Earnings Call Transcript - BY Q4 2025

Operator, Operator

Good morning all and welcome to the Byline Bancorp 4Q 2025 Earnings Call. My name is Carli, and I'll be coordinating the call today. Please note that this conference call is being recorded. At this time, I'd like to introduce Brooks Rennie, Head of Investor Relations of Byline Bancorp. Please go ahead.

Brooks Rennie, Head of Investor Relations

Thank you, Carli. Good morning, everyone, and thank you for joining us today for the Byline Bancorp Fourth Quarter and Full Year 2025 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 their 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 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 risks and uncertainties, please see the forward-looking statement and non-GAAP financial measures disclosure in the earnings release. As a reminder for investors, this quarter, we plan on attending the KBW Winter Financial Services Conference in Boca Raton, Florida. With that, I would now like to turn the conference call over to Alberto Paracchini, President of Byline Bancorp.

Alberto Paracchini, President

Thank you, Brooks. Good morning, everyone, and Happy New Year to all of you. We appreciate you joining the call this morning to review our fourth quarter and full year 2025 results. With me today are Chairman and CEO, Roberto Herencia; our CFO, Tom Bell; and our Chief Credit Officer, Mark Fucinato. Before we get started, I'd like to pass the call over to our Chairman, Roberto Herencia for his remarks.

Roberto Herencia, Chairman & CEO

Thank you, Alberto, and a Happy New Year to all. We extend our best wishes for a successful and healthy year ahead. We are delighted and proud to finish the year on a strong note and excited to announce a 20% increase in our quarterly dividend. This is no doubt a reflection of our strong financial performance and confidence in our ability to continue to deliver top quartile results in key profitability metrics as Alberto and the team will cover shortly. What our Board and team have accomplished over the last few years is remarkable and provides a great platform for the future. Our North Star, is to be the preeminent local commercial bank. The Chicago banking market, including the verticals we run out of Chicago, offers significant opportunities for growth and development, with Byline well positioned to lead. Every day, we are reminded that we live in an era of radical uncertainty where the rules-based order is fading. Of course, we care about the impact on our customers, the majority of whom live in a world that is very distant from billionaires, Davos and geopolitics. In this environment, as the local community and commercial bank, we become even more relevant to our customers and the people who work with us. We believe in people-first banking, where engaged employees delight our customers, enabling Byline to produce top quartile returns for our shareholders. In December, we were named to America's Best Workplaces for 2026 overall. We wrapped up the year with continued low turnover and an engaged workforce of just over 1,000 employees who work together to deliver value for our customers and community. This is inspiring for me and the rest of the Byline team. We have at Byline identified our common purpose, which is to become the preeminent local bank. We strive to execute consistently with that at all levels all the time, and that defines our future. Others do not have to do it for us. The position of the franchise is enviable as the largest local community bank, the second-largest local commercial bank, and the largest, most stable platform for quality lenders to bring their books and grow their businesses. We have the balance sheet, plus a strategically stable ownership group with all the tools and structure in place that a lender needs to just focus on serving clients and finding new ones. This gives us an edge over what most banks dream of – organic growth. We are driving everything toward compounding returns, which means reliable, sustainable, prudent growth over the long run. You can see that in all our actions regarding capital and recruiting and in our track record for achieving top-tier financial results. To summarize why we are excited: First, the people we have in place, from those who have been here for over 40 years to those who joined us over the last 5 years as a result of merger activity in the market. Second, the results out of that execution have been exquisite, 130 million reasons in the last year to back up this excitement. Third, the quality and simplicity of our strategic plans have kept us focused. We don't strive to be everything to everyone. We are a commercial bank, striving for preeminence in that segment. Fourth, our position in the marketplace, as I've described, and finally, our unique shareholder base and their representation in our boardroom. This is an incredibly optimistic time for Byline, a company populated by exceptionally kind, competent people who care about what we do and how we do our work. Differentiate and separate is what we plan to do. I truly believe that among the thousands of community banks, we are unique in our approach and prospects. And with that, I'm happy to return the call to Alberto.

Alberto Paracchini, President

Great. Thank you, Roberto. This morning, I'll walk you through the highlights for the full year as well as the quarter. Tom will follow with details on the financials, and I'll come back and wrap up before we open it up for questions. As always, you can find the deck for this morning's call on the IR section of our website. Please refer to the disclaimer at the front. So turning to our full year results on Slide 4. Byline delivered strong results for both the fourth quarter and full year of 2025. Before I get into the numbers, I want to thank our team. The results we're sharing today are a direct reflection of their dedication to customers and the effort they put in throughout the course of the year. A year ago, I said we had excellent momentum and felt confident in our ability to profitably grow the business and deliver value for shareholders. I'm pleased to report we did exactly that. The operating environment evolved differently than we anticipated. Interest rates remained elevated longer than expected, macroeconomic uncertainty increased, and regulatory and policy changes came faster than in the past. Against that backdrop, we stayed focused on what matters: serving customers, executing our strategy, and achieving several important milestones. First, we closed our transaction with First Security, converted systems, and completed the integration all within a single quarter. Second, we upgraded important customer-facing technology platforms. And third, we continued our preparation to cross the $10 billion asset threshold in 2026. We also grew relationships, sustained profitability, built capital, returned $42 million back to stockholders, and grew tangible book value per share by approximately 17%. Overall, 2025 was a productive year in which we continued advancing our strategy to become the preeminent commercial bank in Chicago. For the year, net income was $130.1 million or $2.89 per diluted share on revenue of $446 million, up 9.7% year-on-year. Profitability was strong with pretax pre-provision ROA of 219 basis points, ROA of 136 basis points, and ROTCE of 13.5%. Year-on-year loan growth came in at 8.9%, and deposits grew 2.5%. Capital ratios increased throughout the year and ended strong with TCE at 11.3%, demonstrating strength and financial stability. Lastly, we maintained positive operating leverage, notwithstanding the rate environment toward the end of the year and our continued investment in the business. Turning to the fourth quarter on Slide 5. Results for the fourth quarter were also strong. Net income was $34.5 million or $0.76 per diluted share on revenue of $117 million. Profitability and returns remain solid. Pretax pre-provision income was $56.6 million, pretax pre-provision ROA was 232 basis points, ROA was 141 basis points, and again, ROTCE notwithstanding a higher capital base was 13%. Revenue was up 1.1% from the prior quarter and 12% year-on-year, driven by higher net interest income. From a balance sheet standpoint, loans grew 3% linked quarter, deposits declined to $7.65 billion due largely to balance sheet management at the end of the year. Origination activity was consistent with prior quarters at $323 million, with growth coming primarily from our commercial and leasing businesses. On the liability side, noninterest-bearing deposits were essentially flat at 24% of total deposits, and deposit costs came down 19 basis points to below 2% for the quarter. Expenses remained well-managed and came in at $60.4 million. Our efficiency ratio was 50.3%, and our cost-to-asset ratio was 2.47% as of quarter-end. Asset quality remained stable. Credit costs for the quarter were $9.7 million, driven by net charge-offs of $6.7 million, down on a quarter-over-quarter basis and a reserve build of $3 million. Our allowance now stands at 1.45% of total loans, up 3 basis points from last quarter, and NPLs increased to 95 basis points. Turning to capital. Our capital levels remain strong across the board, and that strength gives us real flexibility in how we allocate resources. We put that flexibility to work this quarter by repurchasing approximately 346,000 shares. Looking ahead, our Board authorized a new repurchase program that allows us to buy back up to 5% of outstanding shares. And the Board also approved a 20% increase in our quarterly dividend, which will be paid this quarter. I'll now turn it over to Tom to walk you through the financials in more detail.

Thomas J. Bell, CFO

Thank you, Alberto, and good morning, everyone. Starting with our loans on Slide 6. Total loans increased by $3.3 million annually and stood at $7.5 billion at year-end. Origination activity was solid, which was up 22% compared to the prior quarter. Payoff activity increased $156 million from Q3 and stood at $361 million. Line utilization ended up to 60% for the quarter. Our loan pipelines remain strong, and we expect loan growth to continue in the mid-single digits to 2026. Turning to Slide 7. Total deposits were $7.6 billion for the quarter, down 2.3% from the prior quarter, primarily due to managing the balance sheet to stay below the $10 billion year-end and Q4 seasonality outflows. We saw a nice decline in deposit costs for the quarter, continuing to see the benefit from disciplined deposit pricing, which drove deposit costs lower by 19 basis points. Turning to Slide 8. We had record high net interest income of $101 million in Q4, up 1.4% from the prior quarter, primarily due to loan growth and lower rates paid on deposits and lower interest expense related to the sub debt payoff, partially offset by lower yields on loans and securities. This was the third consecutive quarter of NII growth and reflects a 10.7% increase for the full year. The net interest margin grew to 4.35%, up 8 basis points linked quarter and on a year-over-year basis, NIM expanded 25 basis points. The improvement in the margin was driven by a decrease in the cost of interest-bearing liabilities, which declined by 29 basis points. Our outlook for net interest income is based on the forward curve, which currently assumes a 50 basis point decline in the Fed funds rate for 2026. This implies a net interest income range of $99 million to $100 million for the first quarter. We continue to remain focused on growing and sustaining our net interest income by growing the balance sheet and reducing our asset sensitivity. Turning to Slide 9. Noninterest income was $15.7 million, essentially flat from the prior quarter. Gain on sale of loans was $5.4 million, down $1.6 million linked quarter, reflecting lower premiums and a mix of loans sold. Swap income was up nicely for the quarter as we continue to focus on growing other fee income categories. Our gain on sale forecast for 2026 is, on average, $5.5 million per quarter, with lower Q1 expectations due to typical seasonality. Turning to Slide 10. Expenses came in at $60 million, essentially flat from the prior quarter. The modest decrease reflected lower loan-related and data processing expenses, partially offset by higher incentive compensation. For 2026, we expect our quarterly noninterest expense to trend between $58 million and $60 million. Turning to Slide 11. Our allowance for credit losses increased 3% to $109 million, representing 1.45% of total loans, up 3 basis points from the prior quarter. We recorded $9.7 million in provision for credit losses in Q4 compared to $5.3 million in Q3. Net charge-offs decreased to $6.7 million compared to $7.1 million in the previous quarter. NPAs to total assets increased to 77 basis points in Q4 from 69 basis points in Q3. The increase was partially driven by a lower balance sheet at year-end. Moving on to capital on Slide 12. This quarter capped a year of meaningful progress in growing our capital position. For the quarter, CET1 came in at a strong 12.33%, up 18 basis points linked quarter and up 63 basis points year-over-year. Additionally, the TCE to TA ratio stood at 11.29%, up 168 basis points from last quarter. In closing, we remain focused on long-term stockholder value by growing tangible book value per share, EPS, and increasing our return on tangible common equity. With that, Alberto, back to you.

Alberto Paracchini, President

Thank you, Tom. Before we open the call for questions, let me touch on our priorities heading into 2026. First, we remain on track and expect to cross the $10 billion asset threshold this year, and we're well prepared for that milestone. We're monitoring the regulatory environment closely, particularly potential changes to asset thresholds, but we're not slowing down in anticipation of what might happen. We will continue to move forward. Second, our focus remains on organic growth. Last April, we launched a commercial payments business, and the progress so far has been excellent. We've onboarded 6 customers and have several more in the pipeline for this year. We've also added approximately $70 million in liability balances and seen a corresponding increase in ACH volumes, both transactions as well as dollars. We entered 2026 with good pipelines and remain well positioned to continue gaining share across all our commercial businesses. Third, credit discipline remains a priority. The way we maintain that discipline is by staying close to our portfolio, monitoring it, and identifying and addressing issues quickly as they emerge. As we move into 2026, we're excited about where we stand. We've built a strong team, we're generating real operating leverage. Our competitive position is solid, and we're able to capitalize on opportunities when they come. In short, we like where we're positioned. Before we turn to questions, I want to thank our employees for everything they do for our company and our customers on a daily basis. And with that, Carli, we can open the call up for questions.

Operator, Operator

Our first question is from Nathan Race from Piper Sandler.

Nathan Race, Analyst

Maybe just to zoom out for a second, Alberto. You guys posted a really strong year in 2025. Pre-tax pre-provision income was up 13% year-over-year. So just curious, as you look at the company broadly, which areas or which verticals are you most excited about to just continue to scale up and where you see an opportunity to become more efficient, whether it's in the technology front where you guys have been proactively investing or in any other areas?

Alberto Paracchini, President

Yes. Thanks for the question, Nate. So I touched on it a little bit in the remarks there. So certainly, we continue to be excited with our commercial payments team. It's a team that we launched last April. We're being very deliberate in how we approach that market. But we have a great team. We've added people there, and we're starting to see the benefit of not only having a pipeline but onboarding customers, growing deposits, growing transaction volumes, and correspondingly, ultimately, the fees that come along with that. So we're certainly excited about that, but we're also excited given our position in Chicago and the current competitive dynamics about our ability to continue to gain share in the commercial banking space here. As you know, we are today the largest community bank in the market. Tomorrow, when we go over $10 billion, we will be between $10 billion and probably $70 billion or $75 billion, and we will be the largest local commercial bank in the market. So we like where we are, and we like the opportunities that we have across really all of our businesses, Nate.

Nathan Race, Analyst

Got it. That's really helpful color. Changing gears to capital. You guys have continued to build at pretty strong clips, just given the profitability profile. And I noticed in the last couple of earnings decks, the 8% to 9% TCE target has been absent. So curious if there's anything to read into that in terms of how you think about capital returns to shareholders and what that implies in terms of the M&A environment these days. Or if you're just looking to maybe operate with higher capital levels going forward versus the previous targets?

Alberto Paracchini, President

Yes. I think from if you think about it in terms of, we always talk about wanting to have some degree of flexibility. So that comes with it. So we do carry a bit more capital to allow for that. I think our experience has been that this has served us well. It has allowed us to move very quickly and really without any hesitation or delay when opportunities come up in the market, and we like that. That being said, I think this past quarter, you also saw the comments related to the increase in dividends to the degree that we have excess capital, we will return that capital back to shareholders. As you know, this past quarter, we were active; we were repurchasing shares. We thought we repurchased shares at attractive prices. And also over time, and I think you've heard the comments, we want to have a sustainable and growing dividend over time. I think our Board took action in that regard with the dividend increase that we just announced. So hopefully, that's an indication of the capital priorities. We want to have capital to take advantage of growth opportunities, support the business, provide a sustainable dividend, and have enough flexibility to pursue M&A when and if those opportunities surface. We think the combination of that gives us enough flexibility to grow the business and also return capital back to shareholders if we have no use for that capital.

Nathan Race, Analyst

Okay. That's very helpful. If I could just sneak 1 more in for Tom. I think you mentioned in your comments that you're looking to reduce the asset sensitivity of the balance sheet going forward. Just curious if you could shed some more light on that and kind of how you think that positions the margin going forward in light of potentially additional Fed cuts this year?

Thomas J. Bell, CFO

Sure, Nate. The margin has been growing, and we're happy with that. We like the idea that NII is growing. We continue to issue some CDs, but also we have some flexibility to do more interest-bearing accounts. Because of the mix of our bank, we really want to have some more floating rate liabilities, and I think we're set up well for that. It will take time to get there. But again, the disciplined pricing we've had over the last year related to deposits has really helped to lift the margin. The goal is to keep it stable. At year-end, we had a lot of activity in the fourth quarter, and we sold some securities just to keep the bank under $10 billion. That was a really important effort for us. We will likely be buying those securities back here in the first quarter. Those transactions are tighter margin trades. That’s why we focus on NII - stable and growing net interest income.

Alberto Paracchini, President

Yes. To add to what Tom said, Nate. It gives us ample flexibility from a competitive standpoint. We're not in a situation like other institutions that are trying to get their margin back to a level for base profitability. With our margin today, it gives us a lot of flexibility competitively that we can use when appropriate.

Operator, Operator

Our next question comes from Damon DelMonte from KBW.

Damon DelMonte, Analyst

Just looking for a little color on the loan growth outlook. I know you mentioned mid-single-digit growth, but can you just kind of remind us what areas of your lending platform offer the best opportunities across which segments can drive that?

Alberto Paracchini, President

Really, I mean, commercial, I would still say that, Damon. Real estate I think is going to be a function of transaction activity. It's not to say that there are not transactions happening, but certainly since rates started going up in 2022. I think transaction activity relative to what it was before has been somewhat muted. With rates coming down, is that going to change? Are we going to see some of that? Obviously, if that picks up, then probably what we would tell you at some point is that we probably move that guidance up. But at this point, I think that kind of mid-single-digit range is solid.

Damon DelMonte, Analyst

Got it. Okay. And then, Tom, with regards to your commentary on NII for the next quarter, is typically the first quarter like a seasonally low quarter for you guys, and then you'll see a steady build as we go through the rest of the year, or do you think that...

Thomas J. Bell, CFO

No.

Damon DelMonte, Analyst

There's not really much seasonality in the first quarter.

Thomas J. Bell, CFO

Damon, you're right. There are fewer days in the quarter, so that's one drag. Loan fees, etc., that go through the margin are a little bit lower during the first quarter. But generally speaking, again, stable to growing throughout the year.

Damon DelMonte, Analyst

Got it. Okay.

Alberto Paracchini, President

Yes. I would also add to that, Damon. I think always we've gotten some rate cuts here towards the end of the year last year. Naturally, we're asset sensitive. So notwithstanding the fact that our margin expanded, if we see rate cuts, there's a transition period where we have to catch up on a gradual declining rate scenario. We usually take about a quarter to catch up and reprice. Just keep that in mind as you think about the rate environment going forward.

Thomas J. Bell, CFO

Damon, one more thing to point out is, remember, with the Fed cuts in the fourth quarter, the SBA loans reset January 1. So when you see guidance a little bit lower than what we reported for the fourth quarter, some of that is driven by the fact that we have loans resetting here January 1.

Damon DelMonte, Analyst

Got it. Okay. Great. And then with regards to credit and kind of your outlook for net charge-offs for the upcoming year, as you think about provisioning. I think last year, you had around close to 40 basis points of net charge-offs, which was down a little bit from '24. Based on what you're seeing in your portfolio, do you feel like you're going to be in that near 40 basis point range again?

Alberto Paracchini, President

I think our guidance has been pretty consistent in the 30 to 40 basis points range. It might be closer to the high end or the low end of that range, but it’s likely to stay within those 30 to 40 basis points.

Operator, Operator

Our next question comes from Brendan Nosal from Hovde Group.

Brendan Nosal, Analyst

Yes. Maybe just to start off here on kind of the underlying pieces of the loan growth outlook. Just thinking between origination activity and payoffs. I think originations dropped 17% for this year to $1.3 billion or so. So like how do you think about the underlying pace of originations that are getting you to that mid-single-digit net growth outlook for 2026?

Alberto Paracchini, President

I would point you to that page in the deck that shows the kind of trend of originations and payoffs. It's slide — it's Page 6 of the deck where it talks about portfolio trends. I know throughout the year, we get questions sometimes regarding, well, your loan growth is exceeding the target. The answer that you hear us give is we have a pretty good handle in terms of what we're seeing from an origination standpoint. We think we know the activity that's going to pay off. But obviously, sometimes the timing can be a little bit harder to predict. I think in the past quarter, certainly, you saw payoffs catch up a bit. So I would point you to that chart and kind of that mid-single-digit range in the categories I highlighted, primarily our commercial banking categories, is really where we expect to see growth. The nuance quarter-on-quarter is really going to be that payoff number and our ability to accurately predict that. So hopefully, that answers your question.

Brendan Nosal, Analyst

Yes, yes. That's helpful. Switching gears here to net interest income, but a bit more of a conceptual question. You folks have been outperforming your quarterly NII guide pretty consistently for the past, I would say, 2 years or so, despite the short-term part of the curve coming down and your asset sensitivity. Is there a point at which you gain a little more comfort with how your balance sheet is responding to this environment? Do you get a little more bullish with the NII outlook that you're giving?

Thomas J. Bell, CFO

That's a good question. I think Alberto touched on it with the loan payoffs. I mean, I think loan payoffs were probably lower overall for the year than expected. So we benefited from some NII related to that. We continue to hear that payoffs will probably be a little bit higher. So that's where we provide some caution. But generally speaking, I think we've done a really good job on deposit pricing. We still need to grow more deposits. We had some fourth-quarter noise because of the $10 billion, but we continue to focus on growing core deposits first and foremost and then sprinkling in some other deposits to help support the balance sheet. We're continuing to grow NII. I think it's grown meaningfully. We've done well on the rate-down scenarios that have happened, that we've been able to have stable and growing NII. At some point, you will run out of room to continue to drop deposit costs meaningfully. And you still have to be mindful of the competition and the other banks that are growing. I think our numbers are really strong still. We are really proud of the results we've had. But it really is a function of loan growth and low-cost deposits, and we have seasonality that happens. A lot of our deposits that we saw leave in the fourth quarter, we have seen a recovery on some of that. We will benefit from that as well. Furthermore, we will see how the payment scheme does, and the benefits we get from that will give us a chance to say guidance could be better.

Roberto Herencia, Chairman & CEO

Yes. I would add to that.

Thomas J. Bell, CFO

Those are a couple of thoughts.

Alberto Paracchini, President

Just to add a bit more on the deposit pricing thing. We've been outperforming our internal models as it pertains to it. So you're probably questioning what are you guys doing, and why is that? I think analytically, we're getting a little better at being able to segment our portfolio more granularly, allowing us to make more precise pricing decisions in different segments of the portfolio. That's resulted in some of the outperformance you’re seeing. We saw it in terms of how quickly we've been able to reprice liabilities with the changes in the fourth quarter. Just keep in mind that ultimately, we will exhaust that, and that has limits. It will catch up, but that's something to keep in mind. We’ve been performing better than what we thought internally we could do, which has been positive overall.

Brendan Nosal, Analyst

Yes. That's super helpful. I'm going to sneak 1 more in here. Just on the SBA business. The gains on sale have been compressing for a couple of years now. Is there a point at which the risk-adjusted return that you're getting for the overall business, including lending plus gains, isn't up to where you want it to be? And how far are we from that point today?

Thomas J. Bell, CFO

I still think, Brendan, we're pretty far from that. Also, when you look at the compression and the gain on sale margin, a lot of that has to do with the mix. Anytime that you have a higher proportion of loans that are longer tenor loans, that mix drives that. Certainly, to a degree, you have other types of government-guaranteed loans like a USDA loan here or there, that also impacts the gain on sale margin. To answer your question on the big picture side of it, I think you would have to see materially more compression for it to get to a point where you start to rethink whether, on a risk-adjusted basis, it’s still attractive.

Operator, Operator

Our next question comes from Terry McEvoy from Stephens.

Terence McEvoy, Analyst

Maybe just circling back to the commercial payments team. Are these clients or customers, are they fintech companies? And if so, could you talk about the due diligence you're doing there? Are they more traditional payments to your commercial customers? And Alberto, what are some medium-term goals and objectives that we can track over the next couple of years to track the progress?

Alberto Paracchini, President

Yes, good question, Terry. So I think on that commercial payments business, I would say so far, think of payroll processing companies. Not necessarily small commercial customers, but payroll processors that provide payroll services. As part of those services, we provide the ability to originate and process payroll payments for their client base. That’s an example. Some of the clients we've onboarded have been in that vertical. We also want to look for opportunities beyond that in terms of companies that would need to have a payment element to their business, it could be embedded finance or a company trying to embed payments into their product offering to their end clients. That's certainly something we could entertain, both through access to traditional payment rails and through supporting their issuing of cards or acquiring card transactions. This gives you a flavor of the capabilities of the team that we have and the business that we are going after. As far as metrics going forward, we'll keep you updated. We're off to a good start. I would tell you it's been deliberate. We launched the business in April of last year. The team came on board fully a year earlier. This has not been a quick build. We prioritized having processes, procedures, policies, and infrastructure to support the clients we want to do business with. We're not taking a shotgun approach; we're not trying to onboard 10 or 15 customers a year. We're aiming for 3 or 4, and onboarding takes 6 to 9 months for reasons regarding compliance processes, procedures, and policies. Hopefully, that gives you some color on that business.

Terence McEvoy, Analyst

Yes, that's great. And then maybe just one quick last one. Did the government shutdown impact the SBA business in Q4? It didn't look like it from a revenue standpoint. Did anything get pushed into the first quarter? I know Tom said Q1 is going to be down a bit, but just wondering there.

Alberto Paracchini, President

It always has a little bit of an impact, Terry, but I think we would tell you it was immaterial.

Operator, Operator

Our next question comes from Brian Martin from Janney Montgomery Scott.

Brian Martin, Analyst

I think someone mentioned the swap income and suggested that there may be more focus on fee income this year. You've already touched on the SBA. I’m curious about our current run rate, which is around $16 million. Is that a sustainable level? Additionally, where should we be looking to enhance that run rate as we approach 2026?

Alberto Paracchini, President

I think it's a good level. We want to see that absolute number go up. The answer is yes. A couple of areas to look at: Tom mentioned swaps and derivatives. We want to continue to do as much as we can there. That’s a bit of a rate-sensitive dynamic, but we want to take advantage of those situations. Second would be the commercial payments business, which generates fee income through treasury management fees and the like. Our wealth management business, while being a small part of our business today, grew nicely this year. We're getting closer to eclipsing $1 billion in assets under management, which is a milestone for that business. Hopefully, over time, that business begins to contribute a bit more. Then obviously, you have the gain on sale business from our SBA government-guaranteed lending.

Brian Martin, Analyst

Got you. Okay. That's helpful. And I guess maybe one for Tom. Just given some of the noise, I think you talked about at year-end managing the balance sheet to the $10 billion level. Can you help us just maybe give a guidepost on the average earning assets in Q1? Given the end of period, fourth quarter was a bit lower than the average for the quarter, but knowing your commentary about kind of buying back some here in the first quarter, what landing spot or range do you think about the earning asset base for Q1?

Thomas J. Bell, CFO

I think kind of in that $150 million to $200 million, Brian. We had a number of payoffs. The payoffs kind of came early in the quarter, and the loan growth came towards the end. I think that plus the fact that we had about $100 million of securities that we had cleaned up for the portfolio a little bit. I would call it $150 million to $200 million in more earning assets, but still below $10 billion in total assets for the first quarter.

Brian Martin, Analyst

Yes. So the average in the fourth quarter was $9.2 billion, but the period end was closer to $9 billion, maybe. So perhaps thinking about a $9.2 billion level is a decent way to think about Q1 as a landing spot broadly.

Thomas J. Bell, CFO

I think so; that sounds right.

Alberto Paracchini, President

No, I was going to say, Brian, just I commented on it, and Tom commented on it as well. To be clear, towards the end of the year, we wanted to ensure that we did not go over $10 billion. The comments related to balance sheet management were attributed to that. We achieved that, and we don't have that constraint going forward. So you will not see management activity to keep us below a certain level in terms of assets.

Brian Martin, Analyst

Yes. No, I appreciate that, Alberto. That's kind of what I figured. I just want to make sure I have the right starting point given all the noise, which was just the management function. So thank you for that commentary. Maybe just one or two others. Just on the credit quality front, any changes in the criticized or classified levels from third to fourth quarter when we see the filings come out?

Alberto Paracchini, President

No significant changes; just variations over time. We will be quick to act if we identify issues, even if it involves criticism. We always have a perspective when we do this. We have a strategy in place. Where is the credit? What is the path that allows us to forecast the potential for recovery? We will respond swiftly if we lack confidence. However, I would emphasize that it is just variations over time.

Brian Martin, Analyst

Okay. The last question from me is regarding the net interest income dollars. When considering the margin percentage, does it seem reasonable that with the current outlook for rates this year, possibly having two rate cuts and less volatility compared to last year, the core margin could show a bit more stability this year when excluding the accretion? Or should we not view it that way?

Alberto Paracchini, President

Yes, it's going to be stable, Brian. I don't like discussing margins, but I believe it will remain stable. It has seen growth, but I’m not sure we can expect that to continue. However, if we can maintain the current margin throughout the year, I think we would be quite satisfied.

Brian Martin, Analyst

Yes. I apologize for asking the question. I know it's a bigger financial picture question with the rate environment. So I appreciate the color. And thank you for the questions, and congrats on a great year.

Alberto Paracchini, President

Yes. Thank you, Brian. We appreciate it.

Operator, Operator

Thank you very much. We currently have no further questions. So I'd just like to hand back to Alberto Paracchini for any further remarks.

Alberto Paracchini, President

Great, Carli. So to everyone on the call, thank you for joining us today. We appreciate your interest in Byline, and we look forward to talking to you again next quarter. Thank you very much.

Operator, Operator

As we conclude today's call, we'd like to thank everyone for joining. You may now disconnect your lines.