BYLINE BANCORP, INC. Income Taxes Disclosure
Note 11—Income Taxes
The following were the components of provision for income taxes for the years ended December 31, 2025, 2024, and 2023:
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Current tax expense: |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
$ |
26,066 |
|
|
$ |
30,663 |
|
|
$ |
6,349 |
|
State and local |
|
|
9,373 |
|
|
|
12,211 |
|
|
|
4,875 |
|
Total current tax expense |
|
|
35,439 |
|
|
|
42,874 |
|
|
|
11,224 |
|
Deferred tax expense (benefit): |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
|
8,425 |
|
|
|
1,344 |
|
|
|
23,569 |
|
State and local |
|
|
(662 |
) |
|
|
(3,898 |
) |
|
|
3,009 |
|
Total deferred tax expense (benefit) |
|
|
7,763 |
|
|
|
(2,554 |
) |
|
|
26,578 |
|
Provision for income taxes |
|
$ |
43,202 |
|
|
$ |
40,320 |
|
|
$ |
37,802 |
|
Note 11—Income Taxes (continued)
The following is a reconciliation between the statutory U.S. federal income tax rate of 21% for 2025, 2024, and 2023, and the effective tax rate:
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|
|||||||||||||||
|
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
|
||||||
Income before provision for income taxes |
|
$ |
173,253 |
|
|
|
|
|
$ |
161,079 |
|
|
|
|
|
$ |
145,680 |
|
|
|
|
|
|||
Calculated tax expense at statutory rate |
|
$ |
36,383 |
|
|
|
21.0 |
% |
|
$ |
33,827 |
|
|
|
21.0 |
% |
|
$ |
30,593 |
|
|
|
21.0 |
% |
|
State and local taxes, net of Federal Benefit (1) |
|
|
8,711 |
|
|
|
5.0 |
|
|
|
8,313 |
|
|
|
5.3 |
|
|
|
7,884 |
|
|
|
5.4 |
|
|
Nontaxable or nondeductible items, net |
|
|
(1,840 |
) |
|
|
(1.1 |
) |
|
|
(2,059 |
) |
|
|
(1.3 |
) |
|
|
(632 |
) |
|
|
(0.5 |
) |
|
Other adjustments |
|
|
(52 |
) |
|
|
— |
|
|
|
239 |
|
|
|
— |
|
|
|
(43 |
) |
|
|
— |
|
|
Effective tax rate |
|
$ |
43,202 |
|
|
|
24.9 |
% |
|
$ |
40,320 |
|
|
|
25.0 |
% |
|
$ |
37,802 |
|
|
|
25.9 |
% |
|
(1) State taxes in Illinois made up the majority of the effect of the state and local tax category.
The following were the significant components of the deferred tax assets and liabilities as of December 31, 2025 and 2024:
|
|
2025 |
|
|
2024 |
|
||
Deferred tax assets: |
|
|
|
|
|
|
||
Net operating losses |
|
$ |
27,083 |
|
|
$ |
22,144 |
|
Interest on non-accrual loans |
|
|
6,312 |
|
|
|
6,837 |
|
Allowance for credit losses - loans and leases and loan basis |
|
|
33,928 |
|
|
|
32,693 |
|
Servicing assets |
|
|
2,107 |
|
|
|
2,332 |
|
Premises and equipment |
|
|
6,217 |
|
|
|
5,998 |
|
Other real estate owned |
|
|
509 |
|
|
|
180 |
|
Net unrealized holding loss on securities available-for-sale |
|
|
29,112 |
|
|
|
47,022 |
|
Accrued expenses |
|
|
7,873 |
|
|
|
6,317 |
|
Other |
|
|
6,172 |
|
|
|
5,670 |
|
Total deferred tax assets |
|
|
119,313 |
|
|
|
129,193 |
|
Deferred tax liabilities: |
|
|
|
|
|
|
||
Equipment leasing |
|
|
(61,591 |
) |
|
|
(54,532 |
) |
Core deposit intangibles |
|
|
(4,880 |
) |
|
|
(4,285 |
) |
Deposits |
|
|
(16 |
) |
|
|
(43 |
) |
Trust preferred securities |
|
|
(4,075 |
) |
|
|
(4,211 |
) |
Net unrealized holding gain on cash flow hedges |
|
|
(4,105 |
) |
|
|
(7,643 |
) |
Other |
|
|
(2,867 |
) |
|
|
(2,021 |
) |
Total deferred tax liabilities |
|
|
(77,534 |
) |
|
|
(72,735 |
) |
Net deferred tax assets |
|
$ |
41,779 |
|
|
$ |
56,458 |
|
The following were the gross carryforwards available to offset future taxable income as of December 31, 2025 and 2024:
|
|
2025 |
|
|
2024 |
|
||
Federal gross NOL carryforwards - begin to expire in 2030 |
|
$ |
16,907 |
|
|
$ |
6,804 |
|
Federal gross NOL carryforwards - with no expiration |
|
|
— |
|
|
|
200 |
|
Illinois gross NLD carryforwards - begin to expire in 2031 |
|
|
305,781 |
|
|
|
268,469 |
|
All other state gross NOL carryforwards - begin to expire in 2036 |
|
|
6,129 |
|
|
|
4,724 |
|
All other state gross NOL carryforwards - with no expiration |
|
|
6,533 |
|
|
|
5,790 |
|
Pursuant to Sections 382 and 383 of the Internal Revenue Code, annual use of net operating loss ("NOL") and credit carryforwards may be limited in the event a cumulative change in ownership of more than 50 percent occurs within a three‑year period. The Company has determined that such an ownership change occurred as of June 28, 2013, as a result of our recapitalization. This ownership change resulted in estimated annual limitations on the utilization of tax attributes, including net operating loss carryforwards. Approximately $756,000 of the restricted Federal net operating losses will become available each year related to Federal net operating losses generated prior to the 2013 recapitalization.
Note 11—Income Taxes (continued)
In connection with the Company’s acquisition of Oak Park River Forest, the Company acquired $4.3 million in additional Federal net operating losses that are subject to an annual Section 382 limitation of approximately $781,000. In connection with the Company’s acquisition of Inland, the Company acquired $4.1 million in additional Federal net operating losses that are subject to an annual Section 382 limitation of approximately $4.2 million, which was pro-rated to $2.1 million for 2023 based on the Inland acquisition date. In connection with the Company’s acquisition of First Security, the Company acquired $12.0 million in additional Federal net operating losses that are subject to an annual Section 382 limitation of approximately $1.5 million, which is pro-rated to $1.1 million for 2025 based on the First Security acquisition date. The Company utilized the remaining balances of both the Oak Park River Forest and Inland losses on its 2024 tax return, and the Federal net operating losses acquired in connection with the First Security acquisition begin to expire in 2030.
During the second quarter of 2024, Illinois House Bill 4951 was enacted, which amends numerous Illinois tax law provisions, including a temporary limitation on Net Loss Deduction ("NLD") usage. For tax years 2024, 2025, and 2026, C Corporations are limited to utilizing a maximum of $500,000 of NLD against taxable income. NLDs that are limited during these years have an extended expiration date for the years in which they are limited. The extended expiration of the Company’s NLD carryforwards is December 31, 2043. During the third quarter of 2025, H.R. 1 was signed into law. The legislation includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in 2025, including the restoration of immediate expensing of domestic R&D expenditures, reinstatement of 100% bonus depreciation, and more favorable rules for determining the limitation on business interest expense. The Company has evaluated the impact of this law on future periods and has determined the impact to be immaterial.
The Company and the Bank file consolidated income tax returns. The Company and the Bank are no longer subject to United States federal income tax examinations for years before 2022 and state income tax examinations for years before 2021.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 28, 2025 | |
| 2023 | Mar 4, 2024 | |
| 2022 | Mar 7, 2023 | |
| 2021 | Mar 7, 2022 | |
| 2020 | Mar 4, 2021 | |
| 2019 | Mar 12, 2020 | |
| 2018 | Mar 15, 2019 | |
| 2017 | Mar 30, 2018 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.