

Average

Balance(5)

 

 

Interest

Inc / Exp

 

 

Average

Yield /

Rate

 

 

Average

Balance(5)

 

 

Interest

Inc / Exp

 

 

Average

Yield /

Rate

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

91,852

 

 

$

316

 

 

 

1.37

%

 

$

107,555

 

 

$

368

 

 

 

1.36

%

Loans and leases(1)

 

 

3,470,264

 

 

 

56,646

 

 

 

6.48

%

 

 

3,387,569

 

 

 

55,045

 

 

 

6.45

%

Securities available-for-sale

 

 

798,234

 

 

 

5,005

 

 

 

2.49

%

 

 

768,189

 

 

 

4,738

 

 

 

2.45

%

Securities held-to-maturity

 

 

88,115

 

 

 

573

 

 

 

2.58

%

 

 

91,892

 

 

 

585

 

 

 

2.53

%

Tax-exempt securities(2)

 

 

56,649

 

 

 

355

 

 

 

2.48

%

 

 

55,656

 

 

 

337

 

 

 

2.40

%

Total interest-earning assets

 

$

4,505,114

 

 

$

62,895

 

 

 

5.54

%

 

$

4,410,861

 

 

$

61,073

 

 

 

5.49

%

Allowance for loan and lease losses

 

 

(24,215

)

 

 

 

 

 

 

 

 

 

 

(21,557

)

 

 

 

 

 

 

 

 

All other assets

 

 

415,535

 

 

 

 

 

 

 

 

 

 

 

420,635

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

4,896,434

 

 

 

 

 

 

 

 

 

 

$

4,809,939

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’

   EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest checking

 

$

308,821

 

 

$

407

 

 

 

0.52

%

 

$

316,394

 

 

$

384

 

 

 

0.48

%

Money market accounts

 

 

653,141

 

 

 

1,505

 

 

 

0.91

%

 

 

618,213

 

 

 

1,200

 

 

 

0.77

%

Savings

 

 

489,486

 

 

 

157

 

 

 

0.13

%

 

 

479,837

 

 

 

148

 

 

 

0.12

%

Time deposits

 

 

1,130,308

 

 

 

5,046

 

 

 

1.77

%

 

 

1,084,550

 

 

 

4,239

 

 

 

1.55

%

Total interest-bearing

   deposits

 

 

2,581,756

 

 

 

7,115

 

 

 

1.09

%

 

 

2,498,994

 

 

 

5,971

 

 

 

0.95

%

Federal Home Loan Bank advances

 

 

360,891

 

 

 

1,719

 

 

 

1.89

%

 

 

394,588

 

 

 

1,723

 

 

 

1.73

%

Other borrowed funds

 

 

65,226

 

 

 

800

 

 

 

4.86

%

 

 

61,582

 

 

 

786

 

 

 

5.06

%

Total borrowings

 

 

426,117

 

 

 

2,519

 

 

 

2.35

%

 

 

456,170

 

 

 

2,509

 

 

 

2.18

%

Total interest-bearing liabilities

 

$

3,007,873

 

 

$

9,634

 

 

 

1.27

%

 

$

2,955,164

 

 

$

8,480

 

 

 

1.14

%

Non-interest bearing demand deposits

 

 

1,194,445

 

 

 

 

 

 

 

 

 

 

 

1,175,523

 

 

 

 

 

 

 

 

 

Other liabilities

 

 

54,231

 

 

 

 

 

 

 

 

 

 

 

53,631

 

 

 

 

 

 

 

 

 

Total stockholders’ equity

 

 

639,885

 

 

 

 

 

 

 

 

 

 

 

625,621

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND

   STOCKHOLDERS’ EQUITY

 

$

4,896,434

 

 

 

 

 

 

 

 

 

 

$

4,809,939

 

 

 

 

 

 

 

 

 

Net interest spread(3)

 

 

 

 

 

 

 

 

 

 

4.27

%

 

 

 

 

 

 

 

 

 

 

4.35

%

Net interest income

 

 

 

 

 

$

53,261

 

 

 

 

 

 

 

 

 

 

$

52,593

 

 

 

 

 

Net interest margin(4)

 

 

 

 

 

 

 

 

 

 

4.69

%

 

 

 

 

 

 

 

 

 

 

4.73

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loan accretion impact on margin

 

 

 

 

 

$

6,351

 

 

 

0.56

%

 

 

 

 

 

$

8,259

 

 

 

0.74

%

Net interest margin excluding loan

   accretion(6)

 

 

 

 

 

 

 

 

 

 

4.13

%

 

 

 

 

 

 

 

 

 

 

3.99

%

 

(1)

Loan and lease balances are net of deferred origination fees and costs and initial indirect costs.  Non-accrual loans and leases are included in total loan and lease balances.

 

(2)

Interest income and rates exclude the effects of a tax equivalent adjustment to adjust tax exempt investment income on tax exempt investment securities to a fully taxable basis due to immateriality.

 

(3)

Represents the average rate earned on interest-earning assets minus the average rate paid on interest-bearing liabilities.

 

(4)

Represents net interest income (annualized) divided by total average earning assets.

 

(5)

Average balances are average daily balances.

 

(6)

Represents a non-GAAP financial measure.  See “Reconciliation of non-GAAP Financial Measures” for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure.

 



Byline Bancorp, Inc.

Page 4 of 23

Net interest income for the fourth quarter of 2018 was $53.3 million, an increase of $668,000, or 1.3%, from $52.6 million for the third quarter of 2018.

The increase in net interest income was primarily due to:

 

An increase of $1.6 million in interest and fees on loans and leases, primarily due to growth in loan and lease originations and the rising interest rate environment; and

 

An increase of $258,000 in interest income on securities, primarily due to additional purchases during the fourth quarter of 2018.

Partially offset by:

 

An increase of $1.1 million in interest expense on deposits, primarily due to the rising interest rate environment.

 

 

 

Net interest margin for the fourth quarter of 2018 was 4.69%, a decrease of four basis points compared to 4.73% for the third quarter of 2018. Total net accretion income on acquired loans contributed 56 basis points to the net interest margin for the fourth quarter of 2018 compared to 74 basis points for the third quarter of 2018, a decrease of 18 basis points. Net interest margin excluding loan accretion increased 14 basis points to 4.13% during the fourth quarter of 2018, compared to 3.99% for the third quarter of 2018. Despite a $1.9 million decrease in net loan accretion, interest and fees on loans and leases increased $1.6 million for the fourth quarter of 2018 compared to the third quarter of 2018.

 

The average cost of total deposits was 0.75% for the fourth quarter of 2018, an increase of 11 basis points compared to the third quarter of 2018, primarily due to increased rates on interest bearing deposits. Additionally, there was growth in average time deposits of $45.8 million and money market accounts of $34.9 million, partially offset by growth in average non-interest bearing demand deposits of $18.9 million.

Provision for Loan and Lease Losses

The provision for loan and lease losses was $3.9 million for the fourth quarter of 2018, a decrease of $1.9 million compared to $5.8 million for the third quarter of 2018. The fourth quarter provision included allocations of $2.5 million for originated loans and leases, $1.6 million for acquired non-impaired loans, and a $152,000 release for acquired impaired loans. The decreased provision during the fourth quarter of 2018 was primarily due to a reduction in specific impairment in the unguaranteed portion of the government guaranteed portfolio offset by increases to the general reserve driven by originated loan and lease portfolio growth.


Byline Bancorp, Inc.

Page 5 of 23

Non-interest Income

The following table presents the components of non-interest income for the periods indicated:

 

Three Months Ended

 

 

Year Ended

 

 

 

December 31,

 

 

September 30,

 

 

June 30,

 

 

March 31,

 

 

December 31,

 

 

December 31,

 

 

December 31,

 

(dollars in thousands)

 

2018

 

 

2018

 

 

2018

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

NON-INTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fees and service charges on

   deposits

 

$

1,852

 

 

$

1,825

 

 

$

1,456

 

 

$

1,312

 

 

$

1,304

 

 

$

6,445

 

 

$

5,289

 

Loan servicing revenue

 

 

2,667

 

 

 

2,622

 

 

 

2,533

 

 

 

2,450

 

 

 

2,548

 

 

 

10,272

 

 

 

9,599

 

Loan servicing asset revaluation

 

 

(2,862

)

 

 

(2,446

)

 

 

(2,074

)

 

 

(1,887

)

 

 

(1,844

)

 

 

(9,269

)

 

 

(5,941

)

ATM and interchange fees

 

 

1,286

 

 

 

1,781

 

 

 

1,141

 

 

 

1,218

 

 

 

1,498

 

 

 

5,426

 

 

 

5,840

 

Net gains on sales of securities

   available-for-sale

 

 

160

 

 

 

 

 

 

4

 

 

 

 

 

 

 

 

 

164

 

 

 

8

 

Net gains on sales of loans

 

 

9,337

 

 

 

5,015

 

 

 

9,723

 

 

 

7,476

 

 

 

9,036

 

 

 

31,551

 

 

 

33,062

 

Wealth management and

   trust income

 

 

679

 

 

 

674

 

 

 

192

 

 

 

 

 

 

 

 

 

1,545

 

 

 

 

Other non-interest income

 

 

1,447

 

 

 

1,672

 

 

 

1,527

 

 

 

859

 

 

 

97

 

 

 

5,505

 

 

 

2,201

 

Total non-interest income

 

$

14,566

 

 

$

11,143

 

 

$

14,502

 

 

$

11,428

 

 

$

12,639

 

 

$

51,639

 

 

$

50,058

 

 

Non-interest income for the fourth quarter of 2018 was $14.6 million, an increase of $3.4 million compared to $11.1 million for the third quarter of 2018.

The increase in total non-interest income was primarily due to:

 

An increase of $4.3 million in net gains on sales of loans, primarily due to an increase in government guaranteed loans sold, coupled with a slight increase in average premiums as a result of the mix of loans sold; and

 

An increase of $160,000 in net gains on sales of securities available-for-sale due to calls of securities during the quarter.

 

 

Partially offset by:

 

A decrease of $495,000 in ATM and interchange fees, primarily due to a credit card vendor agreement signing bonus in the prior quarter; and

 

An additional $416,000 in loan servicing asset revaluation, primarily due to the change in fair value of the servicing asset as a result of increased prepayment rates and a higher interest rate environment.

 

 

During the fourth quarter of 2018, the Company sold $87.4 million of government guaranteed loans compared to $59.6 million during the third quarter of 2018, contributing to the increase in net gains on sale of loans for the quarter. The increase in sales is primarily due to the timing of loans closed becoming fully funded and mix of loans sold. While the current government shutdown may impact our level of originations and government guaranteed loan sales during the first quarter of 2019, as a Small Business Administration (“SBA”) preferred lender with an experienced team, we continue to source new transactions and remain ready to resume normal operations after the shutdown ends.


Byline Bancorp, Inc.

Page 6 of 23

Non-interest Expense

The following table presents the components of non-interest expense for the periods indicated:

 

Three Months Ended

 

 

Year Ended

 

 

 

December 31,

 

 

September 30,

 

 

June 30,

 

 

March 31,

 

 

December 31,

 

 

December 31,

 

 

December 31,

 

(dollars in thousands)

 

2018

 

 

2018

 

 

2018

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

NON-INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

$

21,548

 

 

$

21,312

 

 

$

19,244

 

 

$

18,278

 

 

$

17,118

 

 

$

80,382

 

 

$

67,269

 

Occupancy expense, net

 

 

4,027

 

 

 

3,548

 

 

 

4,499

 

 

 

3,755

 

 

 

3,553

 

 

 

15,829

 

 

 

14,078

 

Equipment expense

 

 

641

 

 

 

617

 

 

 

558

 

 

 

603

 

 

 

663

 

 

 

2,419

 

 

 

2,472

 

Loan and lease related expenses

 

 

2,223

 

 

 

1,015

 

 

 

1,471

 

 

 

1,400

 

 

 

1,116

 

 

 

6,109

 

 

 

3,685

 

Legal, audit and other professional

   fees

 

 

2,746

 

 

 

2,358

 

 

 

4,418

 

 

 

1,851

 

 

 

2,658

 

 

 

11,373

 

 

 

7,027

 

Data processing

 

 

2,846

 

 

 

2,724

 

 

 

10,371

 

 

 

2,301

 

 

 

2,284

 

 

 

18,242

 

 

 

9,539

 

Net loss (gain) recognized on other

   real estate owned and other related

   expenses

 

 

48

 

 

 

(284

)

 

 

472

 

 

 

(1

)

 

 

(430

)

 

 

235

 

 

 

(294

)

Regulatory assessments

 

 

462

 

 

 

675

 

 

 

366

 

 

 

241

 

 

 

299

 

 

 

1,744

 

 

 

1,193

 

Other intangible assets amortization

   expense

 

 

1,834

 

 

 

1,898

 

 

 

1,130

 

 

 

767

 

 

 

767

 

 

 

5,629

 

 

 

3,074

 

Advertising and promotions

 

 

590

 

 

 

537

 

 

 

347

 

 

 

249

 

 

 

232

 

 

 

1,723

 

 

 

1,035

 

Telecommunications

 

 

391

 

 

 

435

 

 

 

466

 

 

 

418

 

 

 

428

 

 

 

1,710

 

 

 

1,593

 

Other non-interest expense

 

 

3,008

 

 

 

3,121

 

 

 

2,428

 

 

 

2,057

 

 

 

1,670

 

 

 

10,614

 

 

 

8,852

 

Total non-interest expense

 

$

40,364

 

 

$

37,956

 

 

$

45,770

 

 

$

31,919

 

 

$

30,358

 

 

$

156,009

 

 

$

119,523

 

 

Non-interest expense for the fourth quarter of 2018 was $40.4 million, an increase of $2.4 million from $38.0 million for the third quarter of 2018.

The increase in total non-interest expense was primarily due to:

 

 

An increase of $1.2 million in loan and lease related expenses, primarily due to increased broker fee expenses due to an increase in government guaranteed loan sales;

 

An increase of $479,000 in occupancy expense, net, primarily due to costs associated with our prior branch consolidations and seasonal increases; and

 

An increase of $388,000 in legal, audit and other professional fees, primarily due to professional services incurred related to the pending acquisition of Oak Park River Forest Bankshares, Inc. and our core system conversion.

 

Partially offset by:

 

 

 

A decrease of $213,000 in regulatory assessments, primarily due to an improved risk profile as a result of improved financial ratios and performance.

The Company’s efficiency ratio was 56.81% for the fourth quarter of 2018, compared with 56.57% for the third quarter of 2018. Excluding merger-related expenses, planned core system conversion expenses, and impairment charges on assets held for sale, the Company’s adjusted efficiency ratio1 was 54.95% for the fourth quarter of 2018, compared with 55.78% for the third quarter of 2018.

 

 

 

 

 

 

(1)

Represents a non-GAAP financial measure.  See “Reconciliation of non-GAAP Financial Measures” for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure.



Byline Bancorp, Inc.

Page 7 of 23

INCOME TAXES

The Company recorded income tax expense of $6.5 million during the fourth quarter of 2018, an effective tax rate of 27.4%, compared to $5.4 million during the third quarter of 2018, an effective tax rate of 27.1%, an increase of $1.1 million. The increase was primarily due to the increase in net income recorded during the quarter.

STATEMENTS OF FINANCIAL CONDITION

Total assets were $4.9 billion at December 31, 2018, an increase of $25.2 million compared to $4.9 billion at September 30, 2018, and an increase of $1.6 billion compared to $3.4 billion at December 31, 2017.

The current quarter increase was primarily due to:

 

An increase in loans and leases of $45.8 million, primarily due to an increase of $171.6 million in our originated loan portfolio, partially offset by a decrease of $125.8 million in our acquired loan portfolio;

 

An increase in securities of $18.8 million, primarily due to additional purchases of mortgage-backed and government guaranteed mortgage-backed securities during the quarter; and

 

An increase in loans held for sale of $11.1 million, primarily due to the timing of loan closings at December 31, 2018.

Partially offset by:

 

A decrease in interest bearing deposits with other banks of $27.9 million, primarily due to lower reserve and cash management requirements;

 

A decrease in due from counterparty of $9.1 million due to the timing of the settlement of loans sold at December 31, 2018;

 

A decrease in deferred tax assets, net of $6.9 million, primarily due to utilization of operating loss carryforwards; and

 

A decrease in other assets of $4.8 million, primarily due to a reduction in the fair value of interest rate swaps resulting from lower interest rates.

 


Byline Bancorp, Inc.

Page 8 of 23

The following table shows our allocation of the originated, acquired impaired and acquired non-impaired loans and leases at the dates indicated:

 

December 31, 2018

 

 

September 30, 2018

 

 

December 31, 2017

 

(dollars in thousands)

 

Amount

 

 

% of Total

 

 

Amount

 

 

% of Total

 

 

Amount

 

 

% of Total

 

Originated loans and leases

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

$

652,234

 

 

 

18.6

%

 

$

619,767

 

 

 

17.9

%

 

$

513,622

 

 

 

22.5

%

Residential real estate

 

 

466,309

 

 

 

13.3

%

 

 

445,717

 

 

 

12.9

%

 

 

400,571

 

 

 

17.6

%

Construction, land development, and

   other land

 

 

144,128

 

 

 

4.1

%

 

 

140,391

 

 

 

4.1

%

 

 

97,638

 

 

 

4.3

%

Commercial and industrial

 

 

803,508

 

 

 

22.9

%

 

 

696,750

 

 

 

20.2

%

 

 

416,499

 

 

 

18.3

%

Installment and other

 

 

11,718

 

 

 

0.3

%

 

 

7,729

 

 

 

0.2

%

 

 

3,724

 

 

 

0.2

%

Leasing financing receivables

 

 

159,901

 

 

 

4.6

%

 

 

155,825

 

 

 

4.5

%

 

 

141,329

 

 

 

6.2

%

Total originated loans and leases

 

$

2,237,798

 

 

 

63.8

%

 

$

2,066,179

 

 

 

59.8

%

 

$

1,573,383

 

 

 

69.1

%

Acquired impaired loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

$

146,808