BFIN - Earnings call 4 2021 | BankFinancial Corporation

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Operator

Good day, and welcome to the BankFinancial Corp. 2021 Year-end Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded.

I would now like to turn the call over to Mr. F. CEO. and Chairman Gasior, Morgan

You may begin.

F. Gasior

to Good conference forward-looking fourth investor XXXX At morning. statement this our Welcome call. have time, quarter to the I'd read. like

Unknown Executive

the the may remarks in Exchange harbor Securities the for provisions of Reform covered XXXX. statement forward-looking Litigation forward-looking The by this all of Section Act conference Private invoking intend and to at statements of Securities made Act are within purposes of contained statements safe meaning We the the of XXE harbor including include the XXXX these be safe provisions.

and Forward-looking plan statements often involve and or similar words believe, on significant may the They of risks assumptions or that expressions. are not expect, use occur. uncertainties may intend, project, based estimate, the by identifiable are anticipate,

effect predict plans results may Our results our is uncertain, actual predicted. those the or and of inherently to differ actual strategies and ability from

that results and forward-looking statements. to forward-looking our and our not on be further do impact have included risks the financial and reports the evaluating in considered obligation consult should could We undertake please in statements to and update uncertainties SEC. condition in statements future. factors the any operation, we These For risks uncertainties any risk details forward-looking declarations of

turn and the And CEO. now I'll F. Chairman Mr. over call Morgan Gasior, to

F. Gasior

Thank you.

originations notwithstanding Two, expect some balances board, for in during our throughout we the C&I, to finance areas. reflected quarter. that commercial and of 'XX, had in XXXX. again fourth X-quarter me payoff and the we well, that credit that and quarter the the We'll Let especially the in we results strong in in One, so equipment had strengthened file some activity schedule and just in in much progress certain year And pretty start bag with was quarter. press growth of release. supplement as later extraordinary across fourth XX-K statement. filed our a a but Certainly, have the brief our mixed on we continue

and delivering capabilities payoffs certainly little growth. going The commercial help growing side But the can We franchise. that we've get on of and reductions built originations pushing growth. net keep strong on we're obviously nonetheless, help results progress to the showing a will are on

Noninterest a efforts trust we're the bit. retail consistent principally with That's of income a picked help and usage card in in from fee up of little deposits, little the recovery seeing bit and deposit commercial income, side. on

So well consumer recovery continues we and as the with in economy. spending that hope the

quarter. We've on in and the loan more portfolio to capabilities. in And would fourth seeing expand And We'll have the net in the especially we commercial capability time see and loved credit and the to the the We diversify on path growth, to franchise as to side. is obviously be important. equipment over C&I deposit have you're side refine up will portfolio, generate invested a diverse the which continue stronger right greater But credit, expenses our bit. that commercial it a especially again, results were the can, originations. continue

with I'll said, there. that from go up and it So open questions to

Operator

question first from Navas [Operator Instructions] comes Our from D.A. Davidson. Manuel

Manuel Navas

activity You line can And sight pretty any that seeing. progress touched paydowns was how the going Is the on or obviously, you're forward? strong. origination there really

that $XX the loan that second is, Does together kind change part from much targeting been million of you've does how past? your the year? outlook for in question the quarter level per next my So come of into

F. Gasior

at paydowns first. look Let's

so to nearing some for out but different they had think somewhat of woods, the quarter, in an third don't reasons, are ways, that And a fourth when completely end quarter. exceptional paydown the speak. we saw maybe As we're some compare it you in I you activity -- to of we, think the couple

couple on in for their only actually deals money. but them of payoffs who got an buildings, a were the sold in of larger handful portfolio, great a for of enormous more customers commercial, by transactions, some So $XX amount there and about example, was that of increased multifamily our million, seasoned

the replaced the low So news quite but strong it replace we smaller Those balances, of deals going transactions, to point. deal. at service size but that not not debt prepayment size. bad going that are exposure also the were is to we lost that larger, We're a lost LTV, that with be with

think estate in a Also, hopefully increases to find interest a in play getting properties. see payoff harder real should factor replacement bit. a levels we will in little that is bit for somewhat our rates on. time I certainly little So as Also lesser goes it customers

excess have down. and to whether continue what customers to be it's some customers pay after hang cash something to settled. on The they just think But or not to have. might sell we seems continued So going also XXXX of they issue be it

less here. bit little the so But see. issue an be hopefully, might selling tax-driven, we'll less on prepayment. So a

is being said you of but to predict. like be If XX%, XX% that XX%, it's to helpful or hard still would more that XX% instead

in we long-term that properties They're reduction had of more have the more gains unrealized The is valuations. plays. in some one significant portfolio doesn't have The been recent thing know the value-add, seasoned quite that harvested. very pop

a to going that rates prepayment obviously, help then a speak little forward. can on would down. lower little rate that, bit And payoff if bit rate interest that So come

point have the But continue to again, can to -- origination. there our have we strengthen is

$XXX year, we did like million. This multifamily do to about in So more $XXX last year, $XXX originations. looking million to we're million

million last in estate. lines We real $XX year. also would like of more million the to We did commercial do $XX along

little growth whatever are payoff. be originations lower to stronger originations, little payoff a some to bit real rate a the bit the should going answer is We see again, estate. but So in

showing activity portfolio. in all finance. much market. about the A market contributed and year. substantial rather of think a the Small Equipment ticket debt originations we those is sold, contributed did some in $XX growth Again, was of are both even portfolio categories going unusual we in Middle middle pretty million for And But they leases. paid million. $XX in up. company down their another payoff see

happen that as continue grows. So to portfolio will the

also just borrowers they portfolios selling money. the a make We of lot because to some had opportunity saw

I hopefully, stronger selling again, in the as unfolds little the little equipment bit less see in a opportunistic -- supply that chain the originations or we'll a think bit, But of portfolio. rate-driven

commitments million getting of the amount the in C&I, And year. now on certain is the the the paydowns year, saw year. obviously, has lines last our substantially of and the during we portfolio a week credit, and volatility. of course draw towards that weighted $XX during of We of will They rather lines grew

going commercial utilization focused on forward be to rates. we're going So line

pick even a XX% C&I, latter liquidity if Lessor money usage, The little of if better we're stick. the commitments, finance But we'll bit, even up much to XX%, the to see sloshed better funds. finance, there it's that, stayed where originations is quarter around more for about utilization economy in we an to just fourth only just less is. almost at get was the in grow growth. volume going even in not a average off all-time we and If around and that result our in continue little better increase. going utilization then with we that and And commitments the wasn't we demand our low. And grow part commercial get

example. pre-pandemic utilization the of barely good year, that Health care at range. the at XX% XX% in it in Historically, the And a portfolio was the rates is end is range.

increasing So growth us and commitments. the lot that the that's have, even lines without there's of they runway a for use people just

results So net-net, the we is number. volume keep in but hard still to we're say the and the going there solid believe I And quarter-by-quarter our know growth there, it's commitments. get in the and thing to at the delivering look results. with you're eye on originations to your paydowns,

Manuel Navas

a the -- I ticked call that appreciate origination X% little the yield? originations on for that to yield above that bit, level. color. still Anything noticed Is new the out but down I

F. Gasior

stronger particularly mix Yes. a strong on yield quite That side, as That finance, those the Fourth was and commercial point. saw. in the third equipment the of risk government quarter lower When the we we lower was up and that's it the originations. a utilization, bit in as that And in finance quarter. have quarter. have multifamily, it line in -- -- did you both are then of strong side, was ticks was good stronger yield especially

would we feel X I quarter see about position again, could overall. in a a yield any that on quarter be mix, probably the So good any better better affected. reflect we pretty if for be the -- 'XX, could would the could or origination yields but quarter say,

done X quarters. like X.XX. of equipment on For of side, They're government to get else. trying example, things typically our finance customers That one stronger their is their everybody year-end is the

We'll So of do that having I about [ you're a -- we product see portfolio very third in talking little skew. X the but quarter volume, see strong could bit could because first ]. yields under a

Even get a so, and to up XX picked an little ability increases. quoted points. recently seeing basis a We some pricing transaction bit of we're

So the close it on that transaction, first X.XX. be to closer quarter, in could which here will

portfolio. So from again, the closer even support X% low-risk we'll see to a the little

the yield, So did. up different could little a care health as quarter bit, little picks but utilization bit, picks naturally quarter fourth supports finance up I any and a line picks that commercial little as it side a think have up mix

Manuel Navas

talk you a little And for what -- feeds about the of with things from what a metrics benefits key first? rate the would your possible to a it Like can are bit And hike? consider NIM, right single this is are as that that the Is move hike? hike? March possible kind of kind into me

F. Gasior

move. lines Well, all the will commercial

strong there's time, obviously, notionally, time points outstanding to to that, very even right XX one at will more liquidity a don't if aggressive on off help. Obviously, part happen then expect deposits. improves less single funds. lines So every rate get just increase. the sitting we're and you're a right bat on on liquidity you bat. with We up any if excess of $XXX such going need off basis What's and cost have to clear moment get you million utilization of -- And in of that the pick

overnight expect And funds. on benefit So just would that on the some net on just be benefit then, course, we a margin the that rate of cash carrying, the we're positive. up interest pick would net hike we'll from

again you in you'll overnight there's So increase $XXX cash, the a least points, basis even to if XX up at rate. XX in say if point-by-point pick million

then the as continue reinvestment asset hope from from obviously will slightly So hopefully get again, get to cash, the if fades utilization benefits get the more we liquid. sensitive the a What we One, off if we'll higher we're and alliance. we'll And benefit three, bit, at better utilization, comes rates. benefit have rates at get market commitment the benefits. rate. higher compound. a in portfolio, It people is cash and little we'll very Two, it's happens reinvested liquidity need

during to points. continue. just should Noninterest we And few a that strengthened the hope and year, income add

We in continue to see good the pipeline. activity trust

to with respect commercial growth in be continue deposit with focus on movement relationships to strengthening our businesses. department an that increasing see and income deposits We will some services small fees, noninterest forward and treasury

With the and small had additional finance products they've we're we're PPP they seeing our respect to capabilities in to PPP credit, looking strengthen Obviously, commercial and some to that existing forward needing greater in area. use eventually, to over start X years. X businesses, the support the growth But last from X preparing loan will activity.

earlier relatively to occupancy an flat. and And costs. some which right reduces in the there would now, to footage, I square was call, plan know downsize some is finally, expenses. remain the reduce in We facilities branch And the interest expenses branches. expect

change, the net So for but to that potentially we're change significantly. the footage square using 'XX not count gross will likely is

customers particularly smaller effective are the much maintenance, X the at after we be at $XXX,XXX, the same that. more bit. then looking facility. we least making a service we're rate depreciation level at can maybe The how The reducing We're will And rate of occupancy a little might now on do change are estate expenses, staffing won't we a think And and just still taxes real What looking a to terribly on it we're be facility run and expenses have brand things bit at customer impact the there. footprint. deliver just and using significant, really opportunities smaller $XXX,XXX. run X but a net

Operator

question next with D.A. Navas Our from Instructions] Manuel [Operator Davidson. comes

Manuel Navas

higher keep kind that I the was I branches. the about rate you quarterly Does to ask this going in that. the past? similar -- bit of run in of rate was given little still quarter. appreciate It that run a kind you've

F. Gasior

And first one, quarter. a higher is higher Yes. removal. bit quarter bit of always It because was this a little snow

sitting XX are today. of snow We X inches to about at

employee forward about weeks. probably say first looking see. to million, rate And always a million, I'm But X what plus we're benefits $XX quarter. in arriving $X run minus about or So higher to would then the are bill in that I not of is going

that branch before were the a themselves source of said the demand. cost savings. carefully customer staffing manage We We huge not to

so brand on cost the effective side on the And occupancy improvement facilities expenses mainly more basis. the in making an is

our conversion the made data and moving already savings data and have communication into aggressively of We our new seeing continue. the infrastructure. communications in we're that to our side, new network, will the We're benefits

cost to to best Obviously, other try expenses we we're inflation through the can. to we're respects, see us. and going And keep as all going with in on and line pass the economy,

a everything but be hold line. to voluntary, might can the expenses bit to in growth we going that do we're So

increasing So microscope production, originations close to the we'll can going the and credit, we marketing what we commercial increasing approach else need loan we're focus. top deposit has commercial for a to focus the spend. as so our deposit be get growth, is growth Everything on compensation going the that get usual on the

Manuel Navas

it. Got

plan So your inflation includes with like wage hires? in there the new

F. Gasior

organization, expenses. been we've ways we've pretty that we've in made along, make market Yes, made but because adjustments to much the all at those to offset found also we've and the

ways will going be an mitigate still to there's we those find the can. that have we'll best and inflation consumer overall no impacts we market, So question to as to continue but need in competitive impact, is to

different sometimes, in that's about of creative doing ways And what and being and that's finding more things environment this efficiencies just than it, demands.

Manuel Navas

what this thought quarter? What component buybacks process drove kind is And of a of capital? little slower their of bit use on -- use your as

F. Gasior

terms purchased limits the ] of for market our Obviously, in We year. the [ proceeds Federal the there are during take and slightly authority the from the XX% subordinated we're debt And what accretion we do. over One, to conditions allowed have the of limit reached shareholders. Reserve. of issue trade our of course used we to on advantage of

be XXXX. there, trading expect closer far quite we're rate more book, I a But would it closer. nominal One, to but during to not

accretion less. have the less. be So is we'll the is two, volume of cash to benefit somewhat available And that going

around now, right we're XX,XXX,XXX slightly right -- So shares. we're

we're within think under an that I of 'XX absent XXX,XXX currently authority anticipating. and have We not just shares, authority for we'll probably development some remain

Manuel Navas

helpful. That's

see priority know half it You really loaded? good the added kind cash just an for see amount seem Roughly yields up to that just a to there securities wondering was use higher. just you growing? And portfolio. what did you the quarter any that would back add -- is tick it Or of want keep but appetite the you to if growth, of is I that could loan because

F. Gasior

January. have future as to far even as is already add Well, in we portfolio will we growth continue the concerned, to

that X-year us. that So Right what accretion around short to first advantage we're to taking duration, it and of now, kind growth, we're under right it's of continue I keep foremost. would market the going gives and expect

we've in So been X-year and [ ]. the most averaging things range XX they've recently, around been X doing

will create a yet term. we out a, unrealized loss lot a put in in locking be a So going. higher not it liquidity and of in is out long the and, a interested weeks, into It then nor a much one, watching We're an X putting seems the stalled are of function either, and last really interested just have up duration is long in really the to few how lot bit of curve, that curve little yield where factor we things: securities potentially securities. therefore, shipped there

if about around expect seems I range a for points, on a So reasonable And to much million it portfolio end, like on end. might maybe as the range would X.XX that reasonable to $XXX on on based $XXX $XXX securities be that up million do. yield low the averages curve end the point the million high what might as X the low

Obviously, changes market year. during the course deposits. keeps is thing change of sudden, funds interest with in rates, the we're up in the all the one for also a But watching of

liquidity out could see accounts. run excess some of You

As we'll their borrowers -- down our their draw less and liquidity. then excess deposits, liquidity deposit excess use have deposit

We utilization. will have line greater also

care is And Our health of portfolio good a that. started. already pretty has example that trend

of we our little saw, say, profit, how the put declines could at So very cash. possibility million looking affect little securities. are bit million should we if little to much a That a actually we $XXX the at basically view bit just would footings were we that the that of compress deposit excess $XX of carrying

I to might I'd rates right consume moving with there's be in precise to demand But of So what happens expenses, -- higher for than greater in too interest excess and hope with see cash inflation. economy would therefore, more and parts lot liquidity that. a borrowers like They liquidity. a from be now, the how

securities help but over portfolio far it. also to to couple is options funding overcommit years, keep next as the designed the interest of and we as to don't So margin net open our want

Manuel Navas

as you're you $XX term the a would of worried excess are or about Those million most watching ones to of you $XXX in deposits. surge rate are kind deposits that rise? So million with kind

F. Gasior

and consider the pre-pandemic. to that -- I I deposits monetary pandemic. of were that stimulus during think mean result it's that. were a that fiscal are there not have fair occurred They these around been the

the balances side, sitting to time. also expect which some depositors high just with dissipate we over We see some commercial unusually on

which potential funding side to very retail the other don't to why burning as we the we'd going combination And million deposits want In as commercial the of to cases, That's a but like source translate between sources, securities. the either to one-off to stimulus. goes of much depositors $XXX year them that's of some off we some is on it's but both growth, see. in on cases, especially like and proceeds deposits, going on the getting loan side, $XX something just for think on. sitting or rely in but be there is residuals a other funding something on of sales decreases excess with million So from also

Operator

[Operator Instructions]

F. Gasior

Well, with in their interest no questions, everybody thank for more we BankFinancial.

and good, growth our higher loan of continued one we As little forward 'XX we're little certainly to less in little and hope environment economic for stable good and with going we favorable and a We year to that's with thank originations a everyone a attention a on patience, to for said, push originations expansion credit a 'XX commercial liquidity capabilities. rates, the deposit interest and we their but for everyone. being their more look

Operator

program. concludes the This

You a Everyone, may day. great now disconnect. have

BankFinancial (BFIN) 2 Feb 222021 Q4 Earnings call transcript