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

You're looking for a clear-eyed view of Byline Bancorp, Inc. (BY) as we head into 2026, and honestly, the picture isn't simple. They've built a strong niche, but the current rate environment is defintely testing their model. Here's the quick map of their near-term risks and opportunities, grounded in what we project for the 2025 fiscal year data.

Byline Bancorp, Inc. (BY) - SWOT Analysis: Strengths

Strong focus on high-margin SBA (Small Business Administration) lending.

Byline Bancorp has built a powerful, national-scale engine around its Small Business Administration (SBA) lending, which is a key source of high-margin, fee-generating income. This is defintely a core strength that differentiates them from regional peers. For the fiscal year 2024, Byline Bank was recognized as the Illinois SBA 7(a) Lender of the Year for the 16th consecutive year.

Nationally, Byline was a top SBA 7(a) lender by dollar volume in FY2024, with total originations of $504.6 million. This scale allows them to be a Preferred Lender, which speeds up the approval process for small businesses. Plus, they were also named the 504 Third-Party Lender of the Year and Export Lender of the Year in Illinois for FY2024, originating $47.5 million in SBA 504 loans and delivering $6.1 million to exporters. The government guarantee on a large portion of these loans also mitigates credit risk, which is a smart way to grow assets.

• FY2024 SBA 7(a) National Volume: $504.6 million
• FY2024 SBA 7(a) Illinois Volume: $119.6 million
• Unguaranteed SBA/USDA exposure (12/31/2024): $421.5 million

Diversified commercial loan portfolio, reducing sector-specific risk.

You want to see a bank's loan book spread out, and Byline Bancorp does a good job of this, which helps buffer against downturns in any single industry. Their total loan and lease portfolio grew to $7.46 billion in the third quarter of 2025, up from $6.90 billion a year earlier. The portfolio is heavily weighted toward commercial clients, which aligns with their strategy to be the preeminent commercial bank in Chicago.

Here's the quick math: Commercial and Industrial (C&I) loans made up 40% of the portfolio in Q3 2025, a 2 percentage point increase from the prior year, showing local businesses are still investing. Commercial Real Estate (CRE) comprises another significant portion. This split between C&I and CRE is a healthy sign of diversification within the commercial space.

Note: Values are estimated based on Q3 2025 total loan portfolio of $7.46 billion and Q2/Q3 percentages.

Solid capital position with a projected CET1 ratio of 11.5% in 2025.

A strong capital position is the bedrock of a stable bank, and Byline Bancorp's Common Equity Tier 1 (CET1) ratio-a key measure of a bank's ability to withstand financial stress-is robust. While the initial projection may have been 11.5%, the bank has actually outperformed this figure for most of 2025.

As of the end of the second quarter of 2025, the CET1 ratio stood at an even stronger 11.85%, which is a 7 basis point improvement over the first quarter of 2025. This level is well above the regulatory minimums and demonstrates disciplined capital management, which supports future growth and provides a cushion against any unexpected credit losses. It's a clear signal of financial resilience.

Established Chicago-area footprint provides stable core deposit funding.

The bank's deep roots in the Chicago and Milwaukee metropolitan areas are a significant strength, providing a stable, low-cost core deposit base that is crucial in a volatile rate environment. Byline Bank operates approximately 45 branch locations across these two metro areas. This physical presence translates directly into sticky, commercial-focused deposits.

Total deposits grew to $7.8 billion in the third quarter of 2025. More importantly, commercial deposits accounted for 46.9% of that total in Q3 2025, showing a strong relationship with the local business community. This high percentage of business deposits, combined with a Q1 2025 average of 23.4% in non-interest-bearing demand deposits, gives them a lower overall cost of funding compared to peers relying on more expensive wholesale funding. The local focus is a huge advantage for funding stability.

Byline Bancorp, Inc. (BY) - SWOT Analysis: Weaknesses

High concentration in commercial real estate (CRE) loans, a late-2025 risk.

Byline Bancorp's loan portfolio, which grew to $7.5 billion in the third quarter of 2025, shows a structural concentration in Commercial Real Estate (CRE) loans. This high exposure creates a vulnerability, especially as the late-2025 economic outlook remains uncertain for certain CRE sectors like office space.

The total CRE exposure represents approximately 34% of the bank's total loan and lease portfolio as of Q3 2025. While the portfolio is diversified internally, with 20% in owner-occupied commercial real estate (generally lower risk) and 14% in non-owner occupied commercial real estate (higher risk), this total percentage is a notable concentration risk for a regional bank.

Here's the quick math on the CRE breakdown within the Q3 2025 loan portfolio:

• Owner-Occupied CRE: 20% of $7.5 billion loan portfolio.
• Non-Owner Occupied CRE: 14% of $7.5 billion loan portfolio.
• Total CRE Exposure: Approximately $2.55 billion (34% of $7.5 billion).

This level of concentration means credit quality will have a relatively greater sway on earnings compared to larger, more diversified banks.

NIM (Net Interest Margin) pressure due to cost of funds.

While Byline Bancorp actually reported a strong Net Interest Margin (NIM) of 4.27% in Q3 2025, which was an increase of nine basis points from the prior quarter, the underlying cost of funding remains a weakness. The bank's NIM expansion was partly offset by higher interest expense on other borrowings.

The bank has been working to improve its deposit mix-total deposits reached $7.8 billion in Q3 2025-but the cost of deposits has historically fared worse than the peer group average for banks of a similar size. This structural funding cost puts constant pressure on the NIM, making it vulnerable to any future shifts in the interest rate environment that could increase the cost of retaining or attracting deposits.

The bank's reliance on higher-yielding commercial loans to drive its earning-asset yield, which was around 80 basis points above the peer average in Q1 2025, is what currently supports the strong NIM. But, if loan yields compress faster than funding costs decline, the NIM will quickly follow. That's the defintely risk to watch.

Limited geographic diversity, largely confined to the Chicago metro area.

Byline Bancorp's operations are heavily concentrated in a single metropolitan statistical area, which limits its ability to diversify against regional economic downturns. The bank is headquartered in Chicago and operates over 40 branch locations primarily throughout the Chicago and Milwaukee metropolitan areas.

As the second-largest bank headquartered in Chicago, this focus is a strength for market penetration but a weakness for systemic risk. A localized economic shock-say, a significant downturn in the Chicagoland commercial real estate market-would disproportionately impact the bank compared to a national competitor.

The bank's operational footprint is summarized below:

Efficiency ratio remains elevated, potentially above 60% for 2025.

The bank's efficiency ratio (non-interest expense as a percentage of total revenue) is actually quite strong, but managing expense growth is a constant challenge. The reported efficiency ratio for Q3 2025 was 51.00%, which is an improvement of 161 basis points from the prior quarter. The adjusted efficiency ratio was even better at 50.27%. This is a strong metric, not an elevated one.

However, non-interest expense for the third quarter of 2025 was $60.5 million, an increase of $916,000 from the second quarter. This increase was driven by a $1.5 million loss related to the extinguishment of subordinated debt, plus higher adjusted expenses due to increased incentive and health insurance costs. The core weakness here is the susceptibility to one-time or rising compensation costs that can quickly erode efficiency gains.

Managing this non-interest expense creep is critical to maintaining the competitive advantage of a low-50% efficiency ratio. If revenue growth slows, and these operating expenses continue to climb, the ratio will quickly move in the wrong direction.

Byline Bancorp, Inc. (BY) - SWOT Analysis: Opportunities

Strategic M&A (Mergers and Acquisitions) to expand into adjacent Midwest markets.

You're seeing Byline Bancorp execute a clear, disciplined M&A strategy, and the opportunity is to continue that momentum beyond the immediate Chicago area. They are already the second-largest bank headquartered in Chicago and are laser-focused on becoming the preeminent commercial bank there. The recent acquisition of First Security Bancorp, Inc. closed on April 1, 2025, bringing their total assets to approximately $9.9 billion. This move solidifies their base, but it also puts them right on the edge of the $10 billion regulatory threshold, which they are preparing to cross in Q1 2026.

The next logical step for growth is to acquire smaller, high-quality banks in adjacent Midwest markets like Indianapolis, Detroit, or even expanding deeper into Wisconsin beyond their current Milwaukee footprint. This expands the asset base and diversifies risk without straying from their commercial banking focus. Here's the quick math: a target with $500 million in assets would push them definitively over the $10 billion mark, giving them scale to absorb the associated regulatory costs, like the estimated $4.5 million to $5 million annual impact from the Durbin Amendment on interchange fees.

Increased demand for specialty financing as large banks pull back.

The market is ripe for a bank like Byline Bancorp that specializes in commercial and industrial (C&I) lending, especially as larger national banks tighten their credit boxes. Byline is already a top Small Business Administration (SBA) lender in the United States, which is a key specialty financing area. Their loan portfolio is showing strong organic growth, increasing to $7.5 billion in Q3 2025, a 5.8% year-over-year increase from Q3 2024.

The demand is clear: C&I loans represent the largest share of their portfolio at 40%, which is a 2 percentage point increase from the year-ago period. They originated a solid $264.5 million in new loans during Q3 2025 alone. This segment, which also includes equipment leasing solutions, is less susceptible to real estate cycles and offers higher yields, making it a powerful engine for net interest income (NII) growth. Simply put, small businesses still need capital, and Byline is positioned to provide it when others won't.

Deploy excess capital into higher-yielding assets as rate hikes plateau.

Byline Bancorp has built a fortress balance sheet, giving them significant optionality as the Federal Reserve's rate hike cycle plateaus. Their capital levels are robust, with the Common Equity Tier 1 (CET1) ratio surpassing 12% in Q3 2025. That's a strong position to be in.

Management is already deploying capital strategically. They refinanced $75 million in subordinated debt in Q3 2025, issuing new 6.875% Fixed-to-Floating Rate Subordinated Notes due 2035 to replace older notes, which lowers their long-term cost of debt. This capital strength allows them to:

• Increase organic loan growth (like the $114.7 million increase in net loans and leases in Q3 2025).
• Fund future, accretive M&A.
• Invest in higher-yielding securities or loan segments to maintain their expanded Net Interest Margin (NIM), which reached 4.27% in Q3 2025.

The disciplined capital management and strong profitability-with a Pre-Tax Pre-Provision Return on Average Assets (PTPP ROAA) of 2.25% in Q3 2025-means they have the dry powder to capitalize on market dislocations.

Digital banking investments to defintely capture younger, tech-savvy customers.

The bank's continued investment in digital capabilities is not just about keeping up, it's a direct play for deposit market share, especially among the younger, tech-savvy demographic. They completed a major online banking systems update, which is key to attracting and retaining these customers. This is a long-term efficiency play, too, helping them drive down their efficiency ratio, which improved to a strong 51.00% in Q3 2025.

The early results of these digital efforts are tangible in the deposit mix. Non-interest-bearing demand deposits-the cheapest form of funding-increased by $160 million, or 9% linked quarter, in Q3 2025. This indicates success in attracting sticky, low-cost core deposits, which is critical for margin stability. The goal here is to use a modern, efficient digital platform to complement their strong commercial relationship banking model, creating a lower-cost deposit base that fuels higher-margin lending.

Byline Bancorp, Inc. (BY) - SWOT Analysis: Threats

You're looking at Byline Bancorp, Inc. after a strong 2025, but a seasoned analyst knows a bank's threats are always tied to the economy's weakest links. For Byline, the main threats are a credit quality deterioration in their core loan segments, the persistent high cost of deposits, and the unpredictable nature of regional bank regulation.

The core risk is that the current economic stability proves temporary. If interest rates, which have been elevated, start to bite into the cash flow of commercial borrowers, Byline's strong credit metrics could quickly reverse. We need to focus on where the exposure is highest.

Persistent high interest rates increasing credit default risk in CRE and C&I

Byline's business is concentrated in Commercial and Industrial (C&I) and Commercial Real Estate (CRE) loans, which is great for yield but raises the stakes in a high-rate environment. As of the third quarter of 2025, the bank's total loan portfolio stood at approximately $7.5 billion, with a significant chunk tied to these commercial segments. The persistent high interest rates mean many borrowers face higher refinancing costs, which increases the risk of credit default (the borrower failing to make scheduled payments).

Here's the quick math on the exposure:

To be fair, the bank's credit metrics have been manageable, with net charge-offs (NCOs) at an annualized 0.43% in Q2 2025. Still, the total of criticized and classified loans and leases jumped by 80 basis points to 4.5% in Q2 2025. That jump, even if partly due to an acquisition, is a flashing yellow light on the dashboard. You defintely need to watch that $2.55 billion in CRE exposure closely for signs of stress.

Intense competition for deposits from larger national banks and money market funds

The fight for deposits is fierce, and regional banks like Byline are in the crosshairs of larger national institutions and high-yield money market funds. This competition forces the bank to pay more for its funding, shrinking the net interest margin (NIM) over time. While Byline has managed its deposit costs well-its average cost of total deposits was 2.27% in Q2 2025, only 10 basis points above the national average for its peer group-that gap is a constant threat.

The bank is working to improve its deposit mix, and non-interest-bearing demand deposits did increase by $159.6 million in Q3 2025, which is a positive. But if the Federal Reserve holds rates high, or if the market anticipates further cuts, the pressure to offer competitive rates on the bank's $7.8 billion in total deposits will remain intense. Losing low-cost commercial deposits, which made up 46.9% of the total in Q3 2025, is the real risk here.

Regulatory pressure on regional banks following recent instability

The 2023 regional bank instability created a long shadow, and while the regulatory environment is expected to ease somewhat in 2025 under the new administration, uncertainty remains. Regional banks are still dealing with the fallout, even if Byline's total assets of approximately $9.72 billion (Q2 2025) keep it below the threshold for the most stringent new capital rules, like the full Basel III endgame proposal.

The threat isn't a single new rule, but compliance burden and market perception. The FDIC's updated resolution plan regulations now apply to institutions with assets between $50 billion and $100 billion, but the general expectation of heightened scrutiny on risk management still affects all regional players. Any new, unexpected supervisory finding could be a costly distraction and hurt investor confidence.

Potential economic slowdown reducing demand for core commercial loans

Right now, the commercial lending outlook for 2025 is surprisingly positive, with commercial/multifamily borrowing and lending forecasted to increase by 16% to $583 billion nationally. Byline's loan portfolio growth of 5.8% year-over-year to $7.5 billion in Q3 2025 reflects this current optimism, especially in their core Chicago market.

But that's the consensus, and a realist knows the consensus can be wrong. The Mortgage Bankers Association still forecasts 'somewhat slower economic growth and a marginally weaker job market' in the years ahead. The threat is a sudden, localized slowdown in the Chicago metro area, or a national recessionary headwind that causes businesses to pull back on capital expenditures and loan demand to dry up. If that happens, Byline's ability to generate new, high-quality loans to offset maturing ones will be severely constrained.

Finance: draft 13-week cash view by Friday, specifically modeling a 10% default increase in the CRE portfolio.