Byline Bancorp 3Q 2026 Earnings Conference Call - BYLINE BANCORP INC

Good morning and welcome to Byline Bancorp third quarter 2026 earnings call. My name is Ben and I will be your conference operator today. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer period. If you would like to ask a question, simply press the star followed by the number one on your telephone. If You would like to withdraw your question, press star and two. If your listening via speakerphone, please lift your handset prior to asking your question if you require operator assistance please press star then zero please note the conference call is being recorded at this time i would like to introduce brooks rennie the head of investor relations for byline bancorp to begin the conference call thank you ben good morning everyone and thank you for joining us today for the byline bank corp third quarter 2026 earnings call in accordance with regulation fd this call is being recorded and is available via webcast on our investor relations website along with our earnings release and the corresponding presentation slides as part of today's call management may make certain statements that constitute projections beliefs or other forward-looking statements regarding future events or the future financial performance of the company we caution that such statements are subject to certain risks, uncertainties, and other factors that could cause actual results to differ materially from those discussed. The company's risk factors are disclosed and discussed in its SEC filings. In addition, our remarks and slides may reference or contain certain non-GAAP financial measures, which are intended to supplement but not substitute for the most directly comparable GAAP measures. Reconciliation of each non-GAP financial measure to the comparable gap financial measure can be found within the appendix of the earnings release. For additional information about risks and uncertainties, please see the forward-looking statement and non-gap financial measures disclosures in the earnings relief. As a reminder for investors, we plan to participate in two investor conferences during the quarter, the Hubby Group Financial Services Conference in Orlando and the Piper Sandler Financial Services Conference in Miami, both in November. With that, I will now turn the conference call over to Alberto Paracini, President of Byline Bank Corp. Thank you, Brooks. Good morning, everyone, and thank you for joining us to review our third quarter results. With me today are Chairman and CEO Roberto Varencia, our CFO Tom Bell, and our Chief Credit Officer Mark Cisinato. In terms of the agenda for today, I'll kick us off with the highlights for the quarter, followed by Tom, who will walk you through the financials i'll come back before wrapping up the call for questions as always you can find the deck for this morning on the ir section of our website and please refer to the disclaimer at the front before we get started i'd like to pass the call over to roberto for his comments roberta thank you alberto and good morning to all thank you for spending a few minutes with us this morning. Another excellent quarter with notable positive developments. Financial results were solid and consistent. Quite a few records achieved this quarter. Key metrics were once again top quartile or top decile among our peer group. We increased our dividend during the quarter and continued to repurchase shares opportunistically. We also announced the acquisition of Illinois State Bancorp, and with that, the analyst community gets the certainty they've been so eager to obtain as to when we will cross the $10 billion threshold. before passing the call back to alberto and the team i like to to talk about these details i want to spend a few minutes as i usually do talking about our people and leadership which is of course what makes these results possible sadly i first want to take a moment to remember our colleague matt robertson who passed away in september matt was part of the byline family for more than seven years and led one of our commercial real estate teams. He was an accomplished banker and a respected leader in the Chicago commercial real state community. What stands out the most about Matt is the impact he had on the people around him. Matt was a mentor to many of our younger bankers and credit professionals. He is known for his positive attitude, his commitment to his colleagues and customers, and the energy he brought to Byline every day. I talk often about the importance of our people and the culture we're building at Byline. Matt represented so much of what we value. Relationships, mentorship, teamwork, and genuinely caring about the people around you. We miss Matt greatly, and our thoughts remain with his wife, his children, and all of Matt's family, friends, and colleagues. We are grateful for the time we had with Matt and for the lasting impact he made at Byline and on so many of us personally. More broadly, I'm especially proud that Byline was recently named one of American Bankers 2026 best banks to work for. This recognition is particularly meaningful because employee feedback is a central part of this evaluation. We work hard to build a culture where people feel connected to the organization, have opportunities to develop and build meaningful careers, and understand the important role they play in our success. We remain focused on developing our people, creating opportunities from within and making sure we have the leadership staff necessary for $10 billion and beyond. And we actually do. This leads directly to the leadership transitions and organizational changes we announced earlier this month, effective January 1st, 2027. Rogan Potassi, head of commercial banking, and Mark Fasinato, chief credit officer, will retire at the end of this year after a combined 25 years of service to Bylane. Brogan has been instrumental in building our commercial banking franchise and strengthening our position in the Chicago market, while Mark has played an equally important role in strengthening our credit infrastructure and building the disciplined credit culture that is fundamental to how we operate. Both have also invested considerable time in developing the people around them. A condition to their retirement. I'm being playful with that last comment, of course, just a bit. We are incredibly grateful for their leadership and the lasting positive impact they have had here at Byline. We're delighted that Brogan and Mark will remain involved in advisory capacities for the foreseeable future with us. If we had an official Chicago Bankers Hall of Fame, these two individuals would be inducted without a wait period. As part of these planned transitions, we shared in an 8K earlier this month the names of the name executive officers that will lead the reorganized commercial bank and credit functions. There are also many other promotions that cascade from these changes beyond the NEOs, including expanded responsibilities and even a swap or exchange of roles into C-Suite leaders as part of our commitment to developing leadership. Singling out all of them would not be appropriate in an earnings call. The overarching message, however, is that these moves are intentional, giving talented leaders opportunities to lead different parts of the organization, building broader experience and strengthening our executive bench as we cross the 10 billion threshold we have known for some time that these transitions are approaching and we've been deliberate in preparing for them to me that is what good succession planning looks like we are confident in the team we have in place and excited about what this next generation of leadership will bring to byline i am proud of the organization we're building together these changes demonstrate the depth of leadership we have developed across the company and reinforce something i have said many times our people and our culture are fundamental to our success this team our people in general anchors the optimism and excitement i feel about byline's growth prospects and our progress towards becoming the premier commercial bank in chicago for that alberto i'll turn it back to you great thank you roberto moving on to slide four on the deck the third quarter combined strong financial results with several important milestones we delivered record net income and revenue expanded our net interest margin and grew deposits while maintaining strong capital levels we also announced definitive agreement to acquire illinois state bankrupt and return capital to shareholders through a higher dividend as well as share purchases all in all a very productive quarter for byline net income came in at 41.8 million or 94 cents per diluted share up from 40.2 million and 90 cents last quarter eps was up four percent link quarter, and up approximately 15% from a year ago. Revenue reached a record $121 million, up 3% from the second quarter, with growth in both net interest income and non-interest income. These results translated into an ROA of 167 basis points, ROTCE of just under 15%, percent and pre-tax preparation roa of 245 basis points expenses totaled 59.8 million and our efficiency ratio is 48.4 percent while the ratio increased from the second quarter it improved by 260 basis points on a year-on-year basis turning to the balance sheet deposits grew 168 million or 8.5% annualized to $8 billion. Our loan-to-deposit ratio declined to 93.2% from 96.1% last quarter, and we used excess cash to reduce wholesale funding and manage the size of the balance sheet. Loans and leases declined roughly 1% to $7.5 billion, as elevated payoffs more than offset strong origination activity. We ended the quarter with assets just below $10 billion and have flexibility to manage the balance sheet through year-end. We expect to cross the $10 billion threshold in 2027, which would defer the impact of Durbin until the second half of 2028. Moving to asset quality, credit costs for the quarter were $6.7 million, reflecting net charge ups of $5.8 million and a small reserve bill. Net charge ups came in at 31 basis points consistent with prior guidance. Non-performing loans increased 22 basis points for the quarter driven by two relationships, one government guaranteed and one commercial that moved to non-accrual status during the quarter. Our allowance increased three basis points to just over one and a half percent of total loans. Criticized and classified loans declined to 3.1 percent from 3.9 percent last quarter, marking the third consecutive quarterly decline. Capital levels continue to remain strong. During the quarter, we repurchased approximately 522,000 shares, totaling $20.2 million. Importantly, we executed across all four of our capital priorities during the quarter – supporting organic growth, increasing our dividend, deploying capital towards M&A, returning capital through share repurchases with that i'll turn the call over to tom who'll walk you through the financials thank you alberto and good morning everyone starting with our loans on slide five total loans ended the quarter at 7.5 billion dollars down one percent from the second quarter origination activity was strong with 362 million in new loans up 129 million dollars or 55 linked quarter. However, payoff activity continued and remained elevated at $396 billion, up 17% linked quarters. Line utilization decreased to 57% from 61% last quarter, reflecting higher net repayment activity and the impact of $112 million of new line commitments added during the quarter. Looking ahead, we currently expect fourth quarter loan balances to remain flat as payoff activity and new business production are expected to largely offset. Turning to slide six, total deposits were $8 billion for the quarter, up 2.1% or 8.5% annualized linked quarter. From a mixed perspective, growth was driven by interest checking balances and DDAs, partially offset by lower money market and saving balances. The solid deposit growth for the corner allowed us to reduce our reliance on wholesale funding and improve our loan-to-deposit ratio to 93.2% from 96.1%. Deposit costs increased modestly for the quarter, up three basis points to 1.95%, while the cost of interest-bearing deposits increased five basis points at 2.54%. Turning to slide seven, we had record high net interest income of $103.7 million, up 3% from the prior quarter, primarily due to higher income from investment securities, reduced wholesale funding costs, and the additional day in the quarter. This was partially offset by higher deposit costs. The net interest margin increased 5 basis points to 4.33%. The improvement reflected higher yields on cash and securities and lowering borrowing costs, partially offset higher deposit cost. Including accretion, the NIM increased 10 basis points per quarter. Given our asset-sensitive position, we are well positioned to grow our non-interest income in a rising rate environment. That said, given the rate outlook and the management of the balance sheet to stay under $10 billion per year end, we expect non-interest income to be in the $103 to $105 million range for the fourth quarter. Turning to slide 8. income totaled $17.3 million in Q3 and increased to 3% compared to the second quarter. The increase was primarily driven by higher BOLI income. We also had higher swap income and wealth management income partially offset by lower servicing asset valuation. Our guidance for Q4 remains unchanged with gain on sale revenues at $5.5 million with total non-interest income to be in the $14 million the $15 million range. Turning to slide 9, expenses came in at $59.8 million, up 6% from the prior quarter, primarily due to higher incentive compensation, partially offset by lower marketing expenses. Non-interest expense to average assets continued to move lower at 2.39%, an improvement of 8 basis points year over year. Looking ahead to Q4, our non-interest expense guidance will be higher at $62 million to $64 million, which reflects higher incentive compensation, benefit costs, and marketing spend. Notwithstanding the higher expense guidance for the fourth quarter, we still believe that our full-year efficiency ratio will be at or below 50%. Before moving to credit, I want to briefly touch on taxes. During the third quarter, we purchased tax credits which reduced our effective tax rate to 23.3 percent from 25.7 last quarter looking ahead to 2027 we currently estimate our annual effective tax rate to be in the 25.5 percent range turning to slide 10. net charge loss for 5.8 million dollars or 31 basis points annualized compared to 4.4 million dollars or 24 basis points last quarter Criticized and classified loans declined to 3.1% of total loans from 3.9% last quarter. Our allowance for credit losses was $113 million, or 1.51% of the total loans, up three basis points from last quarter, driven by an increase in the individually assessed category. Moving on to capital on slide 11. Capital ratios increased during this quarter and remain well above regulatory requirements. CET1 increased 37 basis points to 13.29%. Our TCE ratio was 11.12% at September 30th, down 24 basis points linked quarter due to higher AOCI and the impact of share repurchases, but up 34 basis points year-over-year. As a result of our strong capital position, we continue to return capital to stockholders. During the quarter, we repurchased roughly 522,000 shares of common stock and increased our quarterly cash dividend by 16.7% to $0.14 per share. Our capital position is a source of strength and continues to provide flexibility to fund organic growth, return capital to stockholders, and pursue strategic opportunities. With that, Alberto, back to you. Thank you, Tom. So to wrap up, we're pleased with this quarter's results and remain focused on executing our strategy. Our priorities are straightforward. Grow customer relationships, deliver profitable growth, and invest in the business while preserving a strong balance sheet. We do all of that while maintaining credit discipline, closed portfolio monitoring, and balancing risk with reward. Looking ahead to the fourth quarter, our pipelines remain healthy and we're confident in our ability to serve customers and compete effectively in the market. Our capital position gives us flexibility to support growth, invest back into the business, and return capital to shareholders. Looking head, we're prepared to operate above $10 billion in assets and welcome illinois state bankrupts customers employees and shareholders to byline in 2027. we believe the combination will strengthen our deposit base expand our market presence and add new customer relationships we remain optimistic about the opportunities ahead and focused on delivering long-term value to our shareholders before we open the call for questions i'd like to recognize Mark Fusinato, who is here today participating in his 25th and final quarterly earnings call before retiring. Mark joined Byline in 2019 and has served as Chief Credit Officer since 2020. During his tenure, Mark has made significant contributions to our company. Our processes and practices are stronger, our credit culture has matured, and the relationship between our lines of business and credit has become a competitive advantage. I am fortunate to work with Mark and grateful for his friendship and support over the last seven years. On behalf of Byline, our board, and all of us here, thank you for your contribution and years of service. We wish you well in retirement. I'd also like to take a moment to introduce Scott Hawthorne, who will succeed mark as chief credit officer at the beginning of 2027. scott joined byline three and a half years ago and is currently deputy chief credit officers he brings more than 20 years of banking and credit experience having worked prior to byline at mb financial and fifth third finally thank you to all of our employees for their commitment to customers and their contributions to another strong quarter and with that operator we can open the call up for questions we will now begin the question and answer session if you would like to ask a question please press star 1 to raise your hand to withdraw your question press star one again we ask that you pick up your handset when asking a question to allow for optimum sound quality if you are muted locally please remember to unmute your device please stand by while we compile the q a roster your first call from the line of nathan race with piper sandler hey guys good morning thanks for taking the questions and congratulations on your upcoming retirement mark wishing all wishing you all the best in your next chapter appreciate um i wanted to start on just the strong core deposit growth in the quarter obviously it helps you kind of pay down some wholesale funding in the quarter and just maybe curious alberto if you can just pack unpack some of the drivers is it just some typical blocking tackling pulling market share and to what extent do you have kind of visibility into kind of additional kind of core deposit gathering at this clip just to maybe continue to work down some wholesale funding sources and drive and support them in yeah good question nate a good morning uh so obviously it's it's uh when you annualize the growth this quarter it looks uh it looks super solid at eight and a half percent the growth was actually um a bit higher because we also you know repaid tom roughly around 80 million dollars in in broker deposits so net it was really double digit growth um uh joking putting putting putting you know trying to put a joke aside but you know i wish we can continue to grow at that type of rate going forward but uh in all reality uh i i think the the growth was this quarter was just simply um you know blocking and tackling as as you know we are more commercially focused so as we bring in um new banking relationships they can be you know lumpier uh coming in um and i think that's that's the you know that's The short answer to your question is just we added we continue to add banking relationships we had a good quarter of that um if you look at the changes in the balances it was driven by interest checking uh you know non-interest bearing obviously you know moved higher also which would certainly help so the mix remained um attractive but uh in terms of going forward uh nate i you know listen it's as you know we've always been very focused on the right hand side side of the balance sheet we believe that fundamentally that's really where the value of a financial institution lies and will continue to always be prioritizing deposit growth going forward. And again, in terms of what's driving it, it's again just the focus on the strategy, customer by customer, the segments, and certainly the commercial banking orientation. So hopefully, I gave you some color there. Hopefully, that answers your question. Yep, that helps. And maybe a question for Tom. I know you don't really guide a margin, but if we do get a couple more Fed rate hikes as the forward curve implies, just any thoughts on betas between both loans and deposit costs as we move into 4Q and the first part of next year? Sure. Hi, Nate. Yeah, on the loan side, just hit that first. I mean, we continue to have cash flows and runoff in the, I'll call it $350 million in fixed rate loans that would reprice. Obviously, the book is a little bit over 50% floating rate, so that should give you some guidance on the betas there. on the on the liability side we haven't seen much to date um you know for interest bearing deposits and total deposits but you know generally probably in that 30 to 40 percent range is the beta and if you include cds you know think about it more like 40 to 50 percent okay got it and just one last one for me um just i appreciate the guide on kind of flat loans for the fourth quarter, just given some of the payoff headwinds. But as you look out to next year, and just given that we're perhaps kind of in the latter innings of some of the recycling of acquired loans that we discussed last quarter, and maybe also the latter inings of some kind of the COVID-era CRE loans paying off to some degree, is there anything that you see on the horizon, Alberto, that would cause you guys to not achieve kind mid-single-digit growth in loans next year, notwithstanding the acquisition impact? Really good question, Nate, and thanks for asking it. And I know you were the one that asked the same question last quarter. And, um, I think, look, the, uh, we probably underestimated a little bit how strong, um... you know, the payoff activity was going to be this quarter relative to what we told you in 2Q. That being said, I mean, it's always hard to forecast that variable perfectly. Sometimes we get it right, sometimes we don't, and certainly this quarter was one of those. That being said, if you look at the origination activity, the origina activity remains really good. We're seeing plenty of opportunities, credit demand looks okay broadly in the market. So when we look at that and when you normalize a bit for the elevated payoff activity heading into next year, I think that kind of mid-single-digit range, obviously adjusting the base to reality and also to the reality that we'll be managing the balance sheet here over the last quarter of this year to make sure that we stay under $10 billion through 2026. We still feel good about that mid-single-digit range into 2027. That being said, we're in a rising rate environment. You've heard me comment in the past about real estate transaction volume being lower, the market being competitive. That's likely to be the case in 2027 with higher rates. Also, So you have to factor in, it's not just, you know, Prime or SOFR, it is really the backup and treasury rates, which will have an impact to some degree on cap rates and valuations, and that's likely going to have an on transaction activity going into next year. So with that caveat and all the other uncertainties that you well know and that are – that exist the environment today i still think that for us you know that that single mid single uh mid-digit uh you know kind of growth rate in terms of loans is is probably the the right place okay great i appreciate the color thanks guys i'll step back your next call comes from the line of brendan nozzle of hub t group Hey, good morning, everybody. Hope you're doing well. Hey, Brendan. Maybe just starting off here on kind of your recent M&A announcement. I know it's a little stale at this point, but could you just give us a little bit of background on how the Illinois state deal came to be and just kind of one or two things that you're most excited about for transaction um so it came to be through uh through a meeting and getting to know the the owners and the the leadership of that institution um you know earlier earlier in the year uh we certainly knew of them we knew who they were uh we i personally didn't know them um you personally, but we had been tracking that institution for some time, and we had the opportunity to meet, and it was a situation where you had the leadership team there had built that organization over roughly a 40-year period, and were looking to find a good home for the franchise, the customers, the employees, the relationships that they had built over that period of time. And Brendan, as we've conveyed and talked about in the past, we think we are a really good home for those types of situations. And this is just one example, very similar to some of the transactions that that we've done here in uh in the past so that was the the gist of it um i can tell you that it was relationship driven this was not a competitive uh situation we we you know had a meeting of the minds we felt we were a good fit for each other and we worked on trying to get to an outcome that that uh you know certainly was was good for both parties and and we think we were able to do that so that's in context um you know the the background on the transaction in terms of what it adds you know it adds a press it solidifies our our market presence in certain parts of the city where we you know are just not there uh it adds customer relationships and as always it it's a you know source of you know core deposits and uh funding to to the bank yeah that's super helpful um second one for me just kind of sticking on this theme um it's just been a really accurate period for m a kind of in and around the state of illinois uh over the past couple of months um you obviously got kind of your bite at that uh with the deal that we just discussed um but as you look at you know the m a landscape are there still potential partners that you think could come to market in the near to medium term or has the pipeline for potential partners kind of in your markets depleted somewhat no i think we're still there's still opportunities there uh brendan um i i think you know as as the the the usual wording that that people use to describe you know kind of the m a environment i mean i think there's there's active chat chatter i think you know for us is just um sticking to our knitting um looking to do transactions that make sense that you know are created to the franchise that uh you know hopefully you know with partners that that we like and and that you know where they're you know looking to to partner and and you know put their institution with with a partner that can you know provide them with um just better capabilities and um you know a home for for the business that they've built so i i think you know look the the chatter in the marketplace continues and um i i i would say i think the environment is constructive okay fantastic nice to take my questions Your next call comes from a line of Damon Del Monte of KBW. Hey, good morning, guys. Hope everybody's doing well, and thanks for taking my question. Just wanted to ask on the outlook for non-interest income, Tom, could you just kind of help us connect the dots for the range that you gave of a 14 to 15 off of this quarter? I'm guessing there are some, I think you called out a couple one-time items maybe this quarter that kind of would get us down to that lower level? That's correct, Damon. The bully income was a one-time event, so that kind of brings us back to normal operating levels. Yeah, so, that was like a couple million, maybe? A little over a million dollars, yes. A little bit over a billion dollars. Okay. All right, great. And then, on the expense side, you know, the lift from this quarter, is that just kind of like year-end accruals and, you know, anything else particularly driving that? that's correct year-end accruals and then um some of the marketing campaigns that we maybe didn't do in the third quarter that we anticipate in the fourth quarter the timing of the those expenses so the marketing expenses can be a little bit higher in the Fourth Quarter got it okay and then if I could have oh sure no it's gonna add maybe to to what Tom said I when you look at our performance, obviously performance this year has been super solid. So what you're seeing in terms of the fourth quarter is aligned with that in terms of the higher incentive compensation. Got it. It makes sense. Yep, done a good year. And then just one more quick one on credit. You know, I think you called out a couple loans that drove the NPA increase this quarter. Any color on those? Maybe size or industry or anything like that? Hi, Dave. Mark Fusinato. So one of them was in the solar industry, and we expect that one to hopefully be resolved sometime early next year. We're well-reserved against that one. And the other one was a C&I credit that involved a company that does purchase of distressed credit card consumer debt. And these are both long-term customers at the bank. So these things occur once in a while. We've been tracking them for a long time, and we're properly reserved against both of those situations at the present time. Okay, great. That's all that I had. Thanks again, Mark, and thanks for taking my questions. Great. Thanks, Damon. Thank you. Thank you, Damon Your next call comes from the line of Daniel Tamayo of Raymond James. Yeah, thank you. Good morning, everybody. Good morning. Good morning to you, Danny. Maybe, yeah, maybe first just curious kind of as we think about the crossing of the $10 and the actions that you're taking to stay below in 2026. Is there any kind of reversal of those actions in 2027 and in the beginning of the year that would kind of create an increase in the balance sheet abnormal growth kind of early on, maybe having to do with liquidity or something like that, that we should be thinking about as we model out next year? I think so, Danny. you know we've been kind of conservative on any bond purchases right now just because we don't want to go over so that's certainly an area where we're a little light on a percentage basis and you would expect in the first quarter that that would change okay thanks for that tom and then can you give a little bit of color around the the loan sales in the in the in the third quarter um i mean just looking at the line items it looks like it came from construction and maybe cni but just curious where you were selling and then just thoughts if that you know is it was a one-time event or there's some potential for that to continue sure so the bulk of those sales are the government guaranteed loans um that we sell every quarter that that's something we disclosed in the loan side this time because there were some SAG assets that were sold and, you know, some other loans that other banks took a participation in, so to speak. So those are small pieces in CNI, but the bulk of the sales are the SBA sales. Okay. So that's kind of regular way stuff, but it was just elevated in the quarter is the way to think about it? Yeah. Yeah, I think we highlight, Danny, the – I think I would emphasize just the one that ultimately matters a lot is really the government-guaranteed, you know, kind of recurring government-garanteed loan sales. You can think of the other ones as really not having very material economic impact in terms of the P&L. and how much were those Alberto you remember it's just the I'm sorry what's the question the Delta between the what we sold like 70 million million dollars of SBA loans residual is sag assets and a couple loans we sold the participation it's about 30 million 30 million but I think that's thank you that we these are not like asset sales where we're taking a significant loss or a gain that we're as part of a business structure it's just operating balance sheet okay um and then and then lastly um i'm looking at this correctly the uh the purchase accounting accretion came down quite a bit in the quarter um you know just curious if you're expecting a rebound in that in that level from a scheduled perspective in the fourth quarter i mean the it's less than a million dollars a quarter i i would think it's we've given guidance in the past and the numbers are so small now at least excluding any future transactions which we haven't really disclosed yet so more to come on that but it's a couple million dollars you know currently for 27 in total okay so it's that we're we're still running off from these levels there was nothing unusual in third quarter in terms of excel or i guess it would be the other way maybe yeah no no i think the i think that the point that we tried to highlight danny is like if you just look at the margin execution obviously the the growth in the margin for the quarter was um you know more significant than than it was with accretion included i think accretions was like roughly five basis points execution was like 10 basis points which you know for a quarter were yes rates you know increase but that increase happened very much towards the latter part of the quarter so that's still not baked in so we still think to tom's comments um in his remarks you know it's a nice tailwind going into the fourth quarter and and 2027. understood okay well thanks for all the color obrador and tom appreciate it too bad thank you danny your next call comes from the line of brandon rudd with stevens All right, good morning, Brandon. Your next call comes from the line of Brian Martin with Breen Capital. Your line is open. Please go ahead. Hey, good morning, guys. Hey, Brian. Good morning. Hey, thanks for all the insight thus far. Just a couple for me. Tom, just on the September, do you have a sense for this? Is there a big difference in the September margin exit versus what it was for the quarter? Just trying to gain some perspective on the timing of those wholesale payoffs in the quarter. If it had an impact or is it pretty, you know, the average for the court is a pretty good base? Pretty consistent, you now, averages over quarters. Some of the payoffs that did happen happened in the middle part of September. So I would say generally, yeah, the margin's pretty much consistent on average versus period end. Okay. Thanks for that. And then just on your outlook, Alberto, you suggested, you know, as you have in the past on the real estate, you know, if we are in a little bit of a rising rate environment, that may tail off a bit. But your guide or, you know, comfort level still seems to be in that mid-single-digit outlook in the coming quarters. I mean, does C&I make up for that potential, you Know, slowdown in real estate? And that's how we should think about, you Now, where the growth is in the coming quarters, more on the C&Iside and maybe a little bit less real estate. That's kind of your outlook today that can overcome it. I mean, yeah, I still think we're, listen, we're – it's not to say that we are, you know, deliberately trying to reduce our CRE book. We are not. In fact, if you've tracked kind of our CRE concentration ratio today, we're probably at a pretty low point, which means we have ample capacity to grow that category. I'm just cautioning against, you know, an environment, if you think about the beginning of this year and what market expectations were in terms of rates, it was for lower rates. I think a lot of people on the commercial real estate space were anticipating, given the fact that rates are going to trend lower, properties were going to come to market, transactions were going to come to market and activity overall in terms of financing that was going to increase. I can't point to anything now other than just, you know, look, we've had a significant backup in long intermediate and longer term rates, and that's likely to have, you know, some impact, you know, on projects and overall activity in real estate next year. that being said as you well know the environment can change very quickly um there are you know variables in the environment that if they were to reverse you know so the geopolitics you know the rise in oil inflation trending down then you can you can obviously you know see a reversal of of kind of that environment in terms uh of that having an impact then on on on the business so i i'm just highlighting that but um to answer your question in terms of you know our our business in general you are going to see it's really more broader than just say cni you know we we expect that we'll see growth coming from the different business lines that we have that constitute that so you know cni so that's our bread and butter commercial banking business, our sponsor business, you know, the SBA business, unless we get into, you know, an environment where we're seeing, you know, significantly higher rates that are likely to impact that originations in that business, I mean, I think activity there remains, you know, solid. And then lastly, our leasing business there as well. So leasing this year has been probably a little slower than in the past. As you know, that's a book that tends to repay very quickly because it's just the nature of that business. So that's an area also that we anticipate that going into next year, capital spending continues to remain solid. Demand for essential use equipment of the type that we finance continues to be good. So that's a business that we anticipate also can grow next year. Okay. Thanks, Ben. Alberto, and sorry if I wasn't clear. I guess your point is what I was suggesting, is that if real estate does potentially slow a little bit, it sounds like you've got some pretty good runway in these other areas to kind of offset that if it does happen. And we'll see if it does. But thanks for the clarification on that and the bit of color on the other segments that can help out on that. Maybe just the last for me was the just, I mean, the efficiency ratio and expense management has been great. Just kind of wondering how you're thinking about operating leverage in 27 versus 26 and just how to think about that given, you know, certainly the inflation and inflationary costs and whatnot and how to how to balance that with such a great level where it's at today that's a great question i think we still again want to focus on revenue growth over expense growth so having operating leverage there we're still working on the numbers brian so more to come on that but generally speaking we want revenue growth to exceed expense growth it's a habit it's a habit brian and in terms of um this is not something that it's you know that we focus on this quarter and then we don't talk about it or focus again i mean it's constant so it's not um we want to continue to drive um you know the efficiency you know you have a revenue component there that impacts it, but we want to continue to drive that, you know, cost to asset ratio down. So we are, remain very focused on that. Some of that is just scale as we continue to grow the balance sheet. We want to make sure that, um, you Know, we're, that that growth translates into into uh you know better scale but uh it it's a habit and it's a it's constant you know source of of focus for us gotcha okay well you're doing a great job at it so uh we'll stay tuned and uh thanks for taking thanks brian thanks bryan your next call comes from the line of brandon rudd with stevens morning sorry about earlier i'm not sure what's happening there um i asked two questions uh just the first one uh just to clarify tom the 350 million dollars of fixed rate maturities is that per quarter and then what how how do those roll off yields compare to new origination rates sure yes that's uh for the quarter that includes leasing and the rate is call it 515 ish so we you know think about seven percent you know seven and a quarter for yields depending on the asset 200 basis points or so up to uptake there Okay, perfect. Thank you. And then just one on the buyback with the deal announced earlier this month. Are you restricted from repurchasing additional shares until that closes, or are you still open for more buybacks here in the fourth quarter? No. Okay, got it. Okay, thanks for taking my questions. Thank you, Brandon. If you would like to ask a question, please press star 1 to raise your hand. Your next call comes from the line of Kenneth James of Stonex Group. Good morning, gentlemen. Thanks for taking my question. Yeah, Kenneth. Good morning. Yes, I just kind of wanted to circle back to kind of the balance sheet and kind of growth expectations. I mean, the main thing I'm trying to wrap my head around is the degree of time that you've kind of been managing these elevated payoffs and also around the $10 billion number. I mean, how long does it take to kind of get back up to a normal growth range? I mean I guess I have a natural kind of inclination that once you get past the end of the year that the balance sheet could kind of behave like a coiled spring, you know, kind of back up to mid-single-digit growth rate, and I'm just wondering, you know, is that a fair assumption or does that need to be tempered? I'll let you answer that part first. Sure. I think we think mid-single digits is appropriate as we move forward, you know, X, NEM and AA transaction that we're going to close. So we've been operating in that level. Again, line utilization was down for the quarter. That's kind of not a normal thing that happens, so we expect that over time to move up. And that would certainly give us positive loan growth if we would have had line utilization unchanged quarter over quarter. So I think, generally speaking, a mid-single digits is kind of where we're operating. Okay. And then in terms on the deposit side and kind of the rising rate environment, how do you guys manage your deposit costs in terms of how much of the deposit base is centrally managed on a rate sheet versus linked to an index and automated versus negotiated individually, just generally speaking? we have pricing committee meetings that meet weekly and we review the competition we look at our balance sheet needs and we set rates based on that we have standard rack rates and we offer you know promotional rates from time to time in the marketplace you know and there's certainly you know depending on the size of the trans you know the deposit base there may be some exceptions given, but generally speaking, it's RAC rate type pricing. There are some index price products, like for example, instead of doing brokered CDs, we do brokerd money markets. So we did that for balance sheet management purposes. And so that's indexed to a Fed funds rate or a SOFR rate. Okay. And then in terms of betas that we might see now versus last time, and, you know, what's kind of assumed in your sensitivity modeling. I mean, are they similar? I mean kind of the 40%, 50% total deposit beta number you mentioned. I guess I kind of have an inclination that if we just get three hikes at three meetings that, you know, betas could be managed lower than, you know, 500 basis points was last time. Is that a fair assumption or in line with your thinking the market would allow you to do that? or is last time is a better assumption? We think more to come on that. We'll have to see how they behave. But generally speaking, at least to date, they seem to be reverting back to the normal quotes that we gave on betas. As the Fed was moving in that cycle up, the last 100 basis points really hurt banks, all banks. And I think it was because of the, you know, obviously the liquidity events that were going on at the time. I mean, we've been able to bring back our cost of funds from that level, even though the Fed was, you know, on hold for some time here, our margin expanded over the year. And, you know, I think we're planning on the 40 to 50 that we already disclosed, but we'll certainly defend our deposit base and our customers. And if we have to go higher, we will. But to date, we aren't seeing it in the marketplace. Yeah, Ken, every cycle is different. I wish we were perfect on this, but there's just a lot of uncertainty on, call it, on that topic. History can help you, can certainly give you ranges in terms of, you know, how depositors are going to behave. But to Tom's point, you can look back to the last cycle, and early on that hike cycle, betas were barely moving. And then all of a sudden we got to a certain threshold and, you know, customers woke up, people became much more sensitive, and you saw, you know, how banks reacted to that. The reality of this is, you know, even though we talk about uniformity and betas, people talk about deposit betas as the betas for interest-bearing deposits, the reality is it's just a mix of betas. You know, we have certain pockets of the portfolio that are more rate sensitive, and therefore the betas are going to be higher, they'll react quicker than we have some other parts of the faucet book that are not going to be that sensitive and, you know, are not gonna react very quickly to changes in rate. So how all of that comes out, I think, to Tom's point, that's our view today, but obviously that's subject to to some degree of uncertainty because you know this hike like like all other hikes are tend to be a little bit different from the previous one okay thank you very much for the color gentlemen you bet thank you your next call comes from a line of brendan nozzle of hub t group hey guys you just want to circle back to the the cost conversation real quick um get the guy for the fourth quarter it sounds like some of those things could be transitory or push from the third quarter and i'm just asking because i'm wondering if the full 62 to 64 million in the fourth quarter carries through uh into early 2027 or if there is some kind of you know transitory cost that could fall out of the run rate at the turn of the calendar good question you're right it's this is you know december's you know the fourth quarter estimate we expect the cost to come down in the first quarter not really ready to give guidance there yet but the incentive comp is driving the higher expense base for q4 guidance perfect thank you your next call comes from the line of nathan race of piper sandler yeah thanks for taking a follow-up just going back to buybacks um you know pretty pretty strong activity there i think it's maybe the second highest level buybacks and recorder from what we've seen over the last handful of years and you know that's what the stock trading kind of um you know near kind of all-time high so you know just curious if there's anything to read into that in terms of just maybe how consistent buybacks to a pace of the degree we saw this score can be kind of a more continuous component to your excess capital management strategy, just given how strong your capital levels are and which still probably provides flexibility for acquisitions to the extent they materialize going forward. I think, Nate, if you think just I would put it in the context of, you know, kind of the capital priorities that we lay out in terms of, you know supporting, you, know organic growth. That's, you know, from a, whether you measure it from a from a earn-back perspective or you measure it from kind of just a roughly a yield perspective, that's, That's, you know, probably the top use of capital. So first and foremost, supporting that second, you know, over time and this this past quarter, you know, you saw us do that in terms of having, you know, be able to do, you know, consistently over time, you know, dividend increases that that are you know call it very sustainable um so but that's that's an example of something that that again we did this quarter thirdly in this quarter we we had the opportunity to do that is you know having enough capital and and putting that capital to work um in m&a transactions and then you have the safety valve at the end which is which is the buyback and when it comes to the buy back it's not necessarily buyback at all costs. We're not in a situation where you can think about some of the largest banks in the country where they have really no other use other than to buy back. We have options in terms of what to do with the capital. So we're going to be sensitive to what that buyback yield is, what the earn back is on a buyback relative to the other uses that we potentially have. So hopefully that frames it and gives you a sense. Yeah, that's helpful. Thank you for that, Alberto. And just maybe one more for Tom. You mentioned, you know, 50% of the loan book is floating. Do you have to mix between prime and SOFR there? it's in the deck it's into the deck nate okay sorry i didn't catch that all right sulfur is 34 prime is 19 and other is four okay great it's on page seven of the deck all right got it thanks guys appreciate the color you're welcome absolutely thanks nate thank you for your questions today i will now turn the call back over to mr alberto paracini for any closing remarks great thank you operator uh so thank you for joining us this morning we appreciate your continued interest in byline um i hope you all have a happy uh halloween happy thanksgiving and a happy start to the holiday season and we look forward to talking to you again in the new year with that that concludes the call thank you This concludes today's call. Thank you for attending. You may now disconnect.