Thank you, Ben.

Good morning, everyone, and thank you for joining us today for the Byline Bancorp Third Quarter 2026 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 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 measure 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, we plan to participate in two investor conferences during the quarter, the Hubby Group Financial Services Conference in Orlando and the Piper Sandler Financial Services Conference in Miami, both in November. With that, I will now turn the conference call over to Alberto Paracchini, President of Byline Bancorp.

Thank you, Brooks. Good morning, everyone, and thank you for joining us to review our third quarter results. With me today are Chairman and CEO, Roberto Herencia, our CFO, Tom Bell, and our Chief Credit Officer, Mark Fusinato. In terms of the agenda for today, I'll kick us off with the highlights for the quarter, followed by Tom, who will walk you through the financials. I'll come back before wrapping up the call for questions. As always, you can find the deck for this morning on the IR section of our website, and please refer to the disclaimer at the front. Before we get started, I'd like to pass the call over to Roberto for his comments. Roberto.

Thank you, Alberto, and good morning to all. Thank you for spending a few minutes with us this morning. Another excellent quarter with notable positive developments. Financial results were solid and consistent. Quite a few records achieved this quarter. Key metrics were once again top quartile or top decile among our peer group. We increased our dividend during the quarter and continued to repurchase shares opportunistically. We also announced the acquisition of Illinois State Bancorp, and with that, The analyst community gets the certainty they've been so eager to obtain as to when we will cross the 10 billion threshold. Before passing the call back to Alberto and the team, I'd like to talk about these details. I want to spend a few minutes, as I usually do, talking about our people and leadership, which is, of course, what makes these results possible. Sadly, I first want to take a moment to remember our colleague Matt Robertson, who passed away in September. Matt was part of the Byline family for more than seven years and led one of our commercial real estate teams. He was an accomplished banker and a respected leader in the Chicago commercial real estate community. What stands out the most about Matt is the impact he had on the people around him. Matt was a mentor to many of our younger bankers and credit professionals. He was known for his positive attitude, his commitment to his colleagues and customers, and the energy he brought to Byline every day. I talk often about the importance of our people and the culture we're building at Byline. Matt represented so much of what we value. Relationships, mentorship, teamwork, and genuinely caring about the people around you. We miss Matt greatly and our thoughts remain with his wife, his children and all of Matt's family, friends and colleagues. We are grateful for the time we had with Matt and for the lasting impact he made at Byline and on so many of us personally. More broadly, I'm especially proud that Violent was recently named one of American Bankers 2026 Best Banks to Work For. This recognition is particularly meaningful because employee feedback is a central part of this evaluation. We work hard to build a culture where people feel connected to the organization, have opportunities to develop and build meaningful careers, and understand the important role they play in our success. We remain focused on developing our people, creating opportunities from within and making sure we have the leadership that's necessary for 10 billion and beyond. And we actually do. This leads directly to the leadership transitions and organizational changes we announced earlier this month, effective January 1st, 2027, Brogan Ptacin, Head of Commercial Banking, and Mark Fusinato, Chief Credit Officer, will retire at the end of this year after a combined 25 years of service to Bylane. Brogan has been instrumental in building our commercial banking franchise and strengthening our position in the Chicago market, while Mark has played an equally important role in strengthening our credit infrastructure and building the disciplined credit culture that is fundamental to how we operate. Both have also invested considerable time in developing the people around them. A condition to their retirement. I'm being playful with that last comment, of course, just a bit. We are incredibly grateful for their leadership and the lasting positive impact they have had here at Byline. We're delighted that Brogan and Mark will remain involved in advisory capacities for the foreseeable future with us. If we had an official Chicago Bankers Hall of Fame, these two individuals would be inducted without a wait period. As part of these transitions, we shared in an AK earlier this month the names of the name executive officers that will lead the reorganized commercial bank and credit functions. There are also many other promotions that cascade from these changes beyond the NEOs, including expanded responsibilities and even a swap or exchange of roles into C-suite leaders as part of our commitment to developing leadership. Singling out all of them would not be appropriate in an earnings call. The overarching message, however, is that these moves are intentional. giving talented leaders opportunities to lead different parts of the organization building broader experience and strengthening our executive bench as we cross the 10 billion threshold we have known for some time that these transitions are approaching and we've been deliberate in preparing for them to me that is what good succession planning looks like we are confident in the team we have in place and excited about what this next generation of leadership will bring to Byline. I am proud of the organization we're building together. These changes demonstrate the depth of leadership we have developed across the company and reinforce something I have said many times, our people and our culture are fundamental to our success. This team, our people in general, anchors the optimism and excitement I feel about Byline's growth prospects and our progress towards becoming the premier commercial bank in Chicago. With that, Alberto, I'll turn it back to you.

Great. Thank you, Roberto. Moving on to slide four on the deck, the third quarter combined strong financial results with several important milestones. We delivered record net income and revenue, expanded our net interest margin and grew deposits while maintaining strong capital levels. We also announced a definitive agreement to acquire Illinois State Bancorp and return capital to shareholders through a higher dividend as well as share purchases. All in all, a very productive quarter for Byline. Net income came in at $41.8 million, or $0.94 per diluted share, up from $40.2 million and $0.90 last quarter. EPS was up 4% link quarter and up approximately 15% from a year ago. Revenue reached a record $121 million, up 3% from the second quarter, with growth in both net interest income and non-interest income. These results translated into an ROA of 167 basis points, ROTC of just under 15%, and pre-tax preparation ROA of 245 basis points. Expenses totaled $59.8 million, and our efficiency ratio was 48.4%. While the ratio increased from the second quarter, it improved by 260 basis points on a year-on-year basis. Turning to the balance sheet, deposits grew $168 million, or 8.5% annualized, to $8 billion. Our loan-to-deposit ratio declined to 93.2% from 96.1% last quarter, and we used excess cash to reduce wholesale funding and manage the size of the balance sheet. Loans and leases declined roughly 1% to $7.5 billion as elevated payoffs more than offset strong origination activity. We ended the quarter with assets just below $10 billion and have flexibility to manage the balance sheet through year end. We expect to cross the $10 billion threshold in 2027, which would defer the impact of Durban until the second half of 2028. Moving to asset quality, credit costs for the quarter were $6.7 million, reflecting net charge-ups of $5.8 million and a small reserve bill. Net charge-ups came in at 31 basis points consistent with prior guidance. Non-performing loans increased 22 basis points for the quarter driven by two relationships, one government guaranteed and one commercial that moved to non-accrual status during the quarter. Our allowance increased three basis points to just over 1.5% of total loans. Criticized and classified loans declined to 3.1% from 3.9% last quarter, marking the third consecutive quarterly decline. Capital levels continue to remain strong. During the quarter, we repurchased approximately 522,000 shares, totaling $20.2 million. Importantly, we executed across all four of our capital priorities during the quarter, supporting organic growth, increasing our dividend, deploying capital towards M&A, and returning capital through share reach purchases. With that, I'll turn the call over to Tom, who'll walk you through the financials.

Thank you, Alberto, and good morning, everyone. Starting with our loans on slide five, total loans ended the quarter at $7.5 billion, down 1% from the second quarter. Origination activity was strong, with $362 million in new loans up $129 million, or 55% linked quarter. However, payoff activity continued and remained elevated at $396 million, up 17% linked quarters. Line utilization decreased to 57% from 61% last quarter, reflecting higher net repayment activity and the impact of $112 million of new line commitments added during the quarter. Looking ahead, we currently expect fourth quarter loan balances to remain flat as payoff activity and new business production are expected to largely offset. Turning to slide six. Total deposits were $8 billion for the quarter, up 2.1% or 8.5% annualized linked quarter. From a mixed perspective, growth was driven by interest checking balances and DDAs, partially offset by lower money market and saving balances. The solid deposit growth for the quarter allowed us to reduce our reliance on wholesale funding and improve our loan-to-deposit ratio to 93.2% from 96.1%. Deposit costs increased modestly for the quarter, up three basis points to 1.95%, while the cost of interest-bearing deposits increased five basis points to 2.54%. Turning to slide seven. We had record high net interest income of $103.7 million, up 3% from the prior quarter, primarily due to higher income from investment securities, reduced wholesale funding costs, and the additional day in the quarter. This was partially offset by higher deposit costs. The net interest margin increased five basis points to 4.33%. The improvement reflected higher yields on cash and securities and lowering borrowing costs, partially offset by higher deposit costs. Excluding accretion, the NIM increased 10 basis points per quarter. Given our asset sensitive position, we are well positioned to grow our net interest income in a rising rate environment. That said, given the rate outlook and the management of the balance sheet to stay under $10 billion per year end, we expect net interest income to be in the $103 to $105 million range for the fourth quarter. Turning to slide eight. Non-interest income totaled $17.3 million in Q3 and increased to 3% compared to the second quarter. The increase was primarily driven by higher BOLI income. We also had higher swap income and wealth management income partially offset by lower servicing asset valuation. Our guidance for Q4 remains unchanged with gain on sale revenues at $5.5 million with total non-interest income to be in the $14 million to $15 million range. Turning to slide nine, expenses came in at $59.8 million of 6% from the prior quarter, primarily due to higher incentive compensation, partially offset by lower marketing expenses. Non-interest expense to average assets continued to move lower at 2.39% and improvement of eight basis points year over year. Looking ahead to Q4, Our non-interest expense guidance will be higher at $62 million to $64 million, which reflects higher incentive compensation, benefit costs, and marketing spend. Notwithstanding the higher expense guidance for the fourth quarter, we still believe that our full-year efficiency ratio will be at or below 50%. Before moving to credit, I want to briefly touch on taxes. During the third quarter, we purchased tax credits, which reduced our effective tax rate to 23.3% from 25.7% last quarter. Looking ahead to 2027, we currently estimate our annual effective tax rate to be in the 25.5% range. Turning to slide 10. Net charge loss for $5.8 million or 31 basis points annualized compared to $4.4 million or 24 basis points last quarter. Criticized and classified loans declined to 3.1% of total loans from 3.9% last quarter. And our allowance for credit losses was $113 million or 1.51% of total loans of three basis points from last quarter driven by an increase in the individually assessed category. Moving on to capital on slide 11. Capital ratios increased during this quarter and remain well above regulatory requirements. CET1 increased 37 basis points to 13.29%. Our TCE ratio was 11.12% at September 30th, down 24 basis points linked quarter due to higher AOCI and the impact of share repurchases, but up 34 basis points year over year. As a result of our strong capital position, We continue to return capital to stockholders. During the quarter, we repurchased roughly 522,000 shares of common stock and increased our quarterly cash dividend by 16.7% to 14 cents per share. Our capital position is a source of strength and continues to provide flexibility to fund organic growth, return capital to stockholders, and pursue strategic opportunities. With that, Alberto, back to you.

Thank you, Tom. So to wrap up, we're pleased with this quarter's results and remain focused on executing our strategy. Our priorities are straightforward. Grow customer relationships, deliver profitable growth, and invest in the business while preserving a strong balance sheet. We do all of that while maintaining credit discipline, close portfolio monitoring, and balancing risk with reward. Looking ahead to the fourth quarter, our pipelines remain healthy and we're confident in our ability to serve customers and compete effectively in the market. Our capital position gives us flexibility to support growth, invest back into the business, and return capital to shareholders. Looking ahead, we're prepared to operate above $10 billion in assets and welcome Illinois State Bancorp's customers, employees, and shareholders to byline in 2027. We believe the combination will strengthen our deposit base, expand our market presence, and add new customer relationships. We remain optimistic about the opportunities ahead and focused on delivering long-term value to our shareholders. Before we open the call for questions, I'd like to recognize Mark Fusinato, who is here today participating in his 25th and final quarterly earnings call before retiring. Mark joined Byline in 2019 and has served as Chief Credit Officer since 2020. During his tenure, Mark has made significant contributions to our company. Our processes and practices are stronger, our credit culture has matured, and the relationship between our lines of business and credit has become a competitive advantage. I am fortunate to work with Mark and grateful for his friendship and support over the last seven years. On behalf of Byline, our board, and all of us here, thank you for your contribution and years of service. We wish you well in retirement. I'd also like to take a moment to introduce Scott Hawthorne, who will succeed Mark as Chief Credit Officer at the beginning of 2027. Scott joined Byline three and a half years ago and is currently Deputy Chief Credit Officer. He brings more than 20 years of banking and credit experience. having worked prior to byline at MB Financial and Fifth Third. Finally, thank you to all of our employees for their commitment to customers and their contributions to another strong quarter. And with that, operator, we can open the call up for questions.

We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first call from the line of Nathan Race with Piper Sandler.

Hey guys, good morning. Thanks for taking the questions and congratulations on your upcoming retirement, Mark. Wishing you all Wishing you all the best in your next chapter.

Appreciate it.

I wanted to just start on just the strong core deposit growth in the quarter. Obviously, it helps you kind of pay down some wholesale funding in the quarter. And just maybe curious, Alberto, if you can just unpack some of the drivers. Is it just some typical blocking, tackling, pulling market share? And to what extent do you have kind of visibility into kind of additional kind of core deposit gathering at this clip just to maybe continue to work down some wholesale funding sources and drive and support them in.

Yeah, good question, Nate, and good morning. So obviously, when you annualize the growth this quarter, it looks super solid at 8.5%. The growth was actually a bit higher because we also repaid, Tom, roughly around $80 million in broker deposits. So net, it was really double-digit growth. Joking, trying to put a joke aside, but I wish we can continue to grow at that type of rate going forward. But in all reality, I think the growth this quarter was just simply blocking and tackling. As you know, we are more commercially focused. So as we bring in... New banking relationships, they can be, you know, lumpier coming in. And I think that's the short answer to your question. It's just we added, we continue to add banking relationships. We had a good quarter of that. If you look at the changes in the balances, it was driven by interest checking, you know, Non-interest-bearing obviously moved higher also, which certainly helped. So the mix remained attractive. But in terms of going forward, Nate, listen, as you know, we've always been very focused on the right-hand side of the balance sheet. We believe that fundamentally that's really where the value of a financial institution lies. and, you know, we'll continue to always be prioritizing, you know, deposit growth going forward. And again, you know, in terms of what's driving it is, again, just the focus on the strategy, you know, customer by customer, the segments, you know, and certainly the commercial banking orientation. So hopefully I gave you some color there. Hopefully that answers your question.

Yep, that helps. And maybe a question for Tom. I know you don't really guide a margin, but if we do get a couple more Fed rate hikes as the forward curve implies, just any thoughts on betas between both loans and deposit costs as we move into 4Q and the first part of next year?

Sure. Hi, Nate. Yeah, on the loan side, just hit that first. We continue to have cash flows and runoff in the, I'll call it, $350 million in fixed rate loans that would reprice. Obviously, the book is a little bit over 50% floating rate, so that should give you some guidance on the betas there. On the liability side, we haven't seen much to date for interest bearing deposits and total deposits, but generally, probably in that 30% to 40% range is the beta. and if you include CDs you know I think about it more like 40 to 50 percent.

Okay got it and just one last one for me. Just I appreciate the guide on kind of flat loans for the fourth quarter just given some of the payoff headwinds but you know as you look out to next year and just given that we're perhaps kind of in the latter innings of some of the recycling of acquired loans that we discussed last quarter and maybe also the latter innings of some of the kind of the COVID era CRE loans paying off to some degree. Just is there anything that you see on the horizon, Alberto, that would cause you guys to not achieve kind of mid-single digit growth in loans next year, notwithstanding the acquisition impact?

Really good question, Nate, and thanks for asking it. And I know you were the one that asked the same question last quarter. And I think, look, we probably underestimated a little bit how strong the payoff activity was going to be this quarter relative to what we told you in 2Q. That being said, it's always hard to forecast that variable perfectly. Sometimes we get it right, sometimes we don't. Certainly this quarter was one of those. That being said, if you look at the origination activity, the origination activity remains really good. We're seeing plenty of opportunities, credit demand. looks okay broadly in the market. So we still, when we look at that and when you normalize a bit for the elevated payoff activity heading into next year, I think that kind of mid single digit range, obviously adjusting the base to reality and also to the reality that that will be managing the balance sheet here over the last quarter of this year to make sure that we stay under $10 billion through 2026. We still feel good about that mid single digit range into 2027. That being said, we're in a rising rate environment. You've heard me comment in the past about real estate transaction volume being lower, the market being competitive. That's likely to be the case in 2027 with higher rates. Also, you have to factor in, it's not just prime or SOFR, it's really the backup and treasury rates, which will have an impact to some degree on Cap rates and valuations, and that's likely going to have an impact on transaction activity going into next year. So with that caveat and all the other uncertainties that you well know and that exist in the environment today, I still think that for us, you know, that single mid-digit, you know, kind of growth rate in terms of loans is probably the right place.

Okay, great. I appreciate all the color. Thanks, guys.

I'll step back. Your next call comes from the line of Brendan Nozel of Hopti Group.

Hey, good morning, everybody. Hope you're doing well. Hey, Brendan. Hey, maybe just starting off here on kind of your recent M&A announcement. I know it's a little stale at this point, but could you just give us a little bit of background on how the Illinois State deal came to be and just kind of one or two things that you're most excited about for that transaction?

It came to be through a meeting and getting to know the owners and the leadership of that institution earlier in the year. We certainly knew of them. We knew who they were. I personally didn't know them personally, but we had been tracking that institution for some time. and we had the opportunity to meet and it was a situation where you had the leadership team there had built that organization over roughly a 40-year period and we're looking to find a good home for the franchise, the customers, the employees, the relationships that they had built over that period of time and Brendan, as we've You know, conveyed and talked about in the past. We think we are a really good home for those types of situations. And this is just one example, very similar to some of the transactions that that we've done here in in the past. So that was the gist of it. I can tell you that it was relationship driven. This was not a competitive We had a meeting of the minds. We felt we were a good fit for each other and we worked on trying to get to an outcome that certainly was good for both parties and we think we were able to do that. So that's in context, the background on the transaction. In terms of what it adds It solidifies our market presence in certain parts of the city where we are just not there. It adds customer relationships, and as always, it's a source of core deposits and funding to the bank.

Yeah, that's super helpful. Second one for me, just kind of sticking on this theme. It's just been a really accurate period for M&A, kind of in and around the state of Illinois over the past couple of months. You obviously got kind of your bite at that with the deal that we just discussed. But as you look at the M&A landscape, are there still potential partners that you think could come to market in the near to medium term? Or has the pipeline for potential partners kind of in your markets depleted somewhat?

No, I think there's still opportunities there, Brendan. I think, you know, as the usual wording that people use to describe, you know, kind of the M&A environment, I mean, I think there's active chatter. I think, you know, for us, it's just sticking to our knitting. looking to do transactions that make sense, that are created through the franchise, that hopefully with partners that we like and that where they're looking to partner and put their institution with a partner that can provide them with just better capabilities and You know, a home for the business that they've built. So I think, you know, look, the chatter in the marketplace continues. And I think I would say I think the environment is constructive.

Fantastic. Thanks for taking my questions.

Your next call comes from a line of Damon Del Monte of KBW.

Hey, good morning, guys. Hope everybody's doing well, and thanks for taking my questions. Just wanted to ask on the outlook for non-interest income, Tom, could you just kind of help us connect the dots for the range that you gave of a 14 to 15 off of this quarter? I'm guessing there are some, I think you called out a couple one-time items maybe this quarter that kind of would get us down to that lower level?

That's correct, Damon. The bully income was a one-time event, so That kind of brings us back to normal operating levels.

Yeah, so that was like a couple million maybe?

A little over a million dollars, yes.

A little over a million dollars, okay. All right, great. And then on the expense side, you know, the list from this quarter, is that just kind of like year-end accruals and, you know, anything else particularly driving that?

That's correct. Year-end accruals and then some of the marketing campaigns that we maybe didn't do in the third quarter that we anticipate in the fourth quarter, the timing of those expenses. So the marketing expenses can be a little bit higher in the fourth quarter.

Got it. Okay.

And then if I could add to what Tom said, I think when you look at our performance, obviously performance this year has been super solid. So what you're seeing in terms of the fourth quarter is aligned with that in terms of the higher incentive compensation.

Got it. It makes sense. Yep. Done a good year. And then just one more quick one on credit. You know, I think you called out a couple loans that drove the NPA increase this quarter. Any color on those? Maybe size or industry or anything like that?

Hi, Dan. Mark Fusinato. So one of them was in the solar industry, and we expect that one to hopefully be resolved sometime early next year. We're well-reserved against that one. And the other one was a CNI credit that involved a company that does purchase of distressed credit card consumer debt and these are both long-term customers at the bank. So these things occur once in a while. We've been tracking them for a long time and we're properly reserved against both of those situations at the present time.

Okay, great. That's all that I had. Congrats again, Mark, and thanks for taking my questions.

Great. Thanks, Damon. Thank you.

Your next call comes from the line of Daniel Tamayo of Raymond James.

Yeah, thank you. Good morning, everybody. Good morning, Danny. Yeah, maybe first, just curious, kind of, as we think about the crossing of the $10 billion and the actions that you're taking to stay below in 2026, is there any kind of I think so, Danny. You know, we've been kind of conservative on any bond purchases right now just because we don't want to go over.

So that's certainly an area where we're a little light on a percentage basis and you would expect in the first quarter that that would change.

Okay. Thanks for that, Tom. And then can you give a little bit of color around the loan sales in the third quarter? I mean, just looking at the line items, it looks like it came from construction and maybe CNI, but just curious where you were selling and then just thoughts if that

you know it was a one-time event or there's some potential for that to continue sure so the bulk of those sales are the government guaranteed loans that we sell every quarter that that's something we disclosed in the loan side this time because there were some SAG assets that were sold and you know some other loans that other banks took a participation so to speak so that those are small pieces in CNI but The bulk of the sales are the SBA sales.

Okay. So that's kind of regular way stuff, but it was just elevated in the quarter is the way to think about it?

Yeah. Yeah, I think we highlight, Danny, I think I would emphasize just The one that ultimately matters a lot is really the government guaranteed, you know, kind of recurring government guaranteed loan sales. You can think of the other ones as really not having very material economic impact in terms of the P&L.

And how much were those, Alberto?

Do you remember?

It's just the... I'm sorry, what's the question? The delta between the... Well, we sold like $70 million, $71 million of SBA loans. The residual is SAG assets and a couple loans we sold to participations. It's about $30 million. $30 million.

But I think that's the point.

These are not like asset sales where we're taking a significant loss or a gain that we're, as part of a business structure, it's just operating balance sheets.

Okay. And then lastly, if I'm looking at this correctly, the purchase accounting accretion came down quite a bit in the quarter. Just curious if you're expecting a rebound in that level from a scheduled perspective in the fourth quarter.

I mean, it's less than a million dollars a quarter. I would think it's We've given guidance in the past, and the numbers are so small now, at least excluding any future transactions, which we haven't really disclosed yet. So more to come on that, but it's a couple million dollars, you know, currently for 27 in total.

Okay, so it's that we're still running off in these levels. There was nothing unusual in the third quarter in terms of?

I think the point that we tried to highlight, Danny, is like if you just look at the margin execution, obviously the growth in the margin for the quarter was more significant than it was with accretion included. I think accretion was like roughly five basis points. Execution was like ten basis points, which for a quarter where, yes, rates increase, but that increase happened very much towards the latter part of the quarter, so that's still not baked in. So we still think that Tom's comments in his remarks, it's a nice tailwind going into the fourth quarter and 2027.

Understood. Okay. Well, thanks for all the color, Alberto and Tom. Appreciate it.

You bet. Thank you, Danny. Your next call comes from the line of Brandon Rudd with Stevens.

Brandon? Hi.

Morning, Brandon.

Your next call comes from the line of Brian Martin with Breen Capital. Your line is open. Please go ahead. Hey, good morning, guys. Hey, Brian.

Good morning.

Thanks for all the insight thus far. Just a couple for me. Just, Tom, on the September, do you have a sense for this? Is there a big difference in the September margin exit versus what it was for the quarter? Just trying to gain some perspective on the timing of those wholesale payoffs in the quarter. If it had an impact or is it pretty, the average for the quarter is a pretty good base?

Pretty consistent, you know, averages over quarters. Some of the payoffs that did happen, happened in the middle part of September, so I would say generally, yeah, the margin's pretty much consistent on average versus period end.

Okay. Thanks for that. And then just on your outlook, Alberto, you suggested, you know, as you have in the past on the real estate, you know, if we are in a little bit of a rising rate environment, that may tail off a bit, but Your guide or comfort level still seems to be in that mid-single-digit outlook in the coming quarters. Does C&I make up for that potential slowdown in real estate, and that's how we should think about where the growth is in the coming quarters, more on the C&I side and maybe a little bit less real estate? That's kind of your outlook today that can overcome it?

Yeah, I still think we're... It's not to say that we are deliberately trying to reduce our CRE book. We are not. In fact, if you've tracked kind of our CRE concentration ratio today, we're probably at a pretty low point, which means we have ample capacity to grow that category. I'm just cautioning against If you think about the beginning of this year and what market expectations were in terms of rates, it was for lower rates. I think a lot of people on the commercial real estate space were anticipating, given the fact that rates are going to trend lower, properties were going to come to market, transactions were going to come to market, and activity overall in terms of financing that was going to increase. I can't point to anything now other than just, you know, look, we've had a significant backup in long intermediate and longer term rates. And that's likely to have, you know, some impact, you know, on projects and overall activity in real estate next year. That being said, as you well know, the environment can change very quickly. There are, you know, and many more. So I'm just highlighting that. But to answer your question in terms of our our business in general, you are going to see it's really more broader than just say CNI. We expect that we'll see growth coming from the different business lines that we have that constitute that. So CNI, so that's our bread and butter commercial banking business, our sponsor business, the SBA business, unless we get into an environment where we're seeing are significantly higher rates that are likely to impact that originations in that business. I mean, I think activity there remains solid. And then lastly, our leasing business there as well. So leasing this year has been probably a little slower than in the past. As you know, that's a book that tends to... Repay very quickly because it's just the nature of that business. So, you know, that's an area also that, you know, we anticipate that going into next year, capital spending continues to remain solid, demand for, you know, essential use equipment of the type that we finance, you know, continues to be, you know, Good, so that's a business that we anticipate also can grow next year.

Okay, thanks, Alberto. Sorry if I wasn't clear. Your point is what I was suggesting, is that if real estate does potentially slow a little bit, it sounds like you've got some pretty good runway in these other areas to kind of offset that if it does happen, and we'll see if it does. But thanks for the clarification on that and the bit of color on the other segments that can help out on that discussion. Maybe just the last for me was the efficiency ratio and expense management has been great. Just kind of wondering how you're thinking about operating leverage in 27 versus 26 and just how to think about that given certainly the inflationary costs and whatnot and how to balance that with such a great level where it's at today.

That's a great question. I think we still, again, want to focus on revenue growth over expense growth, so having operating leverage there. We're still working on the numbers, Brian, so more to come on that, but generally speaking, we want revenue growth to exceed expense growth.

It's a habit, Brian, in terms of... This is not something that we focus on this quarter and then we don't talk about it or focus again. I mean, it's constant. We want to continue to drive the efficiency. You have a revenue component there that impacts it, but we want to continue to drive that cost-to-asset ratio down. So we are... remain very focused on that. Some of that is just scale as we continue to grow the balance sheet. We want to make sure that that growth translates into better scale, but it's a habit and it's a constant source of focus for us. Got you.

Okay. Well, you're doing a great job at it, so we'll stay tuned, and thanks for taking our time.

Thanks, Brian. Thanks, Brian. Your next call comes from a line of Brandon Rudd with Stevens.

Morning. Sorry about earlier. I'm not sure what's happening there. I have two questions. Just the first one, just to clarify, Tom, the $350 million of fixed-rate maturities, is that per quarter? and then what how how do those roll off yields compare to new origination rates?

Sure, yes, that's for the quarter. That includes leasing and the rate is call it 515 ish. So we, you know, think about 7%, you know, seven and a quarter for yields. Okay, got it.

200 basis points or so. Okay, perfect. Thank you. And then just one on the buyback with the deal announced earlier this month. Are you restricted from repurchasing additional shares until that closes, or are you still open for more buybacks here in the fourth quarter? No? Okay, perfect. Got it. Okay. Thanks for taking my questions.

Thank you, Brandon.

If you would like to ask a question, please press star 1 to raise your hand. Your next call comes from the line of Kenneth James of Stonex Group.

Good morning, gentlemen. Thanks for taking my question. Yeah, Kenneth, good morning. Yes, I just kind of wanted to circle back to kind of the balance sheet and kind of growth expectations. I mean, the main thing I'm trying to wrap my head around is the degree of time that you've kind of been managing these elevated payoffs and also around the $10 billion number. I mean, how long does it take to kind of get back up to a normal growth range? I mean, I guess I have a natural kind of inclination that once you get past the end of the year, that the balance sheet could kind of behave like a coiled spring, you know, kind of back up to a mid-single-digit growth rate. And I'm just wondering... You know, is that a fair assumption or does that need to be tempered? I'll let you answer that part first.

Sure. I think we think mid-single digits is appropriate as we move forward, you know, X, N, E, M, and A transaction that we're going to close. So we've been operating in that level. Again, line utilization was down for the quarter. That's kind of not a normal thing that happens, so we expect that over time to move up. and that would certainly give us positive loan growth if we would have had line utilization unchanged quarter over quarter. So I think generally speaking at mid single digits is kind of where we're operating.

Okay. And then in terms on the deposit side and kind of the rising rate environment, how do you guys manage your deposit costs in terms of how much of the deposit base is centrally managed on a rate sheet versus link to an index and automated versus negotiated individually, just generally speaking.

We have pricing committee meetings that meet weekly and we review the competition. We look at our balance sheet needs and we set rates based on that. We have standard rack rates and we offer promotional rates from time to time in the marketplace. and there's certainly, depending on the size of the deposit base, there may be some exceptions given, but generally speaking, it's rack rate type pricing. There are some index price products, like for example, instead of doing brokered CDs, we do brokered money markets, so we did that for balance sheet management purposes, and so that's indexed to a Fed funds rate or a SOFA rate.

Okay, and then in terms of betas that we might see now versus last time, and, you know, what's kind of assumed in your sensitivity modeling, I mean, are they similar? I mean, kind of the 40, 50% total deposit beta number you mentioned, I guess I kind of have an inclination that if we just get three hikes at three meetings that, you know, betas could be managed lower than, you know, 500 basis points was last time. is that a fair assumption or in line with your thinking the market would allow you to do that or is last time is a better assumption?

We think more to come on that we'll have to see how they behave but generally speaking at least to date they seem to be reverting back to the normal quotes that we gave on betas as the Fed was moving in that cycle up the last 100 basis points really hurt banks you know all banks and I think it was because of the you know obviously the liquidity events that were going on at the time I mean we've been able to bring back our cost of funds from that level even though the Fed was you know on hold for some time here our margin expanded over the year and you know I think we're planning on the 40 to 50 that we already disclosed but we'll certainly defend our our deposit base and our customers and if we have to go higher we will but today we aren't seeing it in the marketplace

Ken, every cycle is different. I wish we were perfect on this, but there's just a lot of uncertainty on that topic. History can help you, can certainly give you ranges in terms of how depositors are going to behave, but to Tom's point, we can look back to the last and so on. And then, you know, customers woke up, people became much more sensitive and you saw, you know, how banks reacted to that. The reality of this is, you know, even though we talk about uniformity and betas, people talk about deposit betas, the betas for interest bearing deposits, The reality is it's just a mix of betas. We have certain pockets of a portfolio that are more rate sensitive and therefore the betas are going to be higher. They'll react quicker than we have some other parts of the Bossett book that are not going to be that sensitive and are not going to react very quickly to changes in rates. How all of that comes out, I think to Tom's point, that's our view today, but obviously that's subject to some degree of uncertainty because this hike, like all other hikes, tend to be a little bit different from the previous one.

Okay, thank you very much for the call, gentlemen.

You bet. Thank you. Your next call comes from a line of Brendan Nozel of Hupti Group.

Hey, guys. Just want to circle back to the cost conversation real quick. Get the guy for the fourth quarter. It sounds like some of those things could be transitory or push from the third quarter. And I'm just asking because I'm wondering if the full $62 to $64 million in the fourth quarter carries through into early 2027 or if there is some kind of transitory cost that could fall out of the run rate at the turn of the calendar.

Good question. You're right. It's This is, you know, December's, you know, the fourth quarter estimate. We expect the cost to come down in the first quarter. Not really ready to give guidance there yet, but the incentive comp is driving the higher expense base for Q4 guidance.

Perfect. Thank you. Your next call comes from the line of Nathan Race of Piper Sandler.

Yeah, thanks for taking the follow-up. Just going back to buybacks, You know, pretty strong activity there. I think it's maybe the second highest level of buybacks in a quarter from what we've seen over the last handful of years. And, you know, that's with the stock trading kind of, you know, near kind of all-time high. So, you know, just curious if there's anything to read into that in terms of just maybe how consistent, you know, buybacks to a pace of the degree we saw this quarter can be kind of a more continuous component to your excess capital management strategy, just given, you know, how strong your capital levels are and which still probably provides flexibility for acquisitions to the extent they materialize going forward.

I think, Nate, if you think, I would put it in the context of kind of the capital priorities that we lay out in terms of supporting organic growth. That's from a, from whether you measure it from a earn-back perspective or you measure it from kind of just roughly a yield perspective, that's probably the top use of capital. So first and foremost, supporting that. Second, over time and this past quarter, you saw us do that in terms of having be able to do consistently over time dividend increases that are, call it, very sustainable. But that's an example of something that, again, we did this quarter. Thirdly, in this quarter, we had the opportunity to do that is having enough capital and putting that capital to work in M&A transactions. And then you have the safety valve at the end, which is the buyback. And when it comes to the buyback, It's not necessarily buyback at all costs. We're not in a situation where you can think about some of the largest banks in the country where they have really no other use other than to buy back. We have options in terms of what to do with the capital. So we're going to be sensitive to what that buyback yield is, what the earnback is on a buyback relative to and the other uses that we potentially have. So hopefully that frames it and gives you a sense.

Yeah, that's helpful. Thank you for that, Alberto. And just maybe one more for Tom. You mentioned, you know, 50% of the loan book is floating. Do you have the mix between Prime and SOFR there?

It's in the deck. It's in the deck, Nate.

Okay. Sorry, I didn't catch that.

Thank you for your questions today. I will now turn the call back over to Alberto Paracchini for any closing remarks.

Thank you for joining us this morning. We appreciate your continued interest and byline. I hope you all have a happy Halloween, happy Thanksgiving, and a happy start to the holiday season, and we look forward to talking to you again in the new year. With that, that concludes the call. Thank you.

This concludes today's call. Thank you for attending. You may now disconnect.