Byline Bancorp, Inc.

Good morning and welcome to the Byline Bancorp 2021 third quarter earnings call. My name is Sam and I'll be your conference operator today. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there'll 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 you are listening via speakerphone, please lift your handset prior to asking your question. If you require operator assistance, please press star and then zero. Please note the conference call is being recorded. At this time, I would like to introduce Brooks Rennie, Head of Investor Relations, to begin the conference call.

Thank you, Sam. Good morning, everyone. And thank you for joining us today for the Byline Bancorp third quarter 2021 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. Management would like to remind everyone that certain statements made on today's call involve projections 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 for those discussed. The company's risk factors are disclosed and discussed in its SEC filings. In addition, certain slides contain and we refer to non-GAAP measures, which are intended to supplement but not substitute for the most directly comparable GAAP measures. Reconciliation for these numbers 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-GAAP financial measures disclosed in the earnings release. I would now like to turn the conference call over to Alberto Paracini, President of Byline Bancorp.

Brooks, thank you, and good morning to all of you joining the call to review our third quarter results. Joining me on the call are Chairman and CEO Roberto Herencia, our CFO Lindsey Corby, and our Chief Credit Officer Mark Lucinato. Turning over to slide three on the deck for the financial highlights for the quarter. As is our practice, Lindsey will be providing you with much more detail on our results, but I want to start by going over a few areas at a high level. Byline had another outstanding quarter driven by positive trends in a number of key areas. First, we had very good loan growth. Second, our margin expanded nicely from the second quarter. And third, we had stable credit quality, which, when combined with strong internal capital generation, allowed us to continue growing and investing in the business as well as return capital to shareholders. Our net income in the quarter came in at $25.3 million, or $0.66 per share. This was a bit lower than last quarter, but results include a $2.7 million fair value mark on our servicing asset, which cost us about 7 cents per diluted share. Fair value marks are part of the business, can go up and down on a given quarter, but are not reflective of our recurring earnings, which carried over consistently from the second quarter. Our profitability and return metrics were excellent across the board. Digging a bit deeper here, pre-tax preparation revenue was $34.2 million, which translates into a pre-tax preparation ROA of 207 basis points. ROA came in at 153 basis points, which was a bit lower on a link quarter basis, but up 72 basis points from the year-ago period. ROTCE came in at 16.2%. reflective of strong profitability and capital management, as well as materially higher than the year-ago level of 9.4%. Moving on to the balance sheet, the third quarter saw continued growth in both loans and deposits. Our results were driven by momentum across our lending businesses and the value of having a diversified lending platform. Production was strong across the board in CNI, sponsors, CRE, equipment leasing, as well as in our government-guaranteed lending business. Loans, excluding PPP, increased by $348 million, or 35% annualized, and stood at $4.4 billion as of quarter end. This is the second consecutive quarter where we have seen significant loan growth. XPPP, we had $428 million in loan production during the quarter, a record level for the company and up from $315 million in the prior quarter. We also benefited from lower than expected payoffs, some of which we expect to see in the coming quarter. On a year-to-year basis, loans XPPP grew by $588 million, which gets us very close to our goal of being able to fully replace PPP balances with quality conventional loans. Of note is the contribution we're starting to see from investments we've made in bolstering our banking teams, improved profitability, and our position in the marketplace. Our credit standards remain consistent, and we're happy to trade off growth. If the risk-reward equation does not make sense. Demand for credit remains healthy, and the market remains competitive. Price competition in certain categories, namely T&I and CRE, with particular emphasis on multifamily and industrial, is notable. That said, lenders in the market are generally maintaining discipline in credit structures. Customer activity was another positive this quarter, with both new relationship additions and with existing customers increasing the use of their lines. We saw commercial line utilization increase to 52.4% from 50.6% last quarter, which helped us drive some additional growth in commercial balances. Our government guaranteed lending business had record production with $195 million in closed loans, up 36% from the prior quarter. Gain on sale income increased 4% to $12.8 million compared to the prior quarter. We worked really hard at quarter end to make sure we got our customers the benefit of lower fees and higher guarantees on their loans prior to the expiration of certain subsidies at quarter end. We continue to remain the market leader in this business, and as of the government's fiscal year end on September 30th, we're the fifth largest 7 lender in the United States. Moving over to the liability side. With respect to deposits, we continue to see strong inflows of commercial deposits from the buildup of liquidity among existing commercial clients and from the addition of new relationships in the third quarter. Deposits grew by $66 million, or 5.2% annualized, and stood at $5.2 billion as of quarter end, with the growth coming primarily from money market accounts. Our deposit mix remains exceptional, with DDAs representing 41% of total balances. Deposit costs were flat on a quarter-over-quarter basis and continue to be at a cycle low. This quarter was also the first full quarter we started digitally opening consumer deposit accounts. Results are modest at this point, but we're encouraged by the traction we're gaining with growing deposits digitally. and seeing continued improved conversion rates, as well as seeing the early returns on some of our technology investments. Moving on to profitability, our margin expanded by 15 basis points at accretion income and was reflective of higher yields on loans and securities. It also expanded, if you exclude the six basis point drag, of PPP, which was very nice to see, and positions as well for potentially higher rates at some point next year. Lastly, our efficiency ratio remained in the 52 percent range, despite seeing the effects of higher compensation costs, some of which were variable and tied to production levels, and the rest reflective of the current environment. From an asset quality standpoint, our results were very good. NPLs and NPAs declined again on a quarter-over-quarter basis in both dollar and percentage terms and are reflective of what has been a benign credit environment combined with ample liquidity in the market. Charge-offs declined quarter-over-quarter, coming in at 13 basis points, and our allowance represented 131 basis points of loans or 140 basis points, excluding PPP. Our capital position remained strong with a CET1 ratio of 11.3% and a total capital ratio of 14.8% as of quarter end. Given our strong level of profitability and capital, we were well positioned to return capital to shareholders during the quarter. We repurchased approximately 460,000 shares of our common stock. We believe our balance sheet strength positions as well to support organic growth, continue investing in our franchise, and pursue M&A opportunities while returning capital to shareholders. With that, I would like to turn the call over to Lindsay, who will provide you more detail on our results.