BYLINE BANCORP, INC. (BY) stock intrinsic value fair value estimate & owner earnings analysis

Byline Bancorp is a Chicago-area commercial bank. It runs 44 branches in the Chicago metropolitan area and one in Wauwatosa, Wisconsin, and ended 2025 with $9.7 billion of assets, $7.5 billion of loans and leases and $7.6 billion of deposits. It lends to small and mid-sized businesses (commercial real estate, commercial and industrial loans, equipment leasing and SBA and USDA government-guaranteed loans) and funds itself with local deposits; commercial customers hold 43.0% of deposits and 85.1% of the non-interest-bearing ones, which is a cheap funding base. It has grown by buying small banks: Inland Bancorp in 2023 and First Security Bancorp on April 1, 2025. How we measured earnings. We start from operating cash flow, then remove swings in other assets and liabilities, remove stock compensation as a real cost, and deduct capital spending (about $4 million a year, too small to matter). Banks need two extra judgements. First, Byline originates government-guaranteed loans and sells them; the cash tied up in loans waiting to be sold swings from year to year, so we treated it as working capital and removed it too. Second, the accounting adds back the provision for credit losses as a non-cash charge, but for a lender it is a real recurring cost: net charge-offs were 0.39% of average loans in 2025, 0.47% in 2024 and 0.38% in 2023. We therefore deducted the provision when valuing the shares. On this basis, earnings per diluted share were about $3.37 in 2022, $3.10 in 2023, $2.44 in 2024 and $2.77 in 2025, and the anchor is the median of those four years, $2.94. We left out 2021 because the credit provision was unusually small that year ($1.5 million), and 2020 because of the pandemic credit spike. Growth. Owner earnings per share rose 15.8% in 2025 before this credit-cost adjustment; our base case assumes just 5% in the first year, so no reversal of a slowdown is being assumed. The 5% comes from a repeatable mechanism: the bank keeps most of its earnings and lends them out again at a return on equity of about 10.9% (2025), which supports earnings growth of about 5% a year for five years, then 3% for five years as it tapers. We charged the base case for the equity that growth requires, so the growth is not free. We did not credit new acquisitions, rate changes, share gains or management targets. After year 10 the deposit franchise is assumed to keep earning the same amount with no further growth. Base case: $57.6 per share. Bear case: $39.8. Bull case: $73.1. Bear case: Byline's loan book has real concentrations: about $1.1 billion of non-owner-occupied commercial real estate, $476.1 million of multifamily and $408.1 million of construction loans, mostly in the Chicago area, and non-accrual loans rose from $62.1 million to $71.3 million during 2025. In 2020 the credit provision jumped from $20.7 million to $55.9 million and net income fell about 34%. The bear case repeats that hit for two years (earnings 35% below the anchor, about $1.91 a share), then settles at $2.45, roughly the 2024 low, with no growth. Bull case: Net income for the first half of 2026 was $77.8 million against $58.3 million a year earlier, a 33% increase, with a lower provision ($13.4 million against $20.8 million). Annualizing that gives about $3.46 a share, which the bull case takes as the new starting level, growing 6% a year for five years and 4% for five more. Only two quarters support this, so we did not lift the base case to it, and the lower provision may not last. Change in view and risks. This is our first analysis of the company. What would make these numbers wrong: a commercial real estate downturn worse than 2020, a squeeze on deposit costs, or a loss of the gains from selling government-guaranteed loans ($22.7 million in 2025). We could not fully reconcile a few small non-cash items in the 2025 cash flow statement (about $0.35 million out of $140 million), which does not affect the result. Margin-of-safety price. The margin-of-safety price is $34, about 41% below the base case and below the bear case. The bank is stable but leveraged to the credit cycle and to Chicago real estate, so the margin of safety is wider than for a plain deposit-taker.