Byline Bancorp, Inc.

Good morning and welcome to the Byline Bancorp fourth quarter 2020 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Tony Rossi of Financial Profiles. Please go ahead.

Thank you, Eileen. Good morning, everyone, and thank you for joining us today for the Byline Bancorp fourth quarter 2020 earnings call. We'll be using a slide presentation as part of our discussion this morning. Please visit the events and presentations page of Byline's investor relations website for access to the presentations. Before we begin, I'd like to remind you that this conference call contains forward-looking statements with respect to the future performance and financial condition of Byline Bancorp that involve risks and uncertainties, including the impact of the COVID-19 pandemic. Various factors could cause actual results to be materially different from any future results expressed or implied by such forward-looking statements. These factors are discussed in the company's SEC filings, which are available on the company's website. The company disclaims any obligation to update any forward-looking statements made during the call. Management may refer to non-GAAP measures, which are intended to supplement but not substitute for the most directly comparable GAAP measures. The press release, available on the website, contains the financial and other quantitative information to be discussed today, as well as the reconciliation of the GAAP to non-GAAP measures. And with that, I'd like to turn the call over to Alberto Parachini. Alberto? Alberto?

Great. Thank you, Tony. And good morning, everyone, and welcome to our fourth quarter earnings call. Thank you for participating on the call this morning, and I hope you and your families are doing well and staying healthy. You can follow our discussion with presentation materials you can find in the investor relations section of our website. Joining me this morning are Lindsay Corby, our CFO, Mark Fusinato, our chief credit officer, and Roberto Herencia, our chairman. As a reminder, you can follow our discussion with presentation materials that are in the investor relations section of our website. We're happy to be presenting to you the results for the quarter and the year 2020, which we will no doubt remember for the rest of our careers. At this time last year, we had started to pay attention to a virus outbreak in the not so well-known province of Wuhan and had no foresight of what was to come. Banks had to come to grips with an economic crisis, collapsing interest rates, and the effects of a once in a century pandemic. We adapted quickly to a work from home environment, supported customers through multiple rounds of PPP, strengthened our capital position, built reserves, resumed growth, reduced expenses, and continued to invest in the business. All in all, we accomplished a lot in a challenging operating environment. Before we get into the presentation, I want to comment on the appointment by our board of Roberto Horencia, who has served as non-executive chairman of the board since 2013 as executive chairman and CEO of Byline Bancorp. Seldom does one have the privilege of working with someone of Roberto's caliber for an extended period of time. I have been fortunate enough to work with Roberto directly for 27 years, and look forward to continuing to work closely with Roberto in the years ahead. Moving on to our results. For the quarter, net income came in at 12.3 million, or 31 cents per diluted share. This was a decline when compared to the previous quarter, but these results include charges related to both the previously announced consolidation of 11 branches, which was completed at the end of December, and impairments taken to accelerate the disposition of assets held for sale. Collectively, this reduced our net income by approximately 15 cents per diluted share. Our adjusted pre-tax preparation revenue was solid at $30.7 million for the quarter, and our adjusted pre-tax preparation ROA came in at a healthy 191 basis points. Revenue for the quarter was $73.7 million and was driven by an increase in net interest income, which was up 4.7% from the third quarter, and strong non-interest income, albeit lower than the record levels from last quarter. Our margin expanded across the board and also benefited from our ability to continue to lower deposit costs. Moving on to the balance sheet. Loans, excluding PPP, increased by 70.4 million, or 6.4%, from the linked quarter. As previously discussed, our pipeline strengthened gradually over the second half of the year, and we saw the benefit of that during this quarter, with originations increasing to 230 million, up from 204 million in the previous quarter. Overall, production was broad-based across our commercial, commercial real estate, sponsor, and specialty lending areas, including yet another productive quarter from our equipment leasing group, which saw originations rising to $49 million. Our government guaranteed lending business also had a strong quarter of production, with guaranteed loans sold topping $108 million and $9.4 million of gain-on-sale income. which was below the record level set in the third quarter, but up on a year-over-year basis. Total deposits decreased by 58 million, largely due to seasonal fluctuations in public fund balances, despite the continued strong inflows of commercial non-interest-bearing deposits. Our mix was outstanding, and we ended the year with DDA balances representing 37.1% of total deposits. Moving on to asset quality. Asset quality improved with both NPAs, NPLs, charge-offs, and provision expense declining from the prior quarter. We continued to add two reserves and ended the year with the allowance representing 153 basis points of total loans or 174 basis points excluding PPP balances. Loans on deferral increased by $72.6 million to $100.6 million, representing 2.6% of loans excluding PPP. The increase in deferrals was driven by modifications granted to SBA borrowers coming off CARES Act subsidy payments during the fourth quarter. We anticipate that approximately 95% of these borrowers will be eligible for the next round of subsidy payments starting in February. Notwithstanding the improvement in the credit, the outlook for credit, we remain vigilant in identifying weaknesses in our portfolio and continue to perform targeted portfolio reviews across our different business lines. On the business side, we completed the closing of 11 branches identified for consolidation at the end of December. To date, we have not seen any meaningful deposit runoff. As a result of these consolidations, the efficiency of our network continues to improve, with deposits per branch topping 103.3 million at the end of the year, up from 84.4 million at the end of September. Our capital position remains strong, with a CET ratio of 12.2%, and total capital of 6.2% at the end of the quarter. Given the strong financial performance, capital position, and improving outlook, our board authorized the doubling of our quarterly dividend from 3 cents to 6 cents per share and the reinstatement of our stock buyback program. This provides us with the ability to manage our capital position and deliver returns to shareholders while retaining flexibility to continue organic and strategic growth. Slide five provides additional information on our COVID-19 response efforts and the detail on the PPP program. During the fourth quarter, our focus shifted to helping clients navigate through the forgiveness process. At the end of the quarter, we had $286 million of loans in some stage of forgiveness with approved applications totaling $110 million. In January, we began accepting applications for the current round of the PPP program. Through January 26th, we have received over 1,900 applications totaling just over $290 million and have already funded approximately $166 million. Turning to slide six, we provided an update on our loan deferrals. Within our conventional loan portfolio, total modifications remain relatively unchanged from the prior quarter and continue to be less than 1% of total loans. As I mentioned earlier, we granted modifications to SBA loans coming off CARES Act subsidy payments. Each modification request was reviewed and analyzed with updated financial information to determine need and confirm the integrity of our risk ratings. These modifications provide these borrowers with a bridge to the next round of subsidy payments starting on or after February. Slide seven provides an update on our exposure to industry seeing the most impact from COVID-19. These exposures have remained manageable with these industries collectively representing less than 10% of our portfolio excluding PPP. Please refer to the appendix for additional detail on these exposures. Now I'd like to turn the call over to Lindsay, who will provide you with more details on our results. Lindsay?