Byline Bancorp (BY)

Regional banking company Byline Bancorp (NYSE:BY) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 13.6% year on year to $115.7 million. Its non-GAAP profit of $0.83 per share was 15.3% above analysts’ consensus estimates.

Company Overview

Ranking as the fifth most active Small Business Administration lender in the country, Byline Bancorp (NYSE:BY) is a Chicago-based bank that provides banking services to small and medium-sized businesses, commercial real estate developers, and consumers.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

Byline Bancorp competes with other regional banks operating in the Chicago metropolitan area and Midwest region, including First Midwest Bancorp (now part of Old National Bancorp, NASDAQ:ONB), Wintrust Financial (NASDAQ:WTFC), and MB Financial (now part of Fifth Third Bancorp, NASDAQ:FITB), as well as larger national banks with significant regional presence.

Two primary revenue streams drive bank earnings. While net interest income, which is earned by charging higher rates on loans than paid on deposits, forms the foundation, fee-based services across banking, credit, wealth management, and trading operations provide additional income. Over the last five years, Byline Bancorp grew its revenue at an impressive 9.8% compounded annual growth rate. Its growth beat the average banking company and shows its offerings resonate with customers, a helpful starting point for our analysis.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. Byline Bancorp’s annualized revenue growth of 7.7% over the last two years is below its five-year trend, but we still think the results suggest healthy demand. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Byline Bancorp reported year-on-year revenue growth of 13.6%, and its $115.7 million of revenue exceeded Wall Street’s estimates by 4.5%.

Net interest income made up 82.6% of the company’s total revenue during the last five years, meaning Byline Bancorp barely relies on non-interest income to drive its overall growth.

Our experience and research show the market cares primarily about a bank’s net interest income growth as non-interest income is considered a lower-quality and non-recurring revenue source.

Topline growth is certainly important, but the overall profitability of this growth matters for the bottom line. For banks, we look at efficiency ratio, which is non-interest expense (salaries, rent, IT, marketing, excluding interest paid out to depositors) as a percentage of total revenue.

Markets understand that a bank’s expense base depends on its revenue mix and what mostly drives share price performance is the change in this ratio, rather than its absolute value. It’s somewhat counterintuitive, but a lower efficiency ratio is better.

Over the last five years, Byline Bancorp’s efficiency ratio has swelled by 6.9 percentage points, going from 50.8% to 50.5%. Said differently, the company’s expenses have grown at a slower rate than revenue, which typically signals prudent management.

Byline Bancorp’s efficiency ratio came in at 50.3% this quarter, beating analysts’ expectations by 101.3 basis points (100 basis points = 1 percentage point). This result was 1.3 percentage points better than the same quarter last year.

For the next 12 months, Wall Street expects Byline Bancorp to become less profitable as it anticipates an efficiency ratio of 52.3%.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Byline Bancorp’s EPS grew at an astounding 21.8% compounded annual growth rate over the last five years, higher than its 9.8% annualized revenue growth. However, we take this with a grain of salt because its efficiency ratio didn’t improve and it didn’t repurchase its shares, meaning the delta came from factors we consider non-core or less sustainable over the long term.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Byline Bancorp, its two-year annual EPS growth of 2.3% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.

In Q3, Byline Bancorp reported adjusted EPS of $0.83, up from $0.70 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Byline Bancorp’s full-year EPS of $2.92 to shrink by 3.4%. This is unusual as its revenue and operating margin are anticipated to increase, signaling the fall likely stems from "below-the-line" items such as taxes.

Banks operate as balance sheet businesses, with profits generated through borrowing and lending activities. Valuations reflect this reality, emphasizing balance sheet strength and long-term book value compounding ability.

When analyzing banks, tangible book value per share (TBVPS) takes precedence over many other metrics. This measure isolates genuine per-share value by removing intangible assets of debatable liquidation worth. Traditional metrics like EPS are helpful but face distortion from M&A activity and loan loss accounting rules.

Byline Bancorp’s TBVPS grew at an impressive 7.4% annual clip over the last five years. TBVPS growth has also accelerated recently, growing by 17.5% annually over the last two years from $16.35 to $22.58 per share.

Over the next 12 months, Consensus estimates call for Byline Bancorp’s TBVPS to grow by 10.2% to $24.88, solid growth rate.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, Byline Bancorp has averaged a Tier 1 capital ratio of 11.3%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity, or ROE, tells us how much profit a company generates for each dollar of shareholder equity, a key funding source for banks. Over a long period, banks with high ROE tend to compound shareholder wealth faster through retained earnings, buybacks, and dividends.

Over the last five years, Byline Bancorp has averaged an ROE of 11.3%, impressive for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired. This shows Byline Bancorp has a strong competitive moat.

We enjoyed seeing Byline Bancorp beat analysts’ revenue expectations this quarter. We were also glad its net interest income outperformed Wall Street’s estimates. Zooming out, we think this quarter featured some important positives. The stock remained flat at $26.65 immediately after reporting.

Updated: December 4, 2025 at 11:35 PM EST

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

Byline Bancorp doesn’t top our investment wishlist, but we understand that it’s not a bad business. Although its revenue growth was mediocre over the last five years and analysts expect growth to slow over the next 12 months, its astounding EPS growth over the last five years shows its profits are trickling down to shareholders. Tread carefully with this one, however, as its projected EPS for the next year is lacking.

Byline Bancorp’s P/B ratio based on the next 12 months is 1.1x. This valuation multiple is fair, but we don’t have much faith in the company. We're fairly confident there are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $32.60 on the company (compared to the current share price of $29.21).