Byline Bancorp Q3 2026 Earnings: Record Revenue as Net Interest Margin Expands

Byline Bancorp (NYSE: BY) reported Q3 2026 total revenue of $121.0 million, up 4.6% from $115.7 million a year earlier, while diluted EPS rose 14.6% to $0.94 from $0.82. Net income increased approximately 12.3% to $41.8 million, supported by revenue growth and lower year-over-year operating expenses, although non-performing assets and net charge-offs increased sequentially.

Core Financial Results

For the quarter ended September 30, record total revenue reflected growth in both net interest income and non-interest income. Net interest margin reached 4.33%, six basis points above the year-earlier level, while non-interest expense declined modestly year over year.

Compared with Q2, net income rose approximately 4.0%. Higher revenue, a lower credit-loss provision and lower taxes more than offset a 5.9% sequential increase in non-interest expense.

Total revenue is a company-defined non-GAAP measure consisting of net interest income plus non-interest income.

Revenue Mix and Operating Drivers

Net interest income increased 2.8% sequentially to $103.7 million. Byline attributed the improvement to higher investment securities income, lower interest expense on other borrowings following reduced wholesale funding, and one additional day in the quarter. Higher deposit interest expense provided a partial offset.

Net interest margin expanded five basis points from Q2 to 4.33%. Higher securities yields and lower Federal Home Loan Bank advances outweighed a three-basis-point increase in the average cost of total deposits to 1.95%. The contribution from net loan accretion declined to six basis points from 11 basis points, meaning the margin improvement occurred despite a smaller accretion benefit.

Non-interest income rose 2.7% sequentially to $17.3 million. Bank-owned life insurance income, customer swap activity, and wealth management and trust income increased, while loan servicing asset revaluation, equity security fair-value changes, and loan-sale gains were less favorable. Gains on loan sales declined 4.8% to $5.8 million as sales of U.S. government-guaranteed loans fell to $70.8 million from $78.1 million.

Deposit Growth Reduced Funding Reliance, but Credit Metrics Weakened

Deposits increased $168.3 million, or 2.1%, from Q2 to $8.04 billion. Growth in non-interest-bearing demand deposits, interest-bearing accounts, and time deposits more than offset lower money market and savings balances. Other borrowings declined to $272.6 million from $460.4 million, reducing reliance on Federal Home Loan Bank advances. The ratio of loans and leases held for sale and investment to deposits fell to 93.17% from 96.10%.

Loan growth remained a constraint. Loans and leases held for investment declined by $80.9 million because payoffs and sales exceeded portfolio growth during the quarter.

Credit indicators also moved in a less favorable direction. Non-performing assets increased 21.6% from Q2 to $87.9 million, or 0.89% of total assets, primarily because of higher non-accrual loans and leases. Net charge-offs rose to $5.8 million, equivalent to 0.31% of average loans and leases on an annualized basis, compared with 0.24% in Q2.

The allowance for credit losses increased to $113.0 million, or 1.51% of loans and leases held for investment, from 1.48% in Q2. Even so, the quarterly provision declined 5.8% sequentially to $6.7 million because of improved collateral-related qualitative factors and lower period-end loan balances, partly offset by higher reserves for certain individually evaluated loans.

Profitability and Capital

Non-interest expense increased $3.3 million from Q2 to $59.8 million, mainly because salaries and employee benefits rose by $3.4 million. Other operating costs and professional fees also increased, partially offset by lower advertising expense and asset impairment charges. Consequently, the non-GAAP efficiency ratio weakened to 48.40% from 46.93%, though it remained below the year-earlier 51.00%.

Income tax expense declined to $12.7 million from $13.9 million in Q2, and the effective tax rate fell to 23.3% from 25.7%. Byline attributed the decrease primarily to renewable energy tax credits purchased during the quarter.

The common equity tier 1 capital ratio improved to 13.29% from 12.92% sequentially. Total stockholders’ equity nevertheless declined $29.0 million to $1.28 billion because of a larger accumulated other comprehensive loss related to available-for-sale securities, share repurchases, and declared dividends, partly offset by quarterly earnings.

Byline repurchased 521,980 shares during Q3. The board also raised the quarterly dividend by 16.7% to $0.14 per share, bringing the total payout ratio, including dividends and repurchases, to 63.2%. Tangible book value per share declined 1.4% sequentially to $24.14 but remained 6.9% above the prior-year level.

Management’s View

Executive Chairman and CEO Roberto R. Herencia emphasized record earnings, more than $20 million returned to stockholders, and the recently announced acquisition of Illinois State Bancorp. Management expects that transaction to expand Byline’s market presence and core deposit base while adding customer relationships and banking personnel.

President Alberto J. Paracchini focused on the record net interest income and margin expansion achieved despite higher deposit costs. He also cited deposit growth and Byline’s capital position as sources of flexibility for future growth and market opportunities.

Recent Insider Transactions

The supplied insider data reported 22,466 shares purchased across seven transactions and 622,171 shares sold across four transactions during the latest six-month period, resulting in reported net sales of 599,705 shares. The latest disclosed purchase and sale entries are listed below without drawing conclusions about insiders’ outlook.

The dataset presents the two August 7 disclosures separately, with one classified as direct and the other as indirect.

Risks Investors Should Watch

• Credit quality deterioration: Non-performing assets rose 21.6% sequentially, while the annualized net charge-off ratio increased by seven basis points. Continued deterioration could require higher future provisions.
• Contracting loan balances: Payoffs and loan sales exceeded portfolio growth, reducing loans held for investment by $80.9 million. Continued contraction could limit net interest income even if margins remain favorable.
• Higher deposit costs: The average cost of deposits rose three basis points to 1.95%. Further increases could offset the benefits of higher securities yields and lower wholesale funding.
• Operating expense pressure: A 5.9% sequential increase in non-interest expense caused the efficiency ratio to worsen despite higher revenue. Salary and benefit costs were the largest contributor.

Summary

Byline’s Q3 2026 results combined record revenue, higher EPS, and a wider net interest margin with stronger deposit funding and lower borrowings. The main counterweights were declining loan balances, higher sequential operating expenses, and weaker non-performing asset and charge-off metrics. Future quarters will show whether deposit growth and funding improvements can continue supporting margins while the bank manages credit quality and restores loan growth.