- Earnings call transcript Q3 2022

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Operator

Good day, and thank you for standing by. Welcome to the BankFinancial Corporation's Q3 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. like Mr. the now your over would today, speaker I to conference hand to And Gasior. Morgan please Sir, ahead. go

F. Morgan Gasior

to this you. Thank Good I'd read. At XXXX morning, the forward-looking like time, to third and quarter conference investor have statement our welcome call.

Unidentified Company Representative

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

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

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

in details F. and further forward-looking the risks of obligation risk Morgan evaluating and declarations please the I consult Gasior. These in statements Mr. reports be We should undertake the statements. call SEC. could any turn will uncertainties and considered the future. not condition to factors uncertainties Chairman results our and our on impact to CEO, statements have the financial and risks do included operation, For our we forward-looking any now update forward-looking in And over to that

F. Morgan Gasior

in Naperville closing Southern of filings is customers two we Grove Crest we market, online electronic information Naperville suburban branch provide Downers outset we branch in with time to that environment. customers our particularly the this and and additional are our to our in Hazel all branch at issued already At are adequately the area be complete. will new the since banking we adapted locations, you. well Western only The through customers can support branch Thank our have the branch, Naperville branch, those Flossmoor suburbs. our believe consolidated the The notifications

of branches with later. then that, facilities the Both can we up liquidation be close savings. proceed for and to of holiday it discuss January the impact cost XXXX So those I would in those after able season, the and we of changes will will questions. open With

Operator

a Thank Instructions] of you, Davidson. is sir. [Operator Manuel question up, question Navas have we coming and from First D.A.

Your open. line is

Manuel Navas

good Hey, morning.

F. Morgan Gasior

Good morning.

Manuel Navas

Can trends grasp I kind wanted and seems Hey. by in start originations on outlook payoffs, like just just were going of past It I – the quarter growth? firmer forward? a get the matched with your and loan our to of

F. Morgan Gasior

you the expected if Well, and quarter the year-over-year. year activity, second and respectable Sure. best actually increase growth pretty of in we what origination actually was quarter about the our a was in was loan look

larger had In terms payoffs of amount portfolio. in of we payoffs, the multi-family a

One portfolio paid quarter of our customers during and the everything sold their entire off.

negative the that So hoping to to entire the were probably We and difference. almost exactly. growth, $X.XXX billion, that was get was loan biggest to almost variance

particularly portfolio, than the had year. amortization the fiscal because government in fourth us. busy for government's a finance also typically the a higher of scheduled equipment quarter time We usual that's It's

estate just the payoffs factor So third quarter. of good the quarter. doubling to portfolio generally third about contributing almost the felt wasn't well. – in that we But for the the as was a overcome It and originations real enough

the fourth just the the hopefully to our third would year. billion. $X.XXX between billion which goal $X.XX $X.X end the and Board. quarter, $X.X billion end to given into point, lower fourth is set into billion get the at up quarter, to somewhere the hoping of at starting we much going quarter pipelines get Going of across were like We to pretty But

the portfolio that going here particularly into and industrial we quarter, commercial into in yield the And into portfolio have the good finance noteworthy fourth Probably in during quarter. the healthcare greater coupon some most opportunities. that saw quarter you has portfolio the commercial what's in with even growth fourth even portfolio. we seeing healthcare pipelines some As finance We're is continued pick-up the and the the also higher we're new activity draw XXXX, lessor had seeing reasonably is some in in activity and portfolio credits. average

and So even positive the about next the in year. fourth XXXX all for considered, pipelines we portfolio going feel fairly things C&I into quarter

more ebbs with. and liquidity the the inflationary market winter, to to continues a the in active bit also tend environment be As begin credits healthcare

reasonable are think utilization, I we line quarter going fourth And expand said, that, of those pipeline typically I XXXX. have stronger a as into the all healthcare for trends a of In fourth in will equipment finance on particularly is greater positive which new So fourth good pipeline and into originations, quarter portfolio for our top commitments. the we portfolio, and for pretty quarters, quarter. one have

considerably ramp couple before rather the in funding here activity December off. expect up first tails and of We to weeks it November,

bit for scheduled get the people historically. term if little going if So estate real than pipeline can deal. quarter actually we'll quarter. good this can has of a and a meaningful if do quarter, a a that, somewhat We've And of amortization But a then again, average – of larger fund of couple have then into fourth is come we very lower fourth couple some finance credits we equipment get growth good the a nice than out growth larger credits seen rate risk, do portfolio. that looking more out in equipment somewhere portfolio. in, usually better we'll a range we'll $XX we the because million finance, higher little the see And for strong quarter

over, much range. to primary little I a we drop So feasible. all-in-all, a our feasible of but we a commercial see followed up number then XXXX fourth set position, the place, for XXXX. to by to up a environment a possible factors equipment have in quarter that's higher goal is we finance be side the put it's think come of income so aboard reasonable to or A to environment fourth that for get to coupon it's the XXXX. into $X.XX short because sets believe finance If billion in here little interest in and higher quarter strongest go particularly and as But our

Manuel Navas

it other the Is line] That activities. you rates? – down about to any was helpful. line paydown there equipment talked little finance, higher for [straight bit because for but straight I just Should the a guess of come amortization any

F. Morgan Gasior

I as enjoyed that think loans Yes. The the with just due I there agree with bit a our estate. almost saw real XXX% want temper that comment payoffs are sales. a that that little their and activity in third paid so I of market in investment, and the rates bit off far portfolio, fact customers a pipeline, their to to least we quite numbers still at by quarter, they return even higher. are still purchases in in on on the there's their the

that the payoff The apartment then at least We for there's some see and some million properties, of maybe sell the commercial deposit estate still the opposed some we commercial portfolio, as that, payoffs diminish, customers example, having do to growth, helps substantial range their reduced to opportunistically volatile. that payoffs. range, some quarter customers expect a the a still risk in could so million and here. we said quarter activity a portfolio payoffs. or be XX with the liquidity that naturally us XX still on So more have some feel in But real are so with we'll

they pay we and So speaks out, higher them greater we then drawing see liquidity utilization also back is it starting down. utilization But the a month-by-month. know percentage that lines, is that to but trend to on once liquidity did generally a restored, which the

think as less real portfolio is are activity repositioning a an I termination in risk once scheduled or a commercial, because numbers XX% early but bit little volatility Every of equipment over while So those portfolio the XX%, fairly less they're in little in and seeing get consistent. payoffs, the the time deal, finance is rewriting far probably we're we'll as equipment estate the a a activity.

Manuel Navas

That's helpful.

over switching Just your the to trends. of some deposit –

talk on seen You trends liquidity, you on there? a slight broader like basis. trends had You period just have just deposit but of thoughts of and decline kind end plenty there Can still of pricing about competition?

F. Morgan Gasior

activity, Yes. some with funds Well, seasonal as some some our quarter of some customers far balanced higher we goes, public saw and as third out. commercial activity, and activity retail in

handful please If – seeing of customers mute, we Somebody could brokerage to and shop a more saw to really starting rates you a solutions. trend, we're please?

solutions have those well. as So we

do in that's training so option, So something ready We're throughout that's an the sure position the even that's a maintained they're people our week. know quarter. We're this making to if interested in. market again, We issue. competitive

position question So about accelerate. our so of retain the now, priced funds cost maintain deposits, successful. to no it. right and that's But I been our market in we're and far expect do There's to

will just trends people going some down, broader We consuming liquidity. in liquidity see

taxes real of of write typically declines things on in for the we instead real some estate as third paid deposits One happened in estate of we'll and being interesting is quarter see the people XXXX checks here taxes. more seasonally fourth that quarter, see

tuition. quarter, Third going we money for out saw

of really at our now, we and watching our So in is story viable. good to we loans to these And growth but continue very trends, deposits see don't here mission ability. We right to market we're want the retain any the to where defense make it and carefully. play fund best broad-based are price be to the

Manuel Navas

margin that just that couple yet next nice Bringing thoughts of a about talk increase. the in you quarters? together, Can kind

F. Morgan Gasior

Yes.

commercial more is we and big The mission growing real better. bit, a If credit even our maintain all, our step grow is of than little of deals a estate. to favors it probably First that's it to lines it. path finance can

we're chance before. into finance finance, be finance, doing on real going to at We think we C&I with the focus more will finance if happens be to but a to that's at basis, commercial on on it portfolio. deposits. a us lessor on maintain will look good, equipment card best of So as that's to course, where it, portfolios still you continue the but what focus, will maintain But with of finance feel estate, now, ahead maintaining the obviously looking in then, got is example. just margin, that margin. to marketing commercial relative helping finance, is a If put more give wild And And depend just we're on simple that feasible our emphasis the government XXXX, it's active our too, we improve the we going growth is key. healthcare

commercial on of assets the that there. the maturing year. million word, $XX Next million a even with year XXX throughout grow If can next of we right yield. average approximately points we portfolio then the repricing XXX up prepays, and you're off but that money year the over we a told a in little and by $XX of year, a the if picking almost in we equipment roughly And have grow loaded portfolio simply is have reduced securities amount at simply Paul portfolio coming of cash next approximately re-pricing $XXX multifamily finance million,

there not that feel to to ought we if curve we the So then be huge a protect ride demand is the able margin. and interruption to

Manuel Navas

I appreciate queue. into that. can the step I back

Operator

[Operator you. Martin comes Janney. question from Instructions] Thank of Our Brian next

open. is line Your

Brian Martin

Hey. guys. morning, Good

F. Morgan Gasior

Good morning, sir.

Brian Martin

to as of just one there it – is margin, far so the about portfolio. you deposit – up, seems expect what's guess here? the fall there, and base, just Yes. very and and – margin the betas but touch or grow amount just much what's low. on the you it you to understand like have kind like this guess holding a Certainly, that re-pricing expect, margin. on expansion how more optimistic repricing to kind talking the I like margin wanted guess, your fair what and it could there to you – in expand in together given here, if how just more Morgan, go been seems follow-up just understood room it comments of try as – if maintaining get seems about things you they guess just stable if there's could, talking just you I that way just you I you it, continue outlined are than fact I you're the

F. Morgan Gasior

we There's so of I not we we If of great on action scenarios for protect for until turns cost promise year for want have getting for expand it's to something think a which trends on can margin greater and year to the deal funds. federal XXX great visibility XXX, everybody. is deposit the next is over. I different primarily the case reserve year, it rates base in why next think a it the competition just it, That's range. But have now. control that's next result wouldn't started funds, I many obviously interest

will volatility and upward We in see greater an a trend deposits.

on We talk fact that the like are to we're the next gives of We'll we stand as and going that is real the we reposition portfolio, much this we credits. of look than say, thing sense fourth the estate securities commercial quarter better less of repricing said, end have flexibility. loans. the if ability. a will to best then less equipment first our but as what's we in be But and ready at into the how have at for than And certainly it portfolio probably planning reprice, again, margin. The on it mix is is the some of our when we finance protect Obviously us finance delta do this. the to upward in where I we

a anybody. mid We more quarter. to upside all margin. agree those I comfortable promise for with – with pieces to factor. So would want you fourth wouldn't feel is I to the there it that potentially just high-XX to high-XXs are

still involved We year but we these fourth enjoy then closures quarter get of the have some year, that to going function to costs saves. with, in cost what deal will we'll benefit the a then of remain have feel then securities the the deposits And for cash we how the to next we low-XXs next it's redeploy margin that outlined. but can happens we on and be are we've and particularly feasible, protecting the as branch

Brian Martin

right the loans to this thought going given your cash, securities some primarily go you that pipeline this And but into about I remaining know just that's it. is deploying point? the Got primarily, now the did quarter, at it's thought

F. Morgan Gasior

can That would some pick-up be our that. certainly margin from you hope because

pick-up securities, it. obviously of Even the finance real the to in but estate, but the little much do going in better the in and equipment You're some you'll commercial side equipment and margin side. commercial mostly finance a in finance bit

that. are more an next demand securities Securities useful estate, that get attractive priorities alternative would our be in for for we're than real So is estate real and year. are if, payoffs example, expecting then we to down,

You'll duration. probably have a shorter

from the protect You'll income interest that.

a bit. a safe You be. little might even pick up And asset to it's obviously

alternative we see to potentially an an So as other not types estate. security necessarily real to It's just alternative of credits.

I So think more should right defensive now. than offensive,

Brian Martin

level. we about Yes. $XXX margin And high ballpark forward. mix that Morgan, I can think think Just is just kind that so or we kind mean, the you what's I guess, the can of of – going of of breakdown repricing, the that about just that? as a million

F. Morgan Gasior

to over you for turn me Let Paul that.

Brian Martin

Okay.

Paul Cloutier

$XX you million $XXX then in if interest-bearing extend fourth $XX breaks about loans the versus and the is million But XX $XXX of the down flow months, cash, million quarter Brian, then a $XX represents end. quarter million in and repricing. and the into – that cash the in securities half of cash next rest the well, is half, XXXX, million. assets it's at

Brian Martin

Okay.

yields I on versus that maybe year? So kind next real what's understand more versus trying I side, that's loans to on I'm guess higher other loan the guess lower coming yield the – of of areas on for the more just the yields just are repricing estate side

Paul Cloutier

portfolio, of Well, a off there's that's X%. coming about cash a of equipment $XXX around average the weighted coupon of million flow and at finance

Brian Martin

you. Got

Okay.

F. Morgan Gasior

terms this rate maybe of in this upwardly of building We cash lower-for-longer biased environment, an we a didn't been to but not want environment. nicely trapped anticipation what I rate quite of It's set these increases, get an extreme assets. mean, all is flows. Yes. in years have interest-bearing balanced in

the this. the the this rapidly, all be protect happen, known a has fact, meet the a the a to And and cutting balanced in can Fed in in duration and of sudden the flexible policy history policy not stream the flexibility like is one to we year the of also on us this if downside suddenly ability to So been in and starts us goals gives so an here also, a changes in gives subject policy monetary change environment which to a more have sudden of to against add course that sudden year downside. during way some change earnings next

Brian Martin

expectations? your just however Got if you maybe guess – is margin the like it how I – would on you. betas just in your side. kind it? funding I to the there's of like the think after guess it And December, behaves little like the No, mean, the that What sounds to betas, remind on about funding is Fed I I as it sounds guess you're your deposit you're are likely today bit – costs deposit expectation like it? does opportunities a just I the fair thinking mean, a compress said just thought pause about that us, mean, way up, be Or outlining? I pause? after the or catch

F. Morgan Gasior

we have repricing to pretty in we what the the think enough The keep able it chance we're reasonably the steady. to works the treasuries Fed it Even If still if out and I thinking, have a steady. good interesting, close be betas should keeping we force. are if mix even of pauses, right? are

and decline pressure no that of off downward. know. sudden next pivot sees little to all they is [erratically] market bit funding, And their the of a really a maybe way maybe of Now Fed pausing because there's the but thing a takes

the one at nonetheless, inflation all to data supported a XX-year stop market and doing summer be recently to one though Fed seem two they're and very of point. from think the course what pivot. retracing sudden last people or That not this going During of XXXX, been the data there's down does is labor X.XX]. you see the episodes, by was where to But [X.XX

And the summertime, something trend like that happened when the was below in X.

more do, of bottom much and So might say [XXX, margin scenarios, very range. we at good the that just chance a might we line, project we have it of variety as this XXX] in case steady go about in repricing But any competitors and given XX% whether do. might assets timing good and feel what depending But quarter the act to you we bit we dip little way the depositors probability. there's too on to volatility what fundings, look the pretty Yes, to as protect a had when of deposits. of scenario, aggressively base protecting a

Brian Martin

as just I Morgan. you little kind it. on and color expenses, helpful. should than some expenses be guess not, bit of how reinvesting branch Thanks in the business. thought, a know just that about you get near-term then Got we kind you I'm thinking then get That's just of some it's the benefit a benefit you're about the thinking all we the or and the or maybe hard. minute, jumping How the closers, I for for better

thinking So the branch of impact rate? how about just closings kind you're expense on the run

F. Morgan Gasior

Well, the cost $XXX,XXX fully if realized saving. create together an will when about branches

that markets XX,XXX If acceptance going bridge significant Our that's it's facility foot efficient X,XXX good. far work current down foot at and help running of estate is has size. square taxes, to to least and early bricks-and-mortar. read over more very amount with the well out actually Flossmoor for a and us a adjacent up And saves, cost is in that that a real us, so way branch into customer customers facility is serving taking been

and to folks, for to we people like so take deposits. depositors. is of $XXX,XXX, factor still is our we our just for take best to – non-compensation the Inflation have have control there's of a we're have make people, competitive next we to do sure care have we we our make for But can So for to – still we're care we competitive need sure of year that focus expenses. those that to just

for real us or see But Our estate, be side. commercial our focus the be we focus for focus to management some into non-comp relative those success We've I given profitability need, and wealth a of and if and can more commercial there's rate this lower continue assets. profitability opportunities an of that the business be – a will marketing the going But early with be including effort opportunities, finance to on putting assets actually pivoting our money higher work balances, had the will maintaining environment, into some controls in continuing marketing it, just particularly finance trust deposits. be on on great That's any credit to the expenses then cost average to place even we grow to which is deposits, as as funds done. well that's can overall commercial create us. continue with both income but one. and

Brian Martin

you. Got

right. Okay. final then All maybe two ones. just And or one

the valuation can Just balance this Morgan, shares about or just you of guess I I you given think kind talk buyback, on just repurchased guess just outlook buyback? a there you for how that how here. few growth was about the you levels quarter guys and

F. Morgan Gasior

a expensive to tax. shares next year It's due more the back excise to starting buy little

the And quite that expect of we'll in still here healthy. see. the maybe not I but quarter, have third same year, extent we'll then as reasonable quarter, a the activity fourth amount So next

year, period. to a Board of six-month enough capacity quarter take taken over has we much and making next at us but have have time, We the this pretty a a April through sure

accretive to going back. XXX some maybe reasonable said XXX that you said year, a somewhere little as you XXX we're and hopefully, be. prices place less improves, of earnings be buy throwing if opportunity share consistency So obviously, But will extra do between sounds to to fourth so a to for four the then shares there XXX And improve and the share cash off we quarters to the quarter, repurchases. next in be like will some if it's

tax in the quite economic But takes is say tax in the more makes XXXX. place level repurchases, as third So being in share not same more that that the XXXX, I excise sense it assessed. do would XXXX given maybe not the in to still in quarter while to interested still

Brian Martin

Got you.

lastly, – maybe But guess, goes, your where that? far just the color today hearing what you get for as broadly, you about goal just you're worse your growth give loan I as growth [indiscernible] any cautious I customers on from and year? maybe customers? or, don't next guess, I by on a get just thinking little economy as mean, year. to you given just then And about know end far with your what talked Or outlook the a bit you as seeing bit I are is little you Do Okay. a as we're the of little next about sense year? that thinking maybe growth better, more you on know can were bit if I

F. Morgan Gasior

XXXX, the If year. amount consider $X.X which considerable we're growth get we good billion somewhat we in get roughly a A was we to be end solid XX% to able of at at growth a actually than better the thought estate, of beginning to of that the loan that achievement. real meant XXXX,

conserve are closer Next a getting focus starting and Typically, going rates to a and is equipment side. longer finance in of equipment demand rate higher finance zero on it's it is rate to year, finance again, the as at increases, environment been world make the and liquidity say, like look equipment cash. to no where XX% commercial I'd as and to I'd Cash time. we tighter high the finance in this pay probably enemy environment. with point, liquidity lessees like a over would look

portfolio, usually rate, So to is is our in continue And recession-proof. spend for finance. somewhat to going rate finance the historically, rising obviously, and just environment government cyclically, equipment money, higher a government good

their to economy we slows down slows finance we growth. to going going Windows that interested equipment to interested get things generally, their be to with expect of If, reliance and opposed Windows substantially modernizing probably however, that are efficiency, Companies portfolio. be to that would deprecate, maybe and X. in So continue that as it's don't that are potentially of Anything in about type I that production systems automation. so in you consistent on Companies suspect upgrade reduce will. sort, raise operations. operating are But labor can XX the equipment down, the

I So think that's a a interest forward for is growth finance opposed stay because it's feasible. efficient to a bias us. continued perspective it, paying We're – equipment going there's in is and there's XX% cash equipment our greater trends usually and good in that from right cash finance now economically assuming as place, a for

Brian Martin

Got you.

then and two, And and one but people think on back. Thank on there? step I'll looking – two So this then last last any update to about add. to just how I'll let about – the back, ask reserves? you. and Okay, people just me recently the But I'll – the then I just more those just how hiring step think about given and the growth talked you to you've things. know at outlined,

F. Morgan Gasior

on it. we a what I We're of in we expenses. hesitate, – would shift sudden opportunity more group economize find little bit Again, addition we're sure little pretty our impact to for on priorities expect ways not if need. people, There we mean, planning a to make a the I people of people. with may good do. bit a get is we'll shows shape necessarily we huge won't a work to to but have obviously, up great not

and the starting reserve more in ratios account reserves strong the given obviously higher it's as XX, We is in far debtors, more towards or that approach. extremely commercial finance, again, bit little a might basis the But talk we'll now. be point it then if CECL more concerned, the credits finance next if healthcare a But move year, government with likely. credits, growth are a and mix see then have that again, ratio I'd don't the that about will is quarter XX per might right little again, massive we, reserve as that As change in say lower.

get we lower the So and obviously mix somewhere if reasonable it's risk a between less XX mix. and that little XX a bit if want, we seems

Brian Martin

Morgan. all taking questions, for Thanks Perfect. the

F. Morgan Gasior

Appreciate Brian. your interest, Thanks.

Operator

further F. like I Gasior conference you. would questions to back no Morgan I seeing now Thank am Mr. for to the turn queue. remarks. the in closing

F. Morgan Gasior

Well, fourth you everybody in a holiday we and season to forward season, their XXXX. here to will BankFinancial. happy speak wish continuing We We and safe look everyone holiday we quarter. thank in progress the for in interest

Operator

concludes conference Thank for This participating. you call. today's all

You and pleasant day. now may a disconnect, have

F. Morgan Gasior	Chairman and Chief Executive Officer
Paul Cloutier	Executive Vice President and Chief Financial Officer
Manuel Navas	D.A. Davidson & Co.
Brian Martin	Janney Montgomery Scott LLC

BankFinancial (BFIN) 31 Oct 222022 Q3 Earnings call transcript