Byline Bancorp, Inc.

Good morning and welcome to Byline Bancorp fourth quarter 2024 earnings call. My name is Emily 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 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 then two. If you are listening via speakerphone, please lift your handset prior to asking your question. If you require operator assistance, please press start then zero. Please note the conference call is being recorded. At this time, I would like to introduce Brooks Rennie, Head of Investor Relations for Byline Bancorp to begin the conference call. Brooks Rennie, Head of Investor Relations for Byline Bancorp Thank you, Emily.

Good morning, everyone. And thank you for joining us today for the Byline Bancorp fourth quarter and full year 2024 earnings call in accordance with the 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 some 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-GAAP financial measure to the comparable GAAP financial measure can be found within the appendix of the earnings release. For additional information about risks and uncertainties, please see the forward-looking statements in non-GAAP financial measures disclosures in the earnings release. As a reminder for investors, this quarter we plan on attending the KBW Winter Financial Services Conference and the RBC Global Financial Institutions Conference. With that, I'd now like to turn the conference call over to Alberto Parancini, President of IOM Bank Corp.

Thank you, Brooks. Happy New Year to all of you, and thank you for joining the call this morning to review our fourth quarter and full year 2024 results. As always, joining me this morning are Chairman and CEO Roberto Horencia, Tom Bell, our CFO and Treasurer, and Mark Fusinato, our Chief Credit Officer. I'd also like to welcome Brian Duran, who's on the call this morning as well brian joined byline this week as our new general counsel before we get into results i want to pass a call on to roberto to comment on a few items roberto thank you alberto good morning to all and best wishes for a healthy and successful new year 2025. i can't think of a better way to conclude last year another strong

top quartile performance for the final quarter of 2024 with steady and healthy asset quality and record profitability for the full year of 2024. We were also happy to approve a few days ago another penny increase to our quarterly dividend, which represents an 11.1% increase from the previous dividend. Alberto and Tom will distill these numbers for you in a minute. 2025. We continue to feel excited and optimistic about our ability to build out the preeminent commercial bank in Chicago. A softer approach to bank regulatory environment and the expectation of higher M&A activity will continue to create disruption in our local market. We have thrived under those conditions as we're able to attract banking talent, and execute on smaller talking acquisitions. I am a firm believer that the consistency of our results, coupled with the uniqueness of our commercial banking franchise and the opportunity is deserving of a premium valuation. The market is recognizing it, albeit slower than I would like it. Much of our success has been driven by our our commercial banking strategy and the teams and the people who make up those teams our cni lending strategy and teams specifically got supercharged following the acquisition of first bank and trust in evanston in 2018 the core leadership we have in place today in this area was part of first bank and trust the co-founder and ceo of that bank was bob johannan who passed away peacefully last November. Bob became a director of Byline after the acquisition, serving at the highest level in our trust and ALCO committees, and he retired in 2021. Bob was an extraordinary human being and had a gentle kindness to him that was recognized by many, coupled with a soft voice that I can still hear in my mind. It took hard work to heart, and you would rarely find him resting as he was very active in the greater Chicago community, specifically in Evanston. Bob's banking career spanned over 50 years, and he served two terms as a director of the Federal Reserve Bank of Chicago, was a member of the Economic Club of Chicago, the University Club of Chicago, and served as an advisor to the DePaul University Financial Services Center. I first met Bob at the First National Bank of Chicago when I started my banking career, and through a mutual friend, we kept in touch throughout the years, leading to us putting together our banks. Joan and Bob's two boys worked at Byline, and one of them still has an important position with us today. Bob, our friend, will always be remembered, and we remain grateful for his contribution and guidance. With that, I'm happy to pass the call back to you, Alberto.

Thank you, Roberto. In terms of the agenda for today, I'll start and give you the highlights for the full year and the quarter, followed by Tom, who will speak to the financial results. And then I'll come back to wrap up with some closing comments as well as our outlook for 2025 before opening the call off for questions. As a reminder, you can find the deck we're using for today's call on our investor relations website. And as always, please refer to the disclaimer at the front. Turning to our performance on slide three of the deck. Byline, again, reported strong results for the fourth quarter and full year 2024. I'd like to start by thanking our employees for their contributions this past year and for their hard work in serving clients on a daily basis. I'd also like to congratulate them on their performance. At this time last year, I shared with you that I thought we were entering the year with good momentum and in solid footing to profitably grow the franchise and deliver value for our shareholders. I'm happy to report that our company accomplished that in 2024. We managed through an environment characterized by a moderate decline in short-term rates when compared to market expectations. A normalization of the yield curve and an economy that continued to prove resilient despite the inherent uncertainty of an election year. Against that backdrop, we executed our commercial banking strategy well. We grew relationships, had balanced growth, maintained profitability, built capital, and grew tangible book value per share by 12%. We continued to invest in the business, announced a transaction with First Security, and rewarded shareholders with an 11% increase in our quarterly dividend. In summary, 2024 proved to be another productive and successful year for the company. For the year, net income was $121 million or $2.75 per diluted share on revenue of $407 million, which was up 5% year on year. Returns and profitability metrics remained strong with pre-tax preparation ROA of 205 basis points, ROA of 131 basis points, and ROTC of just under 15%. Year-on-year loan growth, inclusive of managed runoff of the Inland portfolio, came in at 3%, and all that growth was funded by deposits, which grew 4%. Operating leverage was positive for the year, which helped drive our cost-to-asset ratio down by 22 basis points to 238 basis points for the year. Lastly, all capital levels remain strong, with TCE ending the year at 9.61%, CET1 at just under 12%, and total capital at roughly 15%. All these ratios reflect increases for the year and are now higher than prior to the Inland transaction. Our balance sheet strength allows for the early repayment of balances in our line tied to the transaction with Inland ahead of schedule. TURNING TO SLIDE FOUR, RESULTS FOR THE QUARTER WERE ALSO STRONG, WITH NET INCOME OF $30.3 MILLION, OR 69 CENTS PER DILUTED SHARE, ON REVENUE OF $105 MILLION. PROFITABILITY AND RETURNS CONTINUED TO BE SOLID, WITH PRETAX PREPARATION INCOME OF $47.2 MILLION, PRETAX PREPARATION ROA OF 204 BASIS POINTS, WHICH MARKS THE NINTH CONSECUTIVE QUARTER ABOVE 200 BASIS POINTS. Rob Leibowitz, ROA came in at 131 basis points and ROTCE of just under 14% given a growing capital base. Revenue was up 3% from the prior quarter and up 4% year on year, notwithstanding the lower rate environment. Rob Leibowitz, The revenue increase was driven by higher net interest income stemming from a 13 basis point increase in the margin and higher gain on sale income. From a balance sheet standpoint, loans and deposits remain flat and stood at $6.9 billion and $7.5 billion, respectively, as of quarter end. Notwithstanding, and net of loan sales, origination activity was strong at almost $300 million for the quarter, with the increase coming primarily from our commercial banking and leasing businesses. Payoff activity came in a bit higher than anticipated at $288 million, And line utilization inched up to 60%. Our government guaranteed business had solid originations for the quarter with 127.5 million in closed loans, which was consistent with the seasonality we tend to see at the end of the year. Moving on to the deposits, non-interest bearing stood at 23.5% of total deposits. And we saw an inflection in overall deposit costs, which decreased 28 basis points quarter on quarter. Tom will provide you with additional color on the faucet trends, cost, the margin, as well as our sensitivity to rates in the current environment. Expenses continue to remain a focus and increase to $57.4 billion, largely due to higher incentive accruals. Correspondingly, our efficiency ratio increased to 53.6% for the quarter, and our cost-to-asset ratio moved up to 248 basis points as of quarter end. Asset quality continued to moderate with overall credit costs coming in at $6.9 million, down $600,000 from last quarter. Net charges also declined and came in at $7.8 million, down $700,000 compared to last quarter. The allowance remained strong and ended the quarter essentially flat at 1.42% of total loans. Now performers decreased 12 basis points to 90 basis points and criticized loans decline both on a link quarter and year-on-year basis. With that, I'd like to turn over the call to Tom, who'll provide you with more detail on our results.

Thank you, Alberto, and good morning, everyone. Our strong earnings this quarter capped off a successful 2024. Despite a different rate environment than the one we anticipated at the start of the year, we had higher net interest income, solid fee revenue growth, and continued to have well-controlled expenses. As a result, we continue to deliver pre-tax, pre-provision greater than 2%, and we grew capital nicely again this quarter, which drove CET1 and all other regulatory capital ratios higher. Starting on slide five with our loan and lease portfolio. Total loans stood at $6.9 billion at December 31st, flat from the prior quarter. We originated $297 million in new loans, with the strongest growth coming from our commercial and leasing teams. Payoff activity increased for the third consecutive quarter, coming in at $288 million, up $21 million link quarter. The increase was largely due to runoff in non-core portfolios, which was offset by growth in new business relationships. Line utilization grew for the sixth consecutive quarter, up 1% to 60%. Our loan pipelines remain strong, and we expect loan growth to continue in the mid-single digits for 2025. Turning to slide six, total deposits were flat for the quarter at $7.5 billion and up 4% for the year. Consistent with the decline in short-term rates, we saw balances decrease in time deposits, offset by increases in money market accounts. Noninterest-bearing demand deposits grew for Q3 and accounted for 23% of total deposits. We lowered our overall cost of deposits in the quarter by 28 basis points to 2.48%, driven by higher DDA balances and disciplined deposit pricing. Turning to slide 7, noninterest income was $88.5 million for Q4, up 1% from the prior quarter, higher than guidance, primarily due to lower interest expense on deposits. This was the third consecutive quarter of solid NII growth and reflects a 3% increase on a year-over-year basis. Our net interest margin grew to 4.01%, up 13 basis points linked quarter. The change in NIM was driven by 37 basis point decrease in the cost of interest-bearing liabilities, offset by lower rates on earning assets. Our outlook for net interest income is based on the forward curve that currently assumes a 50 basis point decline in the Fed funds rate for 2025. This implies a net interest income range of $86 to $88 million for the first quarter, which is partially driven by day count. Turning to slide 8, non-interest income totaled $16.1 million in the fourth quarter, up 12.3% linked quarter, primarily driven by a $7.1 million gain on sale of loans, which increased by $1.2 million, or 21% higher than Q3. The increase was due to higher volumes and higher premiums on loans sold, partially driven by the mix. Our gain on sale forecast for 2025 is on average $5 million per quarter, with lower Q1 expectations due to typical seasonality. Turning to slide nine. Our non-district expense stood at $557.4 million, which came in higher end of our Q4 guidance. The primary drivers of the expense increase was salary and benefits, largely comprised of higher revenue driven compensation, other benefit related expenses, and higher advertising expense. Having said that, we remain disciplined on expense management and continue to manage our expenses prudently. As we look ahead, For 2025, we expect our quarterly non-interest expense to trend between $55 and $57 million. Turning to slide 10, credit quality continues to improve. Provision expense for the quarter came in at $6.9 million, down from $7.5 million in Q3, primarily due to a decrease in non-performing loans. Net charge-off trends down by 8% this quarter, to $7.8 million compared to $8.5 million in the previous quarter. On a year-over-year basis, NCOs were down by 36%. The ACL at the end of Q4 was $98 million, down slightly from the end of the prior quarter. NPLs to total loans decreased by 12 basis points to 90 basis points in Q4. Excluding government guaranteed loans, NPL stood at 76 basis points, down 10 basis points from the previous quarter, and NPA's total assets stood at 71 basis points in Q4. Turning to slide 11. During the quarter, our cash and securities stood at $1.8 billion. The yield on our securities continued to increase nicely and was up 17 basis points to 3.17%, driven by higher rates on new purchases and runoff of lower yielding securities. Moving on to capital on slide 12. For the fifth consecutive quarter, we grew capital ratios and increased our tangible book value per share by 12% compared to last year. CET1 came in a strong 11.7%, up 35 basis points link quarter, and up 135 basis points year over year. Additionally, the TCE to TA ratio stood at 9.61%, up 55 basis points from last year. Again, we had another solid quarter and strong performance metrics, resulting in an excellent year. As a result, our board authorized an 11% increase in our quarterly dividend payable in the first quarter. With that, Alberto, back to you.

Thank you, Tom. And moving on to slides 13 and 14 of the deck. Our approach to the business and strategy remains consistent as we enter 2025. Over the past decade, we built a banking franchise capable of consistently delivering solid organic growth and strong profitability. This is made possible by having a great team who do their part and deliver for clients on a daily basis. We've also developed a strong culture that enables us to attract and retain talented bankers, which in turn continues to fuel our growth. As we start this new year, TAB, Mark McIntyre:" we're optimistic about the opportunities we see in front of us and remain well positioned to win new clients continue to grow deposits and loans. TAB, Mark McIntyre:" and manage both the inherent risks of the business and the ever changing operating environment. TAB, Mark McIntyre:" With respect to the first security transaction we remain on track with our timeline and consistent with prior guidance expect the transaction to close early in the second quarter. We look forward to welcoming the customers and employees of First Security to Byline. With that operator, let's open the call for questions.

Thank you. As a reminder, if you would like to ask a question today, please do so now by pressing start followed by the number one on your telephone keypad. If you change your mind or you feel like your question has already been answered, please press start followed by two to withdraw yourself from the queue. Our first question comes from the line of Nathan Race with Piper Sandler. Nathan, please go ahead.

Hey guys, good morning. Hey, good morning Nate.

Alberto would like to start on SBA. You know, obviously we saw some issues with some other notable SBA lenders that reported this week, so we're just be curious to hear in terms of what you're seeing in terms of delinquencies and just overall credit quality within that portfolio. It was absolutely great to see charge-offs largely remain near expectations this quarter. And I think it would also be helpful just to remind everyone just in terms of some of the initiatives you guys have undertaken over the last several years to kind of de-risk that portfolio.

Of course. Great question, Nate. And I think I would start by just saying, I think we continue to see consistent trends in that book of business as as you know and i think we've mentioned this in prior calls going back to right after uh you know the covet pandemic ended um we we have been actively monitoring that portfolio particularly given the amount of support sba borrowers received so we've been monitoring how those borrowers were coming out of the pandemic, how their business was resuming, and then more importantly, how once that support ended, how those companies were beginning to perform without really having that support in place. So I think what we have seen is we expected deterioration in that portfolio to be, frankly, quicker than what we saw. TAB, Mark McIntyre, We have seen gradual deterioration and have been prepared for that, and I think what you've seen in our results is just continuing to work with those borrowers continuing to be proactive in terms of identifying problems. TAB, Mark McIntyre, You know, and managing you know, a a through up through a raid environment that frankly was difficult for for a lot of them. just managing the book as best as we can to help essentially those borrowers get to the other side. So I think I would summarize it by just saying it's something that we identified early on. We were very proactive with that portfolio and we've continued to essentially actively manage that really since probably the end of 2021 going into 2022 and 2023. With respect to the second part of your question, just as a reminder, we track the unguaranteed exposure on our book, so to speak. So if we go back to 2016, that government guaranteed the unguaranteed portion of that book was around just under 15% of our loan portfolio. Today that book represents just around 6.1% of the portfolio. So that exposure has come down proportionally as the balance sheet has grown over the years. And in absolute terms is an exposure that frankly we see continuing to remain in that range for the foreseeable future. So, hopefully that answers your question, Nate.

Yeah, that's really helpful. Thank you, Alberto. And changing gears and, you know, thinking about the margin in NII Outlook at least over the next quarter or two, you know, it seems like you guys kind of outperformed the kind of NII guidance that you provided in terms of the impact of rate cuts here in the fourth quarter. So just curious, you know, if we have maybe the Fed on pause for this year or maybe just one cut in July, perhaps, you know, how you think, you know, NII can trend this year, you know, absent the impact of the acquisition and just what that implies for the margin assuming, you know, loan growth, you know, remains or reverts back to that kind of 4% to 5% range at least going forward.

Hi, Nate. It's Tom. I think generally it's going to be flat to slightly up. Mike Valdes, You know, again, subject to what happens with the balance sheet, we have for security, you know coming in here in the second quarter. Mike Valdes, But generally speaking, if there's no more rate changes, you know we still have a lag in the SBA that'll get us here this quarter for the 50 basis points that happened in the fourth quarter, but generally speaking flat to slightly up.

Mike Valdes, I think, to add to that may just big picture. Patrick O' Naturally, as you know, we are an institution that naturally is asset sensitive. Patrick O' So certainly to the degree that rates remain higher or that fewer cost cuts materialize over the course of the coming year, to Tom's point, I think we would expect net interest income to be up, you know, in that type of scenario.

And I would also just add, I didn't really have it in my prepared remarks, but we were able to reduce our sensitivity this quarter from last quarter, so that's still something we'd like to do. And at this point, it's a little bit more attractive to hedge that risk than it was, say, in the early fourth quarter. Mm-hmm.

Gotcha. And, you know, just maybe one last one. If the Fed, you know, does remain on pause this year, you know, just curious if you can speak to kind of the repricing gap within the CD portfolio and how much additional funding cost leverage you guys may have on the non-CD side of the book.

Sure. And just to remind you, I think our interest rate risk profile kind of shares the combination of that. But generally speaking, we have, you know, on average – CDs are roughly yielding like 439 in total, and we're repricing at roughly 360-ish, call it, at this point. So definitely an improvement there. On the assets side, we have probably about almost $900 million in loans, kind of at a 526 yield. um which should go up about 200 basis points call it or slightly more than that um and reset and then the securities portfolio is roughly 200 million at like 264 so that's going to get you another two and a half percent pick up there as well yeah one one trend uh also nate that we're we're paying close attention to and actually we saw a bit of that this quarter is

We have a normalized yield curve now, which is making, frankly, kind of liquid accounts a bit more attractive than CDs. So we actually saw flows moving out of CDs and into more liquid accounts, such as money markets. To the degree that the curve continues to remain in its current shape, so to speak, so in other words, a positively sloping yield curve, I think we would expect that to continue, which may give a little bit more upside in terms of repricing liabilities a little bit lower. But one quarter does not make a trend. We'll see if behavior continues to trend in that direction, but that's just something to keep in mind given the shape of the yield curve today.

Very helpful. I appreciate you guys. I'll step back. Thank you. Congrats on a great quarter.

Thank you.

Our next question comes from the line of Brendan Nozel with Hofstede Group. Please go ahead.

Hey, good morning, everybody. Hope you're staying warm.

Yeah, likewise, Brendan. Hi, Brendan.

Maybe just to start off here on asset quality, certainly nice to see the charge-off rate come down again sequentially, but it didn't look like there were any PCD charge-offs in the number this quarter. So maybe just spend a minute on where lost content originated from during the fourth quarter. Thanks.

Yeah, I mean, I think consistent with our commentary the last several quarters, where we're seeing lost content from is the SBA portfolio, you know, which is largely where TAB, Where losses have been centered brandon and that goes to the earlier comments in terms of. TAB, Making sure that we identify that early that be provision and reserved appropriately and then we work through those credits and then what you're seeing is just the the the ultimate resolution of of those loans.

Okay, perfect. That's helpful. Then anyone on kind of the 10 billion question, just kind of curious, one, what's left on the punch list to wrap up internal prep for that threshold? And then two, you know, the asset base is a little bit larger than I was thinking for the quarter. So just wondering how much flex you have across 2025 to keep the balance sheet below 10 at year end?

Yeah, maybe let's take on the latter question, and then we'll talk a little bit about prep. So I think as far as guidance is concerned, we still think that, you know, from a timeline perspective, you know, in terms of crossing the $10 billion asset mark is still kind of broadly speaking, latter half of 25 to really kind of the first to now moving into kind of the third quarter of 2026, if not really, frankly, 2026 at this point. TAB, Mark McIntyre:" The other thing I would I would tell you brandon is. TAB, Mark McIntyre:" Remember that once you cross we're looking at you know for consecutive quarters up off that $10 billion marks before the actual. TAB, Mark McIntyre:" call it, you know set of regulations and expectations formally apply so we're probably looking at the. TAB, Mark McIntyre, very much the latter part of 2026 if not really the beginning of 2027 so just to put that in in context. TAB, Mark McIntyre, As far as the prep is concerned, so we have a project team, we have we obviously performed you know. TAB, Mark McIntyre, An assessment of the things that we wanted to do not just. for purposes of complying with or planning to cross that $10 billion mark. But really, the things that we need to have in place to go beyond that $10 billion, both things that are actual regulations that would apply as well as leading regulatory expectations. So we're well on our way with that. TAB, Mark McIntyre, As I commented right at the beginning, making sure that we have in place a general counsel is was one of those steps and. TAB, Mark McIntyre, we're fortunate that that Brian was you know came on board early this week, so I think in in summary, I think the prep work and and the work that that we have to do is well in its way, and we are very confident that we will not only be able to meet but. will exceed the expectations of being a larger institution.

This is Tom. I would also add, at the end of the quarter, we had a little bit more excess cash than we would normally carry just because of commercial activities that happened on the last day of the year. So we have room there to shrink the balance sheet if we need to and call that $400 million of flexibility. So that could be loans, so to speak.

Yeah, Brendan, and just to add one last comment to that, the guidance we just gave is consistent with, you know, the closing of the first security transaction. So we're factoring that into the comments we just made.

That's super helpful, Collar. And, Tom, you answered my question on the higher cash balances for the quarter as well. So thank you very much.

Thank you, bud.

Our next question comes from the line of Terry McEvoy with Stevens. Terry, please go ahead.

Thanks. Good morning, everyone. Maybe, Tom, a question for you. Tom, you talked about mid-single-digit loan growth. What are your thoughts on the payoffs, which you noted earlier, picked up in the fourth quarter? What are your assumptions there?

we take a take a step back what markets or portfolios are positioned to uh to generate that growth in 2025. as alberto mentioned in his comments i mean we definitely saw payoff activity from the inland transaction and some legacy syndication loans that we had so we're really happy with the fact that some non-core loans were paid off and we can redeploy those the cash, if you will, into customer relationships where we get in deposits. So, you know, that was around a hundred million dollars for the quarter. And, you know, that will, the inland transaction will slow down over time, but the syndications group is certainly much lower and, you know, it probably stabilizes at this point.

Yeah. What one thing, uh, To add there, Terry, as you recall, the Inland transaction, just to put that in context, that was about $1 billion or so in terms of assets. This past year, and this was very much part of the strategy that came with that acquisition, was to be able to essentially recycle assets. Josh Triplett- cash flows coming from that loan book into loans that you know fall into our own originations. Josh Triplett- So I thought we did an excellent job in 2024 just to put it in context and perspective, this past year we had $321 million of runoff in that portfolio. Josh Triplett- That we were able to redeploy into our lending different lending businesses and still show year or year growth. in the portfolio which speaks to our asset generation capabilities and our ability to redeploy that cash um on a measured basis um and and continue to show you know growth on the on the balance sheet so just to to put that in context and in terms of the the businesses we benefit from having a diversified um you know group of businesses so certainly we anticipate commercial banking for all the reasons that you're seeing in the market today to have a good year. Again, in 2025, our leasing business continues to be strong. We're cautiously more optimistic with our real estate business in the sense that we're seeing an uptick in activity there. We're also seeing more competition coming into the market. That's going to be driven by, you know, whether or not we see transaction volume pick up, but we're cautiously optimistic there. So, you know, I think hopefully that gives you, you know, color in terms of where we anticipate seeing growth in the portfolio.

Thank you both. And maybe as a follow-up, Tom, could you just run through your expense outlook one more time? I'm sorry, I was Right and something else was that for the first quarter or particularly interested in kind of your thoughts on full year 2025.

Sure, I mean we gave guidance for the full year and. The guidance was 55 to 57 million per quarter very.

OK, so that was more than just the first quarter that thanks for thanks for clearing that up.

Thanks try to give full year for everything. I mean, obviously, you know, we're always trying to err on the lower side if we can and beat expectations. But, you know, first quarter you typically have some payroll and HR-related compensation and benefits, et cetera, and taxes. But 55 to 57 is our range right now.

Great. Thanks again. Have a nice weekend.

Thank you.

Likewise, Derek.

As a reminder, if you would like to ask a question today, please do so now by pressing start, followed by the number one on your telephone keypad. Our next question comes from Brian Martin with Jenae Montgomery. Brian, please go ahead.

Hey, good morning, everyone.

Hey, Brian. Hi, Brian.

Hey, Tom, just one question. The margin Where did the margin, can you give any thought on where the margin exited the year, you know, versus kind of the quarter? Was it, I guess, assuming it was trending higher than, you know, it got later in the quarter? And then just remind us to drag on, you know, the SBA given that most recent 50 basis point cut as we look at 1Q.

Yeah, I mean, the margin is really in that 4% range, Terry, for the quarter. For December, sorry, for December. You asked for December. Yeah, and as it relates to the SBA, the Fed cut 50 basis points in the fourth quarter and that is effective as a reset lower on prime for them at January 1st. So that's 50 basis points on the SBA balances and the USDA balances.

OK, and then. Just in terms of the capital and kind of where it's at and the opportunities, are you seeing more opportunities today in terms of just given the disruption in the market in terms of adding? You think about this year in 25 as far as adding talent, or are there more opportunities today in terms of potential inorganic growth in terms of full M&A opportunities, acquisitions? Just kind of thinking broadly. Well, opportunity opportunity set in 25 as you kind of look at it.

I I think two things and I think it goes to Roberto's comment really right at the beginning of the call. Anytime that there is. Disruption and and I think. Certainly the the expectations are that. Activity is likely to pick up, which we welcome. TAB, Mark McIntyre:" Because any type anytime that we see disruption, so when you think about you know whether it's regionals or super regional. TAB, Mark McIntyre:" You know anytime that that we see an m&a transaction is going to have you know some degree of effect and in the past we've been able to capitalize very nicely on that so, so I think we look forward to that as far as. Patrick O' M&A picking up. I mean, certainly conversations, you know, there's a lot of talk in anticipation of perhaps a more benign regulatory environment that's conducive to M&A. Patrick O' For us, it really hasn't, that really hasn't been a limitation. We've obviously been able to do transactions over the past several years and pursue those and, you know, have frankly, a very favorable and quick regulatory approval process. What we stick our neck with is really the drivers of M&A, and those have not changed. You know, there's plenty of institutions that, you know, lack succession plans. Their board of directors are getting up in age. Their shareholder base is now in the second, if not third generation. And ultimately wants liquidity, which are really the factors that drive M&A. And I think we think, at least here in Chicago, we are super well positioned to continue to be active participants on that. And we think we're a great partner for institutions that are looking to partner with somebody and provide liquidity to their shareholders.

Tom Frantz, Perfect Thank you for that Alberto and and maybe just the last one for me, I think, Tom maybe I forget someone in the prepared remarks I thought. Tom Frantz, there's some comments here about you know kind of the government guaranteed business kind of being in that. Tom Frantz, You know 5 million is range a quarter just kind of wondering as we think about you know fee income and the opportunity set in 2025 I mean if you're. if you are at a $5 million run rate, it's a fair amount lower than what you produced in 24. So just kind of trying to think about the outlook for fee income in 25, if you give up a bit on the fee side from the government guarantee business, if there's opportunities to kind of grow fee income in 2025 or how we should be thinking about that.

Yeah, I mean, our goal is to obviously grow fee income. And I think we have some other categories. Customer swaps, for example, will help offset some of the potential decline in the SBA gain on sale. But again, the SBA gain on sale premiums are still very strong. If we get the rate cuts, we could see some pick up as well in that side of the market too.

I think, Brian, maybe just to add to what Tom just said, is what we're trying to do is really when we give guidance as far as the SBA business and particularly gain on sale is concerned, we're not, I mean, we're giving you a sense on a quarterly basis of where we would expect it. But as you know, we're really not paying attention to kind of quarterly volatility. We tend to look at this more on a year over year basis. And in that regard, what we are, keenly focused on are the variables that we control, the originations, the pricing. We really don't control what the market thinks these assets are worth. So we try to be conservative in that regard, but certainly to the degree that the market values these assets at a higher level than what we're assuming, which has been the case in the past. and or the mix of assets we originate because of the rate environment is more favorable to higher premiums that can create you know some variance to the positive in that estimate so just keep that in mind no that's helpful i'm just yeah and like you said i was thinking more full year just trying to understand if there's a trajectory to see some increase in fee income it sounds like there is given some of the other opportunities elsewhere and maybe some potential

you know better than expected performance on that on the government guaranteed business to help out so thank you for taking the questions yep you bet the next question comes from damon del monte with kbwe please go ahead hey good morning guys hope everybody's doing well today um ask a little bit about being

Rob Leibowitz, Thank you just want to ask a little bit about fee income Tom appreciate the guidance on the SBA gain on sale loan outlook, but could you guys just talk a little bit more about some of the other fee generating categories, you have and maybe some opportunities that you see here up in the coming year.

Thomas Miller- I think. Just broadly speaking, Damon, we're a pretty traditional commercial bank. So the things that we're paying attention to when you think about like service charges, treasury management fees like this past year, that's an area that we've invested a fair amount in the past. We continue to invest in that area. So we want to continue to see growth in treasury management fees. So that's an example. An other area that We have new leadership. We have a new team in as our wealth management business that's coming off a very low base. I think over time we want to see wealth management be a higher contributor to fees. So that's an area that we're paying close attention to. As you know, that doesn't happen overnight. You know, we're really focused on that business and serving our commercial client base. But that's an area where we want to obviously grow and proportionally have that be a more meaningful part of the fee category and overall revenues. And like Tom said, I think the rate environment is also today probably more conducive to doing derivatives with customers in terms of fixing rates and doing swaps, et cetera. I think those are general categories where we see drivers to inch that fee income category and total up.

Got it. That's helpful. Appreciate that color. And then I guess just secondly, as we think about provisioning and net charge-offs for the upcoming year, net charge-offs were 47 basis points in 2024. Justin Fields , City of Boulder, You feel like you know that you've kind of peaked and we should start to see a more lower level kind of something in the 30 upper 30 basis point range, or do you think that there's still some some loans to move through that would generate elevated net charge on.

Justin Fields , City of Boulder, I think I don't I think consistent with with our guidance in the past Damon I think I think we still see kind of like that, on a normalized basis, the range being somewhere between 30 to 40 basis points somewhere in there. Just know that you're going to have some volatility to some degree there tied to resolution of PCD loans that came from prior transactions. So we'll try to continue to provide disclosure around that to give you clarity in terms of what happens and where charges are coming from on a quarterly basis. But I think on a normalized meeting excluding uh resolutions of loans that are marked that we've acquired that you know we we basically flush through the system so to speak as we work it out of the bank i think that 30 to 40 basis point number is still reasonable got it okay it's helpful thank you and then just lastly tom any update on the the tax rate outlook for 25 very consistent for us right now damon okay great

Okay, that's all that I had. Thank you very much. Have a great weekend.

Thank you, Damon. Thanks, Damon. You do as well.

Our next question comes from Brendan Nozel with Hosty Group. Please go ahead.

Hey, just one follow-up and point of clarification on the expense guide. Does that quarterly outlook for 55 to 57 million include for security, or is that on a standalone basis?

It's standalone at this point.

Got it. Okay. So take that and layer on for security. Fantastic. Thank you.

I think what Tom will do is certainly probably at the end of the second, by the time of the second quarter call, but once the transaction closes, And, you know, we have a quarter under our belt. I'm sure Tom will give you, you know, a bit more clarity in terms of that run rate on a go forward basis.

Yeah, that's perfect. I appreciate the clarification.

Thank you for your questions today. I will now turn the call back over to Mr. Alberto Paraschini for any closing remarks.

Great. Thank you, operator. And thank you all for joining the call today and for your interest in byline. And we look forward to speaking to you again in April. Thank you again.

Thank you, everyone, for joining us today. This concludes our call and you may now disconnect.