UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______to ______

Commission File Number 001-38139

 

Byline Bancorp, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	36-3012593
(State or Other Jurisdiction of Incorporation or Organization)	(IRS Employer Identification Number)

180 North LaSalle Street, Suite 300

Chicago, Illinois 60601

(Address of Principal Executive Offices)

(773) 244-7000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐No ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock	BY	New York Stock Exchange

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Common Stock, $0.01 par value, 43,692,755 shares outstanding as of August 1, 2023

BYLINE BANCORP, INC.

FORM 10-Q

June 30, 2023

INDEX

		Page
PART I.	FINANCIAL INFORMATION	3
Item 1.	Financial Statements. The Unaudited Interim Condensed Consolidated Financial Statements of Byline Bancorp, Inc.	3
	Notes to Unaudited Interim Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	46
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	80
Item 4.	Controls and Procedures	81
PART II.	OTHER INFORMATION	82
Item 1.	Legal Proceedings	82
Item 1A.	Risk Factors	82
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	82
Item 3.	Defaults Upon Senior Securities	82
Item 4.	Mine Safety Disclosures	82
Item 5.	Other Information	82
Item 6.	Exhibits	83

2

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(UNAUDITED)

(dollars in thousands, except share data)	June 30, 2023			December 31, 2022
ASSETS
Cash and due from banks	$	59,564		$	62,274
Interest bearing deposits with other banks		260,621			117,079
Cash and cash equivalents		320,185			179,353
Equity and other securities, at fair value		18,473			7,989
Securities available-for-sale, at fair value (amortized cost    at June 30, 2023—$1,328,835, December 31, 2022—$1,378,343)		1,125,700			1,174,431
Securities held-to-maturity, at amortized cost (fair value    at June 30, 2023—$2,132, December 31, 2022 —$2,672)		2,158			2,705
Restricted stock, at cost		24,377			28,202
Loans held for sale		25,995			47,823
Loans and leases:
Loans and leases		5,570,517			5,421,258
Allowance for credit losses - loans and leases		(92,665	)		(81,924	)
Net loans and leases		5,477,852			5,339,334
Servicing assets, at fair value		21,715			19,172
Premises and equipment, net		56,304			56,798
Other real estate owned, net		2,265			4,717
Goodwill and other intangible assets, net		155,977			158,887
Bank-owned life insurance		83,222			82,093
Deferred tax assets, net		66,895			68,213
Accrued interest receivable and other assets		194,572			193,224
Total assets	$	7,575,690		$	7,362,941
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Non-interest-bearing demand deposits	$	1,793,749		$	2,138,645
Interest-bearing deposits		4,123,343			3,556,476
Total deposits		5,917,092			5,695,121
Other borrowings		574,922			640,399
Subordinated notes, net		73,778			73,691
Junior subordinated debentures issued to capital trusts, net		37,557			37,338
Accrued interest payable and other liabilities		158,399			150,576
Total liabilities		6,761,748			6,597,125
STOCKHOLDERS’ EQUITY
Preferred stock		—			—
Common stock		391			389
Additional paid-in capital		599,718			598,297
Retained earnings		379,078			335,794
Treasury stock, at cost		(50,383	)		(51,114	)
Accumulated other comprehensive loss, net of tax		(114,862	)		(117,550	)
Total stockholders’ equity		813,942			765,816
Total liabilities and stockholders’ equity	$	7,575,690		$	7,362,941

	June 30, 2023				December 31, 2022
	Preferred Shares		Common Shares		Preferred Shares		Common Shares
Par value	$	0.01	$	0.01	$	0.01	$	0.01
Shares authorized		25,000,000		150,000,000		25,000,000		150,000,000
Shares issued		—		39,729,369		—		39,518,702
Shares outstanding		—		37,752,002		—		37,492,775
Treasury shares		—		1,977,367		—		2,025,927

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

3

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(dollars in thousands, except share and per share data)	2023			2022			2023			2022
INTEREST AND DIVIDEND INCOME
Interest and fees on loans and leases	$	99,134		$	59,674		$	191,477		$	115,100
Interest on securities		6,559			6,264			13,159			12,419
Other interest and dividend income		1,579			608			2,638			845
Total interest and dividend income		107,272			66,546			207,274			128,364
INTEREST EXPENSE
Deposits		24,723			2,128			41,021			3,215
Other borrowings		4,241			1,097			10,129			1,492
Subordinated notes and debentures		2,142			1,694			4,240			3,294
Total interest expense		31,106			4,919			55,390			8,001
Net interest income		76,166			61,627			151,884			120,363
PROVISION FOR CREDIT LOSSES		5,790			5,908			15,615			10,903
Net interest income after provision    for credit losses		70,376			55,719			136,269			109,460
NON-INTEREST INCOME
Fees and service charges on deposits		2,233			2,059			4,353			3,943
Loan servicing revenue		3,377			3,384			6,757			6,764
Loan servicing asset revaluation		(865	)		(4,636	)		(209	)		(5,867	)
ATM and interchange fees		1,112			1,131			2,175			2,180
Net realized gains on securities available-for-sale		—			52			—			52
Change in fair value of equity securities, net		193			(697	)		543			(732	)
Net gains on sales of loans		5,704			9,983			10,852			20,810
Wealth management and trust income		1,039			900			1,963			1,948
Other non-interest income		1,498			1,985			3,002			4,489
Total non-interest income		14,291			14,161			29,436			33,587
NON-INTEREST EXPENSE
Salaries and employee benefits		29,642			27,697			60,036			56,656
Occupancy and equipment expense, net		4,404			4,409			8,848			9,537
Impairment charge on assets held for sale		—			—			20			—
Loan and lease related expenses		488			942			1,451			51
Legal, audit and other professional fees		3,675			1,820			6,789			4,420
Data processing		4,272			3,396			8,055			6,582
Net loss recognized on other real estate owned    and other related expenses		288			158			185			212
Other intangible assets amortization expense		1,455			1,868			2,910			3,464
Other non-interest expense		5,104			3,483			9,834			7,406
Total non-interest expense		49,328			43,773			98,128			88,328
INCOME BEFORE PROVISION FOR INCOME TAXES		35,339			26,107			67,577			54,719
PROVISION FOR INCOME TAXES		9,232			5,824			17,525			12,125
NET INCOME		26,107			20,283			50,052			42,594
Dividends on preferred shares		—			—			—			196
INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	26,107		$	20,283		$	50,052		$	42,398
EARNINGS PER COMMON SHARE
Basic	$	0.70		$	0.55		$	1.35		$	1.14
Diluted	$	0.70		$	0.54		$	1.34		$	1.12

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

4

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(dollars in thousands)	2023			2022			2023			2022
Net income	$	26,107		$	20,283		$	50,052		$	42,594
Securities available-for-sale
Unrealized holding gains (losses) arising during the period		(13,822	)		(54,828	)		777			(138,671	)
Reclassification adjustments for net gains    included in net income		—			(52	)		—			(52	)
Tax effect		3,693			14,889			(207	)		37,636
Net of tax		(10,129	)		(39,991	)		570			(101,087	)
Cash flow hedges
Unrealized holding gains arising during the period		8,515			6,914			8,709			24,557
Reclassification adjustments for net (gains) losses included    in net income		(3,863	)		109			(5,819	)		319
Tax effect		(1,243	)		(1,906	)		(772	)		(6,749	)
Net of tax		3,409			5,117			2,118			18,127
Total other comprehensive income (loss)		(6,720	)		(34,874	)		2,688			(82,960	)
Comprehensive income (loss)	$	19,387		$	(14,591	)	$	52,740		$	(40,366	)

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

5

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

										Additional									Accumulated Other			Total
(dollars in thousands,	Preferred Stock				Common Stock					Paid-In			Retained			Treasury			Comprehensive			Stockholders’
except share data)	Shares		Amount		Shares			Amount		Capital			Earnings			Stock			Income (Loss)			Equity
Balance, March 31, 2022		—	$	—		37,811,582		$	388	$	595,006		$	290,397		$	(40,732	)	$	(56,388	)	$	788,671
Net income		—		—		—			—		—			20,283			—			—			20,283
Other comprehensive loss,    net of tax		—		—		—			—		—			—			—			(34,874	)		(34,874	)
Issuance of common stock upon    exercise of stock options, net		—		—		86,001			—		(590	)		—			(939	)		—			(1,529	)
Restricted stock activity, net		—		—		(19,046	)		—		(31	)		—			(518	)		—			(549	)
Issuance of common stock in    connection with employee    stock purchase plan		—		—		22,565			—		—			—			537			—			537
Cash dividends declared on    common stock ($0.09 per    share)		—		—		—			—		—			(3,402	)		—			—			(3,402	)
Repurchase of common stock		—		—		(232,000	)		—		—			—			(5,529	)		—			(5,529	)
Share-based compensation    expense		—		—		—			—		1,553			—			—			—			1,553
Balance, June 30, 2022		—	$	—		37,669,102		$	388	$	595,938		$	307,278		$	(47,181	)	$	(91,262	)	$	765,161

												Additional									Accumulated Other			Total
(dollars in thousands,	Preferred Stock						Common Stock					Paid-In			Retained			Treasury			Comprehensive			Stockholders’
except share data)	Shares			Amount			Shares			Amount		Capital			Earnings			Stock			Income (Loss)			Equity
Balance, January 1, 2022		10,438		$	10,438			37,713,903		$	387	$	593,753		$	271,676		$	(31,570	)	$	(8,302	)	$	836,382
Net income		—			—			—			—		—			42,594			—			—			42,594
Other comprehensive loss,    net of tax		—			—			—			—		—			—			—			(82,960	)		(82,960	)
Issuance of common stock upon    exercise of stock options, net		—			—			203,255			—		(599	)		—			(1,811	)		—			(2,410	)
Restricted stock activity, net		—			—			244,237			1		(32	)		—			(1,218	)		—			(1,249	)
Redemption of preferred stock		(10,438	)		(10,438	)		—			—		—			—			—			—			(10,438	)
Issuance of common stock in    connection with employee    stock purchase plan		—			—			22,526			—		(1	)		—			537			—			536
Cash dividends declared on    preferred stock		—			—			—			—		—			(196	)		—			—			(196	)
Cash dividends declared on    common stock ($0.18 per    share)		—			—			—			—		—			(6,796	)		—			—			(6,796	)
Repurchase of common stock		—			—			(514,819	)		—		—			—			(13,119	)		—			(13,119	)
Share-based compensation    expense		—			—			—			—		2,817			—			—			—			2,817
Balance, June 30, 2022		—			—			37,669,102			388		595,938			307,278			(47,181	)		(91,262	)		765,161

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

6

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

						Additional									Accumulated Other			Total
(dollars in thousands,	Common Stock					Paid-In			Retained			Treasury			Comprehensive			Stockholders’
except share data)	Shares			Amount		Capital			Earnings			Stock			Income (Loss)			Equity
Balance, March 31, 2023		37,713,427		$	390	$	598,103		$	356,365		$	(51,066	)	$	(108,142	)	$	795,650
Net income		—			—		—			26,107			—			—			26,107
Other comprehensive loss,    net of tax		—			—		—			—			—			(6,720	)		(6,720	)
Restricted stock activity, net		(547	)		1		(92	)		—			(25	)		—			(116	)
Issuance of common stock in    connection with employee    stock purchase plan		39,122			—		—			—			708			—			708
Cash dividends declared on    common stock ($0.09 per    share)		—			—		—			(3,394	)		—			—			(3,394	)
Share-based compensation    expense		—			—		1,707			—			—			—			1,707
Balance, June 30, 2023		37,752,002		$	391	$	599,718		$	379,078		$	(50,383	)	$	(114,862	)	$	813,942

					Additional									Accumulated Other			Total
(dollars in thousands,	Common Stock				Paid-In			Retained			Treasury			Comprehensive			Stockholders’
except share data)	Shares		Amount		Capital			Earnings			Stock			Income (Loss)			Equity
Balance, January 1, 2023		37,492,775	$	389	$	598,297		$	335,794		$	(51,114	)	$	(117,550	)	$	765,816
Net income		—		—		—			50,052			—			—			50,052
Other comprehensive income,    net of tax		—		—		—			—			—			2,688			2,688
Restricted stock activity, net		220,105		2		(1,796	)		—			23			—			(1,771	)
Issuance of common stock in    connection with employee    stock purchase plan		39,122		—		—			—			708			—			708
Cash dividends declared on    common stock ($0.18 per    share)		—		—		—			(6,768	)		—			—			(6,768	)
Share-based compensation    expense		—		—		3,217			—			—			—			3,217
Balance, June 30, 2023		37,752,002		391		599,718			379,078			(50,383	)		(114,862	)		813,942

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

7

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Six Months Ended
	June 30,
(dollars in thousands)	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	50,052		$	42,594
Adjustments to reconcile net income to net cash from operating activities:
Provision for credit losses		15,615			10,903
Impairment loss on assets held for sale		20			—
Depreciation and amortization of premises and equipment		1,932			2,239
Net amortization of securities		1,678			2,396
Net change in fair value of equity securities, net		(543	)		732
Net realized gains on securities available-for-sale		—			(52	)
Net gains on sales and valuation adjustments of premises and equipment		—			(16	)
Net gains on sales of loans		(10,852	)		(20,810	)
Originations of U.S. government guaranteed loans		(146,974	)		(176,380	)
Proceeds from U.S. government guaranteed loans sold		162,600			231,405
Accretion of premiums and discounts on acquired loans, net		(1,340	)		(2,859	)
Net change in servicing assets		(2,543	)		1,589
Net gains (losses) on sales and valuation adjustments of other real estate owned		392			(25	)
Net amortization of other acquisition accounting adjustments		2,910			3,464
Amortization of subordinated debt issuance cost		87			87
Accretion of junior subordinated debentures discount		219			217
Share-based compensation expense		3,217			2,817
Deferred tax provision (benefit), net of valuation		(140	)		2,265
Increase in cash surrender value of bank owned life insurance		(1,118	)		(1,059	)
Changes in assets and liabilities:
Accrued interest receivable and other assets		6,110			(12,177	)
Accrued interest payable and other liabilities		11,149			65,560
Net cash provided by operating activities		92,471			152,890
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of securities available-for-sale		(11,221	)		(74,561	)
Proceeds from maturities and calls of securities available-for-sale		4,463			19,315
Proceeds from paydowns of securities available-for-sale		44,708			83,987
Proceeds from sales of securities available-for-sale		—			13,006
Proceeds from maturities and calls of securities held-to-maturity		545			—
Redemption (purchases) of Federal Home Loan Bank stock, net		3,825			(8,000	)
Proceeds from other loans sold		6,750			—
Net change in loans and leases		(152,170	)		(634,619	)
Purchases of premises and equipment		(1,539	)		(2,673	)
Proceeds from sales of premises and equipment		—			28
Proceeds from sales of assets held for sale		—			2,268
Proceeds from sales of other real estate owned		2,559			225
Net cash used in investing activities		(102,080	)		(601,024	)

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

8

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(UNAUDITED)

	Six Months Ended
	June 30,
(dollars in thousands)	2023			2022
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits	$	221,971			233,330
Proceeds from short-term borrowings		9,723,100			12,387,000
Repayments of short-term borrowings		(9,808,100	)		(12,182,000	)
Net increase in securities sold under agreements to repurchase		19,523			23,369
Dividends paid on preferred stock		—			(196	)
Dividends paid on common stock		(6,655	)		(6,769	)
Proceeds from issuance of common stock		602			927
Redemption of preferred stock		—			(10,438	)
Repurchases of common stock		—			(13,119	)
Net cash provided by financing activities		150,441			432,104
NET CHANGE IN CASH AND CASH EQUIVALENTS		140,832			(16,030	)
CASH AND CASH EQUIVALENTS, beginning of period		179,353			157,931
CASH AND CASH EQUIVALENTS, end of period	$	320,185		$	141,901
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest	$	46,538		$	7,118
Cash paid during the period for taxes	$	3,031		$	15,156
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND    FINANCING ACTIVITIES:
Transfer of loans to other real estate owned	$	499		$	2,837
Common dividend declared, not paid	$	113		$	27

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

9

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

Note 1—Basis of Presentation

These unaudited interim condensed consolidated financial statements include the accounts of Byline Bancorp, Inc., a Delaware corporation (the “Company,” “Byline,” “we,” “us,” “our”), a bank holding company whose principal activity is the ownership and management of its Illinois state chartered subsidiary bank, Byline Bank (the “Bank”), based in Chicago, Illinois.

These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission (“SEC”). In preparing these financial statements, the Company has evaluated events and transactions subsequent to June 30, 2023 for potential recognition or disclosure. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position and results of operations for the periods presented have been included. Certain information in footnote disclosures normally included in financial statements prepared in accordance with GAAP has been condensed or omitted pursuant to the rules and regulations of the SEC and the accounting standards for interim financial statements. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Consolidated Financial Statements for the years ended December 31, 2022, 2021, and 2020.

The Company has one reportable segment. The Company’s chief operating decision maker evaluates the operations of the Company using consolidated information for purposes of allocating resources and assessing performance. Therefore, segments disclosures are currently not required.

In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 855, “Subsequent Events,” the Company’s management has evaluated subsequent events for potential recognition or disclosure through the date of the issuance of these condensed consolidated financial statements. On July 1, 2023, we closed our acquisition of Inland Bancorp, Inc. and its subsidiaries (Inland") pursuant to an Agreement and Plan of Merger. Refer to Note 3 - Acquisition for further discussion of this transaction. No other subsequent events were identified that would have required a change to the condensed consolidated financial statements or disclosure in the notes to the condensed consolidated financial statements.

Note 2—Accounting Pronouncements Recently Adopted or Issued

The following reflect recent accounting pronouncements that have been adopted or are pending adoption by the Company.

Adopted Accounting Pronouncements

Financial Instruments—Credit Losses (Topic 326)—In June 2016, FASB issued Accounting Standards Update ("ASU") No. 2016‑13, Financial Instruments - Credit Losses (Topic 326) on the recognition of credit losses, otherwise known as the current expected credit loss model or "CECL", which replaces the incurred loss impairment methodology with a methodology that reflects current expected credit losses. We elected to delay the adoption of the standard in accordance with ASU No. 2019-10, Effective Dates, which delayed the effective date of the ASU for entities not classified as Public Business Entities. The Company’s EGC status expired December 31, 2022, requiring CECL adoption be reflected in our December 31, 2022 financial statements and Form 10-K. Results for reporting periods beginning after September 30, 2022 were presented under the new standard, while prior quarters were reported under, and continue to be reported under, the incurred loss method. For additional information on the new standard, see Note 1—Business and Summary of Significant Accounting Policies in our Annual Report on Form 10-K for the year ended December 31, 2022.

10

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

The following table presents select financial data for the first three quarters of 2022 as reported under the incurred loss method and as recast under CECL:

	For the three month period ended
	March 31, 2022							June 30, 2022							September 30, 2022
	As Reported		Adjustment			Recast		As Reported		Adjustment			Recast		As Reported		Adjustment			Recast
Interest and dividend   income	$	61,818	$	(405	)	$	61,413	$	66,546	$	133		$	66,679	$	79,903	$	(240	)	$	79,663
Interest expense		3,082		—			3,082		4,919		—			4,919		11,028		—			11,028
Net interest income		58,736		(405	)		58,331		61,627		133			61,760		68,875		(240	)		68,635
Provision/(recapture) for   credit losses		4,995		1,564			6,559		5,908		(1,622	)		4,286		4,176		3,032			7,208
Net interest income after       provision/(recapture)       for credit losses		53,741		(1,969	)		51,772		55,719		1,755			57,474		64,699		(3,272	)		61,427
Non-interest income		19,426		117			19,543		14,161		112			14,273		11,992		51			12,043
Non-interest expense		44,555		(599	)		43,956		43,773		(188	)		43,585		46,178		(137	)		46,041
Income before provision      for income taxes		28,612		(1,253	)		27,359		26,107		2,055			28,162		30,513		(3,084	)		27,429
Provision for income taxes		6,301		(340	)		5,961		5,824		558			6,382		7,857		(837	)		7,020
Net income		22,311		(913	)		21,398		20,283		1,497			21,780		22,656		(2,247	)		20,409
Dividends on preferred   shares		196		—			196		—		—			—		—		—			—
Income available to common   stockholders	$	22,115	$	(913	)	$	21,202	$	20,283	$	1,497		$	21,780	$	22,656	$	(2,247	)	$	20,409
Basic earnings per   common share	$	0.60	$	(0.03	)	$	0.57	$	0.55	$	0.04		$	0.59	$	0.61	$	(0.06	)	$	0.55
Diluted earnings per   common share	$	0.58	$	(0.02	)	$	0.56	$	0.54	$	0.04		$	0.58	$	0.61	$	(0.06	)	$	0.55

ASU 2022-02 - Financial Instruments – Credit Losses – Troubled Debt Restructurings and Vintage Disclosures (Topic 326) – The Company adopted this update effective March 31, 2023. This update eliminates the recognition and measurement guidance for troubled debt restructurings (“TDRs”) by creditors in ASC 310-40. The update also enhances disclosure requirements for certain loan restructurings by creditors when a borrower is experiencing financial difficulty. Specifically, rather than applying the recognition and measurement guidance for TDRs, an entity will apply the loan refinancing and restructuring guidance to determine whether a modification or other form of restructuring results in a new loan or a continuation of an existing loan. Additionally, the amendments in this ASU require a public business entity to disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases in the existing vintage disclosures. Refer to Note 5—Loan and Lease Receivables and Allowance for Credit Losses for additional details regarding these disclosures.

Issued Accounting Pronouncements Pending Adoption

Reference Rate Reform (Topic 848)—In March 2020, FASB issued ASU No. 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting and in December 2022, FASB issued ASU 2022-06, Reference Rate Reform: Deferral of the Sunset Date of Topic 848. The amendments in these ASUs provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments in these ASUs provide optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued. These ASUs are intended to help stakeholders during the global market-wide reference rate transition period. The amendments in these ASUs will be in effect for all entities as of March 12, 2020 and sunset on December 31, 2024. Banking regulators have provided guidance that prohibits new financial contracts from referencing LIBOR as the relevant index after December 31, 2021. In December 2021, management approved the use of Term Secured Overnight Financing Rate ("SOFR") as an alternative reference rate to LIBOR. Other alternative reference rates may be considered. At June 30, 2023, $252.9 million of loans, derivatives with a notional amount of $394.1 million, and securities available for sale with a fair value of $36.1 million, include fallback provisions that define the trigger events (an occurrence that precipitates the conversion from LIBOR to a new reference rate), and allow for the selection of a benchmark replacement and a spread adjustment between LIBOR and that benchmark replacement. Junior subordinated debentures with a carrying value of $37.6 million were also tied to LIBOR. Those financial instruments with a LIBOR index at June 30, 2023 are anticipated to covert to an alternative reference rate at the next interest rate reset date.

Fair Value Measurement (Topic 820) - In June 2022, the FASB issued ASU No. 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The guidance in the ASU clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account on the equity security and, therefore, is not considered in measuring fair value. The ASU also requires additional disclosures about the restriction. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The

11

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

Company is evaluating the accounting and disclosure requirements of this update and does not expect them to have a material effect on the consolidated financial statements.

Note 3—Acquisition of a Business

On July 1, 2023 the Company acquired all of the outstanding common stock of Inland Bancorp, Inc. (“Inland”) and its subsidiaries pursuant to an Agreement and Plan of Merger, dated as of November 30, 2022 (the “Merger Agreement”). Inland operated a wholly owned subsidiary, Inland Bank and Trust. Inland was merged with and into Byline. As a result of the merger, Inland’s subsidiary bank, Inland Bank and Trust, was merged with and into Byline Bank, with Byline Bank as the surviving bank. The acquisition improves the Company’s footprint in the Chicagoland market, diversifies its commercial banking business, and strengthens the core deposit base.

At the effective time of the merger (the “Effective Time”), each share of Inland’s common stock was converted into the right to receive: (1) 0.19 shares of Byline’s common stock, par value $0.01 per share and (2) a cash payment in the amount of $0.68 per share, with cash paid in lieu of any fractional shares. The per share cash consideration was based on the total $21.2 million divided by the outstanding shares of Inland common stock. Based on the closing price of shares of the Company’s common stock of $18.09, as reported by the New York Stock Exchange, and 5,932,323 shares of common stock issued with respect to the outstanding shares of Inland common stock, the stock consideration was valued at $107.3 million. Options to acquire 288,200 shares of Inland common stock that were outstanding at the Effective Time were canceled, at the option holders' election, in exchange for a cash payment in accordance with the Merger Agreement of $424,000, to be paid after the closing date. The value of the total merger consideration at closing was $129.0 million.

Merger-related expenses of $1.9 million, including acquisition advisory expenses, are reflected in non-interest expense on the Consolidated Statements of Operations for the six months ended June 30, 2023.

The acquisition of Inland will be accounted for using the acquisition method of accounting in accordance with ASC Topic 805. Assets acquired, liabilities assumed and consideration exchanged will be recorded at their respective acquisition date fair values. Determining the fair value of assets and liabilities involves significant judgment regarding methods and assumptions used to calculate estimated fair values. Fair values are subject to refinement for up to one year after the closing date of the acquisition as additional information regarding the closing date fair values become available. The fair value of the acquired assets and liabilities is in process.

On a related but separate transaction, on March 31, 2023, Byline entered into a side letter agreement with the majority shareholder of Inland in which Byline agreed to purchase 2,408,992 shares of Inland common stock. The purchase price was calculated based on the terms of the Merger Agreement. The transaction was completed on June 30, 2023, which resulted in a cash consideration of $9.9 million.

Note 4—Securities

The following tables summarize the amortized cost and fair values of securities available-for-sale and securities held-to-maturity as of the dates shown and the corresponding amounts of gross unrealized gains and losses:

June 30, 2023	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale
U.S. Treasury Notes	$	42,516	$	—	$	(1,798	)	$	40,718
U.S. Government agencies		148,297		68		(19,847	)		128,518
Obligations of states, municipalities, and    political subdivisions		67,922		11		(5,203	)		62,730
Residential mortgage-backed securities
Agency		673,096		—		(107,416	)		565,680
Non-agency		126,144		—		(24,264	)		101,880
Commercial mortgage-backed securities
Agency		188,308		—		(36,068	)		152,240
Corporate securities		42,767		—		(6,824	)		35,943
Asset-backed securities		39,785		—		(1,794	)		37,991
Total	$	1,328,835	$	79	$	(203,214	)	$	1,125,700

12

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

June 30, 2023	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Held-to-maturity
Obligations of states, municipalities, and    political subdivisions	$	2,158	$	—	$	(26	)	$	2,132
Total	$	2,158	$	—	$	(26	)	$	2,132

December 31, 2022	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale
U.S. Treasury Notes	$	42,430	$	2	$	(1,709	)	$	40,723
U.S. Government agencies		150,524		116		(20,276	)		130,364
Obligations of states, municipalities, and    political subdivisions		68,019		9		(6,152	)		61,876
Residential mortgage-backed securities
Agency		707,157		—		(111,361	)		595,796
Non-agency		130,654		—		(24,405	)		106,249
Commercial mortgage-backed securities
Agency		191,172		—		(34,142	)		157,030
Corporate securities		45,302		—		(3,866	)		41,436
Asset-backed securities		43,085		—		(2,128	)		40,957
Total	$	1,378,343	$	127	$	(204,039	)	$	1,174,431

December 31, 2022	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Held-to-maturity
Obligations of states, municipalities, and political    subdivisions	$	2,705	$	—	$	(33	)	$	2,672
Total	$	2,705	$	—	$	(33	)	$	2,672

The Company did not classify securities as trading during the six months ended June 30, 2023 or during 2022.

13

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

Gross unrealized losses and fair values, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of June 30, 2023 and December 31, 2022, are summarized as follows:

			Less than 12 Months					12 Months or Longer					Total
June 30, 2023	Number of Securities		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Available-for-sale
U.S. Treasury Notes		8		14,318		(340	)		26,400		(1,458	)	$	40,718	$	(1,798	)
U.S. Government agencies		17		4,771		(182	)		110,830		(19,665	)		115,601		(19,847	)
Obligations of states,    municipalities and political    subdivisions		61		14,969		(271	)		43,898		(4,932	)		58,867		(5,203	)
Residential mortgage-backed    securities
Agency		99		24,706		(1,406	)		540,974		(106,010	)		565,680		(107,416	)
Non-agency		19		—		—			101,880		(24,264	)		101,880		(24,264	)
Commercial mortgage-backed    securities
Agency		49		6,799		(1,549	)		145,441		(34,519	)		152,240		(36,068	)
Corporate securities		23		3,972		(516	)		31,971		(6,308	)		35,943		(6,824	)
Asset-backed securities		7		3,380		(49	)		34,611		(1,745	)		37,991		(1,794	)
Total		283	$	72,915	$	(4,313	)	$	1,036,005	$	(198,901	)	$	1,108,920	$	(203,214	)
Held-to-maturity
Obligations of states,   municipalities, and   political subdivisions		3	$	597	$	(10	)	$	1,535	$	(16	)	$	2,132	$	(26	)
Total		3	$	597	$	(10	)	$	1,535	$	(16	)	$	2,132	$	(26	)

			Less than 12 Months					12 Months or Longer					Total
December 31, 2022	Number of Securities		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Available-for-sale
U.S. Treasury Notes		6	$	21,720	$	(1,078	)	$	9,339	$	(631	)	$	31,059	$	(1,709	)
U.S. Government agencies		17		44,508		(4,782	)		70,609		(15,494	)		115,117		(20,276	)
Obligations of states,    municipalities and    political subdivisions		58		50,216		(3,858	)		7,185		(2,294	)		57,401		(6,152	)
Residential mortgage-backed securities
Agency		101		117,598		(11,045	)		478,198		(100,316	)		595,796		(111,361	)
Non-agency		19		35,486		(7,569	)		70,763		(16,836	)		106,249		(24,405	)
Commercial mortgage-backed securities
Agency		47		76,193		(11,840	)		74,315		(22,302	)		150,508		(34,142	)
Corporate securities		24		37,130		(3,128	)		4,306		(738	)		41,436		(3,866	)
Asset-backed securities		8		25,455		(503	)		15,502		(1,625	)		40,957		(2,128	)
Total		280	$	408,306	$	(43,803	)	$	730,217	$	(160,236	)	$	1,138,523	$	(204,039	)
Held-to-maturity
Obligations of states, municipalities and    political subdivisions		4	$	2,672	$	(33	)	$	—	$	—		$	2,672	$	(33	)
Total		4	$	2,672	$	(33	)	$	—	$	—		$	2,672	$	(33	)

14

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

Certain securities have fair values less than amortized cost and, therefore, contain unrealized losses. The Company evaluated the securities which had unrealized losses for potential credit losses and determined there were none. There were 283 securities available-for-sale with unrealized losses at June 30, 2023. There were three securities held-to-maturity with unrealized losses at June 30, 2023. There was no allowance for credit losses for held-to-maturity debt securities at June 30, 2023 or December 31, 2022. The evaluation for potential credit losses is based upon factors such as the creditworthiness of the issuers/guarantors, the underlying collateral, if applicable, and the continuing payment performance of the securities.

Management measures expected credit losses on held-to-maturity debt securities on a collective basis by major security types. The Company’s held-to-maturity portfolio contains municipal bonds that are typically rated by major rating agencies as ‘Aa’ or better. The Company uses industry historical credit loss information adjusted for current conditions to establish an allowance for credit losses. Accrued interest receivable on securities available-for-sale and held-to-maturity totaled $3.9 million at both June 30, 2023 and December 31, 2022, and are excluded from the estimate of credit losses.

The Company anticipates full recovery of amortized cost with respect to these securities by maturity. The Company does not intend to sell these securities and it is not more likely than not that the Company will be required to sell them before recovery of their amortized cost basis, which may be at maturity.

The proceeds from all sales of securities available-for-sale, and the associated gains and losses on sales and calls of securities, for the three and six months ended June 30, 2023 and 2022 are listed below:

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Proceeds	$	—	$	13,006	$	—	$	13,006
Gross gains		—		62		—		62
Gross losses		—		10		—		10

There were no sales of securities during the three and six months ended June 30, 2023, respectively. There were $52,000 in net gains reclassified from accumulated other comprehensive income into earnings for the three and six months ended June 30, 2022, respectively.

Securities posted and pledged as collateral were $351.1 million and $270.6 million at June 30, 2023 and December 31, 2022. At June 30, 2023 and December 31, 2022, of those pledged, the carrying amounts of securities pledged as collateral for public fund deposits were $271.2 million and $223.5 million, respectively, and for customer repurchase agreements of $40.0 million and $23.8 million, respectively. At June 30, 2023 and December 31, 2022, there were no securities pledged for advances from the Federal Home Loan Bank. Other securities were pledged for letters of credit and for purposes required or permitted by law. At June 30, 2023 and December 31, 2022, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’ equity.

At June 30, 2023, the amortized cost and fair value of debt securities are shown by contractual maturity. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.

	Amortized Cost		Fair Value
Available-for-sale
Due in one year or less	$	2,954	$	2,924
Due from one to five years		118,502		110,541
Due from five to ten years		174,431		152,013
Due after ten years		45,400		40,422
Mortgage-backed securities		987,548		819,800
Total	$	1,328,835	$	1,125,700
Held-to-maturity
Due in one year or less	$	1,551	$	1,535
Due from one to five years		607		597
Total	$	2,158	$	2,132

15

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

Note 5—Loan and Lease Receivables and Allowance for Credit Losses

Loan and Lease Receivables

Outstanding loan and lease receivables as of the dates shown were categorized as follows:

	June 30,			December 31,
	2023			2022
Commercial real estate	$	1,959,721		$	1,905,909
Residential real estate		504,364			489,411
Construction, land development, and other land		389,216			440,016
Commercial and industrial		2,101,638			2,055,213
Installment and other		3,686			1,709
Lease financing receivables		599,818			518,654
Total loans and leases		5,558,443			5,410,912
Net unamortized deferred fees and costs		6,197			5,014
Initial direct costs		5,877			5,332
Allowance for credit losses - loans and leases		(92,665	)		(81,924	)
Net loans and leases	$	5,477,852		$	5,339,334

	June 30,			December 31,
	2023			2022
Lease financing receivables
Net minimum lease payments	$	587,296		$	509,980
Unguaranteed residual values		75,719			54,118
Unearned income		(63,197	)		(45,444	)
Total lease financing receivables		599,818			518,654
Initial direct costs		5,877			5,332
Lease financial receivables before allowance for    credits losses - loans and leases	$	605,695		$	523,986

Total loans and leases consist of originated loans and leases, purchased credit deteriorated ("PCD") and acquired non-credit-deteriorated loans and leases. At June 30, 2023 and December 31, 2022, total loans and leases included the guaranteed amount of U.S. government guaranteed loans of $112.3 million and $123.2 million respectively. At June 30, 2023 and December 31, 2022, the discount on the unguaranteed portion of U.S. government guaranteed loans was $26.3 million and $26.7 million, respectively, which are included in total loans and leases. At June 30, 2023 and December 31, 2022, installment and other loans included overdraft deposits of $653,000 and $467,000, respectively, which were reclassified as loans. At June 30, 2023 and December 31, 2022, loans and leases and loans held for sale pledged as security for borrowings were $1.9 billion and $2.2 billion, respectively. Accrued interest on loans and leases were $25.5 million as of June 30, 2023 and December 31, 2022, and are included in the accrued interest receivable and other assets line item on the Condensed Consolidated Statement of Financial Condition.

The minimum annual lease payments for lease financing receivables as of June 30, 2023 are summarized as follows:

	Minimum Lease Payments
2023	$	88,841
2024		181,693
2025		144,991
2026		101,754
2027		55,379
Thereafter		14,638
Total	$	587,296

Originated loans and leases represent originations excluding loans initially acquired in a business combination. However, once an acquired non-credit-deteriorated loan reaches its maturity date, and is re-underwritten and renewed, it is internally classified as an originated loan. PCD loans are those acquired from a business combination with evidence of credit

16

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

quality deterioration and are accounted for under ASC Topic 326. Acquired non-credit-deteriorated loans and leases represent loans and leases acquired from a business combination without more than insignificant evidence of credit quality deterioration and are accounted for under ASC Topic 310-20. The following tables summarize the balances for each respective loan and lease category as of June 30, 2023 and December 31, 2022:

June 30, 2023	Originated		Purchased Credit Deteriorated		Acquired Non-Credit- Deteriorated		Total
Commercial real estate	$	1,806,531	$	30,724	$	126,191	$	1,963,446
Residential real estate		453,880		26,012		25,055		504,947
Construction, land development, and other land		387,623		320		—		387,943
Commercial and industrial		2,086,274		1,726		16,750		2,104,750
Installment and other		3,582		129		25		3,736
Lease financing receivables		604,437		—		1,258		605,695
Total loans and leases	$	5,342,327	$	58,911	$	169,279	$	5,570,517

December 31, 2022	Originated		Purchased Credit Deteriorated		Acquired Non-Credit- Deteriorated		Total
Commercial real estate	$	1,712,152	$	45,143	$	152,193	$	1,909,488
Residential real estate		426,226		32,228		31,508		489,962
Construction, land development, and other land		438,617		372		—		438,989
Commercial and industrial		2,030,616		2,192		24,266		2,057,074
Installment and other		1,410		140		209		1,759
Lease financing receivables		521,689		—		2,297		523,986
Total loans and leases	$	5,130,710	$	80,075	$	210,473	$	5,421,258

PCD loans—The unpaid principal balance and carrying amount of all PCD loans are summarized below. The balances do not include an allowance for credit losses - loans and leases of $1.1 million and $1.9 million at June 30, 2023 and December 31, 2022, respectively.

	June 30, 2023				December 31, 2022
	Unpaid Principal Balance		Carrying Value		Unpaid Principal Balance		Carrying Value
Commercial real estate	$	70,284	$	30,724	$	85,089	$	45,143
Residential real estate		69,803		26,012		76,270		32,228
Construction, land development, and other land		6,993		320		7,042		372
Commercial and industrial		3,427		1,726		3,902		2,192
Installment and other		793		129		807		140
Total purchased credit deteriorated loans	$	151,300	$	58,911	$	173,110	$	80,075

Acquired non-credit-deteriorated loans and leases—The unpaid principal balance and carrying value for acquired non-credit deteriorated loans and leases at June 30, 2023 and December 31, 2022 were as follows:

	June 30, 2023				December 31, 2022
	Unpaid Principal Balance		Carrying Value		Unpaid Principal Balance		Carrying Value
Commercial real estate	$	129,186	$	126,191	$	155,652	$	152,193
Residential real estate		25,397		25,055		31,863		31,508
Construction, land development, and other land		63		—		63		—
Commercial and industrial		17,193		16,750		25,022		24,266
Installment and other		31		25		216		209
Lease financing receivables		1,260		1,258		2,302		2,297
Total acquired non-credit-deteriorated    loans and leases	$	173,130	$	169,279	$	215,118	$	210,473

17

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

The Company hedges interest rates on certain loans using interest rate swaps through which the Company pays variable amounts and receives fixed amounts. Refer to Note 16—Derivative Instruments and Hedging Activities for additional discussion.

Allowance for Credit Losses

Loans and leases considered for inclusion in the allowance for credit losses include acquired non-credit-deteriorated loans and leases, purchased credit deteriorated loans, and originated loans and leases.

The Bank’s credit risk rating methodology assigns risk ratings from 1 to 10, where a higher rating represents higher risk. Risk ratings for all loans of $1.0 million or more are reviewed annually. The risk rating categories are described by the following groupings:

Pass—1‑4, risk levels of borrowers and guarantors that offer a minimal to an acceptable level of risk.

Watch—5, credit exposure that presents higher than average risk and warrants greater than routine attention.

Special Mention—6, potential weaknesses that if left uncorrected may result in deterioration of the repayment prospects.

Substandard Accrual—7, weaknesses in cash flow and collateral coverage resulting in a distinct possibility of losses if not corrected. Used in limited cases, where the borrower is current on payments and an agreed plan for credit remediation.

Substandard Non‑Accrual—8, well‑defined weakness or weaknesses in cash flow and collateral coverage resulting in the distinct possibility of losses if not corrected.

Doubtful—9, weaknesses inherent in substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

Loss—10, is considered uncollectible and of such little value that its continuance as a realizable asset is not warranted.

Revolving loans that are converted to term loans are treated as new originations and are presented by year of origination. Generally, existing term loans that are re-underwritten are reflected in the table in the year of renewal.

18

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

The following tables summarize the risk rating categories of the loans and leases considered for inclusion in the allowance for credit losses - loans and leases calculation, as of June 30, 2023 and December 31, 2022:

	Term loans amortized cost by origination year												Revolving		Total
June 30, 2023	2023		2022		2021		2020		2019		Prior		Loans		Loans
Commercial Real Estate
Pass	$	102,875	$	463,129	$	522,071	$	192,889	$	106,593	$	391,004	$	9,980	$	1,788,541
Watch		366		8,439		19,755		22,068		16,249		53,949		—		120,826
Special Mention		—		—		—		1,875		1,066		8,057		—		10,998
Substandard		—		233		2,081		1,099		9,097		30,571		—		43,081
Total	$	103,241	$	471,801	$	543,907	$	217,931	$	133,005	$	483,581	$	9,980	$	1,963,446
Gross charge-offs for quarter ended June 30, 2023	$	—	$	—	$	60	$	203	$	2,039	$	1,608	$	—	$	3,910
Residential Real Estate
Pass	$	36,607	$	67,682	$	57,845	$	41,240	$	30,487	$	204,751	$	48,711	$	487,323
Watch		—		—		—		906		1,253		10,866		2,750		15,775
Special Mention		—		—		—		315		20		549		—		884
Substandard		—		—		—		197		366		402		—		965
Total	$	36,607	$	67,682	$	57,845	$	42,658	$	32,126	$	216,568	$	51,461	$	504,947
Gross charge-offs for quarter ended June 30, 2023	$	—	$	—	$	—	$	—	$	—	$	9	$	—	$	9
Construction, Land Development,   & Land
Pass	$	29,694	$	65,849	$	181,279	$	65,679	$	16,057	$	24,953	$	1,208	$	384,719
Watch		63		—		—		—		3,153		8		—		3,224
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Total	$	29,757	$	65,849	$	181,279	$	65,679	$	19,210	$	24,961	$	1,208	$	387,943
Gross charge-offs for quarter ended June 30, 2023	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial & Industrial
Pass	$	245,662	$	488,522	$	251,286	$	127,415	$	52,016	$	151,605	$	455,930	$	1,772,436
Watch		12,698		25,957		46,723		12,278		35,047		28,157		58,238		219,098
Special Mention		19,000		—		7,847		—		289		10,016		21,508		58,660
Substandard		—		4,902		11,523		8,142		10,854		9,783		9,352		54,556
Total	$	277,360	$	519,381	$	317,379	$	147,835	$	98,206	$	199,561	$	545,028	$	2,104,750
Gross charge-offs for quarter ended June 30, 2023	$	—	$	942	$	1,077	$	581	$	664	$	623	$	—	$	3,887
Installment and Other
Pass	$	339	$	216	$	125	$	24	$	55	$	455	$	2,486	$	3,700
Watch		—		31		—		—		—		4		1		36
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Total	$	339	$	247	$	125	$	24	$	55	$	459	$	2,487	$	3,736
Gross charge-offs for quarter ended June 30, 2023	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Lease Financing Receivables
Pass	$	179,770	$	250,644	$	119,560	$	40,499	$	9,505	$	3,003	$	—	$	602,981
Watch		—		80		1,328		21		—		—		—		1,429
Special Mention		—		—		—		224		140		116		—		480
Substandard		—		350		307		102		22		24		—		805
Total	$	179,770	$	251,074	$	121,195	$	40,846	$	9,667	$	3,143	$	—	$	605,695
Gross charge-offs for quarter ended June 30, 2023	$	—	$	216	$	400	$	86	$	37	$	28	$	—	$	767
Total Loans and Leases
Pass	$	594,947	$	1,336,042	$	1,132,166	$	467,746	$	214,713	$	775,771	$	518,315	$	5,039,700
Watch		13,127		34,507		67,806		35,273		55,702		92,984		60,989		360,388
Special Mention		19,000		—		7,847		2,414		1,515		18,738		21,508		71,022
Substandard		—		5,485		13,911		9,540		20,339		40,780		9,352		99,407
Total	$	627,074	$	1,376,034	$	1,221,730	$	514,973	$	292,269	$	928,273	$	610,164	$	5,570,517
Gross charge-offs for quarter ended June 30, 2023	$	—	$	1,158	$	1,537	$	870	$	2,740	$	2,268	$	—	$	8,573

19

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

	Term loans amortized cost by origination year												Revolving		Total
December 31, 2022	2022		2021		2020		2019		2018		Prior		Loans		Loans (1)
Commercial Real Estate
Pass	$	471,009	$	510,529	$	207,765	$	111,792	$	84,382	$	324,271	$	28,343	$	1,738,091
Watch		6,422		12,723		20,583		11,004		17,269		44,462		—		112,463
Special Mention		—		—		121		1,075		1,232		10,075		—		12,503
Substandard		—		1,910		915		13,042		12,685		22,915		—		51,467
Total	$	477,431	$	525,162	$	229,384	$	136,913	$	115,568	$	401,723	$	28,343	$	1,914,524
Residential Real Estate
Pass	$	68,752	$	59,075	$	41,768	$	31,726	$	48,432	$	170,279	$	49,622	$	469,654
Watch		—		—		1,137		682		4,098		9,026		2,586		17,529
Special Mention		—		—		323		32		420		876		—		1,651
Substandard		—		—		234		381		296		2,185		660		3,756
Total	$	68,752	$	59,075	$	43,462	$	32,821	$	53,246	$	182,366	$	52,868	$	492,590
Construction, Land Development,   & Land
Pass	$	62,310	$	203,672	$	61,895	$	27,189	$	26,489	$	38,186	$	185	$	419,926
Watch		—		—		—		4,409		—		3,064		—		7,473
Special Mention		—		—		1,845		—		4,199		—		—		6,044
Substandard		—		—		—		1,530		4,012		4		—		5,546
Total	$	62,310	$	203,672	$	63,740	$	33,128	$	34,700	$	41,254	$	185	$	438,989
Commercial & Industrial
Pass	$	508,664	$	305,056	$	137,335	$	72,486	$	96,304	$	113,965	$	549,431	$	1,783,241
Watch		16,657		20,856		15,857		32,282		19,362		9,809		47,119		161,942
Special Mention		—		13,056		697		1,162		2,958		7,831		22,320		48,024
Substandard		1,156		3,415		6,671		11,949		5,434		25,275		10,738		64,638
Total	$	526,477	$	342,383	$	160,560	$	117,879	$	124,058	$	156,880	$	629,608	$	2,057,845
Installment and Other
Pass	$	332	$	146	$	65	$	79	$	15	$	584	$	429	$	1,650
Watch		34		—		—		—		2		73		—		109
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Total	$	366	$	146	$	65	$	79	$	17	$	657	$	429	$	1,759
Lease Financing Receivables
Pass	$	296,395	$	148,588	$	53,642	$	14,478	$	7,245	$	934	$	—	$	521,282
Watch		93		1,560		26		—		—		—		—		1,679
Special Mention		—		—		290		182		250		23		—		745
Substandard		35		82		80		77		6		—		—		280
Total	$	296,523	$	150,230	$	54,038	$	14,737	$	7,501	$	957	$	—	$	523,986
Total Loans and Leases
Pass	$	1,407,462	$	1,227,066	$	502,470	$	257,750	$	262,867	$	648,219	$	628,010	$	4,933,844
Watch		23,206		35,139		37,603		48,377		40,731		66,434		49,705		301,195
Special Mention		—		13,056		3,276		2,451		9,059		18,805		22,320		68,967
Substandard		1,191		5,407		7,900		26,979		22,433		50,379		11,398		125,687
Total	$	1,431,859	$	1,280,668	$	551,249	$	335,557	$	335,090	$	783,837	$	711,433	$	5,429,693

(1) - Includes $8.4 million of substandard loans classified as held for sale.

20

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

The following tables summarize contractual delinquency information of the loans and leases considered for inclusion in the allowance for credit losses - loans and leases calculation at June 30, 2023 and December 31, 2022:

June 30, 2023	2023		2022		2021		2020		2019		Prior		Revolving Loans		Total Loans
Commercial Real Estate
Current	$	103,241	$	471,704	$	543,147	$	217,549	$	131,169	$	470,626	$	9,980	$	1,947,416
30-59 Days Past Due		—		—		—		—		—		41		—		41
60-89 Days Past Due		—		97		760		74		—		714		—		1,645
Greater than 90 Accruing		—		—		—		—		—		—		—		—
Non-accrual		—		—		—		308		1,836		12,200		—		14,344
Total Past Due		—		97		760		382		1,836		12,955		—		16,030
Total	$	103,241	$	471,801	$	543,907	$	217,931	$	133,005	$	483,581	$	9,980	$	1,963,446
Residential Real Estate
Current	$	36,607	$	64,797	$	57,845	$	42,461	$	31,760	$	216,055	$	51,226	$	500,751
30-59 Days Past Due		—		2,885		—		—		—		110		235		3,230
60-89 Days Past Due		—		—		—		—		—		—		—		—
Greater than 90 Accruing		—		—		—		—		—		—		—		—
Non-accrual		—		—		—		197		366		403		—		966
Total Past Due		—		2,885		—		197		366		513		235		4,196
Total	$	36,607	$	67,682	$	57,845	$	42,658	$	32,126	$	216,568	$	51,461	$	504,947
Construction, Land Development,    & Land
Current	$	29,757	$	65,849	$	181,279	$	65,679	$	19,210	$	24,961	$	1,208	$	387,943
30-59 Days Past Due		—		—		—		—		—		—		—		—
60-89 Days Past Due		—		—		—		—		—		—		—		—
Greater than 90 Accruing		—		—		—		—		—		—		—		—
Non-accrual		—		—		—		—		—		—		—		—
Total Past Due		—		—		—		—		—		—		—		—
Total	$	29,757	$	65,849	$	181,279	$	65,679	$	19,210	$	24,961	$	1,208	$	387,943
Commercial & Industrial
Current	$	277,360	$	515,117	$	311,213	$	144,451	$	95,567	$	196,640	$	539,692	$	2,080,040
30-59 Days Past Due		—		4		—		—		—		—		275		279
60-89 Days Past Due		—		327		480		215		553		685		—		2,260
Greater than 90 Accruing		—		—		—		—		—		—		—		—
Non-accrual		—		3,933		5,686		3,169		2,086		2,236		5,061		22,171
Total Past Due		—		4,264		6,166		3,384		2,639		2,921		5,336		24,710
Total	$	277,360	$	519,381	$	317,379	$	147,835	$	98,206	$	199,561	$	545,028	$	2,104,750
Installment and Other
Current	$	339	$	247	$	125	$	24	$	55	$	458	$	2,487	$	3,735
30-59 Days Past Due		—		—		—		—		—		—		—		—
60-89 Days Past Due		—		—		—		—		—		1		—		1
Greater than 90 Accruing		—		—		—		—		—		—		—		—
Non-accrual		—		—		—		—		—		—		—		—
Total Past Due		—		—		—		—		—		1		—		1
Total	$	339	$	247	$	125	$	24	$	55	$	459	$	2,487	$	3,736
Lease Financing Receivables
Current	$	179,070	$	249,956	$	120,522	$	40,587	$	9,606	$	3,058	$	—	$	602,799
30-59 Days Past Due		571		415		366		153		39		44		—		1,588
60-89 Days Past Due		129		353		—		18		—		16		—		516
Greater than 90 Accruing		—		—		—		—		—		—		—		—
Non-accrual		—		350		307		88		22		25		—		792
Total Past Due		700		1,118		673		259		61		85		—		2,896
Total	$	179,770	$	251,074	$	121,195	$	40,846	$	9,667	$	3,143	$	—	$	605,695
Total Loans and Leases
Current	$	626,374	$	1,367,670	$	1,214,131	$	510,751	$	287,367	$	911,798	$	604,593	$	5,522,684
30-59 Days Past Due		571		3,304		366		153		39		195		510		5,138
60-89 Days Past Due		129		777		1,240		307		553		1,416		—		4,422
Greater than 90 Accruing		—		—		—		—		—		—		—		—
Non-accrual		—		4,283		5,993		3,762		4,310		14,864		5,061		38,273
Total Past Due		700		8,364		7,599		4,222		4,902		16,475		5,571		47,833
Total	$	627,074	$	1,376,034	$	1,221,730	$	514,973	$	292,269	$	928,273	$	610,164	$	5,570,517

21

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

Total non-accrual loans without an allowance included $1.6 million of commercial real estate loans and $2.9 million of commercial and industrial loans as of June 30, 2023. The Company recognized $2.0 million of interest income on non-accrual loans and leases for the six months ended June 30, 2023.

December 31, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans		Total Loans(1)
Commercial Real Estate
Current	$	477,334	$	525,048	$	229,260	$	132,067	$	112,126	$	387,349	$	28,343	$	1,891,527
30-59 Days Past Due		97		54		—		—		471		2,060		—		2,682
60-89 Days Past Due		—		—		—		—		—		1,016		—		1,016
Greater than 90 Accruing		—		—		—		—		—		—		—		—
Non-accrual		—		60		124		4,846		2,971		11,298		—		19,299
Total Past Due		97		114		124		4,846		3,442		14,374		—		22,997
Total	$	477,431	$	525,162	$	229,384	$	136,913	$	115,568	$	401,723	$	28,343	$	1,914,524
Residential Real Estate
Current	$	68,752	$	59,075	$	40,731	$	32,440	$	52,950	$	180,128	$	52,146	$	486,222
30-59 Days Past Due		—		—		2,497		—		—		108		122		2,727
60-89 Days Past Due		—		—		—		—		—		—		—		—
Greater than 90 Accruing		—		—		—		—		—		—		—		—
Non-accrual		—		—		234		381		296		2,130		600		3,641
Total Past Due		—		—		2,731		381		296		2,238		722		6,368
Total	$	68,752	$	59,075	$	43,462	$	32,821	$	53,246	$	182,366	$	52,868	$	492,590
Construction, Land Development, & Land
Current	$	62,310	$	203,672	$	63,740	$	33,128	$	34,700	$	41,250	$	185	$	438,985
30-59 Days Past Due		—		—		—		—		—		—		—		—
60-89 Days Past Due		—		—		—		—		—		—		—		—
Greater than 90 Accruing		—		—		—		—		—		—		—		—
Non-accrual		—		—		—		—		—		4		—		4
Total Past Due		—		—		—		—		—		4		—		4
Total	$	62,310	$	203,672	$	63,740	$	33,128	$	34,700	$	41,254	$	185	$	438,989
Commercial & Industrial
Current	$	524,341	$	339,915	$	156,713	$	113,350	$	122,523	$	153,039	$	628,747	$	2,038,628
30-59 Days Past Due		980		1,371		391		1,717		368		922		—		5,749
60-89 Days Past Due		—		8		80		87		—		472		—		647
Greater than 90 Accruing		—		—		—		—		—		—		—		—
Non-accrual		1,156		1,089		3,376		2,725		1,167		2,447		861		12,821
Total Past Due		2,136		2,468		3,847		4,529		1,535		3,841		861		19,217
Total	$	526,477	$	342,383	$	160,560	$	117,879	$	124,058	$	156,880	$	629,608	$	2,057,845
Installment and Other
Current	$	366	$	146	$	65	$	79	$	17	$	657	$	429	$	1,759
30-59 Days Past Due		—		—		—		—		—		—		—		—
60-89 Days Past Due		—		—		—		—		—		—		—		—
Greater than 90 Accruing		—		—		—		—		—		—		—		—
Non-accrual		—		—		—		—		—		—		—		—
Total Past Due		—		—		—		—		—		—		—		—
Total	$	366	$	146	$	65	$	79	$	17	$	657	$	429	$	1,759
Lease Financing Receivables
Current	$	294,948	$	149,642	$	53,680	$	14,557	$	7,411	$	955	$	—	$	521,193
30-59 Days Past Due		1,461		467		295		104		77		2		—		2,406
60-89 Days Past Due		79		39		—		—		9		—		—		127
Greater than 90 Accruing		—		—		—		—		—		—		—		—
Non-accrual		35		82		63		76		4		—		—		260
Total Past Due		1,575		588		358		180		90		2		—		2,793
Total	$	296,523	$	150,230	$	54,038	$	14,737	$	7,501	$	957	$	—	$	523,986
Total Loans and Leases
Current	$	1,428,051	$	1,277,498	$	544,189	$	325,621	$	329,727	$	763,378	$	709,850	$	5,378,314
30-59 Days Past Due		2,538		1,892		3,183		1,821		916		3,092		122		13,564
60-89 Days Past Due		79		47		80		87		9		1,488		—		1,790
Greater than 90 Accruing		—		—		—		—		—		—		—		—
Non-accrual		1,191		1,231		3,797		8,028		4,438		15,879		1,461		36,025
Total Past Due		3,808		3,170		7,060		9,936		5,363		20,459		1,583		51,379
Total	$	1,431,859	$	1,280,668	$	551,249	$	335,557	$	335,090	$	783,837	$	711,433	$	5,429,693

(1) - Includes $8.4 million of substandard loans classified as held for sale.

22

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

Total non-accrual loans without an allowance included $10.8 million of commercial real estate loans, $4.3 million of commercial and industrial loans, and $2.6 million of residential real estate loans, as of December 31, 2022. The Company recognized $2.5 million of interest income on non-accrual loans and leases for the year ended December 31, 2022.

The following table summarize the balance and activity within the allowance for credit losses - loans and leases, the components of the allowance for credit losses - loans and leases by loans and leases individually and collectively evaluated for impairment, and corresponding loan and lease balances by type for the three and six months ended June 30, 2023 are as follows:

June 30, 2023	Commercial Real Estate			Residential Real Estate			Construction, Land Development, and Other Land			Commercial and Industrial			Installment and Other		Lease Financing Receivables			Total
Allowance for credit losses -    loans and leases
Three months ended
Beginning balance	$	24,738		$	2,679		$	3,498		$	51,849		$	25	$	7,676		$	90,465
Provision/(recapture)		4,359			(198	)		(1,563	)		3,161			17		691			6,467
Charge-offs		(2,945	)		—			—			(2,097	)		—		(462	)		(5,504	)
Recoveries		225			63			—			727			1		221			1,237
Ending balance	$	26,377		$	2,544		$	1,935		$	53,640		$	43	$	8,126		$	92,665
Six months ended
Beginning balance	$	26,061		$	3,140		$	3,134		$	41,889		$	24	$	7,676		$	81,924
Provision		3,240			(651	)		(1,199	)		13,964			15		810			16,179
Charge-offs		(3,911	)		(9	)		—			(3,887	)		—		(766	)		(8,573	)
Recoveries		987			64			—			1,674			4		406			3,135
Ending balance	$	26,377		$	2,544		$	1,935		$	53,640		$	43	$	8,126		$	92,665
Ending balance:
Individually evaluated    for impairment	$	8,555		$	—		$	—		$	17,399		$	—	$	—		$	25,954
Collectively evaluated    for impairment		17,822			2,544			1,935			36,241			43		8,126			66,711
Total allowance for credit    losses - loans and leases	$	26,377		$	2,544		$	1,935		$	53,640		$	43	$	8,126		$	92,665
Loans and leases ending balance:
Individually evaluated for    impairment	$	30,750		$	—		$	—		$	38,485		$	—	$	—		$	69,235
Collectively evaluated for    impairment		1,932,696			504,947			387,943			2,066,265			3,736		605,695			5,501,282
Total loans and leases	$	1,963,446		$	504,947		$	387,943		$	2,104,750		$	3,736	$	605,695		$	5,570,517

23

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

The following table summarize the balance and activity within the allowance for loan and lease losses, the components of the allowance for loan and lease losses by loans and leases individually and collectively evaluated for impairment, loans acquired with deteriorated credit quality, and corresponding loan and lease balances by type for the three and six months ended June 30, 2022:

June 30, 2022	Commercial Real Estate			Residential Real Estate		Construction, Land Development, and Other Land		Commercial and Industrial			Installment and Other		Lease Financing Receivables			Total
Allowance for loan and    lease losses
Three months ended
Beginning balance	$	19,706		$	2,145	$	1,116	$	33,244		$	10	$	3,237		$	59,458
Provision		566			339		676		3,852			1		474			5,908
Charge-offs		(497	)		—		—		(2,654	)		—		(324	)		(3,475	)
Recoveries		43			5		—		293			—		204			545
Ending balance	$	19,818		$	2,489	$	1,792	$	34,735		$	11	$	3,591		$	62,436
Six months ended
Beginning balance	$	16,918		$	1,628	$	522	$	33,129		$	9	$	2,806		$	55,012
Provision/(recapture)		3,350			852		1,270		4,310			2		1,119			10,903
Charge-offs		(737	)		—		—		(3,117	)		—		(687	)		(4,541	)
Recoveries		287			9		—		413			—		353			1,062
Ending balance	$	19,818		$	2,489	$	1,792	$	34,735		$	11	$	3,591		$	62,436
Ending balance:
Individually evaluated    for impairment	$	6,002		$	—	$	—	$	11,337		$	—	$	—		$	17,339
Collectively evaluated    for impairment		12,576			1,680		1,764		23,012			8		3,591			42,631
Loans acquired with    deteriorated credit    quality		1,240			809		28		386			3		—			2,466
Total allowance for loan    and lease losses	$	19,818		$	2,489	$	1,792	$	34,735		$	11	$	3,591		$	62,436
Loans and leases ending balance:
Individually evaluated for    impairment	$	45,200		$	5,188	$	5,541	$	27,770		$	—	$	—		$	83,699
Collectively evaluated for    impairment		1,794,663			436,081		428,782		1,876,772			1,153		442,371			4,979,822
Loans acquired with    deteriorated    credit quality		60,075			39,902		1,184		3,232			157		—			104,550
Total loans and leases	$	1,899,938		$	481,171	$	435,507	$	1,907,774		$	1,310	$	442,371		$	5,168,071

24

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

The Company increased the allowance for credit losses - loans and leases by $2.2 million and $10.7 million for the three and six months ended June 30, 2023, respectively, and increased the allowance for loan and lease losses by $3.0 million and $7.4 million for the three and six months ended June 30, 2022, respectively. For loans evaluated for impairment, the Company increased allowance for credit losses - loans and leases by $3.9 million and $10.6 million for the three and six months ended June 30, 2023, respectively. The Company recaptured $3.4 million and $3.7 million of the allowance for loan and lease losses for the three and six months ended June 30, 2022, respectively. For loans and leases collectively evaluated for impairment, the Company recaptured $1.7 million of the allowance for credit losses - loans and leases for the three months ended June 30, 2023, and increased it by $124,000 for the six months ended June 30, 2023. The Company increased the allowance for loan and lease losses by $7.0 million and $11.8 million for the three and six months ended June 30, 2022, respectively. The change in allowance for credit losses - loans and leases collectively evaluated for impairment was mainly due to changes in expected losses driven by macro-economic factors.

The following table presents loans with modified terms as of June 30, 2023:

June 30, 2023	Payment Delay		Term Modification		Combination Term Modification and Interest Rate Reduction		Total Modified by Class		% of Class of Loans and Leases
Modified loans
Commercial real estate	$	110	$	—	$	—	$	110		0.00	%
Commercial and industrial		8,719		51,370		385		60,474		2.87	%
Total modified loans	$	8,829	$	51,370	$	385	$	60,584		1.1	%

Loans reflected as having a payment delay included a general adjustment in loan terms similar to those of pass-rated credits. Loans having term modifications included extension of term as a result of a new borrower structure and other miscellaneous term adjustments. Loans having a combination of term modification and interest rate reduction reflect a longer amortization period and a reduced weighted average contractual rate from 8.85% to 7.01%.

TDRs are granted due to borrower financial difficulty and provide for a modification of loan repayment terms. The tables below present TDRs by loan category as of December 31, 2022:

December 31, 2022	Number of Loans		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Charge-offs		Individually Evaluated
Accruing:
Commercial real estate		2	$	551	$	551	$	—	$	109
Commercial and industrial		1		24		24		—		34
Residential real estate		2		144		144		—		—
Total accruing		5		719		719		—		143
Non-accruing:
Commercial real estate		3		830		623		207		73
Commercial and industrial		6		2,017		982		1,035		38
Total non-accruing		9		2,847		1,605		1,242		111
Total troubled debt restructurings		14	$	3,566	$	2,324	$	1,242	$	254

25

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

Loans modified as troubled debt restructurings that occurred during the three and six months ended June 30, 2022 were:

	Three Months Ended			Six Months Ended
	June 30,			June 30,
	2022			2022
Accruing:
Beginning balance	$	1,456		$	1,927
Additions		—			—
Net payments		(98	)		(569	)
Net transfers from non-accrual		—			—
Ending balance		1,358			1,358
Non-accruing:
Beginning balance		1,343			1,506
Additions		—			—
Net payments		(209	)		(372	)
Charge-offs		—			—
Net transfers to accrual		—			—
Ending balance		1,134			1,134
Total troubled debt restructurings	$	2,492		$	2,492

There were no troubled debt restructurings that subsequently defaulted within twelve months of the restructure date during the six months ended June 30, 2022. In addition, there was no commitment outstanding on troubled debt restructurings at December 31, 2022.

The following table presents the amortized cost basis of collateral-dependent loans and leases, which are individually evaluated to determine expected credit losses as of June 30, 2023 and December 31, 2022:

June 30, 2023	Commercial Construction		Non-owner Occupied Commercial		Owner-Occupied Commercial		Multi-Family		Single Family Residence (1st Lien)		Single Family Residence (2nd Lien)		Business Assets		Total
Commercial real estate	$	—	$	8,076	$	22,673	$	—	$	—	$	—	$	—	$	30,749
Commercial and industrial		—		—		—		—		—		—		38,486		38,486
Total	$	-	$	8,076	$	22,673	$	—	$	—	$	—	$	38,486	$	69,235
December 31, 2022	Commercial Construction		Non-owner Occupied Commercial		Owner-Occupied Commercial		Multi-Family		Single Family Residence (1st Lien)		Single Family Residence (2nd Lien)		Business Assets		Total
Commercial real estate	$	—	$	9,749	$	28,210	$	—	$	—	$	—	$	—	$	37,959
Residential real estate		—		—		—		237		422		220		—		879
Construction, land development,   and other land		5,541		—		—		—		—		—		—		5,541
Commercial and industrial		—		—		—		—		—		—		26,034		26,034
Total	$	5,541	$	9,749	$	28,210	$	237	$	422	$	220	$	26,034	$	70,413

The following table presents the change in the balance of the reserve for unfunded commitments as of June 30, 2023 and 2022:

	For the Three Months Ended					For the Six Months Ended
	June 30,					June 30,
	2023			2022		2023			2022
Beginning balance	$	4,316		$	2,003	$	4,203		$	1,403
Provision for/(recapture) of unfunded commitments		(677	)		188		(564	)		788
Ending balance	$	3,639		$	2,191	$	3,639		$	2,191

26

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

Note 6—Servicing Assets

Activity for servicing assets and the related changes in fair value for the three and six months ended June 30, 2023 and 2022 was as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Beginning balance	$	20,944		$	24,497		$	19,172		$	23,744
Additions, net		1,636			2,294			2,752			4,278
Changes in fair value		(865	)		(4,636	)		(209	)		(5,867	)
Ending balance	$	21,715		$	22,155		$	21,715		$	22,155

Loans serviced for others are not included in the Condensed Consolidated Statements of Financial Condition. The unpaid principal balances of these loans serviced for others as of June 30, 2023 and December 31, 2022 were as follows:

	June 30,		December 31,
	2023		2022
Loan portfolios serviced for:
SBA guaranteed loans	$	1,516,675	$	1,521,014
USDA guaranteed loans		195,969		211,150
Total	$	1,712,644	$	1,732,164

Loan servicing revenue totaled $3.4 million for each of the three months ended June 30, 2023 and 2022. Loan servicing revenue totaled $6.8 million for each of the six months ended June 30, 2023 and 2022.

Loan servicing asset revaluation, which represents the changes in fair value of servicing assets, resulted in a downward valuation adjustment of $865,000 and $4.6 million for the three months ended June 30, 2023 and 2022, respectively. Loan servicing asset revaluation resulted in a downward valuation adjustment of $209,000 and $5.9 million for the six months ended June 30, 2023 and 2022, respectively.

The fair value of servicing rights is highly sensitive to changes in underlying assumptions. Changes in secondary market premiums and prepayment speed assumptions have the most significant impact on the fair value of servicing rights. Generally, as interest rates rise on variable rate loans, loan prepayments increase due to an increase in refinance activity, which may result in a decrease in the fair value of servicing assets. Measurement of fair value is limited to the conditions existing and the assumptions used as of a particular point in time, and those assumptions may change over time. Refer to Note 15—Fair Value Measurement for further details.

Note 7—Other Real Estate Owned

The following table presents the change in other real estate owned (“OREO”) for the three and six months ended June 30, 2023 and 2022:

	Three Months Ended June 30,					Six Months Ended June 30,
	2023			2022		2023			2022
Beginning balance	$	3,712		$	2,221	$	4,717		$	2,112
Net additions to OREO		445			2,528		499			2,837
Proceeds from sales of OREO		(1,795	)		—		(2,559	)		(225	)
Gains (losses) on sales of OREO		(85	)		—		(49	)		76
Valuation adjustments		(12	)		—		(343	)		(51	)
Ending balance	$	2,265		$	4,749	$	2,265		$	4,749

At June 30, 2023, the balance of real estate owned included $566,000 and $2.3 million in foreclosed residential real estate properties recorded as a result of obtaining physical possession of the property as of June 30, 2023 and December 31, 2022, respectively.

27

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

At June 30, 2023 and December 31, 2022, there were no recorded investment of consumer mortgage loans secured by residential real estate properties in foreclosure.

There were no internally financed sales of OREO for the three or six months ended June 30, 2023 or 2022.

Note 8—Leases

The Company enters into leases in the normal course of business primarily for its banking facilities and branches. The Company’s operating leases have varying maturity dates through year end 2042, some of which include renewal or termination options to extend the lease. In addition, the Company leases or subleases real estate to third parties. The Company includes lease extension and termination options in the lease term if, after considering relevant economic factors, it is reasonably certain the Company will exercise the option. In addition, the Company has elected to account for any non-lease components in its real estate leases as part of the associated lease component. The Company has also elected not to recognize leases with original lease terms of 12 months or less ("short-term leases") on the Company’s Condensed Consolidated Statements of Financial Condition.

Leases are classified at the lease commencement date. Lease expense for operating leases and short-term leases is recognized on a straight-line basis over the lease term. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.

The following table summarizes the amount and balance sheet line item for our operating lease right-of-use asset and liability as of the periods indicated:

	Balance Sheet Line Item	June 30, 2023		December 31, 2022
Operating lease right-of-use asset	Accrued interest receivable and other assets	$	10,849	$	11,352
Operating lease liability	Accrued interest payable and other liabilities		13,534		14,391

The Company uses its incremental borrowing rate at lease commencement to calculate the present value of lease payments when the rate implicit in a lease is not known. The Company’s incremental borrowing rate is based on the Federal Home Loan Bank regular advance rate, adjusted for the lease term and other factors. At June 30, 2023, the weighted-average discount rate of operating leases was 2.20% and the weighted average remaining life of operating leases was 6.2 years, compared to 1.95% and 6.2 years as of December 31, 2022.

The following table presents components of total lease costs included as a component of occupancy expense on the Condensed Consolidated Statements of Operations for the following periods:

	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Operating lease cost	$	621		$	720		$	1,244		$	1,578
Short-term lease cost		99			76			168			113
Variable lease cost		357			411			769			880
Less: Sublease income		(159	)		(149	)		(315	)		(276	)
Total lease cost, net	$	918		$	1,058		$	1,866		$	2,295

Operating cash flows paid for operating lease amounts included in the measure of lease liabilities were $821,000 and $962,000 for the three months ended June 30, 2023 and 2022, respectively. Operating cash flows paid for operating lease amounts included in the measure of lease liabilities were $1.7 million and $2.1 million for the six months ended June 30, 2023 and 2022, respectively.

The Company recorded $619,000 and $64,000 of right-of-use lease assets in exchange for operating lease liabilities for the three months ended June 30, 2023 and 2022, respectively. The Company recorded $932,000 and $1.3 million of right-of-use lease assets in exchange for operating lease liabilities for the six months ended June 30, 2023 and 2022, respectively.

28

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

The future minimum lease payments for operating leases, subsequent to June 30, 2023, as recorded on the Condensed Consolidated Statements of Financial Condition, are summarized as follows:

	Operating Lease Commitments
2023	$	1,677
2024		3,331
2025		2,759
2026		2,154
2027		1,112
Thereafter		3,691
Total undiscounted lease payments		14,724
Less: Imputed interest		(1,190	)
Net lease liabilities	$	13,534

The total amount of minimum rentals to be received in the future on these subleases is approximately $1.4 million, and the leases have contractual lives extending through 2028. In addition to the above required lease payments, the Company has contractual obligations related primarily to information technology contracts and other maintenance contracts.

Note 9—Goodwill, Core Deposit Intangible and Other Intangible Assets

The following tables summarize the changes in the Company’s goodwill, core deposit intangible assets, and customer relationship intangible assets for the three and six months ended June 30, 2023 and 2022:

	For the Three Months Ended June 30,
	2023								2022
	Goodwill		Core Deposit Intangible			Customer Relationship Intangible			Goodwill		Core Deposit Intangible			Customer Relationship Intangible
Beginning balance	$	148,353	$	7,498		$	1,581		$	148,353	$	13,475		$	2,134
Amortization		—		(1,388	)		(67	)		—		(1,530	)		(338	)
Ending balance	$	148,353	$	6,110		$	1,514		$	148,353	$	11,945		$	1,796
Accumulated amortization	N/A		$	49,356		$	1,702		N/A		$	43,521		$	1,420
Weighted average remaining    amortization period	N/A		4.8 Years			5.7 Years			N/A		4.5 Years			6.8 Years

	For the Six Months Ended June 30,
	2023								2022
	Goodwill		Core Deposit Intangible			Customer Relationship Intangible			Goodwill		Core Deposit Intangible			Customer Relationship Intangible
Beginning balance	$	148,353	$	8,886		$	1,648		$	148,353	$	15,004		$	2,201
Amortization		—		(2,776	)		(134	)		—		(3,059	)		(405	)
Ending balance	$	148,353	$	6,110		$	1,514		$	148,353	$	11,945		$	1,796
Accumulated amortization	N/A		$	49,356		$	1,702		N/A		$	43,521		$	1,420
Weighted average remaining    amortization period	N/A		4.8 Years			5.7 Years			N/A		4.5 Years			6.8 Years

29

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

The following table presents the estimated amortization expense for core deposit intangible and customer relationship intangible assets remaining at June 30, 2023:

	Estimated Amortization
2023	$	1,426
2024		2,286
2025		1,721
2026		1,157
2027		609
Thereafter		425
Total	$	7,624

Note 10—Income Taxes

The Company uses an estimated annual effective tax rate method in computing its interim tax provision. This effective tax rate is based on forecasted annual pre-tax income, permanent tax differences and statutory tax rates.

The effective tax rate for the six months ended June 30, 2023 and 2022 was 25.9% and 22.2%, respectively. The Company recorded discrete income tax benefit of $140,000 and $2.1 million related to the exercise of stock options and vesting of restricted shares for the six months ended June 30, 2023 and 2022, respectively.

Net deferred tax assets decreased to $66.9 million at June 30, 2023 compared to $68.2 million at December 31, 2022 primarily as a result of the change in unrealized gains on cash flow hedges.

Note 11—Deposits

The composition of deposits was as follows as of June 30, 2023 and December 31, 2022:

	June 30,		December 31,
	2023		2022
Non-interest-bearing demand deposits	$	1,793,749	$	2,138,645
Interest-bearing checking accounts		530,775		592,098
Money market demand accounts		1,600,043		1,415,653
Other savings		562,706		625,798
Time deposits (below $250,000)		1,214,717		762,250
Time deposits ($250,000 and above)		215,102		160,677
Total deposits	$	5,917,092	$	5,695,121

There were $551.4 million and $251.5 million of brokered deposits included in time deposits below $250,000 at June 30, 2023 and December 31, 2022, respectively.

At June 30, 2023, the scheduled maturities of time deposits were:

	Scheduled Maturities
2023	$	767,520
2024		633,946
2025		14,359
2026		6,657
2027 and thereafter		7,337
Total	$	1,429,819

The Company hedges interest rates on certain money market accounts using interest rate swaps through which the Company receives variable amounts and pays fixed amounts. Refer to Note 16—Derivative Instruments and Hedging Activities for additional discussion.

30

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

Note 12—Other Borrowings

The following is a summary of the Company’s other borrowings as of the dates presented:

	June 30,		December 31,
	2023		2022
Federal Home Loan Bank advances	$	540,000	$	625,000
Securities sold under agreements to repurchase		34,922		15,399
Line of credit		—		—
Total	$	574,922	$	640,399

Byline Bank has the capacity to borrow funds from the discount window of the Federal Reserve System. As of June 30, 2023 and December 31, 2022, there were no outstanding advances under the Federal Reserve Bank discount window line.

At June 30, 2023, fixed-rate Federal Home Loan Bank (“FHLB”) advances totaled $40.0 million, with an interest rate of 5.18% and maturity of July 2023. Total variable rate advances were $500.0 million at June 30, 2023, with interest rates ranging from 5.21% to 5.28%, that may reset daily, with maturities between August 2023 and September 2023. Advances from the FHLB are collateralized by residential real estate loans, commercial real estate loans, and securities. The Bank’s maximum borrowing capacity is limited to 35% of total assets. Required investment in FHLB stock is $4.50 for every $100 in advances thereafter.

Securities sold under agreements to repurchase represent a demand deposit product offered to customers that sweep balances in excess of the FDIC insurance limit into overnight repurchase agreements. The Company pledges securities as collateral for the repurchase agreements. Refer to Note 4—Securities for additional discussion.

On October 13, 2016, the Company entered into a $30.0 million revolving credit agreement with a correspondent bank. Through subsequent amendments, the revolving credit agreement was reduced to $15.0 million. The amended revolving line of credit bears interest at either SOFR plus 195 basis points or Prime Rate minus 75 basis points, not to be less than 2.00%, based on the Company’s election, which is required to be communicated at least three business days prior to the commencement of an interest period. If the Company fails to provide timely notification, the interest rate will be Prime Rate minus 75 basis points. On May 26, 2023, the Company amended the agreement with the lender, which provides for: i) the renewal of the revolving line-of-credit facility of up to $15,000,000, extending its maturity date to May 26, 2024; and ii) a new term loan facility in the principal amount of up to $20,000,000 with a maturity date of May 26, 2026, each subject to the existing Negative Pledge Agreement dated October 11, 2018, as amended. At June 30, 2023 and December 31, 2022, the line of credit had no outstanding balance.

The following table presents short-term credit lines available for use as of the dates presented:

	June 30,		December 31,
	2023		2022
Federal Home Loan Bank line	$	2,076,310	$	1,903,549
Federal Reserve Bank of Chicago discount window line		760,627		804,578
Available federal funds lines		135,000		135,000

The Company hedges interest rates on borrowed funds using interest rate swaps through which the Company receives variable amounts and pays fixed amounts. Refer to Note 16—Derivative Instruments and Hedging Activities for additional discussion.

31

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

Note 13—Subordinated Notes and Junior Subordinated Debentures

In 2020, the Company issued $75.0 million in fixed-to-floating subordinated notes that mature on July 1, 2030. The subordinated notes bear a fixed interest rate of 6.00% until July 1, 2025 and a floating interest rate equal to a benchmark rate, which is expected to be the three-month SOFR, plus 588 basis points thereafter until maturity. The transaction resulted in debt issuance costs of approximately $1.7 million that is being amortized over 10 years.

As of June 30, 2023, the net liability outstanding of the subordinated notes was $73.8 million. The Company may, at its option, redeem the notes, in whole or in part, on a semi-annual basis beginning on July 1, 2025, subject to obtaining the prior approval of the Federal Reserve to the extent such approval is then required. The subordinated notes qualify as Tier 2 capital for regulatory capital purposes.

At June 30, 2023 and December 31, 2022, the Company’s junior subordinated debentures by issuance were as follows:

Name of Trust	Aggregate Principal Amount June 30, 2023			Aggregate Principal Amount December 31, 2022			Stated Maturity	Contractual Rate at June 30, 2023			Interest Rate Spread
Metropolitan Statutory Trust I	$	35,000		$	35,000		March 17, 2034		8.30	%	Three-month LIBOR + 2.79%
First Evanston Bancorp Trust I		10,000			10,000		March 15, 2035		7.33	%	Three-month LIBOR + 1.78%
Total liability, at par		45,000			45,000
Discount		(7,443	)		(7,662	)
Total liability, at carrying value	$	37,557		$	37,338

In 2004, the Company’s predecessor, Metropolitan Bank Group, Inc., issued $35.0 million floating rate junior subordinated debentures to Metropolitan Statutory Trust I, which was formed for the issuance of trust preferred securities. The debentures bear interest at three-month LIBOR plus 2.79% (8.30% and 7.53% at June 30, 2023 and December 31, 2022, respectively). Interest is paid on a quarterly basis. The Company has the right to redeem the debentures, in whole or in part, on any interest payment date on or after March 2009. Accrued interest payable was $92,000 and $98,000 as of June 30, 2023 and December 31, 2022, respectively.

As part of the First Evanston acquisition, the Company assumed the obligations to First Evanston Bancorp Trust I of $10.0 million in principal amount, which was formed for the issuance of trust preferred securities. Beginning on March 15, 2010, the interest rate reset to the three-month LIBOR plus 1.78% (7.33% and 6.55% at June 30, 2023 and December 31, 2022, respectively), which is in effect until the debentures mature in 2035. Interest is paid on a quarterly basis. The Company has the right to redeem the debentures, in whole or in part, on any interest payment date on or after March 2010. The Company has the option to defer interest payments on the debentures from time to time for a period not to exceed five consecutive years. Accrued interest payable was $31,000 and $30,000 as of June 30, 2023 and December 31, 2022, respectively.

The Trusts are not consolidated with the Company. Accordingly, the Company reports the subordinated debentures held by the Trusts as liabilities. The Company owns all of the common securities of each trust. The junior subordinated debentures qualify, and are treated as, Tier 1 regulatory capital of the Company subject to regulatory limitations. The trust preferred securities issued by each trust rank equally with the common securities in right of payment, except that if an event of default under the indenture governing the notes has occurred and is continuing, the preferred securities will rank senior to the common securities in right of payment.

32

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

Note 14—Commitments and Contingent Liabilities

Legal contingencies—In the ordinary course of business, the Company and Bank have various outstanding commitments and contingent liabilities that are not recognized in the accompanying consolidated financial statements. In addition, the Company may be a defendant in certain claims and legal actions arising in the ordinary course of business. In the opinion of management, after consultation with legal counsel, the ultimate disposition of these matters is currently not expected to have a material adverse effect on the Company’s Consolidated Financial Statements.

Operating lease commitments—Refer to Note 8—Leases for discussion of operating lease commitments.

Commitments to extend credit—The Company is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Condensed Consolidated Statements of Financial Condition. The contractual or notional amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

The Company’s exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit and letters of credit is represented by the contractual or notional amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for funded instruments. The Company does not anticipate any material losses as a result of the commitments and letters of credit.

The following table summarizes the contract or notional amount of outstanding loan and lease commitments at June 30, 2023 and December 31, 2022:

	June 30, 2023						December 31, 2022
	Fixed Rate		Variable Rate		Total		Fixed Rate		Variable Rate		Total
Commitments to extend credit	$	245,616	$	1,807,433	$	2,053,049	$	258,049	$	1,821,175	$	2,079,224
Letters of credit		521		66,036		66,557		536		61,328		61,864
Total	$	246,137	$	1,873,469	$	2,119,606	$	258,585	$	1,882,503	$	2,141,088

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral is primarily obtained in the form of commercial and residential real estate (including income producing commercial properties).

Letters of credit are conditional commitments issued by the Company to guarantee to a third-party the performance of a customer. Those guarantees are primarily issued to support public and private borrowing arrangements, bond financing and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

Commitments to make loans are generally made for periods of 90 days or less. The fixed rate loan commitments have interest rates ranging from 1.00% to 18.25% and maturities up to 2050. Variable rate loan commitments have interest rates ranging from 1.75% to 14.00% and maturities up to 2048.

Note 15—Fair Value Measurement

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. In addition, the Company has the ability to obtain fair values for markets that are not accessible.

These types of inputs create the following fair value hierarchy:

Level 1—Quoted prices in active markets for identical assets or liabilities.

33

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

Level 2—Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the asset or liability. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available. The Company’s own data used to develop unobservable inputs may be adjusted for market considerations when reasonably available.

The categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to assets and liabilities.

The Company used the following methods and significant assumptions to estimate fair value for certain assets measured and carried at fair value on a recurring basis:

Securities available-for-sale—The Company obtains fair value measurements from an independent pricing service. Management reviews the procedures used by the third party, including significant inputs used in the fair value calculations. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things. When market quotes are not readily accessible or available, alternative approaches are utilized, such as matrix or model pricing.

The Company’s methodology for pricing non-rated bonds focuses on three distinct inputs: equivalent rating, yield and other pricing terms. To determine the rating for a given non-rated municipal bond, the Company references a publicly issued bond by the same issuer if available as well as other additional key metrics to support the credit worthiness. Typically, pricing for these types of bonds would require a higher yield than a similar rated bond from the same issuer. A reduction in price is applied to the rating obtained from the comparable bond, as the Company believes if liquidated, a non-rated bond would be valued less than a similar bond with a verifiable rating. The reduction applied by the Company is one notch lower (i.e. a “AA” rating for a comparable bond would be reduced to “AA-” for the Company’s valuation). In 2023 and 2022, all of the ratings derived by the Company were “BBB-” or better with and without comparable bond proxies. All of the ratings of non-Agency backed bonds derived by the Company were investment grade. The fair value measurement of municipal bonds is sensitive to the rating input, as a higher rating typically results in an increased valuation. The remaining pricing inputs used in the bond valuation are observable. Based on the rating determined, the Company obtains a corresponding current market yield curve available to market participants. Other terms including coupon, maturity date, redemption price, number of coupon payments per year, and accrual method are obtained from the individual bond term sheets.

Equity and other securities—The Company utilizes the same fair value measurement methodology for equity and other securities as detailed in the securities available-sale portfolio above.

Servicing assets—Fair value is based on a loan-by-loan basis taking into consideration the original term to maturity, the current age of the loan and the remaining term to maturity. The valuation methodology utilized for the servicing assets begins with generating estimated future cash flows for each servicing asset, based on their unique characteristics and market-based assumptions for prepayment speeds and costs to service. The present value of the future cash flows are then calculated utilizing market-based discount rate assumptions.

Derivative instruments—Interest rate derivatives are valued by a third party, using models that primarily use market observable inputs, such as yield curves, and are validated by comparison with valuations provided by the respective counterparties. Derivative financial instruments are included in other assets and other liabilities in the Condensed Consolidated Statements of Financial Condition.

34

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

The following tables summarize the Company’s financial assets and liabilities that were measured at fair value on a recurring basis at June 30, 2023 and December 31, 2022:

			Fair Value Measurements Using
June 30, 2023	Fair Value		Level 1		Level 2		Level 3
Financial assets
Securities available-for-sale
U.S. Treasury Notes	$	40,718	$	40,718	$	—	$	—
U.S. Government agencies		128,518		—		128,518		—
Obligations of states, municipalities, and political    subdivisions		62,730		—		62,730		—
Mortgage-backed securities; residential
Agency		565,680		—		565,680		—
Non-Agency		101,880		—		101,880		—
Mortgage-backed securities; commercial
Agency		152,240		—		152,240		—
Corporate securities		35,943		—		35,943		—
Asset-backed securities		37,991		—		37,991		—
Equity and other securities, at fair value
Mutual funds		2,518		2,518		—		—
Equity securities		15,955		—		15,316		639
Servicing assets		21,715		—		—		21,715
Derivative assets		64,159		—		64,159		—
Financial liabilities
Derivative liabilities		18,773		—		18,773		—

			Fair Value Measurements Using
December 31, 2022	Fair Value		Level 1		Level 2		Level 3
Financial assets
Securities available-for-sale
U.S. Treasury Notes	$	40,723	$	40,723	$	—	$	—
U.S. Government agencies		130,364		—		130,364		—
Obligations of states, municipalities, and political    subdivisions		61,876		—		61,876
Mortgage-backed securities; residential
Agency		595,796		—		595,796		—
Non-Agency		106,249		—		106,249		—
Mortgage-backed securities; commercial
Agency		157,030		—		157,030		—
Corporate securities		41,436		—		41,436		—
Asset-backed securities		40,957		—		40,957		—
Equity and other securities, at fair value
Mutual funds		2,518		2,518		—		—
Equity securities		5,471		—		4,805		666
Servicing assets		19,172		—		—		19,172
Derivative assets		65,342		—		65,342		—
Financial liabilities
Derivative liabilities		17,817		—		17,817		—

The following table presents additional information about financial assets measured at fair value on recurring basis for which the Company used significant unobservable inputs (Level 3):

	Six Months Ended June 30,
	2023			2022			2023			2022
	Investment Securities						Servicing Assets
Balance, beginning of period	$	666		$	686		$	19,172		$	23,744
Additions, net		—			—			2,752			4,278
Change in fair value		(27	)		(23	)		(209	)		(5,867	)
Balance, end of period	$	639		$	663		$	21,715		$	22,155

35

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

The Company did not have any transfers to or from Level 3 of the fair value hierarchy during the six months ended June 30, 2023 and 2022.

The following table presents additional information about the unobservable inputs used in the fair value measurements on recurring basis that were categorized within Level 3 of the fair value hierarchy as of June 30, 2023:

Financial Instruments	Valuation Technique	Unobservable Inputs	Range of Inputs	Weighted Average Range			Impact to Valuation from an Increased or Higher Input Value
Single issuer trust preferred	Discounted cash flow	Discount rate	6.4% - 8.2%		7.4	%	Decrease
Servicing assets	Discounted cash flow	Prepayment speeds	(1.0)% - 30.9%		12.7	%	Decrease
		Discount rate	6.2% - 51.6%		13.8	%	Decrease
		Expected weighted average loan life	0.0 - 9.8 years	4.1 years			Increase

The Company used the following methods and significant assumptions to estimate fair value for certain assets measured and carried at fair value on a non-recurring basis:

Individually Evaluated Loans—The Company individually evaluates loans that do not share similar risk characteristics, including non-accrual loans. Specific allowance for credit losses is measured based on a discounted cash flow of ongoing operations, discounted at the loan's original effective interest rat, or a calculation of the fair value of the underlying collateral less estimated selling costs. Valuations of individually assessed loans that are collateral dependent are supported by third party appraisals in accordance with the Bank's credit policy. Accordingly, individually evaluated loans are classified as Level 3.

Assets held for sale—Assets held for sale consist of former branch locations and real estate previously purchased for expansion. Assets are considered held for sale when management has approved to sell the assets following a branch closure or other events. The properties are being actively marketed and transferred to assets held for sale based on the lower of carrying value or its fair value, less estimated costs to sell. The Company records assets held for sale on the Condensed Consolidated Statements of Financial Condition within accrued interest receivable and other assets.

Other real estate owned—Certain assets held within other real estate owned represent real estate or other collateral that has been adjusted to its estimated fair value, less cost to sell, as a result of transferring from the loan portfolio at the time of foreclosure or repossession and based on management’s periodic impairment evaluation. From time to time, non-recurring fair value adjustments to other real estate owned are recorded to reflect partial write-downs based on an observable market price or current appraised value of property.

Adjustments to fair value based on such non-recurring transactions generally result from the application of lower-of-cost-or-market accounting or write-downs of individual assets due to impairment. The following tables summarize the Company’s assets that were measured at fair value on a non-recurring basis, as of June 30, 2023 and December 31, 2022:

			Fair Value Measurements Using
June 30, 2023	Fair Value		Level 1		Level 2		Level 3
Non-recurring
Individually evaluated loans
Commercial real estate	$	22,195	$	—	$	—	$	22,195
Commercial and industrial		21,086		—		—		21,086
Assets held for sale		8,653		—		—		8,653
Other real estate owned		2,265		—		—		2,265

36

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

			Fair Value Measurements Using
December 31, 2022	Fair Value		Level 1		Level 2		Level 3
Non-recurring
Individually evaluated loans
Commercial real estate	$	37,959	$	—	$	—	$	37,959
Residential real estate		879		—		—		879
Construction, land development, and other land		5,541		—		—		5,541
Commercial and industrial		47,846		—		—		47,846
Assets held for sale		8,673		—		—		8,673
Other real estate owned		4,717		—		—		4,717

The following methods and assumptions were used by the Company in estimating fair values of other assets and liabilities for disclosure purposes:

Cash and cash equivalents and interest bearing deposits with other banks—For these short-term instruments, the carrying amount is a reasonable estimate of fair value.

Securities held-to-maturity—The Company obtains fair value measurements from an independent pricing service. Management reviews the procedures used by the third party, including significant inputs used in the fair value calculations. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things. When market quotes are not readily accessible or available, alternative approaches are utilized, such as matrix or model pricing.

Restricted stock—The fair value has been determined to approximate cost.

Loans held for sale—The fair value of loans held for sale are based on quoted market prices, where available, and determined by discounted estimated cash flows using interest rates approximating the Company’s current origination rates for similar loans adjusted to reflect the inherent credit risk.

Loan and lease receivables, net—For certain variable rate loans that reprice frequently and with no significant changes in credit risk, fair value is estimated at carrying value. The fair value of other types of loans is estimated using an exit price notion. It is estimated by discounting future cash flows, using current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

Deposits—The fair value of demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated by discounting future cash flows, using rates currently offered for deposits of similar remaining maturities.

Federal Home Loan Bank advances—The fair value of FHLB advances is estimated by discounting the agreements based on maturities using rates currently offered for FHLB advances of similar remaining maturities adjusted for prepayment penalties that would be incurred if the borrowings were paid off on the measurement date.

Securities sold under agreements to repurchase—The carrying amount approximates fair value due to maturities of less than ninety days.

Subordinated notes—The fair value is based on available market prices.

Junior subordinated debentures—The fair value of junior subordinated debentures, in the form of trust preferred securities, is determined using rates currently available to the Company for debt with similar terms and remaining maturities.

Accrued interest receivable and payable—The carrying amount approximates fair value.

Commitments to extend credit and letters of credit—The fair values of these off-balance sheet commitments to extend credit and commercial and letters of credit are not considered practicable to estimate because of the lack of quoted market prices and the inability to estimate fair value without incurring excessive costs.

37

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

The estimated fair values of financial instruments not carried at fair value and levels within the fair value hierarchy are as follows:

			June 30,				December 31,
	Fair Value		2023				2022
	Hierarchy Level		Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial assets
Cash and due from banks		1	$	59,564	$	59,564	$	62,274	$	62,274
Interest bearing deposits with other banks		2		260,621		260,621		117,079		117,079
Securities held-to-maturity		2		2,158		2,132		2,705		2,672
Restricted stock		2		24,377		24,377		28,202		28,202
Loans held for sale		3		25,995		26,803		47,823		40,657
Loans and lease receivables, net (less impaired    loans at fair value)		3		5,434,571		5,335,289		5,262,447		5,259,991
Accrued interest receivable		3		29,882		29,882		29,815		29,815
Financial liabilities
Non-interest-bearing deposits		2		1,793,749		1,793,749		2,138,645		2,138,645
Interest-bearing deposits		2		4,123,343		4,122,535		3,556,476		3,554,318
Accrued interest payable		2		13,019		13,019		4,494		4,494
Federal Home Loan Bank advances		2		540,000		540,000		625,000		625,000
Securities sold under repurchase agreement		2		34,922		34,922		15,399		15,399
Subordinated notes		2		73,778		70,341		73,691		70,925
Junior subordinated debentures		3		37,557		38,479		37,338		40,131

38

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

Note 16—Derivative Instruments and Hedge Activities

As required by ASC 815, the Company records all derivatives on the Condensed Consolidated Statements of Financial Condition at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. The Company records derivative assets and derivative liabilities on the Condensed Consolidated Statements of Financial Condition within accrued interest receivable and other assets and accrued interest payable and other liabilities, respectively. The following tables present the fair value of the Company’s derivative financial instruments and classification on the Condensed Consolidated Statements of Financial Condition as of June 30, 2023 and December 31, 2022:

	June 30, 2023							December 31, 2022
			Fair Value							Fair Value
	Notional Amount		Other Assets		Other Liabilities			Notional Amount		Other Assets		Other Liabilities
Derivatives designated as hedging instruments
Interest rate swaps designated as cash flow    hedges	$	550,000	$	45,303	$	—		$	550,000	$	47,249	$	—
Derivatives not designated as hedging instruments
Other interest rate derivatives		558,316		18,856		(18,773	)		545,346		18,093		(17,817	)
Other credit derivatives		1,206		—		—			6,678		—		—
Total derivatives	$	1,109,522	$	64,159	$	(18,773	)	$	1,102,024	$	65,342	$	(17,817	)

Interest rate swaps designated as cash flow hedges—Cash flow hedges of interest payments associated with certain financial instruments had notional amounts totaling $550.0 million as of June 30, 2023, and December 31, 2022. The Company assesses the effectiveness of each hedging relationship by comparing the changes in fair value of the derivatives hedging instrument with the fair value of the designated hedged transactions. As of June 30, 2023, the cash flow hedges aggregating $550.0 million in notional amounts are comprised of $450.0 million pay-fixed interest rate swaps associated with certain deposits and other borrowings, and $100.0 million receive-fixed interest rate swaps associated with certain variable rate loans. On July 11, 2023, the Company entered into a $50.0 million forward-starting receive-fixed interest rate swap with an effective date of March 2024.

As of June 30, 2023, pay-fixed interest rate swaps are comprised of five effective hedges totaling $400.0 million, and a $50.0 million forward-starting interest rate swap that is effective in September 2023. Receive-fixed interest rate swaps totaling $100.0 million are comprised of two effective hedges.

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the unrealized gain or loss on the derivatives is recorded in accumulated other comprehensive income (loss) and subsequently reclassified into interest income or expense in the same period during which the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to interest income or expense as interest payments are made on the hedged instruments. Interest recorded on these swap transactions included $3.9 million of interest income and $109,000 of interest expense during the three months ended June 30, 2023, and 2022, respectively, and is reported as a component of interest expense on deposits and other borrowings. Interest recorded on these swap transactions was $5.8 million interest income and $319,000 interest expense during the six months ended June 30, 2023, and 2022, respectively. As of June 30, 2023, the Company estimates $18.4 million of the unrealized gain to be reclassified as a decrease to interest expense during the next twelve months.

Accumulated other comprehensive income also includes the amortization of the remaining balance related to terminated interest rate swaps designated as cash flow hedges, which are over the original life of the cash flow hedge. In March 2023, the Company terminated interest rate swaps designated as cash flow hedges totaling $100.0 million, of which $50.0 million became effective in May 2023 and $50.0 million became effective in June 2023. The transaction resulted in a gain of $4.2 million, net of tax, which was the clean value at termination date and began amortizing as a decrease to interest expense on the effective dates. The remaining unamortized balance was $4.1 million and $15,000 as of June 30, 2023 and December 31, 2022, respectively.

39

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

The following table reflects the cash flow hedges as of June 30, 2023:

Notional amounts	$	550,000
Derivative assets fair value		45,303
Derivative liabilities fair value		—
Weighted average remaining maturity	3.4 years

Receive rates are determined at the time the swaps become effective. As of June 30, 2023, the weighted average pay rates of the five effective pay-fixed hedges for $400.0 million were 0.98% and the weighted average receive rates were 5.08%. As of June 30, 2023, the weighted average pay rates of the receive-fixed interest rate swaps of $100.0 million were 7.44% and the weighted average receive rates were 8.25%.

The following table reflects the net gains (losses) recorded in accumulated other comprehensive income (loss) and the Condensed Consolidated Statements of Operations relating to the cash flow derivative instruments for the six months ended:

	June 30, 2023						June 30, 2022
	Amount of Gain Recognized in AOCI		Amount of Gain Reclassified from AOCI to Income as a Decrease to Interest Expense		Amount of Gain (Loss) Recognized in Other Non-Interest Income		Amount of Gain Recognized in OCI		Amount of Loss Reclassified from OCI to Income as an Increase to Interest Expense			Amount of Gain (Loss) Recognized in Other Non-Interest Income
Interest rate swaps	$	8,709	$	5,819	$	—	$	24,557	$	(319	)	$	—

Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to interest rate movements and other identified risks but do not meet the strict hedge accounting requirements and/or the Company has not elected to apply hedge accounting. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings.

Other interest rate derivatives—The total combined notional amount was $558.3 million as of June 30, 2023 with maturities ranging from March 2024 to March 2033. The fair values of the interest rate derivative agreements are reflected in other assets and other liabilities with corresponding gains or losses reflected in non-interest income. During the six months ended June 30, 2023, there were $472,000 of net transaction fees, included in other non-interest income, related to these derivative instruments. There were no transaction fees during the three months ended June 30, 2023. During the three and six months ended June 30, 2022, there were $533,000 and $1.6 million of net transaction fees, respectively, included in other non-interest income, related to these derivative instruments.

These instruments are inherently subject to market risk and credit risk. Market risk is associated with changes in interest rates and credit risk relates to the Company’s risk of loss when the counterparty to a derivative contract fails to perform according to the terms of the agreement. Market and credit risks are managed and monitored as part of the Company’s overall asset-liability management process. The credit risk related to derivatives entered into with certain qualified borrowers is managed through the Company’s loan underwriting process. The Company’s loan underwriting process also approves the Bank’s swap counterparty used to mirror the borrowers’ swap. The Company has a bilateral agreement with each swap counterparty that provides that fluctuations in derivative values are to be fully collateralized with either cash or securities.

The following table reflects other interest rate derivatives as of June 30, 2023:

Notional amounts	$	558,316
Derivative assets fair value		18,856
Derivative liabilities fair value		18,773
Weighted average pay rates		4.29	%
Weighted average receive rates		5.98	%
Weighted average remaining maturity	5.3 years

40

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

Other derivatives— The Company has entered into risk participation agreements with counterparty banks to assume a portion of the credit risk related to borrower transactions. The credit risk related to these other derivatives is managed through the Company’s loan underwriting process. The total notional amount was $1.2 million and $6.7 million as of June 30, 2023 and December 31, 2022, respectively. Additionally, the Company enters into foreign currency contracts to manage foreign exchange risk associated with certain customer foreign currency transactions. These transactions were not material to the consolidated financial statements as of June 30, 2023 and December 31, 2022. The fair values of the credit derivatives is reflected in other assets and liabilities with corresponding gains or losses reflected in non-interest income or other comprehensive income.

The Company has agreements with its derivative counterparties that contain a cross-default provision under which if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations. The Company also has agreements with certain derivative counterparties that contain a provision where if the Company fails to maintain its status as a well or adequately capitalized institution, then the counterparty could terminate the derivative positions and the Company would be required to settle its obligations resulted in a net asset position.

The following table reflects amounts included in non-interest income in the Condensed Consolidated Statements of Operations relating to derivative instruments that are not designated in a hedging relationship for the three and six months ended June 30, 2023 and 2022:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023			2022
Other interest rate derivatives	$	115	$	286	$	(193	)	$	568
Other credit derivatives		—		1		—			5
Total	$	115	$	287	$	(193	)	$	573

The Company records interest rate derivatives subject to master netting agreements at their gross value and does not offset derivative asset and liabilities on the Condensed Consolidated Statements of Financial Condition. The table below summarizes the Company’s interest rate derivatives and offsetting positions as of:

	June 30, 2023						December 31, 2022
	Derivative Assets Fair Value			Derivative Liabilities Fair Value			Derivative Assets Fair Value			Derivative Liabilities Fair Value
Gross amounts recognized	$	64,159		$	(18,773	)	$	65,342		$	(17,817	)
Less: Amounts offset in the Condensed Consolidated   Statements of Financial Condition		—			—			—			—
Net amount presented in the Condensed Consolidated   Statements of Financial Condition	$	64,159		$	(18,773	)	$	65,342		$	(17,817	)
Gross amounts not offset in the Condensed Consolidated   Statements of Financial Condition
Offsetting derivative positions		(537	)		537			(43	)		43
Collateral posted		(60,520	)		—			(64,370	)		—
Net credit exposure	$	3,102		$	(18,236	)	$	929		$	(17,774	)

As of June 30, 2023, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $18.8 million. If the Company had breached any of these provisions at June 30, 2023, it could have been required to settle its obligations under the agreements at their termination value less offsetting positions of $537,000. For purposes of this disclosure, the amount of posted collateral by the Company and counterparties is limited to the amount offsetting the derivative asset and derivative liability.

41

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

Note 17 – Share-Based Compensation

In June 2017, the Company's Board of Directors adopted, and the Company's stockholder approved, the 2017 Omnibus Incentive Compensation Plan (the “Omnibus Plan”). The Omnibus Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights and other equity-based, equity-related or cash-based awards. A total of 2,600,000 shares of our common stock have been reserved for issuance under the Omnibus Plan. As of June 30, 2023, there were 1,188,654 shares available for future grants under the Omnibus Plan.

The Company primarily grants time-based restricted share awards that vest over a one to four year period, subject to continued employment. The Company also grants performance-based restricted share awards. The number of shares which may be earned under the award is dependent upon the Company’s return on average assets, weighted equally over a three-year period and measured against a peer group consisting of publicly-traded bank holding companies. Results will be measured cumulatively at the end of the three years. Any earned shares will vest on the third anniversary of the grant date.

During 2023, the Company granted 289,676 shares of restricted common stock, par value $0.01 per share. Of this total, 3,627 restricted shares will vest in one year, 201,569 restricted shares will vest ratably over three years on each anniversary of the grant date, 33,098 restricted shares will cliff vest on the third anniversary of the grant date, all subject to continued employment. In addition, 51,382 performance-based shares were granted. The number of performance-based shares which may be earned under the award is dependent upon the Company's total stockholder return and return on average assets, weighted equally, over a three-year period ending December 31, 2025, measured against the KBW Regional Bank Index. Results will be measured cumulatively at the end of the three years and any earned shares will vest on the third anniversary of the grant date.

The following table discloses the changes in restricted shares for the six months ended June 30, 2023:

	Omnibus Plan
	Number of Shares			Weighted Average Grant Date Fair Value
Beginning balance, January 1, 2023		581,337		$	22.93
Granted		289,676			24.62
Incremental performance shares vested		1,826
Vested		(182,294	)		21.47
Forfeited		(14,091	)		24.24
Ending balance outstanding at June 30, 2023		676,454		$	24.00

A total of 182,294 restricted shares vested during the six months ended June 30, 2023. A total of 243,603 restricted shares vested during the year ended December 31, 2022. The fair value of restricted shares that vested during the six months ended June 30, 2023 was $4.4 million. The fair value of restricted shares that vested during the year ended December 31, 2022 was $5.9 million.

The Company recognizes share-based compensation based on the estimated fair value of the restricted stock at the grant date. The fair value of the total stock return performance-based awards granted in 2023 were calculated based on a Monte Carlo simulation, using expected volatilities between 38.11% and 39.80%, a risk-free rate of 4.42%, and a simulation term of 2.85 years. Based on the equal weighing of total stock return and return on average assets, the grant date fair value of the performance based awards was $25.20 per share. Share-based compensation expense is included in non-interest expense in the Condensed Consolidated Statements of Operations.

42

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

The following table summarizes restricted stock compensation expense for the six months ended June 30, 2023 and 2022:

	Six Months Ended June 30,
	2023		2022
Total share-based compensation - restricted stock	$	3,217	$	2,798
Income tax benefit		866		761
Unrecognized compensation expense		12,757		12,050
Weighted average remaining amortization period	2.3 years		2.7 years

The fair value of the unvested restricted stock awards at June 30, 2023 was $12.2 million.

43

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

Note 18—Earnings per Share

A reconciliation of the numerators and denominators for earnings per common share computations is presented below. Incremental shares represent outstanding stock options for which the exercise price is less than the average market price of the Company’s common stock during the periods presented. Options to purchase 930,852 and 986,757 shares of common stock were outstanding as of June 30, 2023 and 2022, respectively. There were 676,454 and 687,213 restricted stock awards outstanding at June 30, 2023 and 2022, respectively. For the three and six months ended June 30, 2023 and 2022, no stock options outstanding were excluded from the calculation of diluted earnings per common share.

The following represent the calculation of basic and diluted earnings per share for the periods presented:

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income	$	26,107	$	20,283	$	50,052	$	42,594
Less: Dividends on preferred shares		—		—		—		196
Net income available to common stockholders	$	26,107	$	20,283	$	50,052	$	42,398
Weighted-average common stock outstanding:
Weighted-average common stock outstanding (basic)		37,034,626		37,064,795		36,995,075		37,093,816
Incremental shares		303,280		547,473		449,306		646,866
Weighted-average common stock outstanding (dilutive)		37,337,906		37,612,268		37,444,381		37,740,682
Basic earnings per common share	$	0.70	$	0.55	$	1.35	$	1.14
Diluted earnings per common share	$	0.70	$	0.54	$	1.34	$	1.12

Note 19—Stockholders’ Equity

A summary of the Company’s preferred and common stock at June 30, 2023 and December 31, 2022 is as follows:

	June 30,		December 31,
	2023		2022
Preferred stock
Par value	$	0.01	$	0.01
Shares authorized		25,000,000		25,000,000
Shares issued		—		—
Shares outstanding		—		—
Common stock, voting
Par value	$	0.01	$	0.01
Shares authorized		150,000,000		150,000,000
Shares issued		39,729,369		39,518,702
Shares outstanding		37,752,002		37,492,775
Treasury shares		1,977,367		2,025,927

During 2016, the Company authorized and issued Series B 7.50% fixed-to-floating non-voting, noncumulative perpetual preferred stock with a liquidation preference of $1,000 per share, plus the amount of unpaid dividends, if any, which was redeemable at the Company’s option on or after March 31, 2022. Holders of Series B Preferred Stock did not have any rights to convert such stock into shares of any other class of capital stock of the Company. Holders of Series B Preferred Stock were entitled to receive a fixed dividend of 7.50% per annum from the original issue date through December 30, 2021.

On February 15, 2022, the Company gave notice of its intention to redeem all of its outstanding shares of the Series B Preferred Stock (the “Preferred Stock Redemption”). The Preferred Stock Redemption was in accordance with the terms of the Certificate of Designations of the Series B Preferred Stock dated as of June 16, 2017 (the “Certificate of Designation”). On March 31, 2022, the Company redeemed all 10,438 outstanding shares of Series B Preferred Stock. Under the Certificate of Designations, the per share redemption price was the liquidation preference of $1,000 per share plus an amount equal to any declared and unpaid dividends thereon for any prior dividend period and totaled $10.6 million.

44

BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

For the six months ended June 30, 2022, we declared and paid dividends on the Series B preferred stock of $196,000.

On December 10, 2020, we announced that our Board of Directors approved a stock repurchase program authorizing the purchase of up to an aggregate of 1,250,000 shares of our outstanding common stock, and on July 27, 2021, our Board of Directors authorized an expansion of the stock repurchase program. Under the extended program, we were authorized to repurchase an additional 1,250,000 shares of our outstanding common stock. This repurchase program expired on December 31, 2022.

On December 12, 2022, we announced that our Board of Directors approved a new stock repurchase program authorizing the purchase of up to an aggregate of 1,250,000 shares of our outstanding common stock. The program is in effect from January 1, 2023 until December 31, 2023 unless terminated earlier. The shares may, at the discretion of management, be repurchased from time to time in open market purchases as market conditions warrant or in privately negotiated transactions. We are not obligated to purchase any shares under the program, and the program may be discontinued at any time. The actual timing, number and share price of shares purchased under the repurchase program will be determined by management at its discretion and will depend on a number of factors, including the market price of our stock, general market and economic conditions and applicable legal requirements.

We did not purchase any shares under the stock repurchase program during the three or six months ended June 30, 2023. We purchased 232,000 shares at a cost of $5.5 million under this program during the three months ended June 30, 2022. We purchased 514,819 shares at a cost of $13.1 million under this program during the six months ended June 30, 2022.

Repurchased shares are recorded as treasury shares on the trade date using the treasury stock method, and the cash paid is recorded as treasury stock. Treasury stock acquired is recorded at cost and is carried as a reduction of stockholders’ equity in the Condensed Consolidated Statements of Financial Condition.

For each of the three months ended June 30, 2023 and 2022, cash dividends were declared and paid to stockholders of record of our common stock of $0.09 per share. For the six months ended June 30, 2023 and 2022, cash dividends were declared and paid to stockholders of record of our common stock of $0.18 per share.

On July 25, 2023, our Board of Directors declared a cash dividend of $0.09 per share payable on August 22, 2023 to stockholders of record of our common stock as of August 8, 2023.

Note 20—Consolidated Statements of Changes in Accumulated Other Comprehensive Income (Loss)

The following table summarizes the changes in accumulated other comprehensive income (loss) for the six months ended June 30, 2023 and 2022:

(dollars in thousands)	Unrealized Gains on Cash Flow Hedges		Unrealized Gains (Losses) on Available-for-Sale Securities			Total Accumulated Other Comprehensive Income (Loss)
Balance, January 1, 2022	$	2,817	$	(11,119	)	$	(8,302	)
Other comprehensive income (loss), net of tax		18,127		(101,087	)		(82,960	)
Balance, June 30, 2022	$	20,944	$	(112,206	)	$	(91,262	)
Balance, January 1, 2023	$	34,315	$	(151,865	)	$	(117,550	)
Other comprehensive income, net of tax		2,118		570			2,688
Balance, June 30, 2023	$	36,433	$	(151,295	)	$	(114,862	)

45

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion and analysis of Byline Bancorp, Inc.’s financial condition and results of operations and should be read in conjunction with our Unaudited Interim Condensed Consolidated Financial Statements and notes thereto included elsewhere in this report. The words “the Company,” “we,” “Byline,” “management,” “our” and “us” refer to Byline Bancorp, Inc. and its consolidated subsidiaries, unless we indicate otherwise. In addition to historical information, this discussion contains forward looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management’s expectations. Factors that could cause such differences are discussed in the sections entitled “Special Note Regarding Forward Looking Statements” and “Risk Factors”. Byline assumes no obligation to update any of these forward looking statements.

Forward-Looking Statements

Statements contained in this report and in other documents we file with or furnish to the Securities and Exchange Commission (“SEC”) that are not historical facts may constitute “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Any statements about our expectations, beliefs, plans, strategies, predictions, forecasts, objectives or assumptions of future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “anticipates,” “believes,” “expects,” “can,” “could,” “may,” “predicts,” “potential,” “opportunity,” “should,” “will,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” “seeks,” “intends” and similar words or phrases. Accordingly, these statements involve estimates, known and unknown risks, assumptions and uncertainties that could cause actual strategies, actions or results to differ materially from those expressed in such statements, and are not guarantees of future results or other events or performance. Because forward-looking statements are necessarily only estimates of future strategies, actions or results, based on management’s current expectations, assumptions and estimates on the date hereof, and there can be no assurance that actual strategies, actions or results will not differ materially from expectations, readers are cautioned not to place undue reliance on such statements.

Our ability to predict results or the actual effects of future plans, strategies or events is inherently uncertain. Factors which could cause actual results or conditions to differ materially from those reflected in forward-looking statements include:

•uncertainty regarding domestic, foreign, and geopolitical developments and the United States and global economic outlook that may impact market conditions or affect demand for certain banking products and services, and the impact on our customers, which could impair the ability of our borrowers to repay outstanding loans and leases, impair collateral values and further increase our allowance for credit losses - loans and leases, as well as result in possible asset impairment charges;

•unforeseen credit quality problems or changing economic conditions that could result in charge-offs greater than we have anticipated in our allowance for credit losses - loans and leases or changes in the value of our investments;

•commercial real estate market conditions in the Chicago metropolitan area and southern Wisconsin;

•deterioration in the financial condition of our borrowers resulting in significant increases in our loan and lease losses and provisions for those losses and other related adverse impacts to our results of operations and financial condition;

•estimates of fair value of certain of our assets and liabilities, which could change in value significantly from period to period;

•competitive pressures in the financial services industry in our market areas relating to both pricing and loan and lease structures, which may impact our growth rate;

•demand for loan products and deposit flows;

•unanticipated developments in pending or prospective loan and/or lease transactions or greater-than-expected paydowns or payoffs of existing loans and leases;

•inaccurate information and assumptions in our analytical and forecasting models used to manage our balance sheet;

•unanticipated changes in monetary policies of the Federal Reserve or significant adjustments in the pace of, or market expectations for, future interest rate changes;

•availability of sufficient and cost-effective sources of liquidity, funding, and capital as and when needed;

•our ability to attract, retain or the loss of key personnel or an inability to recruit appropriate talent cost-effectively;

•adverse effects on our information technology systems resulting from failures, human error or cyberattack, including the potential impact of disruptions or security breaches at our third-party service providers, any of which could result in an information or security breach, the disclosure or misuse of confidential or proprietary information, significant legal and financial losses and reputational harm;

•greater-than-anticipated costs to support the growth of our business, including investments in new lines of business, products and services, or technology, process improvements or other infrastructure enhancements, or greater-than-anticipated compliance or regulatory costs and burdens;

46

•the impact of possible future acquisitions, if any, including the costs and burdens of integration efforts;

•the ability of the Company to receive dividends from Byline Bank;

•legislative or regulatory changes, particularly changes in regulation of financial services companies and/or the products and services offered by financial services companies;

•changes in Small Business Administration (“SBA”) and U.S. Department of Agriculture (“USDA”) U.S. government guaranteed lending rules, regulations, loan and lease products and funding limits, including specifically the SBA Section 7(a) program, as well as changes in SBA or USDA standard operating procedures or changes to the status of Byline Bank as an SBA Preferred Lender;

•changes in accounting principles, policies and guidelines applicable to bank holding companies and banking generally;

•the impact of a possible change in the federal or state income tax rates on our deferred tax assets and provision for income tax expense;

•our ability to implement our growth strategy, including via acquisitions;

•the possibility that any of the anticipated benefits of acquisitions will not be realized or will not be realized within the expected time period;

•the risk that the integration of acquisition operations will be materially delayed or will be more costly or difficult than expected;

•the effect of mergers on customer relationships and operating results; and

•other risks detailed from time to time in filings we make with the SEC.

These risks and uncertainties should be considered in evaluating any forward-looking statements, and undue reliance should not be placed on such statements. Forward looking statements speak only as of the date they are made. You should also consider the risks, assumptions and uncertainties set forth in the “Risk Factors” section in our Annual Report on Form 10-K for the year ended December 31, 2022, that was filed with the SEC on March 7, 2023 as well as those set forth in the reports we file with the SEC. We assume no obligation to update any of these statements in light of new information, future events or otherwise unless required under the federal securities laws.

Overview

Our Business

We are a bank holding company headquartered in Chicago, Illinois, and conduct all our business activities through our subsidiary, Byline Bank, a full service commercial bank, and Byline Bank’s subsidiaries. Through Byline Bank, we offer a broad range of banking products and services to small and medium sized businesses, commercial real estate and financial sponsors and to consumers who generally live or work near our branches. We also offer online account opening to consumer and business customers through our website and provide trust and wealth management services to our customers. In addition to our traditional commercial banking business, we provide small ticket equipment leasing solutions through Byline Financial Group, a wholly-owned subsidiary of Byline Bank, headquartered in Bannockburn, Illinois, with sales offices in Illinois, and sales representatives in Illinois, Michigan, New Jersey, and New York. We participate in U.S. government guaranteed lending programs and originate U.S. government guaranteed loans. Byline Bank is a leading originator of Small Business Administration (“SBA”) loans as of June 30, 2023.

Our results of operations depend substantially on net interest income, which is the difference between interest income on interest-earning assets, consisting primarily of interest income on loans and lease receivables, including accretion income on loans, investment securities and other short-term investments, and interest expense on interest-bearing liabilities, consisting primarily of deposits and borrowings. Our results of operations are also dependent upon our generation of non-interest income, consisting primarily of income from fees and service charges on deposits, loan servicing revenue, wealth management and trust income, ATM and interchange fees, and net gains on sales of investment securities and loans. Other factors contributing to our results of operations include our provision for credit losses, provision for income taxes, and non-interest expenses, such as salaries and employee benefits, occupancy and equipment expenses, and other miscellaneous operating costs.

We reported consolidated net income of $26.1 million and $50.1 million for the three and six months ended June 30, 2023, compared to net income of $20.3 million and $42.6 million for the three and six months ended June 30, 2022, an increase of $5.8 million and $7.5 million, respectively, for each comparable period. The increase in net income was attributable to a $14.5 million and $31.5 million increase in net interest income. The increase in net interest income during the three and six months ended June 30, 2023 was primarily driven by higher yields on loans and leases, and growth in the loan and lease portfolio.

Dividends declared and paid on preferred shares were $196,000 for the six months ended June 30, 2022. Dividends declared on common shares were $3.4 million for each of the three months ended June 30, 2023 and 2022. Dividends paid on common shares were $3.3 million and $3.4 million for each of the three months ended June 30, 2023 and 2022, respectively. Dividends declared on common shares were $6.8 million for each of the six months ended June 30, 2023 and 2022. Dividends paid on common shares were $6.7 million and $6.8 million for each of the six months ended June 30, 2023 and 2022, respectively.

47

For the three months ended June 30, 2023 and 2022, net income available to common stockholders was $26.1 million, or $0.70 per basic and diluted common share, and $20.3 million, or $0.55 per basic and $0.54 per diluted common share, respectively. For the six months ended June 30, 2023 and 2022, net income available to common stockholders was $50.1 million, or $1.35 per basic and $1.34 per diluted common share, and $42.4 million, or $1.14 per basic and $1.12 per diluted common share, respectively.

Our results of operations for the three months ended June 30, 2023 and 2022 yielded an annual return on average assets of 1.41% and 1.17% and a return on average stockholders’ equity of 12.99% and 10.42% respectively. Our results of operations for the six months ended June 30, 2023 and 2022 yielded an annual return on average assets of 1.37% and 1.26% and a return on average stockholders’ equity of 12.69% and 10.65%, respectively.

As of June 30, 2023, we had consolidated total assets of $7.6 billion, total gross loans and leases outstanding of $5.6 billion, total deposits of $5.9 billion, and total stockholders’ equity of $813.9 million.

Inland Bancorp, Inc. Acquisition

On July 1, 2023, we completed our acquisition of Inland Bancorp, Inc., ("Inland") under the terms of a definitive merger agreement. As a result of the merger, Inland's wholly owned bank subsidiary, Inland Bank and Trust, was merged with and into Byline Bank. As of June 30, 2023, Inland had approximately $1.2 billion in total assets, $861.5 million of loans, and $967.6 million of total deposits. Refer to Note 3—Acquisition of a Business for additional information.

Critical Accounting Policies and Significant Estimates

Our accounting and reporting policies conform to accounting principles generally accepted in the United States of America (“GAAP”) and to general practices within the Banking industry. To prepare financial statements and interim financial statements in conformity with GAAP, management makes estimates, assumptions and judgments based on available information. These estimates, assumptions and judgments affect the amounts reported in the financial statements and accompanying notes; and are based on information available as of the date of the financial statements. As this information changes, actual results could differ from the estimates, assumptions and judgments reflected in the financial statements. In particular, management has identified several accounting policies that, due to the estimates, assumptions and judgments inherent in those policies, are critical in understanding our financial statements.

These critical accounting policies and estimates include (i) acquisition-related fair value computations, (ii) the carrying value of loans and leases, (iii) determining the provision and allowance for credit losses, (iv) the valuation of intangible assets such as goodwill, servicing assets and core deposit intangibles, (v) the determination of fair value for financial instruments and (vi) the valuation of or recognition of deferred tax assets and liabilities.

The following is a discussion of the critical accounting policies and significant estimates that require us to make complex and subjective judgments. Additional information about these policies can be found in Note 1 of our audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2022, that we filed with the SEC on March 7, 2023.

Business Combinations

We account for business combinations under the acquisition method of accounting in accordance with ASC 805. We recognize the fair value of the assets acquired and liabilities assumed as of the date of acquisition, with any excess of the fair value of consideration provided over the fair value of the identifiable net tangible and intangible assets acquired recorded as goodwill. Transaction costs are expensed as incurred. Application of the acquisition method requires extensive use of accounting estimates and judgments to determine the fair values of the identifiable assets acquired and liabilities assumed at the acquisition date.

In accordance with ASC 805, the acquiring company retains the right to make appropriate adjustments to the assets and liabilities of the acquired entity for information obtained during the measurement period about facts and circumstances that existed as of the acquisition date. The measurement period ends as of the earlier of (i) one year from the acquisition date or (ii) the date when the acquirer receives the information necessary to complete the business combination accounting.

Carrying Value of Loans and Leases

Our accounting methods for loans and leases differ depending on whether they are new or acquired loans and leases; and for acquired loans, whether the loans were acquired at a discount as a result of credit deterioration since the date of origination.

Originated Loans and Leases

We account for originated loans and leases and purchased loans and leases not acquired through business combinations as originated loans and leases. Newly originated loans that management has the intent and ability to hold for the foreseeable future are reported at their outstanding principal balances net of any allowance for credit losses, unamortized deferred fees and costs, and unamortized premiums or discounts. The net amount of nonrefundable loan origination fees and certain direct costs associated with the loan origination process are deferred and amortized to interest income over the contractual lives of the new loans using methods that approximate the level yield method. Discounts and premiums are amortized or accreted to interest income over the estimated term of the new loans using methods that approximate

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the effective yield method. Interest income on new loans is accrued based on the unpaid principal balance outstanding. Additionally, once an acquired loan reaches its contractual maturity date, it is re-underwritten, and if renewed, it is classified as an originated loan.

Purchased credit deteriorated loans and leases

Purchased credit deteriorated ("PCD") loans are loans that have experienced more than insignificant credit deterioration since origination. PCD loans are recorded at the amount paid. An allowance for credit losses is determined using the same methodology as other loans held for investment. The initial allowance for credit losses determined on a collective basis is allocated to individual loans. The difference between the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through credit loss expense.

Acquired non-credit-deteriorated loans and leases

For acquired non‑credit-deteriorated loans and leases, the difference between the fair value and unpaid principal balance of the loan at the acquisition date is amortized or accreted to interest income over the life of the loan. While credit discounts are included in the determination of the fair value for non-credit-deteriorated loans, since these discounts are expected to be accreted over the life of the loans, they cannot be used to offset the allowance for credit losses that must be recorded at the acquisition date. As a result, an allowance for credit losses is determined at the acquisition date using the same methodology as other loans held for investment and is recognized as a provision for credit losses in the consolidated statements of operations. Any subsequent deterioration (improvement) in credit quality is recognized by recording a provision (recapture) for credit losses.

Provision and allowance for credit losses

The provision for credit losses reflects the amount required to maintain the allowance for credit losses (“ACL”) at an appropriate level based upon management’s evaluation of the adequacy of collectively and individually evaluated loss reserves.

The ACL is maintained at a level that management believes is appropriate to provide for current expected credit losses as of the dates of the Consolidated Statements of Financial Condition, and we have established methodologies for the determination of its adequacy. The methodologies are set forth in a formal policy and take into consideration relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. We increase our ACL by recording provisions for current expected credit losses against our income and decrease by charge‑offs, net of recoveries.

The evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. While management uses available information to recognize losses on loans and leases, changes in economic or other conditions may necessitate revision of the estimate in future periods.

The ACL is maintained at a level management believes is sufficient to provide for current expected credit losses based upon an ongoing review of the loan and lease portfolios by portfolio category, which includes consideration of actual loss experience, peer loss experience, changes in the size and risk profile of the portfolio, identification of individual problem loan and lease situations that may affect a borrower’s ability to repay, reasonable and supportable forecasts, and evaluation of prevailing economic conditions. We use risk ratings as credit indicators to classify loans and leases into pools and to estimate loss rates for each of the loan and lease pools. Additional information about these policies can be found in Note 4 of our Unaudited Interim Condensed Consolidated Financial Statements as of June 30, 2023, included in this report.

For each portfolio, management estimates expected credit losses over the life of each loan and lease utilizing lifetime or cumulative loss rate methodology, which identifies macroeconomic factors and asset-specific characteristics that are correlated with credit loss experience including loan age, loan type, and leverage. The lifetime loss rate is applied to the amortized cost of the loan or lease. This methodology builds on default and loss probabilities by utilizing pool-specific historical loss rates to calculate expected credit losses. These pool-specific historical loss rates may be adjusted for a forecast of certain macroeconomic variables, and other factors such as differences in underwriting standards, or portfolio mix. Each time we measure expected credit losses, management assesses the relevancy of historical loss information and considers any necessary adjustments to address any differences in asset-specific characteristics.

The lifetime loss rates are estimated by analyzing a combination of internal and external data related to historical performance of each loan and lease pool over a complete economic cycle. Loss rates are based on historical averages for each loan and lease pool, adjusted to reflect the impact of a forward-looking forecast of certain macroeconomic variables such as unemployment rates, gross domestic product, or commercial property values, which management considers to be both reasonable and supportable. Various economic scenarios are considered and weighted to arrive at the forecast that most reflects management’s expectation of future conditions. After a one-year forecast period, a one-year reversion period adjusts loss experience to the historical average on a straight-line basis.

Management also considers qualitative risk factor adjustments that are intended to capture internal and external trends not reflected in historical loss history. Each risk factor is assigned an allowance level based on management’s judgment as to the expected impact of each risk factor on each loan portfolio and is monitored quarterly. All acquired loans and leases and originated loans and leases of $500,000 or greater with an internal risk rating of substandard or below, or on nonaccrual, as well as loans classified as Troubled Debt Restructurings, are reviewed individually for impairment on a quarterly basis.

The Company also maintains an allowance for credit losses on off-balance sheet credit exposures for unfunded loan commitments. This allowance is reflected as a component of other liabilities that represents management’s current estimate of expected losses in the

49

unfunded loan commitments. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life based on management’s consideration of past events, current conditions, and reasonable and supportable economic forecasts. Management tracks the level and trends in unused commitments and takes into consideration the same factors as those considered for purposes of the allowance for credit losses on outstanding loans. The Company also evaluates its held-to-maturity debt securities for current expected credit losses.

Goodwill and Other Intangible Assets

Goodwill. Goodwill represents the excess of the purchase consideration over the fair value of net assets acquired in connection with our recapitalization and acquisitions using the acquisition method of accounting. Goodwill is not amortized but is periodically evaluated for impairment under the provisions of ASC Topic 350, Intangibles—Goodwill and Other (“ASC 350”).

Impairment testing is performed using either a qualitative or quantitative approach at the reporting unit level. Our goodwill is allocated to Byline Bank, which is our only applicable reporting unit for the purposes of testing goodwill for impairment. We have selected November 30 as the date to perform the annual goodwill impairment test. Additionally, we perform a goodwill impairment evaluation on an interim basis when events or circumstances indicate impairment potentially exists.

Servicing Assets. Servicing assets are recognized separately when they are acquired through sales of loans or when the rights to service loans are purchased. When loans are sold with servicing rights retained, servicing assets are recorded at fair value in accordance with ASC Topic 860, Transfers and Servicing (“ASC 860”). Fair value is based on market prices for comparable servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. The fair value of servicing rights is highly sensitive to changes in underlying assumptions. Changes in secondary market premiums and prepayment speed assumptions have the most significant impact on the fair value of servicing rights. See Note 6 and Note 15 of our Unaudited Interim Condensed Consolidated Financial Statements as of June 30, 2023, included in this report, for additional information.

Core Deposit Intangible Assets. Other intangible assets primarily consist of core deposit intangible assets. In valuing core deposit intangibles, we consider variables such as deposit servicing costs, attrition rates and market discount rates. Core deposit intangibles are reviewed annually, or more frequently when events or changes in circumstances occur that indicate that their carrying values may not be recoverable. If the recoverable amount of the core deposit intangibles is determined to be less than its carrying value, we would then measure the amount of impairment based on an estimate of the fair value at that time. We also evaluate whether the events or circumstances have occurred that warrant a revision to the remaining useful lives of intangible assets. In cases where a revision is deemed appropriate, the remaining carrying amounts of the intangible assets are amortized over the revised remaining useful life. Core deposit intangibles are currently amortized over an approximate ten-year period.

Customer Relationship Intangible. Other intangible assets also include our customer relationship intangible asset. In valuing our customer relationship intangibles, we consider variables such as assets under administration, attrition rates, and fee structure. Customer relationship intangibles are currently amortized over a 12-year period.

Fair value of Financial Instruments

ASC Topic 820, Fair Value Measurement defines fair value as the price that would be received to sell a financial asset or paid to transfer a financial liability in an orderly transaction between market participants at the measurement date.

The degree of management judgment involved in determining the fair value of assets and liabilities is dependent upon the availability of quoted market prices or observable market parameters. For financial instruments that trade actively and have quoted market prices or observable market parameters, there is minimal subjectivity involved in measuring fair value. When observable market prices and parameters are not available, management judgment is necessary to estimate fair value. In addition, changes in market conditions may reduce the availability of quoted prices or observable data. For example, reduced liquidity in the capital markets or changes in secondary market activities could result in observable market inputs becoming unavailable. Therefore, when market data is not available, we would use valuation techniques requiring more management judgment to estimate the appropriate fair value measurement.

See Note 15 of our Unaudited Interim Condensed Consolidated Financial Statements as of June 30, 2023, included in this report, for a complete discussion of our use of fair value of financial assets and liabilities and their related measurement practices.

Income Taxes

We use the asset and liability method to account for income taxes. The objective of the asset and liability method is to establish deferred tax assets and liabilities for the temporary differences between the financial reporting basis and the income tax basis of our assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. Our annual tax rate is based on our income, statutory tax rates and available tax planning opportunities. Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities. Significant judgment is required in determining tax expense and in evaluating tax positions, including evaluating uncertainties.

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Deferred income tax assets represent amounts available to reduce income taxes payable on taxable income in future years. Such assets arise because of temporary differences between the financial reporting and tax bases of assets and liabilities, as well as from net operating loss carryforwards. We review our deferred tax positions quarterly for changes that may impact realizability. We evaluate the recoverability of these future tax deductions by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. We use short and long‑range business forecasts to provide additional information for its evaluation of the recoverability of deferred tax assets. It is our policy to recognize interest and penalties associated with uncertain tax positions, if applicable, as components of non‑interest expense.

A deferred tax valuation allowance is established to reduce the net carrying amount of deferred tax assets if it is determined to be more likely than not that all or some of the deferred tax asset will not be realized. See Note 11 of the notes to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2022, for further information on income taxes.

Recently Issued Accounting Pronouncements

Refer to Note 2 of our Unaudited Interim Condensed Consolidated Financial Statements as of June 30, 2023, which are included in this report, for a description of recent accounting pronouncements, including the effective dates of adoption and anticipated effects on our results of operations and financial condition.

Primary Factors Used to Evaluate Our Business

As a financial institution, we manage and evaluate various aspects of both our results of operations and our financial condition. We evaluate the levels and trends of the line items included in our consolidated financial statements as well as various financial ratios that are commonly used in our industry. We analyze these ratios and financial trends against our own historical performance, our budgeted performance, and the final condition and performance of comparable financial institutions in our region. Comparison of our financial performance against other financial institutions is impacted by the accounting for acquired non‑credit-deteriorated and purchased credit deteriorated loans.

Results of Operations

Overview

Our results of operations depend substantially on net interest income, which is the difference between interest income on interest-earning assets, consisting primarily of interest income on loans and lease receivables, including accretion income on loans, investment securities and other short-term investments, and interest expense on interest-bearing liabilities, consisting primarily of deposits and borrowings. Our results of operations are also dependent upon our generation of non-interest income, consisting primarily of income from fees and service charges on deposits, loan servicing revenue, wealth management and trust income, ATM and interchange fees, and net gains on sales of investment securities and loans. Other factors contributing to our results of operations include our provisions for credit losses, provision for income taxes, and non-interest expenses, such as salaries and employee benefits, occupancy and equipment expenses, and other miscellaneous operating costs.

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Selected Financial Data

	As of or for the Three Months Ended						As of or For the Six Months Ended
	June 30,						June 30,
(dollars in thousands, except share and per share data)	2023			2022			2023			2022
Summary of Operations
Common Share Data
Basic earnings per common share	$	0.70		$	0.55		$	1.35		$	1.14
Diluted earnings per common share	$	0.70		$	0.54		$	1.34		$	1.12
Adjusted diluted earnings per share(1)(3)	$	0.73		$	0.54		$	1.38		$	1.12
Weighted-average common shares outstanding (basic)		37,034,626			37,064,795			36,995,075			37,093,816
Weighted-average common shares outstanding (diluted)		37,337,906			37,612,268			37,444,381			37,740,682
Common shares outstanding		37,752,002			37,669,102			37,752,002			37,669,102
Cash dividends per common share	$	0.09		$	0.09		$	0.18		$	0.18
Dividend payout ratio on common stock		12.86	%		16.67	%		13.43	%		16.07	%
Tangible book value per common share(1)	$	17.43		$	16.01		$	17.43		$	16.01
Key Ratios and Performance Metrics (annualized   where applicable)
Net interest margin, fully taxable equivalent (1)(4)		4.33	%		3.77	%		4.36	%		3.80	%
Average cost of deposits		1.70	%		0.16	%		1.43	%		0.12	%
Efficiency ratio(2)		52.92	%		55.29	%		52.51	%		55.12	%
Adjusted efficiency ratio(1)(2)(3)		51.39	%		55.29	%		51.47	%		55.12	%
Non-interest income to total revenues(1)		15.80	%		18.69	%		16.23	%		21.82	%
Non-interest expense to average assets		2.67	%		2.52	%		2.68	%		2.60	%
Adjusted non-interest expense to average assets(1)(3)		2.60	%		2.52	%		2.63	%		2.60	%
Return on average stockholders' equity		12.99	%		10.42	%		12.69	%		10.65	%
Adjusted return on average stockholders' equity(1)(3)		13.56	%		10.42	%		13.10	%		10.65	%
Return on average assets		1.41	%		1.17	%		1.37	%		1.26	%
Adjusted return on average assets(1)(3)		1.48	%		1.17	%		1.41	%		1.26	%
Pre-tax pre-provision return on average assets(1)		2.23	%		1.84	%		2.27	%		1.93	%
Adjusted pre-tax pre-provision return on average assets(1)(3)		2.30	%		1.84	%		2.33	%		1.93	%
Return on average tangible common stockholders' equity(1)		16.78	%		14.06	%		16.50	%		14.21	%
Adjusted return on average tangible common   stockholders' equity(1)(3)		17.50	%		14.06	%		17.01	%		14.21	%
Non-interest-bearing deposits to total deposits		30.31	%		40.47	%		30.31	%		40.47	%
Loans and leases held for sale and loans and leases    held for investment to total deposits		94.58	%		96.23	%		94.58	%		96.23	%
Deposits to total liabilities		87.51	%		84.64	%		87.51	%		84.64	%
Deposits per branch	$	155,713		$	141,799		$	155,713		$	141,799
Asset Quality Ratios
Non-performing loans and leases to total loans and leases   held for investment		0.69	%		0.66	%		0.69	%		0.66	%
ACL to total loans and leases held for investment, net before ACL		1.66	%		1.21	%		1.66	%		1.21	%
Net charge-offs to average total loans and leases   held for investment, net before ACL - loans and leases		0.31	%		0.24	%		0.20	%		0.15	%
Capital Ratios
Common equity to total assets		10.74	%		10.73	%		10.74	%		10.73	%
Tangible common equity to tangible assets(1)		8.87	%		8.65	%		8.87	%		8.65	%
Leverage ratio		10.74	%		10.34	%		10.74	%		10.34	%
Common equity tier 1 capital ratio		10.58	%		10.26	%		10.58	%		10.26	%
Tier 1 capital ratio		11.22	%		10.95	%		11.22	%		10.95	%
Total capital ratio		13.52	%		13.09	%		13.52	%		13.09	%

(1) Represents a non-GAAP financial measure. See “Reconciliations of non-GAAP Financial Measures” for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure.

(2) Represents non-interest expense less amortization of intangible assets divided by net interest income and non-interest income.

(3) Calculation excludes impairment charges on assets held for sale.

(4) Represents the remaining net unaccreted discount as a result of applying the fair value acquisition accounting adjustment at the time of the business combination on acquired loans.

(5) Interest income and rates include the effects of a tax equivalent adjustment to adjust tax-exempt investment income on tax-exempt investment securities to a fully taxable basis, assuming a federal income tax rate of 21%.

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We reported consolidated net income of $26.1 million for the three months ended June 30, 2023 compared to net income of $20.3 million for the three months ended June 30, 2022, an increase of $5.8 million. The increase in net income was primarily attributable to a $14.5 million increase in net interest income, offset by an increase in non-interest expense of $5.6 million and an increase in the provision of income taxes of $3.4 million.

The increase in net interest income during the three months ended June 30, 2023 was mainly a result of higher yields and increased average loan and leases balances. The increase in non-interest expense was primarily due to increases in legal, audit and other professional fees due to merger-related activities, and other non-interest expenses due to increased general expenses. The increase in the provision for income taxes is due to higher income before taxes.

Net income available to common stockholders was $26.1 million, or $0.70 per basic and diluted common share, for the three months ended June 30, 2023 compared to $20.3 million, or $0.55 per basic and $0.54 per diluted common share, for the three months ended June 30, 2022.

Our annualized return on average assets was 1.41% for the three months ended June 30, 2023 compared to 1.17% for the three months ended June 30, 2022. Our annualized return on average stockholders’ equity was 12.99% for the three months ended June 30, 2023 compared to 10.42% for the three months ended June 30, 2022. Our efficiency ratio was 52.92% for the three months ended June 30, 2023 compared to 55.29% for the three months ended June 30, 2022.

We reported consolidated net income of $50.1 million for the six months ended June 30, 2023 compared to net income of $42.6 million for the six months ended June 30, 2022, an increase of $7.5 million. The increase in net income was primarily attributable to a $31.5 million increase in net interest income, offset by a $9.8 million increase in non-interest expense, a $5.4 million increase in the provision for income taxes, a $4.7 million increase in the provision for credit losses, and a $4.2 million decrease in non-interest income.

The increase in net interest income during the six months ended June 30, 2023 was mainly a result of higher yields on loans and leases and increased average balances. The increase in non-interest expense was mostly due to an increase in salaries and employee benefits. The increase in provision for income taxes was due to higher income before taxes. The increase in provision for credit losses was mainly attributable to increases in specific reserves on individually evaluated loans, and loan and lease portfolio growth. The decrease in non-interest income was primarily due to decrease in net gains on sales of loans due to lower volume and average premiums.

Net income available to common stockholders was $50.1 million, or $1.35 per basic and $1.34 per diluted common share, for the six months ended June 30, 2023 compared to $42.4 million, or $1.14 per basic and $1.12 per diluted common share, for the six months ended June 30, 2022. Dividends on preferred shares were $196,000 for the six months ended June 30, 2022.

Our annualized return on average assets was 1.37% for the six months ended June 30, 2023 compared to 1.26% for the six months ended June 30, 2022. Our annualized return on average stockholders’ equity was 12.69% for the six months ended June 30, 2023 compared to 10.65% for the six months ended June 30, 2022. Our efficiency ratio was 52.51% for the six months ended June 30, 2023 compared to 55.12% for the six months ended June 30, 2022.

Net Interest Income

Net interest income, representing interest income less interest expense, is a significant contributor to our revenues and earnings. We generate interest income from interest and dividends on interest-earning assets, which include loans, leases and investment securities we own. We incur interest expense from interest paid on interest-bearing liabilities, which include interest-bearing deposits, subordinated debt, Federal Home Loan Bank advances, junior subordinated debentures and other borrowings. To evaluate net interest income, we measure and monitor (i) yields on our loans and other interest-earning assets, (ii) the costs of our deposits and other funding sources, (iii) our net interest spread, and (iv) our net interest margin. Net interest spread is the difference between rates earned on interest-earning assets and rates paid on interest-bearing liabilities. Net interest margin is calculated as the annualized net interest income divided by average interest-earning assets. Because non-interest-bearing sources of funds, such as non-interest-bearing deposits and stockholders’ equity, also fund interest-earning assets, net interest margin includes the benefit of these non-interest-bearing sources.

We also recognize income from the accretable discounts associated with the purchase of interest-earning assets. Because of our recapitalization and acquisitions, we derive a portion of our interest income from the accretable discounts on purchase credit deteriorated and acquired non-credit-deteriorated loans. The accretion is generally recognized over the life of the loan and is impacted by changes in expected cash flows on the loan. This accretion will continue to have an impact on our net interest income as long as loans acquired with a discount at acquisition represent a meaningful portion of our interest-earning assets. As of June 30, 2023, purchased credit deteriorated loans accounted for under ASC Topic 326 represented 1.1% of our total loan and lease portfolio compared to 1.4% at December 31, 2022.

Changes in the market interest rates we earn on interest-earning assets or pay on interest-bearing liabilities, as well as the volume and types of interest-earning assets, interest-bearing and non-interest-bearing liabilities, are usually the largest drivers of periodic changes in net interest spread, net interest margin and net interest income. In addition, our interest income includes the accretion of the discounts on our acquired loans, which will also affect our net interest spread, net interest margin and net interest income.

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The following tables present, for the periods indicated, information about (i) average balances, the total dollar amount of interest income from interest-earning assets and the resultant average yields; (ii) average balances, the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rates; (iii) net interest income; (iv) the interest rate spread; and (v) the net interest margin. Yields have been calculated on a pre-tax basis (dollars in thousands).

	Three Months Ended June 30,
	2023								2022
	Average Balance(5)			Interest Inc / Exp		Average Yield / Rate			Average Balance(5)			Interest Inc / Exp		Average Yield / Rate
ASSETS
Cash and cash equivalents	$	135,003		$	1,041		3.09	%	$	66,034		$	74		0.45	%
Loans and leases(1)		5,535,593			99,134		7.18	%		5,009,077			59,674		4.78	%
Taxable securities		1,250,780			6,324		2.03	%		1,330,200			5,904		1.78	%
Tax-exempt securities(2)		151,205			980		2.60	%		168,567			1,131		2.69	%
Total interest-earning assets	$	7,072,581		$	107,479		6.10	%	$	6,573,878		$	66,783		4.07	%
Allowance for credit losses - loans and leases		(92,804	)							(59,883	)
All other assets		424,122								461,730
TOTAL ASSETS	$	7,403,899							$	6,975,725
LIABILITIES AND STOCKHOLDERS’    EQUITY
Deposits
Interest checking	$	541,036		$	2,175		1.61	%		615,831		$	415		0.27	%
Money market accounts		1,534,463			10,799		2.82	%		1,307,320			1,194		0.37	%
Savings		575,254			220		0.15	%		664,954			83		0.05	%
Time deposits		1,328,679			11,529		3.48	%		627,199			436		0.28	%
Total interest-bearing deposits		3,979,432			24,723		2.49	%		3,215,304			2,128		0.27	%
Other borrowings		509,419			4,241		3.34	%		497,082			1,083		0.87	%
Federal funds purchased		—			—		0.00	%		2,527			14		2.32	%
Subordinated notes and debentures		111,255			2,142		7.72	%		110,649			1,694		6.14	%
Total borrowings		620,674			6,383		4.12	%		610,258			2,791		1.83	%
Total interest-bearing liabilities	$	4,600,106		$	31,106		2.71	%	$	3,825,562		$	4,919		0.52	%
Non-interest-bearing demand deposits		1,848,538								2,265,426
Other liabilities		148,983								104,085
Total stockholders’ equity		806,272								780,652
TOTAL LIABILITIES AND STOCKHOLDERS’    EQUITY	$	7,403,899							$	6,975,725
Net interest spread(3)							3.39	%							3.55	%
Net interest income, fully taxable equivalent				$	76,373							$	61,864
Net interest margin, fully taxable equivalent(2)(4)							4.33	%							3.77	%
Reconciliation to reported net interest income:
Less: Tax-equivalent adjustment					207		0.01	%					237		0.01	%
Net interest income				$	76,166							$	61,627
Net interest margin(4)							4.32	%							3.76	%
Net loan accretion impact on margin				$	611		0.03	%				$	1,383		0.08	%

(1)Loan and lease balances are net of deferred origination fees and costs and initial direct costs. Non-accrual loans and leases are included in total loan and lease balances.

(2)Interest income and rates include the effects of a tax equivalent adjustment to adjust tax-exempt investment income on tax-exempt investment securities to a fully taxable basis, assuming a federal income tax rate of 21%.

(3)Represents the average rate earned on interest-earning assets minus the average rate paid on interest-bearing liabilities.

(4)Represents net interest income (annualized) divided by total average interest-earning assets.

(5)Average balances are average daily balances.

54

	For the Six Months Ended June 30,
	2023								2022
	Average Balance(5)			Interest Inc / Exp		Average Yield / Rate			Average Balance(5)			Interest Inc / Exp		Average Yield / Rate
ASSETS
Cash and cash equivalents	$	116,394		$	1,483		2.57	%	$	70,404		$	103		0.29	%
Loans and leases(1)		5,510,124			191,477		7.01	%		4,840,510			115,100		4.80	%
Taxable securities		1,263,010			12,755		2.04	%		1,334,747			11,379		1.72	%
Tax-exempt securities(2)		151,509			1,974		2.63	%		169,107			2,255		2.69	%
Total interest-earning assets	$	7,041,037		$	207,689		5.95	%	$	6,414,768		$	128,837		4.05	%
Allowance for credit losses - loans and leases		(88,586	)							(57,895	)
All other assets		422,236								484,728
TOTAL ASSETS	$	7,374,687							$	6,841,601
LIABILITIES AND STOCKHOLDERS’    EQUITY
Deposits
Interest checking	$	573,342		$	4,669		1.64	%	$	597,665		$	593		0.20	%
Money market accounts		1,500,260			18,527		2.49	%		1,281,519			1,668		0.26	%
Savings		594,316			447		0.15	%		657,155			159		0.05	%
Time deposits		1,148,545			17,378		3.05	%		644,543			795		0.25	%
Total interest-bearing deposits		3,816,463			41,021		2.17	%		3,180,882			3,215		0.20	%
Other borrowings		541,249			10,093		3.76	%		394,385			1,478		0.76	%
Federal funds purchased		1,381			36		5.30	%		1,271			14		2.32	%
Subordinated notes and debentures		111,178			4,240		7.69	%		110,570			3,294		6.01	%
Total borrowings		653,808			14,369		4.43	%		506,226			4,786		1.91	%
Total interest-bearing liabilities	$	4,470,271		$	55,390		2.50	%	$	3,687,108		$	8,001		0.44	%
Non-interest-bearing demand deposits		1,961,945								2,256,778
Other liabilities		147,130								91,451
Total stockholders’ equity		795,341								806,264
TOTAL LIABILITIES AND STOCKHOLDERS’    EQUITY	$	7,374,687							$	6,841,601
Net interest spread(3)							3.45	%							3.61	%
Net interest income, fully taxable equivalent				$	152,299							$	120,836
Net interest margin, fully taxable equivalent(2)(4)							4.36	%							3.80	%
Reconciliation to reported net interest income:
Less: Tax-equivalent adjustment					415		0.01	%					473		0.02	%
Net interest income				$	151,884							$	120,363
Net interest margin(4)							4.35	%							3.78	%
Net loan accretion impact on margin				$	1,340		0.04	%				$	2,859		0.09	%

(1)Loan and lease balances are net of deferred origination fees and costs and initial direct costs. Non-accrual loans and leases are included in total loan and lease balances.

(2)Interest income and rates include the effects of a tax equivalent adjustment to adjust tax-exempt investment income on tax-exempt investment securities to a fully taxable basis, assuming a federal income tax rate of 21%.

(3)Represents the average rate earned on interest-earning assets minus the average rate paid on interest-bearing liabilities.

(4)Represents net interest income (annualized) divided by total average interest-earning assets.

(5)Average balances are average daily balances.

55

Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates. The following table sets forth the effects of changing rates and volumes on our net interest income during the periods shown. Information is provided with respect to (i) effects on interest income attributable to changes in volume (changes in volume multiplied by prior rate) and (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume). Changes applicable to both volume and rate have been allocated to volume. Yields have been calculated on a pre-tax basis. The table below is a summary of increases and decreases in interest income and interest expense resulting from changes in average balances (volume) and changes in average interest rates (dollars in thousands):

	Three Months Ended June 30, 2023
	Compared to Three Months Ended June 30, 2022
	Increase (Decrease) Due to
	Volume			Rate			Total
Interest income
Cash and cash equivalents	$	532		$	435		$	967
Loans and leases(1)		9,488			29,972			39,460
Taxable securities		(409	)		829			420
Tax-exempt securities		(113	)		(38	)		(151	)
Total interest income	$	9,498		$	31,198		$	40,696
Interest expense
Deposits
Interest checking	$	(297	)	$	2,057		$	1,760
Money market accounts		1,620			7,985			9,605
Savings		(29	)		166			137
Time deposits		6,089			5,004			11,093
Total interest-bearing deposits		7,383			15,212			22,595
Other borrowings		98			3,060			3,158
Federal funds purchased		1			(15	)		(14	)
Subordinated notes and debentures		12			436			448
Total borrowings		111			3,481			3,592
Total interest expense	$	7,494		$	18,693		$	26,187
Net interest income, fully taxable equivalent	$	2,004		$	12,505		$	14,509

(1)Includes loans and leases on non-accrual status.

	Six Months Ended June 30, 2023
	Compared to Six Months Ended June 30, 2022
	Increase (Decrease) Due to
	Volume			Rate			Total
Interest income
Cash and cash equivalents	$	584		$	796		$	1,380
Loans and leases(1)		23,329			53,048			76,377
Taxable securities		(742	)		2,118			1,376
Tax-exempt securities		(231	)		(50	)		(281	)
Total interest income	$	22,940		$	55,912		$	78,852
Interest expense
Deposits
Interest checking	$	(192	)	$	4,268		$	4,076
Money market accounts		2,688			14,171			16,859
Savings		(38	)		326			288
Time deposits		7,634			8,949			16,583
Total interest-bearing deposits		10,092			27,714			37,806
Other borrowings		2,747			5,868			8,615
Federal funds purchased		3			19			22
Subordinated notes and debentures		25			921			946
Total borrowings		2,775			6,808			9,583
Total interest expense	$	12,867		$	34,522		$	47,389
Net interest income, fully taxable equivalent	$	10,073		$	21,390		$	31,463

(1)Includes loans and leases on non-accrual status.

Net interest income for the three months ended June 30, 2023 was $76.2 million compared to $61.6 million during the same period in 2022, an increase of $14.5 million, or 23.6%. Interest income increased $40.7 million for the three months ended June 30, 2023 compared to the same period in 2022 primarily a result of higher yields and increased average balances on loans and leases. Interest expense increased

56

by $26.2 million for the three months ended June 30, 2023 compared to the same period in 2022 mostly due to increases in the average rates paid on deposits, change in deposit mix, and growth of deposits.

Net interest income for the six months ended June 30, 2023 was $151.9 million compared to $120.4 million during the same period in 2022, an increase of $31.5 million, or 26.2%. Interest income increased $78.9 million for six months ended June 30, 2023 compared to the same period in 2022 primarily a result of higher yields and increased average balance on loans and leases. Interest expense increased by $47.4 million for the six months ended June 30, 2023 compared to the same period in 2022 mostly due to increases in the average rates paid on deposits, change in deposit mix, and growth of deposits.

The net interest margin for the three months ended June 30, 2023 was 4.32%, an increase of 56 basis points compared to 3.76% for the three months ended June 30, 2022. The primary drivers of the increase for the three month period was an increase yields due to the rising interest rate environment, and the increase in average interest earning assets was driven by organic loan and lease growth. The net interest margin for the six months ended June 30, 2023 and 2022 was 4.35% and 3.78%, respectively.

Provision for Credit Losses

The provision for credit losses reflects the amount required to maintain the allowance for credit losses at an appropriate level based upon management’s evaluation of the adequacy of collectively and individually evaluated loss reserves. The provision for credit losses represents a charge to earnings necessary to establish an allowance for credit losses that, in management’s evaluation, is appropriate to provide coverage for current expected credit losses in the loan and lease portfolio. The ACL is increased by the provision for credit losses and is decreased by charge-offs, net of recoveries on prior charge-offs.

Provision for credit losses - loans and leases was $5.8 million for the three months ended June 30, 2023, compared to $5.9 for the three months ended June 30, 2022, a decrease of $118,000. Provision for credit losses - loans and leases was $15.6 million and $10.9 million for the six months ended June 30, 2023 and 2022, respectively, an increase of $4.7 million. The increase in provision for the comparable six month periods was driven by an increase in specific reserves related to loans individually evaluated for impairment and loan and lease growth.

Non-Interest Income

Non-interest income was $14.3 million for the three months ended June 30, 2023 compared to $14.2 million for the three months ended June 30, 2022, an increase of $130,000, or 0.9%. The increase was primarily due to the change in the loan servicing asset revaluation and in the fair value of equity securities, offset by decrease in net gains on sales of loans. Non-interest income was $29.4 million for the six months ended June 30, 2023 compared to $33.6 million for the six months ended June 30, 2022, a decrease of $4.2 million or 12.4%. The decrease was primarily due to decreases in net gains on sales of loans.

	Three Months Ended June 30,						Six Months Ended June 30,						QTD 2023 Compared to 2022						YTD 2023 Compared to 2022
	2023			2022			2023			2022			$ Change			% Change			$ Change			% Change
Fees and service charges on deposits	$	2,233		$	2,059		$	4,353		$	3,943		$	174			8.5	%	$	410			10.4	%
Loan servicing revenue		3,377			3,384			6,757			6,764			(7	)		(0.2	)%		(7	)		(0.1	)%
Loan servicing asset revaluation		(865	)		(4,636	)		(209	)		(5,867	)		3,771			(81.3	)%		5,658			(96.4	)%
ATM and interchange fees		1,112			1,131			2,175			2,180			(19	)		(1.7	)%		(5	)		(0.2	)%
Net realized gains on securities   available-for-sale		—			52			—			52			(52	)		0.0	%		(52	)		(100.0	)%
Change in fair value of   equity securities, net		193			(697	)		543			(732	)		890		NM				1,275		NM
Net gains on sales of loans		5,704			9,983			10,852			20,810			(4,279	)		(42.9	)%		(9,958	)		(47.9	)%
Wealth management and trust income		1,039			900			1,963			1,948			139			15.4	%		15			0.8	%
Other non-interest income		1,498			1,985			3,002			4,489			(487	)		(24.5	)%		(1,487	)		(33.1	)%
Total non-interest income	$	14,291		$	14,161		$	29,436		$	33,587		$	130			0.9	%	$	(4,151	)		(12.4	)%

Fees and service charges on deposits represent amounts charged to customers for banking services, such as fees on deposit accounts, and include, but are not limited to, maintenance fees, insufficient fund fees, overdraft protection fees, wire transfer fees, and other charges. Fees and service charges on deposits were $2.2 million and $2.1 million for the three months ended June 30, 2023 and 2022, respectively. Fees and service charges on deposits were $4.4 million and $3.9 million for the six months ended June 30, 2023 and 2022, respectively. Increases are due to increases in deposit balances and changes in fee structure.

57

While portions of the loans that we originate are sold and generate gains on sale revenue, servicing rights for the majority of loans that we sell are retained by us. In exchange for continuing to service loans that have been sold, we receive servicing revenue from a portion of the interest cash flow of the loan. We generated $3.4 million in loan servicing revenue on the sold portion of the U.S. government guaranteed loans for the three months ended June 30, 2023 and 2022. We generated $6.8 million in loan servicing revenue on the sold portion of the U.S. government guaranteed loans for the six months ended June 30, 2023 and 2022. At June 30, 2023 and 2022, the outstanding balance of guaranteed loans serviced was $1.7 billion.

Loan servicing asset revaluation represents net changes in the fair value of our servicing assets. Loan servicing asset revaluation had a downward adjustment of $865,000 and $4.6 million for the three months ended June 30, 2023 and 2022, respectively, a change of $3.8 million. Loan servicing asset revaluation had a downward adjustment of $209,000, and $5.9 million for the six months ended June 30, 2023 and 2022, respectively, a change of $5.7 million. Changes in the revaluations were mainly due to decreases in discount rates prompted by current market interest rates and premiums.

Net gains on sales of loans were $5.7 million for the three months ended June 30, 2023 compared to $10.0 million for the three months ended June 30, 2022, a decrease of $4.3 million, or 42.9%, driven by lower volume and reduced premiums in the secondary market. We sold $85.9 million of U.S. government guaranteed loans during the three months ended June 30, 2023 compared to $118.5 million during the three months ended June 30, 2022. Net gains on sales of loans were $10.9 million for the six months ended June 30, 2023 compared to $20.8 million for the six months ended June 30, 2022, a decrease of $10.0 million or 47.9%, driven by reduced premiums in the secondary market. We sold $158.1 million of U.S. government guaranteed loans during the six months ended June 30, 2023 compared to $220.8 million during the six months ended June 30, 2022.

Wealth management and trust income represents fees charged to customers for investment, trust, or wealth management services and are primarily determined by total assets under administration. Wealth management and trust income was $1.0 million for the three months ended June 30, 2023 compared to $900,000 for the three months ended June 30, 2022, an increase of $139,000 or 15.4%. Wealth management and trust income was $2.0 million for the six months ended June 30, 2023 compared to $1.9 million for the six months ended June 30, 2022, an increase of $15,000 or 0.8%. Assets under administration were $636.0 million and $502.6 million as of June 30, 2023 and 2022, respectively.

Other non-interest income was $1.5 million for the three months ended June 30, 2023 compared to $2.0 million for the three months ended June 30, 2022, a decrease of $487,000 or 24.5%. Other non-interest income was $3.0 million for the six months ended June 30, 2023 compared to $4.5 million for the six months ended June 30, 2022, a decrease of $1.5 million or 33.1%. The primary driver of the decrease was decreased interest rate swap fee income.

Non-Interest Expense

Non-interest expense was $49.3 million for the three months ended June 30, 2023 compared to $43.8 million for the three months ended June 30, 2022, an increase of $5.6 million, or 12.7%. Non-interest expense was $98.1 million for the six months ended June 30, 2023 compared to $88.3 million for the six months ended June 30, 2022, an increase of $9.8 million, or 11.1%. These increases were primarily due to an increase in salaries and employee benefits, legal, audit and other professional fees, and other non-interest expense.

The following table presents the major components of our non-interest expense for the periods indicated (dollars in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,				QTD 2023 Compared to 2022						YTD 2023 Compared to 2022
	2023		2022		2023		2022		$ Change			% Change			$ Change			% Change
Salaries and employee benefits	$	29,642	$	27,697	$	60,036	$	56,656	$	1,945			7.0	%	$	3,380			6.0	%
Occupancy and equipment expense, net		4,404		4,409		8,848		9,537		(5	)		(0.1	)%		(689	)		(7.2	)%
Impairment charge on assets held   for sale		—		—		20		—		—			0.0	%		20		NM
Loan and lease related expenses		488		942		1,451		51		(454	)		(48.2	)%		1,400		NM
Legal, audit and other professional fees		3,675		1,820		6,789		4,420		1,855			101.9	%		2,369			53.6	%
Data processing		4,272		3,396		8,055		6,582		876			25.8	%		1,473			22.4	%
Net loss recognized on other real estate   owned and other related expenses		288		158		185		212		130			82.3	%		(27	)		(12.7	)%
Other intangible assets amortization   expense		1,455		1,868		2,910		3,464		(413	)		(22.1	)%		(554	)		(16.0	)%
Other non-interest expense		5,104		3,483		9,834		7,406		1,621			46.5	%		2,428			32.8	%
Total non-interest expense	$	49,328	$	43,773	$	98,128	$	88,328	$	5,555			12.7	%	$	9,800			11.1	%

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Salaries and employee benefits, the single largest component of our non-interest expense, totaled $29.6 million for the three months ended June 30, 2023 compared to $27.7 million for the three months ended June 30, 2022, an increase of $1.9 million, or 7.0%. Salaries and employee benefits, totaled $60.0 million for the six months ended June 30, 2023 compared to $56.7 million for the six months ended June 30, 2022, an increase of $3.4 million, or 6.0%. The increases were primarily a result of merit increases, lower deferred costs and increased incentive compensation.

Loan and lease related expenses were $488,000 for the three months ended June 30, 2023 compared to $942,000 for the three months ended June 30, 2022, a decrease of $454,000, or 48.2%. The decrease was primarily driven by lower reimbursable expenses associated with government guaranteed loan originations. Loan and lease related expenses were $1.5 million for the six months ended June 30, 2023, compared to $51,000 for the six months ended June 30, 2022, an increase of $1.4 million. The increase was mainly related to the recapture of government guaranteed loan expenses during the first six months of 2022.

Legal, audit, and other professional fees were $3.7 million for the three months ended June 30, 2023 compared to $1.8 million for the three months ended June 30, 2022, an increase of $1.9 million, or 101.9%. Legal, audit, and other professional fees were $6.8 million for the six months ended June 30, 2023 compared to $4.4 million for the six months ended June 30, 2022, an increase of $2.4 million or 53.6%. The increase was driven by increased legal fees for merger-related expenses.

Data processing was $4.3 million for the three months ended June 30, 2023, compared to $3.4 million for the three months ended June 30, 2022, an increase of $876,000 or 25.8%. Data processing was $8.1 million for the six months ended June 30, 2023, compared to $6.6 million for the six months ended June 30, 2022, an increase of $1.5 million or 22.4%. The increases were driven by increased software licensing costs and merger-related expenses.

Net loss recognized on other real estate owned and other related expenses was $288,000 for the three months ended June 30, 2023, compared to $158,000 for the three months ended June 30, 2022, an increase of $130,000. Net loss recognized on other real estate owned and other related expenses was $185,000 for the six months ended June 30, 2023, compared to $212,000 for the six months ended June 30, 2022, an increase of $27,000, or 12.7%. These changes were primarily due to sales and transfers of certain properties.

Other non-interest expense was $5.1 million for the three months ended June 30, 2023 compared to $3.5 million for the three months ended June 30, 2022, an increase of $1.6 million or 46.5%. Other non-interest expense was $9.8 million for the six months ended June 30, 2023 compared to $7.4 million for the six months ended June 30, 2022, an increase of $2.4 million or 32.8%. These increases were mostly due to increases in other general expenses.

Our efficiency ratio was 52.92% for the three months ended June 30, 2023 compared to 55.29% for the three months ended June 30, 2022. The change in our efficiency ratio for the three months ended June 30, 2023 was driven by an increase in our net interest income. Our adjusted efficiency ratio was 51.39% for the three months ended June 30, 2023 compared to 55.29% for the three months ended June 30, 2022. Our efficiency ratio was 52.51% for the six months ended June 30, 2023, compared to 55.12% for the six months ended June 30, 2022. The change in our efficiency ratio was due to higher net interest income. Our adjusted efficiency ratio was 51.47% for the six months ended June 30, 2023, compared to 55.12% for the six months ended June 30, 2022.

Please refer to the “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure.

Income Taxes

Our provision for income taxes for the three months ended June 30, 2023 totaled $9.2 million compared to $5.8 million for the three months ended June 30, 2022, an increase of $3.4 million, or 58.5%. The increase in income tax expense was principally due to increases in net income before provision for income taxes. Our effective tax rate was 26.1% for the three months ended June 30, 2023 and 22.3% for the three months ended June 30, 2022.

Our provision for income taxes for the six months ended June 30, 2023 totaled $17.5 million compared to $12.1 million for the six months ended June 30, 2022, an increase of $5.4 million or 44.5%. The increase in income tax expense was principally due to increases in net income before provision for income taxes. Our effective tax rate was 25.9% for the six months ended June 30, 2023 and 22.2% for the six months ended June 30, 2022.

We expect our effective tax rate for 2023 to be approximately 25-27%.

59

Financial Condition

Condensed Consolidated Statements of Financial Condition Analysis

Our total assets increased by $212.7 million, or 2.9%, to $7.6 billion at June 30, 2023 compared to $7.4 billion at December 31, 2022. The increase in total assets includes an increase of $149.3 million in loans and leases, or 2.8%, from $5.4 billion at December 31, 2022 to $5.6 billion at June 30, 2023. Our originated loan and lease portfolio increased by $211.6 million and our our purchased credit deteriorated loans and acquired non-credit-deteriorated loans and leases portfolio decreased by $62.4 million. The increase in our originated portfolio was primarily attributed to growth in commercial real estate, leasing financing receivables and commercial and industrial loans. The decrease in our purchased credit deteriorated loans and acquired non-credit-deteriorated loans and leases portfolio was attributed to decreases in commercial real estate.

Total liabilities increased by $164.6 million, or 2.5%, to $6.8 billion at June 30, 2023 compared to $6.6 billion at December 31, 2022. Total deposits increased by $222.0 million, or 3.9%, driven by growth in time deposits and money market accounts, offset by a decrease in non-interest bearing deposits. Other borrowings decreased by $65.5 million, or 10.2%, mainly due to a decrease in FHLB advances.

Investment Portfolio

Our investment securities portfolio consists of securities classified as available-for-sale and held-to-maturity. There were no securities classified as trading in our investment portfolio as of June 30, 2023 or December 31, 2022. All available-for sale securities are carried at fair value and may be used for liquidity purposes should management consider it to be in our best interest. Securities available-for-sale consist primarily of residential mortgage-backed securities, commercial mortgage-backed securities and U.S. government agencies securities.

Securities available-for-sale decreased by $48.7 million, or 4.1%, from $1.2 billion at December 31, 2022 to $1.1 billion at June 30, 2023. The decrease was mainly attributed to decreases in the fair value of available-for-sale securities and paydowns made during the six months ended June 30, 2023.

At June 30, 2023, our held-to-maturity securities portfolio consists of obligations of states, municipalities and political subdivisions. We carry these securities at amortized cost. Securities held-to-maturity were $2.2 million and $2.7 million at June 30, 2023 and at December 31, 2022, respectively.

We had no securities that had evidence of material credit losses as of June 30, 2023 or December 31, 2022.

The following table summarizes the fair value of the available-for-sale and held-to-maturity securities portfolio as of the dates presented (dollars in thousands):

	June 30, 2023				December 31, 2022
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Available-for-sale
U.S. Treasury Notes	$	42,516	$	40,718	$	42,430	$	40,723
U.S. Government agencies		148,297		128,518		150,524		130,364
Obligations of states, municipalities, and    political subdivisions		67,922		62,730		68,019		61,876
Residential mortgage-backed securities
Agency		673,096		565,680		707,157		595,796
Non-agency		126,144		101,880		130,654		106,249
Commercial mortgage-backed securities
Agency		188,308		152,240		191,172		157,030
Corporate securities		42,767		35,943		45,302		41,436
Asset-backed securities		39,785		37,991		43,085		40,957
Total available-for-sale	$	1,328,835	$	1,125,700	$	1,378,343	$	1,174,431
Held-to-maturity
Obligations of states, municipalities, and    political subdivisions	$	2,158	$	2,132	$	2,705	$	2,672
Total held-to-maturity	$	2,158	$	2,132	$	2,705	$	2,672

60

Certain securities have fair values less than amortized cost and, therefore, contain unrealized losses. At June 30, 2023, we evaluated the securities which had an unrealized loss for credit losses and determined there were none. There were 286 investment securities with unrealized losses at June 30, 2023. We anticipate full recovery of amortized cost with respect to these securities by maturity, or sooner in the event of a more favorable market interest rate environment. We do not intend to sell these securities and it is not more likely than not that we will be required to sell them before recovery of their amortized cost basis, which may be at maturity.

The following table (dollars in thousands) set forth certain information regarding contractual maturities and the weighted average yields of our investment securities as of June 30, 2023. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

	Maturity as of June 30, 2023
	Due in One Year or Less					Due from One to Five Years					Due from Five to Ten Years					Due after Ten Years
	Amortized Cost		Weighted Average Yield(1)			Amortized Cost		Weighted Average Yield(1)			Amortized Cost		Weighted Average Yield(1)			Amortized Cost		Weighted Average Yield(1)
Available-for-sale
U.S. Treasury Notes	$	—		0.00	%	$	42,516		2.35	%	$	—		0.00	%	$	—		0.00	%
U.S. government agencies		—		0.00	%		47,623		1.41	%		93,627		1.91	%		7,047		3.97	%
Obligations of states,    municipalities, and    political subdivisions		2,954		2.55	%		16,650		2.85	%		9,965		3.17	%		38,353		2.28	%
Residential mortgage-   backed securities
Agency		18		1.35	%		18,422		1.78	%		72,937		1.54	%		581,719		1.48	%
Non-agency		—		0.00	%		—		0.00	%		—		0.00	%		126,144		2.14	%
Commercial mortgage-    backed securities
Agency		—		0.00	%		—		0.00	%		13,515		1.63	%		174,793		2.07	%
Corporate securities		—		0.00	%		11,713		4.60	%		31,054		3.70	%		—		0.00	%
Asset-backed securities		—		0.00	%		—		0.00	%		39,785		5.29	%		—		0.00	%
Total available-for-sale	$	2,972		2.54	%	$	136,924		2.20	%	$	260,883		2.57	%	$	928,056		1.73	%
Held-to-maturity
Obligations of states,    municipalities, and    political subdivisions	$	1,551		2.67	%	$	607		2.75	%	$	—		0.00	%	$	—		0.00	%
Total held-to-maturity	$	1,551		2.67	%	$	607		2.75	%	$	—		0.00	%	$	—		0.00	%

(1)The weighted average yields are based on amortized cost.

As of June 30, 2023, and December 31, 2022, investment securities indexed to LIBOR were $36.1 million and $43.5 million, respectively.

Total non-taxable securities classified as obligations of states, municipalities and political subdivisions were $43.7 million at June 30, 2023, a decrease of $190,000 from December 31, 2022.

There were no holdings of securities of any one issuer, other than U.S. government-sponsored entities and agencies, with total outstanding balances greater than 10% of our stockholders’ equity as of June 30, 2023 or December 31, 2022.

Restricted Stock

As a member of the Federal Home Loan Bank system, Byline Bank is required to maintain an investment in the capital stock of the FHLB. No market exists for this stock, and it has no quoted market value. The stock is redeemable at par by the FHLB and is, therefore, carried at cost. In addition, Byline Bank owns stock of Bankers’ Bank that was acquired as part of a bank acquisition. The stock is redeemable at par and carried at cost. As of June 30, 2023 and December 31, 2022, we held $24.4 million and $28.2 million, respectively, in FHLB and Bankers’ Bank stock. We evaluate impairment of our investment in FHLB and Bankers’ Bank based on the ultimate recoverability of the par value rather than by recognizing temporary declines in value. We did not identify any indicators of impairment of FHLB and Bankers’ Bank stock as of June 30, 2023 and December 31, 2022.

61

Loan and Lease Portfolio

Lending-related income is the most important component of our net interest income and is the main driver of the results of our operations. Total loans and leases at June 30, 2023 and December 31, 2022 were $5.6 billion and $5.4 billion, respectively, an increase of $149.3 million, or 2.8%. Originated loans and leases were $5.3 billion at June 30, 2023, an increase of $211.6 million, or 4.1%, compared to $5.1 billion at December 31, 2022. Purchased credit deteriorated loans and acquired non-credit-deteriorated loans and leases were $228.2 million at June 30, 2023, a decrease of $62.4 million, or 21.5%, compared to $290.5 million at December 31, 2022. The increase in our originated portfolio was primarily attributed to organic loan and lease growth, and renewals of acquired non-credit-deteriorate loans and leases that are now reflected with originated loans. The decrease in the purchased credit deteriorated and acquired non-credit-deteriorated loan and lease portfolio was driven by renewals that are reflected within originated loans, payoffs, and maturities during the period.

We strive to maintain a relatively diversified loan portfolio to help reduce the risk inherent in concentration in certain types of collateral. Loans, excluding leases, are typically made to real estate, manufacturing, wholesale, retail and service businesses for working capital needs, business expansions and operations. As of June 30, 2023, the loan portfolio included $420.7 million of unguaranteed 7(a) SBA and USDA loans with exposure to the following top three industries: 17.1% retail trade, 15.4% accommodation and food services, and 11.4% manufacturing. The following table shows our allocation of originated, purchase credit deteriorated and acquired non-credit-deteriorated loans and leases as of the dates presented (dollars in thousands):

	June 30, 2023						December 31, 2022
	Amount			% of Total			Amount			% of Total
Originated loans and leases
Commercial real estate	$	1,806,531			32.4	%	$	1,712,152			31.6	%
Residential real estate		453,880			8.1	%		426,226			7.9	%
Construction, land development, and other land		387,623			7.0	%		438,617			8.1	%
Commercial and industrial		2,086,274			37.5	%		2,030,616			37.5	%
Installment and other		3,582			0.1	%		1,410			0.0	%
Leasing financing receivables		604,437			10.9	%		521,689			9.6	%
Total originated loans and leases	$	5,342,327			95.9	%	$	5,130,710			94.7	%
Purchased credit deteriorated loans
Commercial real estate	$	30,724			0.6	%	$	45,143			0.8	%
Residential real estate		26,012			0.5	%		32,228			0.6	%
Construction, land development, and other land		320			0.0	%		372			0.0	%
Commercial and industrial		1,726			0.0	%		2,192			0.0	%
Installment and other		129			0.0	%		140			0.0	%
Total purchased credit deteriorated loans	$	58,911			1.1	%	$	80,075			1.4	%
Acquired non-credit-deteriorated loans and leases
Commercial real estate	$	126,191			2.4	%	$	152,193			2.8	%
Residential real estate		25,055			0.4	%		31,508			0.6	%
Commercial and industrial		16,750			0.3	%		24,266			0.5	%
Installment and other		25			0.0	%		209			0.0	%
Leasing financing receivables		1,258			0.0	%		2,297			0.0	%
Total acquired non-credit-deteriorated    loans and leases	$	169,279			3.0	%	$	210,473			3.9	%
Total loans and leases	$	5,570,517			100.0	%	$	5,421,258			100.0	%
Allowance for credit losses - loans and leases		(92,665	)					(81,924	)
Total loans and leases, net of allowance for credit losses -    loans and leases	$	5,477,852					$	5,339,334

62

Loans collateralized by real estate comprised 51.3% and 52.4% of the loan and lease portfolio at June 30, 2023 and December 31, 2022, respectively. Commercial real estate loans comprised the largest portion of the real estate loan portfolio as of June 30, 2023 and December 31, 2022 and totaled $2.0 billion, or 68.7% of real estate loans and 35.2% of the total loan and lease portfolio at June 30, 2023. At December 31, 2022, commercial real estate loans totaled $1.9 billion and comprised 67.3% of real estate loans and 35.2% of the total loan and lease portfolio. Purchased credit deteriorated commercial real estate loans decreased from $45.1 million as of December 31, 2022 to $30.7 million as of June 30, 2023, a decrease of $14.4 million, or 31.9%. At June 30, 2023 and December 31, 2022, commercial real estate loans, including both owner-occupied and non-owner occupied, as a percentage of total capital were 293.3% and 313.4%, respectively. Non-owner occupied commercial real estate loans were $791.2 million and $736.7 million, or 86.8% and 86.6% of total capital, at June 30, 2023 and December 31, 2022, respectively.

Residential real estate loans totaled $504.9 million at June 30, 2023 compared to $490.0 million at December 31, 2022, an increase of $14.9 million, or 3.1%. The residential real estate loan portfolio comprised 17.7% and 17.3% of real estate loans as of June 30, 2023 and December 31, 2022, respectively, and 9.1% and 9.0% of total loans and leases at June 30, 2023 and December 31, 2022, respectively. Purchased credit deteriorated residential real estate loans decreased from $32.2 million at December 31, 2022 to $26.0 million at June 30, 2023, a decrease of $6.2 million, or 19.3%. Multifamily real estate loans were $321.5 million at and $304.2 million, or 33.5% and 35.6% of total capital, at June 30, 2023 and December 31, 2022, respectively.

Construction, land development, and other land loans totaled $387.9 million at June 30, 2023 compared to $439.0 million at December 31, 2022, an decrease of $51.0 million, or 11.6%. The construction, land development and other land loan portfolio comprised 13.6% and 15.5% of real estate loans at June 30, 2023 and December 31, 2022, respectively, and 7.0% and 8.1% of the total loan and lease portfolio at June 30, 2023 and December 31, 2022, respectively. The construction, land development and other land loan portfolio was 40.3% and 51.2% of total capital, at June 30, 2023 and December 31, 2022, respectively.

Commercial and industrial loans totaled $2.1 billion at June 30, 2023 and December 31, 2022, an increase of $47.7 million, or 2.3%. The commercial and industrial loan portfolio comprised 37.8% and 37.9% of the total loan and lease portfolio at June 30, 2023 and December 31, 2022, respectively.

Lease financing receivables comprised 10.9% and 9.7% of the loan and lease portfolio at June 30, 2023 and December 31, 2022, respectively. Total lease financing receivables were $605.7 million and $524.0 million at June 30, 2023 and December 31, 2022, respectively, an increase of $81.7 million, or 15.6%.

63

Loan and Lease Portfolio Maturities and Interest Rate Sensitivity

The following table shows our loan and lease portfolio by scheduled maturity at June 30, 2023 (dollars in thousands):

	Due in One Year or Less				Due after One Year Through Five Years				Due after Five Years Through Fifteen Years				Due after Fifteen Years
	Fixed Rate		Floating Rate		Fixed Rate		Floating Rate		Fixed Rate		Floating Rate		Fixed Rate		Floating Rate		Total
Originated loans and leases
Commercial real estate	$	73,329	$	194,422	$	670,514	$	265,646	$	301,569	$	122,356	$	10,288	$	168,407	$	1,806,531
Residential real estate		13,732		34,940		122,653		69,208		42,010		105,293		63,219		2,825		453,880
Construction,    land development,    and other land		3,639		132,172		11,389		205,970		28,755		5,698		—		—		387,623
Commercial and industrial		30,728		380,616		312,624		908,941		155,714		256,706		32,674		8,271		2,086,274
Installment and other		304		700		730		1,633		215		—		—		—		3,582
Leasing financing receivables		15,570		—		522,488		—		66,379		—		—		—		604,437
Total originated loans    and leases	$	137,302	$	742,850	$	1,640,398	$	1,451,398	$	594,642	$	490,053	$	106,181	$	179,503	$	5,342,327
Purchased credit deteriorated loans
Commercial real estate	$	11,524	$	-	$	15,350	$	2,156	$	721	$	563	$	135	$	275	$	30,724
Residential real estate		3,323		48		9,939		548		5,933		470		4,329		1,422		26,012
Construction,    land development,    and other land		283		—		37		—		—		—		—		—		320
Commercial and industrial		—		78		1,644		4		—		—		—		—		1,726
Installment and other		—		—		24		—		105		—		—		—		129
Total purchased credit    deteriorated loans	$	15,130	$	126	$	26,994	$	2,708	$	6,759	$	1,033	$	4,464	$	1,697	$	58,911
Acquired non-credit-deteriorated loans and leases
Commercial real estate		5,763		279		65,118		13,168		12,422		8,916		2,496		18,029	$	126,191
Residential real estate		6,261		2,044		6,967		737		128		4,376		729		3,813		25,055
Commercial and industrial		882		107		6,025		8,315		288		817		—		316		16,750
Installment and other		18		—		7		—		—		—		—		—		25
Leasing financing receivables		406		—		852		—		—		—		—		—		1,258
Total acquired    non-credit-deteriorated    loans and leases	$	13,330	$	2,430	$	78,969	$	22,220	$	12,838	$	14,109	$	3,225	$	22,158	$	169,279
Total loans and leases	$	165,762	$	745,406	$	1,746,361	$	1,476,326	$	614,239	$	505,195	$	113,870	$	203,358	$	5,570,517

At June 30, 2023, 47.4% of the loan and lease portfolio bears interest at fixed rates and 52.6% at floating rates. The expected life of our loan portfolio will differ from contractual maturities because borrowers may have the right to curtail or prepay their loans with or without penalties. Because a portion of the portfolio is accounted for under ASC 310-30, the carrying value is significantly affected by estimates and it is impracticable to allocate scheduled payments for those loans based on those estimates. Consequently, the tables presented include information limited to contractual maturities of the underlying loans. As of June 30, 2023, we had $252.9 million in loans indexed to LIBOR and $1.4 billion in loans indexed to SOFR.

64

Allowance for Credit Losses - Loans and Leases

The ACL is determined by us on a quarterly basis, although we are engaged in monitoring the appropriate level of the allowance on a more frequent basis. The ACL reflects management’s estimate of current expected credit losses inherent in the loan and lease portfolios. The computation includes elements of judgment and high levels of subjectivity.

Factors considered by us include, but are not limited to, actual loss experience, peer loss experience, changes in size and risk profile of the portfolio, identification of individual problem loan and lease situations that may affect a borrower’s ability to repay, application of a reasonable and supportable forecast, and evaluation of the prevailing economic conditions. Changes in conditions may necessitate revision of the estimate in future periods.

We assess the ACL based on three categories: (i) originated loans and leases, (ii) acquired non-credit-deteriorated loans and leases, and (iii) purchased credit deteriorated loans.

Total ACL was $92.7 million at June 30, 2023 compared to $81.9 million at December 31, 2022, an increase of $10.7 million, or 13.1%. The increase was primarily due to an increase in specific reserves related to loans individually evaluated for impairment. Total ACL to total loans and leases held for investment, net before ACL, was 1.66% and 1.51% of total loans and leases at June 30, 2023 and December 31, 2022, respectively. As of June 30, 2023, approximately $38.0 million of the ACL was allocated to unguaranteed portion of SBA 7(a) and USDA loans.

65

The following tables present an analysis of the allowance of the loan and lease losses for the periods presented (dollars in thousands):

	Commercial Real Estate			Residential Real Estate			Construction, Land Development, and Other Land			Commercial and Industrial			Installment and Other			Lease Financing Receivables			Total
Balance at March 31, 2023	$	24,738		$	2,679		$	3,498		$	51,849		$	25		$	7,676		$	90,465
Provision/(recapture) for PCD loans		142			(55	)		(3	)		3			—			—			87
Provision/(recapture) for acquired   non-credit-deteriorated loans		190			(42	)		—			(199	)		—			(7	)		(58	)
Provision/(recapture) for originated loans		4,027			(101	)		(1,560	)		3,357			17			698			6,438
Total provision/(recapture)	$	4,359		$	(198	)	$	(1,563	)	$	3,161		$	17		$	691		$	6,467
Charge-offs for PCD    loans		—			—			—			—			—			—			—
Charge-offs for acquired non-credit    deteriorated loans		—			—			—			—			—			—			—
Charge-offs for originated loans		(2,945	)		—			—			(2,097	)		—			(462	)		(5,504	)
Total charge-offs	$	(2,945	)	$	—		$	—		$	(2,097	)	$	—		$	(462	)	$	(5,504	)
Recoveries for PCD    loans		—			—			—			—			—			—			—
Recoveries for acquired non-credit    deteriorated loans		—			—			—						—			—			—
Recoveries for originated loans		225			63			—			727			1			221			1,237
Total recoveries	$	225		$	63		$	—		$	727		$	1		$	221		$	1,237
Net (charge-offs) recoveries		(2,720	)		63			—			(1,370	)		1			(241	)		(4,267	)
Balance at June 30, 2023		26,377			2,544			1,935			53,640			43			8,126			92,665
Ending ACL Balances
PCD loans		733			341			7			39			2			—			1,122
Acquired non-credit-deteriorated loans		3,061			96			—			684			1			17			3,859
Originated loans		22,583			2,107			1,928			52,917			40			8,109			87,684
Balance at June 30, 2023	$	26,377		$	2,544		$	1,935		$	53,640		$	43		$	8,126		$	92,665
Loans individually    evaluated for impairment	$	8,555		$	—		$	—		$	17,399		$	—		$	—		$	25,954
Loans collectively    evaluated for impairment		17,822			2,544			1,935			36,241			43			8,126			66,711
Balance at June 30, 2023	$	26,377		$	2,544		$	1,935		$	53,640		$	43		$	8,126		$	92,665
Loans and leases ending balance
Loans individually    evaluated for impairment	$	30,750		$	—		$	—		$	38,485		$	—		$	—		$	69,235
Loans collectively    evaluated for impairment		1,932,696			504,947			387,943			2,066,265			3,736			605,695			5,501,282
Total loans and leases at   June 30, 2023, gross	$	1,963,446		$	504,947		$	387,943		$	2,104,750		$	3,736		$	605,695		$	5,570,517
Ratio of net charge-offs to average    loans outstanding during the year
PCD loans		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%
Acquired non-credit-deteriorated loans		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%
Originated loans		0.19	%		0.00	%		0.00	%		0.10	%		0.00	%		0.02	%		0.31	%
Loans ending balance as a    percentage of total loans, gross
Loans individually    evaluated for impairment		0.55	%		0.00	%		0.00	%		0.69	%		0.00	%		0.00	%		1.24	%
Loans collectively    evaluated for impairment		34.70	%		9.06	%		6.96	%		37.09	%		0.07	%		10.87	%		98.76	%

66

	Commercial Real Estate			Residential Real Estate			Construction, Land Development, and Other Land			Commercial and Industrial			Installment and Other			Lease Financing Receivables			Total
Balance at December 31, 2022	$	26,062		$	3,140		$	3,134		$	41,888		$	24		$	7,676		$	81,924
Provision/(recapture) for PCD loans		(418	)		(333	)		(6	)		(7	)		—			—			(764	)
Provision/(recapture) for acquired   non-credit-deteriorated loans and leases		(675	)		(200	)		(1	)		(545	)		—			(17	)		(1,438	)
Provision/(recapture) for originated loans		4,331			(118	)		(1,192	)		14,518			14			828			18,381
Total provision/(recapture)	$	3,238		$	(651	)	$	(1,199	)	$	13,966		$	14		$	811		$	16,179
Charge-offs for PCD    loans		—			—			—			—			—			—			—
Charge-offs for acquired non-credit    deteriorated loans		—			—			—			—			—			—			—
Charge-offs for originated loans		(3,910	)		(9	)		—			(3,887	)		—			(767	)		(8,573	)
Total charge-offs	$	(3,910	)	$	(9	)	$	—		$	(3,887	)	$	—		$	(767	)	$	(8,573	)
Recoveries for PCD    loans		—			—			—			—			—			—			—
Recoveries for acquired non-credit    deteriorated loans		—			—			—			—			—			—			—
Recoveries for originated loans		987			64			—			1,673			5			406			3,135
Total recoveries	$	987		$	64		$	—		$	1,673		$	5		$	406		$	3,135
Net (charge-offs) recoveries		2,923			(55	)		—			2,214			(5	)		361			5,438
Balance at June 30, 2023		26,377			2,544			1,935			53,640			43			8,126			92,665
Ending ACL Balances
PCD loans		733			341			7			39			2			—			1,122
Acquired non-credit-deteriorated loans		3,061			96			—			684			1			17			3,859
Originated loans		22,583			2,107			1,928			52,917			40			8,109			87,684
Balance at June 30, 2023	$	26,377		$	2,544		$	1,935		$	53,640		$	43		$	8,126		$	92,665
Loans individually    evaluated for impairment		8,555			—			—			17,399			—			—			25,954
Loans collectively    evaluated for impairment		17,822			2,544			1,935			36,241			43			8,126			66,711
Balance at June 30, 2023	$	26,377		$	2,544		$	1,935		$	53,640		$	43		$	8,126		$	92,665
Loans and leases ending balance
Loans individually    evaluated for impairment	$	30,750		$	—		$	—		$	38,485		$	—		$	—		$	69,235
Loans collectively    evaluated for impairment		1,932,696			504,947			387,943			2,066,265			3,736			605,695			5,501,282
Total loans and leases at   June 30, 2023, gross	$	1,963,446		$	504,947		$	387,943		$	2,104,750		$	3,736		$	605,695		$	5,570,517
Ratio of net charge-offs to average    loans outstanding during the year
PCD loans		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%
Acquired non-credit-deteriorated loans		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%
Originated loans		0.11	%		0.00	%		0.00	%		0.08	%		0.00	%		0.01	%		0.20	%
Loans ending balance as a    percentage of total loans, gross
Loans individually    evaluated for impairment		0.55	%		0.00	%		0.00	%		0.69	%		0.00	%		0.00	%		1.24	%
Loans collectively    evaluated for impairment		34.70	%		9.06	%		6.96	%		37.09	%		0.07	%		10.87	%		98.76	%

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	Commercial Real Estate			Residential Real Estate			Construction, Land Development, and Other Land			Commercial and Industrial			Installment and Other			Lease Financing Receivables			Total
Balance at March 31, 2022	$	19,706		$	2,145		$	1,116		$	33,244		$	10		$	3,237		$	59,458
Provision/(recapture) for acquired   impaired loans		(382	)		(196	)		27			(18	)		1			—			(568	)
Provision/(recapture) for acquired   non-impaired loans and leases		(740	)		14			—			(514	)		—			(32	)		(1,272	)
Provision for originated loans		1,688			521			649			4,384			—			506			7,748
Total provision	$	566		$	339		$	676		$	3,852		$	1		$	474		$	5,908
Charge-offs for acquired   impaired loans		(34	)		—			—			(1	)		—			—			(35	)
Charge-offs for acquired   non-impaired loans and leases		—			—			—			-			—			—			—
Charge-offs for originated loans   and leases		(463	)		—			—			(2,653	)		—			(324	)		(3,440	)
Total charge-offs	$	(497	)	$	—		$	—		$	(2,654	)	$	—		$	(324	)	$	(3,475	)
Recoveries for acquired   impaired loans		1			4			—			18			—			—			23
Recoveries for acquired   non-impaired loans and leases		—			—			—			—			—			21			21
Recoveries for originated   loans and leases		42			1			—			275			—			183			501
Total recoveries	$	43		$	5		$	—		$	293		$	—		$	204		$	545
Less: Net charge-offs (recoveries)		454			(5	)		—			2,361			—			120			2,930
Balance at June 30, 2022
Acquired impaired loans		1,240			809			28			386			3			—			2,466
Acquired non-impaired   loans and leases		1,461			50			-			1,347			1			32			2,891
Originated loans and leases		17,117			1,630			1,764			33,002			7			3,559			57,079
Balance at June 30, 2022	$	19,818		$	2,489		$	1,792		$	34,735		$	11		$	3,591		$	62,436
Ending ALLL balance
Acquired impaired loans	$	1,240		$	809		$	28		$	386		$	3		$	—		$	2,466
Acquired non-impaired loans   and leases and originated   loans individually evaluated   for impairment		6,002			—			—			11,337			—			—			17,339
Acquired non-impaired loans   and leases and originated loans   and leases collectively evaluated   for impairment		12,576			1,680			1,764			23,012			8			3,591			42,631
Balance at June 30, 2022	$	19,818		$	2,489		$	1,792		$	34,735		$	11		$	3,591		$	62,436
Loans and leases ending balance
Acquired impaired loans	$	60,075		$	39,902		$	1,184		$	3,232		$	157		$	—		$	104,550
Acquired non-impaired loans   and leases and originated loans   individually evaluated for   impairment		45,200			5,188			5,541			27,770			—			—			83,699
Acquired non-impaired loans   and leases and originated loans   and leases collectively evaluated   for impairment		1,794,663			436,081			428,782			1,876,772			1,153			442,371			4,979,822
Total loans and leases at   June 30, 2022, gross	$	1,899,938		$	481,171		$	435,507		$	1,907,774		$	1,310		$	442,371		$	5,168,071
Ratio of net charge-offs   to average loans and leases   outstanding during the   period (annualized)
Acquired impaired loans		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%
Acquired non-impaired loans   and leases		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%
Originated loans and leases		0.03	%		0.00	%		0.00	%		0.19	%		0.00	%		0.01	%		0.24	%
Loans and leases ending balance   as a percentage of total loans   and leases, gross
Acquired impaired loans		1.16	%		0.77	%		0.02	%		0.06	%		0.01	%		0.00	%		2.02	%
Acquired non-impaired loans   and leases and originated loans   individually evaluated for   impairment		0.87	%		0.10	%		0.11	%		0.54	%		0.00	%		0.00	%		1.62	%
Acquired non-impaired loans   and leases and originated loans   and leases collectively evaluated   for impairment		34.73	%		8.44	%		8.30	%		36.31	%		0.02	%		8.56	%		96.36	%

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	Commercial Real Estate			Residential Real Estate			Construction, Land Development, and Other Land			Commercial and Industrial			Installment and Other			Lease Financing Receivables			Total
Balance at December 31, 2021	$	16,918		$	1,628		$	522		$	33,129		$	9		$	2,806		$	55,012
Provision/(recapture) for acquired   impaired loans		(537	)		(203	)		25			(21	)		1			—			(735	)
Provision/(recapture) for acquired   non-impaired loans and leases		(1,889	)		25			—			(1,476	)		—			(53	)		(3,393	)
Provision for originated loans		5,776			1,030			1,245			5,807			1			1,172			15,031
Total provision	$	3,350		$	852		$	1,270		$	4,310		$	2		$	1,119		$	10,903
Charge-offs for acquired   impaired loans		(34	)		—			—			(1	)		—			—			(35	)
Charge-offs for acquired   non-impaired loans and leases		—			—			—			—			—			—			-
Charge-offs for originated loans   and leases		(703	)		—			—			(3,116	)		—			(687	)		(4,506	)
Total charge-offs	$	(737	)	$	—		$	—		$	(3,117	)	$	—		$	(687	)	$	(4,541	)
Recoveries for acquired   impaired loans		1			6			—			44			—			-			51
Recoveries for acquired   non-impaired loans and leases		—			—			—			—			—			37			37
Recoveries for originated   loans and leases		286			3			—			369			—			316			974
Total recoveries	$	287		$	9		$	—		$	413		$	—		$	353		$	1,062
Less: Net charge-offs (recoveries)		450			(9	)		—			2,704			—			334			3,479
Acquired impaired loans		1,240			809			28			386			3			—			2,466
Acquired non-impaired   loans and leases		1,461			50			—			1,347			1			32			2,891
Originated loans and leases		17,117			1,630			1,764			33,002			7			3,559			57,079
Balance at June 30, 2022	$	19,818		$	2,489		$	1,792		$	34,735		$	11		$	3,591		$	62,436
Ending ALLL balance
Acquired impaired loans	$	1,240		$	809		$	28		$	386		$	3		$	—		$	2,466
Acquired non-impaired loans   and leases and originated   loans individually evaluated   for impairment		6,002			—			—			11,337			—			—			17,339
Acquired non-impaired loans   and leases and originated loans   and leases collectively evaluated   for impairment		12,576			1,680			1,764			23,012			8			3,591			42,631
Balance at June 30, 2022	$	19,818		$	2,489		$	1,792		$	34,735		$	11		$	3,591		$	62,436
Loans and leases ending balance
Acquired impaired loans	$	60,075		$	39,902		$	1,184		$	3,232		$	157		$	—		$	104,550
Acquired non-impaired loans   and leases and originated loans   individually evaluated for   impairment		45,200			5,188			5,541			27,770			—			—			83,699
Acquired non-impaired loans   and leases and originated loans   and leases collectively evaluated   for impairment		1,794,663			436,081			428,782			1,876,772			1,153			442,371			4,979,822
Total loans and leases at   June 30, 2022, gross	$	1,899,938		$	481,171		$	435,507		$	1,907,774		$	1,310		$	442,371		$	5,168,071
Ratio of net charge-offs   to average loans and leases   outstanding during the   period (annualized)
Acquired impaired loans		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%
Acquired non-impaired loans   and leases		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%
Originated loans and leases		0.02	%		0.00	%		0.00	%		0.11	%		0.00	%		0.02	%		0.15	%
Loans and leases ending balance   as a percentage of total loans   and leases, gross
Acquired impaired loans		1.16	%		0.77	%		0.02	%		0.06	%		0.01	%		0.00	%		2.02	%
Acquired non-impaired loans   and leases and originated loans   individually evaluated for   impairment		0.87	%		0.10	%		0.11	%		0.54	%		0.00	%		0.00	%		1.62	%
Acquired non-impaired loans   and leases and originated loans   and leases collectively evaluated   for impairment		34.73	%		8.44	%		8.30	%		36.31	%		0.02	%		8.56	%		96.36	%

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Non-Performing Assets

Non-performing loans and leases include loans and leases 90 days past due and still accruing and loans and leases accounted for on a non-accrual basis. Non-performing assets consist of non-performing loans and leases plus other real estate owned. Non-performing assets at June 30, 2023 and December 31, 2022 totaled $40.5 million and $40.7 million, with the decrease driven mainly by decreases to other real estate owned. The U.S. government guaranteed portion of non-performing loans totaled $2.4 million at June 30, 2023 and $2.2 million at December 31, 2022.

Total OREO decreased from $4.7 million at December 31, 2022 to $2.3 million at June 30, 2023. The $2.4 million decrease in OREO resulted mostly from sales.

The following table sets forth the amounts of non-performing loans and leases, non-performing assets, and OREO at the dates indicated (dollars in thousands):

	June 30,			December 31,
	2023			2022
Non-performing assets:
Non-accrual loans and leases(1)(2)	$	38,273		$	36,027
Past due loans and leases 90 days or more and still accruing interest		—			—
Total non-performing loans and leases		38,273			36,027
Other real estate owned		2,265			4,717
Total non-performing assets	$	40,538		$	40,744
Total non-performing loans and leases as a percentage of total    loans and leases		0.69	%		0.66	%
Total non-accrual loans and leases as a percentage of total    loans and leases		0.69	%		0.66	%
Total non-performing assets as a percentage of    total assets		0.54	%		0.55	%
Allowance for credit losses - loans and leases, as a percentage of    non-performing loans and leases		242.12	%		227.40	%
Allowance for credit losses - loans and leases, as a percentage of    non-accrual loans and leases		242.12	%		227.40	%
Non-performing assets guaranteed by U.S. government:
Non-accrual loans guaranteed	$	2,472		$	2,225
Past due loans 90 days or more and still accruing interest guaranteed		—			—
Total non-performing loans guaranteed	$	2,472		$	2,225
Total non-performing loans and leases not guaranteed as a percentage of    total loans and leases		0.64	%		0.62	%
Total non-accrual loans and leases not guaranteed as a percentage of    total loans and leases		0.64	%		0.62	%
Total non-performing assets not guaranteed as a percentage of total assets		0.50	%		0.52	%

(1)Includes $4.0 million of non-accrual loan modifications at June 30, 2023 and $1.6 million of non-accrual restructured loans at December 31, 2022, respectively.

(2)For the six months ended June 30, 2023, $1.9 million in interest income would have been recorded had non-accrual loans been current.

Deposits

Our loan and lease growth is funded primarily through core deposits. We gather deposits primarily through each of our 37 branch locations in the Chicago metropolitan area and one branch in Brookfield, Wisconsin. Through our branch network, online, mobile and direct banking channels, we offer a variety of deposit products including demand deposit accounts, interest-bearing products, savings accounts, and certificates of deposit. We offer competitive online, mobile, and direct banking channels. Small businesses are a significant source of low cost deposits as they value convenience, flexibility, and access to local decision makers that are responsive to their needs.

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Total deposits at June 30, 2023 were $5.9 billion, representing an increase of $222.0 million, or 3.9%, compared to $5.7 billion at December 31, 2022, driven by an increase in time deposits and money market demand accounts. Non-interest-bearing deposits were $1.8 billion, or 30.3% of total deposits, at June 30, 2023, a decrease of $344.9 million, or 16.1%, compared to $2.1 billion at December 31, 2022, or 37.6% of total deposits. Core deposits were 90.3% and 92.7% of total deposits at June 30, 2023 and December 31, 2022, respectively.

The following table shows the average balance amounts and the average contractual rates paid on our deposits for the periods indicated (dollars in thousands):

	For Three Months Ended					For Three Months Ended
	June 30, 2023					June 30, 2022
	Average Balance		Average Rate			Average Balance		Average Rate
Non-interest-bearing demand deposits	$	1,848,538		0.00	%	$	2,265,426		0.00	%
Interest checking		541,036		1.61	%		615,831		0.27	%
Money market accounts		1,534,463		2.82	%		1,307,320		0.37	%
Savings		575,254		0.15	%		664,954		0.05	%
Time deposits (below $100,000)		797,241		3.82	%		254,419		0.21	%
Time deposits ($100,000 and above)		531,438		2.96	%		372,780		0.32	%
Total	$	5,827,970		1.70	%	$	5,480,730		0.16	%

	For the Six Months Ended					For the Six Months Ended
	June 30, 2023					June 30, 2022
	Average Balance		Average Rate			Average Balance		Average Rate
Non-interest-bearing demand deposits	$	1,961,945		0.00	%	$	2,256,778		0.00	%
Interest checking		573,342		1.64	%		597,665		0.20	%
Money market accounts		1,500,260		2.49	%		1,281,519		0.26	%
Savings		594,316		0.15	%		657,155		0.05	%
Time deposits (below $100,000)		663,900		3.35	%		260,635		0.19	%
Time deposits ($100,000 and above)		484,645		2.64	%		383,908		0.29	%
Total	$	5,778,408		1.43	%	$	5,437,660		0.12	%

Our average cost of deposits was 1.70% during the three months ended June 30, 2023, compared to 0.16% for the three months ended June 30, 2022. Our average cost of deposits was 1.43% during the six months ended June 30, 2023 compared to 0.12% during the six months ended June 30, 2022. This increase was principally attributed to higher rates on interest-bearing deposits as a result of the rising interest rate environment and an increase in interest bearing deposits and corresponding decrease in non-interest bearing deposits. The ratio of our average non-interest bearing deposits to total average deposits ratios was 31.7% during the three months ended June 30, 2023, compared to 41.3% during the three months ended June 30, 2022. The ratio of our average non-interest bearing deposits to total average deposits ratios was 34.0% during the six months ended June 30, 2023 compared to 41.55% during the six months ended June 30, 2022. We had $551.4 million in brokered time deposits at June 30, 2023 and $251.5 million at December 31, 2022, which represented 9.3% and 4.4% of total deposits, respectively. The increase in brokered deposits was due to increases in funding requirements. Our loan and lease to deposit ratio was 94.6% at June 30, 2023 compared to 96.0% at December 31, 2022.

The following table shows time deposits and other time deposits of $250,000 or more by time remaining until maturity as of June 30, 2023 (dollars in thousands):

	Less than $250,000		$250,000 or Greater		Total		Uninsured Portion
Three months or less	$	228,848	$	25,904	$	254,752	$	5,903
Over three months through six months		430,216		82,552		512,768		34,552
Over six months through 12 months		529,140		94,771		623,911		27,021
Over 12 months		26,513		11,875		38,388		7,875
Total	$	1,214,717	$	215,102	$	1,429,819	$	75,351

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Total estimated uninsured deposits, were $1.5 billion and $1.6 billion as of June 30, 2023 and December 31, 2022, and represented 25.9% and 28.2% of total deposits, respectively.

Short Term Borrowings

In addition to deposits, we also utilize FHLB advances as a supplementary funding source to finance our operations. The Bank’s advances from the FHLB are collateralized by commercial, residential and multi-family real estate loans and securities. At June 30, 2023 and December 31, 2022, we had an available borrowing capacity from the FHLB of $1.9 billion, subject to the availability of collateral.

At June 30, 2023, the Company had $540.0 million of FHLB advances outstanding with a maturities ranging from July 2023 to September 2023.

The Company has the capacity to borrow funds from the discount window of the Federal Reserve System. There were no borrowings outstanding under the Federal Reserve Bank discount window line as of June 30, 2023 and December 31, 2022. The Company pledges loans as collateral for any borrowings under the Federal Reserve Bank discount window.

The following table sets forth certain information regarding our short-term borrowings at the dates and for the periods indicated (dollars in thousands):

	Six Months Ended June 30,
	2023			2022
Federal Reserve Bank discount window borrowing:
Average balance outstanding	$	—		$	—
Maximum outstanding at any month-end period during the year		—			—
Balance outstanding at end of period		—			—
Weighted average interest rate during period	N/A			N/A
Weighted average interest rate at end of period	N/A			N/A
Federal Home Loan Bank advances:
Average balance outstanding	$	511,929		$	358,083
Maximum outstanding at any month-end period during the year		675,000			735,000
Balance outstanding at end of period		540,000			650,000
Weighted average interest rate during period		3.87	%		0.80	%
Weighted average interest rate at end of period		5.24	%		1.59	%
Federal funds purchased:
Average balance outstanding	$	1,381		$	1,271
Maximum outstanding at any month-end period during the year		—			45,000
Balance outstanding at end of period		—			45,000
Weighted average interest rate during period		5.30	%		2.32	%
Weighted average interest rate at end of period		0.00	%		2.07	%
Bank Term Funding Program:
Average balance outstanding	$	—		$	—
Maximum outstanding at any month-end period during the year		—			—
Balance outstanding at end of period		—			—
Weighted average interest rate during period	N/A			N/A
Weighted average interest rate at end of period	N/A			N/A
Revolving Line of Credit:
Average balance outstanding	$	—		$	—
Maximum outstanding at any month-end period during the year		—			—
Balance outstanding at end of period		—			—
Weighted average interest rate during period	N/A			N/A
Weighted average interest rate at end of period	N/A			N/A

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Customer Repurchase Agreements (Sweeps)

Securities sold under agreements to repurchase represent a demand deposit product offered to customers that sweep balances in excess of the FDIC insurance limit into overnight repurchase agreements. We pledge securities as collateral for the repurchase agreements. Securities sold under agreements to repurchase increased by $19.5 million, from $15.4 million at December 31, 2022 to $34.9 million at June 30, 2023.

Liquidity

We manage liquidity based upon factors that include the amount of core deposits as a percentage of total deposits, the level of diversification of our funding sources, the amount of non-deposit funding used to fund assets, the availability of unused funding sources, off-balance sheet obligations, the availability of assets to be readily converted into cash without undue loss, the amount of cash and liquid securities we hold and the re-pricing characteristics and maturities of our assets when compared to the re-pricing characteristics of our liabilities, the ability to securitize and sell certain pools of assets and other factors.

Our liquidity needs are primarily met by cash and investment securities positions, growth in deposits, cash flow from amortizing loan portfolios, and borrowings from the FHLB. For additional information regarding our operating, investing, and financing cash flows, see Consolidated Statements of Cash Flows in our Unaudited Interim Condensed Consolidated Financial Statements included elsewhere in this report.

As of June 30, 2023, Byline Bank had maximum borrowing capacity from the FHLB of $2.6 billion and $760.6 million from the Federal Reserve Bank (“FRB”). As of June 30, 2023, Byline Bank had open FHLB advances of $540.0 million and open letters of credit of $13.5 million, leaving us with available aggregate borrowing capacity of $1.0 billion based on collateral pledged. In addition, Byline Bank had uncommitted federal funds lines available of $135.0 million and $760.6 million available under the FRB discount window line at June 30, 2023.

As of December 31, 2022, Byline Bank had maximum borrowing capacity from the FHLB of $2.5 billion and $804.6 million from the FRB. As of December 31, 2022, Byline Bank had open advances of $625.0 million and open letters of credit of $13.5 million, leaving us with available aggregate borrowing capacity of $1.0 billion based on collateral pledged. In addition, Byline Bank had an uncommitted federal funds line available of $135.0 million and $804.6 million available under the FRB discount window line at December 31, 2022.

On October 13, 2016, we entered into a $30.0 million revolving credit agreement with a correspondent bank. Through subsequent amendments, the revolving credit agreement was reduced to $15.0 million. The amended revolving line of credit bears interest at either the SOFR plus 195 basis points or the Prime Rate minus 75 basis points, based on our election, which is required to be communicated at least three business days prior to the commencement of an interest period. If we fail to provide timely notification, the interest rate will be Prime Rate minus 75 basis points. On May 26, 2023, the Company amended the agreement with the lender, which provides for: i) the renewal of the revolving line-of-credit facility of up to $15.0 million extending its maturity date to May 26, 2024; and ii) a new term loan facility in the principal amount of up to $20.0 million with a maturity date of May 26, 2026. At June 30, 2023 and December 31, 2022, the line of credit had no outstanding balance.

There are regulatory limitations that affect the ability of Byline Bank to pay dividends to the Company. See Note 21 of our Consolidated Financial Statements, included in our Annual Report on Form 10-K for the year ended December 31, 2022 for additional information. Management believes that such limitations will not impact our ability to meet our ongoing short-term cash obligations.

We expect that our cash and liquidity resources will be generated by the operations of Byline Bank, which we expect to be sufficient to satisfy our liquidity and capital requirements for at least the next twelve months.

Capital Resources

Stockholders’ equity at June 30, 2023 was $813.9 million compared to $765.8 million at December 31, 2022, an increase of $48.1 million, or 6.3%. The decrease was primarily driven by the increase in accumulated other comprehensive loss during the six months ended June 30, 2023, reflecting the unrealized losses in our available-for-sale securities portfolio; the redemption of preferred stock; and the increase of treasury shares under the share repurchase program. These were offset by an increase in retained earnings.

The Company and Byline Bank are subject to various regulatory capital requirements administered by federal banking regulators. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by federal banking regulators that, if undertaken, could have a direct material effect on our financial statements.

Under applicable bank regulatory capital requirements, each of the Company and Byline Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. Byline Bank must also meet certain specific capital guidelines under the prompt corrective action framework. The capital amounts and classification are subject to qualitative judgments by the federal banking regulators about components, risk weightings and other factors.

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Quantitative measures established by regulation to ensure capital adequacy require the Company and Byline Bank to maintain minimum amounts and ratios of CET1 capital, Tier 1 capital and total capital to risk-weighted assets and of Tier 1 capital to average consolidated assets, (referred to as the “leverage ratio”), as defined under these capital requirements.

As of June 30, 2023, Byline Bank exceeded all applicable regulatory capital requirements and was considered “well-capitalized.” There have been no conditions or events since June 30, 2023 that management believes have changed Byline Bank’s classifications.

The regulatory capital ratios for the Company and Byline Bank to meet the minimum capital adequacy standards and for Byline Bank to be considered well capitalized under the prompt corrective action framework and the Company’s and Byline Bank’s actual capital amounts and ratios are set forth in the following tables as of the periods indicated (dollars in thousands):

	Actual					Minimum Capital Required					Required to be Considered Well Capitalized
June 30, 2023	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total capital to risk weighted assets:
Company	$	959,688		13.52	%	$	567,924		8.00	%	N/A		N/A
Bank		911,331		12.89	%		565,528		8.00	%	$	706,910		10.00	%
Tier 1 capital to risk weighted assets:
Company	$	796,359		11.22	%	$	425,943		6.00	%	N/A		N/A
Bank		823,002		11.64	%		424,146		6.00	%	$	565,528		8.00	%
Common Equity Tier 1 (CET1) to risk weighted assets:
Company	$	751,359		10.58	%	$	319,457		4.50	%	N/A		N/A
Bank		823,002		11.64	%		318,110		4.50	%	$	459,492		6.50	%
Tier 1 capital to average assets:
Company	$	796,359		10.74	%	$	296,702		4.00	%	N/A		N/A
Bank		823,002		11.12	%		296,100		4.00	%	$	370,125		5.00	%

	Actual					Minimum Capital Required					Required to be Considered Well Capitalized
December 31, 2022	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total capital to risk weighted assets:
Company	$	900,806		13.00	%	$	554,436		8.00	%	N/A		N/A
Bank		852,047		12.34	%		552,507		8.00	%	$	690,633		10.00	%
Tier 1 capital to risk weighted assets:
Company	$	751,887		10.85	%	$	415,827		6.00	%	N/A		N/A
Bank		778,128		11.27	%		414,380		6.00	%	$	552,507		8.00	%
Common Equity Tier 1 (CET1) to risk weighted assets:
Company	$	706,887		10.20	%	$	311,870		4.50	%	N/A		N/A
Bank		778,128		11.27	%		310,785		4.50	%	$	448,912		6.50	%
Tier 1 capital to average assets:
Company	$	751,887		10.29	%	$	292,258		4.00	%	N/A		N/A
Bank		778,128		10.67	%		291,741		4.00	%	$	364,676		5.00	%

The ratios above reflect the Company’s election to opt into the regulators’ joint CECL transition provision, which allows the Company to phase in the capital impact of the adoption of CECL over the next three years beginning January 1, 2022. Accordingly, capital ratios as of June 30, 2023 reflect 50% of the CECL impact and December 31, 2022 reflect 25% of the CECL impact.

The Company and Byline Bank must maintain a capital conservation buffer consisting of CET1 capital greater than 2.5% of risk-weighted assets above the required minimum risk-based capital levels in order to avoid limitations on paying dividends, repurchasing shares, and paying discretionary bonuses. The conservation buffers for the Company and Byline Bank exceed the minimum capital requirement as of June 30, 2023.

Provisions of state and federal banking regulations may limit, by statute, the amount of dividends that may be paid to the Company by Byline Bank without prior approval of Byline Bank’s regulatory agencies. The Company is economically dependent on the cash dividends received from Byline Bank. These dividends represent the primary cash flow from operating activities used to service obligations. For the six months ended June 30, 2023 the Company received $12.0 million in cash dividends from Byline Bank. For the year ended December 31, 2022, the Company received $24.0 million in cash dividends from Byline Bank in order to pay the required interest on its outstanding junior subordinated debentures in connection with its trust preferred securities interest, redemption of the Series B preferred stock outstanding, and to fund other Company-related activities.

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On March 31, 2022, the Company redeemed all 10,438 outstanding shares of its 7.5% fixed-to-floating noncumulative perpetual preferred stock, Series B. The redemption totaled $10.6 million, including the quarterly dividend payment.

On December 12, 2022, we announced that our Board of Directors approved a new stock repurchase program authorizing the purchase of up to an aggregate of 1,250,000 shares of our common stock. The program is in effect from January 1, 2023 until December 31, 2023, unless terminated earlier. We did not purchase any shares under the stock repurchase program during the three and six months ended June 30, 2023. We purchased 232,000 shares at a cost of $5.5 million under our previously authorized stock repurchase program during the three months ended June 30, 2022, and repurchased 514,819 shares at a cost of $13.1 million during the six months ended June 30, 2022.

On July 25, 2023, the Company's Board of Directors declared a cash dividend of $0.09 per share, payable on August 22, 2023, to stockholders of record of the Company's common stock as of August 8, 2023.

Off-Balance Sheet Items and Other Financing Arrangements

We are a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers. These financial instruments include commitments to extend credit, commercial letters of credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Condensed Consolidated Statements of Financial Condition. The contractual or notional amounts of those instruments reflect the extent of involvement we have in particular classes of financial instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. We evaluate each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by Byline Bank upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral is primarily obtained in the form of commercial and residential real estate (including income producing commercial properties).

Letters of credit are conditional commitments issued by Byline Bank to guarantee the performance of a customer to a third-party. Those guarantees are primarily issued to support public and private borrowing arrangements, bond financing and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

Commitments to make loans are generally made for periods of 90 days or less. The fixed rate loan commitments have interest rates ranging from 1.00% to 18.25% and maturities up to 2050. Variable rate loan commitments have interest rates ranging from 1.75% to 14.00% and maturities up to 2048.

Our exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments. We use the same credit policies in making commitments and conditional obligations as for funded instruments. We do not anticipate any material losses as a result of the commitments and standby letters of credit.

We enter into interest rate swaps that are used to manage differences in the amount, timing, and duration of our known or expected cash receipts and its known or expected cash payments principally related to certain variable rate loans, money market accounts and variable rate borrowings. We also enter into interest rate swaps with certain qualified borrowers to facilitate the borrowers’ risk management strategies and concurrently entered into mirror-image derivatives with a third party counterparty.

We recognize derivative financial instruments at fair value regardless of the purpose or intent for holding the instrument. We record derivative assets and derivative liabilities on the Condensed Consolidated Statements of Financial Condition within other assets and other liabilities, respectively. Because the derivative assets and liabilities recorded on the balance sheet at June 30, 2023 do not represent the amounts that may ultimately be paid under these contracts, these assets and liabilities are listed in the table below (dollars in thousands):

	June 30, 2023
			Fair Value
	Notional		Asset		Liability
Interest rate swaps designated as cash flow hedges	$	550,000	$	45,303	$	—
Other interest rate derivatives		558,316		18,856		(18,773	)
Other credit derivatives		1,206		—		—

See Note 16 of our Unaudited Interim Condensed Consolidated Financial Statements as of June 30, 2023, included in this report, and Note 21 of our Consolidated Financial Statements, included in our Annual Report on Form 10-K for the year ended December 31, 2022 for additional information on derivatives.

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GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures

Some of the financial measures included in our “Selected Financial Data” are not measures of financial performance in accordance with GAAP. Our management uses the non‑GAAP financial measures set forth below in its analysis of our performance:

•“Adjusted net income” and “adjusted diluted earnings per share” exclude certain significant items, which include impairment charges on assets held for sale and merger-related expenses, adjusted for applicable income tax. Management believes the significant items are not indicative of or useful to measure the Company’s operating performance on an ongoing basis.

•“Net interest income, fully taxable-equivalent” and “net interest margin, fully taxable-equivalent” are adjusted to reflect tax-exempt interest income on an equivalent before-tax basis using tax rates effective as of the end of the period. Management believes the metric provides useful comparable information to investors and that these measures may be useful for peer comparison.

•“Total revenue” is the combination of net interest income and non-interest income. Management believes the metric is an important measure of the Company's operating performance on an ongoing basis.

•“Adjusted non-interest expense” is non-interest expense excluding certain significant items, which include impairment charges on assets held for sale, and merger-related expenses.

•“Adjusted efficiency ratio” is adjusted non-interest expense less amortization of intangible assets divided by net interest income and non-interest income. Management believes the metric is an important measure of the Company’s operating performance on an ongoing basis.

•“Adjusted non-interest expense to average assets” is adjusted non-interest expense divided by average assets. Management believes the metric is an important measure of the Company’s operating performance on an ongoing basis.

•“Adjusted return on average stockholders’ equity” is adjusted net income divided by average stockholders’ equity. Management believes the metric is an important measure of the Company’s operating performance on an ongoing basis.

•“Adjusted return on average assets” is adjusted net income divided by average assets. Management believes the metric is an important measure of the Company’s operating performance on an ongoing basis.

•“Non-interest income to total revenues” is non-interest income divided by net interest income plus non-interest income. Management believes that it is standard practice in the industry to present non-interest income as a percentage of total revenue. Accordingly, management believes providing these measures may be useful for peer comparison.

•“Pre‑tax pre‑provision net income” is pre‑tax income plus the provision for credit losses. Management believes this metric demonstrates income excluding the tax provision or benefit and the provision for credit losses, and enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle.

•“Adjusted pre-tax pre-provision net income” is pre-tax pre-provision net income excluding certain significant items, which include impairment charges on assets held for sale, and merger-related expenses. Management believes the metric is an important measure of the Company’s operating performance on an ongoing basis.

•“Pre‑tax pre‑provision return on average assets” is pre-tax income plus the provision for credit losses, divided by average assets. Management believes this ratio demonstrates profitability excluding the tax provision or benefit and excludes the provision for credit losses. “Adjusted pre-tax pre-provision return on average assets” excludes certain significant items, which include impairment charges on assets held for sale.

•“Tangible common equity” is defined as total stockholders’ equity reduced by preferred stock and goodwill and other intangible assets. Management does not consider servicing assets as an intangible asset for purposes of this calculation.

•“Tangible assets” is defined as total assets reduced by goodwill and other intangible assets. Management does not consider servicing assets as an intangible asset for purposes of this calculation.

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•“Tangible book value per common share” is calculated as tangible common equity, which is stockholders’ equity reduced by preferred stock and goodwill and other intangible assets, divided by total shares of common stock outstanding. Management believes this metric is important due to the relative changes in the book value per share exclusive of changes in intangible assets.

•“Tangible common equity to tangible assets” is calculated as tangible common equity divided by tangible assets, which is total assets reduced by goodwill and other intangible assets. Management believes this metric is important to investors and analysts interested in relative changes in the ratio of total stockholders’ equity to total assets, each exclusive of changes in intangible assets.

•“Tangible net income available to common stockholders” is net income available to common stockholders excluding after-tax intangible asset amortization.

•“Adjusted tangible net income available to common stockholders” is tangible net income available to common stockholders excluding certain significant items. Management believes the metric is an important measure of the Company’s operating performance on an ongoing basis.

•“Return on average tangible common stockholders’ equity” is tangible net income available to common stockholders divided by average tangible common stockholders’ equity. Management believes the metric is an important measure of the Company’s operating performance on an ongoing basis.

•“Adjusted return on average tangible common stockholders’ equity” is adjusted tangible net income available to common stockholders divided by average tangible common stockholders’ equity. Management believes the metric is an important measure of the Company’s operating performance on an ongoing basis.

We believe that these non‑GAAP financial measures provide useful information to its management and investors that is supplementary to our financial condition, results of operations and cash flows computed in accordance with GAAP; however, we acknowledge that our non‑GAAP financial measures have a number of limitations. As such, you should not view these disclosures as a substitute for results determined in accordance with GAAP financial measures that we and other companies use. Management also uses these measures for peer comparison.

Reconciliations of Non-GAAP Financial Measures

	As of or For the Three Months Ended June 30,					As of or For the Six Months Ended June 30,
(dollars in thousands, except per share data)	2023			2022		2023			2022
Net income and earnings per share excluding   significant items
Reported Net Income	$	26,107		$	20,283	$	50,052		$	42,594
Significant items:
Impairment charges on assets held for sale		—			—		20			—
Merger-related expense		1,391			—		1,880			—
Tax benefit		(230	)		—		(286	)		—
Adjusted Net Income	$	27,268		$	20,283	$	51,666		$	42,594
Reported Diluted Earnings per Share	$	0.70		$	0.54	$	1.34		$	1.12
Significant items:
Impairment charges on assets held for sale		—			—		—			—
Merger-related expense		0.04			—		0.05			—
Tax benefit		(0.01	)		—		(0.01	)		—
Adjusted Diluted Earnings per Share	$	0.73		$	0.54	$	1.38		$	1.12

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	As of or For the Three Months Ended June 30,					As of or For the Six Months Ended June 30,
(dollars in thousands, except per share data)	2023			2022		2023			2022
Adjusted non-interest expense:
Non-interest expense	$	49,328		$	43,773	$	98,128		$	88,328
Less: Impairment charges on assets held for sale		—			—		20			—
Less: Merger-related expenses		1,391			—		1,880			—
Adjusted non-interest expense	$	47,937		$	43,773	$	96,228		$	88,328
Adjusted non-interest expense excluding amortization of intangible assets:
Adjusted non-interest expense	$	47,937		$	43,773	$	96,228		$	88,328
Less: Amortization of intangible assets		1,455			1,868		2,910			3,464
Adjusted non-interest expense excluding amortization of intangible assets	$	46,482		$	41,905	$	93,318		$	84,864
Pre-tax pre-provision net income:
Pre-tax income	$	35,339		$	26,107	$	67,577		$	54,719
Add: Provision for credit losses		5,790			5,908		15,615			10,903
Pre-tax pre-provision net income	$	41,129		$	32,015	$	83,192		$	65,622
Adjusted pre-tax pre-provision net income:
Pre-tax pre-provision net income	$	41,129		$	32,015	$	83,192		$	65,622
Impairment charges on assets held for sale		—			—		20			—
Merger-related expenses		1,391			—		1,880			—
Adjusted pre-tax pre-provision net income	$	42,520		$	32,015	$	85,092		$	65,622
Taxable equivalent net interest income:
Net interest income	$	76,166		$	61,627	$	151,884		$	120,363
Add: Tax-equivalent adjustment		207			237		415			473
Net interest income, fully taxable equivalent	$	76,373		$	61,864	$	152,299		$	120,836
Total revenues:
Net interest income	$	76,166		$	61,627	$	151,884		$	120,363
Add: non-interest income		14,291			14,161		29,436			33,587
Total revenues	$	90,457		$	75,788	$	181,320		$	153,950
Tangible common stockholders' equity:
Total stockholders' equity	$	813,942		$	765,161	$	813,942		$	765,161
Less: Preferred stock		—			—		—			—
Less: Goodwill and other intangibles		155,977			162,094		155,977			162,094
Tangible common stockholders' equity	$	657,965		$	603,067	$	657,965		$	603,067
Tangible assets:
Total assets	$	7,575,690		$	7,131,717	$	7,575,690		$	7,131,717
Less: Goodwill and other intangibles		155,977			162,094		155,977			162,094
Tangible assets	$	7,419,713		$	6,969,623	$	7,419,713		$	6,969,623
Average tangible common stockholders' equity:
Average total stockholders' equity	$	806,272		$	780,652	$	795,341		$	806,264
Less: Average preferred stock		—			—		—			4,959
Less: Average goodwill and other intangibles		156,766			163,068		157,469			163,948
Average tangible common stockholders' equity	$	649,506		$	617,584	$	637,872		$	637,357
Average tangible assets:
Average total assets	$	7,403,899		$	6,975,725	$	7,374,687		$	6,841,601
Less: Average goodwill and other intangibles		156,766			163,068		157,469			163,948
Average tangible assets	$	7,247,133		$	6,812,657	$	7,217,218		$	6,677,653
Tangible net income available to common stockholders:
Net income available to common stockholders	$	26,107		$	20,283	$	50,052		$	42,398
Add: After-tax intangible asset amortization		1,067			1,361		2,133			2,524
Tangible net income available to common stockholders	$	27,174		$	21,644	$	52,185		$	44,922
Adjusted tangible net income available to common stockholders:
Tangible net income available to common stockholders	$	27,174		$	21,644	$	52,185		$	44,922
Impairment charges on assets held for sale		—			—		20			—
Merger-related expenses		1,391			—		1,880			—
Tax benefit on significant items		(230	)		—		(286	)		—
Adjusted tangible net income available to common stockholders	$	28,335		$	21,644	$	53,799		$	44,922

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	As of or For the Three Months Ended June 30,						As of or For the Six Months Ended June 30,
(dollars in thousands, except share and per share data)	2023			2022			2023			2022
Pre-tax pre-provision return on average assets:
Pre-tax pre-provision net income	$	41,129		$	32,015		$	83,192		$	65,622
Average total assets		7,403,899			6,975,725			7,374,687			6,841,601
Pre-tax pre-provision return on   average assets		2.23	%		1.84	%		2.27	%		1.93	%
Adjusted pre-tax pre-provision return on average assets:
Adjusted pre-tax pre-provision net income	$	42,520		$	32,015		$	85,092		$	65,622
Average total assets		7,403,899			6,975,725			7,374,687			6,841,601
Adjusted pre-tax pre-provision return on   average assets:		2.30	%		1.84	%		2.33	%		1.93	%
Net interest margin, fully taxable equivalent
Net interest income, fully taxable equivalent	$	76,373		$	61,864		$	152,299		$	120,836
Total average interest-earning assets		7,072,581			6,573,878			7,041,037			6,414,768
Net interest margin, fully taxable equivalent		4.33	%		3.77	%		4.36	%		3.80	%
Non-interest income to total revenues:
Non-interest income	$	14,291		$	14,161		$	29,436		$	33,587
Total revenues		90,457			75,788			181,320			153,950
Non-interest income to total revenues		15.80	%		18.69	%		16.23	%		21.82	%
Adjusted non-interest expense to average assets:
Adjusted non-interest expense	$	47,937		$	43,773		$	96,228		$	88,328
Average total assets		7,403,899			6,975,725			7,374,687			6,841,601
Adjusted non-interest expense to average assets		2.60	%		2.52	%		2.63	%		2.60	%
Adjusted efficiency ratio:
Adjusted non-interest expense excluding   amortization of intangible assets	$	46,482		$	41,905		$	93,318		$	84,864
Total revenues		90,457			75,788			181,320			153,950
Adjusted efficiency ratio		51.39	%		55.29	%		51.47	%		55.12	%
Adjusted return on average assets:
Adjusted net income	$	27,268		$	20,283		$	51,666		$	42,594
Average total assets		7,403,899			6,975,725			7,374,687			6,841,601
Adjusted return on average assets		1.48	%		1.17	%		1.41	%		1.26	%
Adjusted return on average stockholders' equity:
Adjusted net income	$	27,268		$	20,283		$	51,666		$	42,594
Average stockholders' equity		806,272			780,652			795,341			806,264
Adjusted return on average stockholders' equity		13.56	%		10.42	%		13.10	%		10.65	%
Tangible common equity to tangible assets:
Tangible common equity	$	657,965		$	603,067		$	657,965		$	603,067
Tangible assets		7,419,713			6,969,623			7,419,713			6,969,623
Tangible common equity to tangible assets		8.87	%		8.65	%		8.87	%		8.65	%
Return on average tangible common   stockholders' equity:
Tangible net income available to   common stockholders	$	27,174		$	21,644		$	52,185		$	44,922
Average tangible common stockholders' equity		649,506			617,584			637,872			637,357
Return on average tangible common   stockholders' equity		16.78	%		14.06	%		16.50	%		14.21	%
Adjusted return on average tangible common   stockholders' equity:
Adjusted tangible net income available to   common stockholders	$	28,335		$	21,644		$	53,799		$	44,922
Average tangible common stockholders' equity		649,506			617,584			637,872			637,357
Adjusted return on average tangible common   stockholders' equity		17.50	%		14.06	%		17.01	%		14.21	%
Tangible book value per share:
Tangible common equity	$	657,965		$	603,067		$	657,965		$	603,067
Common shares outstanding		37,752,002			37,669,102			37,752,002			37,669,102
Tangible book value per share	$	17.43		$	16.01		$	17.43		$	16.01

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Our primary market risk is interest rate risk, which is defined as the risk of loss of net interest income or net interest margin because of changes in interest rates.

We seek to measure and manage the potential impact of interest rate risk. Interest rate risk occurs when interest-earning assets and interest-bearing liabilities mature or re-price at different times, on a different basis or in unequal amounts. Interest rate risk also arises when our assets, liabilities and off-balance sheet contracts each respond differently to changes in interest rates, including as a result of explicit and implicit provisions in agreements related to such assets and liabilities and in off-balance sheet contracts that alter the applicable interest rate and cash flow characteristics as interest rates change.

We are also exposed to interest rate risk through the retained portion of the U.S. government guaranteed loans we make and the related servicing rights. Our U.S. government guaranteed loan portfolio is comprised primarily of SBA 7(a) loans, virtually all of which are quarterly or monthly adjustable with the prime rate. The SBA portfolio reacts differently in a rising rate environment than our other non-guaranteed portfolios. Generally, when interest rates rise, the prepayments in the SBA portfolio tend to increase.

Our management of interest rate risk is overseen by our Board of Directors and management asset liability committees based on a risk management infrastructure approved by our Board of Directors that outlines reporting and measurement requirements. Our risk management infrastructure also requires a periodic review of all key assumptions used, such as identifying appropriate interest rate scenarios, setting loan prepayment rates based on historical analysis, non-interest-bearing and interest-bearing demand deposit lives based on historical analysis and the targeted investment term of capital. The committees closely monitor our interest sensitivity exposure, asset and liability allocation decisions, liquidity and capital positions, and local and national economic conditions and attempts to structure the loan and investment portfolios and funding sources to maximize earnings within acceptable risk tolerances.

We manage the interest rate risk associated with our interest-bearing liabilities by managing the interest rates and tenors associated with our borrowings from the FHLB, and deposits from our customers that we rely on for funding. We manage the interest rate risk associated with our interest-earning assets by managing the interest rates and tenors associated with our investment and loan portfolios, from time to time purchasing and selling investment securities.

We utilize interest rate derivatives to hedge our interest rate exposure on commercial loans when it meets our clients’ and Byline Bank’s needs. Typically, customer interest rate swaps are for terms of more than five years. As of June 30, 2023, we had a notional amount of $1.1 billion of interest rate swaps outstanding, which includes customer swaps and those on Byline Bank’s balance sheet. The overall effectiveness of our hedging strategies is subject to market conditions, the quality of our execution, the accuracy of our valuation assumptions, the associated counterparty credit risk and changes in interest rates.

We do not engage in speculative trading activities relating to interest rates, foreign exchange rates, commodity prices, equities or credit.

Evaluation of Interest Rate Risk

We use a net interest income simulation model to measure and evaluate potential changes in our net interest income. We run various hypothetical interest rate scenarios at least quarterly and compare these results against a scenario with no changes in interest rates. Our net interest income simulation model incorporates various assumptions, which we believe are reasonable but which may have a significant impact on results such as: (1) the timing of changes in interest rates, (2) shifts or rotations in the yield curve, (3) re-pricing characteristics for market-rate-sensitive instruments on and off balance sheet, (4) differing sensitivities of financial instruments due to differing underlying rate indices, (5) the effect of interest rate limitations in our assets, such as floors and caps, (6) the effect of our interest rate swaps and (7) overall growth and repayment rates and product mix of assets and liabilities. Because of limitations inherent in any approach used to measure interest rate risk, simulation results are not intended as a forecast of the actual effect of a change in market interest rates on our results but rather as a means to better plan and execute appropriate asset-liability management strategies and manage our interest rate risk.

Potential changes to our net interest income in hypothetical rising and declining rate scenarios calculated as of June 30, 2023 is presented below (dollars in thousands). For the dynamic balance sheet and rate shift scenarios, we assume interest rates follow a forward yield curve and then increase it by 1/12th of the total change in rates each month for 12 months.

	Immediate Shifts
Twelve Months Ending	+300 basis points			+200 basis points			+100 basis points			-100 basis points			-200 basis points			-300 basis points
Year 1
Percentage change		16.9	%		11.7	%		5.8	%		(4.1	)%		(10.4	)%		(16.9	)%
Dollar amount	$	395,733		$	377,986		$	358,154		$	324,617		$	303,178		$	281,213
Year 2
Percentage change		19.9	%		13.6	%		6.7	%		(5.2	)%		(13.2	)%		(21.2	)%
Dollar amount	$	447,307		$	423,624		$	398,025		$	353,439		$	323,721		$	293,754

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For dynamic balance sheet and rate shifts, a gradual shift downward of 100 basis points would result in a 3.0% decrease in net interest income, and a gradual shift upwards of 100 and 200 basis points would result in 3.3% and 6.5% increases to net interest income, respectively, over the next 12 months.

The Bank's aggregate interest rate risk exposure is monitored and managed within board-approved policy limits. The results of this simulation analysis are hypothetical, and a variety of factors might cause actual results to differ substantially from what is depicted including the timing, magnitude, and frequency of interest rate changes as well as changes in market conditions and management strategies.

Item 4. Controls and Procedures.

The Company’s management, including our Chief Executive Officer and our Chief Financial Officer, have evaluated the effectiveness of our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)), as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of June 30, 2023, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and is accumulated and communicated to the Company’s management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting during the quarter ended June 30, 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

The design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

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PART II-OTHER INFORMATION

Item 1. Legal Proceedings.

We operate in a highly regulated environment. From time to time we are a party to various litigation matters incidental to the conduct of our business. We are not presently party to any legal proceedings the resolution of which we believe would have a material adverse effect on our business, prospects, financial condition, liquidity, results of operation, cash flows or capital levels.

Item 1A. Risk Factors.

There have been no material changes to the risk factors previously disclosed in the “Risk Factors” section included in our Form 10-K for our fiscal year ended December 31, 2022 that was filed with the SEC on March 7, 2023.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

On December 12, 2022, we announced that our Board of Directors approved a new stock repurchase program authorizing the purchase of up to an aggregate of 1,250,000 shares of our outstanding common stock. The program will be in effect from January 1, 2023 until December 31, 2023 unless terminated earlier. The shares may, at the discretion of management, be repurchased from time to time in open market purchases as market conditions warrant or in privately negotiated transactions. We are not obligated to purchase any shares under the program, and the program may be discontinued at any time. The actual timing, number and share price of shares purchased under the repurchase program will be determined by us at our discretion and will depend on a number of factors, including the market price of our stock, general market and economic conditions and applicable legal requirements.

The table below includes information regarding purchases of our common stock during the quarter ended June 30, 2023. We did not purchase any shares of our common stock during the second quarter of 2023 under our stock repurchase program.

Issuer Purchases of Equity Securities
							Maximum Number of
	Total		Average		Total Number of Shares		Shares that
	Number of		Price		Purchased as Part of a		May Yet Be
	Shares		Paid per		Publicly Announced		Purchased Under the
	Purchased(1)		Share		Plan or Program		Plan or Program
April 1 - April 30, 2023		5,471	$	21.46		—		1,250,000
May 1 - May 31, 2023		—		—		—		1,250,000
June 1 - June 30, 2023		—		—		—		1,250,000
Total		5,471	$	21.46		—

(1)All shares acquired during the three months ended June 30, 2023 were acquired pursuant to the Company’s 2017 Omnibus Incentive Compensation Plan. Under the terms of the compensation plan, we can accept previously owned shares of common stock to be surrendered to satisfy the exercise price of stock options, the settlement of restricted stock awards and tax withholding obligations upon vesting and/or exercise.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

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Item 6. Exhibits.

	EXHIBIT
Number	Description
3.1	Amended and Restated Certificate of Incorporation (filed as Exhibit 3.1 to the Company’s Registration Statement on Form S-1, as amended (File No. 333-218362) filed on June 19, 2017 and incorporated herein by reference)
3.2	Amended and Restated Bylaws (filed as Exhibit 3.2 to the Company’s Registration Statement on Form S-1, as amended (File No. 333-218362) filed on June 19, 2017 and incorporated herein by reference)
4.1	Certain instruments defining the rights of holders of long-term debt securities of the registrant and its subsidiaries are omitted pursuant to Item 601(b)(4)(iii) of Regulation S-K. The registrant hereby undertakes to furnish to the SEC, upon request, copies of any such instruments.
10.1	Employment agreement with Thomas J. Bell III (filed as exhibit 10.1 to the Company's Current Report on Form 8-K (File No. 001-38139) filed on April 11, 2023 and incorporated herein by reference) †
10.2	Second Amendment and Restated Term Loan and Revolving Credit Agreement dated as of May 26, 2023 between Byline Bancorp, Inc. and CIBC Bank USA (filed as exhibit 10.1 to the Company's Current Report on Form 8-K (File No. 001-38139) filed May 26, 2023 and incorporated herein by reference)
31.1	Certification of the Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, and Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of the Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, and Section 302 of the Sarbanes-Oxley Act of 2002
32.1(a)	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	Financial information from the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2023, formatted in Inline XBRL interactive data files pursuant to Rule 405 of Regulation S-T: (i) Condensed Consolidated Statements of Condition; (ii) Condensed Consolidated Statements of Operations; (iii) Condensed Consolidated Statements of Comprehensive Income (Loss); (iv) Condensed Consolidated Statements of Changes in Stockholders’ Equity; (v) Condensed Consolidated Statements of Cash Flows; and (vi) Notes to Condensed Consolidated Financial Statements
104	Cover Page Interactive Data File – the cover page XBRL tags are embedded with the Inline XBRL document.

† Indicates a management contract or compensatory plan.

(a)This exhibit shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Byline Bancorp, Inc.
Date: August 3, 2023	By:	/s/	Roberto R. Herencia
			Roberto R. Herencia
			Chief Executive Officer
			(Principal Executive Officer)
Date: August 3, 2023	By:	/s/	Thomas J. Bell III
			Thomas J. Bell III
			Executive Vice President, Chief Financial Officer and Treasurer
			(Principal Financial Officer)

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