Good morning and welcome to Byline Bancorp fourth quarter 2024 earnings call. My name is Emily and I'll be your conference operator today. All lines have been placed on mute to prevent any background noise. After the speaker's remarks there will be a question and answer period. If you would like to ask a question simply press the star followed by the number one on your telephone. If you would like to withdraw your question press star and then two. If you are listening via speakerphone please lift your handset prior to asking your question if you require operator assistance please press start then zero please note the conference call is being recorded at this time i would like to introduce brooks rennie head of investor relations for byline bank corp to prevent to begin the conference call thank you emily good morning everyone and thank you for joining us today for the byline bank corp fourth quarter in full year 2024 earnings 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 of certain risks, uncertainties, and other factors that could cause actual results 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 of 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 risk uncertainties, please see the forward-looking statements and non-GAAP financial measure disclosures in the earnings release. As a reminder for investors, this quarter we plan on attending the KBW Winter Financial Services Conference and the RBC Global Financial Institutions Conference. With that, I'd now like to turn the conference call over to Alberto Parnaccini, President of Byline Bank.

Thank you, Brooks. Happy New Year to all of you and thank you for joining the call this morning to review our fourth quarter and full year 2024 results. As always, joining me this morning are Chairman and CEO Roberto Jarencia, Tom Bell, our CFO and Treasurer, and Mark Fusinato, our chief credit officer i'd also like to welcome brian duran who's on the call this morning as well brian joined byline this week as our new general counsel before we get into results i want to pass a call on to roberto to comment on a few items roberto thank you alberto good morning to all and best wishes for a healthy and successful new year 2025.

I can't think of a better way to conclude last year another strong top quartile performance for the final quarter of 2024 with steady and healthy asset quality and record profitability for the full year 2024. We were also happy to approve a few days ago another penny increase to our quarterly dividend which represents an 11.1% increase from the previous dividend. Alberto and Tom will distill these numbers for you in a minute. 2025, we continue to feel excited and optimistic about our ability to build out the preeminent commercial bank in Chicago. A softer approach to bank regulatory environment and the expectation of higher M&A activity will continue to create disruption in our local market. We have thrived under those conditions as we're able to attract banking talent and execute in smaller talking acquisitions. I am a firm believer that the consistency of our results coupled with the uniqueness of these of our commercial banking franchise and the opportunity is the serving of a premium valuation market is recognizing it albeit slower than i would like it much of our success has been driven by our our commercial banking strategy and the teams and people who make up those teams. Our CNI lending strategy and teams specifically got supercharged following the acquisition of First Bank and Trust in Evanston in 2018. The core leadership we have in place today in this area was part of First Bank and Trust. The co-founder and CEO of that bank was Bob Yohanan, who passed away peacefully last November. Bob became a director of Byline after the acquisition, serving at the highest level in our trust and ALCO committees, and he retired in 2021. Bob was an extraordinary human being and had a gentle kindness to him that was recognized by many, coupled with a soft voice that I can still hear in my mind. It took hard work to heart and you would rarely find him resting as he was very active in the greater Chicago community, specifically in Evanston. Bob's banking career spanned over 50 years and he served two terms as a director of the Federal Reserve Bank of Chicago, was a member of the Economic Club of Chicago, the University Club of Chicago, and served as an advisor to the DePaul University Financial Services Center. I first met Bob at the First National Bank of Chicago when I started my banking career, and through a mutual friend we kept in touch throughout the years, leading to us putting together our banks. Joan and Bob's two boys worked at Byline and one of them still has an important decision with us today. Bob, our friend, will always be remembered and we remain grateful for his contribution and guidance. With that, I'm happy to pass the call back to you, Alberto.

Thank you, Roberto. In terms of the agenda for today, I'll start and give you the highlights for the full year and the quarter, followed by Tom, who'll speak to the financial results, and then I'll come back to wrap up with some closing comments as well as our outlook for 2025 before opening the call-off for questions. As a reminder, you can find the deck we're using for today's call on our investor relations website, and as always, please refer to the disclaimer at the front. Turning to our performance on slide three of the deck, Byline, again, reported strong results for the fourth quarter and full year 2024. I'd like to start by thanking our employees for their contributions this past year and for their hard work in serving clients on a daily basis. I'd also like to congratulate them on their performance. At this time last year, I shared with you that I thought we were entering the year with good momentum and in solid footing to profitably grow the franchise and deliver value for our shareholders. i'm happy to report that our company accomplished that in 2024. we managed through an environment characterized by a moderate decline in short-term rates when compared to market expectations a normalization of the yield curve and an economy that continued to prove resilient despite the inherent uncertainty of an election year against that backdrop we executed our commercial banking strategy well we grew relationships had balanced growth maintained profitability built capital and grew tangible book value per share by 12 percent we continued to invest in the business announced the transaction with first security and rewarded shareholders with an 11 increase in our quarterly dividend in summary 2024 proved to be another productive and successful year for the company for the year net income was 121 million or two dollars and 75 cents per diluted share on revenue of 407 million dollars which was up five percent year on year returns and profitability metrics remain strong with pre-tax preparation roa of 205 basis points roa of 131 basis points and ROTC of just under 15 percent. Year-on-year loan growth inclusive of managed run-up of the Inland portfolio came in at three percent and all that growth was funded by deposits which grew four percent. Operating leverage was positive for the year which helped drive our cost to asset ratio down by 22 basis points to 238 basis points for the year. Lastly, all capital levels remain strong, with TCE ending the year at 9.61%, CET1 at just under 12%, and total capital at roughly 15%. All these ratios reflect increases for the year and are now higher than prior to the Inland transaction. Our balance sheet strength allowed for the early repayment of balances in our line tied to the transaction with Inland ahead of schedule. Turning to slide four, results for the quarter were also strong with net income of $30.3 million or 69 cents per diluted share on revenue of $105 million. Profitability and returns continue to be solid with pre-tax preparation income of $47.2 million, pre-tax preparation ROA of 204 basis points, which marks the ninth consecutive quarter above 200 basis points. ROA came in at 131 basis points, an ROTCE of just under 14 percent, given a growing capital base. Revenue was up 3 percent from the prior quarter and up 4 percent year-on-year, notwithstanding the lower rate environment. The revenue increase was driven by higher net interest income, stemming from a 13 basis point increase in the margin and higher gain-on-sale income. From a balance sheet standpoint, loans and deposits remained flat and stood at $6.9 billion and $7.5 billion, respectively, as of quarter end. Notwithstanding, and net of loan sales, origination activity was strong at almost $300 million for the quarter, with the increase coming primarily from our commercial banking and leasing businesses. Payoff activity came in a bit higher than anticipated at $288 million, and line utilization inched up to 60%. Our government-guaranteed business had solid originations for the quarter with $127.5 million in closed loans, which was consistent with the seasonality we tend to see at the end of the year. Moving on to deposits, non-interest bearings stood at 23.5% of total deposits, and we saw an inflection in overall deposit costs, which decreased 28 basis points quarter on quarter. Tom will provide you with additional color on deposit trends, costs, the margin, as well as our sensitivity to rates in the current environment. Expenses continue to remain a focus and increase to $57.4 billion, largely due to higher incentive accruals. Correspondingly, our efficiency ratio increased to 53.6% for the quarter, and our cost to asset ratio moved up to 248 basis points as of quarter end. Asset quality continued to moderate, with overall credit costs coming in at $6.9 million, down $600,000 from last quarter. Net charges also declined and came in at $7.8 million, down $700,000 compared to last quarter. The allowance remained strong and ended the quarter essentially flat at 1.42% of total loans.

Non-performers decreased 12 basis points to 90 basis points and criticized loans declined both on a linked quarter and year-to-year basis with that i'd like to turn over the call to tom who'll provide you with more detail on our results thank you alberto and good morning everyone our strong earnings this quarter capped off a successful 2024. despite a different rate environment than the one we anticipated at the start of the year we had higher net interest income solid fee revenue growth and continued to have well-controlled expenses. As a result, we continue to deliver pre-tax pre-provision greater than 2%, and we grew capital nicely again this quarter, which drove CET1 and all other regulatory capital ratios higher. Starting on slide 5 with our loan and lease portfolio, total loans stood at $6.9 billion at December 31st, flat from the prior quarter. We originated $297 million in new loans, with the strongest growth coming from our commercial and leasing teams. Payoff activity increased for the third consecutive quarter, coming in at $288 million, up $21 million link quarter. The increase was largely due to runoff in non-core portfolios, which was offset by growth in new business relationships. Line utilization grew for the sixth consecutive quarter, up 1% to 60%. Our loan pipelines remain strong, and we expect loan growth to continue in the mid-single digits for 2025. Turning to slide six, total deposits were flat for the quarter at $7.5 billion and up 4% for the year. Consistent with the decline in short-term rates, we saw balances decrease in time deposits, offset by increases in money market accounts. Non-interest-bearing demand deposits grew for Q3 and accounted for 23% of total deposits. We lowered our overall cost of deposits in the quarter by 28 basis points to 2.48 percent, driven by higher DDA balances and disciplined deposit pricing. Turning to slide seven, the end interest income was 88.5 million dollars for Q4, up one percent from the prior quarter. Higher than guidance, primarily due to lower interest expense on deposits. This was the third consecutive quarter of solid NII growth and reflects a 3% increase on a year-over-year basis. Our net interest margin grew to 4.01% up 13 basis points link quarter. The change in NIM was driven by 37 basis point decrease in the cost of interest bearing liabilities offset by lower rates on earning assets. Our outlook for net interest income is based on the forward curve that currently assumes a 50 basis point decline in the fed funds rate for 2025. This implies a non-interest income range of 86 to 88 million dollars for the first quarter which is partially driven by day count. Turning to slide eight, non-interest income totaled 16.1 million dollars in the fourth quarter of 12.3 percent link quarter primarily driven by a 7.1 million dollar gain on sale of loans which increased by 1.2 million or 21 percent higher than Q3. The increase was due to higher volumes and higher premiums on loans sold partially driven by the mix. Our gain on sale forecast for 2025 is on average $5 million per quarter, with lower Q1 expectations due to typical seasonality. Turning to slide nine, our non-district expense stood at $57.4 million, which came in higher end of our Q4 guidance. The primary drivers of the expense increase was salary and benefits, largely comprised of higher revenue-driven compensation, other benefit-related expenses, and higher advertising expense. Having said that, we remain disciplined on expense management and continue to manage our expenses prudently. As we look ahead for 2025, we expect our quarterly non-insured expense to trend between $55 and $57 million. Turning to slide 10, credit quality continues to improve. Provision expense for the quarter came in at $6.9 million, down from $7.5 million in Q3, primarily due to a decrease in non-performing loans. Net charge-off trends down by 8% this quarter to $7.8 million, compared to $8.5 million in the previous quarter. On a year-over-year basis, NCOs were down by 36%. The ACL at the end of Q4 was $98 million, down slightly from the end of the prior quarter. NPLs to total loans decreased by 12 basis points to 90 basis points in Q4. Excluding government-guaranteed loans, NPLs stood at 76 basis points, down 10 basis points from the previous quarter, and MPAs of total assets stood at 71 basis points in Q4. Turning to slide 11, during the quarter, our cash and securities stood at $1.8 billion. The yield on our securities continued to increase nicely and was up 17 basis points to 3.17%, driven by higher rates on new purchases and runoff of lower rates. Moving on to capital on slide 12, for the fifth consecutive quarter, we grew capital ratios and increased our tangible book value per share by 12 percent compared to last year. CET1 came in a strong 11.7 percent, up 35 basis points link quarter and up 135 basis points year over year. Additionally, the TCE to TA ratio stood at 9.61 percent, up 55 basis points from last year. Again, we had another solid quarter and strong performance metrics resulting in an excellent year. As a result, our board authorized an 11% increase in our quarterly dividend payable in the first quarter. With that, Alberto, back to you.

Thank you, Tom. And moving on to slides 13 and 14 of the deck. Our approach to the business and strategy remains consistent as we enter 2025. Over the past decade, we've built a banking franchise capable of consistently delivering solid organic growth and strong profitability. This is made possible by having a great team who do their part and deliver for clients on a daily basis. We've also developed a strong culture that enables us to attract and retain talented bankers, which in turn continues to fuel our growth. As we start this new year, we're optimistic about the opportunities we see in front of us and remain well-positioned to win new clients, continue to grow deposits and loans, and manage both the inherent risks of the business and the ever-changing operating environment. With respect to the first security transaction, we remain on track with our timeline and, consistent with prior guidance, expect the transaction to close early in the second quarter.

We look forward to welcoming the customers and employees of First Security to Byline. with that operator let's open the call up for questions thank you as a reminder if you would like to ask a question today please do so now by pressing start followed by the number one on your telephone keypad if you change your mind or you feel like your question has already been answered please press start followed by two to withdraw yourself from the queue our first question comes from the line of nathan race with piper sandler nathan please go ahead Hey, guys.

Good morning, Nate. Hey, good morning, Nate.

Alberto, I would like to start on SBA. You know, obviously we saw some issues with some other notable SBA lenders that reported this week. So we'll just be curious to hear in terms of what you're seeing in terms of delinquencies and just overall credit quality within that portfolio. It was absolutely great to see, you know, charge-offs largely remain near expectations this quarter. And I think it would also be helpful just to remind everyone just in terms of some of the initiatives you guys have undertaken over the last several years to kind of de-risk that portfolio.

Of course. Great question, Nate. And I think I would start by just saying I think we continue to see consistent trends in that book of business. As you know, and I think we've mentioned this in prior calls going back to right after the COVID pandemic ended, we have been actively monitoring that portfolio, particularly given the amount of support SBA borrowers received. So we've been monitoring how those borrowers were coming out of the pandemic, how their business was, you know, resuming, and then more importantly how, you know, once that support, you know, ended, how those companies, you know, were beginning to perform, you know, without, you know, really having that support in place. So I think what we have seen is, you know, we've, we've seen, we expected deterioration in that portfolio to be frankly, you know, quicker than what we saw. We have seen gradual deterioration and have been prepared for that. And I think what you've seen in our results is just continuing to work with those borrowers, continuing to be proactive in terms of identifying problems, you know, and managing, you know, through a rate environment that, frankly, was difficult for a lot of them, just managing the book as best as we can to help, you know, essentially those borrowers get to the other side. So I think I would summarize it by just saying, it's something that we identified early on. We were very proactive with that portfolio and we've continued to essentially actively manage that really since probably the end of 2021, going into 2022 and 2023. With respect to the second part of your question, just as a reminder, we track the unguaranteed exposure on our book, so to speak. So if we go back to 2016, that government guarantees, the unguaranteed portion of that book was around just under 15% of our loan portfolio. Today, that book represents just around 6.1% of the portfolio. So that exposure has come down proportionally as the balance sheet has grown over the years. And it's an absolute terms is an exposure that, frankly, we see continuing to remain in that range for the foreseeable future.

So hopefully that answers your question, Nate. yeah that's really helpful thank you alberto and changing gears and you know think about the margin and nii outlook um at least over the next quarter too you know it seems like you guys kind of outperformed the kind of nii guidance that you provided in terms of the impact of rate cuts um here in the fourth quarter um so just curious you know if we have maybe the fed on pause for this year or maybe just one cut in July, perhaps, you know, how you think, you know, NII can trend this year, you know, absent the impact of the acquisition and just what that implies for the margin assuming, you know, loan growth, you know, remains or reverts back to that kind of four to five percent range at least going forward?

Hi, Nate. It's Tom. I think generally it's going to be flat to slightly up. You know, again, subject to what happens with the balance sheet, we have for security, you know, coming in here in the second quarter. But generally speaking, if there's no more rate changes, you know, we still have a lag in the SBA that'll hit us here this quarter for the 50 basis points that happened in the fourth quarter. But generally speaking, flat to slightly up.

I think to add to that, Nate, just big picture, naturally, as you know, we are an institution that naturally uh is acid sensitive so certainly to the degree that rates remain higher or that fewer cost cuts materialize over the course of the coming year to tom's point i think we would expect net interest income to be up you know uh in that type of scenario and i would also just add i didn't really have it in my prepared remarks but you know we were able to reduce our sensitivity this quarter from last quarter.

So that's still something we'd like to do. And, you know, at this point, it's a little bit more attractive to hedge that risk than it was, you know, say in the early fourth quarter.

Gotcha. And, you know, just maybe one last one. If the Fed, you know, does remain on pause this year, you know, just curious if you can speak to kind of the repricing gap within the CD portfolio and how much additional funding cost leverage you guys may have on the non-CD side of the book?

Sure. And just to remind you, I think our interest rate risk profile kind of shares the combination of that. But generally speaking, we have, you know, on average, CDs are roughly yielding like 439 in total. And we're repricing it roughly 360-ish, call it at this point so definitely an improvement there on the asset side we have probably about almost 900 million dollars in loans kind of at a 526 yield which should go up about 200 basis points call it or slightly more than that and reset and then the securities portfolio is roughly 200 million at like 264 so that's going to get you another two and a half percent pickup there Yeah, one trend also, Nate, that we're paying close attention to, and actually we saw a bit of that this quarter, is we have a normalized yield curve now, which is making, frankly, kind of liquid accounts a bit more attractive than CDs.

So we actually saw flows moving out of CDs and into, you know, more liquid accounts such as money markets to the degree that the curve continues to remain in its current shape, so to speak. so in other words a positively sloping yield curve I think we would expect that to continue which you know may give may may give a little bit more upside in terms of you know repricing you know liabilities a little bit lower but you know one quarter does not make a trend you know we'll see how uh behave if behavior continues to trend in that direction but that's just something

to keep in mind given uh the shape of the yield curve very helpful i appreciate you guys i'll step back thank you congrats on a great quarter thank you our next question comes from the line of brendan nozzle with hovdi group please go ahead hey good morning everybody hope you're staying warm yeah likewise brandon maybe just to start off here on on asset quality um certainly nice to see the the charge-off rate come down again sequentially but it didn't look like there were

any pcd charge-offs in the number this quarter so maybe just spend a minute on where lost content originated from during the fourth quarter thanks yeah i mean i think consistent with our commentary the last several quarters where we're seeing lost content from is the sba portfolio you know which is largely where losses have been centered, Brandon. And that goes to the earlier comments in terms of making sure that we identify that early, that be provisioned and reserved appropriately, and then we work through those credits. And then what you're seeing is just the ultimate resolution of those loans.

Perfect. That's helpful. Then anyone on kind of the 10 million question. Just kind of curious, one, what's left on the punch list to wrap up internal prep for that threshold? And then two, the asset base is a little bit larger than I was thinking for the quarter. So just wondering how much flex you have across 2025 to keep the balance sheet below 10 at year end.

Yeah, maybe let's take on the latter question and then we'll talk a little bit about prep. So I think as far as guidance is concerned, we still think that from a timeline perspective. You know, in terms of crossing the $10 billion asset mark is still kind of broadly speaking, latter half of 25 to really kind of the first to now moving into kind of the third quarter of 2026, if not really, frankly, 2026 at this point. The other thing I would I would tell you, Brandon is, remember that once you cross, we're looking at, you know, four consecutive quarters above that $10 billion marks before the actual, call it, you know, set of regulations and expectations formally apply. So we're probably looking at the very much the latter part of 2026, if not really the beginning of 2027. So just to put that in context. As far as the prep is concerned, so we have a project team. We have, we've obviously performed, you know, an assessment of the things that we wanted to do, not just for purposes of complying with, you know, or planning to cross that $10 billion mark, but really the things that we need to have in place to go you know beyond that that 10 billion dollars both things that are actual regulations that would apply as well as leading regulatory uh expectations so we're well on our way uh with that um as i commented right at the beginning uh making sure that uh we have in place a general counsel is was one of those steps and we're fortunate that that Brian was you know came on board early this week so I think in in in summary I think the prep work and and the work that that we have to do is well in its way and we are very confident that we will not only be able to meet but you know will exceed the the expectations of being a larger institution I would – this is Tom.

I would also add, you know, at the end of the quarter, we had a little bit more excess cash than we would normally carry just because of commercial activities that happened on the last day of the year. So we have room there to sort of shrink the balance sheet if we need to and call that, you know, $400 million of flexibility. So that could be loans, so to speak.

Yeah, Brendan, and just to add one last comment to that, the guidance we just gave is consistent with the closing of the first security transaction. So we're factoring that into the comments.

That's super helpful, caller. And Tom, you answered my question on the higher cash balances for the quarter as well. So thank you very much.

You bet.

Our next question comes from the line of Terry McAvoy with Stevens. Terry, please go ahead.

Thanks. Good morning, everyone. Maybe, Tom, a question for you. Tom, you talk about mid-single digit loan growth. What are your thoughts on the payoffs, which you noted earlier picked up in the fourth quarter? What are your assumptions there? And then when you take a step back, what markets or portfolios are positioned to generate that growth in 2025?

As Alberto mentioned in his comments i mean we definitely saw a payoff activity from the inland transaction and some legacy syndication loans that we had so we're really happy with the fact that some non-core loans were paid off and we can redeploy those the cash if you will into customer relationships where we get in deposits so you know that was around 100 million dollars for the quarter and And, you know, the inland transaction will slow down over time, but the syndications group is certainly much lower and, you know, it probably stabilizes at this.

Yeah, one thing to add there, Terry, is, as you recall, the inland transaction, just to put that in context, that was about a billion one or so in terms of assets. This past year, and this was very much part of the strategy that came with that acquisition. was to be able to essentially recycle cash flows coming from that loan book into loans that fall into our own originations. So I thought we did an excellent job in 2024, just to put it in context and perspective. This past year, we had $321 million of runoff in that portfolio that we were able to redeploy into our lending different lending businesses and still show year-over-year growth in the portfolio which speaks to our asset generation capabilities and our ability to redeploy that cash um on a measured basis um and and continue to show you know growth on the on the balance sheet so just to to put that in context and in terms of the the businesses we benefit from having a diversified um you know group of businesses so certainly we anticipate commercial banking um for all the the reasons that you're you're seeing in the market today to have a good year again in in 2025 our leasing business continues to be strong we're cautiously more optimistic with our real estate business in the sense that we're seeing an uptick in activity there. We're also seeing more competition coming into the market. That's going to be driven by, you know, whether or not we see transaction volume pick up, but we're cautiously optimistic there. So, you know, I think hopefully that gives you, you know, color in terms of where we anticipate seeing growth in the portfolio. there.

Thank you both. Then maybe as a follow-up, Tom, could you just run through your expense outlook one more time? I'm sorry, I was writing something else. Was that for the first quarter or particularly interested in kind of your thoughts on full year 2025?

Sure. I mean, we gave guidance for the full year and the guidance was 55 to 57 million per quarter, Gary.

Okay, so that was more than just the first quarter. Thanks for clearing that up. Thanks.

Try to give full year for everything i mean obviously you know we're always there trying to err on the lower side if we can and beat expectations but you know we first quarter you typically have some payroll and hr related compensation and benefits etc and taxes so but 55 to 57 is our range right now thanks again have a nice weekend thank you as a reminder if you would like to ask a question today, please do so now by pressing start followed by the number one on your telephone keypads.

Our next question comes from Brian Martin with Janae Montgomery. Brian, please go ahead.

Hey, good morning, everyone.

Hey, Brian. Hi, Brian.

Hey, Tom, just one question. The margin, where did the margin, can you give any thought on where the margin exited the year versus kind of the quarter?

Was it, I guess, assuming it was trending higher than you know you got later in the quarter and then just remind us to drag on you know the sba given that most recent 50 basis point cut as we look at one q yeah i mean the margin is is really in that four percent range terry for the four for december sorry yeah and as it relates to the sba cut 50 basis points in the fourth quarter and the reset lower on january first. So that's 50 basis points.

And then just in terms of, you know, the capital and kind of worth that and the opportunities, are you seeing more opportunities today in terms of, you know, just given the disruption in the market in terms of adding?

You think about this year in 25 as far as adding talent, or is it, are there more opportunities today in terms of, you know, potential, you know, inorganic growth in terms of, you know, M&A, you know, full M&A opportunities, acquisitions just kind of thinking broadly what opportunities yeah opportunity set in 25 as you kind of look at it i i think two things i think it goes to roberto's comment really right at the beginning of the call anytime that there is disruption and and i think uh certainly the the expectations are that activity is likely to pick up which we welcome because any type any time that we see disruption so when you think about you know whether it's regionals or super regionals um you know any time that that we see an m a transaction is going to have some degree of effect. In the past, we've been able to capitalize very nicely. So I think we look forward to that. As far as M&A picking up, I mean, certainly conversations, there's a lot of talk in anticipation of perhaps a more benign regulatory environment that's conducive to M&A. For us, that really hasn't been a limitation. We've obviously been able to do transactions over the past several years and pursue those and have, frankly, a very favorable and quick regulatory approval process. What we stick our neck with is really the drivers of m a and those have not changed you know there's plenty of institutions that you know lack succession plans their board of directors are getting up in age their shareholder base uh is now in the second if not third generation and ultimately wants liquidity which you know are really the factors that drive m a and i think we think you know at least here in chicago we are super well positioned to continue to be active participants on that. And we think we're a great partner for institutions that are looking to partner with somebody and provide liquidity to their shareholders.

Perfect. Thank you for that, Alberto. And maybe just the last one for me. I think, Tom, maybe I forget someone in the prepared remarks, I thought there's some commentary about you know kind of the government guaranteed business kind of being in that you know five millionish range a quarter just kind of wondering as we think about you know fee income and the opportunity set in 2025 i mean if you're if you are at you know a five million dollar run rate it's you know it's a fair amount lower than what you produced in 24 so just kind of trying to think about the outlook for fee income in 25 if you give up a bit on on the fee on the fee side from the the government guarantee business if there's opportunities to kind of grow fee income in 2025 or how we should be thinking about that yeah i mean our goal is to obviously grow fee income and i think we have some other categories um customer swaps for example will help you know

offset some of the potential decline in the sba gain on sale but again sba gain on sale premiums are still very strong um if we get the rate cuts we could see some pickup as well in that side of the market, too.

I think, Brian, maybe just to add to what Tom just said is what we're trying to do is really, when we give guidance as far as the SBA business and particularly gain on sale is concerned, we're not, I mean, we're giving you a sense on a quarterly basis or where we would expect it. But as you know, we're really not paying attention to kind of quarterly volatility. We tend to look at this more on a year-over-year basis. And in that regard, what we are keenly focused on are the variables that we control, the originations, the pricing. We really don't control what the market thinks these assets are worth. So we try to be conservative in that regard, but certainly to the degree that the market, you know, values these assets at a higher level than what we're assuming, which, you know, has been the case in the past, and or the mix of assets we originate because of the rate environment is more favorable to higher premiums, that can create, you know, some variance to the positive in that estimate. So just keep that in mind.

No, that's helpful. Like you said, I was thinking more full year, just trying to understand if there's a trajectory to see some increase in fee income. It sounds like there is, given some of the other opportunities elsewhere and maybe some potential better than expected performance on the government-guaranteed business to help So thank you for taking the questions. Yep, you bet.

The next question comes from Damon Del Monte with KBWE. Please go ahead.

Hey, good morning, guys. Hope everybody's doing well today. Likewise, David. I just wanted to ask a little bit about fee income. Thank you. I just wanted to ask a little bit about fee income. Tom, I appreciate the guidance on the SBA gain-on-sale loan outlook. Could you guys just talk a little bit more about some of the other fee-generating categories you have and maybe some opportunities that you see here up in the coming year?

I think just broadly speaking, Damon, we're a pretty traditional commercial bank, so the things that we're paying attention to, when you think about like service charges, treasury management fees like this past year. That's an area that we've invested a fair amount in the past. We continue to invest in that area. So we want to continue to see growth in treasury management fees. So that's an example. Another area that we have new leadership, we have a new team in is our wealth management business. That's coming off a very low base. I think over time, we wanna see wealth management be a higher contributor to fees. So that's an area that we're paying close attention to. As you know, that doesn't happen overnight. We're really focused on that business and serving our commercial client base. But that's an area where we wanna obviously grow and proportionally have that be a more meaningful part you know, of the fee category and overall revenues. And like Tom said, I think the rate environment is also, you know, today probably more conducive to doing, you know, derivatives with customers in terms of, you know, fixing rates and doing swaps, et cetera.

So I think those are our general categories where where we see you know drivers um to to to inch that fee income category in total up got it that's helpful appreciate that color um and then i guess just secondly um you know as we think about provisioning and net charge-offs for the upcoming year you know net charge-offs were 47 basis points um in 2024 um do you feel like you know that you've kind of peaked and we should start to see a more lower level kind of something in the 30 upper 30 basis point range or do you think that there's still some uh some loans to move through that would

generate elevated net charge i think i i don't i i think consistent with with our guidance in the past damon i think i think we still see kind of like that on a normalized basis the range being somewhere between 30 to 40 basis points somewhere in there just know that you're going to have some volatility up to to some degree they're tied to resolution of pcb loans that came from from prior transactions so we'll try to continue to provide disclosure around that to give you clarity in terms of you know what happens and and where charges are coming from on a on a quarterly basis but i think on a on a normalized meaning excluding uh resolutions of loans that are marked that we've acquired that you know we we basically flush through the system so to speak as we work it out of the bank i think that 30 to 40 basis point number is still reasonable got it okay that's helpful thank you and then just lastly tom any update on the the tax rate outlook for 25. very consistent for us right now damon okay that's all that i had thank you very much have a great weekend. Thank you, Damon. Thanks, Damon. You do as well.

Our next question comes from Brendan Nozell with Horstey Group. Please go ahead.

Just one follow-up and point of clarification on the expense guide. Does that quarterly outlook for $55 to $57 million include for security or is that on a standalone basis?

It's standalone at this point.

Got it. Okay.

So to take that and layer on for security um fantastic thank you yeah i i think what what tom will will do is certainly uh probably at the end of the second by the time of the second quarter call but you know once we the transaction closes and you know we have a quarter under our belt i'm sure tom will will give you you know a bit more clarity in terms of that run rate on a go forward basis yeah that's perfect i appreciate the clarification thank you for your questions today.

I will now turn the call back over to Mr. Alberto Parachini 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 April. Thank you again.

Thank you everyone for joining us today. This concludes our call and you may now disconnect