
In a skillet over medium heat, melt the butter. Add the onion and diced mini bell peppers. Cook until softened and lightly golden, about 5–7 minutes. Remove from heat and let cool slightly.
Grease a 9x13 baking dish.
Spread the cubed bread evenly in the dish. Sprinkle the sautéed vegetables over the bread. Top with both cheeses.
In a large bowl, whisk together the eggs, milk, salt, pepper, and smoked paprika.
Pour the egg mixture evenly over the bread and cheese. Press the bread down gently so everything soaks up the custard.
Cover tightly with foil and refrigerate overnight (or at least 6 hours).
In the morning, remove the casserole from the refrigerator and let it sit at room temperature for 20–30 minutes while the oven preheats to 350°F.
Bake uncovered for 45 minutes, until the center is set and the top is golden brown. Let rest for 10 minutes before slicing. Sprinkle with fresh parsley if desired.