Byline Bancorp, Inc. Q1 FY2021 Earnings Call

Good day, and welcome to the Byline Bancorp First Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Tony Rossi of Financial Profiles. Please go ahead.

Thank you, Cole. Good morning, everyone, and thank you for joining us today for the Byline Bancorp First Quarter 2021 Earnings Call. We'll be using a slide presentation as part of our discussion this morning. Please visit the Events and Presentations page of Byline's Investor Relations website for access to the presentation. Before we begin, I'd like to remind you that this conference call contains forward-looking statements with respect to the future performance and financial condition of Byline Bancorp that involve risks and uncertainties, including the impact of the COVID-19 pandemic. Various factors could cause actual results to be materially different from any future results expressed or implied by such forward-looking statements. These factors are discussed in the company's SEC filings, which are available on the company's website. The company disclaims any obligation to update any forward-looking statements made during the call. Management may refer to non-GAAP measures, which are intended to supplement, but not substitute for, the most directly comparable GAAP measures. The press release available on the website contains the financial and other quantitative information to be discussed today, as well as the reconciliation of the GAAP to non-GAAP measures. And with that, I'd like to turn the call over to Alberto Paracchini, President of Byline Bancorp.

Great. Thank you, Tony, and good morning everyone, and welcome to our first quarter earnings call. Thank you for participating in the call this morning. And joining me on this call are Roberto Herencia, our Executive Chairman and CEO; Lindsay Corby, our CFO; and Mark Fucinato, our Chief Credit Officer. As is our normal practice, I'll start the call with a summary of our results and provide you with highlights for the quarter, before I turn the call over to Lindsay who will walk you through our financials in more detail. After that, I'll come back with some closing remarks, before we open the call up for questions. As always, you can follow our comments with presentation materials you can find on the Investor Relations section of our website. Overall, we had a very productive first quarter. Net income was a record $21.8 million, or $0.56 per share. This was up substantially both compared to last quarter and on a year-over-year basis. Profitability and return metrics were excellent across the board. ROA came in at 134 basis points, while ROTCE was 14.86%, both record levels for the company. Pre-tax pre-provision ROA came in at 206 basis points, and was up from the previous quarter and at the highest level over the last five quarters. One highlight for the quarter was our strong participation in round two of the PPP program, which is summarized on Page 4 of the deck. We continue to support both existing small business customers, as well as new customers drawn in by the positive experience of working with a relationship-oriented bank in the market. We have approved more than 2,400 loans, totaling $330 million during the current round. And when combined with the first round we processed over 6,600 loans totaling $965 million. We also remain active in helping customers navigate the forgiveness process with $173 million in loans forgiven during the quarter, all in all an excellent job by our bankers in supporting our small business customers and their employees. Economic activity continued to pick up this quarter and our asset base increased by 5.6% to $6.8 billion. Outside of originations related to PPP, we had a good quarter of business development with $152 million of new originations with strong contributions coming from all areas of our commercial banking platform, inclusive of our leasing business. Loan balances excluding PPP increased during the quarter, which is notable given PPP activity, the high level of liquidity built up among our commercial clients and the fact that the first quarter tends to be a seasonally slow period for us. On a year-over-year basis, new loan originations increased by 24%. Our government-guaranteed lending business also had a strong quarter of production with $112 million in closed loans, which was as expected lower than the fourth quarter, but up $32 million over the same period a year ago. Premiums in the secondary market remain at record levels. On a year-over-year basis, our net gains on sales of loans increased 74% to $8.3 million. On the deposit side, we saw continued strong inflows of commercial deposits, stemming from the addition of new relationships and the buildup of liquidity among existing commercial clients. Our deposit mix remains outstanding with DDAs now representing 40.1% of total deposits and core balances exceeding 90% of deposit balances. The improved mix helped us to drive our cost of deposits lower by 3 basis points to 12 basis points at the end of the quarter, which allowed the margin to remain stable with deposit costs helping to offset the impact of increased liquidity and lower securities yields. Asset quality improved with both NPLs and NPAs declining from the prior quarter. Reserve levels remained solid with the allowance representing 1.47% of loans, and 1.71% of loans, excluding PPP. Net charge-offs remained stable at 47 basis points and our coverage improved to 177% of non-performing loans. Classified loans also declined from 2.7% last quarter to 2.4% at the end of the quarter. Capital remains strong with CET at 12.1% and total capital of just under 16% at the end of the quarter. Combined with our strong financial performance, we were well positioned to return capital to shareholders during the quarter, when we repurchased approximately 333,000 shares of our common stock. Our balance sheet strength positions us well to support organic growth, return capital to shareholders, and pursue M&A opportunities. Turning over to slide 5, total deferrals declined by $46.2 million to $54.4 million, and now represent 1.42% of loans, excluding PPP. Deferrals in the government-guaranteed portfolio stood at $34.7 million, a decline of $40.8 million from the prior quarter. Nearly half of the deferrals outstanding consist of loans to borrowers in accommodation and food service industries. Please refer to the appendix for more detail of loans to COVID-affected industries. And with that, I'd like to turn over the call to Lindsay, who will walk you through our financials.

Thanks, Alberto. Good morning, everyone. Thanks for joining us today. I'll start with some additional information on our loan portfolio on slide 6. Our total loans and leases were $4.5 billion at March 31, an increase of $114 million from the end of the prior quarter, which was primarily due to new originations of PPP loans, although we did have a little bit of growth outside of the PPP portfolio. Our originated loan portfolio increased by $181 million or $82 million, when PPP loans are excluded. We saw broad growth across our commercial, commercial real estate and equipment leasing, which helped offset the continued planned runoff in our residential mortgage loan portfolio. When PPP loans and residential mortgage loan portfolio are excluded, our originated loan portfolio increased 13% over the past year, which reflects the growth in our core commercial client base. The growth in the originated portfolio during the first quarter was offset by a decrease of $67 million in our acquired loan portfolio, including $20.4 million in resolutions in the acquired impaired portfolio. Excluding PPP, we had $152 million of new originations in the first quarter, which was partially offset by $123 million of payoffs. Turning to slide 7, we'll look at our government-guaranteed lending business. We had another very strong quarter of production with $112 million of loan commitments. At March 31, the on-balance sheet SBA 7(a) exposure was $442 million, including $50 million of which is guaranteed by the SBA. The USDA on-balance-sheet exposure was $88 million, of which $51 million is guaranteed. While the outlook for a stronger economic recovery is improving, we believe it is prudent to continue increasing our coverage on this portfolio, as these borrowers begin to return to regular payment status from deferrals and subsidies. Accordingly, our allowance as a percentage of unguaranteed loan balances increased to approximately 9% at March 31, up from 8.6% at the end of the prior quarter. The SBA continued to introduce new programs, designed to support the borrowers most impacted by the pandemic. This includes the $28.6 billion Restaurant Revitalization Fund, which will begin accepting applications for grants, targeted to businesses with the primary purpose of serving food or drinks. The SBA programs, subsidies and grants are providing a bridge to assist borrowers until the economy fully reopens. Moving over to deposits. Our total deposits increased $273 million from the end of the prior quarter and exceeded $5 billion for the first time in our history. The growth came in our lower cost deposit categories, as we continue to see strong inflows of DDAs, particularly attributed to PPP funding this quarter. Our deposit activity during the quarter continued to result in a positive shift in our mix of deposits. Non-interest-bearing deposits increased to 40.1% of total deposits from 37.1% at the end of the prior quarter, while commercial deposits now represent just about half of our total deposits. Moving on to net interest income and margin. Our net interest income was $56.6 million for the quarter, up 1% from the prior quarter. This was primarily due to an increase in PPP-related income, as well as lower funding costs. On a GAAP basis, our net interest margin was 3.77% in the first quarter, unchanged from last quarter. Accretion income on acquired loans contributed 13 basis points to the margin for the first quarter, down from 16 basis points in the last quarter. Excluding accretion income, our net interest margin was 3.64%, an increase of three basis points. The increase was due to the PPP income recognition and the decline in our average cost of deposits. We have a little more room to bring down our deposit costs, as time deposits mature and reprice over the next quarter, which should help offset compression from securities and loan yields. We believe our outlook for our core NIM, excluding the impact of PPP and accretion, is expected to be slightly compressed next quarter and level off for the remainder of the year. As economic conditions improve and loan growth returns, our margin outlook could improve as we remix the balance sheet away from securities and more towards loans. In addition, we added $350 million of forward-starting pay-fixed cash flow hedges to protect net interest income in future years, and as well as protect against market value losses in a rising rate environment. Turning to non-interest income on slide 10. In the first quarter, our non-interest income decreased by $2 million from the prior quarter. The decrease was primarily attributed to a couple of factors. First, we had a $1.1 million decline in the net gain on sales of government-guaranteed loans due to a decrease in the volume of loans sold. And second, we had a $1.4 million decrease in net gains on sales of securities. This was partially offset by a decline in the loan servicing asset revaluation charge this quarter. Although the contribution from our government-guaranteed loan group was lower than last quarter, the trends in this business remained positive, as a result of the enhancements made by the SBA. Even with the seasonality we typically see in the first quarter, the contributions on gain on sale exceeded our expectations, particularly when compared to the first quarter of 2020. We sold $73.8 million of loans in the first quarter of 2021, an increase of 21% from last year. The average premium was $12.65 in the first quarter of 2021, which remains well above historical normalized levels and benefited from the temporary waiver of the SBA guarantee fee. The volume of loans sold was also positively impacted by the increased guarantee by the SBA, which enabled us to sell 90% of the loans originated. Moving to non-interest expense trends. Our non-interest expense was $38.8 million in the first quarter, down from $47 million in the prior quarter, which included charges related to the branch consolidations and impairment charges on assets held for sale. Excluding these charges, our non-interest expense declined primarily due to lower occupancy and equipment expense, following the branch consolidation. This was partially offset by an increase in loan-related and other legal fees. Our salaries and benefits expense was reduced this quarter by $2.8 million in deferred loan origination costs related to the second round of PPP. The success we're having in generating balance sheet and revenue growth, while controlling our expenses is reflected in the improvement in our efficiency ratio, which was down to 51.3% this quarter, as well as our non-interest expense to average assets, which declined to $2.39. Excluding the impact of the deferred loan origination costs, we would expect our expense run rate to be in the $41 million to $43 million range for the foreseeable future. Moving on to slide 12. Next, we'll take a look at asset quality. We continued to see good trends in the conventional loan portfolio during the quarter. Our nonperforming assets declined 10 basis points to 64 basis points of total assets and our nonperforming loans declined 12 basis points to 83 basis points of total loans and leases. Excluding government-guaranteed loans our nonperforming loans declined 10 basis points to 76 basis points of total loans and leases. Our provision expense was $4.4 million down from $10.2 million last quarter, which reflects our improved asset quality in the conventional loan portfolio. We had a small release of the reserve for acquired impaired loans due to resolutions and improvements in expected cash flows, which was offset by a further increase in the reserve held against the unguaranteed portion of government-guaranteed loans. We remain measured in our approach to reserve with our total loss absorbency as measured by our allowance, plus acquisition accounting adjustments, representing 198 basis points of total loans and leases excluding PPP loans. On slide 13, liquidity and capital levels continue to be strong. Our robust capital levels along with our earnings contribution continue to support our quarterly dividend of $0.06 per share. In addition, as Alberto discussed, we did repurchase 333,000 shares at a cost of around $6 million. Our stock repurchase program remains in effect until the end of 2022 with approximately 917,000 shares remaining. With that, Alberto, back to you.

Thanks, Lindsay. Turning to slide 14, I'd like to wrap up today with a few comments about our outlook. We've gotten off to a good start for the year and our priorities for 2021 remain consistent since our last call. We're seeing good customer activity, as it picks up in lockstep with the economic recovery and the diminishing impact of the pandemic. Notwithstanding PPP activity and the amount of excess liquidity in the system, loan pipelines remain healthy and we're seeing good deal flow, particularly in commercial real estate, sponsor leasing and small business capital. We also continue to see good opportunities to add talented bankers to the organization. On the M&A front, we continue to look for opportunities that fit our criteria and have seen a pickup in dialogue over the prior quarter. In closing, we remain well positioned to capitalize on both organic and M&A opportunities, continue investing in our franchise and generating returns for our shareholders. With that, operator, please open the call for questions.

Thank you. And we will now begin the question-and-answer session. The first question will come from Terry McEvoy with Stephens. Please go ahead.

Hi, good morning everyone.

Good morning Terry.

Hi, Terry.

I think the commercial loan growth ex-PPP really stood out based on all the other releases we've looked at. And I know you ran through a bunch of areas where you saw growth. Could you just maybe rank order and expand a little bit on what drove the increase in the first quarter and what your thoughts are for the second quarter?

Terry, it was pretty broad-based. We're seeing good activity, good deal flow in general. So I can't say that it's one area today that is above and beyond the others. I think we're seeing good activity across all our commercial business lines. Deal flow—obviously we bid, we compete, we have to actually win it—but we're getting plenty of at bats. And the one thing that I would maybe add that we haven't touched on in the past, we're also seeing good activity on our equipment leasing business, which is a relatively small part of our portfolio today, but it's an area that's been building over time and we're actually seeing really good solid pipelines and good growth coming from that business.

Thank you. And then just as a follow-up, I guess I'm a little surprised there's all these SBA programs or enhancements that Lindsay ran through to support those borrowers yet the reserve relative to the unguaranteed portion was higher quarter-over-quarter. So I guess my question is what do you need to see before that reserve comes down? And how long are these programs in place? Is it essentially a guarantee on an unguaranteed loan so to speak?

Good question, Terry. And I think you hit the nail on the head. I think there's a lot of programs that are supporting these borrowers obviously. So there's a fair amount of uncertainty as these programs wane and these borrowers have to stand up for themselves. And I think we will be cautious as we see the impact of those programs subside over time. We want to see how these borrowers come out on the other side of the pandemic without the support that they're getting today from the various programs.

And Terry if I may add, obviously, we're not a CECL bank. But if you look under the covers of the CECL banks, you'll see that they did everything possible to adjust with qualitative factors, so that those reserves didn't go down as much in particular to the hospitality segment.

Great. Thank you for taking my questions.

Thanks Terry.

Thanks Terry.

Our next question will come from Ebrahim Poonawala with Bank of America. Please go ahead.

Good morning.

Hi, Ebi.

I guess, just first question around capital allocation. So your stock’s obviously up a fair bit year-to-date. Talk to us in terms of the appetite to continue with a similar pace of buybacks that we saw in the first quarter as you move through the rest of the authorization. And also would love an update—we've seen clearly a pickup in M&A activity. I guess, part of some of the strategic changes you made last quarter was to accelerate how quickly you can execute. Just talk to us in terms of, do you see that you're moving closer to getting to a point whether or not we should expect an M&A announcement from Byline?

Good questions Ebi and I'll take the first crack at this. On your first comment related to capital allocation, I think, look I think we have—the nice thing is we have a lot of flexibility to support organic growth and return capital to shareholders. As Lindsay mentioned, the combination of the dividend plus the amount of dollars that we spent on the buyback this past quarter amounts to about 40% of earnings for the quarter, which is pretty good for us. And then lastly—and you touched on it on the second point is M&A. And what we're trying to do is really just balance all those opportunities. Obviously with our profitability up, it just gives us a lot of flexibility. So we won't comment specifically in terms of do we continue to buyback or not and at what levels, but certainly we have flexibility. And if there are uses of capital where we're going to deploy it whether it be on an M&A transaction or supporting growth, supporting the acquisition of teams then I think that's been our guidance, we will certainly find ways to return capital to our shareholders. On the M&A front, I think what I would add to what I just said is, we've certainly seen a pickup in dialogue since we last spoke. As you know these things are not things that materialize immediately. It's a dialogue, it’s relationship building and two parties have to come to an agreement here particularly with price expectations. And that's usually the part where the bid-ask with potential sellers sometimes is more difficult. But that's how I would answer your question.

Got it. And I guess just moving Lindsay around the margin outlook. I just wanted to make sure the core margin ex-accretion was 3.64%. What was the total PPP impact to the margin this quarter? I know you mentioned the 10 basis points increase 1Q over 4Q. But I just wanted to figure out what the contribution was.

So in terms of what it contributed, we had $7 million of net interest income that was associated with the PPP this quarter, Ebi. And then we also included a chart in the slide deck that shows that there were 10 basis points that were attributed to PPP.

Got it. So $7 million and 10 basis points. And remind me how much—what's the breakdown of round one versus round two fees and loans that are outstanding at the end of the quarter?

You bet. As of the end of the quarter, we currently have $617 million of PPP loans on our balance sheet. In terms of the bifurcation on the remaining fees that need to come through for the first round we have approximately $4.1 million left. And for the second round, we have about $10.1 million.

And what's your best guesstimate in terms of how quickly does the second round get forgiven?

Sure. So first round is moving along nicely. We've really seen a pickup with the SBA in terms of the forgiveness processing. Second round, I really think it's going to be the second half of the year, Ebi, and in terms of how it flows will be commensurate with the SBA processing speed. So I do think it's going to be weighted more heavily towards the second half.

One thing to add there, Ebi, is on the second round, borrowers have windows from as short as eight weeks to as long as 24 weeks. So that points to probably somewhere in the latter half of the year.

Understood. Thanks for taking my questions.

Thank you.

Our next question will come from Michael Perito with KBW. Please go ahead.

Thanks. Good morning guys.

Good morning Mike.

Good morning.

So just to piggyback to make sure I understand the margin correctly: so the NIM ex-accretion and ex the 10 basis points was in the mid-350s range. It sounds like that has room to compress in the second quarter, but you're hopeful that it will stabilize in the back half of the year as liquidity is deployed. But then on a reported basis, that will ebb and flow more with the pace of PPP forgiveness, which relative to the first quarter it sounds like the second quarter has actually been moving along at a decent rate. Is that all kind of a fair summarization of the margin thoughts?

Yes. I think you're close. And it's hard to give you exactly where it's headed. Obviously on a GAAP basis, it's a little more volatile with the PPP timing. But, I think you've got the right picture there in terms of what you're seeing. We have a lot of liquidity, and it's going to be really all about the earning asset mix. I do think we have some upside, so the faster we can shift from securities and cash into loans the better. And there is some upside there.

Got it. And then, in terms of the SBA platform, it seems like some of your peer banks that have nice-sized SBA platforms are still pretty bullish about origination activity. You've had a couple of strong quarters of SBA gain on sale here. I was just curious, how long can this kind of elevated origination activity in the SBA platform last? It seems like there's still a lot of support from a structure standpoint to make PPP and SBA attractive. Any updated thoughts we should be mindful of?

It's hard to say precisely Mike. But the program today is still very attractive. Obviously, a 90% guarantee and reduced fees mean that from a pure cost of capital standpoint for borrowers, it's still a very attractive program. So we think that in the short to medium-term, volumes are still going to be pretty good. The second piece that I would add to that is you have all of these borrowers that have gotten PPP loans. That money at some point is going to run out. Some of those borrowers are going to need financing, which bodes well in terms of providing additional demand for SBA loans. So we feel pretty good about it. As you know, we're in the business for the long run. We're not a company that's in the SBA business for just a quarter; we've been in the business a long time, so we take a long-term view of that business. So we feel pretty good about the outlook there.

Very good. And then, just two quick last ones for me. Lindsay, is the first quarter tax rate decent to proxy going forward here?

Yes. For guidance for that, I'd say 25% to 26%.

Got it. And then, any new updates on the tech investment side, in terms of things you guys are close to rolling out or looking at, or just anything in general? I know that seemed like that was an area of focus from a strategic high level last time we spoke, and just curious if there's anything you're willing to bring the market in terms of updates on investments or things that you're looking at?

Yes. We're going to be adding capabilities this year. For example, we will enable a new platform to do online account opening, both on the consumer side and on the business side. We're rolling out additional capabilities to support the SBA platform by being able to do smaller balance loans, which historically we didn't focus on. That will be primarily geared towards our smaller business customers that we established relationships with as part of the PPP program. Last year, we rolled out and implemented nCino for our commercial loan origination business. Today we use that platform across the organization with the exception of leasing to originate both SBA and government-guaranteed loans as well as conventional loans. We're migrating our business customers to the next generation of our business online and mobile platforms. Those are some of the highlights of things on the tech side that we're doing currently. There are other initiatives planned for later in the year and into next year.

No, that's helpful flavor. Appreciate the color. Are a lot of these updates and upgrades with your core or are they outside of your core, or is it a mix?

Primarily outside of the core. There is one in particular that's with our core, but the other ones are all outside of the core.

Appreciate it. Thanks, Alberto and Lindsay and Roberto.

You bet, Mike.

Our next question will come from Nathan Race with Piper Sandler. Please go ahead.

Yes. Hi, everyone. Good morning.

Good morning, Nate.

Hey, Nate.

Going back to the core margin discussion, ex PPP and accretion, and just thinking about the denominator of that equation, are you guys expecting the balance sheet to remain flat or maybe slightly higher as the PPP forgiveness process continues to unfold? Obviously you guys had strong core deposit growth as well in the quarter, so any thoughts on those balance sheet dynamics going forward?

Sure. Nate, our intention is not to shrink the balance sheet here, but you may see some natural attrition because of the PPP and depending on how quickly it's coming off. We do have PPPLF as well, just to remind you of that. Some of it is funded through the PPPLF and that could cause shrinkage. But overall we really want to continue to grow the balance sheet and we've seen great loan pipelines here. Our intention is to continue to grow from here.

Okay, great. And regarding SBA production cadence, with the exception of last year, we generally tend to see SBA production build over the course of the year. Is that a fair way to think about what you expect in terms of sold volumes over 2021?

Yes. We saw good production this quarter and that was up year-over-year. That's our expectation—production building over the course of the year.

Got it. Do you expect secondary market premiums to continue higher, or was this quarter somewhat of an anomaly?

Every time we see bids and where levels are coming in, we look at one another and say some of us have never seen premiums be this high. The good news is they are high, so we will take advantage of that. If premiums were to normalize and decline, we still think the business is attractive. Premiums from these levels would have to decline a lot for us to rethink whether we're better off selling or holding loans. We have flexibility and are agnostic. Today these are very attractive—probably as attractive as we've collectively seen in our careers.

Nate, I did note the guarantee fee being waived and that's helping the premiums. As the SBA enhancements roll off, timing is uncertain, but I would expect premiums to come off some of their highs.

Understood. On M&A, are the deals you might pursue likely similar to what we've seen from you over past years, or could something more transformational be considered?

We’ve shared our criteria for M&A. We're focused on the cohort of banks between roughly $400 million to $2 billion plus, and there are a significant number of them in our market area. That's where we're focused, though the Board would have flexibility to consider something outside of that.

Understood. I appreciate all the color. Thank you everyone.

Our next question will come from Brian Martin with Janney Montgomery. Please go ahead.

Hey, good morning, everyone.

Hey, Brian.

Good morning, Brian.

Just on the reserve—I'm not sure for whom, but you seem optimistic on the outlook with the economy improving and the loan pipeline building. With the SBA enhancements working as intended, you've built the reserve. How should we think about the reserve going forward if the economy continues to improve?

Brian, we remain cautious given the uncertainty. Going forward, provisioning will be commensurate with growth and the ultimate path of the SBA enhancements, subsidies, deferrals and return to regular payment status. We feel our reserves are adequate and are comfortable with where we're at.

And timing—when might you get more clarity from the SBA on how long these enhancement programs will last and the condition of those borrowers?

It's day-to-day with the SBA. For example, the Restaurant Revitalization Fund just came out and they're still not yet taking applications. Things will play out over the next two to three quarters.

Brian, remember our exposure is primarily hospitality and the restaurant business. We're still in the pandemic and restaurants are still slow. A better indication will be when the economy improves and people start going out again—then we'll have better visibility.

Got you. One other follow-up—given the competition in the market and your expectations on loan growth, where are current loan yields on new loans today and how have they been in the last quarter or so?

In terms of loan yields excluding PPP for the quarter, they went down quarter-over-quarter from 4.82% at the end of the year to 4.72%. New loans are coming in more in the range of about 4.50% to 4.60%, so we are seeing a little pressure there.

On a quarter-over-quarter basis, spreads in some businesses have compressed a bit. For example, commercial real estate spreads were wider last fall and compressed a little in the fourth quarter and continued to compress. The quality of transactions remains strong—capitalization and structure are solid. There's a set amount of creditworthy borrowers and competition picks up for those borrowers. C&I is a longer-term relationship business and participants are aggressive to acquire customers. Outside of those examples, pricing has been pretty consistent this quarter compared to last.

Okay. Appreciate that. Thanks for taking the questions.

A follow-up question will come from Michael Perito with KBW. Please go ahead.

Hey guys. One quick follow-up: SBA revenues have been in a pretty high range for the last several years. Given the disruption and market share changes, could this return to being a line of business where revenues grow for you going forward? Or is it more of a defensive market share positioning?

Roberto, do you want to take that?

Happy to, Mike. The idea is to grow the revenue side of the SBA business by making the business more efficient and leveraging the expense base and platforms we have. There's plenty of room in other SBA areas such as USDA 504, which we haven't traditionally focused on. Over time we believe this business has good revenue potential. The mix may change—if 7(a) plateaus and premiums come down it will bring down revenues—but the idea is to grow revenue in the business.

Got it. That's helpful. Thanks guys for the color.

Great. Thank you, Operator. So that concludes our call this morning. Thank you for participating today in the call and your interest in Byline and we look forward to speaking to you again next quarter. Thank you. And with that Operator, I think that concludes the call.

Thank you. And the conference has now concluded. Thank you for attending today's presentation. You may now disconnect.