0001564590-18-013106.txt : 20180511 0001564590-18-013106.hdr.sgml : 20180511 20180510212457 ACCESSION NUMBER: 0001564590-18-013106 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 134 CONFORMED PERIOD OF REPORT: 20180331 FILED AS OF DATE: 20180511 DATE AS OF CHANGE: 20180510 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BYLINE BANCORP, INC. CENTRAL INDEX KEY: 0001702750 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 363012593 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-38139 FILM NUMBER: 18824763 BUSINESS ADDRESS: BUSINESS PHONE: 773-244-7000 MAIL ADDRESS: STREET 1: 180 NORTH LASALLE STREET, SUITE 300 CITY: CHICAGO STATE: IL ZIP: 60601 10-Q 1 by-10q_20180331.htm 3/31/2018 SEC FORM 10-Q by-10q_20180331.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2018

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______to ______

Commission File Number 001-38139

 

 

Byline Bancorp, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Delaware

 

36-3012593

(State or Other Jurisdiction of

Incorporation or Organization)

 

(IRS Employer

Identification Number)

 

180 North LaSalle Street, Suite 300

Chicago, Illinois 60601

(Address of Principal Executive Offices)

(773) 244-7000

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

(Do not check if a smaller reporting company)

Smaller reporting company

Emerging growth company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $0.01 par value, 29,460,991 shares outstanding as of May 10, 2018

 

 

 

 


BYLINE BANCORP, INC.

FORM 10-Q

March 31, 2018

INDEX

 

 

 

 

 

Page

 

 

 

 

 

PART I.

 

FINANCIAL INFORMATION

 

3

Item 1.

 

Financial Statements. The Interim Condensed Consolidated Financial Statements of Byline Bancorp, Inc. filed as part of the report are as follows:

 

3

 

 

Consolidated Statements of Financial Condition at March 31, 2018 (unaudited) and
December 31, 2017

 

3

 

 

Consolidated Statements of Operations for the Three Months Ended March 31, 2018 and 2017 (unaudited)

 

4

 

 

Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2018 and 2017 (unaudited)

 

5

 

 

Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended
March 31, 2018 and 2017 (unaudited)

 

6

 

 

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2018 and 2017
(unaudited)

 

7

 

 

Notes to Unaudited Interim Condensed Consolidated Financial Statements

 

9

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

46

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

 

80

Item 4.

 

Controls and Procedures

 

82

 

 

 

 

 

PART II.

 

OTHER INFORMATION

 

 

Item 1.

 

Legal Proceedings

 

82

Item 1A.

 

Risk Factors

 

82

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

82

Item 3.

 

Defaults Upon Senior Securities

 

82

Item 4.

 

Mine Safety Disclosures

 

82

Item 5.

 

Other Information

 

82

Item 6.

 

Exhibits

 

83

 

 

 

2


 

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

 

 

 

(Unaudited)

 

 

 

 

 

(dollars in thousands, except share and per share data)

 

March 31, 2018

 

 

December 31, 2017

 

ASSETS

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

17,396

 

 

$

19,404

 

Interest bearing deposits with other banks

 

 

110,645

 

 

 

38,945

 

Cash and cash equivalents

 

 

128,041

 

 

 

58,349

 

Securities available-for-sale, at fair value

 

 

626,057

 

 

 

583,236

 

Securities held-to-maturity, at amortized cost (fair value

   March 31, 2018—$110,419, December 31, 2017—$117,277)

 

 

112,266

 

 

 

117,163

 

Restricted stock, at cost

 

 

17,177

 

 

 

16,343

 

Loans held for sale

 

 

8,219

 

 

 

5,212

 

Loans and leases:

 

 

 

 

 

 

 

 

Loans and leases

 

 

2,280,418

 

 

 

2,277,492

 

Allowance for loan and lease losses

 

 

(17,640

)

 

 

(16,706

)

Net loans and leases

 

 

2,262,778

 

 

 

2,260,786

 

Servicing assets, at fair value

 

 

21,615

 

 

 

21,400

 

Accrued interest receivable

 

 

6,971

 

 

 

7,670

 

Premises and equipment, net

 

 

94,014

 

 

 

95,224

 

Assets held for sale

 

 

9,030

 

 

 

9,779

 

Other real estate owned, net

 

 

10,466

 

 

 

10,626

 

Goodwill

 

 

54,562

 

 

 

54,562

 

Other intangible assets, net

 

 

15,991

 

 

 

16,756

 

Bank-owned life insurance

 

 

5,838

 

 

 

5,718

 

Deferred tax assets, net

 

 

47,371

 

 

 

47,376

 

Due from counterparty

 

 

19,987

 

 

 

39,824

 

Other assets

 

 

21,989

 

 

 

16,106

 

Total assets

 

$

3,462,372

 

 

$

3,366,130

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

Non-interest bearing demand deposits

 

$

749,892

 

 

$

760,887

 

Interest bearing deposits:

 

 

 

 

 

 

 

 

NOW, savings accounts, and money market accounts

 

 

1,018,361

 

 

 

973,685

 

Time deposits

 

 

756,294

 

 

 

708,757

 

Total deposits

 

 

2,524,547

 

 

 

2,443,329

 

Accrued interest payable

 

 

1,612

 

 

 

1,306

 

Line of credit

 

 

 

 

 

 

Federal Home Loan Bank advances

 

 

380,000

 

 

 

361,506

 

Securities sold under agreements to repurchase

 

 

27,815

 

 

 

31,187

 

Junior subordinated debentures issued to capital trusts, net

 

 

27,800

 

 

 

27,647

 

Accrued expenses and other liabilities

 

 

37,662

 

 

 

42,577

 

Total liabilities

 

 

2,999,436

 

 

 

2,907,552

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Preferred stock

 

 

10,438

 

 

 

10,438

 

Common stock, voting $0.01 par value at March 31, 2018 and December 31, 2017; 150,000,000 shares authorized at March 31, 2018 and December 31, 2017; 29,404,048 shares issued and outstanding at March 31, 2018 and 29,317,298 issued and outstanding at December 31, 2017

 

 

293

 

 

 

292

 

Additional paid-in capital

 

 

392,932

 

 

 

391,586

 

Retained earnings

 

 

68,687

 

 

 

61,349

 

Accumulated other comprehensive loss, net of tax

 

 

(9,414

)

 

 

(5,087

)

Total stockholders’ equity

 

 

462,936

 

 

 

458,578

 

Total liabilities and stockholders’ equity

 

$

3,462,372

 

 

$

3,366,130

 

 

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

3


 

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

 

 

Three Months Ended

 

 

 

March 31,

 

(dollars in thousands, except share and per share data)

 

2018

 

 

2017

 

INTEREST AND DIVIDEND INCOME

 

 

 

 

 

 

 

 

Interest and fees on loans and leases

 

$

33,654

 

 

$

28,396

 

Interest on taxable securities

 

 

4,055

 

 

 

3,790

 

Interest on tax-exempt securities

 

 

174

 

 

 

133

 

Other interest and dividend income

 

 

259

 

 

 

169

 

Total interest and dividend income

 

 

38,142

 

 

 

32,488

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

Deposits

 

 

2,498

 

 

 

1,483

 

Federal Home Loan Bank advances

 

 

1,358

 

 

 

660

 

Subordinated debentures and other borrowings

 

 

591

 

 

 

807

 

Total interest expense

 

 

4,447

 

 

 

2,950

 

Net interest income

 

 

33,695

 

 

 

29,538

 

PROVISION FOR LOAN AND LEASE LOSSES

 

 

5,115

 

 

 

1,891

 

Net interest income after provision for loan and lease losses

 

 

28,580

 

 

 

27,647

 

NON-INTEREST INCOME

 

 

 

 

 

 

 

 

Fees and service charges on deposits

 

 

1,312

 

 

 

1,219

 

Net servicing fees

 

 

563

 

 

 

919

 

ATM and interchange fees

 

 

1,218

 

 

 

1,348

 

Net gains on sales of securities available-for-sale

 

 

 

 

 

8

 

Net gains on sales of loans

 

 

7,476

 

 

 

8,082

 

Other non-interest income

 

 

859

 

 

 

732

 

Total non-interest income

 

 

11,428

 

 

 

12,308

 

NON-INTEREST EXPENSE

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

18,278

 

 

 

16,602

 

Occupancy expense, net

 

 

3,755

 

 

 

3,739

 

Equipment expense

 

 

603

 

 

 

563

 

Loan and lease related expenses

 

 

1,400

 

 

 

877

 

Legal, audit and other professional fees

 

 

1,851

 

 

 

1,671

 

Data processing

 

 

2,301

 

 

 

2,409

 

Net gain recognized on other real estate owned and other related expenses

 

 

(1

)

 

 

(570

)

Regulatory assessments

 

 

241

 

 

 

184

 

Other intangible assets amortization expense

 

 

767

 

 

 

769

 

Advertising and promotions

 

 

249

 

 

 

289

 

Telecommunications

 

 

418

 

 

 

418

 

Other non-interest expense

 

 

2,057

 

 

 

1,900

 

Total non-interest expense

 

 

31,919

 

 

 

28,851

 

INCOME BEFORE PROVISION FOR INCOME TAXES

 

 

8,089

 

 

 

11,104

 

PROVISION FOR INCOME TAXES

 

 

1,321

 

 

 

4,544

 

NET INCOME

 

 

6,768

 

 

 

6,560

 

Dividends on preferred shares

 

 

193

 

 

 

189

 

INCOME AVAILABLE TO COMMON STOCKHOLDERS

 

$

6,575

 

 

$

6,371

 

EARNINGS PER COMMON SHARE

 

 

 

 

 

 

 

 

Basic

 

$

0.22

 

 

$

0.26

 

Diluted

 

$

0.22

 

 

$

0.25

 

 

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

4


 

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

 

 

 

Three Months Ended

 

 

 

March 31,

 

(dollars in thousands)

 

2018

 

 

2017

 

Net income

 

$

6,768

 

 

$

6,560

 

Securities available-for-sale

 

 

 

 

 

 

 

 

Unrealized holding (losses) gains arising during the period

 

 

(8,852

)

 

 

1,020

 

Reclassification adjustments for net gains included in net income

 

 

 

 

 

(8

)

Tax effect

 

 

2,395

 

 

 

(626

)

Net of tax

 

 

(6,457

)

 

 

386

 

Cash flow hedges

 

 

 

 

 

 

 

 

Unrealized holding gains arising during the period

 

 

4,070

 

 

 

(83

)

Reclassification adjustments for (losses) gains included in net income

 

 

(61

)

 

 

54

 

Tax effect

 

 

(1,116

)

 

 

11

 

Net of tax

 

 

2,893

 

 

 

(18

)

Total other comprehensive income (loss)

 

 

(3,564

)

 

 

368

 

Comprehensive income

 

$

3,204

 

 

$

6,928

 

 

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

5


 

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Three Months Ended March 31, 2018 and 2017

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Accumulated Other

 

 

Total

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Paid-In

 

 

 

 

 

 

Comprehensive

 

 

Stockholders’

 

(dollars in thousands, except share data)

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Retained Earnings

 

 

Income (Loss)

 

 

Equity

 

Balance, January 1, 2017

 

 

25,441

 

 

$

25,441

 

 

 

24,616,706

 

 

$

 

 

$

313,552

 

 

$

50,933

 

 

$

(7,268

)

 

$

382,658

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,560

 

 

 

 

 

 

6,560

 

Other comprehensive income,

   net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

368

 

 

 

368

 

Cash dividends declared on

   preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(189

)

 

 

 

 

 

(189

)

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

286

 

 

 

 

 

 

 

 

 

286

 

Balance, March 31, 2017

 

 

25,441

 

 

$

25,441

 

 

 

24,616,706

 

 

$

 

 

$

313,838

 

 

$

57,304

 

 

$

(6,900

)

 

$

389,683

 

Balance, January 1, 2018

 

 

10,438

 

 

$

10,438

 

 

 

29,317,298

 

 

$

292

 

 

$

391,586

 

 

$

61,349

 

 

$

(5,087

)

 

$

458,578

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,768

 

 

 

 

 

 

6,768

 

Other comprehensive loss,

   net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,564

)

 

 

(3,564

)

Issuance of common stock upon

   exercise of stock options

 

 

 

 

 

 

 

 

86,750

 

 

 

1

 

 

 

1,004

 

 

 

 

 

 

 

 

 

1,005

 

Reclassification of certain income

   tax effects from accumulated

   other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

763

 

 

 

(763

)

 

 

 

Cash dividends declared on

   preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(193

)

 

 

 

 

 

(193

)

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

342

 

 

 

 

 

 

 

 

 

342

 

Balance, March 31, 2018

 

 

10,438

 

 

$

10,438

 

 

 

29,404,048

 

 

$

293

 

 

$

392,932

 

 

$

68,687

 

 

$

(9,414

)

 

$

462,936

 

 

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

6


 

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31, 2018 and 2017

(Unaudited)

 

 

 

 

 

 

 

 

 

March 31,

 

(dollars in thousands)

 

 

2018

 

 

2017

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

 

Net income

 

 

$

6,768

 

 

$

6,560

 

Adjustments to reconcile net income to net cash from operating activities:

 

 

 

 

 

 

 

 

 

Provision for loan and lease losses

 

 

 

5,115

 

 

 

1,891

 

Depreciation and amortization of premises and equipment

 

 

 

1,273

 

 

 

1,298

 

Net amortization of securities

 

 

 

1,009

 

 

 

1,184

 

Net gains on sales of securities available-for-sale

 

 

 

 

 

 

(8

)

Net gains on sales of assets held for sale

 

 

 

(189

)

 

 

(162

)

Net gains on sales of loans

 

 

 

(7,476

)

 

 

(8,082

)

Originations of government guaranteed loans

 

 

 

(82,125

)

 

 

(61,918

)

Proceeds from government guaranteed loans sold

 

 

 

104,604

 

 

 

70,410

 

Accretion of premiums and discounts on acquired loans, net

 

 

 

(7,258

)

 

 

(7,955

)

Net change in servicing assets

 

 

 

(215

)

 

 

(132

)

Net valuation adjustments on other real estate owned

 

 

 

81

 

 

 

276

 

Net gains on sales of other real estate owned

 

 

 

(64

)

 

 

(1,228

)

Amortization of intangible assets

 

 

 

767

 

 

 

769

 

Amortization of time deposit premium

 

 

 

(5

)

 

 

(463

)

Amortization of Federal Home Loan Bank advances premium

 

 

 

(19

)

 

 

(52

)

Accretion of junior subordinated debentures discount

 

 

 

153

 

 

 

204

 

Share-based compensation expense

 

 

 

342

 

 

 

286

 

Deferred tax provision

 

 

 

1,284

 

 

 

4,220

 

Increase in cash surrender value of bank owned life insurance

 

 

 

(120

)

 

 

(119

)

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

 

Accrued interest receivable

 

 

 

673

 

 

 

(666

)

Other assets

 

 

 

622

 

 

 

739

 

Accrued interest payable

 

 

 

306

 

 

 

(534

)

Accrued expenses and other liabilities

 

 

 

4,944

 

 

 

(1,418

)

Net cash provided by operating activities

 

 

 

30,470

 

 

 

5,100

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

 

Purchases of securities available-for-sale

 

 

 

(72,646

)

 

 

(745

)

Proceeds from maturities and calls of securities available-for-sale

 

 

 

5,430

 

 

 

1,182

 

Proceeds from paydowns of securities available-for-sale

 

 

 

14,691

 

 

 

17,718

 

Proceeds from sales of securities available-for-sale

 

 

 

 

 

 

8

 

Proceeds from paydowns of securities held-to-maturity

 

 

 

4,050

 

 

 

5,337

 

Purchases of Federal Home Loan Bank stock

 

 

 

(6,282

)

 

 

(2,610

)

Federal Home Loan Bank stock repurchases

 

 

 

5,448

 

 

 

8,100

 

Proceeds from other loans sold

 

 

 

 

 

 

9,984

 

Net change in loans and leases

 

 

 

(10,723

)

 

 

(9,412

)

Purchases of premises and equipment

 

 

 

(63

)

 

 

(797

)

Proceeds from sales of assets held for sale

 

 

 

954

 

 

 

2,752

 

Proceeds from sales of other real estate owned

 

 

 

1,187

 

 

 

5,157

 

Net cash (used in) provided by investing activities

 

 

 

(57,954

)

 

 

36,674

 

 

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

7


 

BYLINE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

Three Months Ended March 31, 2018 and 2017

(Unaudited)

 

 

 

 

 

 

 

 

 

March 31,

 

(dollars in thousands)

 

 

2018

 

 

2017

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

Net increase in deposits

 

 

$

81,223

 

 

$

85,908

 

Proceeds from Federal Home Loan Bank advances

 

 

 

1,589,900

 

 

 

825,000

 

Repayments of Federal Home Loan Bank advances

 

 

 

(1,571,387

)

 

 

(929,000

)

Repayments of line of credit

 

 

 

 

 

 

(2,500

)

Net (decrease) increase in securities sold under agreements to repurchase

 

 

 

(3,372

)

 

 

14,691

 

Dividends paid on preferred stock

 

 

 

(193

)

 

 

(189

)

Proceeds from issuance of common stock upon exercise of stock options

 

 

 

1,005

 

 

 

 

Proceeds from issuance of preferred stock

 

 

 

 

 

 

1,050

 

Net cash provided by (used in) financing activities

 

 

 

97,176

 

 

 

(5,040

)

NET INCREASE IN CASH AND CASH EQUIVALENTS

 

 

 

69,692

 

 

 

36,734

 

CASH AND CASH EQUIVALENTS, beginning of period

 

 

 

58,349

 

 

 

46,533

 

CASH AND CASH EQUIVALENTS, end of period

 

 

$

128,041

 

 

$

83,267

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

 

Cash paid during the period for interest

 

 

$

4,012

 

 

$

3,795

 

Cash payments during the period for taxes

 

 

$

63

 

 

$

832

 

SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND

   FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

 

Change in fair value of available-for-sale securities, net of tax

 

 

$

(6,457

)

 

$

386

 

Change in fair value of cash flow hedges, net of tax

 

 

$

2,893

 

 

$

(18

)

Delayed payments of mortgage-backed securities

 

 

$

726

 

 

$

372

 

Change in due to broker

 

 

$

9,838

 

 

$

(9,978

)

Transfers of loans to loans held for sale

 

 

$

 

 

$

10,061

 

Transfers of loans to other real estate owned

 

 

$

1,044

 

 

$

808

 

Transfers of land and premises to assets held for sale

 

 

$

 

 

$

1,508

 

Transfers of premises and equipment to other assets

 

 

$

 

 

$

502

 

Transfers of other assets to assets held for sale

 

 

$

16

 

 

$

 

 

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

 


8


BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

 

 

Note 1—Basis of Presentation

These unaudited interim condensed consolidated financial statements include the accounts of Byline Bancorp, Inc., a Delaware corporation (the “Company,” “we,” “us,” “our”), a bank holding company whose principal activity is the ownership and management of its Illinois state chartered subsidiary bank, Byline Bank (the “Bank”), based in Chicago, Illinois.

These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission (“SEC”). In preparing these financial statements, the Company has evaluated events and transactions subsequent to March 31, 2018 for potential recognition or disclosure. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position and results of operations for the periods presented have been included. Certain information in footnote disclosures normally included in financial statements prepared in accordance with GAAP has been condensed or omitted pursuant to the rules and regulations of the SEC and the accounting standards for interim financial statements. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Consolidated Financial Statements for the years ended December 31, 2017, 2016, and 2015.

In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 855, “Subsequent Events,” the Company’s management has evaluated subsequent events for potential recognition or disclosure through the date of the issuance of these consolidated financial statements. No subsequent events were identified that would have required a change to the consolidated financial statements or disclosure in the notes to the consolidated financial statements.

Certain prior period amounts have been reclassified to conform to current period presentation. These reclassifications did not result in any changes to previously reported net income or stockholders’ equity.

During the three months ended March 31, 2018, we revised our previously issued 2017 consolidated financial statements to properly record a deferred tax liability associated with the bad debt recapture assumed from the acquisition of Ridgestone Financial Services, Inc. (“Ridgestone”) and its subsidiaries on October 14, 2016. The acquisition of Ridgestone was accounted for using the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. Assets acquired, liabilities assumed and consideration exchanged were recorded at their respective acquisition date fair values. Determining the fair value of assets and liabilities involves significant judgment regarding methods and assumptions used to calculate estimated fair values. The fair value adjustments associated with this transaction were finalized during the fourth quarter of 2017.

We evaluated the effect of the error to our previously issued consolidated financial statements in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 99 and No. 108,  and, based upon quantitative and qualitative factors, determined that the error was not material to our previously issued consolidated financial statements. Accordingly, we have reflected the change in 2017 and revised our Consolidated Statements of Financial Condition disclosed herein. Consolidated financial statements for periods not presented herein will be revised, as applicable, as they are included in future filings.

All financial information presented in the accompanying notes to these consolidated financial statements was revised to reflect the change. The change did not affect net income or stockholders’ equity for the periods impacted.


9


BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

 

The following table presents the effect of the aforementioned revisions to our Consolidated Statements of Financial Condition as of December 31, 2017:

 

 

December 31, 2017

 

 

 

(dollars in thousands)

 

 

 

As Reported

 

 

Adjustment

 

 

As Revised

 

Goodwill

 

$

51,975

 

 

$

2,587

 

 

$

54,562

 

Deferred tax assets, net

 

 

49,963

 

 

 

(2,587

)

 

 

47,376

 

Total assets

 

 

3,366,130

 

 

 

 

 

 

3,366,130

 

 

Note 2—Recently Issued Accounting Pronouncements

The following reflect recent accounting pronouncements that have been adopted or are pending adoption by the Company. As the Company qualifies as an emerging growth company and has elected the extended transition period for complying with new or revised accounting pronouncements, it is not subject to new or revised accounting standards applicable to public companies during the extended transition period. The accounting pronouncements pending adoption below reflect effective dates for the Company as an emerging growth company with the extended transition period.

Revenue from Contracts with Customers In May 2014, FASB issued Accounting Standards Update (“ASU”) No. 2014-09, deferred by ASU No. 2015-14 and clarifying standards, Revenue from Contracts with Customers, which creates Topics 606 and 610 and supersedes Topic 605, Revenue Recognition. The core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In general, the new guidance requires companies to use more judgment and make more estimates than under current guidance, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. Under the terms of ASU No. 2015-14 the standard is effective for interim and annual periods beginning after December 15, 2017. Early application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. For financial reporting purposes, the standard allows for either full retrospective adoption, meaning the standard is applied to all of the periods presented, or modified retrospective adoption, meaning the standard is applied only to the most current period presented in the financial statements with the cumulative effect of initially applying the standard recognized at the date of initial application. The Company is currently evaluating the provisions of ASU No. 2014-09 to determine the potential impact the standard will have on the Company’s Consolidated Financial Statements. As a financial institution, the Company’s largest component of revenue, interest income, is excluded from the scope of this ASU. The Company is currently evaluating which, if any, of its sources of non-interest income will be impacted by this ASU. Assuming the Company remains an emerging growth company, the Company expects to adopt this new guidance on January 1, 2019, with a cumulative effect adjustment to opening retained earnings, if such adjustment is deemed to be significant. In April 2016, FASB issued ASU No. 2016-10, Identifying Performance Obligations and Licensing. The amendments in this ASU do not change the core principle of the guidance in Topic 606. Rather, the amendments in this ASU clarify the following two aspects of Topic 606: (1) identifying performance obligations and (2) licensing implementation guidance, while retaining the related principles for those areas. The amendments in this ASU affect the guidance in ASU 2014-09, discussed above, which is not yet effective. The effective date and transition requirements for the amendments in this ASU are the same as the effective date and transition requirements in Topic 606, Revenues from Contracts with Customers. The Company is evaluating the provisions of this ASU in conjunction with ASU No. 2014-09 to determine the potential impact Topic 606 and its amendments will have on the Company’s Consolidated Financial Statements.

In May 2016, FASB issued ASU No. 2016-12, Narrow-Scope Improvements and Practical Expedients, amending ASC Topic 606, Revenue from Contracts with Customers. The amendments in this ASU do not change the core principle of the guidance in Topic 606. Rather, the amendments in this ASU affect only several narrow aspects of Topic 606. The amendments in this ASU affect the guidance in ASU 2014-09, discussed above, which is not yet effective. The effective date and transition requirements for the amendments in this ASU are the same as the effective date and transition requirements in Topic 606. The Company is evaluating the provisions of this ASU in conjunction with ASU No. 2014-09 to determine the potential impact Topic 606 and its amendments will have on the Company’s Consolidated Financial Statements.

10


BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

 

In November 2017, FASB issued ASU No. 2017-14, amending ASC Topic 606, Revenue from Contracts with Customers. The ASU amends the codification to incorporate additional previously issued guidance from the SEC. The SEC issued SAB 116 to bring existing SEC staff guidance into conformity with the FASB’s adoption of and amendments to ASC Topic 606, Revenue from Contracts with Customers. The SAB modified SAB Topic 13, Revenue Recognition. ASU 2017-14 supersedes various SEC paragraphs and amends an SEC paragraph pursuant to the issuance of SAB 116. The Company is evaluating the provisions of this ASU in conjunction with ASU No. 2014‑09 to determine the potential impact Topic 606 and its amendments will have on the Company’s Consolidated Financial Statements.

Recognition and Measurement of Financial Assets and Financial Liabilities In January 2016, FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in this ASU require equity securities to be measured at fair value with changes in the fair value recognized through net income. The amendments allow equity investments that do not have readily determinable fair values to be remeasured at fair value under certain circumstances and require enhanced disclosures about those investments. The amendments simplify the impairment assessment of equity investments without readily determinable fair values. The amendments also eliminate the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet. The amendments in this ASU require separate presentation in other comprehensive income of the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. This amendment excludes from net income gains or losses that the entity may not realize because those financial liabilities are not usually transferred or settled at their fair values before maturity. The amendments in this ASU require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or in the accompanying notes to the financial statements. The amendments in this ASU are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the provisions of ASU No. 2016-01 to determine the potential impact the new standard will have on the Company’s Consolidated Financial Statements. Assuming the Company remains an emerging growth company, the new authoritative guidance will be effective for reporting periods beginning January 1, 2019 and is not expected to have a significant impact on the Company’s Consolidated Financial Statements.

In March 2018, FASB issued ASU No. 2018-03, Recognition and Measurement of Financial Assets and Financial Liabilities. The ASU clarifies the guidance in ASU No. 2016-01. The amendments in this ASU are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years beginning after June 15, 2018. The Company is currently evaluating the provisions of ASU No. 2018-03 to determine the potential impact the new standard will have on the Company’s Consolidated Financial Statements. Assuming the Company remains an emerging growth company, the new authoritative guidance will be effective for reporting periods beginning January 1, 2019 and is not expected to have a significant impact on the Company’s Consolidated Financial Statements.

Leases (Topic 842) In February 2016, FASB issued ASU No. 2016-02, Leases. The amendments in this ASU require lessees to recognize the following for all leases (with the exception of short-term) at the commencement date; a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The amendments in this ASU leave lessor accounting largely unchanged, although certain targeted improvements were made to align lessor accounting with the lessee accounting model. This ASU simplifies the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company is evaluating the new guidance and its impact on the Company’s Consolidated Statements of Operations and Consolidated Statements of Financial Condition. Assuming the Company remains an emerging growth company, the new authoritative guidance will be effective for reporting periods after January 1, 2020. The Company expects an increase in assets and liabilities as a result of recognizing additional lease contracts where the Company is a lessee.

11


BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

 

Derivatives and Hedging (Topic 815) In August 2017, FASB issued ASU No. 2017-12, Targeted Improvements to Accounting for Hedging Activities. The amendments in this ASU better align an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The new authoritative guidance will be effective for reporting periods after January 1, 2019 with early adoption permitted. The Company is evaluating the new guidance and its impact on the Company’s Consolidated Statements of Operations and Consolidated Statements of Financial Condition.

Compensation—Stock Compensation (Topic 718) In March 2016, FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting. FASB issued this ASU as part of its Simplification Initiative. The areas for simplification in this ASU involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Amendments in this ASU relate to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value should be applied using a modified retrospective transition method by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted. Amendments related to the presentation of employee taxes paid on the statement of cash flows when an employer withholds shares to meet the minimum statutory withholding requirement should be applied retrospectively. Amendments in this ASU require recognition of excess tax benefits and tax deficiencies in the income statement and the practical expedient for estimating expected term should be applied prospectively. An entity may elect to apply the amendments in this ASU related to the presentation of excess tax benefits on the statement of cash flows using either a prospective transition method or a retrospective transition method. The amendments in this ASU are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. This ASU became effective for the Company on January 1, 2017 and did not have a material impact on the Company’s Consolidated Financial Statements.

In May 2017, the FASB issued ASU 2017-09, Scope of Modification Accounting. The amendments in the ASU provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. An entity should account for the effects of a modification unless all of the following are met: (1) the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) or the modified ward is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified.  If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification. (2) The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified. (3) The classification of the modified award is an equity instrument or liability instrument is the same as the classification of the original award immediately before the original award is modified.  The amendments are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for reporting periods for which financial statements have not yet been issued. The amendments should be applied prospectively to an award modified on or after the adoption date. Assuming the Company remains an emerging growth company, the new authoritative guidance will be effective for reporting periods after January 1, 2019. The Company is evaluating the new guidance and its impact on the Company’s Consolidated Statements of Operations and Consolidated Statements of Financial Condition.

Financial Instruments—Credit Losses (Topic 326) In June 2016, FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments. Current GAAP requires an “incurred loss” methodology for recognizing credit losses that delays recognition until it is probable a loss has been incurred. The main objective of this ASU is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The amendments in this ASU replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The amendments in this ASU require a financial asset (or group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. The measurement of expected credit losses will be based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The amendments in this ASU broaden the information that an entity must consider in developing its expected credit loss estimate for assets measured either collectively or individually. The use of forecasted information

12


BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

 

incorporates more timely information in the estimate of expected credit loss, which will be more decision useful to users of the financial statements. The amendments in this ASU will be effective for fiscal years beginning after December 15, 2019, including interim periods  within those fiscal years. Assuming the Company remains an emerging growth company, the new authoritative guidance will be effective for reporting periods after January 1, 2021. The Company is still evaluating the effects this ASU will have on the Company’s Consolidated Financial Statements. While the Company has not quantified the impact of this ASU, it does expect changing from the current incurred loss model to an expected loss model will result in an earlier recognition of losses.

Statement of Cash Flows (Topic 230) In August 2016, FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments. There is diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230 and other Topics. This ASU addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. Those eight issues are (1) debt prepayment or debt extinguishment costs, (2) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, (3) contingent consideration payments made after a business combination, (4) proceeds from the settlement of insurance claims, (5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, (6) distributions received from equity method investees, (7) beneficial interests in securitization transactions, and (8) separately identifiable cash flows and application of the predominance principle. Current GAAP either is unclear or does not include specific guidance on these eight cash flow classification issues. These amendments provide guidance for each of the eight issues, thereby reducing current and potential future diversity in practice. The amendments in this ASU are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. Assuming the Company remains an emerging growth company, the new authoritative guidance will be effective for reporting periods after January 1, 2019. The Company is currently evaluating the provisions of ASU No. 2016-15 to determine the potential impact the new standard will have on the Company’s Consolidated Financial Statements.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (230), Restricted Cash. The ASU will require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in this update apply to all entities that have restricted cash or restricted cash equivalents and are required to present a statement of cash flows under Topic 230. The amendment is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption of the update is permitted. Assuming the Company remains an emerging growth company, the new authoritative guidance will be effective for reporting periods after January 1, 2019. The Company does not expect this ASU to have a material impact on the Company’s Consolidated Financial Statements.

Income Taxes (Topic 740) In October 2016, the FASB issued ASU No. 2016-16, Income Taxes, Intra-Entity Transfers of Assets Other Than Inventory. The ASU was issued to improve the accounting for income tax consequences of intra-entity transfers of assets other than inventory. Current GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party; this update clarifies that an entity should recognize the income tax consequences of an intra-entity transfer of assets other than inventory when the transfer occurs. The amendment is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption of the update is permitted. Assuming the Company remains an emerging growth company, the new authoritative guidance will be effective for reporting periods after January 1, 2019. The Company does not expect this ASU to have a material impact on the Company’s Consolidated Financial Statements.

Business Combinations (Topic 805) In January 2017, the FASB issued ASU No. 2017-01, Clarifying the Definition of a Business. The guidance clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. This guidance is effective for annual and interim periods beginning after December 15, 2017. Early adoption is permitted. Assuming the Company remains an emerging growth company, the new authoritative guidance will be effective for reporting periods after January 1, 2019. The Company does not expect a material impact of this ASU on the Company’s Consolidated Financial Statements.

Intangibles—Goodwill and Other (Topic 350) In January 2017, FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. The amendments in this ASU are intended to reduce the cost and complexity of the goodwill

13


BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

 

impairment test by eliminating step two from the impairment test. The amendments modify the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. Under the amendments in this ASU, an entity will perform its annual, or interim, goodwill impairment test by comparing the fair value of the reporting unit with its carrying amount. An impairment charge should be recognized for the amount which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The amendments in this ASU are effective for the Company’s annual or any interim goodwill impairment test in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company early adopted these amendments in 2017, which did not have a material impact on the Company’s Consolidated Financial Statements.

Other Income (Subtopic 610-20) In February 2017, the FASB issued ASU No. 2017-05, Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets.  This ASU will clarify the scope of Subtopic 610-20 and add guidance for partial sales of nonfinancial assets.   The amendments should be applied either on retrospectively to each period presented or with a modified retrospective approach.  The amendment is effective for annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019.  The Company is currently evaluating the provisions of ASU No. 2017-05 to determine the potential impact the new standard will have on the Company’s Consolidated Financial Statements.

Nonrefundable Fees and Other Costs (Subtopic 310-20) In March 2017, FASB issued ASU No. 2017-08, Receivables—Nonrefundable Fees and Other Costs. The amendments in the ASU shorten the amortization period for certain callable debt securities held at a premium at the earliest call date. Under current GAAP, the Company amortizes the premium as an adjustment of yield over the contractual life of the instrument. As a result, upon exercise of a call on a callable debt security held at a premium, the unamortized premium is charged to earnings. The ASU shortens the amortization period for certain callable debt securities held at a premium and requires the premium to be amortized to the earliest call date. However, the amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The amendments are effective for annual periods beginning after December 15, 2019, and interim periods within annual periods beginning after December 15, 2020. Early adoption is permitted. The Company is required to apply the amendments on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Assuming the Company remains an emerging growth company, the new authoritative guidance will be effective for reporting periods after January 1, 2020. The Company is currently evaluating the provisions of ASU No. 2017-08 to determine the potential impact the new standard will have on the Company’s Consolidated Financial Statements.

Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815) In July 2017, FASB issued ASU No. 2017-11, (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. The ASU simplifies the accounting for certain financial instruments with down round features, a provision in an equity-linked financial instrument (or embedded feature) that provides a downward adjustment of the current exercise price based on the price of future equity offerings. Down round features are common in warrants, convertible preferred shares, and convertible debt instruments. The ASU requires companies to disregard the down round feature when assessing whether the instrument is indexed to its own stock, for purposes of determining liability or equity classification. Companies that provide earnings per share (EPS) data will adjust their basic EPS calculation for the effect of the feature when triggered (i.e., when the exercise price of the related equity-linked financial instrument is adjusted downward because of the down round feature) and will also recognize the effect of the trigger within equity. The amendments are effective for annual periods beginning after December 15, 2019, and interim periods within annual periods beginning after December 15, 2020. Early adoption is permitted. Assuming the Company remains an emerging growth company, the new authoritative guidance will be effective for reporting periods after January 1, 2020. The Company is currently evaluating the provisions of ASU No. 2017‑11 to determine the potential impact the new standard will have on the Company’s Consolidated Financial Statements.

Income Statement—Reporting Comprehensive Income (Topic 220) In February 2018, FASB issued ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The ASU helps organizations address certain stranded income tax effects in accumulated other comprehensive income (AOCI) resulting from the Tax Cuts and Jobs Act. The ASU provides reporting entities with an option to reclassify stranded tax effects within AOCI

14


BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

 

to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded. The ASU requires reporting entities to disclose: a description of the accounting policy for releasing income tax effects from AOCI; whether they elect to reclassify the stranded income tax effects from the Tax Cuts and Jobs Act; and information about the other income tax effects that are reclassified. The amendments affect any organization that is required to apply the provisions of Topic 220, Income Statement—Reporting Comprehensive Income, and has items of other comprehensive income for which the related tax effects are presented in other comprehensive income as required by GAAP. The amendments are effective for annual periods beginning after December 15, 2018, and interim periods within those fiscal years. The Company early adopted the new guidance on January 1, 2018. The adoption did not impact the Company’s Statements of Operations, and resulted in a reclassification of $763,000 from accumulated other comprehensive income to retained earnings.

Financial Services—Depository and Lending (Topic 942) In May 2018, FASB issued ASU No. 2018-06, Codification Improvements to Topic 942, Depository and LendingIncome Taxes. The amendments in this ASU supersede the guidance within Subtopic 942-741 that has been rescinded by the OCC and no longer relevant. A cross-reference between Subtopic 740-30, Income Taxes—Other Considerations or Special Areas, and Subtopic 942-740 is being added to the remaining guidance in Subtopic 740-30 to improve the usefulness of the codification. The amendments in this Update are effective upon issuance, as no accounting requirements are affected. The amendments in this ASU do not have a material impact on the Company’s Consolidated Financial Statements.

Note 3—Acquisition of a Business

On October 14, 2016, the Company acquired stock of Ridgestone Financial Services, Inc. (“Ridgestone”) and its subsidiaries under the terms of a definitive merger agreement (“Agreement”) dated June 9, 2016. Ridgestone operated two wholly-owned subsidiaries, Ridgestone Bank and RidgeStone Capital Trust I, and specialized in government guaranteed lending as a participant in the SBA and USDA lending programs. Ridgestone provided financial services through its two full-service banking offices in Brookfield, Wisconsin and Schaumburg, Illinois. In addition, Ridgestone had loan production offices located in Wisconsin (Green Bay and Wausau), Indiana (Indianapolis) and California (Newport Beach).

Under the terms of the Agreement, each Ridgestone common share was converted into the right to receive, at the election of the stockholder (subject to proration as outlined in the Agreement), either cash or Company common stock, or the combination of both. Total consideration included aggregate cash in the amount of $36.8 million and the issuance of 4,199,791 shares of the Company’s common stock valued at $16.25 per common share. The transaction resulted in goodwill of $28.9 million, which is nondeductible for tax purposes, as this acquisition was a nontaxable transaction. Goodwill represents the premium paid over the fair value of the net tangible and intangible assets acquired and reflects related synergies expected from the combined operations. Acquisition advisory expenses related to the Ridgestone acquisition of $1.6  million are reflected in non-interest expense on the Consolidated Statements of Operations. Stock issuance costs were not material. There were no contingent assets or liabilities arising from the acquisition.

The acquisition of Ridgestone was accounted for using the acquisition method of accounting in accordance with ASC Topic 805. Assets acquired, liabilities assumed and consideration exchanged were recorded at their respective acquisition date fair values. Determining the fair value of assets and liabilities involves significant judgment regarding methods and assumptions used to calculate estimated fair values. The fair value adjustments associated with this transaction were finalized during the fourth quarter of 2017.

15


BYLINE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except share and per share data) (Unaudited)

 

The following table presents a summary of the estimates of fair values of assets acquired and liabilities assumed as of the acquisition date:

 

Assets

 

 

 

 

Cash and cash equivalents

 

$

25,480

 

Securities available-for-sale

 

 

27,662

 

Restricted stock

 

 

931

 

Loans held for sale

 

 

15,363

 

Loans

 

 

351,820

 

Servicing assets

 

 

20,295

 

Premises and equipment

 

 

2,011

 

Other real estate owned

 

 

1,525

 

Other intangible assets

 

 

486

 

Bank-owned life insurance

 

 

2,352