BY Q1 Deep Dive: Steady Loan Growth and Expense Discipline Amid Macroeconomic Uncertainty

Regional banking company Byline Bancorp (NYSE:BY) reported Q1 CY2025 results topping the market’s revenue expectations, with sales up 2% year on year to $103.1 million. Its non-GAAP profit of $0.65 per share was 4.3% above analysts’ consensus estimates.

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StockStory’s Take

Byline Bancorp’s first quarter results reflected stable core banking trends, with management highlighting disciplined expense control and healthy loan origination as the main drivers. CEO Alberto Paracchini credited the bank’s consistent profitability to flat net interest income, margin expansion, and well-managed expenses, despite a challenging macroeconomic environment marked by cautious client behavior. Management noted that asset quality improved, with lower net charge-offs and declining non-performing loans. In discussing the quarter, Paracchini stated, “We remain focused on being a bank that serves clients through the cycle while maintaining disciplined risk management.”

Looking ahead, Byline Bancorp’s outlook centers on navigating a period of heightened economic uncertainty and managing the integration of the First Security acquisition. Management is focused on maintaining mid-single-digit loan growth, further improving deposit costs, and expanding non-interest income through targeted fee businesses. Paracchini cautioned that clients remain in a “wait-and-see” mode regarding capital expenditures and investments, given evolving trade policies and potential interest rate changes. Management remains optimistic about the bank’s ability to deliver value, with CFO Tom Bell stating, “We expect continued margin management and disciplined expense trends to support our financial targets through the remainder of the year.”

Key Insights from Management’s Remarks

Management attributed first quarter results to steady loan growth, margin improvement, and cost discipline, while emphasizing the successful closing of the First Security acquisition and ongoing client caution amid macroeconomic uncertainty.

• Loan origination momentum: Byline Bancorp achieved $310 million in new loan originations, citing strong commercial banking and leasing activity, with pipelines described as healthy despite client caution tied to economic policy shifts.
• Deposit cost improvement: The bank reported a 26-basis-point reduction in interest-bearing deposit costs and a favorable shift in deposit mix—from time deposits to money market accounts—helping expand the net interest margin to 4.07%.
• Expense discipline: Management noted that non-interest expenses declined by about 2%, driven by lower compensation and marketing spend, and reaffirmed guidance for quarterly expenses to remain in the $55–$57 million range, excluding merger charges.
• Asset quality trends: Asset quality improved, with non-performing loans falling to 0.76% of total loans and net charge-offs declining quarter over quarter. Management attributed the reserve build to changes in loss rates for certain loan categories and portfolio growth.
• First Security integration: The acquisition of First Security closed on April 1, with management emphasizing the fast integration and successful migration of customers and employees. The transaction sets the stage for consolidated reporting in future periods and is expected to influence near-term operational metrics.

Drivers of Future Performance

Management expects Byline Bancorp’s performance to be shaped by prudent growth in loans and deposits, ongoing expense control, and the integration of First Security, all against a backdrop of economic uncertainty and evolving policy.

• Mid-single-digit loan growth: Management reaffirmed expectations for mid-single-digit loan growth, supported by an active commercial pipeline and ongoing client engagement, although clients remain cautious due to uncertain trade and rate environments.
• Expense management focus: The company plans to hold quarterly non-interest expenses flat, outside of merger integration costs, and is targeting additional efficiencies as it absorbs First Security’s operations and systems.
• Expansion of fee income: Byline Bancorp is prioritizing growth in non-interest income, particularly through its wealth management and commercial fee-based businesses, aiming to align its revenue mix more closely with peers as it surpasses $10 billion in assets.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will monitor (1) the pace of loan and deposit growth relative to management’s expectations, (2) the impact of First Security integration on expense and revenue synergies, and (3) the ability to expand non-interest income, particularly in fee-based business lines. We will also watch for changes in client sentiment in response to evolving economic and trade policy conditions.

Byline Bancorp currently trades at $25.52, down from $27.10 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).

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