Byline Bancorp, Inc. (BY) Earnings Call Transcript & Summary

Good morning, and welcome to the Byline Bancorp Third Quarter 2025 Earnings Call. My name is Carly. I'll be the conference operator today. [Operator Instructions] Please note that this conference call is being recorded. At this time, I'd like to introduce Brooks Rennie, Head of Investor Relations of Byline Bancorp.

Thank you, Carly. Good morning, everyone, and thank you for joining us today for the Byline Bancorp Third Quarter 2025 Earnings Call. In accordance with Regulation FD, this call is being recorded and is available via webcast on our Investor Relations website, along with our earnings release and the corresponding presentation slides. As part of today's call, management may make certain statements that constitute projections, beliefs or other forward-looking statements regarding future events or the future financial performance of the company. We caution that such statements are subject to certain risks, uncertainties and other factors that could cause actual results to differ materially from those discussed. The company's risk factors are disclosed and discussed in its SEC filings. In addition, our remarks and slides may reference or contain certain non-GAAP financial measures, which are intended to supplement but not substitute for the most directly comparable GAAP measures. Reconciliation of each non-GAAP financial measures to the comparable GAAP financial measure can be found within the appendix of the earnings release. For additional information about risks and uncertainties, please see the forward-looking statement and non-GAAP financial measures disclosures in the earnings release. As a reminder for investors, this quarter, we plan on attending the Hovde Financial Services Conference in Naples, Florida; and the Piper Sandler Financial Services Conference in Miami in November. With that, I would now like to turn the conference call over to Alberto Paracchini, President of Byline Bancorp.

Thank you, Brooks, and good morning, everyone, and thank you for joining the call this morning to go over our third quarter results. With me today are Chairman and CEO, Roberto Herencia; our CFO, Tom Bell; and our Chief Credit Officer, Mark Fucinato. This quarter, we streamlined the format to focus on key highlights for the quarter and our financial results, so we can move quickly to Q&A and allow ample time for discussion. Before we get started, I'd like to pass the call over to our Chairman, Roberto Herencia, for his remarks. Roberto?

Alberto, thank you, and good morning to all. I appreciate you spending some time with us here this morning. The quarter capped a string of 12 consecutive quarters of very strong financial performance for Byline and highlights the consistency of our execution, the resiliency of our business model and the optionality and flexibility we strive to maintain in our operating model. The team continues to run a very good bank and for that, we have to thank our team members and employees. Results reflect each and every one of their contributions, which we value dearly. This quarter, our SBA team went above and beyond anticipating government shutdown and allowing us to end the quarter strong and prepare us well for the end of the shutdown whenever that comes. Profitability metrics for the quarter were once again top quartile as Alberto and Tom will review. Credit quality continues to be stable to improving in some segments, which against the backdrop of macroeconomic uncertainty, heightened geopolitical tensions and more recently, the federal government shutdown has been surprising to the positive. We continue to be vigilant over those risks. Capital flexibility is a major differentiator. Our capital ratios are strong and continue to build amid strong profitability and solid revenue growth. Our primary deployment options, which Alberto has covered clearly in the past, continue to be the same. Our stance on $10 billion asset threshold and M&A remain unchanged. We are open to disciplined deals that make sense like the ones you have seen in the past. We have the capital to be opportunistic and believe we can deliver strong financial results on our own without the need to force a deal. On the things that truly matter, that our employees have tangibly achieved since we last spoke to you. We were recognized by the SBA in early August with the 2024 SBA 7(a), 504 and Export Lender of the Year awards. For the second year in a row, the Chicago Sun-Times has named Byline Bank, one of Chicago's Best Workplaces. We now rank as one of the top 25 workplaces in the city and fifth among large companies. These results are based on our workplace policies, practices and philosophy in addition to employee survey results, measuring the employee experience. Byline was also named once again to the 2026 America's Best Workplaces by Best Companies Group as a result of our high level of employee engagement scores on our annual survey. We continue to be very focused on employee engagement, development and attracting the best talent. We continue to experience as a result, low levels of employee turnover. With that, I'm happy to turn over the call to Alberto.

Great. And thank you, Roberto. In terms of the agenda for today, I'll kick us off with the highlights for the quarter, followed by Tom, who will cover the financials in more detail. I'll then return with closing comments before we open the call up for questions. So with that, let's turn to our results. For the quarter, we delivered net income of $37 million or $0.82 per diluted share on revenue of $116 million, a strong performance driven by solid execution. Revenue and EPS grew both quarter-on-quarter and 13.6% and 19%, respectively, on a year-on-year basis. Our performance continues to reflect excellent profitability with Pre-Tax Pre-Provision income of $55 million, Pre-Tax Pre-Provision ROAA of 2.25%. ROAA of 1.5% and ROTCE of 15.1%, which remains comfortably above our cost of capital, notwithstanding continued growth in our capital base. The margin expanded 9 basis points from last quarter to 4.27%, supported by an improved deposit mix and higher asset yields. Expenses remain well managed. And while our efficiency ratio is strong at 51%, we continue to actively look for ways to become more efficient and invest in the business at the same time. Moving on to the balance sheet. Loans grew 6% linked quarter and 11% on a year-to-date basis, ending at $7.5 billion. Deposits totaled $7.8 billion at quarter end and were up 1% linked quarter and 7% on a year-to-date basis. Demand for credit remained stable from last quarter with originations coming in at $264 million, driven by our commercial banking and equipment leasing teams. Moving to credit. Credit costs declined this quarter with the provision coming in at $5.3 million, a decrease of $6.6 million compared to last quarter. Asset quality metrics all improved with NPAs, NPLs and net charge-offs all declining compared to the prior quarter. The allowance remains strong at 1.42% of total loans. Turning to capital. Capital level continue to grow and remain robust with CET1 surpassing 12%. Tangible book value per share grew nicely this quarter, up 5% linked quarter and 12% year-on-year. This quarter, we also refinanced $75 million in subordinated debt. We leveraged the upgrade to our credit rating earlier this year with strong market demand to issue debt at an attractive level that reflected a 266 basis point improvement in our credit spreads. With that said, we continue to build capital to support balance sheet growth, future M&A opportunities and increased capital flexibility. With that, I'd like to turn over the call to Tom, who will provide you with more detail on our results.

Thank you, Alberto, and good morning, everyone. Starting with our loans on Slide 5. Total loans increased to $107 million or 6% annualized and was $7.5 billion at September 30. As Alberto mentioned, origination activity was solid for the quarter with $264 million in new loans, up 25% compared to a year ago. Payoff activity decreased $41 million from Q2 and stood at $205 million. Loan commitments grew and draw activity added to the loan growth for the quarter, even as line utilization remained relatively flat at 59%. As we look ahead for Q4, we expect loan growth to continue in the mid-single digits. I would like to note that our loan growth could be impacted somewhat by higher government loan -- sorry, impacted somewhat higher by the government shutdown that goes into effect maybe in 2026. As a result, our government-guaranteed loan originations will remain on balance sheet until the government is reopened. Turning to Slide 6. Total deposits were $7.8 billion for the quarter, up slightly from the prior quarter. The uptick in deposits was due to noninterest-bearing accounts increasing $160 million or 9% linked quarter, which was driven by seasonality in deposits. This was offset by decreases in time deposits, driven by lower brokered CDs and CDs shifting into money market accounts. We saw a continued improvement in the mix, which drove deposit costs lower by 11 basis points to 2.16%. Turning to Slide 7. We had record net interest income of $99.9 million in Q3, up 4.1% from the prior quarter, primarily due to organic loan growth and lower rates paid on deposits. This was offset by higher interest expense related to refinancing of the $75 million of sub debt this quarter, which contributed a 7 basis point drag on NIM. The net interest margin grew to 4.27%, up 9 basis points linked quarter and year-over-year NIM expanded 39 basis points. Specifically, we saw lower interest expense on deposits and higher rates on earning assets. As a reminder, our SBA loans reset on a quarterly lag. As a result, the mid-September rate cut is effective October 1. With the market expectations of 2 Fed cuts in the fourth quarter, we expect net interest income of $97 million to $99 million. I would note that earning asset growth and disciplined pricing has generated growing NII in this declining rate environment. Turning to Slide 8. Noninterest income totaled $15.9 million in the third quarter, up 9.5% from the last quarter, primarily due to $7 million gain in sale on loans sold driven by higher volumes. The SBA loan pipeline is solid. However, due to the government shutdown, we are currently unable to sell and settle loans in the secondary market. Timing will determine the impact of our gain on sale income for Q4. As a result, we will not be providing gain on sale guidance for the fourth quarter. Turning to Slide 9. Our noninterest expense came in at $60.5 million, up 1.5% from the prior quarter. The increase reflects higher salary and employee benefits, including a $2 million in higher incentive compensation accruals due to higher performance and a $1.5 million increase in noninterest expense, which includes $843,000 of remaining expense associated with the call sub debt. These were partially offset by merger-related and secondary public offering expenses recorded in the second quarter. Our efficiency ratio stood at 51% compared to 52.6% in the second quarter, an improvement of 161 basis points. For Q4, we expect noninterest expense in the same range as Q3 results. Turning to Slide 10. In the third quarter, we saw credit metrics improve. Our allowance for credit losses decreased slightly to $105.7 million, representing 1.42% of total loans, down 5 basis points from the prior quarter. The decline was primarily due to individually assessed loan resolutions in the quarter, offset by loan growth and higher adjustments to economic factors. We recorded a $5.3 million provision for credit losses in Q3 compared to $11.9 million in Q2. Net charge-offs decreased to $7.1 million compared to $7.7 million in the previous quarter. NPLs to total loans and leases decreased to 85 basis points in Q3 from 92 basis points in Q2. NPAs to total assets decreased to 69 basis points in Q3 from 75 basis points in Q2. Moving on to capital on Slide 11. This quarter, our capital increased further with CET1 at 12.15% and tangible common equity ratio was 10.78%. We increased our tangible book value per share by $1.02, up 5% linked quarter and up 12% compared to last year. For the quarter, our total capital was 15.81%, which grew meaningfully due to the sub debt issuance. If you exclude the sub debt that was called on October 1, total capital is approximately 15.14%. With that, Alberto, back to you.

Thank you, Tom. So to wrap up on Slide 12, we continue to execute well against our strategic priorities and are focused on building the preeminent commercial banking franchise in Chicago. Earlier this year, we announced the expansion of our commercial payments business and the hiring of an experienced team to lead that effort. We've been focused on putting the infrastructure in place, establishing the requisite controls, and I'm happy to report that our pipelines are starting to build. Looking forward, we're focused on onboarding customers and scaling the business in 2026. We're also getting closer to the $10 billion asset mark. We anticipate crossing the threshold during the first quarter of next year, which means we will not see the effect of Durbin and higher insurance assessments until 2027. Looking ahead for the rest of this year, our pipeline remains healthy, and we're optimistic about our ability to continue to execute for customers and deliver results for our shareholders. I'd like to thank all of our employees for supporting our customers and for their contributions to our results this quarter. With that, operator, we can open the call up for questions.

[Operator Instructions] Our first question comes from David Long from Raymond James.

Let's talk about the margin here and net interest income. The bank screened as asset sensitive. You look at Slide 7, and it indicates each 25 basis point cut in a ramp scenario, hits your NII by about $2.5 million. What are the assumptions that are built into that right now?

Dave, it's Tom. I mean we have been beating the model assumptions. I think it's in part due to what the competition is offering us as far as rates resets on deposits. And I think, again, we talked a little bit about in the past, some of the premiums that were maybe paid during the liquidity events of years past, and we continue to look at the competition and look at where we can adjust rates. And I think that's what we've been really disciplined on.

Dave, to add to what Tom just said, I think also analytically, we're better, and we have gotten better. So in addition to just the competitive environment in Chicago overall improving over the years and becoming -- for those of us that have been in the market for a long time, becoming certainly much more rational over the years. I think analytically, we're getting a bit better in being able to segment customers and being able to basically drive improvements in costs related to accounts and the different segments of our business, which has contributed to what Tom just said, which is essentially just outperforming our model a bit. So I think that's you're seeing the effect of that.

And I would also just add, you can look at the yields on loans. And given the rate declines, you are seeing loan yields come down just from the resets based on the mix between fixed and floating. We have benefited a little bit more, too, because rates have been higher. So any of the fixed rate refinancings that have been coming cash flowing out, we've improved nicely on, including securities.

No, that s some very good color. And then in the quarter, the obvious -- obviously, on the funding side, real nice change in the mix, your funding, your deposit costs, in particular, came down; wiggle room do you have on the funding side and the deposit side to still lower those costs, giving you an opportunity to continue to beat this model.

Again, I think we are asset sensitive, and we do expect -- I gave guidance on NII. We have obviously asset growth that's helped us nicely, too. But we have some room on the CD book. It continues to reprice lower. We've been very short on the CD book. And I think there are certainly some rack rate deposits that we're not going to be able to reprice. So it's kind of a mix, Dave.

Our next question comes from Adam Kroll from Piper Sandler.

This is Adam Kroll on for Nathan Race. Yes. So I guess, given the recent pickup in M&A activity, especially in the Midwest and with your capital continuing to build at pretty strong clips, I'd be curious just to hear your updated thoughts on M&A and how you're thinking about managing capital levels?

Yes. So I think Roberto touched on it right at the beginning of the call, Adam and I think we're certainly open for M&A. So we're -- in terms of the usual discussion around how our conversations, I think we actively engage in conversations. So I think that remains consistent. So we're certainly open and actively looking at opportunities that may present themselves in the marketplace here. So -- but that's going to be, I think, consistent with the discipline around transactions that make sense for us to do that we think deliver value for shareholders. So with that caveat, I think we continue to look at opportunities and are hopeful that we'll be able to continue to find situations that make sense as we have done in the past. As far as capital priorities, I think those also remain consistent. We want to fund the growth of the bank. We want to have capital that we can use opportunistically for M&A. We want to have a stable and growing dividend that we can comfortably afford. And we have the safety valve, which is -- we have a buyback authorization in place. And when we have opportunities to acquire our stock at attractive levels, we have the flexibility to do that.

And then I appreciate the comments about crossing $10 billion organically next year. But I was just curious if you could size up the estimated impact from Durbin?

I think -- I'm glad you asked the question because we get -- we have not been asked that question directly on the call. So I think for Durbin today, as we would look at the impact, it would be somewhere between $4.5 million to $5 million on the -- and that includes the FDIC effect as well. And that would -- as you know, if we cross at any point in 2026, the Durbin impact doesn't really go into effect until July 1 of the following year. So that would be 2027, whereas the effect of higher insurance cost comes after 4 consecutive quarters above $10 billion. Thank you for asking the question because now we have that on the record.

Yes, no problem. If I could squeeze in one more. Just I appreciate the comments on Byline anticipating and preparing for the government shutdown. But I was curious if you could just touch on how the government shutdown has impacted your SBA business so far? And is there an upcoming deadline where it will materially impact your gain on sale in the fourth quarter?

Very good question. And as you know, we have been in the SBA business for some time. So we've had to navigate through shutdowns before. So our team is very experienced in terms of being able to navigate through usually the short-term impact of a shutdown. So I think the first thing I would say is from an origination standpoint, we continue to be active in originating SBA loans, so that continue to market, continue to try to originate new business. On things that are in the pipeline, what we do is we tend to -- in anticipation of a shutdown, we pull PLP numbers so that we can continue to fund and close those loans given that we have the highest designation in the program as that was under the preferred lender program. The thing that potentially gets impacted, and it typically is a timing issue is during a shutdown, we cannot sell and settle loans. So to the degree that we have loans that are available for sale and ready to be sold and the shutdown is still in effect, then we are effectively holding those loans until the government is back to work and we can then sell the loans in the secondary market. And that's typically a timing issue. So I would say, in the short run, unless we really get here into a protracted shutdown where we're here, let's say, mid-November or so and the government is still not back to work, that may impact the timing of loans that we would otherwise would be selling in the fourth quarter, we may then sell probably in the first quarter. So that would be the short-term impact. And obviously, that has a positive effect, too, because we're essentially -- even though we can't sell them, so yes, there might be a delay or a timing issue with gain on sale income, we actually earn the carry on the loan because we'll carry the loans on our balance sheet. So -- but that's -- hopefully, that answers your question, and I think that's, in short, the summary on that.

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

Congrats on the quarter. So, Tom, you mentioned in your remarks, I think, on the deposit mix change. It sounds as though maybe that may bounce back a little bit with the DDA just in terms of how to think about kind of NII margin. Some of that was seasonal, the strong growth this quarter and the mix change? Or is that -- do you think it's kind of sustainable where that mix is at today?

No, that's correct. It's seasonality, there are outflows in DDA.

All right. And then can you just talk a little bit about -- you guys talked about the competitive landscape. I guess, heard from several other banks recently just that competition has gotten stronger on the deposit side and even on the loan side in the market, what you're seeing competitively? Is it -- sounds like it's gotten a little bit easier from your commentary, but that's over time rather than just kind of recently. But just the competitive landscape, just a little commentary, if you can, on loans and deposits.

It's still competitive. I would just, again, remind everyone, right, we re still a relationship bank. We bring in core deposits with our commercial accounts, and that helps support our margin and our spreads. So it's not all at the margin funding that's going on here. So that -- we're benefiting from that. And then I think just being short on the CD book has allowed us to reprice just given the expectations of more cuts to come here. So it's still competitive. I think you can see where the market is trading or offers are for new money, so to speak. But it's more about the relationship and the small business banking relationships and our commercial relationships.

Brian, just to add to one thing on the question on the -- particularly on the asset side. I think Tom is spot on in that it's always competitive. But look, I -- when you look at markets in general, whether it's investment grade, whether it's high yield, spreads are at all-time tight levels. So it's not inconsistent to think that some of that would spill into kind of the market. And yes, do we see some of that? Yes, some businesses have gotten a little bit more competitive or there's more competition. People are willing to trade off a bit more in pricing in order to get high-quality transactions, but it's always competitive. And it's -- you just have to manage your business accordingly.

No, I appreciate that, Alberto. And maybe just one back to the margin. Just one comment, Tom. I guess it sounds like obviously, a good expansion in the quarter, but it sounds like even with that expansion, you kind of went through the benefit from -- you had the impact from the sub debt in there. Just trying to get a sense for maybe if you can talk or give a little thought on where the margin, given the seasonality that comes back on the DDA and then the impact of that sub debt in the quarter, kind of where did the margin kind of end the month or exit the quarter in September, just as kind of a starting point as we look forward?

Brian, our NII guidance is still right in the same range. It's a little bit lower on the low end just because we are expecting 2 cuts here in the fourth quarter. So we are still asset sensitive, and we will have some slight decline in net interest income from that. So the margin would go down a little bit, I would say, to be determined based on the Fed cuts.

All right. And maybe just the last one... Yes, okay, I hear you.

A lot of puts and takes related to -- it's about $1.5 million related to the interest expense on the sub debt that goes away. So that benefits us. We have earning asset growth that benefits us. So we still think we're in the same range on NIM.

I appreciate that, Tom. And then last one for me was, can you guys just give a little commentary, just talk a little bit about the commercial payments team and kind of where that -- kind of what that business is and where it's -- what your expectations kind of high level are without -- just so we can watch that going forward?

Sure. You bet. So I think earlier in the year, we announced and there's some -- we actually got some picked up in press in that we had hired a team, some experienced bankers. Some of our bankers here had worked with these individuals before. So we had an opportunity to really bring on board high-quality talented individuals, and we were fortunate to do that. But the gist of that business is really a commercial payments business. So think about high -- trying to do business with businesses that are -- originate a lot of ACH transactions, process payroll, for example, so you would have payroll processors in that business as well as looking to be a sponsor bank for issuing and acquiring debit or prepaid cards. So that -- in summary, Brian, that's kind of the gist of the business. I like to use the term commercial payments because it's really more on the commercial banking side as opposed to -- this is not a retail product. This is not something that's targeted at consumers. It's really trying to do business with program sponsors that are high users of payment products. And so far, I think, as I said on the comments, initially, it's about building the infrastructure, having the proper controls, making sure that we have the necessary hires to support the team, not just from a sales standpoint, but operationally and from a risk management standpoint. So that's been completed. We've been actively calling and trying to start building the business. The pipelines are growing. We have customers that we're in the process of onboarding. These are -- as you could probably imagine, these are not -- these are -- there's more to onboarding a high-volume type commercial customer as opposed to a simpler kind of loan and deposit basic relationship. So the onboarding process is a little bit lengthier, but we feel good where the team is. The pipeline is building, and we'll start seeing the impact of that in 2026 and beyond. So we're super excited about that segment of our business.

And just to clarify, those credits are typically -- are they smaller granular credits? Are they larger credits? What's kind of the typical size range in those transactions?

Yes, there's very little in credit, if any. It's really just a function more on the deposit side and on the treasury management side.

[Operator Instructions] Our next question comes from Brandon Rud with Stephens.

Most of my questions have been asked and answered already, but maybe just one modeling question here. Do you have the amount of fixed rate loans that are maturing over the next 12 months? And how those yields compare to your new origination yields?

Yes. For 2026, it's roughly like $750 million. And I would say that, again, depending on what happens with the forward curves, rates are at or slightly higher than where we are today. So there's still a lot today compared relatively to that.

Got you. Okay. And maybe just one because it was a topic early in the earnings season, I should ask. Can you remind us of your NDFIs exposure and what clients fall into that bucket for you?

Yes. It is -- so a general comment. So Brandon, we have are roughly around $221 million that we would categorize in the call report as NDFI. So that represents just under 3% of our total loan portfolio. The one thing I would tell you about that, that consists of commercial-related transactions and business that we have done for a long time. So we are not -- that doesn't include anything. We haven't started anything, for example, to have a business that's focused on financing private credit funds or financing structured -- asset-backed structured transactions. These are things like we finance, for instance, the acquisition of practices where a registered investment adviser acquires another small registered investment adviser and we finance that practice. So there's a lot of granularity in that exposure, and it's not the -- I would say it's an exposure that's materially different than, for example, the couple of cases that you guys saw this quarter related to NDFI lending by some other institutions.

And then Tom, I think your comment on expenses in the fourth quarter is similar to 3Q, so $59-ish million on a core basis. Is that also a good run rate to start off with for 2026 and then layer on inflation and growth there?

We're not really giving guidance on '26, but I would just say that there's incentive comp that's built in this year that, in theory, we reset for next year. So higher performance this year is warranting higher incentives. So we start over, and I would expect those expense numbers to be lower.

Our next question comes from Matthew Renck from KBW.

Just a follow-up to the expense question. I appreciate the guidance for next quarter. In the prepared remarks, you mentioned that you believe you can get the efficiency ratio lower. So I was wondering if there was any initiatives you were contemplating or if there's any new technologies you're investing in that could drive operational efficiency?

Yes, good question, Matt. I think maybe the right way to think about it is this is something that we're constantly looking at. We're constantly looking for ways in which we can operate more efficiently. As you have seen -- if you look at the trend with our efficiency ratio, it tends to bounce up. I think we've been in that kind of 49% to 52% range, which compared to others, compared to peers, I think we fare very well with it. What I would highlight with that is it's something that we always want to be focused on because it provides us with investment capital to reinvest back into the business. So I wouldn't view it as just we have a program that we're doing, and we're trying to execute against that program. We're constantly looking for ways in which we can try to drive that efficiency as low as we can or at least we can maintain it at the levels kind of where it's at today so that we can generate opportunities for reinvestment back into the business.

Our next question comes from Ynyra from Hovde Group.

This is Ynyra on for Brendan from Hovde Group. First question is just to do with capital. We noticed that the share repurchasing kind of went down this quarter. Any thoughts on creating a more active repurchase program again and how you're thinking of reinvesting capital?

Yes. I think consistent with priorities that we mentioned earlier in the call, Ynyra, I think capital priorities is be able to support the growth of the company, support organic growth, have capital flexibility to pursue M&A consistent with transactions that -- like transactions we've done in the past, transactions that make sense, that meet our criteria, we certainly want to be able to execute on that and have the flexibility to do so, maintain a growing comfortable dividend over time. And the last thing is really the safety valve, which is really if we find ourselves having excess capital and we have opportunities to acquire the stock at what we think are attractive levels for shareholders, then we would do that.

And then my follow-up question is to do with new loan yields. So you guys originated $260 million of originations this quarter. Can you speak to where new paper priced this quarter in relation to the portfolio yield of 7.14%?

Sure. This is Tom. I mean, again, depending on the asset class, you do have different yields. But I would still say that spreads are 250 over SOFR to 300 over. And then obviously, the SBA business is higher than that.

[Operator Instructions] Our next question is a follow-up from David Long from Raymond James.

Just wanted to follow up on credit. Two things. One, the reserve level. It looks like reserves released in the quarter. Was that more a function of loan mix, portfolio performance or the economic outlook?

I think it was more around the resolution of loans with specific reserves, David. So we worked those assets out. We took the charges against the specific reserves, and we don't have those reserves anymore.

And then with the SBA shutdown, how is that going to impact your reserving? I mean if you're going to hold on to these loans potentially a little bit longer, maybe just talk through that process and how do you think about that?

I mean we would look -- we would kind of -- if we're holding -- I think it's a good question. So thank you for asking it. So if we're holding the full loan as opposed to the, call it, just the unguaranteed portion only, we would have to be thinking about a more protracted shutdown, David. We would still probably carry those loans as held for sale. But to answer the philosophical question as to how we think -- if we were balance sheeting those loans, how we think about setting reserves? I think we would look through the guaranteed portion and look at the unguaranteed exposure and then reserve accordingly.

Our next question is a follow-up from Brian Martin from Janney Montgomery Scott.

Just one last one for me was on the -- going back to the M&A for just one moment. Just given it's a greater priority than the buyback, can you just remind us, Alberto, just in terms of what you're looking for in the transaction, what's important on the M&A opportunities you're going to consider? And does it matter larger or smaller today? Or would you think about doing multiple deals at once? Just trying to understand that dynamic.

Yes. I think it s still very consistent with the -- what we think is the opportunity set here in Chicago. So broadly, Brian, I think institutions between, let's say, $400 million and up to maybe a couple of billion dollars. Obviously, we've grown a bit. So we can -- we have the ability to tackle something a little bit larger today than, let's say, what we did 2 years ago or 3 years ago. The geography is still consistent. The greater Chicago metropolitan area, that means -- does that mean strictly just the city limits of Chicago, no greater Chicago, the suburbs, maybe going all the way up to Milwaukee, maybe going down a bit into Northwest Indiana. I think that's -- those are markets consistent with that. Financially attractive, strategically attractive, and we pay -- as you know, we pay a lot of attention to deposits. If we think about the last 3 transactions that we've done, those were essentially transactions for us to acquire deposits and then redeploy those funds over time into the different lending businesses that we have. So it would have to be consistent with that. But each opportunity is different. Each situation is different. And the good news is we've built a team, and we have a lot of experience with the team that's here, that's done transactions here as opposed to just general experience that we may have from just being in the business and having done M&A over the years. So we feel good about our team, our process, our playbook. And I think hopefully, as you guys can -- have seen the results show that in our results, I should say.

We currently have no further questions. So I'd just like to hand back to Mr. Paracchini for any further remark.

Great. So thank you, Carly, and thank you all for joining the call today and for your interest in Byline. We want to wish you a happy Halloween, a happy Thanksgiving holiday, a happy holiday season, and we look forward to speaking to you again in the new year. Thank you.

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