7/25/2025

speaker
Operator
Conference Operator

Thank you, Carly. Good morning, everyone.

speaker
Carly
Investor Relations

And thank you for joining us today for the Byline Bancorp second quarter 2025 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-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 statement and non-GAAP financial measures disclosures in the earnings release. As a reminder for investors, this quarter we plan on attending the Raymond James Bank Conference here in Chicago and the Stevens Bank Forum in Little Rock in September. With that, I would now like to turn the conference call over to Alberto Parcini, President,

speaker
Alberto Parcini
President

Thank you, Brooks. Good morning, everyone, and thank you for joining the call this morning to go over our second quarter results. As always, with me on the call today are Chairman and CEO Roberto Herencia, Tom Bell, our CFO and Treasurer, Mark Fusinato, our Chief Credit Officer, and Brian Duran, our General Counsel. Before we get to the agenda, I would like to pass on the call to Roberto for some comments. Roberto?

speaker
Roberto Herencia
Chairman and Chief Executive Officer

Thank you, Alberto, and good morning to all. I'm really very pleased with the results of this quarter. This is yet another very strong performance, including several metrics among the top quartile of our peer group, and even stronger when reported numbers are adjusted to reflect core operating ratios. We continue to operate comfortably within the risk limits and criteria we've established. Our focus continues to be becoming the preeminent commercial bank in Chicago. Nothing beats clarity of communication internally with our employees and board and externally with our customers and the analyst, investor, and regulatory community. As such, we continue to execute well on strategic plans we have shared at large, and we do so in a patient and honest approach to risk. As we see some of our peers bet on mergers with out-of-state banks and expanding to multiple non-configured states searching for what seems to be the shiny object today, size. This combination of communication and execution have allowed us to produce consistently strong results over the last few years. It also has earned us a number of awards which are meaningful to us and our deliberate approach to being home to the best banking talent in town. The most recent awards For the month of June and July, we were proud to receive where 2025 Chicago sometimes best workplaces, US News and World Report 2025 best companies to work for. That was in three categories, best companies in the Midwest, best in finance and insurance, and best companies in the US overall. And Forbes, America's best in state banks. These awards are based primarily on engagement survey data of our employees, in addition to the array of employee programs we offer, such as learning and career development, employee benefits and compensation. They reflect well on what we offer our people, work-life balance and flexibility, job and company stability, physical and psychological comfort and sense of belonging and esteem. Our success and performance are anchored by the engagement of our people. We're proud of what they do and how they do it. Our people and leadership teams have done a terrific job. We can't highlight this aspect of our business enough. With that, I'm happy to pass on the call to Alberto and the team.

speaker
Alberto Parcini
President

Great. Thank you, Roberto. in terms of the agenda for this morning i'll start with the highlights for the quarter tom will walk you through the financials and then i'll come back and wrap up before we open the call up for questions in general we are pleased with our results for the second quarter our financial performance remains strong and we execute it well on several strategic priorities early in the quarter we successfully closed the transaction with first security completed the systems conversion, and wrapped up the integration by the end of April. The transaction added approximately $280 million in deposits and $153 million in loans, along with several important commercial relationships. I'd like to take the opportunity to welcome all former First Security customers, employees, and stockholders participating on the call this morning. And I also want to give a huge shout out to all employees who took part in the conversion and integration efforts. as well as those who played a significant role on a systems upgrade to our online banking systems platform that was also completed in the second quarter. Lastly, the end of the quarter marked Byline's 12th anniversary and eighth year as a public company. I would like to take a moment to recognize and thank everyone that's been a part of our story over those years for their contribution. Roger Spreen, Turning to our results on slide four of the deck we reported net income of 30 million or 66 cents per diluted share on revenue of $110 million. Roger Spreen, These results include the impact of merger charges taken in connection with first security and expenses related to a secondary offering of securities completed during the quarter. Roger Spreen, Including those net income came in at 33.8 million or 75 cents per diluted share. Profitability and return metrics were again strong with pre-tax preparation income of 51 million, pre-tax preparation ROA of 212 basis points, which marks the 11th consecutive quarter this metric has exceeded 200 basis points. ROA came in at a healthy 1.25% or 1.41% on an adjusted basis. An ROTC comfortably exceeded our cost of capital coming in at just under 13% or 14.4% on an adjusted basis, notwithstanding our growing capital base. Total revenue came in at $110.5 million, which was up $7.4 million for the quarter and 11% year on year. Revenue growth was driven by a 9% increase in net interest income stemming from higher balances. The margin expanded by 11 basis points to 4.18%, reflecting a better mix of both deposits and earning assets when compared to the prior quarter. Non-interest income declined marginally due to a negative fair value mark on our servicing asset, notwithstanding higher gain on sale revenue and other fees. Expenses came in around $60 million, inclusive of charges. If we exclude those, expenses remain well-managed at $54.7 million, marking a 2% decrease from the prior quarter. Adjusted for merger and offering expenses, our efficiency ratio was excellent at 48.2% for the quarter, and our cost-to-asset ratio came in at 228 basis points, which was down 18 basis points from the prior quarter and 6 basis points year-on-year. Moving on to the balance sheet. We saw continued growth in both loans and deposits, which ended the quarter at $7.4 and $7.8 billion, respectively. Excluding the impact of first security, loans grew by $155 million, or 9%, and deposits, excluding brokerage, grew 6.4% quarter on quarter. Business development activity picked up from last quarter, with originations coming in at $359 million. driven again by our commercial banking and leasing businesses. Offsetting this, we saw slightly higher payoff activity during the quarter. Moving to credit, credit costs came in at $11.9 million and consisted of $7.7 million in net charge-offs and a net reserve bill of $4.2 million. Net charges came in at 43 basis points or 28 basis points if we exclude PCD-related charge-offs. NPL saw a 16 basis point uptick from last quarter, driven largely by lower resolution activity towards the end of the quarter. The ACL remained strong at 1.47% of loans at the end of the quarter. The net reserve build was attributed to growth in the portfolio, the impact of first security and net credit migration within the portfolio. Turning to capital. Michael Leccese, M.D.: : Capital levels continue to grow and remain robust with tc surpassing 10% and ct one ending the quarter at just under 12%. Michael Leccese, M.D.: : Having strong capital levels provides us with flexibility, the flexibility needed to take advantage of opportunities when they present themselves. Michael Leccese, M.D.: : This quarter, we had the opportunity to repurchase a large block of shares in a single transaction at what we considered attractive pricing. We capitalized on the opportunity and repurchased 418,000 shares, thereby returning approximately $10 million back to shareholders in addition to our regular quarterly dividend. With that, I'd like to turn over the call to Tom, who'll provide you with more detail on our results.

speaker
Tom Bell
Chief Financial Officer and Treasurer

Thank you, Alberto, and good morning, everyone. Our performance this quarter reflects strong financial results driven by higher net interest income, healthy growth in both loans and deposits, and disciplined expense management. These results underscore the resilience of our operating model, notwithstanding the uncertainty present in the economic environment. Starting with loans on slide 5. Total loans increased to $307 million, or 17.5% annualized, and stood at $7.4 billion at June 30th. inclusive of the $153 million in loans added from the first security transaction. Origination activity was strong for the quarter with $359 million in new loans, up 16% quarter over quarter and up 20% compared to a year ago. Payoff activity increased by $9 million from Q1 and stood at $245 million. Line utilization declined by 1% to 59%. Loan yields came in at 7.12%, up three basis points, linked quarter. And our loan pipelines remain strong. For the second half of the year, we expect loan growth to be in the upper end of our mid-single-digit range. Turning to slide six, total deposits increased to $7.8 billion, up 13.7% annualized from the prior quarter, inclusive of the $279 million of deposits from First Security. The increase was due to money market and non-interest bearing demand accounts and net of $130 million reduction in broker deposits. The improved mixed growth deposit costs lower by three basis points to 2.27%. Turning to slide seven, we had a record high net interest income of $96 million in Q2, up 9% from the prior quarter, primarily due to the first security transaction, organic loan growth, and higher yields on securities offset by interest expense mainly due to growth in deposits. The net interest margin grew to 4.18%, up 11 basis points link quarter, and on a year-over-year basis, NIM expanded 20 basis points. Specifically, we saw higher rates on earning assets and lower interest-bearing liability costs. Assuming the Fed is on hold for Q3, our net interest income outlook is projected to range from $95 to $97 million. More importantly, our asset-sensitive balance sheet has generated growing NII over the past five quarters, despite the rate cuts in 2024. This performance reflects disciplined balance sheet management, and we remain focused on sustaining this momentum going forward. Turning to slide eight, non-interest income totaled $14.5 million in the second quarter, slightly lower than the prior quarter, primarily due to a $2.1 million negative failure value mark on the servicing asset and the change in fair value of equity securities. Our gain on sale guidance remains unchanged at an average $5 million per quarter. Turning to slide nine, our non-interest expense came in at $59.6 million for the second quarter, up $3.2 million from the prior quarter, primarily due to the impact of the first security transaction. The uptick in expenses was mainly due to merger-related charges, which includes higher salaries, employee benefits, increased professional fees, and conversion costs. On an adjusted basis, our non-interest expense stood at $54.7 million, which is in the lower end of our Q2 guidance range. All projected cost targets related to the first security transaction are on track. We continue to remain disciplined on expense management and expect our Q3 non-interest expense guidance to trend between $56 and $58 million. Turning to slide 10. In the second quarter, our allowance for credit loss increased to $107.7 million, representing 1.47% of total loans, up four basis points from the prior quarter. This includes a day one $3.2 million increase to ACL for the first security transaction. We recorded $11.9 million provision for credit losses in Q2 compared to $9.2 million in Q1. The increase reflects adjustments for macroeconomic conditions, portfolio activity including loan growth, and the $864,000 double account related to deferred security. Net charge-offs increased to $7.7 million compared to $6.6 million in the previous quarter. and excluding PCD, net charge-offs were $4.9 million, which represents 28 basis points. NPLs to total loans and leases increased to 92 basis points in Q2 from 76 basis points in Q1. Moving on to capital on slide 11. We had another solid quarter with strong performance metrics, resulting in an excellent first half of the year. More importantly, we continue to demonstrate our ability to execute against our strategic priorities. For the seventh consecutive quarter, we grew our tangible book value per share, which was up 3% linked quarter and up 14% compared to last year. CET1 came in at a strong 11.85%, up seven basis points linked quarter, and up 101 basis points year over year. Additionally, the TCE to TA ratio stood at 10.39%, up 44 basis points from last quarter. For the quarter, we repurchased approximately 544,000 shares, and our dividend payout ratio was 15% of earnings. With that, I'll bring it back to you. Thank you, Tom.

speaker
Alberto Parcini
President

Moving on to slide 12, as you can see on the slide, our strategy remains consistent and effective. We're pleased with our financial performance and execution in the first half of the year, which reflects the momentum of our different initiatives, as well as disciplined execution. Looking ahead, our pipelines remain healthy, and we continue to be well-positioned to seize opportunities and continue to create long-term value for shareholders. So to wrap up, I want to take a moment to thank all our employees for all they do and for stepping up to the plate on a daily basis to support our customers and our business. And with that, operator, we can open the call for questions.

speaker
Operator
Conference Operator

Thank you very much. We now have to open the lines to Q&A. If you'd like to ask your question, please signal by pressing star followed by 1 on your telephone keypad now. To remove a certain line of questioning, it will be star followed by 2. As a reminder, to raise a question, it will be star followed by 1. Our first question comes from Nathan Race from Piper Sandler. Nathan, your line is now open.

speaker
Nathan Race
Analyst, Piper Sandler

Hey, guys. Good morning. Thanks for taking the questions. Good morning, Nate. Just hoping to dig a little deeper into some of the loan growth commentary. You know, it sounds like your pipelines are pretty strong and healthy heading into the back half of this year. And just in context of, you know, some of the earlier comments around just ongoing opportunities to take share, you know, just curious, you know, how much of the encouraging loan growth prospects you're seeing are a function of just continued share gains versus maybe just improved client sentiment now that we got some of the Macro uncertainty from earlier this year, somewhat behind us.

speaker
Alberto Parcini
President

Good question, Nate. And it's hard to really break it down in terms of, you know, specifically, you know, what do we work at? Where should we attribute that, you know, kind of healthy pipeline, kind of the growth that we've seen? I think what we would say is Notwithstanding the uncertainty in the environment and the fact that I think in general, when you talk to clients, they were mindful and cautious given all the talk around tariffs and ultimately were tariffs would settle, was it posturing to try to negotiate better trade deals or was this something that was really going to be impactful to their operations. Notwithstanding all of that, customer activity has remained generally pretty healthy throughout. So we continue to see customers borrowing because they were expanding capacity, they wanted to buy equipment, they wanted to acquire companies and all of that. It really, it wasn't something where we saw a pause and now we're seeing a resumption in pause. And then by the same token, we're also growing clients. So I think, I wish I could tell you, give you a more precise answer, but I think it's just a combination of both, Nate, in short.

speaker
Nathan Race
Analyst, Piper Sandler

Okay. That's really helpful. We've obviously seen M&A activity increase across the industry lately, and I know you guys are continuing to build capital at pretty strong clips just given the profitability profile. So we'll just be curious to maybe get some updated thoughts on kind of the M&A opportunities that may exist today and kind of how you're thinking about managing excess capital in the meantime between buybacks and so forth.

speaker
Alberto Parcini
President

Yeah, so first on M&A, I think I mean, I think the conversations and the chatter around M&A has been, I think, has been there over the course of the year. I think it was probably incredibly optimistic at the start of the year. And I think those expectations, along with the noise and the discussion in the environment surrounding tariffs and the likely impact of that tended to dampen those expectations a bit. But I think as we continue to get more clarity around really what, you know, the trade policies of the administration are going to be and you start to see some of these trade policies deals get announced. And I think the market is starting to price in the likely impact of that. And I think it's probably more positive than what the market originally anticipated when Liberation Day first came out. So I think on M&A, look, conversations continue. I think there's certainly interest I think it's transaction dependent. There are still some of the challenges for some potential sellers surrounding the mark to market on fixed rate portfolios, whether it be securities or loans, the impact that has on capital. So those challenges still are there and still exist. As far as our TAB, Mark McIntyre, kind of capital priorities, I think they we have a standard hierarchy that we use when it comes to capital so. TAB, Mark McIntyre, First, we deploy capital to support organic and you know inorganic growth, when the opportunities present themselves second we want to support a sustainable dividend and third we repurchase shares. TAB, Mark McIntyre, I would tend to agree with you that, at the moment we have a lot of capital flexibility. So I think everything is on the table, which is really a great position to be in at the moment.

speaker
Nathan Race
Analyst, Piper Sandler

Got it. That's a really helpful color. And then maybe just one last one on credit, maybe for Mark. Just curious if you could shed any more light or color on the increase in non-accrual loans. And it looked like classified and criticized loans also increased in the quarter. So I wasn't sure if any of the provision in the quarter was tied to some specific impairments and maybe just some general thoughts in terms of what you're seeing in terms of some of the credit migration that occurred in 2Q.

speaker
Mark Fusinato
Chief Credit Officer

Sure, Nate. Thanks. You know, it was very granular. The things that we saw in the second quarter were not centered on a single line of business. Some event-driven decisions were made on certain credits. And as you know, one or two of our deals of any size can move our ratios. But I believe that we're still within our historical ranges that we've seen in terms of our metrics with credit over the last several years. I'd love it to get even stronger working on that. But we're really good at identifying problems and making real-time decisions on ratings in terms of strategies for our workout credits, and I expect that to continue. We're going to be very straightforward on trying to resolve things. Business resolutions are always the best, but sometimes we can't get a business resolution, so we have to change directions on a particular credit. But overall, I'm still confident we're in a good place and we're doing the right things and making the right decisions. regardless of what line of business the portfolio is we're talking about.

speaker
Nathan Race
Analyst, Piper Sandler

Okay, great. I appreciate all the color. Thanks, guys.

speaker
Roberto Herencia
Chairman and Chief Executive Officer

Thank you, bud. Thanks, Nate.

speaker
Operator
Conference Operator

Thank you very much. Next question comes from Damon Del Monte from KBW. Damon, your line is now open.

speaker
Damon Del Monte
Analyst, KBW

Hey, good morning, guys. Thanks for taking my question. Just curious, given the increased optimism with loan growth here in the back half of the year, I'm just wondering how we should kind of think about the securities portfolio. I know you guys have been adding to that in recent quarters. Do you feel that that level of growth will kind of slow down as you look to kind of remix the earning assets? Or do you think that given continued deposit growth, you could kind of store some of the liquidity and securities?

speaker
Tom Bell
Chief Financial Officer and Treasurer

Hi, Damon. It's Tom. You know, I think the only one a lot of purchases, you know, for the first half of the year and securities, other than the first part of the pond for security transaction where we, you know, acquire their, their assets there. We're likely just given the balance sheet to probably let just run off cash flows run off and go into funding loan growth at this point. um you know we're there's a lot of activity on the balance sheet this quarter as you saw you know between the home loan bank borrowing being reduced broker deposits being reduced and kind of the cash but we're still mindful of the the 10 billion dollar number for this year and you know given our loan growth you know we want to just focus on customers at this point so not likely to grow the security portfolio through the rest of the year got it great and then

speaker
Damon Del Monte
Analyst, KBW

On the deposit front, I noticed that the cost of money market was up, I think, nine basis points this quarter. Is that a reflection of the first security transaction and maybe blending in that they have higher cost of deposits? Or is that indicative of what you're seeing across your footprint from a competition standpoint?

speaker
Tom Bell
Chief Financial Officer and Treasurer

No, it was related for security and transaction. Pricing has been pretty much unchanged as it relates to competition at this point. So no added increases in money market costs because we are losing deposits or anything like that.

speaker
Damon Del Monte
Analyst, KBW

Got it. Great. Okay, thanks. Appreciate the call. That's all that I had. Thank you.

speaker
Alberto Parcini
President

Thanks, Damon.

speaker
Operator
Conference Operator

Thank you very much. Our next question comes from Brendan Nizzo from HODE Group. Brendan, your line is not open.

speaker
Brendan Nizzo
Analyst, HODE Group

Good morning, everybody. Hope you're doing well. Just to start off here on just on the cost outlook for the third quarter, can you just unpack that a little bit and speak to some of the drivers of the increase from this quarter's run rate?

speaker
Tom Bell
Chief Financial Officer and Treasurer

Sure. I mean, most of it was related to the first security acquisition that took place. So when you exclude those one time items, we're kind of back to our standard level. The guidance for the next quarter is maybe a little bit higher than last quarter, but, you know, we have marketing costs and other things that kind of happen in the second half of the year. So we want to just be mindful of that. But generally on track with where we're trending right now.

speaker
Brendan Nizzo
Analyst, HODE Group

Okay, perfect. Maybe one more for me, just a little bigger picture. There was clearly a step function up in earnings power and PPNR this quarter, I think up like 20% sequentially or so. Just kind of curious, you know, as you look at that, like how sustainable do you think, you know, this quarter's earnings power is? I think if I work through the guide, it looks like next quarter is probably something similar, but just given that step up, I'd love to hear your thoughts on how durable that is.

speaker
Alberto Parcini
President

I think, I think, TAB, Mark McIntyre, Big picture. TAB, Mark McIntyre, Nate Brendan. TAB, Mark McIntyre, I look there's we obviously had the impact of for security, so we had the assets, the liabilities that came with that transaction. TAB, Mark McIntyre, And then you know, putting aside the charges for the quarter related to the merger. really the impact of the cost saves and basically the rationale for doing the transaction. I think what you're seeing in the earnings is the impact of that. So to answer, I think you bring up a good point. And yes, the earnings power has increased as a result of being able to execute on that in addition to continuing to grow the, call it the core business that is outside of that transaction.

speaker
Brendan Nizzo
Analyst, HODE Group

Okay. All right. That's helpful. Well, congrats on the quarter and thank you for taking the questions. You bet. Thank you.

speaker
Operator
Conference Operator

Thank you very much. As a reminder, to raise a question, we'll be star-followed by one on your telephone keypad. To remove yourself from the line of questioning, we'll be star-followed by two. As a reminder, to raise a question, it's star-followed by one. Our next question comes from Terry McKilvey of Stevens. Terry, your line is now open.

speaker
Terry McKilvey
Analyst, Stephens Inc.

Thanks. Happy Friday, everybody. A question for Alberto. I don't know if it's your top priority, but it's top left on page 12 is the staying ahead of regulatory expectations. Could you just maybe talk about how crossing $10 billion may change given some of the discussions in Washington, how you're prepared for that and Any other regulatory topics that you're focused on today?

speaker
Alberto Parcini
President

Really good question, Terry. And I think what we would say is we have a long-term view of things. And I think it's fair to say that just in the environment, you know, certainly the pendulum has swung significantly. away from the direction where it was let's say under the previous administration um but we turn we take a long-term view so uh you know we we recognize that uh potentially the pendulum can also swing back in the other direction so we try to stay centered on on you know kind of a we try to stay even keel when it comes to that and certainly there are Tom Frantz, Higher expectations as an institution continues to grow, I think that first threshold of $10 billion is one and we want to continue, we continue to plan and prepare to make sure that we are well ahead of those expectations, when and if we we cross that threshold.

speaker
Terry McKilvey
Analyst, Stephens Inc.

James Heiting. appreciate that thanks and. James Heiting. Maybe a question for Tom a follow up on damon's question just maybe a little more clarity is. What's your ability from here to lower interest-bearing deposit costs, particularly CDs? It looks like yields were kind of sub 4% last quarter. Is there more room to go in the second half of the year?

speaker
Tom Bell
Chief Financial Officer and Treasurer

There is some room, Terry, but not as much unless the Fed were to cut rates. So I think I think we're kind of at the end of the repricing from the higher rate environment here. You know, we had a very short duration CD book. I think we continue to stay short with anticipation that at some point maybe the Fed will cut rates. But to date, they haven't. And so I think we've benefited from that. Again, mindful of first and foremost, customer relationships, bringing in DDA with the, you know, with the lending relationship and the treasury management fees, et cetera. So that's our first and foremost. But, you know, obviously we're going to have to sprinkle in some CDs. And right now, customer deposits, whether they're CDs or money markets, are cheaper than the wholesale markets. So I think we see that as an opportunity to add CDs in the coming quarters here.

speaker
Alberto Parcini
President

Yeah, I think, Terry, if I could add to what Tom said, I think there's the general Jorge Mancilla- repricing that comes with changes in interest rates and rates headed lower you have certificates that are at higher rates, those are repricing effectively as at lower rate so there's that impact and then there's the ongoing work that is you know, continuing to. segment our portfolio continue to understand customer behavior better to find opportunities so that we can strategically price the faucet better and that's ongoing so that's not i i wouldn't tell you that that one is is that we're done without one we and that one is is one that will continue both on the on the consumer side as well as on the commercial side great

speaker
Terry McKilvey
Analyst, Stephens Inc.

Thank you both, and have a nice weekend.

speaker
Alberto Parcini
President

You as well. Thanks, Jerry.

speaker
Operator
Conference Operator

Thank you very much. Our next question comes from Brian Martin of JNE Montgomery. Brian, your line is now open.

speaker
Brian Martin
Analyst, JNE Montgomery

Hey, good morning, guys. Good morning, Brian. Say, just one, Tom, just back to the expenses for a minute. The cost savings from the first security transaction, given the integration, I guess, is how much of that is in the numbers currently?

speaker
Tom Bell
Chief Financial Officer and Treasurer

I mean, it's already baked in. We've had pretty much the full quarter. There may be a few things that, you know, trickle into this quarter, but generally speaking, all the cost saves are in.

speaker
Brian Martin
Analyst, JNE Montgomery

Okay. I just want to make sure, just trying to understand that, like you said, that increase going from where we're at today, the core basis up to that 56 to 58 just seemed higher on the higher side, given if there were more cost savings and the additional marketing and other expenses you talked about. So, okay.

speaker
Tom Bell
Chief Financial Officer and Treasurer

um just one it is higher brian right brian it is a little higher as i said um my comments primarily due to you know additional marketing spend that usually happens in the second half of the year um but it's not really related to the first security transaction gotcha that's what i just want to clarify and in kind of the the targeted kind of let's say the expense you know the efficiency level where it's at today and the uh

speaker
Brian Martin
Analyst, JNE Montgomery

the cost to assets ratio down a fair amount, I guess those would be expected to trend a bit higher from where they are. Do you think they're kind of sustainable where we are at current levels, given the leverage you get from the transaction?

speaker
Alberto Parcini
President

I think, as you well know, Brian, so we look at both because on the efficiency side, that number is also impacted by revenues. Jorge Mancilla- We have to gain on sale component on our revenues that can move up or down, and we have also the fair value mark on the. Jorge Mancilla- servicing assets, so that that can make that number, you know move up and down a bit. Jorge Mancilla- On the NIE to average asset that cost to to asset ratio, I think I pay attention to that one a lot simply because. It's a pure measure of expenses. And as you continue to grow the asset base, I think we would continue to want to see that number continue to take down. We've made a ton of progress over the years on that metric. And that one, we want to continue to drive that number down, obviously, as we continue to grow.

speaker
Brian Martin
Analyst, JNE Montgomery

Gotcha. OK, that's helpful. And just maybe the last two for me. You talked about, Alberto, the capital flexibility, I guess, and certainly understand the commentary about the M&A. But in terms of the buyback, I mean, given where the valuation is at today, I mean, do you anticipate continuing to be active at current prices on the buyback?

speaker
Alberto Parcini
President

So, I won't comment on that directly, but I would point you to the transaction that we did this quarter where we had an opportunity to act on you know a nice block of shares at what we thought was a very attractive price and we took advantage of it so we're going to continue to be opportunistic in that regard and you know continue to kind of follow the the capital usage utilization hierarchy that that i touched on um a bit earlier yeah and i guess my question just to be clear i was just thinking is it more a matter of do you kind of continue to build capital for

speaker
Brian Martin
Analyst, JNE Montgomery

Tom Frantz, You know the organic growth and or potential m&a rather than you'll be overly aggressive on on the buyback was kind of the vein, I was looking at, but I appreciate the. Tom Frantz, The color there and then maybe just the last one for me was on the for Tom on the on the margin just time, can you just remind us the. Tom Frantz, The cash flows on the bond portfolio and then the fixed rate loans coming do and then just if you I think you commented a little bit earlier, but just on the cost of deposits, I guess, I know you talked about the CD race. If the Fed doesn't move, it kind of feels like the cost of deposits are kind of flatlined here. They're kind of stable in the near term. Is that a fair read on how things are trending there?

speaker
Tom Bell
Chief Financial Officer and Treasurer

Yeah, let me. So on the portfolio, there's roughly 207 million of cash flows over the next 12 months. And as I said, we're probably not going to reinvest those at this point. And your other question was related to the margin and deposit costs?

speaker
Brian Martin
Analyst, JNE Montgomery

Yeah, just deposit costs and fixed rate loans repricing.

speaker
Tom Bell
Chief Financial Officer and Treasurer

OK. Yeah, and we certainly have fixed rate loans repricing. I'll get you the specific number here in a second. But it's a little over $200 million annually. You know, as it relates to deposit costs, as Alberto just kind of alluded to, we are, you know, we're still very disciplined on our deposit pricing, and we're continuing to find opportunities to tweak things, you know, in certain sectors. So I think that you would expect deposit costs to be kind of flat to down a little bit, generally speaking.

speaker
Brian Martin
Analyst, JNE Montgomery

Okay. Yep. Perfect. Okay. All right. Thank you for taking the questions, Ed.

speaker
Tom Bell
Chief Financial Officer and Treasurer

Thanks, Brian.

speaker
Operator
Conference Operator

Thank you very much. We currently have no further questions, so I'd like to hand back to Alberto Paragini for any closing remarks.

speaker
Alberto Parcini
President

Great. Thank you, Carly, and thank you to everyone for joining the call today and for your interest in byline, and we look forward to speaking to you again in October. Thank you.

speaker
Operator
Conference Operator

As we conclude today's call, we'd like to thank everyone for joining. You may disconnect your lines.

Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

Q2BY 2025

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