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Section 1: 10-Q (10-Q)

by-10q_20190331.htm

 

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 March 31, 2019

OR

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

For the transition period from ______to ______

Commission File Number 001-38139

 

 

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, 38,014,042 shares outstanding as of May 8, 2019

 

 

 

 


BYLINE BANCORP, INC.

FORM 10-Q

March 31, 2019

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 are as follows:

 

3

 

 

Consolidated Statements of Financial Condition at March 31, 2019 (unaudited) and December 31, 2018

 

3

 

 

Consolidated Statements of Operations for the Three Months Ended March 31, 2019 and 2018 (unaudited)

 

4

 

 

Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2019 and 2018 (unaudited)

 

5

 

 

Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended
March 31, 2019 and 2018 (unaudited)

 

6

 

 

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2019 and 2018
(unaudited)

 

7

 

 

Notes to Unaudited Interim Condensed Consolidated Financial Statements

 

9

Item 2.

 

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

 

49

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

 

84

Item 4.

 

Controls and Procedures

 

86

 

 

 

 

 

PART II.

 

OTHER INFORMATION

 

 

Item 1.

 

Legal Proceedings

 

86

Item 1A.

 

Risk Factors

 

86

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

86

Item 3.

 

Defaults Upon Senior Securities

 

86

Item 4.

 

Mine Safety Disclosures

 

86

Item 5.

 

Other Information

 

86

Item 6.

 

Exhibits

 

87

 

 

 

2


 

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

 

 

 

(Unaudited)

 

 

 

 

 

(dollars in thousands, except per share data)

 

March 31, 2019

 

 

December 31, 2018

 

ASSETS

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

50,026

 

 

$

30,190

 

Interest bearing deposits with other banks

 

 

31,971

 

 

 

91,670

 

Cash and cash equivalents

 

 

81,997

 

 

 

121,860

 

Equity and other securities, at fair value

 

 

7,216

 

 

 

 

Securities available-for-sale, at fair value

 

 

964,553

 

 

 

817,656

 

Securities held-to-maturity, at amortized cost (fair value at

   March 31, 2019—$4,431, December 31, 2018—$97,739)

 

 

4,425

 

 

 

99,266

 

Restricted stock, at cost

 

 

19,202

 

 

 

19,202

 

Loans held for sale

 

 

510

 

 

 

19,827

 

Loans and leases:

 

 

 

 

 

 

 

 

Loans and leases

 

 

3,567,566

 

 

 

3,501,626

 

Allowance for loan and lease losses

 

 

(27,106

)

 

 

(25,201

)

Net loans and leases

 

 

3,540,460

 

 

 

3,476,425

 

Servicing assets, at fair value

 

 

19,534

 

 

 

19,693

 

Accrued interest receivable

 

 

11,974

 

 

 

10,863

 

Premises and equipment, net

 

 

97,069

 

 

 

97,680

 

Assets held for sale

 

 

13,596

 

 

 

14,489

 

Other real estate owned, net

 

 

4,799

 

 

 

5,314

 

Goodwill

 

 

128,177

 

 

 

128,177

 

Other intangible assets, net

 

 

31,646

 

 

 

33,419

 

Bank-owned life insurance

 

 

6,087

 

 

 

5,961

 

Deferred tax assets, net

 

 

30,534

 

 

 

35,643

 

Due from counterparty

 

 

20,691

 

 

 

5,338

 

Other assets

 

 

27,455

 

 

 

31,761

 

Total assets

 

$

5,009,925

 

 

$

4,942,574

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

Non-interest-bearing demand deposits

 

$

1,163,255

 

 

$

1,192,873

 

Interest-bearing deposits:

 

 

 

 

 

 

 

 

NOW, savings accounts, and money market accounts

 

 

1,385,551

 

 

 

1,413,158

 

Time deposits

 

 

1,259,710

 

 

 

1,143,885

 

Total deposits

 

 

3,808,516

 

 

 

3,749,916

 

Accrued interest payable

 

 

4,390

 

 

 

3,484

 

Line of credit

 

 

 

 

 

 

Federal Home Loan Bank advances

 

 

425,000

 

 

 

425,000

 

Securities sold under agreements to repurchase

 

 

34,369

 

 

 

34,166

 

Junior subordinated debentures issued to capital trusts, net

 

 

36,912

 

 

 

36,768

 

Accrued expenses and other liabilities

 

 

31,989

 

 

 

42,568

 

Total liabilities

 

 

4,341,176

 

 

 

4,291,902

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Preferred stock

 

 

10,438

 

 

 

10,438

 

Common stock, voting, $0.01 par value at March 31, 2019 and December 31, 2018;

   150,000,000 shares authorized at March 31, 2019 and December 31, 2018;

   36,398,144 shares issued and outstanding at March 31, 2019 and 36,343,239

   issued and outstanding at December 31, 2018

 

 

362

 

 

 

361

 

Additional paid-in capital

 

 

548,005

 

 

 

546,849

 

Retained earnings

 

 

116,363

 

 

 

102,522

 

Accumulated other comprehensive loss, net of tax

 

 

(6,419

)

 

 

(9,498

)

Total stockholders’ equity

 

 

668,749

 

 

 

650,672

 

Total liabilities and stockholders’ equity

 

$

5,009,925

 

 

$

4,942,574

 

 

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

3


 

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

 

 

Three Months Ended

 

 

 

March 31,

 

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

 

2019

 

 

2018

 

INTEREST AND DIVIDEND INCOME

 

 

 

 

 

 

 

 

Interest and fees on loans and leases

 

$

54,383

 

 

$

33,654

 

Interest on taxable securities

 

 

5,759

 

 

 

4,055

 

Interest on tax-exempt securities

 

 

343

 

 

 

174

 

Other interest and dividend income

 

 

625

 

 

 

259

 

Total interest and dividend income

 

 

61,110

 

 

 

38,142

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

Deposits

 

 

8,076

 

 

 

2,498

 

Federal Home Loan Bank advances

 

 

2,099

 

 

 

1,358

 

Subordinated debentures and other borrowings

 

 

850

 

 

 

591

 

Total interest expense

 

 

11,025

 

 

 

4,447

 

Net interest income

 

 

50,085

 

 

 

33,695

 

PROVISION FOR LOAN AND LEASE LOSSES

 

 

3,999

 

 

 

5,115

 

Net interest income after provision for loan and lease losses

 

 

46,086

 

 

 

28,580

 

NON-INTEREST INCOME

 

 

 

 

 

 

 

 

Fees and service charges on deposits

 

 

1,770

 

 

 

1,312

 

Loan servicing revenue

 

 

2,539

 

 

 

2,450

 

Loan servicing asset revaluation

 

 

(1,261

)

 

 

(1,887

)

ATM and interchange fees

 

 

717

 

 

 

913

 

Change in fair value of equity securities, net

 

 

499

 

 

 

 

Net gains on sales of loans

 

 

6,233

 

 

 

7,476

 

Wealth management and trust income

 

 

595

 

 

 

 

Other non-interest income

 

 

896

 

 

 

859

 

Total non-interest income

 

 

11,988

 

 

 

11,123

 

NON-INTEREST EXPENSE

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

22,892

 

 

 

18,278

 

Occupancy expense, net

 

 

4,280

 

 

 

3,755

 

Equipment expense

 

 

669

 

 

 

603

 

Loan and lease related expenses

 

 

1,577

 

 

 

1,400

 

Legal, audit and other professional fees

 

 

2,066

 

 

 

1,851

 

Data processing

 

 

3,273

 

 

 

2,301

 

Net loss (gain) recognized on other real estate owned and other related expenses

 

 

196

 

 

 

(1

)

Regulatory assessments

 

 

(59

)

 

 

241

 

Other intangible assets amortization expense

 

 

1,773

 

 

 

767

 

Advertising and promotions

 

 

709

 

 

 

249

 

Telecommunications

 

 

464

 

 

 

418

 

Other non-interest expense

 

 

2,839

 

 

 

1,752

 

Total non-interest expense

 

 

40,679

 

 

 

31,614

 

INCOME BEFORE PROVISION FOR INCOME TAXES

 

 

17,395

 

 

 

8,089

 

PROVISION FOR INCOME TAXES

 

 

4,798

 

 

 

1,321

 

NET INCOME

 

 

12,597

 

 

 

6,768

 

Dividends on preferred shares

 

 

196

 

 

 

193

 

INCOME AVAILABLE TO COMMON STOCKHOLDERS

 

$

12,401

 

 

$

6,575

 

EARNINGS PER COMMON SHARE

 

 

 

 

 

 

 

 

Basic

 

$

0.34

 

 

$

0.22

 

Diluted

 

$

0.34

 

 

$

0.22

 

 

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

4


 

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

  

 

 

Three Months Ended

 

 

 

March 31,

 

(dollars in thousands)

 

2019

 

 

2018

 

Net income

 

$

12,597

 

 

$

6,768

 

Securities available-for-sale

 

 

 

 

 

 

 

 

Unrealized holding gains (losses) arising during the period

 

 

8,635

 

 

 

(8,852

)

Tax effect

 

 

(2,296

)

 

 

2,395

 

Net of tax

 

 

6,339

 

 

 

(6,457

)

Cash flow hedges

 

 

 

 

 

 

 

 

Unrealized holding gains (losses) arising during the period

 

 

(1,817

)

 

 

4,070

 

Reclassification adjustments for net gains included in net income

 

 

(705

)

 

 

(61

)

Tax effect

 

 

702

 

 

 

(1,116

)

Net of tax

 

 

(1,820

)

 

 

2,893

 

Total other comprehensive income (loss)

 

 

4,519

 

 

 

(3,564

)

Comprehensive income

 

$

17,116

 

 

$

3,204

 

 

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

5


 

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Three Months Ended March 31, 2019 and 2018

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Accumulated Other

 

 

Total

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Paid-In

 

 

 

 

 

 

Comprehensive

 

 

Stockholders’

 

(dollars in thousands, except share data)

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Retained Earnings

 

 

Income (Loss)

 

 

Equity

 

Balance, January 1, 2018

 

 

10,438

 

 

$

10,438

 

 

 

29,317,298

 

 

$

292

 

 

$

391,586

 

 

$

61,349

 

 

$

(5,087

)

 

$

458,578

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,768

 

 

 

 

 

 

6,768

 

Other comprehensive loss,

   net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,564

)

 

 

(3,564

)

Issuance of common stock upon

   exercise of stock options

 

 

 

 

 

 

 

 

86,750

 

 

 

1

 

 

 

1,004

 

 

 

 

 

 

 

 

 

1,005

 

Reclassification of certain income

   tax effects from accumulated

   other comprehensive income

   (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

763

 

 

 

(763

)

 

 

 

Cash dividends declared on

   preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(193

)

 

 

 

 

 

(193

)

Share-based compensation

   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

342

 

 

 

 

 

 

 

 

 

342

 

Balance, March 31, 2018

 

 

10,438

 

 

$

10,438

 

 

 

29,404,048

 

 

$

293

 

 

$

392,932

 

 

$

68,687

 

 

$

(9,414

)

 

$

462,936

 

Balance, January 1, 2019

 

 

10,438

 

 

$

10,438

 

 

 

36,343,239

 

 

$

361

 

 

$

546,849

 

 

$

102,522

 

 

$

(9,498

)

 

$

650,672

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,597

 

 

 

 

 

 

12,597

 

Other comprehensive loss,

   net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,519

 

 

 

4,519

 

Issuance of common stock upon

   exercise of stock options

 

 

 

 

 

 

 

 

50,662

 

 

 

1

 

 

 

635

 

 

 

 

 

 

 

 

 

636

 

Forfeiture of restricted stock

   awards

 

 

 

 

 

 

 

 

(8,500

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock in

   connection with employee

   stock purchase plan

 

 

 

 

 

 

 

 

12,743

 

 

 

 

 

 

291

 

 

 

 

 

 

 

 

 

291

 

Cumulative-effect adjustment

   (ASU 2016-01)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,440

 

 

 

(1,440

)

 

 

 

Cash dividends declared on

   preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(196

)

 

 

 

 

 

(196

)

Share-based compensation

   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

230

 

 

 

 

 

 

 

 

 

230

 

Balance, March 31, 2019

 

 

10,438

 

 

$

10,438

 

 

 

36,398,144

 

 

$

362

 

 

$

548,005

 

 

$

116,363

 

 

$

(6,419

)

 

$

668,749

 

 

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

6


 

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

 

Three Months Ended

 

 

 

 

March 31,

 

(dollars in thousands)

 

 

2019

 

 

2018

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

 

Net income

 

 

$

12,597

 

 

$

6,768

 

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

 

 

 

 

 

 

 

 

 

Provision for loan and lease losses

 

 

 

3,999

 

 

 

5,115

 

Impairment loss on assets held for sale

 

 

 

392

 

 

 

 

Depreciation and amortization of premises and equipment

 

 

 

1,590

 

 

 

1,273

 

Change in fair value of equity securities, net

 

 

 

(499

)

 

 

 

Net amortization of securities

 

 

 

600

 

 

 

1,009

 

Net gains on sales of assets held for sale

 

 

 

(13

)

 

 

(189

)

Net gains on sales of loans

 

 

 

(6,233

)

 

 

(7,476

)

Originations of U.S. government guaranteed loans

 

 

 

(47,157

)

 

 

(82,125

)

Proceeds from U.S. government guaranteed loans sold

 

 

 

55,421

 

 

 

104,604

 

Accretion of premiums and discounts on acquired loans, net

 

 

 

(5,201

)

 

 

(2,346

)

Net change in servicing assets

 

 

 

159

 

 

 

(215

)

Net valuation adjustments on other real estate owned

 

 

 

84

 

 

 

81

 

Net losses (gains) on sales of other real estate owned

 

 

 

33

 

 

 

(140

)

Amortization of intangible assets

 

 

 

1,773

 

 

 

767

 

Amortization of time deposit premium

 

 

 

(69

)

 

 

(5

)

Amortization of Federal Home Loan Bank advances premium

 

 

 

 

 

 

(19

)

Accretion of junior subordinated debentures discount

 

 

 

144

 

 

 

153

 

Share-based compensation expense

 

 

 

230

 

 

 

342

 

Deferred tax provision, net of valuation

 

 

 

3,515

 

 

 

1,284

 

Increase in cash surrender value of bank owned life insurance

 

 

 

(126

)

 

 

(120

)

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

 

Accrued interest receivable

 

 

 

(1,917

)

 

 

673

 

Other assets

 

 

 

4,236

 

 

 

622

 

Accrued interest payable

 

 

 

906

 

 

 

306

 

Accrued expenses and other liabilities

 

 

 

(10,579

)

 

 

(4,894

)

Net cash provided by operating activities

 

 

 

13,885

 

 

 

25,468

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

 

Purchases of securities available-for-sale

 

 

 

(84,950

)

 

 

(72,646

)

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

 

 

 

14,850

 

 

 

5,430

 

Proceeds from paydowns of securities available-for-sale

 

 

 

18,966

 

 

 

14,691

 

Proceeds from paydowns of securities held-to-maturity

 

 

 

 

 

 

4,050

 

Purchases of Federal Home Loan Bank stock

 

 

 

(9,630

)

 

 

(6,282

)

Federal Home Loan Bank stock repurchases

 

 

 

9,630

 

 

 

5,448

 

Net change in loans and leases

 

 

 

(62,197

)

 

 

(5,797

)

Purchases of premises and equipment

 

 

 

(979

)

 

 

(63

)

Proceeds from sales of assets held for sale

 

 

 

514

 

 

 

954

 

Proceeds from sales of other real estate owned

 

 

 

445

 

 

 

1,263

 

Net cash used in investing activities

 

 

 

(113,351

)

 

 

(52,952

)

 

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

7


 

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(UNAUDITED)

 

 

 

 

Three Months Ended

 

 

 

 

March 31,

 

(dollars in thousands)

 

 

2019

 

 

2018

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

Net increase in deposits

 

 

$

58,669

 

 

$

81,223

 

Proceeds from Federal Home Loan Bank advances

 

 

 

1,620,500

 

 

 

1,589,900

 

Repayments of Federal Home Loan Bank advances

 

 

 

(1,620,500

)

 

 

(1,571,387

)

Net (decrease) increase in securities sold under agreements to repurchase

 

 

 

203

 

 

 

(3,372

)

Dividends paid on preferred stock

 

 

 

(196

)

 

 

(193

)

Proceeds from issuance of common stock upon exercise of stock options

 

 

 

636

 

 

 

1,005

 

Proceeds from issuance of common stock

 

 

 

291

 

 

 

 

Net cash provided by financing activities

 

 

 

59,603

 

 

 

97,176

 

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

 

 

 

(39,863

)

 

 

69,692

 

CASH AND CASH EQUIVALENTS, beginning of period

 

 

 

121,860

 

 

 

58,349

 

CASH AND CASH EQUIVALENTS, end of period

 

 

$

81,997

 

 

$

128,041

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

 

Cash paid during the period for interest

 

 

$

10,044

 

 

$

4,012

 

Cash payments (refunds) during the period for taxes

 

 

$

(2,556

)

 

$

63

 

SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND

   FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

 

Change in fair value of available-for-sale securities, net of tax

 

 

$

6,339

 

 

$

(6,457

)

Change in fair value of cash flow hedges, net of tax

 

 

$

(1,820

)

 

$

2,893

 

Delayed payments of mortgage-backed securities

 

 

$

626

 

 

$

726

 

Transfer of securities from held-to-maturity to available-for-sale

 

 

$

94,837

 

 

$

 

Reclassification of equity and other securities

 

 

$

6,609

 

 

$

 

Transfers of loans to other real estate owned

 

 

$

230

 

 

$

1,044

 

Internally financed sale of other real estate owned

 

 

$

183

 

 

$

 

Transfer of other assets to assets held for sale

 

 

$

 

 

$

16

 

Due from counterparties

 

 

$

15,353

 

 

$

19,837

 

 

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

 


8


 

 

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 March 31, 2019 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, 2018, 2017, and 2016.

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 consolidated financial statements.

The Company has one 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.

On October 17, 2018, the Company entered a definitive merger agreement with Oak Park River Forest Bankshares, Inc. (“Oak Park River Forest”), the parent company of Community Bank of Oak Park River Forest, to which the Company will acquire Oak Park River Forest through the merger of Oak Park River Forest with and into the Company, followed immediately by the merger of Community Bank of Oak Park River Forest with and into Byline Bank. On April 30, 2019, Byline completed its acquisition of Oak Park River Forest. Under the terms of the merger agreement, each share of Oak Park River Forest's common stock was converted into the right to receive 7.9321 shares of Byline common stock and $33.375 in cash. The value of the total merger consideration at closing was approximately $39.6 million. No other subsequent events were identified that would have required a change to the consolidated financial statements or disclosure in the notes to the 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.

Adopted Accounting Pronouncements

Revenue from Contracts with Customers In May 2014, FASB issued Accounting Standards Update (“ASU”) No. 2014-09, deferred by ASU No. 2015-14 and clarifying standards, Revenue from Contracts with Customers, which creates Topics 606 and 610 and supersedes Topic 605, Revenue Recognition. The core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In April 2016, FASB issued

9


 

ASU No. 2016-10, Identifying Performance Obligations and Licensing. The amendments in this ASU clarify the following two aspects of Topic 606: (1) identifying performance obligations and (2) licensing implementation guidance, while retaining the related principles for those areas. In May 2016, FASB issued ASU No. 2016-12, Narrow-Scope Improvements and Practical Expedients, amending ASC Topic 606, Revenue from Contracts with Customers. The amendments in this ASU affect only several narrow aspects of Topic 606. In November 2017, FASB issued ASU No. 2017-14, amending ASC Topic 606, Revenue from Contracts with Customers. The ASU amends the codification to incorporate additional previously issued guidance from the SEC. The SEC issued SAB 116 to bring existing SEC staff guidance into conformity with the FASB’s adoption of and amendments to ASC Topic 606.

In general, the new guidance requires companies to use more judgment and make more estimates than under current guidance, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The new authoritative guidance was initially effective for reporting periods after January 1, 2017 but was deferred to January 1, 2018. Given our emerging growth status, the Company adopted this new guidance on January 1, 2019 using the full retrospective method, meaning the standard is applied to all periods presented in the financial statements with the cumulative effect of initially applying the standard recognized at the beginning of the earliest period presented.

The majority of the Company’s revenue streams, including interest and dividend income, servicing fees, and gains on sales of loans and investments, are outside the scope of Topic 606. Revenue streams reported as fees and service charges on deposits, ATM and interchange fees, and wealth management and trust income are within the scope of Topic 606. The Company applied the requirements of Topic 606 to the revenue streams that are within its scope. The adoption of Topic 606 did not result in any changes in the either timing or amount of recognized; there was no cumulative effect adjustment to opening retained earnings as no material changes were identified in the timing of revenue recognition. However, the presentation of certain costs associated with our ATM and debit card income were offset against ATM and interchange income. This change in presentation resulted in $346,000 of expenses for the three months ended March 31, 2019 being netted against ATM and interchange fees and reported in non-interest income instead of as other non-interest expense in non-interest expense. In addition, to conform to the current period presentation, $305,000 of related expenses for the three months ended March 31, 2018 were reclassified from other non-interest expense in non-interest expense to being netted against ATM and interchange fees in non-interest income. The Company elected to apply the practical expedient and therefore does not disclose information about remaining performance obligations that have an original expected term of one year or less and allows the Company to expense costs related to obtaining a contract as incurred when the amortization period would have been one year or less.

The Company adopted ASU 2014-09 using the full retrospective approach. The following table presents the impact of adopting the new revenue standard on our Consolidated Statements of Operations for the periods presented (in thousands):

 

 

 

For the Three Months Ended

 

 

For the Three Months Ended

 

 

 

March 31, 2019

 

 

March 31, 2018

 

 

 

As Reported

 

 

Balance

without

Adoption

of ASC 606

 

 

Effect of

Change

 

 

As Reported

 

 

Balance

without

Adoption

of ASC 606

 

 

Effect of

Change

 

Non-interest income: