BY

Byline Bancorp ($BY) Insiders Buy $1.27M Despite 4.5% Stock Drop - What Do They Know?

06/17/2025 03:19

Byline Bancorp ($BY), an Illinois-based regional bank holding company serving the Chicago metropolitan area and southeastern Wisconsin, has caught investors' attention with two contrasting signals emerging simultaneously. With a market cap of $1.14 billion, the company provides commercial and retail banking services in its core markets. A secondary offering of 4.28 million shares announced on June 10th was priced at $24.75 per share, representing a 7.4% discount to the prevailing market price. JP Morgan served as the sole underwriter for the approximately $106 million offering. As expected, shares dropped 4.5% to $25.53 following the announcement. However, in a remarkable coincidence, multiple insiders including the CEO began massive purchases at the offering price of $24.75 almost simultaneously with the secondary offering announcement. Director Valle Del purchased 40,808 shares worth approximately $1.01 million, an unusually large single transaction. CEO Roberto Herencia bought 4,040 shares (about $100,000), while directors Steven Kent acquired 4,125 shares and Phillip Cabrera purchased 2,360 shares. In total, six directors concentrated their buying on the same day. This pattern is highly unusual. Typically, insiders refrain from purchasing during secondary offering announcements, but Byline Bancorp's management demonstrated aggressive buying behavior instead. This suggests management views the current share price as significantly undervalued. Not all insiders moved in the same direction. CFO Megan Biggam sold a total of 12,187 shares over June 9-10, generating approximately $326,000 in cash. These transactions were executed under Rule 10b5-1 plans, indicating they were pre-scheduled sales. Byline Bancorp's recent performance provides some foundation for insider optimism. Q1 2025 earnings per share came in at 64 cents, slightly down from 70 cents in the prior year, but revenue increased 2% to $103.08 million, significantly beating analyst expectations of $100.82 million. More importantly, the company has undergone structural changes. The completion of its merger with First Security Bancorp in April expanded asset size and market share. In regional banking, economies of scale directly correlate with profitability, making this merger a potential catalyst for medium-term performance improvement. The secondary offering's background also offers positive interpretation. Selling shareholders included the estate of Daniel Goodwin and Equity Shares Investors, existing major shareholders rather than the company itself raising capital. Simultaneously, the company announced a $5-10 million share repurchase program. Looking at price action, shares began around $22 in June 2024, peaked near $28 in mid-July, and currently trade in the $25 range. Analysts maintain a median price target of $32, suggesting approximately 27% upside potential from current levels. However, several risks warrant attention. Regional banks remain sensitive to interest rate environment changes and credit risks, particularly those with significant commercial real estate exposure. Byline Bancorp maintains substantial exposure to Chicago's commercial real estate market. Synthesizing the current situation, while short-term price pressure from the secondary offering appears inevitable, the strong insider buying signal suggests positive medium-term prospects. Valle Del's $1 million purchase particularly indicates conviction beyond simple portfolio adjustment. However, the CFO's sales, despite being under 10b5-1 plans, create mixed messaging given the timing. Investors should note the concentrated insider buying around $24.75. This price level likely serves as important support going forward, and any decline below could present additional buying opportunities. Conversely, breaking above the $27-28 range would increase the probability of reaching the $32 price target.