Earnings call transcript Q1 2023

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Operator

Good day and thank you for standing by. Welcome to the BankFinancial Corporation First Quarter 2023 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Chairman and CEO, Mr. F. Gasior. Morgan ahead. go Please

F. Morgan Gasior

morning investor to time, conference our to Good first I'd BankFinancial quarter have read. statement XXXX call. forward-looking and right. the welcome Corporation like All At this

Katie Multon

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

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

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

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

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

F. Morgan Gasior

all time, are and be complete this At filings questions. you. to Thank take we would pleased

Operator

the question line Company. with from Manuel first Davidson Our comes Instructions] [Operator & of D.A. Navas

Manuel Navas

there's forward How for to look trends what expected feel lot like going given growth some for and and X% loan to a I of pull XX% conditions? this flatter kind a then. Maybe quarter, quarter. XXXX get growth Just noticed of thinking probably your demand you're expectations current than forward. trying was little current do last seasonality some

F. Morgan Gasior

our in yield focusing going the on see as with what liquidity, given growth would curve happened investment-grade much to The and side yield side. the I government Well, not don't requirements. we're say, the and current meet Equipment what's Finance happened in just

as have of it we'll The as And good might that's it going commercial Finance, growth at we sectors finance much -- certain just -- the be beginning somewhat to So as the had not not focus remains in the we active year. in but Equipment still, first have for of as We some growth been quarter. sector. on had thought.

Our it health get and line care of borrowers a time utilization they are short back see then down. We pay and in somewhat period still volatile. for remittances

say certain we than their holding seems health to I are at because little would expected. their year balances otherwise up have side have care a did cash less remittances are the and the of So than beginning it the shorter

with both real at rents, don't all, So estate all look then in and the if see in the current purchase of -- much market conditions, and pricing flat we activity. as of terms we the credits

that beginning as We some muted year. we at are the but was as refinance it as the expect to we of seeing be activity thought

a be range X% to liquidity maintaining little focus from growth is in reasonable of again, market, at that's ticket, discipline could focus of to bit and to levels with, middle maintaining The small also going It margin and a commercial right on all, So compress bit. for probably yield profitability X/XX growth to the XX/XX got a for us a appropriate all primary corporate maintenance. now. continue portfolio, we're say I'd being in finance where we other, if at, the

current our levels, transactions some less so So inverted this we'll just as at the at said, I the meet objectives those see Finance don't Equipment yield curve space, point, in growth. especially yield with of its

Manuel Navas

payoffs but in payoffs but -- some guess of less X%, trends the also slowed bit trends continue little originations? I to also two And encompassed muted that of all that's kind a the Those hit so down. probably Okay. slowdown of kind origination

F. Morgan Gasior

Yes.

If you sector take real estate significantly, saw. it you by payoffs, payoffs as declined sector on

about see selling buildings refinance stays it's going some at, curve significant yield activity from amount see you're the people just to continue we'll payoffs muted but of terms to a where and Assuming in activity not of relatively payoffs.

Finance lines estate we what rather And had quarter, That's significantly big good in pay very I Finance over strategy. absent much continue The commercial X our a portfolio quarter. first pay in part So next to real pretty line the It finance will liquid. will into actually always in rates. of the second quarters. portfolio down saw along about Equipment change down of the X first the to utilization. quarter. X sector all the the is That utilization in to is liquidity line Like continues to X we said, the Equipment

quarter than been quarter second Health even has in and care first We saw the a less volatile. we utilization in little the probably growth now in more expected.

where going Equipment be that's balances in again, see volatility So is to sector. selective we'll we're Finance. the think in I finance And in some loan commercial

it's possible and will in do the much continue originations. that just So won't as payoffs Equipment we Finance portfolio

Manuel Navas

I Could seeing bit? -- everybody. driving for Rates up What's to are shift outflows to Just you of deposit there? kind what going the over a them? are

kind -- can on deposits light kind where and discussion of bit? thoughts a liquidity just stabilize Just on your your of in of the thoughts

F. Morgan Gasior

a this were a Well, year last It for because than and quarter in in the But of higher MD&A in try year. last year first fairly our XX-Q. put collateralized little our our detail We than had typical funds. bit higher the bit year taxes we somewhat the -- little first outflows public was us. quarter this typical. more was to That's

already here some we're and seeing that money side, flip the May. in back On April flow of in

seasonal. area the So in do. trust we that seasonal and appears We had usually higher be somewhat to estate activity than distributions

We related growth they're in well. putting stage now assets They're They and their so volatility customers that that closed funds to liquidation saw initially see into business into selling investing from other some asset in reinvesting. We continue the accumulation mode, year. they've and that these they're in. couple department are sold have they're but beneficiaries through And a good and trust are just to of throughout They And they're is -- it first their in busy we'll quarter of of the markets. some will we'll some and the see mode. distributing are -- done deposited retirement in the the process assets. other introduce bank customers they're also in were that liquidation very some It's that and business.

X low-X these by cases, obviously customers in figures asset some figures deposits. volatility We results are in some talking accumulation which about in and

During the as more competition into the the and for into part again first of deposits, quarter, and March particularly into accelerating middle then quarter got April. we saw we

they see a million deposits So robust result, also started we about of still I'll the And as some still But to say the we very $XX competition Bank showed tracking we've issues when declines competition. right said better in losses. deposit insurance well-established for $XX understand to advantage customers increased had options slowed comfortable with from a in that that We've customers they're had deposit pivoted are million and into insurance insurance. get that deposits there process And established networks making And in program resulted we training of with increased and insurance. sure has it. the wallets that are years. for many to as share due it's and Valley a could who Signature, bit Silicon coverage us of XX-Q, but down deposit haven't our And and actually taking deposit there.

deposits to new a actually bring handful that their and deposit of existing But some So we've try of In come customers something again there the bit. a to we are including customers, around that diversify is options seen week that that helped of in insurance week, XXth, from now saw them. many look a has first the couple customers, those customers. they us understand of back available commercial

don't loss, we competition. there you So, go will, feel are say loss to forward, competitors high to I for some We rates. still low There's necessarily adequate we'll would gross if the liquidity. of have on in maintain out Xs that going that see

to right should short-term to continues well have focus time, at developing at same to come the share variable X tied going deposit where our of account and on that stabilization. far, out. and But with strengthen wallet the the CD We continuing commercial the to competitive. combination that's a But that's indexes say base be has so the pretty existing Hard is good deposits. in pretty resulted

is tax last tax did pretty which even were April we disbursements. and our month, of in in example, the some saw the actually we after recovery April April we stable week For in

on by to want really doing about with other now, insurance than year keep So competition. some a quite XX%, the XX%, year, to for by mindful at see the fast of ratio any we're competition good and growing we're range, due a stabilization bit going little see offset runoff maybe can hard deposits. the and what's the work might to if be commercial and that on deposits end side our continue there. deposit still to same result to we to of Don't some that and loan-to-deposit the additional from do the the has even some we'll stable, of would of X% bit retail get X% we we of But going the can have make we growth provided a deposits right the There's to XX% in us. end projections keep growth. how day, end work We're if

Manuel Navas

NIM Is half Like where the some growth with Just update trajectory is bit in and see kind kind little the higher-yield bit little going? and some upside really the that you less actually of probably discussed helpful leads of Equipment That's a discussion. an year previously on a into Finance. NIM robust? back there less outlook potential the loan NIM in a question still of about --

F. Morgan Gasior

it last now. happens to saying And as wildcard was been and that said Well, deposit key quarter, the the be a interest remains actually, is expense wildcard. the The about for to we've what -- next. it going we year

intensified, competition we're deposit interest side. have successful the obviously the are if new means deposits in higher commercial to we is even going bringing that potentially a expense As it in

going margin. one, challenge maintaining the be greatest next yields issue number terms expense and on interest So is is deposit the I'd higher to originations. appropriate interest that, in say, expanding maintaining net After of

expansion portfolio. finance Those will even prime-plus to Street better expansion. to are I'd chance the be a the higher-yielding key So But give general commercial yield us that X.XX%. pretty stabilization the If say even maybe average maintain in did the The can rate with affecting bit a Fed it we potentially prime that, well. today originations strengthen we first in our the going first quarter, the loans, of is Wall was quarter growth at increase assets. and the

key to to it that the commitments that, probably increasing So the expansion. gets us stable, utilization. closer number is increasing If margin best chance the get towards X we that and If that is our maintenance. margin stays

And estate for we're lower-yielding with do do best going avoid in some to customers originations real to diluting but for will we the our margin assets refinances.

originations some do on will Equipment Finance. grade We for in investment customers

maintain interest do the our best we're yields expense. maintain to have will expansion. But balances wildcard margin stabilization origination We best the we're the these be going first. to And our originate deposit to and our to to Then commitments that relationships. support and do going

Manuel Navas

uptick That's in really commercial? you offer color a little there's is question last any as Can NPLs. that helpful. on My in

F. Morgan Gasior

process XX-Q reviewed if talk a the to the to process. told. the years, in -- and is and through usually many counsel. we're to government of what vendor, government we've government going in where had in collection it the with days is an go a This with recovery can't the equipment time with going the dealing claims position, we're the XXX take the through with being actually comfortable comfortable We necessary, while duration process about were We probably It's doing There and write put we private it this Yes. as this. is outside is both contractor as wrote minimum potential the first been government and That's vendor. claims between it of about issue go the it But in everything we avenues and the could concerned it But we wrote on far much We're given at about a where we've with is nonaccrual space. is. it. then XX-Q. and about moment, the the we've

Operator

the from comes Martin [Operator Instructions] Brian next Janney. Our with question line of

Brian Martin

spreads I Morgan, about are versus type they loan you slowing I don't can the growth be may those Equipment what aren't of what know you could of I kind get that benefit bit from guess, the some ago? getting the potentially possibility back a kind -- your I yields? acceptable Finance with getting guess, change comment on mean a what swing throughout of kind what positive some originations, just direction? some and the you has there is get -- originations that to changes there change that year? of And were quarter or Or to in today

F. Morgan Gasior

speaking, put the yields problem inverted Generally portfolio. minimum the at into moment, the we're is running that on we yield curve. And

X% to are trying curve we transaction, higher. that's just from part talking Finance acceptable So X.XX%. investment-grade not fourth wants be of you X-year at average yields as or lost somebody an do that to keep to as an low yield if some speaking, quarter -- about yield. Equipment latter the the X% yields we're and transaction, yields And Generally could

out the most government the that's going us going that's take of space, to space investment-grade so out for to take of us And credits.

duration, to has very something do, leases, might fair might to we that lessor the of might we cost our margin. Xs do it's value is funds much and the is X But to likely time market in get from the those going because we be not lower-yielding due years. -- shorter to spaces time, especially in what high on as Now just if now see we're

quantity work maintenance BB+, a average this need So, on expansion. yields the ticket. margin of of were they and therefore projections the first terms be market Those margin smaller in category, B+, and that's other and to where quarter Xs the corporate to middle for in in the small

Brian Martin

Got you.

No, that's liquidity the growth what sheet maintain I talking balance And this guess, you Okay. given that expect currently. year, kind what's your deposit the you're funding just loan on the you -- on of helpful. about flows, sense

from of that what's how just growth to still utilize from funded loan it So there Is -- you kind about this plan you deposit the to cash? -- come growth? trying understand, is the you're here, thinking do going year? funding Just you

F. Morgan Gasior

will come sheet. it balance from repositioning the Generally,

time the And have of keep in being cash and some in securities account. are might the for we maturing, that we'll X.XX% yield liquidity the a

of baseline. So that's a kind

off at the commercial we why don't from flows market better equipment And Another growth. we fund to We us. and that investment We've government make We're government can investment in some other, the real cash grade sense forward grade can fund got necessarily the But flows point, from from flows finance cash reason the commercial finance in can equipment that and from Finance. estate cash. the still growth. and cash going corporate fund finance can reposition middle small ticket. Equipment

funding the can So generally much our That's pricing But with it goal and bit for securities some then loans deposits. into then we commercial is go inverted all little base conversation funding speaking, in loan the base fund a pricing to than yield we if we're stronger commercial a to deposits of put price, we continue little a had we comfortable a -- we're portfolio even last of normal in growth and pretty can internally. reasonable growth a to liquidity, a if quarter at establish in categories a our environment in going commercial. self-fund terms and curve. establish more take If severely baseline stable

Brian Martin

next months, guess, over quarters? if you couple I the kind about And you XX given Got mean, maybe the as point margin outlook. increase repricing margin -- just that what today, at next what's percentage rate -- this on of we kind I just missed far the of said percentage of I are thinking what you. how you a as get over the if

F. Morgan Gasior

about think specific Yes. numbers. too now to there's variables right be I talking many just

in second flows more call will said We'll we and portfolio in in the cash of we get in -- remains than of half. the first it stable. out As the year second last the half the the

interest have coming it in bit is back of it's fourth makes predict. the bit less compression that So little to and the again, margin see and could we repricing have a difficult But expense to deposit comes greater it because flows the and possible thing something of opportunity to But quarter, a a down a then we quantity greater quarter. a third we second quarter, what cash in reprice. second

The the and on the commercial side other is is predict probably yields makes higher. to and mix commercial go likely the finance thing in that in percentage? originations the the Average difficult finance it utilization utilization. what portfolio X%, were April But

going And portfolio. hurting utilization. more as reprice quarter, current at stable, carry just bit and now. second numbers how yields. to stable, cash specific to are right are us really we'll a that's in work see We're a in higher at to have look bit quarter, get have difficult liquidity competition We'll we probably the as at greater And on why into And little be is we'll It's third deposits. things least to the to to the little have with not then continue opportunity a upward.

Brian Martin

you. Got

Just Okay. deposit -- pause outlook when is cost -- -- does is I costs potential funding I do just after for And about guys, on does beta? your you it sense Fed guess, have -- funding how the mean, I you your today's peak the funding maybe hike? that guess, the given a cost what sense peak your that

F. Morgan Gasior

a statement I I don't like too to think -- it's that. early make

of yield what Fed T-bills. expense I down of think deposit part the got X-month you've the peak, a a curve. level comes of And I is this to severely in terms it funds in calling inverted think is X-month,

peak. in market against think short-term You're call difficult that that are until short And that would I it changes, duration. a funds funding money to competing be

We're pivot as Fed a if planning there in the thinking there's believe term particularly not. and don't here. we is So short

of a change is appropriate be before half it the then. might that a if think all a be at not think material deposit of but the to fact. in the expense year, monetary second then market's short-term there's peak key there's pivot going a sudden, to interest looking right that I policy, If probably Fed in probably So I the start

Brian Martin

you. Got

how Okay. about ones. And then last a of couple just

the expense pretty just your side, Just on this kind look quarter. of expenses maintained well

of how over change kind you're thinking the of approaching any the about Just year? balance in expenses

F. Morgan Gasior

no. Fundamentally,

basis know, and maintained stable pretty time. consistent on it's you a As we've well pretty for a long been

variable being are careful with We expenses.

have but and conferences and on traveling to So a where there we to not minor go meet don't we maybe little a at that possibility as still many do goes customers maybe is major for we marketing, events less everybody maybe our the events trip.

there's that. of things have to But So fundamentally, we that aspects do.

We have to marketing continue deposits. for

We commercial finance. have for to continue marketing

level We have appropriate to the personnel our make have And for to critical originations. sure commercial controls. we finance have of we maintain

little -- now, right things to mildly if that off some back ambitious be a think we And we the that probably want reasonably stable. do therefore, of -- some in half, So bit. ambitious there we'll will expenses we second might were

get We will benefit some expense. occupancy of the savings in

of one April. the as the of XX-Q, One closed facility our the in branch, we in is -- noted

the the in great quarter, side. closes And is material get think facility a grant the we So the second occupancy getting is third if for hopefully a which to operation another after expense area under community. we'll emergency state ready thing an a then grant's on contingent save received, that a A go to authority we've cost governmental regional got services getting that. on saves It's who's operate contract.

if protect that be even that profitability have deposit interest provides to opportunity we higher us. to So helpful some expense. will Again,

And where is commercial commercial key our matters keeping so then secondarily, deposits, available we're resources to deposits strategic deposit for execute and to profitability; of maintain expense interest for finance. that's and focused kind

Brian Martin

you. Got

valuations this focus a that buyback, moving quarter. then more current moving loan capital I priority few where more and Okay. guess, conditions, of maybe given of growth a on that around guess bought -- the you are just back or given a bit? a is I outlook, is a And shares bit of kind

F. Morgan Gasior

stability less, above the going higher activity than thing all. to is in Obviously, first it was market, I good for events at no given would the be the a likely now. quarter is and that in say liquidity recent and least the

did these point expect second program, So a how unfold quarter. the as second again, in at quarter We'll is this everywhere levels, a muted key. just see is year as last the time, now. levels, lot events stable obviously, it's all market. attractive the third attractive repurchase share the But least bank, I'd during relatively it company at and in the liquidity holding We at maintaining for right at and

in So there the first take right now, And than we'll a things was quarter in second I would a time. expect quarter. the at then activity quarter less

Brian Martin

just less probably though bit Morgan, loan the there, growth other some forecast it here. being in kind And Okay. what's about occurred a bit and as profitability lower is comments, sounds your of given the the little items given of a

pivoting how you guess, where thinking in just of trend ROA I of given change the the of here you kind to the about kind conditions So are or in kind market?

F. Morgan Gasior

guess per again, I share. -- to on we focus earnings would I tend

finance have of on the what -- interest overcome to would interest because second on little So is, expecting harder for quarter, a low in and strong compression in last Again, the XXs and it at see may based a than little we commercial If some deposit we on bit and we be today improve see bit quarter that second expense cash stabilize we little of third relative in see can goal us fourth We strong thought the to the in the really it a just side. quarter. some growth to -- margin flows. and is a deposit getting to as high good mid-XXs, would growth would in maintain third originations the call. XXs, we're the commercial deposit retail said, I'd into deposit we maybe expense say risk,

pretty can for of deposit to in on the sooner But if mix help. to expense year high market second a we later, pivot the the what loans not, of it quarters. and that next And but thinks do So mid the in then half. our keep be XXs half, the in we'll interest if we're we the going second the will happy be see particularly the goes than couple we it will thinking, remainder of then how is in turn

Brian Martin

Got you.

Okay. And a just maybe last That's helpful. one.

On about looks what you numbers mentioned see be pretty standpoint Q, spoke from of you I performing? seeing just are the but can trends than in I earlier from strong. outside credit, one it -- the guess, to the and guess, credit continuing and -- that are how the filings themselves credit if one-off, out a from the trends other that you're anything

F. Morgan Gasior

in The you real perform very extremely And focused estate portfolio doing loan multifamily is continues portfolio is which well. the real portfolio as on is grown it well. commercial a with a very bit know, vast the very, our a our portfolio estate to We've And the last low-risk long here been majority have time. of years around of relatively but loans very seasoned couple the assets portfolio.

of very branch to our a have of that, by on own office. exposure about held We that's little an of It's one them loan offices is $XX one something investor. million. And

exposure CRE be we're any concerned we what seeing. comfortable with. we're have So really don't speaking, office to with generally And

individual We the couple of There's it have one you one in C&I side, in side Chicago a can on equipment -- substandards. of the see the borrowers, customer.

than now But we of while isolated resolve to a ability for can. best issues, couple that substandard other fundamentally, our stable. remain we're the been of and things with working They've will best a as

that change so so could weakens, haven't to good. but the seen We otherwise. far, economy really any think if Obviously, trends

Operator

Henry HFW the [Operator line [ph] Instructions] comes Capital. question of with next Welbeck Our from

Unidentified Analyst

went the me your on your outlook color -- for for million quarter. to color versus they some like give mid-XXs I million. Can up $X.X mean next Morgan, I NPAs? more you $X.X

F. Morgan Gasior

the credit earlier That's we of portfolio. government finance spoke the one in Yes.

There's and government. the process vendor. the covered with the government an what's need I we But recourse I it between as on. I best understand through have could. think We claims the as go to issue and going

We the the with of contractor and prime this vendor potential avenues juncture. have recovery at

go from to that something accrual. process play Because that forward issue the out. claims have let happened. But process, there. of we'll on But we that first We'll put in it the it's the that So quarter. was

Unidentified Analyst

is Is foreign some a NPA? Or in that local like that state?

F. Morgan Gasior

a sorry. States That's I'm government credit. United

Unidentified Analyst

like Is a Illinois credits? that Okay. local

F. Morgan Gasior

States government. United No,

Operator

like no further am hand this I Gasior would over to Mr. the And further I remarks. any showing and to questions conference for time back at

F. Morgan Gasior

the questions Thanks all of Obviously, talking enjoy to and forward spring and BankFinancial. working at through. We to look unusual the in everyone your and interest for you day. the times their please difficult we're to end

Operator

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

may You now disconnect.

BankFinancial (BFIN) 3 May 232023 Q1 Earnings call transcript