Byline Bancorp (BY)

Regional banking company Byline Bancorp (NYSE:BY) reported Q4 CY2025 results exceeding the market’s revenue expectations, with sales up 11.8% year on year to $117 million. Its non-GAAP profit of $0.76 per share was 6% 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.

In general, banks make money from two primary sources. The first is net interest income, which is interest earned on loans, mortgages, and investments in securities minus interest paid out on deposits. The second source is non-interest income, which can come from bank account, credit card, wealth management, investing banking, and trading fees. Luckily, Byline Bancorp’s revenue grew at a decent 10% compounded annual growth rate over the last five years. Its growth was slightly above the average banking company and shows its offerings resonate with customers.

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 recent performance shows its demand has slowed as its annualized revenue growth of 7.4% over the last two years was below its five-year trend. 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 11.8%, and its $117 million of revenue exceeded Wall Street’s estimates by 4.6%.

Net interest income made up 83.1% 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.

Net interest income commands greater market attention due to its reliability and consistency, whereas non-interest income is often seen as lower-quality revenue that lacks the same dependable characteristics.

The underlying profitability of top-line growth determines the actual bottom-line impact. Banking institutions measure this dynamic using the efficiency ratio, which is calculated by dividing non-interest expenses like personnel, facilities, technology, and marketing by total revenue.

Investors place greater emphasis on efficiency ratio movements than absolute values, understanding that expense structures reflect revenue mix variations. Lower ratios represent better operational performance since they show banks generating more revenue per dollar of expense.

Over the last five years, Byline Bancorp’s efficiency ratio has swelled by 7 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 254.7 basis points (100 basis points = 1 percentage point).

For the next 12 months, Wall Street expects Byline Bancorp to become less profitable as it anticipates an efficiency ratio of 52.2%.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Byline Bancorp’s EPS grew at an astounding 23.3% compounded annual growth rate over the last five years, higher than its 10% 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 2.4% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q4, Byline Bancorp reported adjusted EPS of $0.76, up from $0.69 in the same quarter last year. This print beat analysts’ estimates by 6%. Over the next 12 months, Wall Street expects Byline Bancorp’s full-year EPS of $2.99 to shrink by 1.4%. 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 profit by intermediating between depositors and borrowers, making them fundamentally balance sheet-driven enterprises. Market participants emphasize balance sheet quality and sustained book value growth when evaluating these institutions.

This is why we consider tangible book value per share (TBVPS) the most important metric to track for banks. TBVPS represents the real, liquid net worth per share of a bank, excluding intangible assets that have debatable value upon liquidation. EPS can become murky due to acquisition impacts or accounting flexibility around loan provisions, and TBVPS resists financial engineering manipulation.

Byline Bancorp’s TBVPS grew at an impressive 7.8% annual clip over the last five years. TBVPS growth has also accelerated recently, growing by 14.2% annually over the last two years from $17.98 to $23.44 per share.

Over the next 12 months, Consensus estimates call for Byline Bancorp’s TBVPS to grow by 10.6% to $25.92, mediocre 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 11.6%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity, or ROE, quantifies bank profitability relative to shareholder equity - an essential capital source for these institutions. Over extended periods, superior ROE performance drives faster shareholder wealth compounding through reinvestment, share repurchases, and dividend growth.

Over the last five years, Byline Bancorp has averaged an ROE of 11.6%, respectable for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired.

We enjoyed seeing Byline Bancorp beat analysts’ revenue expectations this quarter. We were also glad its net interest income outperformed Wall Street’s estimates. Overall, we think this was a decent quarter with some key metrics above expectations. The stock remained flat at $31.70 immediately following the results.

Updated: January 22, 2026 at 11:09 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’s business quality ultimately falls short of our standards. Although its revenue growth was decent over the last five years, it’s expected to deteriorate over the next 12 months and its estimated net interest income for the next 12 months are weak. And while the company’s astounding EPS growth over the last five years shows its profits are trickling down to shareholders, the downside is its projected EPS for the next year is lacking.

Byline Bancorp’s P/B ratio based on the next 12 months is 1x. This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're fairly confident there are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $33.80 on the company (compared to the current share price of $31.70).