Byline Bancorp, Inc. (NYSE:BY) Q4 2019 Earnings Conference Call - Final Transcript

Jan 24, 2020 • 10:00 am ET

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Byline Bancorp, Inc. (NYSE:BY) Q4 2019 Earnings Conference Call - Final Transcript

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Executive
Alberto J. Paracchini

quarter, earnings came in at $15.9 million or $0.41 per diluted share. Adjusting for charges related to merger, system conversions and other asset impairment costs, earnings came in at $16.1 million or $0.42 per diluted share. Profitability remained strong with ROAA and ROATCE on an adjusted basis of 117 basis points and 12.4% respectively.

Total assets increased by 1.5% sequentially, while loans declined slightly during the quarter despite very solid loan originations of $179 million, which were up from $97 million last quarter. Consistent with the third quarter, our originations were stronger in the commercial small business and sponsor finance groups. We continue to see good deal flow across the business, but believe given the stage of the economy and credit cycle, it's important to remain disciplined and selective when evaluating opportunities.

Payoff and paydown activity was elevated at $190 million, and offset the strong originations we saw during the quarter. Our CRE and residential portfolios were particularly impacted. On the CRE front, we saw a number of projects reach completion and borrowers opting to sell their projects or secure long-term permanent financing. Our residential portfolio saw increased paydown stemming from the lower rate environment. Our commercial portfolio, including small business, also saw higher-than-anticipated payoffs coming from business sales or refinancings at terms outside of our credit appetite.

On the deposit front, we had a strong quarter of deposit growth, particularly on non-interest bearing and other core categories. Time deposits declined to 28.3% of total deposits and the shift in mix contributed to deposit costs declining 6 basis points for the quarter. Our basic strategy of pursuing full banking relationships and doing more business with existing clients continues to generate very good results. Given the deposit and loan growth dynamics during the quarter, we saw our loan-to-deposit ratio ticked down to 91.5%, and our liquidity in the form of investment securities increase. We expect to redeploy that excess liquidity over time in our loan portfolio.

Revenues for the quarter declined as expected given the current rate environment, but were up 1.2% over last year. Net interest income was lower, impacted by a lower margin compared to the third quarter. Non-interest income was down slightly, driven by lower gain on sale revenue due primarily to lower average premiums as well as a fair value charge taken against our servicing asset.

On the expense side, we saw operating expenses declined sequentially by $1.8 million from the third quarter. Lastly, asset quality improved with higher resolution activity driving lower non-performing loan levels. Provision expense declined and covered lower net charge-offs, which came down by 14 basis points from last quarter to 42 basis points in the fourth quarter. The allowance increased 2 basis points to 84 basis points at the end of the year.

With that, I'd like to turn over the call to Lindsay who will provide you more detail on our results.

Executive
Lindsay Y. Corby

Thanks, Alberto. Good morning, everyone. Starting with loans and leases. Our total loans and leases were $3.8 billion at