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Byline Bancorp, Inc. (NYSE:BY)
Q2 2019 Earnings Call
Jul 26, 2019, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to the Byline Bancorp Inc. Second Quarter 2019 Earnings Conference Call. [Operator Instructions].

I would now like to turn the conference over to Tony Rossi, from Financial Profiles. Please, go ahead.

Allyson Pooley -- President and Chief Executive Officer

Thank you, Brandon. Good morning, everyone, and thank you for joining us today for the Byline Bancorp Second Quarter 2019 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. 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 and CEO. Alberto?

Alberto J. Paracchini -- President, Chief Executive Officer & Director

Thank you, Tony. Good morning, and welcome to our second quarter earnings call. I appreciate all of you joining us this morning. As usual, with me are Lindsay Corby, our CFO; and Tim Hadro, our Chief Credit Officer. I'll start the call this morning with an overview of our performance and give you key highlights for the quarter before passing the call over to Lindsay, who will go over the financial results in more detail. I will come back with closing remarks before opening the call up for questions. As a reminder, you can follow our comments this morning with the help of a deck that you can find in the Investor Relations section of our website.

Moving on to slide three on that deck. We delivered another good quarter driven by positive trends in a number of key areas. We had solid loan growth, saw the margin expand nicely from the first quarter, had a strong quarter of noninterest income and continued to see improvement in our efficiency ratio. We also completed our acquisition of Oak Park River Forest Bankshares and have begun to see the initial benefits of that transaction. Earnings came in at $13.2 million or $0.34 per diluted share, which included conversion and merger related expenses. Excluding these items, amounting to $0.07 per share, adjusted earnings were $0.41 per diluted share.

Our returns continue to improve, on an adjusted basis, ROA was 121 basis points up from 110 basis points in the year-ago period, ROATCE came in at 13.44%, up from slightly higher than 11% last year. And our pretax preparation ROA was 215 basis points, up 14 basis points from the year-ago period. Overall, revenue increased 10.6% for the first quarter with good balance between spread and fee income categories. Our net interest income increased 8.7% from the prior quarter, reflecting the impact of both the acquisition and organic growth.

Our net interest margin expanded by 14 basis points, excluding accretion income reflecting higher yield from loans and securities, offset by deposit cost that moderated from the prior quarter. From a business perspective, loans were up 8.29% for the quarter and 15.3% on a year-over-year basis. We saw a good growth in the C&I category offset by higher pay of activity in CRE. The market remains competitive in both C&I and CRE, notwithstanding, we continue to see good opportunities to acquire customers and talent.

I'll provide additional commentary on this point during the closing remarks. On the deposit front, our total deposits increased $251.7 million and stood at just under $4.1 billion at the end of the quarter. Deposit cost moderated from the prior quarter increasing by five basis points compared to 12 basis points in the first quarter. With respect to our efficiency, we continued to demonstrate solid progress as reflected by both, an improving efficiency ratio and the level of noninterest expense to average assets, adjusted for acquisition and merger related expenses.

Our overall expense levels increased from the prior quarter due primarily to the addition of Oak Park River Forest, but this increase was more than offset by our growth in revenue. On an adjusted basis, our efficiency ratio improved to 56% in the second quarter, down from just under 60% in the previous quarter and more meaningfully, we had a 7 percentage point reduction from the same period last year.

Looking at asset quality, our NPLs increased by 10 basis points for the quarter, largely stemming from our government-guaranteed business as we experience higher inflows and lower resolution activity for the quarter. Net charge-offs remain stable at 25 basis points and our allowance for loan and lease losses increased by five basis points from the previous quarter.

With that, I'd like to pass the call over to Lindsay.

Lindsay Corby -- Executive Vice President, Chief Financial Officer

Thanks, Alberto. I'll start on slide four with the review of our loan and lease portfolio. Our total loans and leases were $3.9 billion at June 30, a net increase of $296 million or 8.3% from the prior quarter. The increase in total loans and leases was primarily due to the acquisition. Our originated loan portfolio increased approximately $97 million net.

Most of the growth came in our C&I and government-guaranteed portfolio, which was up $92 million in the quarter. Our acquired portfolio increased $198.8 million as a result of the acquisition and offset by expected payoffs and pay downs of this category. Overall, we saw higher payoff this quarter at $136 million versus $82 million in the prior quarter.

Moving to deposits. On slide five, our total deposits increased $252 million to $4.1 billion at June 30 primarily due to the impact of the acquisition. We look to average deposit balances as period end balances typically fluctuate. Excluding the deposits assumed in the acquisition, average deposits grew by $97.6 million or 10.4% annualized growth. And average noninterest-bearing DDA growth was $16.8 million or 5.7% for the quarter.

The organic growth in average deposits and the core deposits added from the acquisition helped off that the increase and deposit costs for the quarter. Our total deposit costs increased five basis points, which is down from the 12 basis point increase we saw last quarter. Similarly, in our cost of interest-bearing deposits, we saw an increase of seven basis points this quarter, down from 18 basis points in the prior quarter.

Moving to slide six. Net interest income and margin. Our net interest income increased $4.4 million, this was the result of the partial quarter impact of the acquisition as well as the organic growth in our loan and lease portfolio. Our net interest margin increased eight basis points to 4.51% in the second quarter, despite a smaller contribution from accretion income. Accretion income contributed 40 basis points to the margin in the second quarter, down from 46 basis points last quarter.

Excluding accretion income, our net interest margin increased 14 basis points to 4.11%. The increase was primarily due to the impact of higher yielding loans added from Oak Park River Forest as well as strong growth in our portfolio of government-guaranteed loans, which also carry higher yield. The yields on loans and leases excluding accretion income increased to 5.77% from 5.59% in the previous quarter. The improvement in average loans and lease yield more than offset the increase in our deposits this quarter.

Turning to noninterest income on slide seven. In the second quarter, our noninterest income increased by $2.2 million or 18.3% from the prior quarter, which included approximately $1 million in gains on security sales as a result of some repositioning we did in the investment portfolio. The remainder of the increase was primarily due to a $1.2 million increase in our net gain in government-guaranteed loan sales. We sold $75.2 million of government-guaranteed loans during the second quarter compared with $66.2 million of loans in the prior quarter.

We had a higher percentage of USDA loan with an overall mix of loans sold in last quarter. This resulted in the more favorable mix that positively impacted our average premium. Due to the higher prepayment fee, we recorded an additional $1.2 million fair value adjustment of our servicing assets, which had approximately the same impact on our noninterest income last quarter. Moving to slide eight. Let's look at our noninterest expense.

Our second quarter expenses included $3.2 million in merger related expense and $394,000 in core system conversion expense. Adjusting for these items in both periods as well as the impairment charge on an asset held for sale last quarter, our noninterest expense increased $1.7 million from the prior quarter. The primary driver of these increases was the addition of personnel from Oak Park River Forest, this was partially offset by lower payroll taxes.

Our regulatory assessment expense also returned to more normalized level, following the credit we recognized in the first quarter. With the full quarter of recognizing the expense savings from our systems conversions, we are beginning to see more projected synergies for the First Evanston acquisition being realized. Our priority over the second half of the year is integrating Oak Park River Forest, which should put us in a good position to realize the remainder of the efficiencies by 2020. We remain on track with our expectations of cost savings.

Turning to slide nine. We'll take a look at asset quality. Our nonperforming assets increased to 83 basis points of total assets from 70 basis points at the end of the prior quarter. Due to higher nonperforming loans and leases and the addition of OREO properties largely coming from both our government-guaranteed lending business and the acquisition of Oak Park River Forest. Our nonperforming assets included $4.7 million of government-guaranteed loan balances and $1.5 million of government-guaranteed OREO balances as of June 30.

In new inflow into nonperforming loans and leases was largely comprised of loans from the government-guaranteed business. Excluding government-guaranteed NPLs, our nonperforming loans to total loans ratio was 82 basis points, up from 71 basis points at the end of the prior quarter. Our net charge-offs were $2.4 million or 25 basis points of average loans and leases for the quarter approximately the same level as in the prior quarter.

During the quarter, our provision expense was $6.4 million, which covered charge-offs and resulted in an increase in our allowance for loan loss. The increase was primarily driven by 3 factors: first, we provisioned for specific impairment in the unguaranteed portion of the government-guaranteed portfolio; second, we increased our general reserves due to growth; and third, we were seeing higher migration of acquired nonimpaired loans as a result of renewals, which results in moving them into the originated loan portfolio and accounting for them in our general reserve.

Specifically, the second quarter provision included allocations of $3.3 million for originated loans and leases, $2.5 million for acquired nonimpaired loans, and $525,000 for acquired impaired loans. Our provision for the second quarter increased our allowance for loan and lease losses to 81 basis points of total loans and leases from 76 basis points at the end of the prior quarter. And our coverage of NPLs, excluding the government-guaranteed portion was 98%.

In addition to the traditional allowances of percentage of loan and lease metrics, we also analyzed the allowance in conjunction with the acquisitions accounting adjustment impacting our acquired portfolio. At June 30, the acquisition accounting adjustment plus our allowance for loan and lease losses represented 175 basis points of total loans and leases.

With that, I would like to pass the call back to Alberto.

Alberto J. Paracchini -- President, Chief Executive Officer & Director

Thank you, Lindsay. In closing, I'd like to provide you with additional comments on the market environment, our positioning and some of the previously announced leadership changes. As far as the environment is concerned, we continue to see good opportunities to acquire new customers and selectively add quality employees to the company. We have recently added employees in both revenue and nonrevenue generating areas.

We believe we have an attractive platform for both customers and employees, who value doing business with a local institution that is nimble, but with the size and capital strength needed to compete in the marketplace. With respect to the recently announced leadership changes, one of our goals as a company is to have a talent in place that allow for smooth transitions to take place when we have executive departures.

We had one instance occurred during the second quarter with Bruce Lammers announcing his retirement. This week, we also announced that Tim would be retiring and stepping down from his position as Chief Credit Officer at the end of the month. In both cases, we've had talent in place, thereby allowing for continuity in both areas. Tom Abraham, took over leadership of our government-guaranteed lending business, Tom has been with the predecessor company since 2006 and has over 30 years of industry experience.

With Tom's leadership, we're confident in the direction of our business, which for the first half of the year was ranked as the 5th largest SBA lender nationally and #1 in both Illinois and Wisconsin. Tim will be succeeded as Chief Credit Officer by Owen Beacom effective on July 31. Owen joined us as part of the First Evanston acquisition, where he served as their Chief Lending Officer. He has more than 35 years of experience, working in the Chicago banking industry and has a strong understanding of our markets and customer base.

Since joining Byline, Owen has served as Deputy Chief Credit Officer and has worked closely with Tim in anticipation of his eventual retirement. He's well prepared to lead our credit administration functions as we continue to grow over the coming years. I want to take a moment to thank Tim for his leadership and service to the company. Tim has been with us since day one and before, and it's been a privilege to have had the opportunity to work with him over the past 6 years.

With that, operator, I'd like to open the call for questions.

Questions and Answers:

 

Operator

[Operator Instructions] Our first question comes from Nathan Race with Piper Jaffray. Please go ahead.

Nathan Race -- Piper Jaffray -- Analyst

Hey guys. Good morning.

Alberto J. Paracchini -- President, Chief Executive Officer & Director

Good morning.

Nathan Race -- Piper Jaffray -- Analyst

Maybe just start on, kind of the loan growth outlook from here. It looks like payoffs are obviously, higher in the quarter. Production stepped up noticeably, so just curious, maybe what you're seeing from a payoff perspective thus far in 3Q and that kind of strong production that we saw here in 2Q was also looking like it'll manifest itself in terms of mid-to high single-digit loan growth continuing.

Alberto J. Paracchini -- President, Chief Executive Officer & Director

Yes. I would say, Nate, still in the same range, mid-to high single-digit, what could temper it from, call it, the high single-digit range to the mid-single-digit range would be payoffs and that is a bit of a wildcard as you well know. We saw higher payoffs this quarter, particularly coming from the CRE side of the business and we don't see the factors there really changing at this point. So I would say, still the mid-to high single-digit and to a degree that, that's tempered a bit, I would say, it would be really stemming from payoffs in, particularly coming from the CRE book.

Nathan Race -- Piper Jaffray -- Analyst

Got you. And then perhaps just in terms of loan pricing, curious may be where you're putting new loans on the portfolio today. Obviously, the increase in SBA production help loan yields increase on a core basis. And so I'm just curious to know what the July fed rate cut? How we should think about the core loan yields trajectory into 3Q? And then just overall thoughts on may be how the core NIM is going to inflict as well?

Lindsay Corby -- Executive Vice President, Chief Financial Officer

Sure. You did see some nice expansion there in the mid NIM and that was obviously driven primarily from the fact that the loans were coming on at slightly higher rates for 2 factors. Nate, one was the acquisition of Oak Park, their yields are higher than ours. And also, the yields stemming from the government-guaranteed portfolio, those also tend to be higher. So it was the mix really this quarter that tended to drive that increase in the yield. We did think here with the rate environment that you will see some pressure there going forward on our floating rate assets. So in terms of the long-term outlook with the NIM, I would say, it's going to -- it's going to compress here a little bit in the second quarter, just given the rate environment in the following rates. So depending on what happens next week, we'll see what the outlook is and what the remainder of the quarter looks like, but we do think that we'll hover right around that 4% range, Nate, as we have in the past give or take.

Nathan Race -- Piper Jaffray -- Analyst

Okay, that's very helpful. I appreciate that, Lindsay. And then if I could just ask one more on credit. Seems like part of the provision increased this quarter was tied to some of the nongovernment-guaranteed loan, nonaccruals increasing the course. So just curious, what you're seeing from an asset quality perspective within the SBA portfolio and perhaps just broadly?

Alberto J. Paracchini -- President, Chief Executive Officer & Director

Yes. I think In general, two things on the SBA portfolio that as you well know it's a portfolio -- it's a higher risk business. In general, we're lending to companies that are going the route of a government-guaranteed lone because of the fact that they don't qualify for conventional financing. So that's a business that typically will carry higher nonperforming loans as just a standard part of the business. What we saw this quarter was two things, I mean inflows were probably a bit higher in that business, nothing that I would say would be coming from any particular segment or any particular type, there was good granularity.

I mean these are not very large loans as a whole. And then, coupled with the fact that we did see lower resolution activity for the quarter. So net-net, we saw an increase in area of focus for us really is on the resolution side and making sure that sometimes timing is your enemy, and there you don't control timing all the time. But certainly making sure that we continue to manage the resolution process effectively and to essentially moderate the growth in NPLs. So as far as the rest of the portfolio, generally, we didn't see anything, anything -- hardly anything in terms of inflows into NPLs. And overall, I would say credit quality in the book as a whole remains solid. So I guess, I don't know Tim, if you have anything else that you want to add.

Tim Hadro -- Executive Vice President, Chief Credit Officer

No, I just -- I would only reinforce the level of NPLs is the function of the inflows and outflows and it's the outflows -- the inflows have been pretty much as you said, a little higher than we anticipated, but not that much. The outflows which is to a certain degree controllable, have been disappointing in the last couple of quarters and, I think, it's an opportunity to improve and we can focus on that going forward.

Nathan Race -- Piper Jaffray -- Analyst

Okay great. And congratulations on your retirement, Tim.

Tim Hadro -- Executive Vice President, Chief Credit Officer

Thank you.

Operator

Our next question comes from Terry McEvoy with Stephens. Please go ahead.

Terry McEvoy -- Stephens -- Analyst

Happy Friday everyone

Alberto J. Paracchini -- President, Chief Executive Officer & Director

Thank you.

Terry McEvoy -- Stephens -- Analyst

Alberto, you mentioned some hiring -- some recent hires that will contribute to future revenue. I'm wondering if you'd be a little more specific in terms of what areas within the bank you have made some additions.

Alberto J. Paracchini -- President, Chief Executive Officer & Director

Sure. So Terry, I would say, on the revenue generation side, we've added bankers in C&I, we've added a couple of bankers in CRE, and we probably still have some incremental hires that we'll be looking to make here this quarter. In addition, to those revenue-generating areas, we've added talent in other areas of the company. So for example, we have a new General Counsel that joined us recently. He came from the Former MB Financial, and we've added folks in different functions of the organization, such as compliance and other parts of the bank. But on the -- to your specific question on the revenue-generating front, we've been selective, but we've had good success in adding really high quality individuals to the organization that we think will have -- will make good contributions going forward.

Terry McEvoy -- Stephens -- Analyst

And then, Lindsay, just a follow-up for you on Nate's question. I was hoping you'll be a little bit more specific on the margin, I know you said, around 4%, but as we kind of 4%, 10% ex accretion this quarter. So I guess, my question, if we get a rate cut of 25 basis points, what would be on a core basis, your thoughts around the margin impact?

Lindsay Corby -- Executive Vice President, Chief Financial Officer

Sure. So in terms of a 25 basis point decrease, we look at it -- that it'll be less than $1 million in terms of our static net interest income. But I think, that will be offset Terry, by volume. So I don't see necessarily that our net interest income in terms of the aggregate dollar's to be going down because of that. In terms of the actual NIM percentage, yes, it'll come down a little bit, but again, it's going to depend on deposit pricing and competitive dynamics here in the market and what we can do responding to that. We want to make sure we're doing right by our customers and offering appropriate rates.

Terry McEvoy -- Stephens -- Analyst

Okay that's helpful. Thank you both.

Operator

Thank you. Our next question comes from Michael Perito with KBW. Please go ahead.

Michael Perito -- KBW -- Analyst

Hey good morning. Thanks for taking my questions and Tim, good luck in your retirement as well.

Alberto J. Paracchini -- President, Chief Executive Officer & Director

Good morning, Mike.

Michael Perito -- KBW -- Analyst

I wanted to start on expenses. I think last quarter, Lindsay, you said, $42 million to $44 million was a decent run rate in the back half of the year and may be moving into 2020 as well. I guess, with the second quarter under your belt now and the deal closed in early July. Is that -- does that number still hold? Do you have a better sense of where in that range you might fall? And any other color, are you going off from the expense outlook would be helpful.

Lindsay Corby -- Executive Vice President, Chief Financial Officer

Sure. So I think that range really still holds, Mike. We've obviously done some hiring and we're continuing to do some hiring. So I'd say, there is a chance that it would beyond the higher end. In my view, depending on how successful we are in that venture and the ventures that Alberto was talking about in terms of hiring new lenders.

Alberto J. Paracchini -- President, Chief Executive Officer & Director

Yes Mike, and I would say, tackling that on, I mean these are -- to a degree that we continue to see good opportunities to add quality bankers, we will do that. So to Lindsay's point, if that cost -- we're certainly very willing to make those investments because we're pretty confident in the fact that they were more than payoff for themselves in the future.

Michael Perito -- KBW -- Analyst

Got it. Helpful. And then, Alberto, any -- we talked about the SBA business on the credit side, but you saw some on kind of the production side, what does the pipelines looks like there moving forward?

Alberto J. Paracchini -- President, Chief Executive Officer & Director

Pipelines remains pretty solid on the SBA side. I think, the only commentary is, we're probably caring it's -- we're probably carrying a pipeline that's today probably slightly smaller than what we've carried in the past. I don't view that as an indication of business activity, but rather a function of, I think, we've gotten more efficient and call it, closing loans and our processes have continued to improve. So therefore, we can call it carry less spending inventories, so to speak, in order to generate more production out of that unit. But as far as how does that translate? How does that comment translate into future business? I think we feel pretty good about where we are with respect to that business, the level of originations and the level of anticipated fundings here for the rest of the year.

Michael Perito -- KBW -- Analyst

Helpful. And then just lastly also Alberto, I was looking for a comment on your M&A outlook and appetite for the deals?

Alberto J. Paracchini -- President, Chief Executive Officer & Director

Yes. I mean, I think activity probably in terms of the typical conversations and the typical chatter that takes place, I think has been probably similar to what it was last quarter. I think price expectations, there's probably still some gap, I know you've seen some transactions here being announced, locally here in Chicago in the last day or so in the last couple of days, which may be is an indication that price expectations between sellers and where buyers can effectively be willing to transact may be those are coming down a bit, but I think it's -- the level of conversation has remained at a level that I would say is been very comparable to the last quarter, last couple of quarters.

Michael Perito -- KBW -- Analyst

Great. Thank you guys for all the color. I appreciate it.

Alberto J. Paracchini -- President, Chief Executive Officer & Director

Have a good weekend. Thanks.

Operator

[Operator Instructions] Our next question comes from Andrew Liesch with Sandler O'Neill. Please go ahead.

Andrew Liesch -- Sandler O'Neill -- Analyst

Morning. Just, started -- keep going back to the margin here. But I'm just kind of curious what deposit pricing dynamics you've seen in Chicago. I know that you guys have had your campaigns that you've been running in -- if there's any sort of relief in Chicago area? And what that could mean for you guys to control your rate, you're still bringing a good deposit growth.

Lindsay Corby -- Executive Vice President, Chief Financial Officer

Yes. We've seen it to remain competitive here in the market. I would say, we've seen some relief on the CD side, Andrew, and that's really where the relief has been coming from, if at all. So it's a very competitive and dynamic marketplace and we'll see what happens with rates here. But we tend to keep our duration low, so that we can take advantage of repricing. So depending on what happens next week and what the outlook is, we do think that there's some opportunity and some relief from a cost to deposit standpoint.

Alberto J. Paracchini -- President, Chief Executive Officer & Director

Yes. Andrew, I would add -- I would say, I think it was you who asked the question last quarter, and I think our answer to that question at that time was, let's see what happens. I think rates -- the market has anticipated, rates coming down, we'll see what happens with the Fed here shortly. But I think there's been -- the environment remains competitive, but I think the intensity of that competition has eased somewhat. I don't want to say that it's -- we're back to levels where there's -- competition is muted or anything like that.

But I think, the intensity of that competitive environment has eased somewhat as people are reacting in anticipation and in reactions to the fact that overall rates are lower and there is an expectation that the Fed is going to do something. And I think we've seen some of that, I thought we managed well our position this quarter with the portfolio and I think, we took advantage of some flexibility that we received with the closing of veteran's action and we anticipated well in terms of where to price deposits and where to ease up while still managing pretty good average balance growth for the quarter.

So I think, let's see where rates go from here, let's see what the rate does -- what the Fed does, I think some folks pay attention to that as a parameter and to a degree that, that has an impact in terms of how they view pricing then I think the market overall will react.

Andrew Liesch -- Sandler O'Neill -- Analyst

Got you. That's really helpful commentary. You guys have covered all my other questions. Tim, congrats on the retirement and I think it's probably a good thing that we haven't had to ask you too many questions over the years. So, thank you.

Tim Hadro -- Executive Vice President, Chief Credit Officer

That's my definition of a successful earning call when I do not have to speak.

Andrew Liesch -- Sandler O'Neill -- Analyst

Right. Right. Well, congratulation.

Tim Hadro -- Executive Vice President, Chief Credit Officer

Thank you. It's better -- I prefer congratulations and good luck because that makes me nervous about retiring.

Andrew Liesch -- Sandler O'Neill -- Analyst

Yes, yes.

Operator

Our next question comes from Brian Martin with Janney. Please go ahead.

Lindsay Corby -- Executive Vice President, Chief Financial Officer

Hey good morning Brian.

Brian Martin -- FIG Partners -- Analyst

Just a couple of follow-ups. Lindsay, Alberto, just the -- remind me the percentage of your variable rate loans. Our percentage of loans that are variable rate are kind of tied to LIBOR today, any just, ballpark with where that's at?.

Lindsay Corby -- Executive Vice President, Chief Financial Officer

Sure. So in terms of LIBOR of the total portfolio, it's around a quarter of the portfolio inside of LIBOR. And then in terms of our variable rate for -- it's about a little over half, it's about 54%.

Brian Martin -- FIG Partners -- Analyst

54%. Okay. And then just on the funding side. I guess, if you see the impact of -- if the Fed does cut, I mean how -- I guess to the earlier question on funding, I guess, are there certain deposits that are indexed? Or it's just all going to be active management on your part and trying to offset the impact of a rate cut?

Lindsay Corby -- Executive Vice President, Chief Financial Officer

No. It's primarily active management, Brian.

Brian Martin -- FIG Partners -- Analyst

Okay. All right. And then, I guess, have you -- I guess, I -- I guess, let me just go on the next one, are you seeing, just to your point on M&A, are you guys seeing more opportunity today, given the disruption in the market for kind of lift out in hiring? Is it -- is it you're kind of suggesting here? Or is it more -- are you seeing more from a whole bank type of transaction when you look at the landscape today?

Alberto J. Paracchini -- President, Chief Executive Officer & Director

I think we're pursuing -- I would tell you, I think our strategy has not changed. I think the answer to that would be both. Obviously, with -- what has changed is the environment in terms of the opportunity to hire good people has certainly -- that part of the equation we've seen because of some of the recent disruptions in the marketplace, it's opened up opportunities to really add on really talented individuals and we've taken advantage of that. But overall, the overarching strategy remains the same.

I think, when you look at, from an M&A perspective, the number of targets I think there's kind of 43 institutions that are within that kind of target segment of $300 million to roughly about $3 billion here in Chicago and then at the higher end there's really not that many. So that skews the number to words, kind of the numbers down a bit from the higher end, but that's been our kind of target segment since inception and I think the opportunities are, are and will be there in the future.

Brian Martin -- FIG Partners -- Analyst

Okay. Perfect. And lastly just with Oak Park done now, I guess, the assumption is that you guys are -- would be ready or kind of hoping for business on M&A, if there were opportunities, that's fair to think about it?

Alberto J. Paracchini -- President, Chief Executive Officer & Director

Yes. I think that's fair.

Brian Martin -- FIG Partners -- Analyst

Okay. And then just Lindsay, if you have any commentary on the purchase accounting? If you could offer anything there that'd be helpful, and that's it for me.

Lindsay Corby -- Executive Vice President, Chief Financial Officer

In terms of the purchase accounting for Oak Park?

Brian Martin -- FIG Partners -- Analyst

No, just in general. Just in aggregate, the kind of the outlook.

Lindsay Corby -- Executive Vice President, Chief Financial Officer

Yes, outlook. So I think our outlook really hasn't changed too much. We added additional accretion obviously, from Community Bank of Oak Park, I think that's you're hitting at, right, Brian?

Brian Martin -- FIG Partners -- Analyst

Yes, just kind of -- I guess, it should trend lower from here given the impact we saw...

Lindsay Corby -- Executive Vice President, Chief Financial Officer

Correct. It'll continue to stare step down. The range I gave you, I think it's fair, it'll be a little higher here in the beginning. Typically, when you add a transaction on, the accretion runs off faster in the beginning, Brian, so -- and then it flows down from there.

Brian Martin -- FIG Partners -- Analyst

Okay. Thanks guys I appreciate it.

Operator

I'm showing no further questions. I would like to turn the conference back over to management for any closing remarks.

Alberto J. Paracchini -- President, Chief Executive Officer & Director

Thank you, operator. I just want to take a moment again to thank Tim, for his years of service. It's really been a privilege to know and to have worked with Tim overall these years, and we look forward to continuing to have Tim involved as an advisor now as opposed to the Chief Credit Officer. But our relationship will certainly continue. So I just want to acknowledge that and thank, Tim, once again. And with that, I want to thank you for dialing in this morning and participating on the call and thank you for your interest in Byline, and we will talk to you again next quarter. And with that, operator, I'll pass the call over back to you.

Operator

[Operator Closing Remarks].

Duration: 37 minutes

Call participants:

Allyson Pooley -- President and Chief Executive Officer

Alberto J. Paracchini -- President, Chief Executive Officer & Director

Lindsay Corby -- Executive Vice President, Chief Financial Officer

Nathan Race -- Piper Jaffray -- Analyst

Tim Hadro -- Executive Vice President, Chief Credit Officer

Terry McEvoy -- Stephens -- Analyst

Michael Perito -- KBW -- Analyst

Andrew Liesch -- Sandler O'Neill -- Analyst

Brian Martin -- FIG Partners -- Analyst

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