Good morning, and welcome to Byline Bancorp Third Quarter 2024 Earnings Call. My name is Kate, and I will be your conference operator today. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. Please note, the conference call is being recorded. At this time, I would like to introduce Brooks Rennie, Head of Investor Relations for Byline Bancorp, to begin the conference call.

Thank you, Kate. Good morning, everyone, and welcome to Byline Bancorp's third quarter 2024 earnings conference call. In accordance with Regulation FD, this call is being recorded and is available via webcast on our Investor Relations website along with our earnings release and the corresponding presentation slides. As part of today's call, management may make certain statements that constitute projections, beliefs or other forward-looking statements regarding future events or the future financial performance of the company. We caution that such statements are subject to certain risks, uncertainties and other factors that could cause actual results to differ materially from those discussed. The company's risk factors are disclosed and discussed in its SEC filings. In addition, our remarks and slides may reference or contain certain non-GAAP financial measures, which are intended to supplement, but not substitute for, the most directly comparable GAAP measures. Reconciliation for each non-GAAP financial measure to the comparable GAAP financial measure can be found within the appendix of the earnings release. For additional information about risks and uncertainties, please see the forward-looking statement and non-GAAP financial measures disclosures in the earnings release. As a reminder for investors, this quarter, we plan on attending the Hovde Financial Services Conference and the Piper Sandler East Coast Conference. With that, I would now like to turn the conference call over to Alberto Paracchini, President of Byline Bancorp.

Thank you, Brooks. Good morning, everyone, and thanks for joining us today to go over our third quarter results. With me this morning are Roberto Herencia, our Chairman and CEO; Tom Bell, our CFO; and Mark Fucinato, our Chief Credit Officer. Before we get into a review of our results for the quarter, I would like to pass the call on to Roberto for his comments. Roberto?

Thank you, Alberto, and good morning to all. Our performance this quarter was once again solid across the board with strong profitability metrics, several of which continue to rank in the top quartile among our peer group. We're proud to continue to deliver strong results. They showcase the consistency and resiliency of the franchise and our business model. We believe the marketplace in time will reward a franchise with these attributes and prospects with a premium valuation. We're also excited about the announced merger with First Security, which Alberto will touch on in a minute. This is yet another disciplined merger with a quality group of shareholders and within the merger metrics we have had in place since we started Byline back in 2013. We continue to feel excited and optimistic about our ability to build out a preeminent commercial bank in Chicago. The Chicago banking market continues to be our kind of market, rich with opportunities to gain market share in the spaces we know well and punch above our weight. As we said before, we're keenly focused on being home to the best commercial banking talent in town. We recently were recognized with two new workplace awards. Chicago's Best Workplaces for 2024, ranking Byline as one of the Top 25 Workplaces in the City by the Chicago Sun Times and Best Workplaces in Illinois by Best Companies Group and the Illinois Society for Human Resources Management. These awards are in addition to the award from U.S. News & World Report as one of the Best Companies to Work For in the Midwest that we received earlier this year and we shared on our last call. We're thrilled and humbled at the same time to receive these awards in recognition and celebration of our people and the culture we have built at Byline. The awards, which are significantly driven by employee feedback, demonstrate that the investments we're making in employee development, inclusion, competitive compensation, and benefits are making an impact indeed. With that, I'm delighted to pass the call back to Alberto.

Excellent. Thank you, Roberto. In terms of the agenda this morning, I will start with some comments and highlights for the quarter, Tom will follow and cover the financial results in more detail, and I'll come back to wrap up before opening the call up for questions. As a reminder, you can find the deck we're using for today's call on our website. And as always, please refer to the disclaimer at the front. Let me start by saying that we are proud of our overall performance and results for the quarter. Aside from the continued strong financial performance of the company, which I will get to shortly, we also announced a transaction with First Security Bancorp here in Chicago. The transaction will add approximately $355 million in assets, $201 million in loans, and importantly, $323 million in deposits, of which we consider 96% to be core. We believe the transaction is financially attractive, as reflected by minimal tangible book value dilution, a short earn-back period, EPS accretion, and return in excess of our cost of capital. Furthermore, the transaction is in line with our track record of executing franchise-enhancing M&A opportunities that are consistent with our strategy of becoming the preeminent commercial bank in Chicago. I'd like to take this opportunity to welcome First Security employees and shareholders that are on the call this morning. And we look forward to completing the transaction in the first half of 2025. Moving on to our results, starting on Page 3. For the third quarter, we reported net income of $30.3 million or $0.69 per diluted share on revenue of $102 million. Excluding transaction-related charges, net income was $30.7 million or $0.70 per diluted share. Turning to profitability and return metrics. They also came in strong with an ROA of 129 basis points and a return on tangible common equity of 14.5%. The lower ROTCE this quarter compared to last quarter was driven not by declining profitability, but rather by growth in our capital base stemming from retained earnings and AOCI recapture. Our pre-tax preparation income set a new record for the company at $47.5 million, resulting in pre-tax preparation ROA of 202 basis points, marking the 8th consecutive quarter of that metric exceeding 200 basis points. Total revenue increased to $102 million, up $2.5 million for the quarter. The increase was driven by higher net interest income stemming from higher average earning assets, which offset a decline in the margin as expected. Non-interest income increased to $14.4 million, driven by a lower fair value mark on our servicing asset and increases in other fees. Expenses, excluding transaction-related charges, came in at $53.9 million and continued to remain well managed for the quarter. The ratio of operating expenses adjusted for transaction charges to average assets declined 5 basis points to 2.29% from the prior quarter. As far as the margin is concerned, which Tom will cover in more detail shortly, we saw a 10 basis point decline to 3.89% for the quarter as expected. That said, excluding accretion, the margin compressed by only 6 basis points. Notwithstanding, earning asset growth drove net interest income higher for the quarter. Lastly, our efficiency ratio stood at 52%, remaining stable on a quarter-on-quarter basis. Moving on to the balance sheet. Loans remained relatively flat at $6.9 billion. Higher pay-offs of acquired loans towards the latter part of the quarter impacted end-of-period balances. We made good progress on reducing non-core loans in the portfolio coming from prior acquisitions. You'll notice that we carried higher cash balances at quarter end, which bodes well going forward as we deploy that cash into loans. That said, average balances grew modestly for the quarter. We anticipate loan growth for the rest of the year to be in the mid-single-digit range. Business development activity remained healthy, driven by commercial and leasing teams and our government-guaranteed lending business also had a good quarter with commitments closed totaling $114 million. Shifting on to the liability side. Total deposits stood at $7.5 billion and grew by $151 million or 8.2% annualized from the second quarter. In prior calls, we've discussed our desire to bring down the loan-to-deposit ratio to plus or minus a target level of 90%. We made good progress on that front with the ratio declining to 92% from the second quarter and it's down 319 basis points on a year-on-year basis. Asset quality remained stable from last quarter with NPLs excluding government-guaranteed balances increasing 3 basis points to 86 basis points at the end of the quarter. Charge-offs declined by $1 million from last quarter to $8.5 million or 49 basis points and include approximately $2.4 million related to PCD loans. Excluding that impact, charge-offs were $6 million or 35 basis points for the quarter. The allowance remained strong and ended the quarter at 1.44% of total loans. Having and maintaining strong capital levels gives us the ability to grow organically, invest back into the business, and provides us with the flexibility to take advantage of opportunities. Our capital ratio strengthened further this quarter with CET1 and total capital coming in at 11.35% and 14.4% respectively. With a TCE ratio of 9.72% as of quarter end, we remain above our targeted operating range of 8% to 9%. Lastly, we also continued to steadily grow tangible book value per share. In summary, we delivered strong results in the quarter and remain well positioned to continue to grow the business going forward. We're in the middle of our strategic planning process and I can't recall a time when the opportunity set in front of us has been more attractive. With that, I'd like to turn over the call to Tom, who will provide you with more detail on our results.

Thank you, Alberto, and good morning, everyone. Despite the changing interest rate environment, we had strong results for the quarter, driven by higher net interest income, fee revenue growth, and well-controlled expenses. As a result, we grew capital nicely this quarter, which resulted in higher TCE, tangible book value, CET1, and all other regulatory capital ratios. All in all, this was another great quarter for Byline. With that, we can start on Slide 4 with the loan and lease portfolio. Total loans stood at $6.9 billion at September 30, flat from the prior quarter. We originated $212 million in new loans, and pay-offs were higher for the quarter, coming in at $267 million, up $32 million linked quarter. Pay-off activity increased largely by run-off in non-core portfolios, which was offset by growth in new business relationships. Line utilizations grew for the 5th consecutive quarter, up 1% to 59%. As we look ahead for the remainder of the year, pipelines are stronger and we expect loan growth to continue in the mid-single digits for 2025. Turning to Slide 5. Total deposits increased to $7.5 billion, up 8.2% annualized from the second quarter. The increase in deposits was driven by growth in commercial money market accounts and consumer time deposits. Non-interest-bearing demand deposits accounted for 23% of total deposits, down slightly from Q2, primarily driven by commercial client needs. The mix was stable after accounting for seasonal customer activities for the quarter. We are pleased with our loan-to-deposit ratio results, which decreased 319 basis points from a year ago. Turning to Slide 6. Net interest income was $87.5 million for Q3, up 1% from the prior quarter, higher than guidance, primarily due to increases in interest income, offset by higher interest expense on deposits. The NIM for the quarter was 3.88%, down 10 basis points linked quarter, driven by higher cash balances and lower accretion. Depending on the Fed rate path going forward, we expect net interest income for Q4 in the $85 million to $87 million range, and we continue to focus on stable to growing net interest income. Turning to Slide 7. Non-interest expense income totaled $14.4 million in the third quarter, which was up 12% linked quarter, primarily driven by a change in fair value of equity securities, an increase in both our wealth management and customer swap businesses. The volume of government-guaranteed loans sold was higher compared to Q2. The average premium was 9.7% for Q3, lower than the second quarter, primarily due to mix of loans sold. We expect gain on sale income in the $5 million to $6 million range for Q4. Turning to Slide 8. Our non-interest expense remained well managed and came in at $54.3 million for the third quarter, up 2% from the prior quarter. The uptick in expenses was mainly due to higher salaries, employee benefits, and acquisition costs. Discipline on expense management remains evident as noted by our track record of improving our expenses to average assets to a record low 2.31% as well as consistently maintaining an efficiency ratio in the low 50s. As we look ahead, we expect non-interest expense to increase in the fourth quarter, mainly due to one-time costs related to investments in our digital banking platform and seasonality in our advertising spend. For Q4, we expect expenses between $55 million and $57 million. And for 2025, we expect our expenses to range in the $54 million to $57 million area. Turning to Slide 9. Provision expenses for the quarter came in at $7.5 million, up from $6 million in Q2, primarily attributed to increases related to individually assessed loans in the government-guaranteed loan portfolio. The ACL at the end of Q3 was $98.4 million, down 1% from the end of the prior quarter. Net charge-offs trended down by 11% this quarter to $8.5 million compared to $9.5 million in the previous quarter. NPLs to total loans increased by 9 basis points to 1.02% in Q3. Excluding government-guaranteed loans, NPLs stood at 86 basis points, up 3 basis points from the previous quarter and NPAs to total assets stood at 75 basis points in Q3. Due to our consistent track record of delivering pre-tax, pre-provision above 2%, we are well positioned to absorb higher credit costs while maintaining strong financial results. Turning to Slide 10. During the quarter, our cash position stood at approximately $453 million, which decreased $278 million from the second quarter, primarily due to the repayment of the term facility trade. Our liquidity remains strong, which positions us well to fund future business development. Moving on to capital on Slide 11. Our capital levels continued to grow during the quarter. We are very pleased to see that CET1 now exceeds 11% and stood at 11.35% as of quarter end, which is ahead of our schedule after the Inland transaction. Our total capital increased by 55 basis points linked quarter to 14.41%. Additionally, TCE to TA ratio stood at 9.72%, up 90 basis points linked quarter. We remain positive about the opportunities ahead as we execute on our strategy and enhance our franchise value. With that, Alberto, back to you.

Thank you, Tom. So to wrap up, Slide 12 does not change very much and gives you a summary of what we think about when running the business. This past quarter, we made excellent progress across all of the categories listed here. We continue to grow our commercial franchise, we further bolstered the strength of our balance sheet, we invested in the business and we announced an attractive acquisition transaction consistent with our strategy and delivered strong financial performance. While we were pleased with our results for the quarter, we remain optimistic about our ability to continue to execute for customers and deliver results for stockholders. I would like to thank all our employees for their hard work and the contributions they make on a daily basis to our organization. With that, operator, let's open the call up for questions.

Absolutely. We will now begin the question-and-answer period. The first question will come from the line of Nate Race with Piper Sandler. Nate, your line is now open.

Hey guys. Good morning. Hope you're doing well.

Good morning, Nate.

Good morning, Nate.

Alberto, I was wondering if you could just expand on your comments just in terms of your enthusiasm and excitement coming out of the strategic planning process heading into next year. Curious if you could just touch on some of the aspects of the business that you're most excited about on an organic basis. And curious if some of those comments also tie into some optimism on the acquisition front as well.

I believe the answer to your last question is yes, Nate. We announced a transaction this quarter and still see continued opportunities for similar types of transactions. Regarding your first point, as we look ahead, we recognize that we are currently the largest publicly traded commercial bank in the market under $10 billion. Once we surpass the $10 billion mark, we will be the largest in our segment with the same characteristics, operating as a commercial bank that is publicly traded and has excellent capabilities between $10 billion and $50 billion. This provides us with a strong opportunity to keep executing our strategy that we've followed for the past 11 years. Roberto mentioned our ability to attract talent, and we continue to find good opportunities to bring in banking professionals to enhance our service to customers. I am even more optimistic now than I was during the company's recapitalization in 2013. I hope this provides clarity to your question.

Yes, that's very helpful. I'm curious if you could provide some insight regarding your infrastructure, compliance, and headcount as you prepare to surpass the $10 billion mark. Are you at about 80% or 90% ready? It would be great if you could elaborate on that for us.

Yes, to address the timeline, this is not a new initiative for us. We’ve been preparing for it for some time, even when we were a smaller company. As we approach crossing the $10 billion pipeline, we will primarily invest in people. It's difficult to specify exact percentages, but we want to ensure that in areas of risk management and our control functions, we have the necessary capabilities and expertise to meet increased regulatory expectations. Regarding the timeline, in the previous quarter, there was a question about when we expect to cross this threshold and how M&A plays a role. We have just announced an M&A transaction, and we still believe that this could happen organically sometime between the second half of 2025 and the first half of 2026. We have flexibility in managing this without negatively impacting the business, meaning it could adjust by one or two quarters. M&A transactions take time due to due diligence and approval processes, but at this point, it’s reasonable to assess that timeline as being between the second half of 2025 and extending into 2026.

Okay. That's very helpful. Maybe one last one for Tom. I appreciate the NII guidance for 4Q. Does that include any additional Fed rate cuts through the end of the year? And just generally thinking about NII growth on a legacy Byline basis for next year, assuming the Fed maybe has more gradual rate cutting cadence?

Sure. Yes, thanks Nate. Obviously, the 50 basis point cut, we'll have a little catch-up going on here and I think that was some of the pressure we saw because of the CD book, so to speak. But we think that the NIM is stable and is growing, at least at this point, again, subject to what the Fed does here. But we also think just given our organic growth that we should actually be able to keep NII stable through the period.

Okay, great. And that excludes the acquisition, right?

Yes.

Okay. Good deal. And sorry, Tom, just one last clarifying question. Was the expense guidance, I think you mentioned $54 million to $57 million for next year. Is that excluding the deal?

It is excluding the deal.

Okay, great. I appreciate the color. Thanks guys. Congrats on a great quarter.

You bet. Thanks, Nate.

The next question will come from the line of Damon DelMonte with KBW. Damon, your line is now open.

Hey, good morning guys. Hope everybody is doing well today. Just had a question regarding the loan growth outlook. It seems pretty positive as we go into 2025. Have you seen much change in behavior from the commercial real estate side of things with the initial rate cuts and maybe additional conversations with the expectation that rates could be coming lower?

Good morning, Damon. Thank you for your question. We certainly need to see some further developments, and a slight decrease in short-term rates would be beneficial. There has been an increase in longer-term rates, which will have its effects as well. Regarding our pipeline, I can share that our commercial real estate pipeline is currently higher than it has been at any point this year. This is definitely an improvement, although I wouldn't say it's solely due to interest rates. For a noticeable increase in rate-induced transactions, rates would need to decrease further. I recommend monitoring transaction activity closely, as it typically indicates both new originations and pay-offs. Our observations align with market trends, where well-capitalized sponsors are well-positioned to capitalize on opportunities and have access to funding. We, along with other institutions, are ready to provide the necessary capital to support these sponsors in executing their strategies. This situation is more influenced by those factors than simply how rates are reacting—such as the Fed's 50 basis point cut leading us to where we are today.

Got it. Okay. That's helpful. Thank you. And then with regards to credit and specifically net charge-offs, if we kind of look at the last couple of quarters, I think it was like 50 basis points this quarter, 56 the quarter before. Would you kind of expect that trend to continue for a little bit longer or do you think you kind of go back to the mid-30 level, a little bit more normalized?

Yes. I think I would point you to keep paying attention, I think we've talked about this in prior quarters, keep paying attention to that PCD component because those are essentially acquired loans that we mark that now you're seeing flowing through charge-offs just because of the way the accounting works today. So keep paying attention. We're improving and added additional disclosure on the deck for that so that you could keep track of that. If you exclude what was PCD this quarter, as an example, that charge-off rate is roughly in the 35 basis point range, which is consistent with what our rate has been historically over time.

Great. That's helpful. Thank you. And then I guess just lastly, on capital management thoughts, any updates here? TCE, I think you noted is up to 9.7%, which is comfortably above your 8% to 9% target. The pending transaction shouldn't have too meaningful of an impact on capital levels. So any near-term thoughts on deploying the excess capital?

Yes. I believe our guidance is in line with what we've previously stated. If we're generating excess capital and operating above our short to medium-term needs, we will explore options such as adjustments to our dividend, share buybacks, or other opportunities, like the one we acted on this quarter. We see these as attractive ways to utilize capital, and we want to maintain the flexibility to do so. However, our primary focus remains on supporting organic business growth. That said, if we find ourselves consistently operating with capital that exceeds our deployment needs, we will seek ways to return that capital to our shareholders.

Got it. Great. Okay. That's all that I had. Thank you.

Thank you. The next question will come from the line of Terry McEvoy with Stephens. Terry, your line is now open.

Thanks. Good morning everyone. And first off, Alberto, thanks for expanding on the opportunity set being really attractive today. I thought that was very insightful and appreciate that. A couple of questions. When I look at the bottom of Page 4, the originations down about a third quarter-over-quarter. Was that due to being more selective pricing competition or just how the quarter shaped up? And as a follow-up there, Tom, the mid-single digit loan growth, how do pay-offs come into play because they seem to be higher in Q3 for you and the industry overall?

Yes, Terry, we are still experiencing strong business development activity in terms of our pipelines. Referring to that chart, there have been some fluctuations since the third quarter of 2023, where we saw figures around $311 million drop to $241 million. This appears to be due to quarterly volatility, as some loans may not close within one quarter and extend into the next. Overall, I believe we are maintaining good momentum in this area, and I do not have any concerns. Regarding pay-offs, when we announced the Inland acquisition, we indicated our intention to allow some run-off in that portfolio, which would enable us to redeploy those liabilities into our own lending businesses. We did observe some of that this quarter, and we are pleased with it and wish to pursue more. Additionally, we noted elevated cash balances at the end of the quarter, which Tom will expand upon, and this is promising for the future since we plan to redeploy that cash into our lending businesses over time. So, Tom?

Sure. Yes. I think as Alberto alluded to, some of the Inland loan pay-offs, we had some syndication loans pay-offs. So call that non-core lending. So we like that because we can redeploy those funds into customer relationship stuff. But I think there's also been a little bit of a slowdown or at least to tap the brakes just to see what happens with the elections and the outcome from that. But generally, the pipelines are very strong, as Alberto alluded to. In the fourth quarter, I think we've seen elevated pipelines. We'll see what the pull-through rate is. But things look very good into the future here for loan demand. Hopefully, that answers your question, Terry.

Yes. Thanks, Tom. And then can you just talk about deposit market pricing, your strategy as rates come down, interest-bearing deposit costs up a little bit more than I was modeling in the third quarter and where you see kind of betas heading as well?

Sure. So I mean, our CD book is roughly five months, just to put that in perspective. So we're going to have a little lag depending on what the Fed does. Obviously, if they do 25 basis points is more gradual for us and that will be less painful. But when we have a 50 basis point cut, it's going to take a while for us to catch-up on that on the CD front. But to answer your question about pricing, the market definitely has reacted to the expectations and we've seen significant declines in the pricing of what I'd call new acquisition accounts. And we've also seen just back of book repricing soften up as well. So we expect things to move pretty swiftly here as it relates to pricing betas and declines. Most banks have some exception pricing and we're in that 90% range on repricing on the exceptions and consistent with the other areas, other product suite where we're kind of in line with the normal 30 or 40 betas.

Terry, I'd like to add to that by discussing our approach to the business. In previous calls, we highlighted our willingness to accept higher margin and funding costs if it presented opportunities to build relationships and grow our business in the marketplace. We believe that the temporary increased costs of funding are outweighed by the long-term benefits of nurturing these relationships. Additionally, our long-term strategy is to operate primarily with customer deposits to fund loan growth. We aim to maximize this approach while staying within reasonable limits. For instance, this quarter, we reduced broker deposits by $51.5 million, replacing them with customer deposits. While broker deposits may appear appealing, especially with proposed regulatory changes, we believe it’s wise to focus on building our customer deposits instead of relying on other funding sources.

Thanks for that. And then just one quick one. I apologize if this was in the release, but the $200 million of the BTFP I think matured in January. Did you may take any actions given where rates are today or will that be off the balance sheet in January?

It's off now, Terry. When the Fed cut rates, the earnings rate is basically on top of the borrowing rate. So it doesn't make sense to hold the investment.

That's what I thought. Okay. Thanks for taking my question.

The next question will come from the line of Brendan Nosal with Hovde Group. Brendan, your line is now open.

Hey, good morning guys. Hope you doing well. Thanks for taking the questions.

Good morning, Brendan.

Just as we kind of look ahead to the next year, I mean, the profitability at the bank has been really fantastic for quite some time now. Like you said, eight quarters of PPNR ROA above 2%. Do you think you can hold the line on that 2% number as we move across '25?

I believe, as Tom mentioned earlier, that it's reasonable to say that most institutions of our size, particularly those in the $10 billion to $100 billion range, are working to reprice liabilities as we seem to be entering a cycle of easing rates. There will be a period of adjustment, Brendan. Depending on the duration of your CD portfolio, it may lag a bit. However, ultimately, we expect to return to balance, at which point your margin should stabilize and reset to a new base for growth. We've indicated, and Thomas highlighted regarding margin guidance, that our primary focus is on net interest income. This is influenced by our observation this quarter where, despite a slight compression in margin, we managed to counterbalance it with growth in earning assets, boosting net interest income. To address your question, it is possible that we may experience a quarter or two of adjustments as we allow the CDs to reprice, potentially leading to a dip in margin similar to what occurred this quarter. That scenario is certainly plausible, but we aim to increase net interest income. Ultimately, we should see margins align with the level of profitability you referenced in your question. I hope that clarifies things.

Yes, that's super helpful timing on the cadence and the various factors that are driving that. Okay, good. Maybe another one from me. Looking at others that have reported recently with SBA portfolios, it looks like a fair bit of stress in some of their books. It doesn't seem like you saw too much in your own portfolio this quarter, saw the allowance coverage on the unguaranteed piece up a bit quarter-over-quarter. But just kind of curious, what stress you're seeing in that book at this moment?

I think we've always been cautious, especially as we came out of the pandemic. We view our portfolio as higher risk, but also with the potential for higher returns. Our perspective has always been centered on the balance of risk-adjusted returns in that business, which we find attractive. We're somewhat surprised that we haven't seen more stress in that portfolio sooner, as we expected it would arise shortly after the primary pandemic effects, especially with the resumption of business for many borrowers and the expiration of government support for small borrowers. Instead, we are observing a trend toward normalization in the portfolio. Yes, we are seeing some stress, but we believe we are well prepared for it. We anticipated these challenges as best as we could, and I think we’ve done a good job in that regard. As you mentioned, we have considered the reserves we need to maintain to operate within that business.

Fantastic. Thank you for taking my questions.

You bet.

The next question will come from the line of Brian Martin with Janney. Brian, your line is now open.

Hey, good morning guys.

Good morning, Brian.

Same, just one thought, Alberto, or just one question. Just given kind of the dynamics in the market and kind of your positioning, as you and Roberto outlined, I mean, do you see an opportunity to accelerate the loan growth beyond the mid-single-digit range? As you kind of look here, it sounds like, I mean, you've got both the organic and the inorganic play here. But just in terms of just focusing on organic, I mean, do you see an ability to move that up from where it's at given the marketplace today?

I believe it will ultimately depend on the opportunities available to us, Brian. To clarify, we are not going to alter our credit philosophy or our approach to risk appetite. However, if we do encounter chances to expand our activities, we will certainly consider them. In the past, we've successfully attracted bankers to our platform, but there is typically a waiting period due to non-solicitation agreements during which the new banking team cannot reach out to customers. Once those agreements expire, the team can begin to engage customers and potentially contribute to loan growth. Additionally, we are also adjusting our expectations regarding pay-off activity. When providing guidance, we are making our best estimates on portfolio run-off in the short term, although we acknowledge that these estimates may not always be accurate. If pay-off activity decreases while originations remain steady, this will lead to an increase in net loan growth. It's a complex question and difficult to answer with precision, but I hope we have outlined some of the factors influencing our estimates.

It seems there is an opportunity based on your positioning and perspective today, especially considering your optimism for the future. Regarding the deal front, Alberto, should we anticipate smaller deals rather than larger ones in the overall picture? Is that the current view on the landscape or the opportunities in the market?

I think we haven't changed our criteria. If you consider First Security, it's in the $350 million to $375 million range. That's been our base level for some time, and it can go up to a couple of billion dollars. We still see opportunities among that group of banks in Chicago, and we look forward to participating in additional consolidation related to those institutions.

Got you. Okay. And maybe just the last one or two, just on margin, maybe for Tom. Just have you seen with rates down a bit as far as where the loan pricing is at today, has it gotten more competitive? Do you expect that to kind of play out here?

No change on that front. The asset pricing has been very stable, I would say.

Okay. And new origination yields, Tom, if you gave in the deck, maybe I missed it, but where are they kind of at today in terms of pricing?

Depending on the asset class, it's SOFR plus 300, its prime minus 50 maybe.

Got you. Okay, perfect. And then last, just one or two here. On the bank term lending program, Tom, just remind us the impact. It sounds like that occurred later in the quarter, but just the impact on the margin percentage. Is it pretty small or what's that impact?

It's about 6 basis points, maybe 7 basis points tops. So in other words, the margin would expand by 6 basis points to 7 basis points in the coming quarter, because that's a tight spread transaction.

Right. Okay. And that was not really impacted in the current quarter, correct? That was because it was done later?

Yes, it was just for one week. We unwound it a week ago.

I just wanted to clarify that. Could you provide your thoughts, Tom, on net interest income and how you're addressing the potential margin challenges? As we look ahead to the next five quarters, assuming we experience four to five rate cuts, do you see maintaining or staying flat as the goal? I'm interested in your perspective or any assumptions about these rate cuts. If we do see four or five additional rate cuts along with the steady increases we anticipate, would that inform your approach to growing it sequentially each quarter?

Yes. I mean, we're trying to have stable NII to growing NII. But I mean, as it relates to the margin, I mean, you have the sensitivity on Page 6 of the deck.

Yes. I was just talking about NII. I understand your comments on percentage. Just in terms of dollars of NII, I just want to make sure I understood kind of your outlook in terms of overcoming...

Yes, I think we gave guidance in the $85 million to $87 million range and it's just subject to if the Fed does more or less.

Got you. Perfect.

Hey, Brian, I want to add a point regarding the trade-off between margin and net interest income. As you noted, the bank term funding transaction impacts the margin by adding 5 to 7 basis points, but it also results in a loss of net interest income. So, while the margin may expand under these circumstances, we end up making less money. This is why, as Tom mentioned, we focus on managing the margin, but we must also remember that net interest income is ultimately what covers our expenses.

Yes, understood. That's what I was asking for, but thanking you for taking the questions and congratulations on another great quarter.

Thanks Brian.

Thank you, Brian.

Thank you for your questions today. I will now turn the call back over to Mr. Alberto Paracchini for any closing remarks.

Great. Thank you, operator, and thank you all for joining the call today and for your interest in Byline. And we look forward to speaking to you again in 2025. So have a great day. Thank you.

That concludes today's call. Thank you all for your participation. And you may now disconnect your lines.