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Section 1: 10-Q (10-Q)

by-10q_20190930.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 September 30, 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, 38,174,780 shares outstanding as of November 7, 2019

 

 

 

 


BYLINE BANCORP, INC.

FORM 10-Q

September 30, 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 September 30, 2019 (unaudited) and December 31, 2018

 

3

 

 

Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2019 and 2018  (unaudited)

 

4

 

 

Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2019 and 2018 (unaudited)

 

5

 

 

Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2019 and 2018 (unaudited)

 

6

 

 

Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2018 (unaudited)

 

10

 

 

Notes to Unaudited Interim Condensed Consolidated Financial Statements

 

12

Item 2.

 

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

 

55

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

 

97

Item 4.

 

Controls and Procedures

 

100

 

 

 

 

 

PART II.

 

OTHER INFORMATION

 

 

Item 1.

 

Legal Proceedings

 

101

Item 1A.

 

Risk Factors

 

101

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

101

Item 3.

 

Defaults Upon Senior Securities

 

101

Item 4.

 

Mine Safety Disclosures

 

101

Item 5.

 

Other Information

 

101

Item 6.

 

Exhibits

 

102

 

 

 

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)

 

September 30, 2019

 

 

December 31, 2018

 

ASSETS

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

75,275

 

 

$

30,190

 

Interest bearing deposits with other banks

 

 

33,564

 

 

 

91,670

 

Cash and cash equivalents

 

 

108,839

 

 

 

121,860

 

Equity and other securities, at fair value

 

 

7,648

 

 

 

 

Securities available-for-sale, at fair value

 

 

1,031,933

 

 

 

817,656

 

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

   September 30, 2019—$4,502, December 31, 2018—$97,739)

 

 

4,417

 

 

 

99,266

 

Restricted stock, at cost

 

 

24,331

 

 

 

19,202

 

Loans held for sale

 

 

7,176

 

 

 

19,827

 

Loans and leases:

 

 

 

 

 

 

 

 

Loans and leases

 

 

3,831,090

 

 

 

3,501,626

 

Allowance for loan and lease losses

 

 

(31,585

)

 

 

(25,201

)

Net loans and leases

 

 

3,799,505

 

 

 

3,476,425

 

Servicing assets, at fair value

 

 

19,939

 

 

 

19,693

 

Accrued interest receivable

 

 

13,013

 

 

 

10,863

 

Premises and equipment, net

 

 

96,006

 

 

 

97,680

 

Assets held for sale

 

 

15,472

 

 

 

14,489

 

Other real estate owned, net

 

 

8,531

 

 

 

5,314

 

Goodwill

 

 

145,638

 

 

 

128,177

 

Other intangible assets, net

 

 

33,905

 

 

 

33,419

 

Bank-owned life insurance

 

 

9,699

 

 

 

5,961

 

Deferred tax assets, net

 

 

33,388

 

 

 

35,643

 

Due from counterparty

 

 

47,045

 

 

 

5,338

 

Other assets

 

 

31,793

 

 

 

31,761

 

Total assets

 

$

5,438,278

 

 

$

4,942,574

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

Non-interest-bearing demand deposits

 

$

1,221,431

 

 

$

1,192,873

 

Interest-bearing deposits:

 

 

 

 

 

 

 

 

NOW, savings accounts, and money market accounts

 

 

1,589,081

 

 

 

1,413,158

 

Time deposits

 

 

1,269,802

 

 

 

1,143,885

 

Total deposits

 

 

4,080,314

 

 

 

3,749,916

 

Accrued interest payable

 

 

4,778

 

 

 

3,484

 

Line of credit

 

 

 

 

 

 

Federal Home Loan Bank advances

 

 

506,000

 

 

 

425,000

 

Securities sold under agreements to repurchase

 

 

32,290

 

 

 

34,166

 

Junior subordinated debentures issued to capital trusts, net

 

 

37,207

 

 

 

36,768

 

Accrued expenses and other liabilities

 

 

41,823

 

 

 

42,568

 

Total liabilities

 

 

4,702,412

 

 

 

4,291,902

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Preferred stock

 

 

10,438

 

 

 

10,438

 

Common stock, voting, $0.01 par value at September 30, 2019 and December 31, 2018;

   150,000,000 shares authorized at September 30, 2019 and December 31, 2018;

   38,169,126 shares issued and outstanding at September 30, 2019 and 36,343,239

   issued and outstanding at December 31, 2018

 

 

378

 

 

 

361

 

Additional paid-in capital

 

 

579,564

 

 

 

546,849

 

Retained earnings

 

 

144,525

 

 

 

102,522

 

Accumulated other comprehensive income (loss), net of tax

 

 

961

 

 

 

(9,498

)

Total stockholders’ equity

 

 

735,866

 

 

 

650,672

 

Total liabilities and stockholders’ equity

 

$

5,438,278

 

 

$

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

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

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

 

2019

 

 

2018

 

 

2019

 

 

2018

 

INTEREST AND DIVIDEND INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans and leases

 

$

63,391

 

 

$

55,045

 

 

$

177,298

 

 

$

128,326

 

Interest on taxable securities

 

 

6,554

 

 

 

5,076

 

 

 

18,550

 

 

 

13,703

 

Interest on tax-exempt securities

 

 

486

 

 

 

337

 

 

 

1,257

 

 

 

740

 

Other interest and dividend income

 

 

598

 

 

 

615

 

 

 

1,794

 

 

 

1,287

 

Total interest and dividend income

 

 

71,029

 

 

 

61,073

 

 

 

198,899

 

 

 

144,056

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

9,618

 

 

 

5,971

 

 

 

27,000

 

 

 

12,214

 

Federal Home Loan Bank advances

 

 

2,771

 

 

 

1,723

 

 

 

7,044

 

 

 

4,441

 

Subordinated debentures and other borrowings

 

 

802

 

 

 

786

 

 

 

2,484

 

 

 

2,057

 

Total interest expense

 

 

13,191

 

 

 

8,480

 

 

 

36,528

 

 

 

18,712

 

Net interest income

 

 

57,838

 

 

 

52,593

 

 

 

162,371

 

 

 

125,344

 

PROVISION FOR LOAN AND LEASE LOSSES

 

 

5,931

 

 

 

5,842

 

 

 

16,321

 

 

 

14,913

 

Net interest income after provision for loan and lease losses

 

 

51,907

 

 

 

46,751

 

 

 

146,050

 

 

 

110,431

 

NON-INTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fees and service charges on deposits

 

 

1,612

 

 

 

1,825

 

 

 

4,823

 

 

 

4,593

 

Loan servicing revenue

 

 

2,692

 

 

 

2,622

 

 

 

7,861

 

 

 

7,605

 

Loan servicing asset revaluation

 

 

(1,610

)

 

 

(2,446

)

 

 

(4,094

)

 

 

(6,407

)

ATM and interchange fees

 

 

973

 

 

 

1,540

 

 

 

2,635

 

 

 

3,303

 

Net gains on sales of securities available-for-sale

 

 

178

 

 

 

 

 

 

1,151

 

 

 

4

 

Change in fair value of equity securities, net

 

 

(15

)

 

 

 

 

 

1,035

 

 

 

 

Net gains on sales of loans

 

 

9,405

 

 

 

5,015

 

 

 

23,110

 

 

 

22,214

 

Wealth management and trust income

 

 

653

 

 

 

674

 

 

 

1,874

 

 

 

866

 

Other non-interest income

 

 

918

 

 

 

1,672

 

 

 

2,582

 

 

 

4,058

 

Total non-interest income

 

 

14,806

 

 

 

10,902

 

 

 

40,977

 

 

 

36,236

 

NON-INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

24,537

 

 

 

21,312

 

 

 

71,081

 

 

 

58,834

 

Occupancy expense, net

 

 

3,745

 

 

 

3,548

 

 

 

12,362

 

 

 

11,802

 

Equipment expense

 

 

767

 

 

 

617

 

 

 

2,168

 

 

 

1,778

 

Loan and lease related expenses

 

 

1,949

 

 

 

1,015

 

 

 

5,367

 

 

 

3,886

 

Legal, audit and other professional fees

 

 

4,066

 

 

 

2,358

 

 

 

9,113

 

 

 

8,627

 

Data processing

 

 

4,062

 

 

 

2,724

 

 

 

11,055

 

 

 

15,396

 

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

   related expenses

 

 

95

 

 

 

(284

)

 

 

543

 

 

 

187

 

Regulatory assessments

 

 

228

 

 

 

675

 

 

 

540

 

 

 

1,282

 

Other intangible assets amortization expense

 

 

2,003

 

 

 

1,898

 

 

 

5,735

 

 

 

3,795

 

Advertising and promotions

 

 

843

 

 

 

537

 

 

 

2,284

 

 

 

1,133

 

Telecommunications

 

 

474

 

 

 

435

 

 

 

1,475

 

 

 

1,319

 

Other non-interest expense

 

 

2,679

 

 

 

2,880

 

 

 

8,358

 

 

 

6,769

 

Total non-interest expense

 

 

45,448

 

 

 

37,715

 

 

 

130,081

 

 

 

114,808

 

INCOME BEFORE PROVISION FOR INCOME TAXES

 

 

21,265

 

 

 

19,938

 

 

 

56,946

 

 

 

31,859

 

PROVISION FOR INCOME TAXES

 

 

5,923

 

 

 

5,402

 

 

 

15,796

 

 

 

7,787

 

NET INCOME

 

 

15,342

 

 

 

14,536

 

 

 

41,150

 

 

 

24,072

 

Dividends on preferred shares

 

 

196

 

 

 

196

 

 

 

587

 

 

 

587

 

INCOME AVAILABLE TO COMMON STOCKHOLDERS

 

$

15,146

 

 

$

14,340

 

 

$

40,563

 

 

$

23,485

 

EARNINGS PER COMMON SHARE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.40

 

 

$

0.40

 

 

$

1.09

 

 

$

0.73

 

Diluted

 

$

0.39

 

 

$

0.39

 

 

$

1.07

 

 

$

0.71

 

 

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

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

(dollars in thousands)

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net income

 

$

15,342

 

 

$

14,536

 

 

$

41,150

 

 

$

24,072

 

Securities available-for-sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains (losses) arising during the period

 

 

3,992

 

 

 

(3,451

)

 

 

24,954

 

 

 

(14,859

)

Reclassification adjustments for net gains included in net income

 

 

(178

)

 

 

 

 

 

(1,151

)

 

 

(4

)

Tax effect

 

 

(1,062

)

 

 

961

 

 

 

(6,762

)

 

 

4,138

 

Net of tax

 

 

2,752

 

 

 

(2,490

)

 

 

17,041

 

 

 

(10,725

)

Cash flow hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains (losses) arising during the period

 

 

(251

)

 

 

1,070

 

 

 

(5,484

)

 

 

6,702

 

Reclassification adjustments for net gains included in net

   income

 

 

(363

)

 

 

(428

)

 

 

(1,643

)

 

 

(863

)

Tax effect

 

 

171

 

 

 

(179

)

 

 

1,985

 

 

 

(1,626

)

Net of tax

 

 

(443

)

 

 

463

 

 

 

(5,142

)

 

 

4,213

 

Total other comprehensive income (loss)

 

 

2,309

 

 

 

(2,027

)

 

 

11,899

 

 

 

(6,512

)

Comprehensive income

 

$

17,651

 

 

$

12,509

 

 

$

53,049

 

 

$

17,560

 

 

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

 

 

 

 

 

 

Comprehensive

 

 

Stockholders’

 

(dollars in thousands, except share data)

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Retained Earnings

 

 

Income (Loss)

 

 

Equity

 

Balance, December 31, 2017

 

 

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

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,768

 

 

 

 

 

 

2,768

 

Other comprehensive loss,

   net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(921

)

 

 

(921

)

Issuance of common stock upon

   exercise of stock options

 

 

 

 

 

 

 

 

8,000

 

 

 

 

 

 

130

 

 

 

 

 

 

 

 

 

130

 

Issuance of common stock and

   stock options due to business

   combination, net of issuance

   costs

 

 

 

 

 

 

 

 

6,682,850

 

 

 

67

 

 

 

151,208

 

 

 

 

 

 

 

 

 

151,275

 

Issuance of common stock in

   connection with restricted stock

   awards

 

 

 

 

 

 

 

 

126,157

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forfeiture of restricted stock

   awards

 

 

 

 

 

 

 

 

(2,100

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared on

   preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(198

)

 

 

 

 

 

(198

)

Share-based compensation

   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

416

 

 

 

 

 

 

 

 

 

416

 

Balance, June 30, 2018

 

 

10,438

 

 

$

10,438

 

 

 

36,218,955

 

 

$

360

 

 

$

544,686

 

 

$

71,257

 

 

$

(10,335

)

 

$

616,406

 

 

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

 

6


 

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(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, June 30, 2018

 

 

10,438

 

 

$

10,438

 

 

 

36,218,955

 

 

$

360

 

 

$

544,686

 

 

$

71,257

 

 

$

(10,335

)

 

$

616,406

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14,536

 

 

 

 

 

 

14,536

 

Other comprehensive loss,

   net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,027

)

 

 

(2,027

)

Issuance of common stock upon

   exercise of stock options

 

 

 

 

 

 

 

 

51,763

 

 

 

1

 

 

 

566

 

 

 

 

 

 

 

 

 

567

 

Issuance of common stock in

   connection with employee

   stock purchase plan

 

 

 

 

 

 

 

 

8,882

 

 

 

 

 

 

172

 

 

 

 

 

 

 

 

 

172

 

Cash dividends declared on

   preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(196

)

 

 

 

 

 

(196

)

Share-based compensation

   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

403

 

 

 

 

 

 

 

 

 

403

 

Balance, September 30, 2018

 

 

10,438

 

 

$

10,438

 

 

 

36,279,600

 

 

$

361

 

 

$

545,827