BY - Byline Bancorp Inc. Reports Fourth Quarter 2017 Financial Results

Byline Bancorp, Inc. (the “Company”)(NYSE: BY), the parent company of Byline Bank (the “Bank”), today reported net loss of $766,000, or $0.03 per diluted share, for the fourth quarter of 2017, compared with net income of $9.8 million, or $0.32 per diluted share, for the third quarter of 2017, and net income of $63.9 million, or $2.62 per diluted share, for the fourth quarter of 2016. Fourth quarter 2017 financial results include $7.2 million, or $0.24 per diluted share, in expense related to the reduction in the value of the Company’s net deferred tax assets as a result of the decrease in the federal corporate tax rate and $1.3 million, or $0.04 per diluted share, in merger-related expense. Excluding these significant items, adjusted earnings were $7.3 million, or $0.24 per diluted share, for the fourth quarter of 2017.

“Although the fourth quarter of 2017 included several significant items related to the tax law changes and merger-related expenses, we continued to see positive momentum in our new business development activity,” said Alberto J. Paracchini, President and Chief Executive Officer of Byline Bancorp, Inc. “Our total loans and leases increased at a 10.9% annualized rate in the quarter, driven by strong growth in our commercial real estate and commercial and industrial portfolios. Our Small Business Capital operations also had a strong quarter, with $132.3 million in closed loan commitments and more than $9.0 million net gain on the sale of loans.

“We remain focused on executing our strategy of pursuing disciplined organic growth in 2018. Our pending acquisition of First Evanston Bancorp, Inc. will enable us to enter new markets in the greater Chicago metropolitan area, provide us with increased scale and allow us the opportunity to add a productive team of experienced commercial, retail and wealth management professionals. We are highly focused on completing the First Evanston acquisition and providing a smooth transition for our new customers and colleagues,” said Mr. Paracchini.

STATEMENTS OF OPERATIONS

Net Interest Income

The following table presents net interest income for the periods indicated:

The following table presents the quarter-to-date schedule of average interest-earning assets and average interest-bearing liabilities for the periods indicated:

Net interest income for the fourth quarter of 2017 was $32.2 million, an increase of $739,000 from $31.4 million for the third quarter of 2017.

The increase in net interest income was primarily due to:

• An increase of $963,000 in interest and fees on loans and leases, primarily due to the growth in the originated loan and lease portfolio and the increase in average yield on loans and leases to 5.66% for the fourth quarter of 2017 compared to 5.60% for the third quarter of 2017; and
• A decrease of $92,000 in interest expense on other borrowings, primarily due to the repayment of the outstanding balance of $16.2 million under the Company’s line of credit during the third quarter of 2017.

Partially offset by:

• An increase of $159,000 in interest expense on Federal Home Loan Bank advances, primarily due to an increase in advances outstanding during the quarter; and
• An increase of $106,000 in interest expense on deposits, primarily due to higher rates on money market accounts and time deposits.

Net interest margin for the fourth quarter of 2017 was 4.26%, an increase of 8 basis points from the third quarter of 2017. The net interest margin increase was primarily driven by the increased loan and lease volume and yields during the quarter. Total net loan accretion on acquired loans contributed 30 basis points to the net interest margin for the fourth quarter of 2017 and 29 basis points for the third quarter of 2017. Net interest margin excluding loan accretion expanded 7 basis points to 3.96% during the fourth quarter.

The cost of average total deposits was 0.35%, an increase of two basis points from the third quarter of 2017 due to slightly higher rates on interest bearing deposits, offset by growth in quarter-to-date average non-interest bearing demand deposits of $19.5 million.

Provision for Loan and Lease Losses

The provision for loan and lease losses was $3.3 million for the fourth quarter of 2017, a decrease of $553,000 compared to $3.9 million for the third quarter of 2017. The fourth quarter provision included allocations of $1.9 million for acquired non-impaired loans, $806,000 for originated loans and leases and a $625,000 provision for acquired impaired loans. The lower provision for the fourth quarter of 2017 was mainly due to lower historical loss rates offset by additional growth in the loan and lease portfolio.

Non-interest Income

The following table presents the components of non-interest income for the periods indicated:

Non-interest income for the fourth quarter of 2017 was $12.6 million, an increase of $721,000 from $11.9 million for the third quarter of 2017, primarily due to:

• An increase of $1.5 million in net gains on sales of loans; and
• A decrease of $255,000 in servicing fees, primarily due to the change in fair value of the servicing asset as a result of increases in prepayment speeds on government guaranteed loans.

During the fourth quarter of 2017, the Company sold $87.9 million of government guaranteed loans compared to $71.8 million during the third quarter of 2017, contributing to the increase in net gains on sale of loans for the quarter.

Non-interest Expense

The following table presents the components of non-interest expense for the periods indicated:

Non-interest expense for the fourth quarter of 2017 was $30.4 million, a decrease of $707,000 from $31.1 million for the third quarter of 2017.

The decrease in total non-interest expense was primarily due to:

• A decrease of $2.0 million in other non-interest expense, primarily due to a $951,000 decrease in impairment charges on assets held for sale; and
• A decrease of $995,000 in net loss recognized on other real estate owned and other related expenses, primarily due to increased gains on sales of assets during the quarter and lower other real estate owned expenses; and
• A $409,000 decrease in provision for unfunded commitments, primarily due to the funding of outstanding commitments.

Partially offset by:

• An increase of $1.1 million in legal, audit and other professional fees, primarily due to professional services related to the First Evanston Bancorp, Inc. acquisition announced during the fourth quarter of 2017; and
• An increase of $795,000 in salaries and employee benefits, primarily due to higher commissions and additional salary and benefit expenses for new hires; and
• An increase of $252,000 in occupancy expense primarily due to a reduction in real estate tax expenses during the third quarter.

The Company’s efficiency ratio was 66.06% for the fourth quarter of 2017, compared with 69.92% for the third quarter of 2017.

INCOME TAXES

The Company recorded income tax expense of $11.9 million during the fourth quarter of 2017 compared to a benefit of $1.4 million during the third quarter of 2017, an increase of $13.2 million. On December 22, 2017, President Donald Trump signed into law “H.R. 1”, commonly known as the “Tax Cuts and Jobs Act”. Among other items, the law reduced the federal corporate income tax rate to 21% effective January 1, 2018. As a result of the rate change, the Company’s net deferred tax assets were required to be revalued during the period in which the new legislation was enacted, and recorded net income tax expense of $7.2 million, or $0.24 per diluted share, during the fourth quarter as a result of this change. As a result of the new 21% corporate federal tax rate, the Company expects its effective tax rate for 2018 to be approximately 27% to 29%.

Also contributing to the increase in income tax expense in the current quarter, the Company recorded a state income tax benefit of $4.6 million, or $0.16 per diluted share, during the quarter ended September 30, 2017, as a result of increased value to the deferred tax asset related to the Company’s Illinois net loss deduction. As part of a budget package passed by the Legislature of the State of Illinois, the Illinois corporate income tax rate increased from 5.25% to 7.00% effective July 1, 2017.

STATEMENTS OF FINANCIAL CONDITION

Total assets were $3.4 billion at December 31, 2017, an increase of $60.7 million from $3.3 billion at September 30, 2017, and an increase of $70.3 million compared to $3.3 billion at December 31, 2016.

The increase was primarily due to:

• An increase in loans and leases of $61.0 million from $2.2 billion at September 30, 2017 to $2.3 billion at December 31, 2017; and
• An increase in due from counterparty of $18.7 million due to an increase in loans sold and not settled at December 31, 2017.

Partially offset by:

• A decrease in net deferred tax assets of $10.4 million, to $50.0 million, primarily due to the revaluing of the asset during the fourth quarter of 2017.

The following table shows our allocation of the originated, acquired impaired and acquired non-impaired loans and leases at the dates indicated:

ASSET QUALITY

Non-Performing Assets

The following table sets forth the amounts of non-performing loans and leases, non-performing assets, and other real estate owned at the dates indicated:

Variances in non-performing assets:

• Non-performing loans and leases were $16.8 million at December 31, 2017 and September 30, 2017; and
• Other real estate owned was $10.6 million at December 31, 2017, a decrease of $3.2 million from $13.9 million at September 30, 2017.

Allowance for Loan and Lease Losses

The following table presents the balance and activity within the allowance for loan and lease losses for the periods indicated:

The allowance for loan and lease losses as a percentage of total loans and leases held for investment increased from 0.72% at September 30, 2017 to 0.73% at December 31, 2017.

Net Charge-Offs

Net charge-offs during the fourth quarter of 2017 were $2.6 million, or 0.46% of average loans and leases, on an annualized basis, an increase of $732,000 compared to $1.9 million, or 0.34%, during the third quarter of 2017, and 0.31% for the year ended December 31, 2017.

Net charge-offs for the fourth quarter of 2017 included $2.1 million in the non-guaranteed portion of SBA loans and $84,000 for commercial banking while net charge-offs for the third quarter of 2017 included $591,000 in the non-guaranteed portion of SBA loans and $846,000 for commercial banking.

Deposits and Other Liabilities

The following table presents the composition of deposits at the dates indicated:

Total deposits were $2.4 billion at December 31, 2017, a decrease of $77.6 million compared to the previous quarter and a decrease of $47.1 million compared to December 31, 2016.

The decrease in the current quarter was primarily due to:

• A decrease in money market deposits of $68.1 million, from $418.0 million at September 30, 2017 to $349.9 million at December 31, 2017, primarily due to variability in a public deposit relationship during the fourth quarter 2017; and
• A decrease in time deposits of $17.7 million, from $726.5 million at September 30, 2017 to $708.8 million at December 31, 2017. The decrease in balances was driven by the non-renewal of prior promotional rate time deposits.

Partially offset by:

• An increase in non-interest bearing demand deposits of $7.2 million, from $753.7 million at September 30, 2017 to $760.9 million at December 31, 2017; and
• An increase in savings deposits of $1.7 million, from $435.5 million at September 30, 2017 to $437.2 million at December 31, 2017.

Total borrowings and other liabilities were $464.2 million at December 31, 2017, an increase of $139.2 million from $325.0 million at September 30, 2017, and an increase of $41.7 million from $422.8 million at December 31, 2016.

The increase was primarily due to:

• An increase in Federal Home Loan Bank advances of $126.9 million, from $234.6 million at September 30, 2017 to $361.5 million at December 31, 2017, primarily due to the Bank’s ongoing funding needs as a result of increased loan demand; and
• An increase in accrued expenses and other liabilities of $11.6 million, from $30.9 million at September 30, 2017 to $42.6 million at December 31, 2017, primarily due to loan purchases not yet settled of $9.8 million during the fourth quarter of 2017.

Stockholders’ Equity

Total stockholders’ equity was $458.6 million at December 31, 2017, a decrease of $1.0 million from $459.5 million at September 30, 2017, and an increase of $75.9 million from $382.7 million at December 31, 2016.

The following table presents the actual regulatory capital dollar amounts and ratios of the Company and Byline Bank as of December 31, 2017:

Capital ratios for the period presented are based on the Basel III regulatory capital framework as applied to the Company’s current business and operations, and are subject to, among other things, completion and filing of the Company’s regulatory reports and ongoing regulatory review and implementation guidance.

Conference Call, Webcast and Slide Presentation

The Company will host a conference call and webcast at 9:00 a.m. Central Time (10:00 a.m. Eastern Time) on Friday, January 26, 2018 to discuss its quarterly financial results. Analysts and investors may participate in the question-and-answer session. The call can be accessed via telephone at (888) 317-6016. A recorded replay can be accessed through February 9, 2018 by dialing (877) 344-7529; passcode: 10115834.

A slide presentation relating to the fourth quarter 2017 results will be accessible prior to the scheduled conference call. The slide presentation and webcast of the conference call can be accessed on the News and Events page of the Company’s investor relations website at www.bylinebancorp.com.

About Byline Bancorp, Inc.

Headquartered in Chicago, Byline Bancorp, Inc. is the parent company for Byline Bank, a full service commercial bank serving small- and medium-sized businesses, financial sponsors, and consumers. Byline Bank has approximately $3.4 billion in assets and operates more than 50 full service branch locations throughout the Chicago and Milwaukee metropolitan areas. Byline Bank offers a broad range of commercial and retail banking products and services including small ticket equipment leasing solutions and is one of the top 10 Small Business Administration lenders in the United States.

Non-GAAP Financial Measures

This release contains certain financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These measures include non-interest income to total revenues, pre-tax pre-provision return on average assets, tangible book value per share and tangible common equity to tangible assets. Management believes that these non-GAAP financial measures provide useful information to management and investors that is supplementary to the Company’s financial condition, results of operations and cash flows computed in accordance with GAAP; however, management acknowledges that our non-GAAP financial measures have a number of limitations. As such, these disclosures should not be viewed as a substitute for results determined in accordance with GAAP financial measures that we and other companies use. Management also uses these measures for peer comparison. See “Reconciliation of Non-GAAP Financial Measures” in the financial schedules included in this press release for a reconciliation of the non-GAAP financial measures to the comparable GAAP financial measures.

Adjusted net income excludes significant items, which include the net deferred tax asset valuation reversal, incremental income tax benefit related to Illinois corporate income tax rate increase, incremental income tax expense related to federal corporate income tax reduction, impairment charges on assets held for sale, and merger related expense, adjusted for applicable income tax. Management believes the significant items are not indicative of or useful to measure the Company’s operating performance on an ongoing basis.

Non-interest income to total revenues is non-interest income divided by net interest income plus non-interest income. Management believes that it is standard practice in the industry to present non-interest income as a percentage of total revenue. Accordingly, management believes providing these measures may be useful for peer comparison.

Pre-tax pre-provision return on average assets is pre-tax income plus the provision for loan and lease losses, divided by average assets. Management believes this metric is important due to the tax benefit resulting from the reversal of the net deferred tax asset valuation allowance, the decrease in the federal corporate income tax rate, and the increase in the Illinois state income tax rate. The ratio demonstrates profitability excluding the tax provision or benefit and excludes the provision for loan and lease losses.

Tangible book value per share is calculated as tangible common equity, which is stockholders’ equity reduced by preferred stock and goodwill and other intangible assets, divided by total shares of common stock outstanding. Management believes this metric is important due to the relative changes in the book value per share exclusive of changes in intangible assets.

Tangible common equity to tangible assets is calculated as tangible common equity divided by tangible assets, which is total assets reduced by goodwill and other intangible assets. Management believes this measure is important to investors and analysts interested in relative changes in the ratio of total stockholders’ equity to total assets, each exclusive of changes in intangible assets.

Forward-Looking Statements

This communication contains forward-looking statements within the meaning of the U.S. federal securities laws. Forward-looking statements include, without limitation, statements concerning plans, estimates, calculations, forecasts and projections with respect to the anticipated future performance of the Company. These statements are often, but not always, made through the use of words or phrases such as “may”, “might”, “should”, “could”, “predict”, “potential”, “believe”, “expect”, “continue”, “will”, “anticipate”, “seek”, “estimate”, “intend”, “plan”, “projection”, “would”, “annualized”, “target” and “outlook”, or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. Forward-looking statements reflect various assumptions and involve elements of subjective judgement and analysis, which may or may not prove to be correct, and which are subject to uncertainties and contingencies outside the control of Byline and its respective affiliates, directors, employees and other representatives, which could cause actual results to differ materially from those presented in this communication. No representations, warranties or guarantees are or will be made by Byline as to the reliability, accuracy or completeness of any forward-looking statements contained in this communication or that such forward-looking statements are or will remain based on reasonable assumptions. You should not place undue reliance on any forward-looking statements contained in this communication. Forward-looking statements speak only as of the date they are made, and we assume no obligation to update any of these statements in light of new information, future events or otherwise unless required under the federal securities laws.

Additional Information

The information included herein does not constitute an offer to sell or a solicitation of an offer to buy any securities or a solicitation of any vote or approval. Byline will file a registration statement on Form S-4 with the SEC in connection with its proposed acquisition of First Evanston Bancorp, Inc. (“First Evanston”), and First Evanston’s wholly-owned subsidiary, First Bank & Trust. The registration statement will include a joint proxy statement of Byline and First Evanston, which also will constitute a prospectus of Byline, that will be sent to the stockholders of Byline and the shareholders of First Evanston. INVESTORS, STOCKHOLDERS OF BYLINE AND SHAREHOLDERS OF FIRST EVANSTON ARE ADVISED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS WHEN IT BECOMES AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION ABOUT BYLINE, FIRST EVANSTON AND THE PROPOSED TRANSACTION. When filed, the joint proxy statement/prospectus and other documents relating to the merger filed by Byline with the SEC can be obtained free of charge from the SEC’s website at www.sec.gov. These documents also can be obtained free of charge by accessing Byline’s website at www.bylinebancorp.com under the tab “About Us-Investor Relations.” Alternatively, these documents, when available, can be obtained free of charge from Byline upon written request to Byline Bancorp, Inc., Attn: Corporate Secretary, 180 North LaSalle Street, Suite 300, Chicago, Illinois 60601, 60018 or by calling (773) 244-7000, or from First Evanston upon written request to First Evanston Bancorp, Inc., Attn: Corporate Secretary, 820 Church Street, Evanston, Illinois 60201 or by calling (847) 733-7400.

Participants in this Transaction

Byline, First Evanston, their respective directors and executive officers and certain of their other members of management and employees may be deemed to be participants in the solicitation of proxies from Byline’s stockholders and First Evanston’s shareholders in connection with the proposed transaction. Information about the directors and executive officers of Byline may be found in the prospectus of Byline relating to its initial public offering of common stock filed with the SEC on July 3, 2017, a copy of which can be obtained free of charge from Byline or from the SEC’s website as indicated above. In addition, information about the directors and executive officers of Byline and First Evanston and other persons who may be deemed participants in the transaction will be included in the joint proxy statement/prospectus and other relevant materials when filed with the SEC.

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