Byline Surpasses $10B Threshold With NII Growth and 20% Dividend Hike

Date of Call: Jan 23, 2026

Financials Results

• Revenue: Q4 2025 revenue: $117M, up 12% YOY. Full year revenue: $446M, up 9.7% YOY.
• EPS: Q4 2025 EPS: $0.76 per diluted share. Full year EPS: $2.89 per diluted share.
• Gross Margin: Not explicitly provided.
• Operating Margin: Q4 2025 ROA: 141 basis points. Full year ROA: 136 basis points. Q4 2025 ROTCE: 13%. Full year ROTCE: 13.5%.

Guidance:

• Loan growth expected to be in the mid-single digits for 2026.
• Expect to cross the $10 billion asset threshold in 2026.
• NII for Q1 2026 expected to be $99M to $100M, assuming a 50 bps decline in Fed funds rate.
• Quarterly noninterest expense for 2026 expected to trend between $58M and $60M.
• Gain on sale of loans forecast for 2026 is ~$5.5M per quarter on average.
• Net charge-offs expected to be in the 30 to 40 basis points range for 2026.

Business Commentary:

Financial Performance and Dividend Growth:

• Byline Bancorp reported net income of $130.1 million for the full year 2025, with a 20% increase in the quarterly dividend.
• The strong financial performance and confidence in future profitability led to the dividend increase, reflecting the company's top-tier financial results.

Net Interest Income and Margin Improvement:

• The company achieved a record high net interest income of $101 million in Q4, up 1.4% from the prior quarter, with a net interest margin of 4.35%, an 8 basis points increase linked quarter.
• This improvement was driven by loan growth, lower deposit rates, and reduced interest expense from sub-debt payoff.

Loan Growth and Deposit Management:

• Total loans increased by 3.3% annually to $7.5 billion, with origination activity up 22% from the prior quarter.
• The company managed its balance sheet to stay below $10 billion, which led to a decline in total deposits by 2.3% from the prior quarter primarily due to Q4 seasonality outflows.

Capital Position and Shareholder Returns:

• Byline Bancorp's capital levels remained strong, with a CET1 ratio of 12.33% and a TCE to TA ratio of 11.29%.
• The strong capital position allowed for share repurchases and a sustainable dividend increase, providing flexibility for future growth and M&A opportunities.

Credit Quality and Risk Management:

• Credit costs for the quarter were $9.7 million, with net charge-offs down from $7.1 million in the previous quarter.
• The company maintained a close watch on its portfolio, ensuring quick identification and addressing of credit issues, which helped stabilize credit costs.

Sentiment Analysis:

Overall Tone: Positive

• "We are delighted and proud to finish the year on a strong note and excited to announce a 20% increase in our quarterly dividend." "We have the balance sheet plus a strategically stable ownership group... This gives us an edge." "We are driving everything toward compounding returns..." "In short, we like where we're positioned."

Q&A:

• Question from Nathan Race (Piper Sandler): Which areas or verticals are you most excited about to continue to scale up and where you see an opportunity to become more efficient?
  Response: Excited about the commercial payments team progress, gaining share in Chicago commercial banking, and opportunities across all businesses.

• Question from Nathan Race (Piper Sandler): Given the absence of the 8-9% TCE target, what does that imply for capital returns and the M&A environment?
  Response: Carrying higher capital for flexibility to pursue M&A, return excess capital to shareholders via dividends (recent 20% increase) and buybacks (new 5% program authorized).

• Question from Nathan Race (Piper Sandler): You mentioned reducing asset sensitivity of the balance sheet. How does that position the margin going forward?
  Response: Focus on floating rate liabilities and disciplined deposit pricing to keep margin stable and growing; NII is the primary focus.

• Question from Damon Del Monte (KBW): What areas of your lending platform offer the best opportunities to drive mid-single-digit growth?
  Response: Primarily commercial banking categories; real estate growth depends on transaction activity which may pick up as rates decline.

• Question from Damon Del Monte (KBW): Is there seasonality in Q1 for NII?
  Response: Fewer days and lower loan fees in Q1, but overall stable to growing NII throughout the year.

• Question from Damon Del Monte (KBW): What is the outlook for net charge-offs for the upcoming year?
  Response: Expect net charge-offs to be in the 30 to 40 basis points range for 2026.

• Question from Brendan Nosal (Hovde Group): How do you think about the underlying pace of originations to achieve mid-single-digit net growth?
  Response: Origination trends are monitored, but payoffs are more variable; the mid-single-digit outlook is based on commercial banking strength.

• Question from Brendan Nosal (Hovde Group): Given consistent NII outperformance, do you gain more comfort and become more bullish on the outlook?
  Response: Guidance reflects caution on potential higher payoffs, but strong deposit pricing and balance sheet management support stable, growing NII.

• Question from Brendan Nosal (Hovde Group): Is the risk-adjusted return on the SBA business compressing to a point where it's no longer attractive?
  Response: Not yet; material further compression would be needed to rethink the risk-adjusted return.

• Question from Terence McEvoy (Stephens): Can you describe the commercial payments clients and provide medium-term goals?
  Response: Clients include payroll processors and fintech companies needing payment infrastructure; onboarding is deliberate (3-4 per year) with a focus on compliance and processes.

• Question from Terence McEvoy (Stephens): Did the government shutdown impact the SBA business in Q4?
  Response: Impact was immaterial.

• Question from Brian Martin (Janney Montgomery Scott): Is the ~$16M swap income a good sustainable level and where is it headed?
  Response: A good level; aim to grow through swaps, commercial payments fees, wealth management, and SBA gain on sale.

• Question from Brian Martin (Janney Montgomery Scott): What is a guidepost for average earning assets in Q1?
  Response: Expect Q1 average earning assets to be around the $9.2B level, with no balance sheet management to stay below $10B going forward.

• Question from Brian Martin (Janney Montgomery Scott): Any material changes in criticized or classified levels from Q3 to Q4?
  Response: No material changes; credit quality is monitored closely with quick downgrades if needed.

• Question from Brian Martin (Janney Montgomery Scott): Given rate outlook, should the core margin be more stable?
  Response: Expect the margin to be stable, not necessarily growing, which would be satisfactory.

Contradiction Point 1

Impact and Timing of the Government Shutdown on the SBA Business

Material impact on Q4 gain-on-sale timing versus immaterial overall effect.

Did the government shutdown affect SBA's Q4 business and shift revenue to Q1? - Terence McEvoy (Stephens)

2025Q4: The shutdown had 'an impact... but it was... immaterial.' - [Alberto Paracchini](CEO)

How has the government shutdown impacted SBA business and could it materially affect Q4 gain-on-sale income? - Adam Kroll (Piper Sandler), on behalf of Nathan Race

2025Q3: The primary impact is a timing issue for gain-on-sale income, as loans cannot be sold or settled during the shutdown. If the shutdown persists into late November, some Q4 loans may be carried on the balance sheet and sold/sold in Q1 2026, potentially delaying related income. - [Alberto Paracchini](CEO)

Contradiction Point 2

Outlook for Net Interest Margin (NIM) Stability

From cautious stability to confidence in maintaining current level.

Will the current interest rate outlook lead to greater stability in the core net interest margin this year? - Brian Martin (Janney Montgomery Scott)

2025Q4: The margin is expected to be stable. The company is satisfied with maintaining its current level. - [Alberto Paracchini](CEO)

What assumptions underlie the model's NII impact from a 25 bps rate cut, and does the improved funding mix allow for further cost reductions? - David Long (Raymond James)

2025Q3: The model has been outperformed due to improved deposit pricing discipline and benefits from higher fixed-rate loan yields as they reset. - [Thomas J. Bell](CFO) and [Alberto Paracchini](CEO)

Contradiction Point 3

Deposit Cost Flexibility and Outlook

Contradiction on the ability and expectation to lower deposit costs in the near term.

How does reducing asset risk affect margins with potential Fed rate cuts? - Damon Del Monte (Keefe, Bruyette, & Woods)

2025Q4: The goal is to increase floating-rate liabilities to stabilize the margin... The company benefits from disciplined deposit pricing. - [Thomas J. Bell](CFO), [Alberto Paracchini](CEO)

Tom, can you remind us about the cash flows from the bond portfolio and fixed-rate loans coming due, and confirm if the cost of deposits, particularly CD rates, remains stable in the near term if the Fed doesn't act? - Brian Martin (Janney Montgomery Scott)

2025Q2: There is some room to lower CD costs, but not significantly unless the Fed cuts rates... Deposit costs are expected to be flat to slightly down, generally speaking. - [Thomas J. Bell](CFO)

Contradiction Point 4

Capital Position and M&A Flexibility

Contradiction in describing the level of capital flexibility available for M&A.

With the 8-9% TCE target absent, could you discuss capital return priorities and the M&A environment? - Nathan Race (Piper Sandler)

2025Q4: The company maintains a strong capital position for flexibility to pursue M&A. - [Alberto Paracchini](CEO)

What are your updated thoughts on current M&A opportunities in the industry? - Nathan Race (Piper Sandler)

2025Q2: Conversations continue, but interest is transaction-dependent. Challenges remain for potential sellers due to mark-to-market impacts on fixed-rate portfolios affecting capital. - [Alberto Paracchini](CEO)

Contradiction Point 5

Net Interest Income (NII) Guidance and Rate Sensitivity

Inconsistent messaging on the bank's asset sensitivity and NII response to potential Fed rate cuts.

How does reducing asset sensitivity affect the margin outlook with Fed rate cuts? - Nathan Race (Piper Sandler)

2025Q4: The goal is to increase floating-rate liabilities to stabilize the margin... The company benefits from disciplined deposit pricing and expects to buy back securities sold to stay below $10 billion in Q4, which will impact Q1 margins. The current margin provides ample competitive flexibility. - [Thomas J. Bell](CFO) and [Alberto Paracchini](CEO)

Can you discuss deposit and asset repricing opportunities over the next several quarters and the impact of 2 versus 4 Fed rate cuts? - Brian Martin (Janney Montgomery Scott)

2025Q1: The bank is asset sensitive; net interest income is less sensitive to rate cuts than in prior cycles... For every 25 bps annualized rate cut, NII is expected to decline by ~$2.3 million. - [Thomas J. Bell](CFO)