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Section 1: 10-Q (10-Q 1ST QUARTER 2020)

by-10q_20200331.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, 2020

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, 38,383,021 shares outstanding as of May 4, 2020

 

 

 

 


BYLINE BANCORP, INC.

FORM 10-Q

March 31, 2020

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

 

 

Condensed Consolidated Statements of Financial Condition at March 31, 2020 and December 31, 2019 (unaudited)

 

3

 

 

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2020 and 2019  (unaudited)

 

4

 

 

Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2020 and 2019 (unaudited)

 

5

 

 

Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2020 and 2019 (unaudited)

 

6

 

 

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019 (unaudited)

 

8

 

 

Notes to Unaudited Interim Condensed Consolidated Financial Statements

 

10

Item 2.

 

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

 

45

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

 

83

Item 4.

 

Controls and Procedures

 

85

 

 

 

 

 

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

 

88

Item 3.

 

Defaults Upon Senior Securities

 

88

Item 4.

 

Mine Safety Disclosures

 

88

Item 5.

 

Other Information

 

88

Item 6.

 

Exhibits

 

89

 

 

 

2


 

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements

 

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(UNAUDITED)

 

 

 

 

 

 

 

 

 

(dollars in thousands, except per share data)

 

March 31, 2020

 

 

December 31, 2019

 

ASSETS

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

45,233

 

 

$

48,228

 

Interest bearing deposits with other banks

 

 

74,386

 

 

 

32,509

 

Cash and cash equivalents

 

 

119,619

 

 

 

80,737

 

Equity and other securities, at fair value

 

 

7,413

 

 

 

8,031

 

Securities available-for-sale, at fair value

 

 

1,299,483

 

 

 

1,186,292

 

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

   March 31, 2020—$4,516, December 31, 2019—$4,498)

 

 

4,408

 

 

 

4,412

 

Restricted stock, at cost

 

 

24,197

 

 

 

22,127

 

Loans held for sale

 

 

13,299

 

 

 

11,732

 

Loans and leases:

 

 

 

 

 

 

 

 

Loans and leases

 

 

3,860,259

 

 

 

3,785,661

 

Allowance for loan and lease losses

 

 

(41,840

)

 

 

(31,936

)

Net loans and leases

 

 

3,818,419

 

 

 

3,753,725

 

Servicing assets, at fair value

 

 

17,800

 

 

 

19,471

 

Premises and equipment, net

 

 

96,446

 

 

 

96,140

 

Other real estate owned, net

 

 

9,273

 

 

 

9,896

 

Goodwill and other intangible assets, net

 

 

178,362

 

 

 

180,255

 

Bank-owned life insurance

 

 

9,898

 

 

 

9,750

 

Deferred tax assets, net

 

 

33,845

 

 

 

38,315

 

Accrued interest receivable and other assets

 

 

102,292

 

 

 

100,926

 

Total assets

 

$

5,734,754

 

 

$

5,521,809

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

Non-interest-bearing demand deposits

 

$

1,290,896

 

 

$

1,279,641

 

Interest-bearing deposits

 

 

2,947,940

 

 

 

2,867,936

 

Total deposits

 

 

4,238,836

 

 

 

4,147,577

 

Short-term borrowings

 

 

640,647

 

 

 

539,638

 

Junior subordinated debentures issued to capital trusts, net

 

 

37,462

 

 

 

37,334

 

Accrued interest payable and other liabilities

 

 

55,142

 

 

 

47,145

 

Total liabilities

 

 

4,972,087

 

 

 

4,771,694

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Preferred stock

 

 

10,438

 

 

 

10,438

 

Common stock

 

 

380

 

 

 

379

 

Additional paid-in capital

 

 

582,517

 

 

 

580,965

 

Retained earnings

 

 

160,652

 

 

 

159,033

 

Accumulated other comprehensive income (loss), net of tax

 

 

10,348

 

 

 

(700

)

Treasury stock, at cost

 

 

(1,668

)

 

 

 

Total stockholders’ equity

 

 

762,667

 

 

 

750,115

 

Total liabilities and stockholders’ equity

 

$

5,734,754

 

 

$

5,521,809

 

 

 

 

 

March 31, 2020

 

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

Preferred Shares

 

 

Common Shares

 

 

Preferred Shares

 

 

Common Shares

 

Par value

 

$

 

 

$

0.01

 

 

$

 

 

$

0.01

 

Shares authorized

 

 

50,000

 

 

 

150,000,000

 

 

 

50,000

 

 

 

150,000,000

 

Shares issued

 

 

10,438

 

 

 

38,501,507

 

 

 

10,438

 

 

 

38,256,500

 

Shares outstanding

 

 

10,438

 

 

 

38,383,021

 

 

 

10,438

 

 

 

38,256,500

 

Treasury shares

 

 

 

 

 

118,486

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

3


 

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

 

 

Three Months Ended

 

 

 

March 31,

 

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

 

2020

 

 

2019

 

INTEREST AND DIVIDEND INCOME

 

 

 

 

 

 

 

 

Interest and fees on loans and leases

 

$

54,158

 

 

$

54,383

 

Interest on securities

 

 

8,016

 

 

 

6,102

 

Other interest and dividend income

 

 

992

 

 

 

625

 

Total interest and dividend income

 

 

63,166

 

 

 

61,110

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

Deposits

 

 

7,804

 

 

 

8,076

 

Short-term borrowings

 

 

1,897

 

 

 

2,166

 

Junior subordinated debentures issued to capital trusts

 

 

640

 

 

 

783

 

Total interest expense

 

 

10,341

 

 

 

11,025

 

Net interest income

 

 

52,825

 

 

 

50,085

 

PROVISION FOR LOAN AND LEASE LOSSES

 

 

14,455

 

 

 

3,999

 

Net interest income after provision for loan and lease losses

 

 

38,370

 

 

 

46,086

 

NON-INTEREST INCOME

 

 

 

 

 

 

 

 

Fees and service charges on deposits

 

 

1,673

 

 

 

1,770

 

Loan servicing revenue

 

 

2,758

 

 

 

2,539

 

Loan servicing asset revaluation

 

 

(3,064

)

 

 

(1,261

)

ATM and interchange fees

 

 

1,216

 

 

 

717

 

Net gains on sales of securities available-for-sale

 

 

1,375

 

 

 

 

Change in fair value of equity securities, net

 

 

(619

)

 

 

499

 

Net gains on sales of loans

 

 

4,773

 

 

 

6,233

 

Wealth management and trust income

 

 

669

 

 

 

595

 

Other non-interest income

 

 

392

 

 

 

896

 

Total non-interest income

 

 

9,173

 

 

 

11,988

 

NON-INTEREST EXPENSE

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

24,666

 

 

 

22,892

 

Occupancy and equipment expense, net

 

 

5,524

 

 

 

4,949

 

Loan and lease related expenses

 

 

1,311

 

 

 

1,577

 

Legal, audit and other professional fees

 

 

2,334

 

 

 

2,066

 

Data processing

 

 

2,665

 

 

 

3,144

 

Net loss recognized on other real estate owned and other

   related expenses

 

 

519

 

 

 

196

 

Other intangible assets amortization expense

 

 

1,893

 

 

 

1,773

 

Other non-interest expense

 

 

4,615

 

 

 

4,082

 

Total non-interest expense

 

 

43,527

 

 

 

40,679

 

INCOME BEFORE PROVISION FOR INCOME TAXES

 

 

4,016

 

 

 

17,395

 

PROVISION FOR INCOME TAXES

 

 

1,050

 

 

 

4,798

 

NET INCOME

 

 

2,966

 

 

 

12,597

 

Dividends on preferred shares

 

 

196

 

 

 

196

 

INCOME AVAILABLE TO COMMON STOCKHOLDERS

 

$

2,770

 

 

$

12,401

 

EARNINGS PER COMMON SHARE

 

 

 

 

 

 

 

 

Basic

 

$

0.07

 

 

$

0.34

 

Diluted

 

$

0.07

 

 

$

0.34

 

 

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)

 

2020

 

 

2019

 

Net income

 

$

2,966

 

 

$

12,597

 

Securities available-for-sale

 

 

 

 

 

 

 

 

Unrealized holding gains arising during the period

 

 

16,665

 

 

 

8,635

 

Reclassification adjustments for net gains included in net income

 

 

(1,375

)

 

 

 

Tax effect

 

 

(4,258

)

 

 

(2,296

)

Net of tax

 

 

11,032

 

 

 

6,339

 

Cash flow hedges

 

 

 

 

 

 

 

 

Unrealized holding losses arising during the period

 

 

 

 

 

(1,817

)

Reclassification adjustments for net losses (gains) included in net

   income

 

 

21

 

 

 

(705

)

Tax effect

 

 

(5

)

 

 

702

 

Net of tax

 

 

16

 

 

 

(1,820

)

Total other comprehensive income

 

 

11,048

 

 

 

4,519

 

Comprehensive income

 

$

14,014

 

 

$

17,116

 

 

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

5


 

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Accumulated Other

 

 

 

 

 

 

Total

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Paid-In

 

 

Retained

 

 

Comprehensive

 

 

Treasury

 

 

Stockholders’

 

(dollars in thousands, except share data)

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Income (Loss)

 

 

Stock

 

 

Equity

 

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 income,

   net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,519

 

 

 

 

 

 

4,519

 

Issuance of common stock upon

   exercise of stock options

 

 

 

 

 

 

 

 

50,662

 

 

 

1

 

 

 

635

 

 

 

 

 

 

 

 

 

 

 

 

636

 

Restricted stock activity

 

 

 

 

 

 

 

 

(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

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,211

 

 

 

 

 

 

 

 

 

13,211

 

Other comprehensive income,

   net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,071

 

 

 

 

 

 

5,071

 

Issuance of common stock upon

   exercise of stock options

 

 

 

 

 

 

 

 

116,048

 

 

 

1

 

 

 

1,668

 

 

 

 

 

 

 

 

 

 

 

 

1,669

 

Issuance of common stock due to

   business combination, net of

   issuance costs

 

 

 

 

 

 

 

 

1,464,558

 

 

 

15

 

 

 

28,877

 

 

 

 

 

 

 

 

 

 

 

 

28,892

 

Restricted stock activity

 

 

 

 

 

 

 

 

136,469

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared on

   preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(195

)

 

 

 

 

 

 

 

 

(195

)

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

278

 

 

 

 

 

 

 

 

 

 

 

 

278

 

Balance, June 30, 2019

 

 

10,438

 

 

$

10,438

 

 

 

38,115,219

 

 

$

378

 

 

$

578,828

 

 

$

129,379

 

 

$

(1,348

)

 

$

 

 

$

717,675

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15,342

 

 

 

 

 

 

 

 

 

15,342

 

Other comprehensive income,

   net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,309

 

 

 

 

 

 

2,309

 

Issuance of common stock upon

   exercise of stock options

 

 

 

 

 

 

 

 

3,472

 

 

 

 

 

 

54

 

 

 

 

 

 

 

 

 

 

 

 

54

 

Issuance cost in connection with

   business combination

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(157

)

 

 

 

 

 

 

 

 

 

 

 

(157

)

Restricted stock activity

 

 

 

 

 

 

 

 

36,350

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock in

   connection with employee

   stock purchase plan

 

 

 

 

 

 

 

 

14,085

 

 

 

 

 

 

289

 

 

 

 

 

 

 

 

 

 

 

 

289

 

Cash dividends declared on

   preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(196

)

 

 

 

 

 

 

 

 

(196

)

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

550

 

 

 

 

 

 

 

 

 

 

 

 

550

 

Balance, September 30, 2019

 

 

10,438

 

 

$

10,438

 

 

 

38,169,126

 

 

$

378

 

 

$

579,564

 

 

$

144,525

 

 

$

961

 

 

$

 

 

$

735,866

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15,852

 

 

 

 

 

 

 

 

 

15,852

 

Other comprehensive loss,

   net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,661

)

 

 

 

 

 

(1,661

)

Issuance of common stock upon

   exercise of stock options

 

 

 

 

 

 

 

 

71,029

 

 

 

 

 

 

787

 

 

 

 

 

 

 

 

 

 

 

 

787

 

Restricted stock activity

 

 

 

 

 

 

 

 

16,345

 

 

 

1

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared on

   preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(196

)

 

 

 

 

 

 

 

 

(196

)

Cash dividends declared on

   common stock ($0.03 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,148

)

 

 

 

 

 

 

 

 

(1,148

)

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

615

 

 

 

 

 

 

 

 

 

 

 

 

615

 

Balance, December 31, 2019

 

 

10,438

 

 

$

10,438

 

 

 

38,256,500

 

 

$

379

 

 

$

580,965

 

 

$

159,033

 

 

$

(700

)

 

$

 

 

$

750,115

 

 

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

6


 

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Three Months Ended March 31, 2020

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Accumulated Other

 

 

 

 

 

 

Total

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Paid-In

 

 

Retained

 

 

Comprehensive

 

 

Treasury

 

 

Stockholders’

 

(dollars in thousands, except share data)

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Income (Loss)

 

 

Stock