Byline Bancorp Inc (BY) 2021 Q1 法說會逐字稿

Good day and welcome to the Byline Bancorp First Quarter 2021 Earnings Conference Call. (Operator Instructions) Please note that this event is being recorded. I would now like to turn the conference over to Tony Rossi of Financial Profiles. Please go ahead.

Thank you, Cole. Good morning, everyone, and thank you for joining us today for the Byline Bancorp First Quarter 2021 Earnings Call. We'll be using a slide presentation as part of our discussion this morning. Please visit the Events and Presentations page of Byline's Investor Relations website for access to the presentation. Before we begin, I'd like to remind you that this conference call contains forward-looking statements with respect to the future performance and financial condition of Byline Bancorp that involve risks and uncertainties, including the impact of the COVID-19 pandemic. Various factors could cause actual results to be materially different from any future results expressed or implied by such forward-looking statements. These factors are discussed in the company's SEC filings, which are available on the company's website. The company disclaims any obligation to update any forward-looking statements made during the call. Management may refer to non-GAAP measures which are intended to supplement but not substitute for the most directly comparable GAAP measures. The press release available on the website contains the financial and other quantitative information to be discussed today as well as the reconciliation of the GAAP to non-GAAP measures. And with that, I'd like to turn the call over to Alberto Paracchini, President of Byline Bancorp.

Great. Thank you, Tony, and good morning, everyone, and welcome to our first quarter earnings call. Thank you for participating in the call this morning. And joining me on this call are Roberto Herencia, our Executive Chairman and CEO; Lindsay Corby, our CFO; and Mark Fucinato, our Chief Credit Officer. As is our normal practice, I'll start the call with a summary of our results and provide you with highlights for the quarter before I turn the call over to Lindsay, who will walk you through our financials in more detail. After that, I'll come back with some closing remarks before we open the call up for questions. As always, you can follow our comments with presentation materials you can find on the Investor Relations section of our website.

Overall, we had a very productive first quarter. Net income was a record $21.8 million or $0.56 per share. This was up substantially, both compared to last quarter and on a year-over-year basis. Profitability and return metrics were excellent across the board. ROA came in at 134 basis points, while ROTCE was 14.86%, both record levels for the company. Pretax pre-provision ROA came in at 206 basis points and was up from the previous quarter and at the highest level over the last 5 quarters.

One highlight for the quarter was our strong participation in round 2 of the PPP program, which is summarized on Page 4 of the deck. We continue to support both existing small business customers as well as new customers drawn in by the positive experience of working with a relationship-oriented bank in the market. We have approved more than 2,400 loans totaling $330 million during the current round. And when combined with the first round, we processed over 6,600 loans totaling $965 million. We also remain active in helping customers navigate the forgiveness process with $173 million in loans forgiven during the quarter. All in all, an excellent job by our bankers in supporting our small business customers and their employees.

Economic activity continued to pick up this quarter, and our asset base increased by 5.6% to $6.8 billion. Outside of originations related to PPP, we had a good quarter of business development with $152 million of new originations, with strong contributions coming from all areas of our commercial banking platform, inclusive of our leasing business. Loan balances excluding PPP increased during the quarter, which is notable given PPP activity, the high level of liquidity built up among our commercial clients, and the fact that the first quarter tends to be a seasonally slow period for us. On a year-over-year basis, new loan originations increased by 24%. Our government-guaranteed lending business also had a strong quarter of production with $112 million in closed loans which was, as expected, lower than the fourth quarter but up $32 million over the same period a year ago. Premiums in the secondary market remain at record levels.

On a year-over-year basis, our net gains on sales of loans increased 74% to $8.3 million. On the deposit side, we saw continued strong inflows of commercial deposits stemming from the addition of new relationships and the buildup of liquidity among existing commercial clients. Our deposit mix remains outstanding with DDAs now representing 40.1% of total deposits and core balances exceeding 90% of deposit balances. The improved mix helped us to drive our cost of deposits lower by 3 basis points to 12 basis points at the end of the quarter, which allowed the margin to remain stable with deposit costs helping to offset the impact of increased liquidity and lower securities yields. Asset quality improved with both NPLs and NPAs declining from the prior quarter. Reserve levels remained solid, with the allowance representing 1.47% of loans and 1.71% of loans, excluding PPP. Net charge-offs remained stable at 47 basis points, and our coverage improved to 177% of nonperforming loans. Classified loans also declined from 2.7% last quarter to 2.4% at the end of the quarter.

Capital remains strong with CET at 12.1% and total capital of just under 16% at the end of the quarter. Combined with our strong financial performance, we were well positioned to return capital to shareholders during the quarter when we repurchased approximately 333,000 shares of our common stock. Our balance sheet strength positions us well to support organic growth, return capital to shareholders and pursue M&A opportunities.

Turning over to Slide 5, total deferrals declined by $46.2 to $54.4 million and now represent 1.42% of loans, excluding PPP. Deferrals in the government-guaranteed portfolio stood at $34.7 million, a decline of $40.8 million from the prior quarter. Nearly half of the deferrals outstanding consist of loans to borrowers in accommodation and foodservice industries. Please refer to the appendix for more detail of loans to COVID-affected industries.

And with that, I'd like to turn over the call to Lindsay, who will walk you through our financials.

Thanks, Alberto. Good morning, everyone. Thanks for joining us today. I'll start with some additional information on our loan portfolio on Slide 6. Our total loans and leases were $4.5 billion at March 31, an increase of $114 million from the end of the prior quarter, which was primarily due to new originations of PPP loans, although we did have a little bit of growth outside of the PPP portfolio. Our originated loan portfolio increased by $181 million or $82 million when PPP loans are excluded. We saw broad growth across our commercial, commercial real estate and equipment leasing, which helped offset the continued planned runoff in our residential mortgage loan portfolio. When PPP loans and residential mortgage loan portfolio are excluded, our originated loan portfolio increased 13% over the past year, which reflects the growth in our core commercial client base. The growth in the originated portfolio during the first quarter was offset by a decrease of $67 million in our acquired loan portfolio, including $20.4 million in resolutions in the acquired impaired portfolio. Excluding PPP, we had $152 million of new originations in the first quarter, which was partially offset by $123 million of payoffs.

Turning to Slide 7, we'll look at our government-guaranteed lending business. We had another very strong quarter of production with $112 million of loan commitments. At March 31, the on-balance sheet SBA 7(a) exposure was $442 million, including $50 million of which is guaranteed by the SBA. The USDA on balance sheet exposure was $88 million, of which $51 million is guaranteed. While the outlook for a stronger economic recovery is improving, we believe it is prudent to continue increasing our coverage on this portfolio as these borrowers begin to return to regular payment status from deferrals and subsidies. Accordingly, our allowance as a percentage of unguaranteed loan balances increased to approximately 9% at March 31, up from 8.6% at the end of the prior quarter. The SBA continued to introduce new programs designed to support the borrowers most impacted by the pandemic. This includes the $28.6 billion Restaurant Revitalization Fund, which will begin accepting applications for grants targeted to businesses with the primary purpose of serving food or drinks. The SBA programs, subsidies and grants are providing a bridge to assist borrowers until the economy fully reopens.

Moving over to deposits, our total deposits increased $273 million from the end of the prior quarter and exceeded $5 billion for the first time in our history. The growth came in our lower-cost deposit categories as we continue to see strong inflows of DDAS, particularly attributed to PPP funding this quarter. Our deposit activity during the quarter continued to result in a positive shift in our mix of deposits. Noninterest-bearing deposits increased to 40.1% of total deposits from 37.1% at the end of the prior quarter, while commercial deposits now represent just about half of our total deposits.

Moving on to net interest income and margin, our net interest income was $56.6 million for the quarter, up 1% from the prior quarter. This was primarily due to an increase in PPP-related income as well as lower funding costs. On a GAAP basis, our net interest margin was 3.77% in the first quarter, unchanged from last quarter. Accretion income on acquired loans contributed 13 basis points to the margin for the first quarter, down from 16 basis points in the last quarter. Excluding accretion income, our net interest margin was 3.64%, an increase of 3 basis points. The increase was due to the PPP income recognition and the decline in our average cost of deposits. We have a little more room to bring down our deposit costs as time deposits mature and reprice over the next quarter, which should help offset compression from securities and loan yields. We believe our outlook for our core NIM, excluding the impact of PPP and accretion, is expected to be slightly compressed next quarter and level off for the remainder of the year. As economic conditions improve and loan growth returns, our margin outlook could improve as we remix the balance sheet away from securities and more towards loans. In addition, we added $350 million of forward starting pay fixed cash flow hedges to protect net interest income in future years and as well as protect against market value losses in a rising rate environment.

Turning to noninterest income on Slide 10, in the first quarter, our noninterest income decreased by $2 million from the prior quarter. The decrease was primarily attributed to a couple of factors. First, we had a $1.1 million decline in the net gain on sales of government-guaranteed loans due to a decrease in the volume of loans sold. And second, we had a $1.4 million decrease in net gains on sales of securities. This was partially offset by a decline in the loan servicing asset revaluation charge this quarter. Although the contribution from our government-guaranteed loan group was lower than last quarter, the trends in this business remained positive as a result of the enhancements made by the SBA. Even with the seasonality we typically see in the first quarter, the contributions on gain on sale exceeded our expectations, particularly when compared to the first quarter of 2020. We sold $73.8 million of loans in the first quarter of 2021, an increase of 21% from last year. The average premium was $12.65 in the first quarter of 2021, which remains well above historical normalized levels and benefited from the temporary waiver of the SBA guarantee fee. The volume of loans sold was also positively impacted by the increased guarantee by the SBA which enabled us to sell 90% of the loans originated.

Moving to noninterest expense trends. Our noninterest expense was $38.8 million in the first quarter, down from $47 million in the prior quarter, which included charges related to the branch consolidations and impairment charges on assets held for sale. Excluding these charges, our noninterest expense declined primarily due to lower occupancy and equipment expense following the branch consolidation. This was partially offset by an increase in loan-related and other legal fees. Our salaries and benefits expense was reduced this quarter by $2.8 million in deferred loan origination costs related to the second round of PPC. The success we're having in generating balance sheet and revenue growth, while controlling our expenses is reflected in the improvement in our efficiency ratio, which was down to 51.3% this quarter as well as our noninterest expense to average assets, which declined to $2.39. Excluding the impact of the deferred loan origination costs, we would expect our expense run rate to be in the $41 million to $43 million range for the foreseeable future.

Moving on to Slide 12. Next, we'll take a look at asset quality. We continued to see good trends in the conventional loan portfolio during the quarter. Our nonperforming assets declined 10 basis points to 64 basis points of total assets, and our nonperforming loans declined 12 basis points to 83 basis points of total loans and leases. Excluding government-guaranteed loans, our nonperforming loans declined 10 basis points to 76 basis points of total loans and leases. Our provision expense was $4.4 million, down from $10.2 million last quarter, which reflects our improved asset quality in the conventional loan portfolio. We had a small release of the reserve for acquired impaired loans due to resolutions and improvements in expected cash flows, which was offset by a further increase in the reserve held against the unguaranteed portion of government-guaranteed loans. We remain measured in our approach to reserve with our total loss absorbency as measured by our allowance plus acquisition accounting adjustments, representing 198 basis points of total loans and leases, excluding PPP loans.

On Slide 13, liquidity and capital levels continue to be strong. Our robust capital levels, along with our earnings contribution, continue to support our quarterly dividend of $0.06 per share. In addition, as Alberto discussed, we did repurchase 333,000 shares at a cost of around $6 million. Our stock repurchase program remains in effect until the end of 2022 with approximately 917,000 shares remaining. With that, Alberto back to you.

Thanks, Lindsay. Turning to Slide 14, I'd like to wrap up today with a few comments about our outlook. We've gotten off to a good start for the year and our priorities for 2021 remained consistent since our last call. We're seeing good customer activity as it picks up in lockstep with the economic recovery and the diminishing impact of the pandemic. Notwithstanding PPP activity and the amount of excess liquidity in the system, loan pipelines remain healthy and we're seeing good deal flow, particularly in commercial real estate, sponsor leasing and small business capital. We also continue to see good opportunities to add talented bankers to the organization. On the M&A front, we continue to look for opportunities that fit our criteria and have seen a pickup in dialogue over the prior quarter. In closing, we remain well positioned to capitalize on both organic and M&A opportunities, continue investing in our franchise and generating returns for our shareholders. With that, Operator, please open the call for questions.

(Operator Instructions) Our first question today will come from Terry McEvoy with Stephens.

I think the commercial loan growth ex PPP really stood out based on all the other releases we've looked at. And I know you kind of ran through a bunch of areas where you saw growth. Could you just maybe rank order and expand a little bit on what drove the increase in the first quarter and what your thoughts are for the second quarter?

Terry, it was pretty broad-based. We're seeing good activity, good deal flow in general. So I can't say that it's one area today that is above and beyond the others. I think we're seeing good activity across all our commercial business lines. Deal flow, it's -- obviously we bid, we compete, we have to actually win it. But we're getting plenty of at bats. And the one thing that I would maybe add that we haven't touched on in the past, we're also seeing good activity on our equipment leasing business, which is a relatively small part of our portfolio today, but it's an area that's been building over time, and we're actually seeing really good solid pipelines and good growth coming from that business.

Thank you. And then just as a follow-up, I guess I'm a little surprised there's all these SBA programs, or enhancements as you call them, that Lindsay ran through to support those borrowers, yet the reserve relative to the unguaranteed portion was higher quarter-over-quarter. So I guess my question is, what do you need to see before that reserve comes down? And how long are these programs in place? Is it essentially a guarantee on an unguaranteed loan, so to speak?

Good question, Terry. And I think you hit the nail in the head. I think there's a lot of programs that are supporting these borrowers, obviously. So there's a fair amount of uncertainty as these programs wane and these borrowers have to stand up for themselves. And I think we will be cautious as we see the impact of those programs subside over time. We want to see how these borrowers come out on the other side of the pandemic without the support that they're getting today from the various programs.

And Terry, if I may add, obviously we're not a CECL bank. But if you look under the covers of the CECL banks, you'll see that they did everything possible to adjust with qualitative factors so that those reserves didn't go down as much. In particular, to the hospitality segment.

And our next question will come from Ebrahim Poonawala with Bank of America.

I guess just first question just around capital allocation. So your stock is obviously up a fair bit year-to-date. Talk to us in terms of the appetite to continue with a similar pace of buybacks that we saw in the first quarter as you move through the rest of the authorization. And also, would love an update, we've seen clearly a pickup in M&A activity. I guess part of some of the strategic changes you made last quarter was to accelerate how quickly you can execute. Just talk to us in terms of do you see that you're moving closer to getting to a point whether or not we should expect an M&A announcement from By?

Good questions, Ebi, and I'll take the first crack at this. On your first comment related to capital allocation, I think, look, I think we have -- the nice thing is we have a lot of flexibility to support organic growth, return capital to shareholders. As Lindsay mentioned, the combination of the dividend plus the amount of dollars that we spent on the buyback this past quarter amounts to about 40% of earnings for the quarter, which is pretty good for us. And then lastly, and you touched on it on the second point, is M&A. And what we're trying to do is really just balance all those opportunities. Obviously, with our profitability up, it just gives us a lot of flexibility. So we won't comment specifically in terms of do we continue to buy back or not and at what levels, but certainly, we have flexibility. And if the uses of capital, we don't have a use of capital where we're going to deploy it, whether it be on an M&A transaction or supporting growth, supporting the acquisition of teams, then I think that's been our guidance, we will certainly find ways to return capital to our shareholders. On the M&A front, I think what I would add to what I just said is, we've certainly seen a pickup in dialogue since we last spoke. As you know, these things are not things that materialize immediately. It's a dialogue, it is relationship building, and 2 parties have to come to an agreement here, particularly with price expectations. And that's usually the part where the bid-ask with potential sellers sometimes is more difficult. But that's what I would -- that's how I would answer your question.

Got it. And I guess just moving, Lindsay, around the -- thanks for the margin outlook. I just wanted to make sure the core margin ex accretion was 3.64%. What was the total PPP impact to the margin this quarter? I know you mentioned the 10 basis points increase 1Q over 4Q. But I just wanted to figure out what the -- yes.

So in terms of what it contributed, we had $7 million of net interest income that was associated with the PPP this quarter, Ebi. And then we also included a chart in the slide deck that shows that there was 10 basis points that was attributed to PPP.

Got it. So $7 million and $10 million. And remind me how much -- what's the breakdown of round 1 versus round 2 fees and loans that are outstanding at the end of the quarter?

You bet. As of the end of the quarter, we currently have $617 million of PPP loans on our balance sheet. In terms of the bifurcation on the remaining fees that need to come through for the first round, we have $4.1 million approximately left. And for the second round, we have about $10.1 million.

And what's your best guesstimate, I guess, in terms of how quickly does the second round get forgiven?

Sure. So first round is moving along nicely. We've really seen a pickup with the SBA in terms of the forgiveness processing. Second round, I really think it's going to be the second half of the year, Ebi, and terms of how it flows will be commensurate with the SBA processing speed. So I do think it's going to be weighted more heavily towards the second half.

Yes. One thing to add there, Ebi, is on the second round, borrowers have -- the windows are from as short as 8 weeks to as long as 24 weeks. So that points to probably somewhere in the latter half of the year.

And our next question will come from Michael Perito with KBW.

So just to piggyback, just to make sure I understand the margin correctly, so the NIM ex accretion and ex the 10 basis points was in the mid-350s range. It sounds like that has room to compress in the second quarter, but you're hopeful that it will stabilize in the back half of the year as liquidity is deployed. But then on a reported basis, obviously that will ebb and flow more with the pace of PPP forgiveness, which relative to the first quarter, it sounds like the second quarter has actually been moving along at a decent rate. Is that all kind of a fair summarization of the margin thoughts?

Yes. I think you're close. And it's hard to give you exactly where it's headed. Obviously, on a gross and a GAAP basis, it's a little more volatile with the PPP timing. But I think you've got the right picture there in terms of what you're seeing. It's -- we've got a lot of liquidity, and it's going to be really all about the earning asset mix. And I do think we have some upside, so the faster we can shift from securities and cash and into loans, the better. And there is some upside there.

Got it. And then in terms of the -- it seems like some of your peer banks that have nice-sized SBA platforms are still pretty bullish about the origination activity. And obviously, you've had a couple of strong quarters of SBA gain on sale here. I was just curious if you could provide -- really, 3 in a row actually. So just curious if you could provide any thoughts. I mean, I guess, how long -- I guess the real question is, Alberto or Roberto, how long can this kind of elevated origination activity in the SBA platform kind of last here? I mean, it seems like there's still a lot of support from a structure standpoint to PPP loans attractive, but any updated thoughts there that we should be mindful of?

It's hard to say precisely, Mike. But look, the program today is still very attractive. Obviously, a 90% guarantee, reduced fees. So from a -- just from a pure cost of capital standpoint for borrowers, it's still a very attractive program. So we think that in the short to medium term, volumes are still going to be pretty good. The second piece that I would add to that is you have -- we have all of these borrowers that have gotten PPP loans. And in some way, shape or form, those borrowers got financing from that program. That money at some point is going to run out. And those borrowers are probably not, certainly not 100% of them, but some of those borrowers are going to need financing, which bodes well in terms of providing additional demand for SBA loans. So we feel pretty good about it. As you know, we're in the business for the long run. We're not a company that's in the SBA business this quarter or next quarter. We've been in the business a long time, so we take a long-term view of that business. So we feel pretty good about the outlook there.

Very good. And then just 2 quick last ones for me. Just Lindsay, is the first quarter tax rate decent to proxy going forward here?

Yes. For guidance for that, I'd say 25% to 26%.

Got it. And then any new updates on the tech investment side in terms of things you guys are close to rolling out or looking at? Or just anything kind of in general? I mean, I know that seemed like that was an area of focus from a strategic high level last time we spoke, and just curious if there's anything you're willing to bring the market in terms of updates on investments or things that you're looking at?

Yes. We're going to be -- we continue to add capabilities, Mike. I mean, we have a pipeline of call it projects that we're executing on to continue to add capabilities to our platform. So for example, this year we're going to enable a new platform to do online account opening, both on the consumer side and on the business side. We're rolling out additional capabilities to kind of support and buttress the SBA platform that we have today by being able to do smaller balance loans, which it's not something that historically we focused on. So now we have a platform and we're going to be rolling out that. That will be primarily geared towards our really smaller business customers that actually we established a lending relationship with as part of the PPP program. Those are 2 examples. Last year we rolled out and implemented nCino for our commercial loan origination business in general. So today, we really use that platform across the organization with the exception of leasing to really originate both SBA and government-guaranteed loans as well as conventional loans. So those are just a few examples of things that are in the pipeline. We're migrating, another example, we're migrating our business customers to the next generation of our business online and mobile platforms. So that's in progress. So just -- those are some of the highlights of things on the tech side that we're doing currently. And then there are things that we're planning and looking at for later in the year as well as into next year. But those are some of the highlights.

No, that's helpful flavor. I appreciate the color. I guess just -- you don't have to get specific on names, but just out of curiosity, are a lot of these updates and upgrades like with your core or are they outside of your core? Or is it a mix?

Primarily outside of the core. There are some, there is one in particular that I mentioned there that's with our core. The other ones are all outside of the core.

(Operator Instructions) Our next question will come from Nathan Race with Piper Sandler.

Going back to the core margin discussion ex PPP and accretion and just kind of thinking about the denominator of that equation, are you guys expecting the balance sheet to kind of remain flat, maybe slightly higher as the PPP forgiveness process continues to unfold? Obviously, you guys had strong core deposit growth as well in the quarter, so just kind of any thoughts on those balance sheet dynamics going forward?

Sure. So Nate, our intention is not to shrink the balance sheet here, but you may see some just natural attrition because of the PPP and depending on how quickly it's coming off. We do have PPPLF as well, just to remind you of that. So some of it is funded through the PPPLF, and that could cause them as well in terms of shrinkage. But overall, we really want to continue to grow the balance sheet, and we've seen great loan pipelines here. And so our intention is to continue to grow from here.

Okay. Great. And changing gears a little bit and thinking about the SBA production and then kind of that cadence over the course of the year, with the exception of maybe last year, I think we generally tend to see SBA production build over the course of the year. Is that a fair way to think about just what you guys expect in terms of sold volumes and so forth over the course of 2021?

So clearly, we have seen -- we saw good production obviously this quarter. It was up comparatively speaking on a year-over-year basis, Nate. That's our expectation just because it's what we have seen how the business has essentially performed in the past. So to answer your question, the short answer there is, yes, that's kind of what we expect over the course of the year.

Got it. And do you guys kind of continue to expect the secondary market premiums to continue to go higher? Or is it -- was this quarter somewhat of an anomaly? Or how are you guys kind of thinking about expectations in secondary book premiums?

Yes, it's a good question. It seems like every time we see bids and we see where levels are coming in, I think we kind of look at one another here internally and say, some of us have never seen premiums be this high. The good news is, they are high, so we will take advantage of that. But also, if premiums were to normalize and decline, we still think the business is obviously attractive. So premiums from these levels would have to decline a lot for us to rethink whether or not we're better off selling the loans or we're better off holding them. And certainly, we have the flexibility to do either. And as we've said in the past, we're pretty agnostic when it comes to that. So -- but today, I mean, these are very, very attractive. I mean, probably as attractive as we have collectively seen in our careers in terms of the strength on -- from market participants to buy guaranteed loans.

Yes, and Nate, just to add to that, I did say in my prepared remarks about the guarantee fee being waived, and that's definitely helping in terms of the premiums, just to keep that in mind. So as the SBA enhancements roll off, the timing of that is still a little uncertain given that it's driven by the funding and the programs and the ultimate end to those is still not completely certain yet. But once that is gone, I would see them come off a little bit of their highs. So we'll see.

Yes. Got it. That's great color. I appreciate that. And if I could just ask one more, just going back to the M&A discussion. Curious, as you guys kind of think about the discussions you're having, are the deals that we could expect going forward likely going to be similar to what we've seen from you guys over the past several years? Or is it maybe something more transformational?

I think, Nate, the way I would say it is, I think our -- we've shared in terms of kind of what the criteria is for M&A transactions. That's not to say that certainly the Board would not consider something outside of that. But I would say we're kind of focused still on kind of the general cohort of banks that are let's say between $400 million to $2 billion plus. And we think that, that cohort and the number of banks in that range, there's a significant number of them in our market area. So that's really where we're kind of focused. But again, that's not to say that our Board would not have flexibility in considering something outside of that.

Our next question will come from Brian Martin with Janney Montgomery.

Just can you -- I guess most of my stuff has been answered, but just on the reserve, I mean, I'm not sure for whom, but just it seems like you seem very optimistic on the outlook with the economy kind of improving and the loan pipeline building. Just kind of curious, in the SBA enhancements, I guess, if they're working as they should, and you've built the reserve to where that needs to be. Just how we think about the reserve going forward if the economy continues to improve here and kind of things play out as you guys are thinking, I guess?

Sure, Brian. So I think, as Alberto said, in regards to the SBA, yes, there's enhancements. We remain cautious. So just in terms of setting the stage there. But overall, if we look forward, our provisioning is really going to be commensurate with the growth that we're going to be seeing. And frankly, just the ultimate certainty that comes out of these SBA enhancements, whether it's the subsidy payments or deferrals and that as far as getting back to regular payment status, what ultimately happens. So I think we are definitely cautious just because there is still a level of uncertainty and we're going to follow it through from there. And so we'll see what happens, but I think we feel that our reserves are adequate and we feel comfortable with where we're at.

And the clarity, Lindsay, just on the SBA, is there a time on kind of when you'd get more details from it as far as like how long these enhancement programs last? What's kind of the timing of that, where you might expect to have more clarity on the condition of those credits and borrowers?

You know, Brian, it's day-to-day with the SBA. So for example, with the Restaurant Revitalization Fund that just came out, and they still are not yet taking applications. So it's hard to give you a perfect answer. Things over the next I'd say 2 to 3 quarters will definitely play out. I don't know, Alberto or Roberto, if you have anything else?

The one thing I was going to say, Brian, is so remember, it's hospitality, right, mostly the restaurants business that we have exposure in the SBA portfolio. So I think we're still in the pandemic, the restaurants are still slow. So I think a better indication would be as the economy improves and people start really to embrace going out again and visiting restaurants, that will be a better point of demarcation.

Gotcha. Okay, that makes sense. I mean, I guess I'm thinking about the vaccine and all that, but getting out vac and getting everyone doing that is important. And maybe just one other follow-up for me was just given the competition in the market and your expectations on loan growth, or at least it sounds as though that momentum is building, just kind of the current yields, the current loan rate you're putting on loans today. Where is that at? And how has that been lately here in the last quarter or so?

Sure. So in terms of the loan yields excluding PPP for the quarter, Brian, they did go down quarter-over-quarter. So they were at 4.82% at the end of the year, and they went down to 4.72%. So we are seeing some pressure there. New loans are coming more in the range of about 4.50% to 4.60%, so we are seeing a little bit of pressure there.

Brian, just to add to what Lindsay said, so on a quarter-over-quarter basis, I would say spreads in general, some businesses are I would say spreads have compressed a bit. I would characterize that, for example, in commercial real estate, spreads were wider last fall, they compressed a little bit in the fourth quarter, and we've seen some compression. That being said, the quality of the transactions that we're seeing, the capitalization of those transactions, the structure is very strong. So there's only a set amount of really creditworthy borrowers, and it's normal to expect that competition would pick up for those borrowers in the market, and we have seen that. Commercial is always competitive, particularly as you have companies that are looking for new banks, there's still -- it's fair to say there's still some of the effects of the disruption here in the market. So you have attractive borrowers whose lines and facilities have expired or matured that are out in the market, and that's going to draw competition. And again, in C&I, that's a longer-term business, it's less transactional. So people are going to be, us included, people are going to be aggressive in wanting to acquire customers that you can build a long-term relationship with. But aside from that, I would say pricing in general, outside of those examples, has been pretty consistent this quarter compared to last quarter.

And our next question will be a follow-up from Michael Perito with KBW.

Just one quick follow-up. Just looking for a broader -- I was just looking through the model as we were talking through stuff. And the SBA revenues, they've been in a pretty high range for the last 4 or 5 years. I mean it seems like there's a lot of disruption in market share going on in that marketplace right now. And I was curious if you could give a quick comment on whether you think this could kind of return to being a line of business that -- where the revenues grow for you going forward? Is that the target? Or is it more, still more of a defensive market share type positioning? Or just give us, maybe you could just provide a little extra color on, that would be helpful.

Roberto, you want to take that one?

Happy to. Mike, the idea is to grow the revenue side of the SBA business with what we have, just to make the business more efficient and lever off the expense base and the platforms that we have. There is plenty of room for us in other areas of SBA, such as USDA 504 which traditionally we haven't been focused on. And as we talked a little bit about this the last time, and we're paying attention, right? We're getting into the weeds there. So over time, we believe that this business has really good revenue potential for us. Now the mix may change a little bit, as Lindsay mentioned. If 7(a) business plateaus a little bit and premiums come down a bit, which would be the right expectation, it will bring down revenues. But the idea is to grow the revenue side of this business.

And then there are no further questions, so this concludes the question-and-answer session. I'd like to turn the conference back over to management for any closing remarks.

Great. Thank you, Operator. So that concludes our call this morning. Thank you for participating today in the call and your interest in Byline, and we look forward to speaking to you again next quarter. Thank you. And will that, Operator, I think that concludes the call.

Thank you. And the conference has now concluded. Thank you for attending today's presentation. And at this time, you may now disconnect.