Chicago, IL – Byline Bank CEO Alberto Paracchini often foregoes the traditional corner office, opting instead for the bustling back rooms of the bank’s numerous branches, particularly those located conveniently near his home in the greater Chicago area. This unconventional approach to leadership underscores a deeper philosophy: that a strong workplace culture, cultivated from the ground up, is paramount to sustained success and client satisfaction. As Byline Bank, a $9.65 billion-asset lender headquartered in Chicago’s financial district, stands on the cusp of a significant regulatory and operational threshold – the $10 billion asset mark – Paracchini’s leadership style and strategic foresight are proving instrumental.
Paracchini’s presence in local branches is intentionally designed to be non-intimidating. "I’m just a guy," he states, emphasizing that his visits are not intended to create undue pressure on branch employees. This deliberate effort to foster an environment where employees feel comfortable and valued is a cornerstone of his leadership. He believes that prioritizing employee well-being directly translates into enhanced client service and overall business prosperity, a principle he has championed throughout Byline Bank’s remarkable growth trajectory. Thirteen years ago, Byline was a privately held community bank with $2.4 billion in assets; today, it is a substantial institution nearing a critical inflection point.
The CEO attributes the bank’s positive workplace culture to a collective team effort, beginning at the highest levels. "This is one person, and this is not just the [human resources] team, but it starts at the very top with the support and direction that we get from our board," Paracchini explained. This commitment to shared responsibility and top-down support is crucial as the bank navigates the complexities of expansion.
A Detour into Banking Becomes a Lifelong Career
Interestingly, Paracchini’s path into banking was not a direct one. Raised in a family of bankers, he initially harbored "zero interest" in the profession. His father and siblings were all involved in the industry, yet he pursued a college education in political science and Spanish, aiming for a career far removed from finance. However, a temporary job at a bank after graduation unexpectedly evolved into a decades-long career, ultimately leading him to build and lead Byline Bank to its current impressive stature.
Now, as Byline Bank approaches the $10 billion asset milestone, it faces significant implications. This threshold will not only impact the bank’s revenue streams, particularly concerning the Durbin Amendment’s interchange fee cap, but will also bring it under the direct regulatory oversight of the Consumer Financial Protection Bureau (CFPB) for the first time. In an exclusive interview with Banking Dive, Paracchini discussed the evolving landscape and the enduring principles guiding Byline Bank’s growth.
Navigating the $10 Billion Threshold: A Strategic Milestone
BANKING DIVE: Heading toward $10 billion in assets, what stands out on the road ahead for Byline?
ALBERTO PARACCHINI: To us, getting to $5 billion was an important milestone, and getting to $7 billion was another important milestone. Getting to $10 billion is just another milestone, and we need to be prepared to make sure that we not only comply, but that we meet or exceed the expectations that our regulators have of us, that our board has of us, to make sure that we’re prepared to meet those expectations and then continue to execute our strategy until we get to the next milestone along the journey. We’ll celebrate crossing $10 billion for a short period of time, and then we’ll put our heads down again and continue to focus on the important things – executing our strategy and taking advantage of the opportunities that we have in our market.
The journey to $10 billion represents more than just a number; it signifies a new era of regulatory scrutiny and operational complexity. For banks of this size, increased oversight from bodies like the CFPB is standard. This typically involves more rigorous reporting, enhanced compliance protocols, and a deeper dive into consumer protection practices. The Durbin Amendment, enacted in 2010 as part of the Dodd-Frank Act, specifically regulates debit card interchange fees, capping them for banks with assets exceeding $10 billion. This cap has a direct impact on revenue for larger institutions, necessitating strategic adjustments in other areas of the business.
Byline Bank’s proactive approach to this transition is evident in its long-term preparation. Paracchini revealed that the groundwork for managing a $10 billion institution began years prior.
H2: Proactive Preparation for Regulatory Evolution
BANKING DIVE: With $10 billion on the horizon, when does preparation for that size begin?
ALBERTO PARACCHINI: We’ve always known that as an organization, we have opportunities to grow in the market. We always want our risk management, our controls to be on par, if not slightly ahead of, where the business is today. We started [preparing for] $10 billion when we were $2 to $2.5 billion smaller than we are today. We wanted to make sure that by the time we’re in a position where crossing $10 billion is imminent, we’re well, well, on our way to not only meeting but being ahead of expectations.
This forward-thinking strategy highlights a commitment to robust risk management and compliance. Byline Bank’s internal systems and processes have likely been undergoing continuous refinement to align with anticipated regulatory requirements. This preemptive action is crucial for avoiding operational disruptions and maintaining a competitive edge as the bank scales.
H2: Diverse Strategies for Crossing the $10 Billion Mark
BANKING DIVE: Did you ever feel the need to pump the brakes on growth?
ALBERTO PARACCHINI: Years ago, we asked ourselves, “Is there an optimal way to cross $10 billion?” If you talk to some of my colleagues in the industry, they will say, “Oh, you need, $2 billion more, $3 billion more right before you cross.” In other words, you need to find an M&A opportunity that you can execute so that you can cross over and have more assets to support your ability to cover the expenses that you’ll need. That’s one line of thinking. Other banks would say, “We’re going to manage and constrain our growth to stay right under $10 billion until we find an opportunity that would comfortably get us beyond $10 billion.” Others still would say, “We are going to execute our strategy, and we are going to cross this organically, and we’re just going to continue to do what we do and continue to grow. It may take us a little bit longer to grow into our expense base, but that’s the way that we’re going to do it.” Those are some of the things that we heard from others who had crossed this threshold. And then we actually studied the matter to see what the data showed – there was no one way that was the perfect way to cross that threshold. Our conclusion then was – is – we’re just going to continue to stay focused on executing our strategy and growing organically, which has been our primary driver of growth. We’re going to continue to look at M&A opportunities like we have, which has been essentially consolidating smaller banks over time. We’re going to focus on things that we can control, and we’re going to proceed accordingly.
Paracchini’s detailed explanation reveals a thoughtful consideration of various strategies employed by other financial institutions when approaching the $10 billion asset mark. These include:
- Accelerated Growth through M&A: Some banks opt for large mergers or acquisitions immediately preceding the $10 billion threshold to rapidly increase asset size, thereby bolstering their capacity to absorb the associated increase in operational expenses. This approach can offer immediate scale and market presence.
- Staged Growth and Strategic Acquisition: Another tactic involves carefully managing organic growth to remain just below the $10 billion mark while strategically searching for an acquisition that would provide a substantial leap beyond it, ensuring a more controlled transition.
- Organic Growth Focus: A third strategy prioritizes consistent organic growth, accepting a potentially longer timeframe to align expenses with revenue as the bank naturally expands.
Byline Bank, after thorough analysis, opted for a hybrid approach, emphasizing its core strategy of organic growth while remaining open to strategic mergers and acquisitions. This demonstrates a balanced perspective, seeking to leverage internal strengths while capitalizing on external opportunities. The bank’s recent acquisitions of First Security Bancorp (last year) and Inland Bancorp (in 2023) exemplify this strategy of consolidating smaller institutions to enhance its market position and capabilities.
H3: The Strategic Advantage of Mergers and Acquisitions
BANKING DIVE: Byline has grown through acquisition multiple times, including with the purchase of First Security Bancorp last year and Inland Bancorp in 2023. You said you’re open to more deals. What are the biggest benefits to M&A, from your perspective?
ALBERTO PARACCHINI: Through M&A, you can grow your deposit base. That is super important, and is a big reason why we find M&A attractive. There’s also the ability to access talent. In 2018, we were starting to build our commercial and industrial business. That’s a long process. If you’re hiring bankers, sometimes one at a time, that’s going to be a deliberate process. We had the opportunity to acquire this institution that brought with it 27 bankers, and a really good lower-middle-market-focused commercial banking business that dramatically accelerated our growth and our ability to have a presence in that space. That simply accelerated, probably by five years, our ability to have that type of presence in a really short period of time. We’re an institution that, in order to sustain our growth, we know we’re going to need more talent. We’re always looking for talented bankers to join the company, and certainly M&A is a way to accomplish that.
Paracchini highlights two primary benefits of M&A for Byline Bank:
- Deposit Base Expansion: A growing deposit base is the lifeblood of any bank, providing stable funding for lending activities and enhancing profitability. M&A can quickly infuse a significant amount of deposits, strengthening the bank’s financial foundation.
- Talent Acquisition and Business Line Acceleration: Perhaps one of the most compelling aspects of strategic acquisitions for Byline Bank is the rapid acquisition of skilled personnel and established business lines. Paracchini cited an example where an acquisition brought 27 bankers and a robust commercial banking business, accelerating the bank’s market presence in that sector by an estimated five years. This highlights the efficiency of M&A in circumventing the time-consuming and often challenging process of organic talent recruitment and business development.
The implications of Byline Bank’s impending $10 billion asset milestone are far-reaching. The bank will experience a heightened level of regulatory oversight, requiring substantial investment in compliance infrastructure and personnel. Simultaneously, the Durbin Amendment’s interchange fee cap will likely necessitate a strategic re-evaluation of revenue streams, potentially leading to a greater focus on fee-based services or a more aggressive pursuit of lending opportunities.
However, Byline Bank’s proactive approach, coupled with its proven ability to integrate acquisitions effectively and foster a positive employee culture, positions it well to navigate these challenges. Paracchini’s leadership, characterized by its grounded and people-centric philosophy, suggests that Byline Bank is not merely growing in size, but is also building a resilient and adaptable organization prepared for future success. The bank’s journey from a modest community institution to a significant player in the financial landscape is a testament to its strategic vision and its unwavering commitment to its employees and clients. As it crosses this new frontier, Byline Bank is poised to continue its trajectory of growth and influence within the competitive banking sector.
