Byline Bancorp, Inc. (BY): 5 FORCES Analysis [Nov-2025 Updated]

You're analyzing Byline Bancorp, Inc. right now, and the key story isn't just their $7.5 billion loan portfolio as of Q3 2025, but the fact they're barreling toward that critical $10 billion asset size, which brings a whole new level of regulatory scrutiny. To be fair, understanding their competitive footing-from the intense rivalry in the Chicago/Milwaukee market to the high threat from fintech substitutes-is essential before making any investment call. Below, I've mapped out exactly how the power of their suppliers and customers stacks up against the barriers to entry, giving you the precise, unvarnished view you need to see where the real risk and opportunity lie for Byline Bancorp, Inc. right now.

Byline Bancorp, Inc. (BY) - Porter's Five Forces: Bargaining power of suppliers

When you look at Byline Bancorp, Inc. (BY), the power held by its funding suppliers-primarily depositors and capital markets-is a critical lever in its profitability. For a commercial bank focused on the Chicago/Milwaukee markets, managing this cost of funds is key to maintaining that strong Net Interest Margin (NIM) we saw expand to 4.28% in Q3 2025.

Depositor power is moderate, driven by low switching costs for core banking products. Depositors have options, but Byline Bancorp has been successful in growing its base, with total deposits reaching $7.828 billion as of September 30, 2025. The composition matters, too; management noted a positive shift in mix, which helped drive deposit costs down in the third quarter of 2025.

The cost of funding is definitely sensitive; you saw the average cost of total deposits rise significantly in 2024. That full-year 2024 average cost hit 2.61%, which was an increase of 71 basis points compared to 2023. While Byline Bancorp, Inc. successfully lowered that cost to 2.16% in Q3 2025, this recent history shows how quickly supplier pricing power can compress margins if the deposit mix shifts unfavorably or if competitive rates force repricing. Here's a quick look at that recent cost trend:

Access to capital is solid, demonstrated by the $75.0 million subordinated debt offering at 6.875% in Q3 2025. Byline Bancorp, Inc. completed this private placement of fixed-to-floating rate subordinated notes due 2035 on August 7, 2025. This move was strategic, as the net proceeds were used to redeem outstanding 6.00% subordinated notes due 2030. This action, along with retained earnings, helped boost the total capital ratio to 15.81% in Q3 2025. It shows the ability to tap the capital markets for regulatory Tier 2 funding when needed, even if the coupon rate is higher than the debt it replaced.

Finally, the labor supply remains a key operational consideration. Labor supply is competitive in Chicago/Milwaukee, requiring defintely strong compensation to retain talent. The bank's focus on being the preeminent commercial bank in Chicago means it must compete for high-quality relationship managers and credit analysts. The success in Q3 2025, with record revenues of $115.735 million, depends entirely on that talent base.

• Total assets were approximately $9.8 billion as of September 30, 2025.
• The bank operates 46 branch locations across the Chicago and Milwaukee metropolitan areas.
• Net income for Q3 2025 was $37.2 million.

Byline Bancorp, Inc. (BY) - Porter's Five Forces: Bargaining power of customers

You're looking at Byline Bancorp, Inc.'s customer power, and honestly, it's a mixed bag depending on which customer segment we're talking about. For the basic consumer products side of the business, customer power is definitely high. Switching banks for checking or savings is relatively easy; the switching costs are minimal, so customers can vote with their feet if the pricing or service isn't right. Byline Bancorp, Inc. operates with 44 branch locations across the Chicago and Milwaukee metropolitan areas, which is a physical footprint that helps them compete for these price-sensitive retail customers.

When you shift focus to the commercial clients, specifically Small and Medium-sized Businesses (SMBs), their power is more moderate. Why moderate? Because Byline Bancorp, Inc. is the second-largest bank headquartered in Chicago, operating in a dense regional market. SMBs have options, but Byline Bancorp, Inc.'s deep focus on commercial relationships, with 40% of its loan portfolio in commercial and industrial loans as of Q3 2025, means they have established relationships that raise the cost of switching slightly compared to a pure retail customer. Still, a competitor can always offer a better rate on a working capital loan, so leverage remains present.

The key factor mitigating customer power, particularly for business clients, is Byline Bancorp, Inc.'s established niche in government-guaranteed lending. Byline Bank is distinguished by the U.S. Small Business Administration (SBA) as a National Preferred SBA 7(a) Lender. This specialization means that for a business owner specifically seeking SBA financing, their options are narrowed to a smaller pool of experienced lenders, slightly reducing their immediate leverage. For example, in fiscal year 2024, Byline Bank originated $119.6 million in SBA 7(a) loans in Illinois alone, where they were the top lender.

Here's a quick look at how the loan book is structured, which tells you where their commercial focus lies, and the scale of their customer base:

The growth in the loan book itself is evidence that Byline Bancorp, Inc. is successfully acquiring and retaining customers despite the competitive environment. The loan portfolio grew to $7.5 billion in Q3 2025, up 5.8% year-over-year from $6.9 billion in Q3 2024. This growth shows that their value proposition-especially in specialized lending-is resonating with clients who might otherwise have more options. The total assets for the bank stood at $9.8 billion as of September 30, 2025.

The overall customer power dynamics can be summarized by these key facts:

• Consumer switching costs are low, demanding competitive pricing.
• SMB clients have moderate power in the dense Chicago market.
• Specialized SBA lending expertise slightly reduces leverage for business borrowers.
• Loan portfolio grew to $7.5 billion in Q3 2025, showing successful acquisition.
• Total deposits reached $7.8 billion, indicating customer stickiness on the liability side.

If onboarding for a new commercial client takes longer than expected, churn risk rises defintely. Finance: draft 13-week cash view by Friday.

Byline Bancorp, Inc. (BY) - Porter's Five Forces: Competitive rivalry

You're analyzing the competitive landscape for Byline Bancorp, Inc. in the hyper-competitive Chicagoland area. The rivalry here is defintely intense, given the density of financial institutions vying for the same commercial and consumer deposits and loan demand.

Byline Bancorp, Inc. is positioned as the second-largest bank headquartered in Chicago, competing directly against much larger national and regional players who have deeper pockets and broader geographic reach. Still, Byline Bancorp, Inc. maintains a significant local footprint, operating 46 branch locations throughout the Chicago and Milwaukee metropolitan areas. This local presence is a key lever against larger, less community-focused competitors.

Mergers and acquisitions (M&A) remain an active strategy to manage this rivalry by gaining scale. Byline Bancorp, Inc. executed this in Q1 2025 by completing its merger with First Security Bancorp, Inc. effective April 1, 2025. This transaction, with a total merger consideration valued at approximately $41.5 million, was a clear move to bolster its market position. The result was a combined entity with total assets reaching approximately $9.8 billion based on pre-merger year-end 2024 figures.

Effective management of this rivalry is visible in Byline Bancorp, Inc.'s strong profitability, which allows it to compete on more than just price. For instance, the reported Pre-Tax Pre-Provision Return on Average Assets (PTPP ROAA) for Q3 2025 stood at 2.25%, marking the twelfth consecutive quarter above 2.00%.

Here's a quick look at some of the key Q3 2025 performance numbers that reflect competitive execution:

The bank's ability to maintain high profitability while integrating an acquisition shows operational discipline that helps fend off rivals. Other indicators of its competitive standing include:

• Net Income for Q3 2025 was $37.2 million.
• Diluted Earnings Per Share (EPS) for Q3 2025 was $0.82.
• Net Interest Margin (NIM) expanded 9 basis points quarter-over-quarter to 4.27% in Q3 2025.
• Common Equity Tier 1 (CET1) ratio stood at 12.15% in Q3 2025.
• Non-Performing Loans (NPLs) fell to 0.85% of total loans in Q3 2025.

Byline Bancorp, Inc. (BY) - Porter's Five Forces: Threat of substitutes

You're looking at the competitive landscape for Byline Bancorp, Inc. (BY) as we close out 2025, and the threat of substitutes is definitely a major factor, especially given the pace of digital change.

Fintech lenders and digital platforms are a high threat, substituting traditional loan origination and payment services. In the small business lending arena, traditional community banks, which held a 45% market share historically, now face fintech lenders capturing 28% of new originations in 2025. This pressure is evident as businesses pivot, with 72% now going directly to non-bank sources for applications. The sheer scale of digital finance is massive; the global fintech lending market reached $590 billion in 2025, and in developed regions, more than 50% of SME loans are now sourced via fintech platforms. For consumer-side services, more than 60% of U.S. personal loan originations are completed online.

Still, the competition isn't just digital. Credit unions and insurance companies substitute certain consumer and commercial lending products at competitive rates. For instance, Credit Unions approved 15% of small business loans in 2025, often undercutting traditional bank rates. The market is fragmented, with online lenders approving 25% of small business loans overall.

Here's a quick look at how the market is split for small business loan approvals in 2025:

The bank's specialization in small-ticket equipment leasing and SBA loans provides a defensible, lower-threat niche. Byline Bancorp, Inc.'s total loan portfolio stood at $7.5 billion as of Q3 2025, and they originated $264.5 million in new loans that quarter. While the overall average SBA loan size in the US for 2025 was $435,827, Byline Bancorp, Inc.'s focus on this area, alongside equipment leasing, targets segments where relationship banking and specialized underwriting still hold sway. New paper for Byline Bancorp, Inc. is pricing at 250 to 300 basis points over SOFR, with SBA business yields being higher than that.

Large corporations can bypass the bank for funding by issuing debt directly in capital markets. This is a constant pressure point for larger balance sheet items, though Byline Bancorp, Inc.'s focus on small- and medium-sized businesses keeps this threat somewhat at arm's length. The bank's strong capital position, with a CET1 ratio at 12.15% in Q3 2025, gives it flexibility to compete for the middle-market clients who might otherwise look to capital markets.

You should track the growth of non-bank sources for applications, which is up to 72% for some businesses. Finance: draft a sensitivity analysis on new loan yields versus the portfolio yield of 7.14% by next Wednesday.

Byline Bancorp, Inc. (BY) - Porter's Five Forces: Threat of new entrants

The threat of new entrants for Byline Bancorp, Inc. remains relatively low, primarily due to the substantial hurdles inherent in establishing a full-service commercial bank in the Chicago market. Honestly, the barriers to entry are structural, not just competitive.

Threat is low due to high regulatory barriers and the significant capital needed for a full-service bank. Starting a de novo bank requires navigating a complex licensing process, which demands significant initial capital commitments and a proven management team. For context, new bank charters have fallen dramatically since the 2008 financial crisis, largely because of higher start-up costs and tighter margins in the industry. Still, some optimism exists; executives in a 2025 survey indicated that 10 to 25 new bank charters per year would be ideal, though the path remains difficult.

The impending $10 billion asset threshold for Byline Bancorp, Inc. will increase compliance costs, raising the barrier for any future entrant seeking similar scale. As of September 30, 2025, Byline Bancorp, Inc. reported total assets of $9.8 billion, placing it right on the cusp of this regulatory step-up. Crossing the $10 billion asset mark subjects a bank to heightened regulatory expectations, including supervision by the Consumer Financial Protection Bureau (CFPB). The estimated additional compliance cost for banks surpassing this level is significant, equating to a 0.41% tax on average annual profits. A new entrant aiming for Byline Bancorp, Inc.'s current scale would immediately face this elevated cost structure, making organic growth much harder.

Establishing a branch network of 45+ locations in a mature market is capital-intensive and slow. Byline Bank currently operates 45 branch locations throughout the Chicago and Milwaukee metropolitan areas as of September 30, 2025. Building out a physical footprint of this size in an established metropolitan area requires massive upfront investment in real estate, technology, and staffing, which is a multi-year, multi-million dollar endeavor. For perspective, Byline Bank grew its network through acquisitions, such as the one completed in Q1 2025 that brought assets to approximately $9.9 billion.

Acquisition is the more likely method for new players to enter the Chicago market, not de novo growth. The data supports this: Byline Bancorp, Inc. itself has grown its footprint and asset base through strategic purchases, like the one closing on April 1, 2025. For a new player, buying an existing institution with an established branch network and deposit base is far more efficient than starting from zero, especially given the regulatory friction associated with new charters. The competitive landscape in Chicago suggests consolidation, not greenfield development, is the primary entry vector for new significant players.

• Regulatory scrutiny increases sharply past the $10 billion asset mark.
• CFPB supervision becomes mandatory above the $10 billion level.
• Replicating 45 branches is extremely capital-intensive.
• Acquisition is the proven path for market entry in Chicago.

Finance: draft the projected compliance cost increase based on $9.8 billion assets by next Tuesday.