Byline Bancorp, Inc. (BY) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
Despite strong financial metrics and optimistic guidance, the lack of clarity on NII outlook and the impact of the government shutdown on loan sales creates uncertainty. The potential for mid-single-digit loan growth and stable margins is balanced by the absence of a clear TCE target and the cautious approach to asset sensitivity. The market cap indicates moderate volatility, suggesting a neutral stock price reaction.
Key Financial Performance
Net Income (Full Year 2025) $130.1 million or $2.89 per diluted share, on revenue of $446 million, up 9.7% year-on-year. Reasons for change: Strong profitability, loan growth of 8.9%, deposit growth of 2.5%, and positive operating leverage despite a challenging rate environment.
Net Income (4Q 2025) $34.5 million or $0.76 per diluted share, on revenue of $117 million. Reasons for change: Higher net interest income and solid profitability.
Revenue (Full Year 2025) $446 million, up 9.7% year-on-year. Reasons for change: Increased net interest income and loan growth.
Revenue (4Q 2025) $117 million, up 12% year-on-year and 1.1% from the prior quarter. Reasons for change: Higher net interest income.
Loan Growth (Full Year 2025) 8.9% year-on-year. Reasons for change: Strong origination activity and increased line utilization.
Deposit Growth (Full Year 2025) 2.5% year-on-year. Reasons for change: Disciplined deposit pricing and balance sheet management.
Net Interest Income (4Q 2025) $101 million, up 1.4% from the prior quarter and 10.7% for the full year. Reasons for change: Loan growth, lower deposit costs, and reduced interest expense from sub-debt payoff.
Net Interest Margin (4Q 2025) 4.35%, up 8 basis points from the prior quarter and 25 basis points year-on-year. Reasons for change: Decrease in cost of interest-bearing liabilities.
Noninterest Income (4Q 2025) $15.7 million, flat from the prior quarter. Reasons for change: Lower gain on sale of loans offset by higher swap income.
Allowance for Credit Losses (4Q 2025) $109 million, representing 1.45% of total loans, up 3 basis points from the prior quarter. Reasons for change: Reserve build and stable asset quality.
Capital Ratios (4Q 2025) CET1 at 12.33%, up 18 basis points from the prior quarter and 63 basis points year-on-year. TCE to TA ratio at 11.29%, up 168 basis points from the prior quarter. Reasons for change: Strong capital position and disciplined resource allocation.
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Operating Highlights
Commercial Payments Business: Launched in April 2025, onboarded 6 customers, added $70 million in liability balances, and increased ACH volumes.
Market Position: Positioned as the largest local community bank and second largest local commercial bank in Chicago. Focused on organic growth and gaining market share in commercial businesses.
Financial Performance: Net income for 2025 was $130.1 million, up 9.7% year-on-year. Revenue reached $446 million. Loan growth was 8.9%, and deposits grew 2.5%.
Efficiency: Efficiency ratio at 50.3% and cost-to-asset ratio at 2.47% as of Q4 2025. Maintained positive operating leverage despite rate environment.
Capital Management: Repurchased 346,000 shares, authorized a new repurchase program for up to 5% of outstanding shares, and increased quarterly dividend by 20%.
Asset Growth: Prepared to cross the $10 billion asset threshold in 2026, with regulatory monitoring in place.
Integration: Completed integration of First Security within a single quarter.
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Risk or Challenges
Interest Rate Environment: Interest rates remained elevated longer than expected, creating challenges for profitability and financial planning.
Macroeconomic Uncertainty: Increased macroeconomic uncertainty impacted the operating environment, requiring adjustments to strategy and operations.
Regulatory and Policy Changes: Faster-than-expected regulatory and policy changes posed challenges to compliance and operational adjustments.
Deposit Decline: Deposits declined by 2.3% in the fourth quarter due to balance sheet management and seasonal outflows, potentially impacting liquidity.
Credit Costs: Credit costs increased to $9.7 million in the fourth quarter, driven by net charge-offs and reserve builds, indicating potential credit quality concerns.
Non-Performing Loans (NPLs): NPLs increased to 95 basis points, reflecting a rise in non-performing assets and potential credit risk.
Asset Threshold Transition: Preparation for crossing the $10 billion asset threshold in 2026 requires significant operational and regulatory readiness.
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Guidance & Outlook
Loan Growth: Loan growth is expected to continue in the mid-single digits through 2026.
Net Interest Income: Net interest income is projected to range between $99 million and $100 million for the first quarter of 2026, based on a forward curve assuming a 50 basis point decline in the Fed funds rate.
Gain on Sale Forecast: Gain on sale of loans is forecasted to average $5.5 million per quarter in 2026, with lower expectations in Q1 due to seasonality.
Noninterest Expense: Quarterly noninterest expense is expected to trend between $58 million and $60 million in 2026.
Asset Threshold: The company expects to cross the $10 billion asset threshold in 2026 and is well-prepared for this milestone.
Commercial Payments Business: The commercial payments business launched in 2025 is expected to onboard more customers in 2026, with several already in the pipeline.
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Shareholder Return Plan
Quarterly Dividend Increase: Announced a 20% increase in the quarterly dividend, reflecting strong financial performance and confidence in delivering top quartile results.
Share Repurchase Program: Repurchased approximately 346,000 shares in the quarter. The Board authorized a new repurchase program allowing the buyback of up to 5% of outstanding shares.
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Key Q&A
Q:Which areas or verticals is the company most excited about scaling up and becoming more efficient?
A:The company is excited about their commercial payments team, which was launched last April. They are seeing benefits in growing deposits, transaction volumes, and fees. Additionally, they are optimistic about gaining market share in the commercial banking space in Chicago, where they are the largest community bank and will soon be the largest local commercial bank in the market.
Q:Why has the 8% to 9% TCE target been absent in recent earnings decks?
A:The company prefers to maintain flexibility by carrying more capital, which has allowed them to act quickly on market opportunities. They have been returning excess capital to shareholders through dividends and share repurchases. The company aims to grow the balance sheet, support business growth, maintain a sustainable dividend, pursue M&A opportunities, and execute a buyback program.
Q:What is the company’s approach to reducing asset sensitivity of the balance sheet and its impact on margins?
A:The company is issuing CDs and interest-bearing accounts to have more floating rate liabilities. They aim to keep the margin stable and growing. They sold securities in the fourth quarter to stay under $10 billion in assets and plan to buy them back in the first quarter. The margin provides flexibility from a competitive standpoint.
Q:What is the loan growth outlook and which segments offer the best opportunities?
A:The company expects mid-single-digit loan growth, primarily driven by commercial banking. Real estate growth depends on transaction activity, which has been muted due to rising rates since 2022. If rates come down, transaction activity may increase, potentially leading to higher growth guidance.
Q:Is the first quarter typically a seasonally low quarter for net interest income (NII)?
A:Yes, the first quarter is seasonally low due to fewer days in the quarter and lower loan fees. Additionally, the company is asset-sensitive, and rate cuts at the end of the previous year require a transition period to reprice and reset.
Q:What is the outlook for net charge-offs in the upcoming year?
A:The company expects net charge-offs to be in the range of 30 to 40 basis points, consistent with previous guidance.
Q:What is the underlying pace of originations and payoffs for achieving mid-single-digit loan growth in 2026?
A:The company monitors origination and payoff trends closely. While loan growth exceeded targets in the past, payoffs caught up in the fourth quarter. Mid-single-digit growth is expected primarily in commercial banking categories, with variations depending on payoff timing.
Q:Why has the company been consistently outperforming its quarterly NII guidance?
A:The company has benefited from lower-than-expected loan payoffs, disciplined deposit pricing, and improved analytical capabilities for segmenting and pricing their portfolio. However, they acknowledge that these factors have limits and may not sustain indefinitely.
Q:What is the company’s view on the SBA business and gain on sale compression?
A:The company believes the SBA business remains attractive on a risk-adjusted basis despite gain on sale compression, which is influenced by the mix of loan tenors and types. They would need to see much more compression to reconsider the business's attractiveness.
Q:What is the focus and progress of the commercial payments team?
A:The commercial payments team focuses on clients like payroll processing companies and fintechs with payment elements. The team aims to onboard 3-4 clients annually with a deliberate 6-9 month onboarding process to ensure compliance and proper support. The business launched in April last year and is off to a good start.
Q:Did the government shutdown impact the SBA business in Q4?
A:The government shutdown had a minimal and immaterial impact on the SBA business in Q4.
Q:What is the outlook for fee income growth and its contributing areas?
A:The company aims to grow fee income through swaps and derivatives, the commercial payments business, wealth management (approaching $1 billion in assets under management), and the SBA gain on sale business.
Q:What is the expected average earning asset level for Q1?
A:The company expects average earning assets to be in the range of $9.2 billion, reflecting some recovery from fourth-quarter management activities to stay below $10 billion in total assets.
Q:Were there any material changes in criticized or classified levels from Q3 to Q4?
A:No, there were no material changes in criticized or classified levels, only normal ebbs and flows.
Q:What is the outlook for the core margin percentage in 2026?
A:The company expects the core margin to remain stable, with no significant growth anticipated. They aim to maintain the current margin level throughout the year.
Q:Review of Unclear Management Responses
A:Management avoided providing a direct answer to the question about whether they would become more bullish with their NII outlook, citing factors like loan payoffs and deposit pricing but not committing to a clear stance. Additionally, they used vague language when discussing the limits of their ability to outperform internal models for deposit pricing and NII growth.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Bancorp Full
Bancorp Happy
Bancorp risk
Boca Raton
Byline Bancorp
Executive
Happy New
Origination activity
ROA basis
bank Chicago
community bank
course
credit loss
decline
end Origination
financials
flexibility
future
income balance
increase dividend
lender
liability
people
platform
point ROA
point ROTCE
position
preparation ROA
quality
reflection
result today
return
seasonality
share Profitability
sheet end
stockholder
strength
BY Transcript
Byline Bancorp, Inc. (BY) Q4 2025 Earnings Call Transcript
Unknown1-23
Despite strong financial metrics and optimistic guidance, the lack of clarity on NII outlook and the impact of the government shutdown on loan sales creates uncertainty. The potential for mid-single-digit loan growth and stable margins is balanced by the absence of a clear TCE target and the cautious approach to asset sensitivity. The market cap indicates moderate volatility, suggesting a neutral stock price reaction.
Byline Bancorp, Inc. (BY) Q3 2025 Earnings Call Transcript
Unknown10-24
The earnings call reveals a mix of positive and negative indicators. While there is optimism around loan growth, NII, and strategic positioning, uncertainties about government shutdown impacts, competitive pressures, and unclear management responses temper sentiment. The market cap suggests moderate sensitivity to these mixed signals, aligning with a neutral outlook.
Byline Bancorp, Inc. (BY) Q2 2025 Earnings Call Transcript
Positive7-25
The earnings call revealed strong financial health with upgraded credit ratings, disciplined expense management, and a sustainable increase in earnings power. Despite some increases in non-performing loans, management remains confident in addressing credit issues. The Q&A highlighted a healthy loan growth pipeline, capital flexibility, and strategic focus on organic growth and share buybacks. These factors suggest a positive outlook, likely leading to a stock price increase of 2% to 8% over the next two weeks, particularly given the company's small-cap status.
Byline Bancorp, Inc. (BY) Q1 2025 Earnings Call Transcript
Positive4-25
The earnings call indicates strong financial performance with increased net income, EPS, and revenue, alongside improved credit quality and capital ratios. Despite some uncertainties in client behavior and market competition, the dividend increase and share repurchases suggest confidence in future performance. The Q&A section reveals optimism about loan growth and M&A opportunities, despite market volatility. Overall, the positive financial metrics and strategic initiatives outweigh the risks, suggesting a positive stock price movement in the coming weeks.
BY Slides
BY Report
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