Byline Bancorp, Inc. (BY) is a bank holding company headquartered in Chicago, Illinois, that conducts its business activities through its subsidiary, Byline Bank. The company has grown to become a prominent player in the Chicagoland market, offering a diverse range of banking products and services to small and medium-sized businesses, commercial real estate and financial sponsors, as well as consumers.
Business Overview and History
Byline Bancorp was formed in 2013 through a recapitalization of the former Metropolitan Bank Group. Since then, the company has embarked on a strategic journey to transform itself into the preeminent commercial bank in the Chicago metropolitan area.
Byline Bank operates a network of 45 branches in the Chicago metropolitan area and one branch in Wauwatosa, Wisconsin. The bank offers a range of deposit products and lending services to small and medium-sized businesses, commercial real estate clients, financial sponsors, and consumers. Byline is also a participant in U.S. government guaranteed lending programs, including the Small Business Administration (SBA) 7(a) program, and originates U.S. government guaranteed loans.
In 2014, Byline acquired Baytree Leasing Company, a small-ticket equipment leasing business, to diversify its revenue streams and expand its product offerings. This acquisition laid the foundation for the company's Byline Financial Group (BFG) subsidiary, which has since grown to become a significant contributor to Byline's overall business.
Byline's growth strategy has also been driven by a series of strategic acquisitions. In 2016, the company acquired Ridgestone Financial Services, Inc., a bank holding company based in Brookfield, Wisconsin. This acquisition strengthened Byline's presence in the Midwest and added depth to its commercial and industrial (C&I) lending expertise.
The company's acquisition spree continued in 2018 with the purchase of First Evanston Bancorp, Inc., a bank holding company located in Evanston, Illinois. This transaction further bolstered Byline's C&I lending capabilities and expanded its footprint in the Chicago metropolitan area.
In 2019, Byline acquired Oak Park River Forest Bankshares, Inc., a bank holding company based in Oak Park, Illinois. This acquisition enhanced the company's commercial real estate (CRE) lending expertise and added to its deposit base.
Most recently, in 2023, Byline completed the acquisition of Inland Bancorp, Inc., a bank holding company headquartered in Oak Brook, Illinois. This transaction strengthened Byline's position in the Chicagoland market, diversified its commercial banking business, and enhanced its core deposit base.
Throughout its history, Byline Bancorp has faced various challenges, including the economic impacts of the COVID-19 pandemic. The company has navigated these challenges by maintaining disciplined credit underwriting, investing in technology and digital capabilities, and focusing on its core commercial banking strategy. Byline's consistent performance and strong market position have enabled it to selectively pursue acquisition opportunities that have expanded its franchise and capabilities.
Financial Performance and Ratios
Byline Bancorp has consistently delivered strong financial performance, with a focus on profitability and prudent risk management. As of the end of 2024, the company reported total assets of $9.5 billion, total gross loans and leases outstanding of $6.9 billion, total deposits of $7.5 billion, and total stockholders' equity of $1.1 billion.
The company's net income for the full year 2024 was $120.8 million, or $2.75 per diluted share, on revenue of $406.9 million. This represents an 11.9% increase in net income compared to the prior year. Byline's return on average assets (ROA) and return on average tangible common equity (ROTCE) for 2024 were 1.31% and 14.85%, respectively, indicating solid profitability.
For the fourth quarter of 2024, Byline reported revenue of $104.7 million and net income of $30.3 million, representing year-over-year growth of 4% and 3.9%, respectively. The revenue increase was primarily driven by higher net interest income resulting from loan growth and margin expansion. The growth in net income was attributed to higher revenue and lower provision for credit losses.
Byline's capital ratios remain strong, with a Common Equity Tier 1 (CET1) ratio of 11.70%, a Tier 1 capital ratio of 12.73%, and a total capital ratio of 14.74% as of the end of 2024. These ratios are well above the regulatory requirements for well-capitalized banks, providing the company with ample financial flexibility to support its growth initiatives.
Liquidity
Byline's liquidity position is robust, with a loan-to-deposit ratio of 92.64% as of December 31, 2024. The company's net interest margin (NIM) for the full year 2024 was 3.97%, reflecting its ability to generate strong net interest income and manage its funding costs effectively.
As of December 31, 2024, Byline had $563.1 million in cash and cash equivalents. The company also maintains significant available credit lines, including a $2.7 billion FHLB line, a $792.4 million FRB Discount Window, $127.5 million in uncommitted Fed Funds lines, and a $15 million revolving credit agreement. These resources provide Byline with substantial liquidity to support its operations and growth initiatives.
The company's debt-to-equity ratio stood at 0.68, indicating a conservative approach to leverage and financial stability. For the full year 2024, Byline generated operating cash flow of $175.2 million and free cash flow of $171.2 million, demonstrating strong cash generation capabilities.
Operational Highlights and Initiatives
Byline's success is underpinned by its focus on commercial banking, particularly in the areas of commercial and industrial (C&I) lending, commercial real estate (CRE) lending, and government-guaranteed lending. The company's diversified lending approach and specialized expertise in these areas have enabled it to navigate various economic environments and maintain a strong asset quality profile.
In 2024, Byline's C&I loan portfolio grew by 6.9% year-over-year, reaching $2.6 billion and accounting for 37.9% of the total loan and lease portfolio. The company's CRE loan portfolio, including both owner-occupied and non-owner-occupied CRE loans, stood at $2.4 billion, or 34.1% of the total loan and lease portfolio, as of the end of 2024.
Byline's government-guaranteed lending business, which focuses on originating Small Business Administration (SBA) and United States Department of Agriculture (USDA) loans, also continued to be a key driver of the company's growth. As of December 31, 2024, the total unpaid principal balance of SBA and USDA loans serviced for others was $1.7 billion.
The company's Byline Financial Group (BFG) subsidiary, which provides small-ticket equipment leasing solutions, has also been a consistent contributor to Byline's overall performance. As of the end of 2024, the leasing portfolio stood at $715.9 million, representing 10.4% of the total loan and lease portfolio.
Byline has also made strategic investments in its wealth management and trust services business, with the goal of diversifying its revenue streams and better serving its commercial client base. As of December 31, 2024, the company had $746.5 million in assets under administration, including $119.7 million in money market demand accounts.
Human Capital
As of December 31, 2024, Byline had 1,030 employees, primarily located in the Chicagoland and greater Milwaukee, Wisconsin areas. The company is dedicated to attracting, retaining, and developing top talent to support its long-term strategy and growth objectives. Byline provides competitive compensation and benefits, as well as opportunities for professional development, to maintain an engaged and productive workforce.
Outlook and Future Prospects
Looking ahead, Byline Bancorp remains focused on executing its strategic plan to become the preeminent commercial bank in the Chicago metropolitan area. The company is well-positioned to capitalize on the current market environment, which is characterized by a softer regulatory approach and increased merger and acquisition (M&A) activity in the banking industry.
Byline's pipeline of potential acquisition targets, combined with its ability to attract top banking talent, positions the company for continued growth and expansion. The company's recently announced acquisition of First Security Bancorp, Inc., expected to close in the first half of 2025, will further strengthen its presence in the Chicagoland market and add to its commercial banking capabilities.
Moreover, Byline's strong capital position and liquidity profile provide the necessary resources to support its organic growth initiatives, including the expansion of its commercial lending teams, the enhancement of its digital banking capabilities, and the ongoing investment in its wealth management and trust services business.
For the first quarter of 2025, Byline expects net interest income to range between $86 million and $88 million, partially driven by day count. The company anticipates gain on sale forecasts for 2025 to average $5 million per quarter, with lower expectations in Q1 due to typical seasonality. Quarterly noninterest expense is expected to trend between $55 million and $57 million in 2025. Loan growth is projected to continue in the mid-single-digits for 2025.
Byline anticipates crossing the $10 billion asset mark between the latter half of 2025 and the third quarter of 2026, a milestone that will bring additional regulatory requirements and opportunities for the company.
Despite the inherent challenges and uncertainties that exist in the banking industry, Byline Bancorp remains well-equipped to navigate the dynamic market conditions and deliver consistent, profitable growth for its shareholders. The company's disciplined approach to risk management, its diversified business model, and its commitment to serving the needs of its commercial and retail customers position it for continued success in the years ahead.
Conclusion
Byline Bancorp has demonstrated its ability to successfully execute its strategic plan and transform itself into a leading commercial bank in the Chicago metropolitan area. Through a combination of organic growth and strategic acquisitions, the company has built a diversified business model, a strong capital and liquidity profile, and a talented team of banking professionals.
As Byline Bancorp continues to capitalize on the favorable market conditions and industry trends, investors can expect the company to maintain its focus on profitability, prudent risk management, and shareholder value creation. With its strong foundations and promising growth prospects, Byline Bancorp is well-positioned to solidify its position as the preeminent commercial bank in the Chicagoland market.