☒.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date. At ~~October 23, 2017,~~April 28, 2023, there were ~~18,049,423~~12,693,993 shares of Common Stock, $0.01 par value, outstanding.

~~BANKFINANCIAL CORPORATION~~

~~Form 10-Q~~

~~September 30, 2017~~

Table of Contents

BANKFINANCIAL CORPORATION

Form 10-Q

March 31, 2023

Table of Contents


			34

Item 4.	Mine Safety Disclosures	34

Item 5.	Other Information	34

Item 6.	Exhibits	35

Signatures		36

Table of Contents

BANKFINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(In thousands, except share and per share data) - Unaudited

	*March 31, 2023*			*December 31, 2022*
Assets
Cash and due from other financial institutions	$	19,963		$	12,046
Interest-bearing deposits in other financial institutions		57,042			54,725
Cash and cash equivalents		77,005			66,771
Securities, at fair value		170,239			210,338
Loans receivable, net of allowance for credit losses: March 31, 2023, $10,032 and December 31, 2022, $8,129		1,225,288			1,226,743
Foreclosed assets, net		1,393			476
Stock in Federal Home Loan Bank ("FHLB") and Federal Reserve Bank ("FRB"), at cost		7,490			7,490
Premises held-for-sale		1,246			—
Premises and equipment, net		22,955			24,956
Accrued interest receivable		8,316			7,338
Bank-owned life insurance		18,731			18,815
Deferred taxes		5,395			5,480
Other assets		6,052			7,035
Total assets	$	1,544,110		$	1,575,442

Liabilities
Deposits
Noninterest-bearing	$	287,493		$	280,625
Interest-bearing		1,027,721			1,094,309
Total deposits		1,315,214			1,374,934
Borrowings		35,000			—
Subordinated notes, net of unamortized issuance costs		19,645			19,634
Advance payments by borrowers for taxes and insurance		7,321			8,674
Accrued interest payable and other liabilities		14,571			20,529
Total liabilities		1,391,751			1,423,771

Stockholders’ equity
Preferred stock, $0.01 par value, 25,000,000 shares authorized, none issued or outstanding		—			—
Common stock, $0.01 par value, 100,000,000 shares authorized; 12,693,993 shares issued at March 31, 2023 and 12,742,597 shares issued at December 31, 2022		127			127
Additional paid-in capital		85,346			85,848
Retained earnings		71,449			71,808
Accumulated other comprehensive loss		(4,563	)		(6,112	)
Total stockholders’ equity		152,359			151,671
Total liabilities and stockholders’ equity	$	1,544,110		$	1,575,442

September 30, 2017 December 31, 2016
Assets
Cash and due from other financial institutions $ 10,620
$ 13,053
Interest-bearing deposits in other financial institutions 115,041
83,631
Cash and cash equivalents 125,661
96,684
Securities, at fair value 98,787
107,212
Loans receivable, net of allowance for loan losses:
September 30, 2017, $8,374 and December 31, 2016, $8,127 1,335,631
1,312,952
Other real estate owned, net 3,569
3,895
Stock in Federal Home Loan Bank and Federal Reserve Bank, at cost

8,290
11,650
Premises and equipment, net 30,774
31,413
Accrued interest receivable 4,569
4,381
Core deposit intangible 408
782
Bank owned life insurance 22,790
22,594
Deferred taxes 20,214
22,411
Other assets 3,576
6,063
Total assets $ 1,654,269
$ 1,620,037

Liabilities
Deposits
Noninterest-bearing $ 231,049
$ 249,539
Interest-bearing 1,140,040
1,089,851
Total deposits 1,371,089
1,339,390
Borrowings 60,928
51,069
Advance payments by borrowers for taxes and insurance 10,683
11,041
Accrued interest payable and other liabilities 11,791
13,757
Total liabilities 1,454,491
1,415,257

Stockholders’ equity
Preferred Stock, $0.01 par value, 25,000,000 shares authorized, none issued or outstanding —
—
Common Stock, $0.01 par value, 100,000,000 shares authorized; 18,063,623 shares issued at September 30, 2017 and 19,233,760 issued at December 31, 2016 180
192
Additional paid-in capital 155,481
173,047
Retained earnings 43,786
39,483
Unearned Employee Stock Ownership Plan shares —
(8,318 )
Accumulated other comprehensive income 331
376
Total stockholders’ equity 199,778
204,780
Total liabilities and stockholders’ equity $ 1,654,269
$ 1,620,037

See accompanying notes to the consolidated financial statements.

Table of Contents

BANKFINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data) - Unaudited

	*Three Months Ended*
	*March 31,*
	*2023*			*2022*
Interest and dividend income
Loans, including fees	$	14,393		$	10,813
Securities		1,114			299
Other		653			306
Total interest income		16,160			11,418
Interest expense
Deposits		2,300			445
Borrowings and Subordinated notes		360			198
Total interest expense		2,660			643
Net interest income		13,500			10,775
Provision for credit losses - loans		85			276
Recovery of credit losses - unfunded commitments		(37	)		—
Provision for credit losses		48			276
Net interest income after provision for credit losses		13,452			10,499
Noninterest income
Deposit service charges and fees		816			781
Loan servicing fees		129			101
Trust and insurance commissions and annuities income		367			338
(Loss) earnings on bank-owned life insurance		(84	)		28
Losses on sales of securities		(454	)		—
Valuation adjustment on bank premises held-for-sale		(553	)		—
Other		92			196
Total noninterest income		313			1,444
Noninterest expense
Compensation and benefits		5,555			5,480
Office occupancy and equipment		2,038			2,134
Advertising and public relations		190			142
Information technology		849			851
Professional fees		317			373
Supplies, telephone, and postage		359			347
FDIC insurance premiums		154			116
Other		830			846
Total noninterest expense		10,292			10,289
Income before income taxes		3,473			1,654
Income tax expense		840			386
Net income	$	2,633		$	1,268
Basic and diluted earnings per common share	$	0.21		$	0.10
Basic and diluted weighted average common shares outstanding		12,721,841			13,204,041

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Interest and dividend income
Loans, including fees $ 13,345
$ 12,388
$ 39,061
$ 36,834
Securities 389
306
1,095
927
Other 387
151
976
424
Total interest income 14,121
12,845
41,132
38,185
Interest expense
Deposits 1,419
1,012
3,903
2,749
Borrowings 196
2
444
73
Total interest expense 1,615
1,014
4,347
2,822
Net interest income 12,506
11,831
36,785
35,363
Provision for (recovery of) loan losses (225 ) (525 ) (15 ) 300
Net interest income after provision for (recovery of) loan losses 12,731
12,356
36,800
35,063
Noninterest income
Deposit service charges and fees 584
583
1,682
1,691
Other fee income 523
478
1,494
1,478
Insurance commissions and annuities income 41
53
170
180
Gain on sale of loans, net 10
38
70
59
Gain on sale of securities (includes $46 accumulated other comprehensive income reclassifications for unrealized net gains on available for sale securities for the nine months ended September 30, 2016) —
—
—
46
Loan servicing fees 58
66
188
214
Amortization and impairment of servicing assets (27 ) (28 ) (86 ) (96 )
Earnings on bank owned life insurance 67
54
196
151
Trust income 169
167
534
492
Other 198
226
526
553
Total noninterest income 1,623
1,637
4,774
4,768
Noninterest expense
Compensation and benefits 5,330
5,315
16,792
17,021
Office occupancy and equipment 1,693
1,487
4,914
4,769
Advertising and public relations 167
144
807
618
Information technology 638
707
2,070
2,130
Supplies, telephone, and postage 337
345
1,027
1,018
Amortization of intangibles 123
129
374
394
Nonperforming asset management 84
89
215
300
Operations of other real estate owned 403
243
861
768
FDIC insurance premiums 150
238
462
691
Other 1,275
1,215
3,551
3,639
Total noninterest expense 10,200
9,912
31,073
31,348
Income before income taxes 4,154
4,081
10,501
8,483
Income tax expense 594
1,573
2,488
3,240
Net income $ 3,560
$ 2,508
$ 8,013
$ 5,243
Basic earnings per common share $ 0.20
$ 0.13
$ 0.44
$ 0.27
Diluted earnings per common share $ 0.20
$ 0.13
$ 0.44
$ 0.27
Weighted average common shares outstanding 18,139,659
18,788,731
18,368,742
19,114,603
Diluted weighted average common shares outstanding 18,140,109
18,789,054
18,369,170
19,114,918

See accompanying notes to the consolidated financial statements.

Table of Contents

BANKFINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(LOSS)

(In thousands) - Unaudited

	*Three Months Ended*
	*March 31,*
	*2023*			*2022*
Net income	$	2,633		$	1,268
Unrealized holding gain (loss) on securities arising during the period		1,641			(4,065	)
Tax effect		(427	)		1,088
Unrealized holding gain (loss) on securities, net of tax		1,214			(2,977	)
Reclassification adjustment for loss included in net income		454			—
Tax effect, included in income tax expense		(119	)		—
Reclassification adjustment for loss included in net income, net of tax		335			—
Other comprehensive gain (loss), net of tax		1,549			(2,977	)
Comprehensive income (loss)	$	4,182		$	(1,709	)

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Net income $ 3,560
$ 2,508
$ 8,013
$ 5,243
Unrealized holding gain (loss) arising during the period 16
(13 ) (67 ) (75 )
Tax effect (9 ) 5
22
29
Net of tax 7
(8 ) (45 ) (46 )
Reclassification adjustment for gain included in net income —
—
—
(46 )
Tax effect, included in income tax expense —
—
—
18
Reclassification adjustment for gain included in net income, net of tax —
—
—
(28 )
Other comprehensive income (loss) 7
(8 ) (45 ) (74 )
Comprehensive income $ 3,567
$ 2,500
$ 7,968
$ 5,169

See accompanying notes to the consolidated financial statements.

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BANKFINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands, except per share data) - Unaudited

									*Accumulated*
			*Additional*						*Other*
	*Common*		*Paid-in*			*Retained*			*Comprehensive*
	*Stock*		*Capital*			*Earnings*			*Income (Loss)*			*Total*
For the three months ended

Balance at December 31, 2021	$	132	$	90,709		$	66,545		$	80		$	157,466
Net income		—		—			1,268			—			1,268
Other comprehensive loss, net of tax effect		—		—			—			(2,977	)		(2,977	)
Repurchase and retirement of common stock (50,000 shares)		—		(539	)		—			—			(539	)
Cash dividends declared on common stock ($0.10 per share)		—		—			(1,323	)		—			(1,323	)
Balance at March 31, 2022	$	132	$	90,170		$	66,490		$	(2,897	)	$	153,895

Balance at December 31, 2022	$	127	$	85,848		$	71,808		$	(6,112	)	$	151,671
Cumulative effect of change in accounting principle		—		—			(1,719	)		—			(1,719	)
Net income		—		—			2,633			—			2,633
Other comprehensive income, net of tax effect		—		—			—			1,549			1,549
Repurchase and retirement of common stock (48,604 shares)		—		(502	)		—			—			(502	)
Cash dividends declared on common stock ($0.10 per share)		—		—			(1,273	)		—			(1,273	)
Balance at March 31, 2023	$	127	$	85,346		$	71,449		$	(4,563	)	$	152,359

Common
Stock

Additional
Paid-in
Capital

Retained
Earnings

Unearned
Employee
Stock
Ownership
Plan
Shares

Accumulated
Other
Comprehen-sive
Income
Total
Balance at January 1, 2016 $ 203
$ 184,797
$ 36,114
$ (9,297 ) $ 547
$ 212,364
Net income —
—
5,243
—
—
5,243
Other comprehensive loss, net of tax —
—
—
—
(74 ) (74 )
Repurchase and retirement of common stock (1,026,106 shares) (10 ) (12,685 ) —
—
—
(12,695 )
Nonvested stock awards-stock-based compensation expense —
875
—
—
—
875
Cash dividends declared on common stock ($0.15 per share) —
—
(2,977 ) —
—
(2,977 )
ESOP shares earned —
198
—
733
—
931
Balance at September 30, 2016 $ 193
$ 173,185
$ 38,380
$ (8,564 ) $ 473
$ 203,667

Balance at January 1, 2017 $ 192
$ 173,047
$ 39,483
$ (8,318 ) $ 376
$ 204,780
Net income —
—
8,013
—
—
8,013
Other comprehensive loss, net of tax —
—
—
—
(45 ) (45 )
Net exercise of stock options (198,026 shares) 2
(1,239 ) —
—
—
(1,237 )
Prepayment of ESOP Share Acquisition Loan

(8 ) (7,185 ) —
8,318
—
1,125
Repurchase and retirement of common stock (614,673 shares) (6 ) (9,142 ) —
—
—
(9,148 )
Cash dividends declared on common stock ($0.20 per share) —
—
(3,710 ) —
—
(3,710 )
Balance at September 30 , 2017 $ 180
$ 155,481
$ 43,786
$ —
$ 331
$ 199,778

See accompanying notes to the consolidated financial statements.

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BANKFINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) - Unaudited

	*Three Months Ended*
	*March 31,*
	*2023*			*2022*
Cash flows from operating activities
Net income	$	2,633		$	1,268
Adjustments to reconcile net income to net cash from operating activities
Provision for credit losses - loans		85			276
Recovery of credit losses - unfunded commitments		(37	)		—
Depreciation and amortization		216			489
Net change in net deferred loan origination costs		(83	)		(194	)
Losses on sales of securities		454			—
Valuation adjustment on bank premises held-for-sale		553			—
Loss on disposal of premises and equipment		4			—
Gain on sale of foreclosed assets		—			(6	)
Foreclosed assets valuation adjustments		—			(8	)
(Loss) earnings on bank-owned life insurance		84			(28	)
Net change in:
Accrued interest receivable		(978	)		(1,242	)
Other assets		1,132			(334	)
Accrued interest payable and other liabilities		(6,338	)		(8,220	)
Net cash from operating activities		(2,275	)		(7,999	)
Cash flows from (used in) investing activities
Securities:
Proceeds from maturities		—			1,488
Proceeds from principal repayments		170			325
Proceeds from sale of securities		42,631			—
Purchases of securities		(744	)		(52,778	)
Net change in loans receivable		(1,387	)		(11,227	)
Proceeds from sale of foreclosed assets		4			45
Proceeds from sale of premises and equipment		3			—
Purchase of premises and equipment, net		(320	)		(402	)
Net cash from (used in) investing activities		40,357			(62,549	)
Cash flows from financing activities
Net change in:
Deposits		(59,720	)		(26,826	)
Borrowings		35,000			—
Advance payments by borrowers for taxes and insurance		(1,353	)		(1,924	)
Repurchase and retirement of common stock		(502	)		(539	)
Cash dividends paid on common stock		(1,273	)		(1,323	)
Net cash from financing activities		(27,848	)		(30,612	)
Net change in cash and cash equivalents		10,234			(101,160	)
Beginning cash and cash equivalents		66,771			502,162
Ending cash and cash equivalents	$	77,005		$	401,002

Supplemental disclosures of cash flow information:
Interest paid	$	2,411		$	456
Income taxes paid		1			16
Income taxes refunded		—			3
Assets transferred to premises held-for-sale		1,799			—
Loans transferred to foreclosed assets		921			274

Nine Months Ended
September 30,
2017 2016
Cash flows from operating activities
Net income $ 8,013
$ 5,243
Adjustments to reconcile to net income to net cash from operating activities
Provision for (recovery of) loan losses (15 ) 300
Prepayment of ESOP Share Acquisition Loan

1,125
—
ESOP shares earned —
931
Stock–based compensation expense —
875
Depreciation and amortization 2,846
2,815
Amortization of premiums and discounts on securities and loans (72 ) (104 )
Amortization of core deposit intangible 374
394
Amortization of servicing assets 86
96
Net change in net deferred loan origination costs 343
(36 )
Net gain (loss) on sale of other real estate owned 100
(15 )
Net gain on sale of loans (70 ) (59 )
Net gain on sale of securities —
(46 )
Loans originated for sale (1,291 ) (1,097 )
Proceeds from sale of loans 1,361
1,156
Other real estate owned valuation adjustments 301
244
Net change in:
Accrued interest receivable (188 ) 70
Earnings on bank owned life insurance (196 ) (151 )
Other assets 4,027
3,515
Accrued interest payable and other liabilities (1,966 ) (1,279 )
Net cash from operating activities 14,778
12,852
Cash flows from investing activities
Securities
Proceeds from maturities 49,695
58,577
Proceeds from principal repayments 2,461
3,545
Proceeds from sales of securities —
46
Purchases of securities (43,808 ) (47,423 )
Loans receivable
Loan participations sold 3,615
3,023
Principal payments on loans receivable 459,706
366,784
Purchase of loans (23,451 ) —
Proceeds of loan sale —
14,746
Originated for investment (465,562 ) (395,087 )
Proceeds of redemption of Federal Home Loan Bank of Chicago stock 3,514
—
Purchase of Federal Home Loan Bank and Federal Reserve Bank stock (154 ) —
Proceeds from sale of other real estate owned 1,966
2,616
Purchase of premises and equipment, net (906 ) (660 )
Net cash from (used in) investing activities (12,924 ) 6,167

~~Continued~~

~~Table of Contents~~

~~BANKFINANCIAL CORPORATION~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(In thousands) - Unaudited~~

Nine Months Ended
September 30,
2017 2016
Cash flows from financing activities
Net change in deposits $ 31,699
$ 103,776
Net change in borrowings 9,859
(62,912 )
Net change in advance payments by borrowers for taxes and insurance (358 ) (3,058 )
Repurchase and retirement of common stock (9,148 ) (12,695 )
Cash dividends paid on common stock (3,710 ) (2,977 )
Shares retired for tax liability (1,219 ) —
Net cash from financing activities 27,123
22,134
Net change in cash and cash equivalents 28,977
41,153
Beginning cash and cash equivalents 96,684
59,377
Ending cash and cash equivalents $ 125,661
$ 100,530

Supplemental disclosures of cash flow information:
Interest paid $ 4,269
$ 2,704
Income taxes paid 198
182
Loans transferred to other real estate owned 2,041
215

See accompanying notes to the consolidated financial statements.

Table of Contents

BANKFINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands, except share and per share data)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation: BankFinancial Corporation, a Maryland corporation headquartered in Burr Ridge, Illinois, ~~(the “Company”),~~ is the owner of all of the issued and outstanding capital stock of BankFinancial, National Association (the “Bank”). The interim unaudited consolidated financial statements include the accounts of and transactions of BankFinancial Corporation, the Bank, and the Bank’s wholly-owned subsidiaries, Financial Assurance Services, Inc. and BFBFIN Asset Recovery ~~Corporation~~Company, LLC (collectively, “the Company”), and reflect all normal and recurring adjustments that are, in the opinion of management, considered necessary for a fair presentation of the financial condition and results of operations for the periods presented. Such adjustments are the only adjustments reflected in the accompanying financial statements. All significant intercompany accounts and transactions have been eliminated. The results of operations for the ~~three- and nine-month periods~~three-month period ended ~~September 30, 2017~~March 31, 2023 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, ~~2017.~~

2023 or for any other period.

Certain information and note disclosures normally included in financial statements prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange ~~Commission.~~

Commission (“SEC”).

Use of Estimates: ~~To prepare~~The preparation of the consolidated financial statements in conformity with US GAAP requires management ~~makes~~to make estimates and assumptions ~~based on available information. These estimates and assumptions~~that affect the amounts reported in the consolidated financial statements and accompanying notes. Although these estimates and assumptions are based on the ~~disclosures provided,~~best available information, actual information and ~~future~~actual results could ~~differ.~~differ from those estimates.

Factored Receivables: The Company purchases invoices from its factoring customers in schedules or batches. These receivables are included in loans receivable on the Consolidated Statements of Financial Condition, and as commercial loans and leases in Note 4 - Loans receivable. The face value of the invoices purchased or amount advanced is recorded by the Company as factored receivables, and the unadvanced portions of the invoices purchased, less fees, are considered customer reserves. The customer reserves are held to settle any payment disputes or collection shortfalls, may be used to pay customers’ obligations to various third parties as directed by the customer, are periodically released to or withdrawn by customers, and are reported as noninterest-bearing deposits in the Consolidated Statements of Financial Condition. The unpaid principal balances of these receivables were $7.7 million and $7.0 million at March 31, 2023 and December 31, 2022, respectively, and are included in commercial loans and leases. The customer reserves associated with the factored receivables were $1.7 million and $1.4 million at March 31, 2023 and December 31, 2022, respectively.

Factoring fees are recognized in interest income as incurred by the customer and deducted from the customer's reserve balances. Other factoring-related fees, which include wire transfer fees, broker fees, and other similar fees, are reported by the Company as loan servicing fees in noninterest income.

Allowance for Credit Losses: On January 1, 2023, the Company adopted Accounting Standards Update (“ASC 326”) No.2016-13,Financial Instruments – Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments. ASC 326 amends guidance on reporting credit losses for financial assets held at amortizedcost basis and available-for-sale debt securities. ASC 326 eliminates the probable initial recognition threshold in current US GAAP and instead, requires an entity to reflect its current estimate of all expected credit losses based on historical experience, current conditions and reasonable and supportable forecasts. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. ASC 326 also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the reserve for credit losses. In addition, entities need to disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination.

The Company adopted ASC 326 using the modified retrospective approach. Results for the periods beginning after January 1, 2023 are presented under Accounting Standards Codification 326 while prior period amounts continue to be reported in accordance with previously applicable US GAAP. The Company recorded a net reduction of retained earnings of $1.7 million upon adoption. The transition adjustment includes an increase in credit related reserves of $1.9 million and the recording of an unfunded commitment reserve of $417,000, respectively, net of the corresponding increase in deferred tax assets of $604,000.

	*January 1, 2023*
	*Post ASC 326 Adoption*		*Pre-ASC 326 Adoption*		*Pre-tax impact of ASC 326 Adoption*
Assets:
Allowance
One-to-four family residential real estate	$	380	$	281	$	99
Multi-family mortgage		4,647		4,017		630
Nonresidential real estate		1,300		1,234		66
Commercial loans and leases		3,670		2,548		1,122
Consumer		39		49		(10)
Total allowance for credit losses	$	10,036	$	8,129	$	1,907

Liabilities:
Unfunded commitment reserve	$	417	$	—	$	417

Table of Contents

BANKFINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands, except share and per share data)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

The allowance for credit losses (“ACL”) is evaluated on a regular basis and established through charges to earnings in the form of a provision for credit losses. When a loan or portion of a loan is determined to be uncollectible, the portion deemed uncollectible is charged against the allowance and subsequent recoveries, if any, are credited to the allowance. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

Portfolio Segmentation (“Pooled Loans”)

Portfolio segmentation is defined as the pooling of loans based upon similar risk characteristics such that quantitative methodologies and qualitative adjustment factors for estimating the allowance for credit losses is constructed for each segment. The allowance for credit losses for Pooled Loans estimate is based upon periodic review of the collectability of the loans quantitatively correlating historical loan experience with reasonable and supportable forecasts using forward looking information. Adjustments to the quantitative evaluation may be made for differences in current or expected qualitative risk characteristics such as changes in: underwriting standards, delinquency level, regulatory environment, economic condition, Company management and the status of portfolio administration including the Company’s Loan Review function.

Individually Evaluated Loans

The Company establishes a specific loss reserve for individually evaluated loans which do not share similar risk characteristics with the loans included in the forecasted allowance for credit losses. These individually evaluated loans are removed from the pooling approach discussed above for the forecasted allowance for credit losses, and include nonaccrual loans and other loans deemed appropriate by management.

Accrued Interest Receivable

Upon adoption of ASC 326 and its related amendments on January 1, 2023, the Company made the following elections regarding accrued interest receivable:

●

Presenting accrued interest receivable balances separately within another line item on the Consolidated Statements of Financial Condition.

●

Continuing our policy to fully reserve accrued interest receivable by reversing interest income. For commercial loans, the reserve is established upon becoming 90 days past due. For consumer loans, the charge-off typically occurs upon becoming 120 days past due. Historically, the Company has not experienced uncollectible accrued interest receivable on its investment securities.

●

Not measuring an allowance for credit losses for accrued interest receivable due to the Company’s policy of fully reserving uncollectible accrued interest receivable balances in a timely manner, as described above.

Reserve for Unfunded Commitments

The reserve for unfunded commitments (the “Unfunded Commitment Reserve”) represents the expected credit losses on off-balance sheet commitments such as unfunded commitments to extend credit and standby letters of credit. However, a liability is not recognized for commitments unconditionally cancellable by the Company. The Unfunded Commitment Reserve is recognized as a liability (other liabilities on the Consolidated Statements of Financial Condition), with adjustments to the unfunded commitment reserve recognized as a provision for credit loss expense in the Consolidated Statements of Income. The Unfunded Commitment Reserve is determined by estimating expected future fundings, under each segment, and applying the expected loss rates. Expected future fundings are based on historical averages of funding rates (i.e., the likelihood of draws taken). To estimate future fundings on unfunded balances, current funding rates are compared to historical funding rates.

Troubled Debt Restructurings and Vintage Disclosures: ASU 2022-02“Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures” eliminates the Troubled Debt Restructurings (“TDR”) accounting model for creditors that have already adopted ASC 326. In lieu of the TDR accounting model, loan refinancing and restructuring guidance in ASC Subtopic 310-20 “Investments—Debt Securities” will apply to all loan modifications, including those made for borrowers experiencing financial difficulty. This standard also enhances disclosure requirements related to certain loan modifications. Additionally, this standard introduces new requirements to disclose gross write-off information in the vintage disclosures of financing receivables by credit quality indicator and class of financing receivable by year of origination. The Company adopted the standard on January 1, 2023.

Reclassifications: Certain reclassifications have been made in the prior period’s financial statements to conform them to the current period’s presentation.

These unaudited consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form ~~10-K~~10-K for the year ended December 31, ~~2016,~~2022, as filed with the Securities and Exchange Commission.

~~Recent Accounting Pronouncements~~

In May 2014, the FASB issued an update (ASU No. 2014-09, Revenue from Contracts with Customers) creating FASB Topic 606, Revenue from Contracts with Customers. The guidance in this update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides steps to follow to achieve the core principle. An entity should disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Qualitative and quantitative information is required about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. The amendments in this update become effective for annual periods and interim periods within those annual periods beginning after December 15, 2017. We have evaluated the impact of adopting the new guidance on the consolidated financial statements. Our finding is that the new pronouncement will not have a significant impact on the consolidated financial statements as the majority of our business transactions will not be subject to this pronouncement.

In January 2016, the FASB issued an update (ASU No. 2016-01, Financial Instruments - Recognition and Measurement of Financial Assets and Liabilities). The new guidance is intended to improve the recognition and measurement of financial instruments by requiring: equity investments (other than equity method or consolidation) to be measured at fair value with changes in fair value recognized in net income; public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; separate presentation of financial assets and financial liabilities by measurement category and form of financial assets (~~i.e.~~ securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; eliminating the requirement to disclose the fair value of financial instruments measured at amortized cost for organizations that are not public business entities; eliminating the requirement for non-public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is to be required to be disclosed for financial instruments measured at amortized cost on the balance sheet; and requiring a reporting organization to present separately in other comprehensive income the portion of the total change in fair value of a liability resulting from the change in the instrument-specific credit risk (also referred to as “own credit”) when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The new guidance is effective for public business entities for fiscal years beginning after December 15, 2017. We have evaluated the impact of adopting the new guidance on the consolidated financial statements. Our finding is that the new pronouncement will not have a significant impact on our Statement of Operations.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). The standard requires a lessee to recognize assets and liabilities on the balance sheet for leases with lease terms greater than 12 months. ASU 2016-02 is effective

Table of Contents

BANKFINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands, except share and per share data)

NOTE ~~1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~ ~~(continued)~~

for fiscal years, and interim periods within those years, beginning after December 15, 2018, and early adoption is permitted. We are currently evaluating the impact that the standard will have on our consolidated financial statements. Our preliminary finding is that the new pronouncement will not have a significant impact on our consolidated financial statements as the projected minimum lease payments under existing leases subject to the new pronouncement are less than one percent of our current total assets.

In March 2016, the FASB issued ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). The standard is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. ASU 2016-09 was effective January 1, 2017. This new pronouncement affects the effective tax rate reported as existing vested stock options are exercised. The amount of the impact on the effective tax rate is determined by the number of stock options exercised and the stock price of the Company when the stock options are exercised. Excess tax benefits and deficiencies are recorded in the tax expense.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). These amendments require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. ASU 2016-13 is effective for SEC filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 (~~i.e.~~, January 1, 2020, for calendar year entities). Early application will be permitted for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. We are currently evaluating the impact that the standard will have on our consolidated financial statements. Our initial review indicates that we have maintained sufficient historical loan data to support the requirements of this pronouncement. In addition, we have begun tracking the average life of the various segments of our loan portfolio. We are currently evaluating various loss methodologies to determine their correlation to our various loan categories' historical performance.

In March of 2017, the FASB issued ASU No. 2017-08, “Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities” (“ASU 2017-08”). This guidance shortens the amortization period for premiums on certain callable debt securities to the earliest call date (with an explicit, noncontingent call feature that is callable at a fixed price and on a preset dates), rather than contractual maturity date as currently required under GAAP. The ASU does not impact instruments without preset call dates such as mortgage-backed securities. For instruments with contingent call features, once the contingency is resolved and the security is callable at a fixed price and preset date, the security is within the scope of the ASU. ASU 2017-08 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, and early adoption is permitted. Effective January 2017, we early adopted the pronouncement. Adoption of the new pronouncement was immaterial to the consolidated financial statements.

~~Table of Contents~~

~~BANKFINANCIAL CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Table amounts in thousands, except share and per share data)~~

~~NOTE~~ 2 - EARNINGS PER SHARE

Amounts reported in earnings per share reflect earnings available to common stockholders for the period divided by the weighted average number of shares of common stock outstanding during the period, exclusive of unearned BankFinancial, NA Employee Stock Ownership Plan (the "ESOP") shares and unvested restricted stock shares. Stock options and restricted stock are regarded as potential common stock and are considered in the diluted earnings per share calculations to the extent that they would have a dilutive effect if converted to common stock.period.

	*Three Months Ended*
	*March 31,*
	*2023*		*2022*
Net income available to common stockholders	$	2,633	$	1,268
Basic and diluted weighted average common shares outstanding		12,721,841		13,204,041
Basic and diluted earnings per common share	$	0.21	$	0.10

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Net income available to common stockholders $ 3,560
$ 2,508
$ 8,013
$ 5,243
Average common shares outstanding 18,140,599
19,460,022
18,567,796
19,813,088
Less:
Unearned ESOP shares —
(670,351 ) (198,114 ) (694,655 )
Unvested restricted stock shares (940 ) (940 ) (940 ) (3,830 )
Weighted average common shares outstanding 18,139,659
18,788,731
18,368,742
19,114,603
Add - Net effect of dilutive unvested restricted stock 450
323
428
315
Diluted weighted average common shares outstanding 18,140,109
18,789,054
18,369,170
19,114,918
Basic earnings per common share $ 0.20
$ 0.13
$ 0.44
$ 0.27
Diluted earnings per common share $ 0.20
$ 0.13
$ 0.44
$ 0.27
Number of antidilutive stock options excluded from the diluted earnings per share calculation —
536,459
—
536,459
Weighted average exercise price of anti-dilutive option shares $ —
$ 12.99
$ —
$ 12.99

NOTE 3 - SECURITIES

The fair value of securities and the related gross unrealized gains and losses recognized in accumulated other comprehensive income ~~are shown below.~~

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses
Fair Value
September 30, 2017
Certificates of deposit $ 80,360
$ —
$ —
$ 80,360
Equity mutual fund 500
2
—
502
Mortgage-backed securities - residential 12,645
553
(10 ) 13,188
Collateralized mortgage obligations - residential 4,728
14
(17 ) 4,725
SBA-guaranteed loan participation certificates 12
—
—
12
$ 98,245
$ 569
$ (27 ) $ 98,787
December 31, 2016
Certificates of deposit $ 85,938
$ —
$ —
$ 85,938
Equity mutual fund 500
—
(1 ) 499
Mortgage-backed securities - residential 14,561
644
(21 ) 15,184
Collateralized mortgage obligations - residential 5,587
15
(28 ) 5,574
SBA-guaranteed loan participation certificates 17
—
—
17
$ 106,603
$ 659
$ (50 ) $ 107,212

~~Table of Contents~~

~~BANKFINANCIAL CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Table amounts in thousands, except share and per share data)~~

~~NOTE 3 - SECURITIES~~ ~~(continued)~~

~~The mortgage-backed~~is as follows:

	*Amortized Cost*		*Gross Unrealized Gains*		*Gross Unrealized Losses*			*Fair Value*
Available-for-Sale Securities

March 31, 2023
Certificates of deposit	$	2,977	$	—	$	—		$	2,977
Municipal securities		240		—		(13	)		227
U.S. Treasury Notes		128,137		—		(5,772	)		122,365
U.S. government-sponsored agencies		40,000		—		(261	)		39,739
Mortgage-backed securities - residential		3,880		25		(124	)		3,781
Collateralized mortgage obligations - residential		1,171		—		(21	)		1,150
	$	176,405	$	25	$	(6,191	)	$	170,239
December 31, 2022
Certificates of deposit	$	2,233	$	—	$	—		$	2,233
Municipal securities		240		—		(15	)		225
U.S. Treasury Notes		170,906		—		(7,803	)		163,103
U.S. government-sponsored agencies		40,000		—		(301	)		39,699
Mortgage-backed securities - residential		3,997		27		(143	)		3,881
Collateralized mortgage obligations - residential		1,223		—		(26	)		1,197
	$	218,599	$	27	$	(8,288	)	$	210,338

Mortgage-backed securities and collateralized mortgage obligations reflected in the preceding table were issued by U.S. government-sponsored entities orand agencies, Freddie Mac, Fannie Mae and Ginnie Mae, and are obligations which the government has affirmed its commitment to support. ~~All securities reflected in the preceding table were classified as available-for-sale at September 30, 2017 and December 31, 2016.~~

The amortized cost and fair values of securities available-for-sale by contractual maturity are shown below. Securities not due at a single maturity date are shown separately. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	*March 31, 2023*
	*Amortized Cost*		*Fair Value*
Due in one year or less	$	63,028	$	61,858
Due after one year through five years		108,326		103,450
		171,354		165,308
Mortgage-backed securities - residential		3,880		3,781
Collateralized mortgage obligations - residential		1,171		1,150
	$	176,405	$	170,239

Table of Contents

September 30, 2017

Amortized
Cost

Fair
Value
Due in one year or less $ 80,360
$ 80,360
Equity mutual fund 500
502
Mortgage-backed securities - residential 12,645
13,188
Collateralized mortgage obligations - residential 4,728
4,725
SBA-guaranteed loan participation certificates 12
12
$ 98,245
$ 98,787

~~Sales of securities were as follows:~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Proceeds $ —
$ —
$ —
$ 46
Gross gains —
—
—
46

BANKFINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands, except share and per share data)

NOTE 3 - SECURITIES (continued)

Securities available-for-sale with unrealized losses not recognized in income are as follows:

Less than 12 Months 12 Months or More Total

Fair
Value

Unrealized
Loss

Fair
Value

Unrealized
Loss

Fair
Value

Unrealized
Loss
September 30, 2017
Mortgage-backed securities - residential $ 1,182
$ (10 ) $ —
$ —
$ 1,182
$ (10 )
Collateralized mortgage obligations - residential —
—
3,270
(17 ) 3,270
(17 )
$ 1,182
$ (10 ) $ 3,270
$ (17 ) $ 4,452
$ (27 )

December 31, 2016
Equity Mutual Fund $ 499
$ (1 ) $ —
$ —
$ 499
$ (1 )
Mortgage-backed securities - residential 1,187
(21 ) —
—
1,187
(21 )
Collateralized mortgage obligations - residential 3,691
(18 ) 1,028
(10 ) 4,719
(28 )
$ 5,377
$ (40 ) $ 1,028
$ (10 ) $ 6,405
$ (50 )

	*Less than 12 Months*							*12 Months or More*							*Total*
	*Count*		*Fair Value*		*Unrealized Loss*			*Count*		*Fair Value*		*Unrealized Loss*			*Count*		*Fair Value*		*Unrealized Loss*
March 31, 2023
Municipal securities		—	$	—	$	—			1	$	227	$	(13	)		1	$	227	$	(13	)
U.S. Treasury Notes		2		4,170		(53	)		179		118,195		(5,719	)		181		122,365		(5,772	)
U.S. government-sponsored agencies		9		39,739		(261	)		—		—		—			9		39,739		(261	)
Mortgage-backed securities - residential		14		2,414		(78	)		2		539		(46	)		16		2,953		(124	)
Collateralized mortgage obligations - residential		4		256		(4	)		4		894		(17	)		8		1,150		(21	)
		29	$	46,579	$	(396	)		186	$	119,855	$	(5,795	)		215	$	166,434	$	(6,191	)

December 31, 2022
Municipal securities		1	$	225	$	(15	)		—	$	—	$	—			1	$	225	$	(15	)
U.S. Treasury Notes		147		104,439		(4,104	)		53		58,664		(3,699	)		200		163,103		(7,803	)
U.S. government-sponsored agencies		9		39,699		(301	)		—		—		—			9		39,699		(301	)
Mortgage-backed securities - residential		18		3,016		(143	)		—		—		—			18		3,016		(143	)
Collateralized mortgage obligations - residential		5		1,009		(18	)		1		171		(8	)		6		1,180		(26	)
		180	$	148,388	$	(4,581	)		54	$	58,835	$	(3,707	)		234	$	207,223	$	(8,288	)

The Company evaluates marketable investment securities with significant declines in fair value on a quarterly basis to determine whether they should be considered ~~other-than-temporarily~~ impaired under current accounting guidance, which generally provides

~~Table of Contents~~

~~BANKFINANCIAL CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Table amounts in thousands, except share and per share data)~~

~~NOTE 3 - SECURITIES~~ ~~(continued)~~

that if a marketable security is in an unrealized loss position, whether due to general market conditions or industry or issuer-specific factors, the holder of the securities must assess whether the ~~impairment~~security is ~~other-than-temporary.~~

~~Certain mortgage-backed~~impaired.

U.S. Treasury Notes, U.S. government-sponsored agencies and certain other available-for-sale securities ~~and collateralized mortgage obligations~~ that the Company holds in its investment portfolio were in an unrealized loss position at ~~September 30, 2017,~~March 31, 2023, but the unrealized ~~losses~~loss was not recognized into income because the U.S. Treasury Notes are backed by the full faith and credit of the United States and the other issuers were ~~not considered significant under the Company’s impairment testing methodology. In addition, the Company does not intend to sell these securities, and~~ high credit quality, it isnot likely that the Company will ~~not~~ be required to sell these securities before their anticipated recovery ~~occurs.~~

~~NOTE 4 - LOANS RECEIVABLE~~

~~Loans receivable are as follows:~~

September 30, 2017 December 31, 2016
One-to-four family residential real estate $ 105,186
$ 135,218
Multi-family mortgage 576,425
542,887
Nonresidential real estate 176,301
182,152
Construction and land 2,827
1,302
Commercial loans 147,079
103,063
Commercial leases 333,120
352,539
Consumer 1,747
2,255
1,342,685
1,319,416
Net deferred loan origination costs 1,320
1,663
Allowance for loan losses (8,374 ) (8,127 )
Loans, net $ 1,335,631
$ 1,312,952

~~The following tables present the balance in the allowance for loan losses~~occurs and the ~~loans receivable by portfolio segment~~decline in fair value was due to changes in interest rates and ~~based on impairment method:~~

other market conditions. The fair values are expected to recover as maturity dates of these securities approach.

We reviewed the available-for-sale securities in an unrealized loss position within the guidelines of ASC 326and determined that no credit loss is required to be recognized.

The proceeds from sales of securities and the associated losses were as follows:

	*Three Months Ended*
	*March 31,*
	*2023*			*2022*
Proceeds	$	42,631		$	—
Gross gains		—			—
Gross losses		(454	)		—

Allowance for loan losses Loan Balances

Individually
evaluated for
impairment

Collectively
evaluated for
impairment
Total
Individually
evaluated for
impairment

Collectively
evaluated for
impairment
Total
September 30, 2017
One-to-four family residential real estate $ —
$ 812
$ 812
$ 4,616
$ 100,570
$ 105,186
Multi-family mortgage —
3,872
3,872
959
575,466
576,425
Nonresidential real estate —
1,590
1,590
—
176,301
176,301
Construction and land —
68
68
—
2,827
2,827
Commercial loans —
1,241
1,241
—
147,079
147,079
Commercial leases —
769
769
—
333,120
333,120
Consumer —
22
22
—
1,747
1,747
$ —
$ 8,374
$ 8,374
$ 5,575
$ 1,337,110
1,342,685
Net deferred loan origination costs 1,320
Allowance for loan losses (8,374 )
Loans, net $ 1,335,631

Table of Contents

BANKFINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands, except share and per share data)

NOTE 4 - LOANS RECEIVABLE ~~(continued)~~

Allowance for loan losses Loan Balances

Individually
evaluated for
impairment

Collectively
evaluated for
impairment
Total
Individually
evaluated for
impairment

Collectively
evaluated for
impairment
Total
December 31, 2016
One-to-four family residential real estate $ —
$ 1,168
$ 1,168
$ 4,962
$ 130,256
$ 135,218
Multi-family mortgage —
3,647
3,647
787
542,100
542,887
Nonresidential real estate 26
1,768
1,794
260
181,892
182,152
Construction and land —
32
32
—
1,302
1,302
Commercial loans —
733
733
—
103,063
103,063
Commercial leases —
714
714
—
352,539
352,539
Consumer —
39
39
—
2,255
2,255
$ 26
$ 8,101
$ 8,127
$ 6,009
$ 1,313,407
1,319,416
Net deferred loan origination costs 1,663
Allowance for loan losses (8,127 )
Loans, net $ 1,312,952

~~Activity~~

The summary of loans receivable by class of loans is as follows:

	*March 31, 2023*			*December 31, 2022*
One-to-four family residential real estate	$	21,475		$	23,133
Multi-family mortgage		544,673			537,394
Nonresidential real estate		123,360			119,705
Commercial loans and leases		544,216			553,056
Consumer		1,596			1,584
		1,235,320			1,234,872
Allowance for credit losses		(10,032	)		(8,129	)
Loans, net	$	1,225,288		$	1,226,743

Net deferred loan origination costs included in the ~~allowance~~table above were $1.7 million as of March 31, 2023 and $1.6 million as of December 31, 2022.

Allowance for ~~loan losses is~~Credit Losses - Loans

The following table represents the activity in the ACL by class of loans:

	*One-to-four family residential real estate*			*Multi-family mortgage*		*Nonresidential real estate*			*Commercial loans and leases*			*Consumer*			*Total*
For the three months ended

March 31, 2023
Beginning balance, prior to adoption of ASC 326	$	281		$	4,017	$	1,234		$	2,548		$	49		$	8,129
Impact of adopting ASC 326		99			630		66			1,122			(10	)		1,907
Beginning balance, after adoption of ASC 326		380			4,647		1,300			3,670			39			10,036
Provision for (recovery of) credit losses		(31	)		62		47			(16	)		23			85
Loans charged off		—			—		—			(79	)		(22	)		(101	)
Recoveries		5			5		—			1			1			12
	$	354		$	4,714	$	1,347		$	3,576		$	41		$	10,032

March 31, 2022
Beginning balance	$	331		$	3,377	$	1,311		$	1,652		$	44		$	6,715
Provision for (recovery of) credit losses		(14	)		8		(162	)		425			19			276
Loans charged off		(4	)		—		(192	)		—			(18	)		(214	)
Recoveries		2			5		—			1			1			9
	$	315		$	3,390	$	957		$	2,078		$	46		$	6,786

As of March 31, 2023 we had $380,000 recorded as ~~follows:~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Beginning balance $ 8,122
$ 8,915
$ 8,127
$ 9,691
Loans charged off:
One-to-four family residential real estate (89 ) (102 ) (282 ) (509 )
Multi-family mortgage (7 ) —
(10 ) (51 )
Nonresidential real estate —
(55 ) (165 ) (1,715 )
Consumer (7 ) (6 ) (7 ) (24 )
(103 ) (163 ) (464 ) (2,299 )
Recoveries:
One-to-four family residential real estate 15
5
100
92
Multi-family mortgage 11
10
62
156
Nonresidential real estate 10
39
10
200
Construction and land —
—
—
35
Commercial loans 542
45
552
150
Commercial leases 2
7
2
7
Consumer —
1
—
2
580
107
726
642
Net recoveries (charge-offs) 477
(56 ) 262
(1,657 )
Provision for (recovery of) loan losses (225 ) (525 ) (15 ) 300
Ending balance $ 8,374
$ 8,334
$ 8,374
$ 8,334

an unfunded commitment reserve, included in other liabilities on the Consolidated Statements of Financial Condition.

Table of Contents

BANKFINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands, except share and per share data)

NOTE 4 - LOANS RECEIVABLE (continued)

~~Impaired loans~~

Several of the following disclosures are presented by “recorded investment,” which the FASB defines as “the amount of the investment in a loan, which is not net of a valuation allowance, but which does reflect any direct write-down of the investment.” The following represents the components of recorded investment:

~~Loan principal balance~~

~~Less unapplied payments~~

~~Plus negative unapplied balance~~

~~Less escrow balance~~

~~Plus negative escrow balance~~

~~Plus unamortized net deferred loan costs~~

~~Less unamortized net deferred loan fees~~

~~Plus unamortized premium~~

~~Less unamortized discount~~

~~Less previous charge-offs~~

~~Plus recorded accrued interest~~

~~Less reserve for uncollected interest~~

~~= Recorded investment~~

The following tables present the balance in the ACL and loans ~~individually evaluated for impairment~~receivable by class of ~~loans:~~

loans based on evaluation method. Allocation of a portion of the ACL to one category does not preclude its availability to absorb losses in other categories:

	*One-to-four family residential real estate*		*Multi-family mortgage*		*Nonresidential real estate*		*Commercial loans and leases*		*Consumer*		*Total*
March 31, 2023
Loans:
Loans individually evaluated	$	89	$	148	$	—	$	8,848	$	—	$	9,085
Loans collectively evaluated		21,386		544,525		123,360		535,368		1,596		1,226,235
	$	21,475	$	544,673	$	123,360	$	544,216	$	1,596	$	1,235,320
ACL:
Loans individually evaluated	$	—	$	—	$	—	$	—	$	—	$	—
Loans collectively evaluated		354		4,714		1,347		3,576		41		10,032
	$	354	$	4,714	$	1,347	$	3,576	$	41	$	10,032

	*One-to-four family residential real estate*		*Multi-family mortgage*		*Nonresidential real estate*		*Commercial loans and leases*		*Consumer*		*Total*
December 31, 2022
Loans:
Loans individually evaluated	$	752	$	473	$	—	$	1,487	$	—	$	2,712
Loans collectively evaluated		22,381		536,921		119,705		551,569		1,584		1,232,160
	$	23,133	$	537,394	$	119,705	$	553,056	$	1,584	$	1,234,872
ACL:
Loans individually evaluated	$	—	$	—	$	—	$	—	$	—	$	—
Loans collectively evaluated		281		4,017		1,234		2,548		49		8,129
	$	281	$	4,017	$	1,234	$	2,548	$	49	$	8,129

Three months ended
September 30, 2017 Nine months ended
September 30, 2017

Loan
Balance

Recorded
Investment
Partial Charge-off
Allowance
for Loan
Losses
Allocated

Average
Investment
in Impaired
Loans

Interest
Income
Recognized

Average
Investment
in Impaired
Loans

Interest
Income
Recognized
September 30, 2017
With no related allowance recorded:
One-to-four family residential real estate $ 4,980
$ 4,031
$ 966
$ —
$ 4,100
$ 14
$ 4,251
$ 51
One-to-four family residential real estate - non-owner occupied 571
576
19
—
557
—
594
—
Multi-family mortgage - Illinois 965
961
—
—
965
10
815
31
$ 6,516
$ 5,568
$ 985
$ —
$ 5,622
$ 24
$ 5,660
$ 82

Year ended
December 31, 2016

Loan
Balance

Recorded
Investment
Partial Charge-off
Allowance
for Loan
Losses
Allocated

Average
Investment
in Impaired
Loans

Interest
Income
Recognized
December 31, 2016
With no related allowance recorded:
One-to-four family residential real estate $ 5,379
$ 4,548
$ 886
$ —
$ 2,947
$ 70
One-to-four family residential real estate - non-owner occupied 503
386
119
—
251
9
Multi-family mortgage - Illinois 787
787
—
—
980
41
6,669
5,721
1,005
—
4,178
120
With an allowance recorded:
Nonresidential real estate 262
260
21
26
164
—
262
260
21
26
164
—
$ 6,931
$ 5,981
$ 1,026
$ 26
$ 4,342
$ 120

Table of Contents

BANKFINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands, except share and per share data)

NOTE 4 - LOANS RECEIVABLE (continued)

Individually Evaluated Loans

The following tables present loans individually evaluated by class of loans:

									*Three Months Ended*
									*March 31, 2023*
	*Loan Balance*		*Recorded Investment*		*Partial Charge-off*		*Allowance for Credit Losses Allocated*		*Average Investment*		*Interest Income Recognized*
March 31, 2023
With no related allowance recorded:
One-to-four family residential real estate	$	87	$	89	$	—	$	—	$	78	$	2
Multi-family mortgage		133		148		—		—		49		—
Commercial loans and leases		8,958		8,848		50		—		3,714		—
	$	9,178	$	9,085	$	50	$	—	$	3,841	$	2

									*Year ended*
									*December 31, 2022*
	*Loan Balance*		*Recorded Investment*		*Partial Charge-off*		*Allowance for Credit Losses Allocated*		*Average Investment*		*Interest Income Recognized*
December 31, 2022
With no related allowance recorded:
One-to-four family residential real estate	$	752	$	752	$	—	$	—	$	1,143	$	29
Multi-family mortgage		473		473		—		—		590		27
Commercial loans and leases		1,606		1,487		49		—		445		47
	$	2,831	$	2,712	$	49	$	—	$	2,178	$	103

Nonaccrual Loans

The following tables present the recorded investment in nonaccrual loans and loans 90 days or more past due ~~over 90 days~~ still on accrual by class of loans:

Loan Balance
Recorded
Investment

Loans Past
Due Over 90
Days, Still
Accruing
September 30, 2017
One-to-four family residential real estate $ 3,392
$ 1,658
$ —
One-to-four family residential real estate – non-owner occupied 751
576
—
Multi-family mortgage - Illinois 378
371
—
$ 4,521
$ 2,605
$ —
December 31, 2016
One-to-four family residential real estate $ 2,861
$ 2,483
$ —
One-to-four family residential real estate – non-owner occupied 428
368
—
Multi-family mortgage - Illinois 187
185
—
Nonresidential real estate 262
260
—
$ 3,738
$ 3,296
$ —

	*Nonaccrual*		*Loans Past Due Over 90 Days Still Accruing*
March 31, 2023
One-to-four family residential real estate	$	55	$	—
Commercial loans and leases		8,807		—
	$	8,862	$	—
December 31, 2022
One-to-four family residential real estate	$	92	$	—
Commercial loans and leases		1,310		238
Consumer		5		—
	$	1,407	$	238

Nonaccrual loans and ~~impaired~~individually evaluated loans are defined differently. Some loans may be included in both categories, and some loans may only be included in one category. Nonaccrual loans include both smaller balance homogeneous loans that are collectively evaluated ~~for impairment~~ and loans individually ~~classified impaired loans.~~

evaluated.

The Company’s reserve for uncollected loan interest was ~~$250,000~~$241,000 and ~~$199,000~~$38,000 at ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~2022, respectively. When a loan is on nonaccrual status and the ultimate collectability of the total principal of ~~an impaired~~a loan is in doubt, all payments are applied to principal under the cost recovery method. Alternatively, when a loan is on ~~non-accrual~~nonaccrual status but there is doubt concerning only the ultimate collectability of interest, contractual interest is credited to interest income only when received, under the cash basis ~~method pursuant to the provisions of FASB ASC 310–10, as applicable.~~method. In all cases, the average balances are calculated based on the month–end balances of the financing receivables within the period ~~reported pursuant to the provisions of FASB ASC 310–10, as applicable.~~reported.

Table of Contents

BANKFINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands, except share and per share data)

NOTE 4 - LOANS RECEIVABLE (continued)

Past Due Loans

The following tables present the aging of the recorded investment of loans ~~at September 30, 2017~~ by ~~class of loans:~~

portfolio segment:

	30-59 Days Past Due		60-89 Days Past Due		Greater Than 89 Days Past Due		Total Past Due		Nonaccrual		Current		Total
March 31, 2023
One-to-four family residential real estate loans	$	496	$	16	$	—	$	512	$	55	$	20,908	$	21,475
Multi-family mortgage:
Senior notes		786		148		—		934		—		500,517		501,451
Junior notes		362		185		—		547		—		42,675		43,222
Nonresidential real estate:
Owner occupied		—		—		—		—		—		22,264		22,264
Non-owner occupied		—		—		—		—		—		101,096		101,096
Commercial loans and leases:
Commercial		5,106		1,139		—		6,245		384		278,775		285,404
Equipment finance - Government		6,421		423		—		6,844		8,420		187,672		202,936
Equipment finance - Corporate Investment-grade		794		—		—		794		3		55,079		55,876
Consumer		6		5		—		11		—		1,585		1,596
	$	13,971	$	1,916	$	—	$	15,887	$	8,862	$	1,210,571	$	1,235,320

	30-59 Days Past Due		60-89 Days Past Due		Greater Than 89 Days Past Due		Total Past Due		Nonaccrual		Current		Total
December 31, 2022
One-to-four family residential real estate loans	$	411	$	19	$	—	$	430	$	92	$	22,611	$	23,133
Multi-family mortgage:
Senior notes		31		—		—		31		—		494,957		494,988
Junior notes		—		—		—		—		—		42,406		42,406
Nonresidential real estate:
Owner occupied		—		—		—		—		—		22,617		22,617
Non-owner occupied		—		—		—		—		—		97,088		97,088
Commercial loans and leases:
Commercial		2,424		336		111		2,871		1,310		279,272		283,453
Equipment finance - Government		2,034		5,106		—		7,140		—		204,443		211,583
Equipment finance - Corporate Investment-grade		—		81		127		208		—		57,812		58,020
Consumer		12		4		—		16		5		1,563		1,584
	$	4,912	$	5,546	$	238	$	10,696	$	1,407	$	1,222,769	$	1,234,872

30-59 Days
Past Due

60-89 Days
Past Due

90 Days or
Greater
Past Due

Total Past
Due

Loans Not
Past Due
Total
One-to-four family residential real estate loans $ 94
$ 749
$ 1,655
$ 2,498
$ 79,800
$ 82,298
One-to-four family residential real estate loans – non-owner occupied 12
3
577
592
22,321
22,913
Multi-family mortgage - Illinois —
—
371
371
288,508
288,879
Multi-family mortgage - Other —
—
—
—
281,887
281,887
Nonresidential real estate —
—
—
—
174,724
174,724
Construction —
—
—
—
2,548
2,548
Land —
—
—
—
281
281
Commercial loans:

Regional commercial banking —
—
—
—
40,315
40,315
Health care —
—
—
—
72,685
72,685
Direct commercial lessor 275
369
—
644
33,787
34,431
Commercial leases:

Investment rated commercial leases —
2,225
—
2,225
230,009
232,234
Other commercial leases —
—
—
—
102,698
102,698
Consumer —
—
—
—
1,754
1,754
$ 381
$ 3,346
$ 2,603
$ 6,330
$ 1,331,317
$ 1,337,647

Table of Contents

BANKFINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands, except share and per share data)

NOTE 4 - LOANS RECEIVABLE (continued)

~~The following tables present~~

At March 31, 2023, the ~~aging of~~Company had no loan modifications that meet the ~~recorded investment of loans at December 31, 2016 by class of loans:~~

30-59 Days
Past Due

60-89 Days
Past Due
90 Days or
Greater
Past Due
Total Past
Due

Loans Not
Past Due
Total
One-to-four family residential real estate loans $ 984
$ 335
$ 2,235
$ 3,554
$ 92,665
$ 96,219
One-to-four family residential real estate loans – non-owner occupied 664
114
368
1,146
37,179
38,325
Multi-family mortgage - Illinois 605
439
184
1,228
294,223
295,451
Multi-family mortgage - Other —
—
—
—
243,944
243,944
Nonresidential real estate —
—
260
260
178,644
178,904
Construction —
—
—
—
950
950
Land —
—
—
—
349
349
Commercial loans:

Regional commercial banking —
—
—
—
26,480
26,480
Health care —
—
—
—
41,086
41,086
Direct commercial lessor —
—
—
—
31,847
31,847
Commercial leases:

Investment rated commercial leases 51
—
—
51
273,405
273,456
Other commercial leases —
—
—
—
84,988
84,988
Consumer —
—
—
—
2,263
2,263
$ 2,304
$ 888
$ 3,047
$ 6,239
$ 1,308,023
$ 1,314,262

definition described in ASU 2022-02“Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings

~~The~~ and Vintage Disclosures for additional reporting.

At December 31, 2022 the Company ~~evaluates~~evaluated loan extensions or modificationsnot qualified under Section 4013 of the CARES Act or under OCC Bulletin 2020-35 in accordance with FASB ASC ~~310–40~~340-10 with respect to the classification of the loan as a Troubled Debt Restructuring ~~("TDR"~~(“TDR”). ~~In general,~~Under ASC 340-10, if the Company grants a loan extension or modification to a borrower experiencing financial difficulties for other than an insignificant period of time that includes a below–market interest rate, principal forgiveness, payment forbearance or other concession intended to minimize the economic loss to the Company, the loan extension or loan modification is classified as a TDR. In cases where borrowers are granted new terms that provide for a reduction of either interest or principal then due and payable, management measures any impairment on the restructured loan in the same manner as for impaired loans as noted above.

The Company had ~~$17,000~~ ofno TDRs at ~~September 30, 2017, compared to $341,000 at~~ December 31, ~~2016.~~ No ~~specific valuation reserves were allocated to those loans at September 30, 2017 and December 31, 2016. The Company had~~ no ~~outstanding commitments to borrowers whose loans were classified as TDRs at either date.~~

~~The following table presents loans classified as TDRs:~~

September 30, 2017 December 31, 2016
One-to-four family residential real estate $ —
$ 205
Troubled debt restructured loans – accrual loans —
205
One-to-four family residential real estate 17
136
Troubled debt restructured loans – nonaccrual loans 17
136
Total troubled debt restructured loans $ 17
$ 341

During the nine months ended September 30, 2017, there were no loans modified and classified as TDRs. During the nine months ended September 30, 2016, the terms of certain loans were modified and classified as TDRs. The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity

~~Table of Contents~~

~~BANKFINANCIAL CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Table amounts in thousands, except share and per share data)~~

~~NOTE 4 - LOANS RECEIVABLE~~ ~~(continued)~~

~~date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan.~~

~~The following tables present TDR activity:~~

For the Nine Months Ended September 30,
2017 2016

Number
of loans

Pre-
Modification
outstanding
recorded
investment

Post-
Modification
outstanding
recorded
investment

Number
of loans

Pre-
Modification
outstanding
recorded
investment

Post-
Modification
outstanding
recorded
investment
One-to-four family residential real estate —
$ —
$ —
1
$ 63
$ 63

Due to
reduction in
interest rate Due to
extension of
maturity date Due to
permanent
reduction in
recorded
investment Total

For the Nine Months Ended September 30, 2016
One-to-four family residential real estate $ —
$ 63
$ —
$ 63

The TDRs described above had no impact on interest income, resulted in no change to the allowance for loan losses allocated and resulted in no charge-offs for the nine months ended September 30, 2016.

~~The following table presents TDRs for which there was a payment default during the nine months ended September 30, 2017 and 2016 within twelve months following the modification.~~

2017 2016

Number
of loans

Recorded
investment

Number
of loans

Recorded
investment
One-to-four family residential real estate 1
$ 17
2
$ 87

~~A TDR is considered to be in payment default once it is 90 days contractually past due under the modified terms.~~

The TDRs for which there was a payment default resulted in no change to the allowance for loan losses allocated and resulted in no charge-offs during the nine months ended September 30, 2017 and 2016.

There were certain other loan modifications during the three and nine months ended September 30, 2017 and 2016 that did not meet the definition of a TDR. These loans had a total recorded investment of $149,000 and $615,000 at September 30, 2017 and 2016, respectively. The modification of these loans involved either a modification of the terms of a loan to borrowers who were not experiencing financial difficulties or a delay in a payment that was considered to be insignificant.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy.

2022.

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, including current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans ~~based on~~as to credit risk. ~~This analysis includes non-homogeneous loans, such as commercial and commercial real estate loans. This analysis is performed on a monthly basis.~~Risk ratings are updated any time the situation warrants. The Company uses the following definitions for risk ratings:

Pass. This category includes loans that are all considered acceptable credits, ranging from investment or near investment grade, to loans made to borrowers who exhibit credit fundamentals that meet or exceed industry standards.

Watch. A “Watch List” loan is a loan that requires elevated monitoring because it does not conform to the applicable published loan policy or loan product underwriting standards, evidences intermittent past due payments or because of other matters of possible concern.

Special Mention. A ~~Special Mention~~“Special Mention” asset has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the

~~Table of Contents~~

~~BANKFINANCIAL CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Table amounts in thousands, except share and per share data)~~

~~NOTE 4 - LOANS RECEIVABLE~~ ~~(continued)~~

institution’s credit position at some future date. Special Mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.

Substandard. Loans categorized as ~~Substandard~~“Substandard” continue to accrue interest, but exhibit a well-defined weakness or weaknesses that may jeopardize the liquidation of the debt. The loans continue to accrue interest because they are well secured and collection of principal and interest is expected within a reasonable time. The risk rating guidance published by the Office of the Comptroller of the Currency clarifies that a loan with a well-defined weakness does not have to present a probability of default for the loan to be rated Substandard, and that an individual loan’s loss potential does not have to be distinct for the loan to be rated Substandard.

Nonaccrual. An asset classified ~~Nonaccrual~~“Nonaccrual” has all the weaknesses inherent in one classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. ~~The loans were placed on nonaccrual status.~~

~~Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered “Pass” rated loans.~~

~~As of September 30, 2017, based~~

Based on the most recent analysis performed, the risk categories of loans by class of loans are as follows:

	*Pass*		*Watch*		*Special Mention*		*Substandard*		*Substandard Nonaccrual*		*Total*
March 31, 2023
One-to-four family residential real estate	$	21,080	$	44	$	16	$	280	$	55	$	21,475
Multi-family mortgage		541,885		2,640		—		148		—		544,673
Nonresidential real estate		120,351		3,009		—		—		—		123,360
Commercial loans and leases		505,882		14,283		11,398		3,846		8,807		544,216
Consumer		1,581		5		5		5		—		1,596
	$	1,190,779	$	19,981	$	11,419	$	4,279	$	8,862	$	1,235,320

	*Pass*		*Watch*		*Special Mention*		*Substandard*		*Substandard Nonaccrual*		*Total*
December 31, 2022
One-to-four family residential real estate	$	22,648	$	62	$	4	$	327	$	92	$	23,133
Multi-family mortgage		534,253		3,141		—		—		—		537,394
Nonresidential real estate		116,635		3,070		—		—		—		119,705
Commercial loans and leases		523,889		22,299		1,517		4,041		1,310		553,056
Consumer		1,559		12		4		4		5		1,584
	$	1,198,984	$	28,584	$	1,525	$	4,372	$	1,407	$	1,234,872

Pass
Special
Mention
Substandard Nonaccrual Total
One-to-four family residential real estate loans $ 80,401
$ —
$ 257
$ 1,653
$ 82,311
One-to-four family residential real estate loans – non-owner occupied 22,258
—
40
577
22,875
Multi-family mortgage loans - Illinois 289,175
—
480
372
290,027
Multi-family mortgage loans - Other 286,398
—
—
—
286,398
Nonresidential real estate loans 176,139
—
162
—
176,301
Construction loans 2,543
—
—
—
2,543
Land loans 284
—
—
—
284
Commercial loans:
Regional commercial banking 40,251
—
—
—
40,251
Health care 71,633
—
982
—
72,615
Direct commercial lessor 34,213
—
—
—
34,213
Commercial leases:

Investment rated commercial leases 230,931
—
—
—
230,931
Other commercial leases 102,189
—
—
—
102,189
Consumer 1,747
—
—
—
1,747

$ 1,338,162
$ —
$ 1,921
$ 2,602
$ 1,342,685

Table of Contents

BANKFINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands, except share and per share data)

NOTE 4 - LOANS RECEIVABLE (continued)

	Term Loans Amortized Cost Basis by Origination Year
	2023		2022			2021		2020		2019		Prior		Revolving loans			Total
March 31, 2023

*One-to-four family residential real estate loans:*
Risk-rating
Pass	$	—	$	151		$	—	$	200	$	—	$	16,109	$	4,620		$	21,080
Watch		—		—			—		—		—		44		—			44
Special mention		—		—			—		—		—		16		—			16
Substandard		—		—			—		—		—		128		152			280
Nonaccrual		—		—			—		—		—		26		29			55
	$	—	$	151		$	—	$	200	$	—	$	16,323	$	4,801		$	21,475
*One-to-four family residential real estate loans:*
Current period recoveries	$	—	$	—		$	—	$	—	$	—	$	5	$	—		$	5
	$	—	$	—		$	—	$	—	$	—	$	5	$	—		$	5
Multi-family mortgage:
Risk rating
Pass	$	20,500	$	217,091		$	125,506	$	63,839	$	23,907	$	82,363	$	8,679		$	541,885
Watch		—		—			—		—		—		2,640		—			2,640
Substandard		—		—			—		—		—		148		—			148
	$	20,500	$	217,091		$	125,506	$	63,839	$	23,907	$	85,151	$	8,679		$	544,673
Multi-family mortgage:
Current period recoveries	$	—	$	—		$	—	$	—	$	—	$	5	$	—		$	5
	$	—	$	—		$	—	$	—	$	—	$	5	$	—		$	5
Nonresidential real estate:
Risk rating
Pass	$	8,759	$	54,580		$	22,232	$	8,660	$	10,171	$	15,695	$	254		$	120,351
Watch		—		1,030			1,632		—		—		347		—			3,009
	$	8,759	$	55,610		$	23,864	$	8,660	$	10,171	$	16,042	$	254		$	123,360
Commercial loans and leases :
Risk rating
Pass	$	23,848	$	213,313		$	102,419	$	65,130	$	9,314	$	5,771	$	86,087		$	505,882
Watch		393		121			43		1,648		33		65		11,980			14,283
Special mention		—		11,050			—		—		—		—		348			11,398
Substandard		—		—			—		40		58		—		3,748			3,846
Nonaccrual		—		8,494			4		306		3		—		—			8,807
	$	24,241	$	232,978		$	102,466	$	67,124	$	9,408	$	5,836	$	102,163		$	544,216
Commercial loans and leases :
Current period gross charge-offs	$	—	$	(79	)	$	—	$	—	$	—	$	—	$	—		$	(79	)
Current period recoveries		—		—			—		—		—		1		—			1
	$	—	$	(79	)	$	—	$	—	$	—	$	1	$	—		$	(78	)
Consumer:
Risk rating
Pass	$	84	$	134		$	247	$	160	$	335	$	5	$	616		$	1,581
Watch		—		—			—		—		—		—		5			5
Special mention		—		—			—		—		—		—		5			5
Substandard		—		—			—		—		—		—		5			5
	$	84	$	134		$	247	$	160	$	335	$	5	$	631		$	1,596
Consumer:
Current period gross charge-offs	$	—	$	—		$	—	$	—	$	—	$	—	$	(22	)	$	(22	)
Current period recoveries		—		—			—		—		—		—		1			1
	$	—	$	—		$	—	$	—	$	—	$	—	$	(21	)	$	(21	)

Table of Contents

~~As of December 31, 2016, the risk categories of loans by class of loans are as follows:~~

Pass
Special
Mention
Substandard Nonaccrual Total
One-to-four family residential real estate loans $ 93,514
$ —
$ 629
$ 2,486
$ 96,629
One-to-four family residential real estate loans – non-owner occupied 38,179
—
41
369
38,589
Multi-family mortgage loans - Illinois 297,826
122
1,048
187
299,183
Multi-family mortgage loans - Other 243,704
—
—
—
243,704
Nonresidential real estate loans 180,047
—
1,845
260
182,152
Construction loans 946
—
—
—
946
Land loans 356
—
—
—
356
Commercial loans:
Regional commercial banking 26,365
—
66
—
26,431
Health care 41,001
—
—
—
41,001
Direct commercial lessor 30,881
800
—
—
31,681
Commercial leases:

Investment rated commercial leases 271,972
—
—
—
271,972
Other commercial leases 84,356
161
—
—
84,517
Consumer 2,255
—
—
—
2,255
$ 1,311,402
$ 1,083
$ 3,629
$ 3,302
$ 1,319,416

BANKFINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands, except share and per share data)

NOTE 5 - ~~OTHER REAL ESTATE OWNED~~

R~~eal~~FORECLOSED ASSETS

Real estate that is acquired through foreclosure or a deed in lieu of foreclosure is classified as other real estate owned ("OREO") until it is sold. When real estate is acquired through foreclosure or by deed in lieu of foreclosure, it is recorded at its fair value, less the estimated costs of disposal. If the fair value of the property is less than the loan balance, the difference is charged against the allowance for ~~loan~~credit losses.

September 30, 2017 December 31, 2016
Balance Valuation Allowance Net OREO Balance Balance Valuation Allowance Net OREO Balance
One–to–four family residential $ 1,955
$ (207 ) $ 1,748
$ 1,702
$ (137 ) $ 1,565
Multi-family mortgage —
—
—
370
—
370
Nonresidential real estate 1,772
(221 ) 1,551
1,171
(105 ) 1,066
Land 314
(44 ) 270
1,101
(207 ) 894
$ 4,041
$ (472 ) $ 3,569
$ 4,344
$ (449 ) $ 3,895

~~Table~~

Assets are classified as foreclosed when physical possession of ~~Contents~~

~~BANKFINANCIAL CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Table amounts~~the collateral is taken regardless of whether foreclosure proceedings have taken place. Other foreclosed assets received in ~~thousands, except share and per share data)~~

~~NOTE 5 - OTHER REAL ESTATE OWNED~~ ~~(continued)~~

satisfaction of borrowers’ debts are initially recorded at fair value of the asset less estimated costs to sell.

	*March 31, 2023*						*December 31, 2022*
	*Balance*		*Valuation Allowance*		*Net Balance*		*Balance*		*Valuation Allowance*		*Net Balance*

Other real estate owned	$	472	$	—	$	472	$	472	$	—	$	472
Other foreclosed assets		921		—		921		4		—		4
	$	1,393	$	—	$	1,393	$	476	$	—	$	476

The following represents the roll forward of ~~OREO and the composition of OREO properties:~~

For the Three Months Ended September 30, For the Nine Months Ended September 30,
2017 2016 2017 2016
Beginning balance $ 4,896
$ 5,373
$ 3,895
$ 7,011
New foreclosed properties 105
94
2,041
215
Valuation adjustments (227 ) (115 ) (301 ) (244 )
Sales and Payments (1,205 ) (971 ) (2,066 ) (2,601 )
Ending balance $ 3,569
$ 4,381
$ 3,569
$ 4,381

foreclosed assets:

	*For the Three Months Ended*
	*March 31,*
	*2023*			*2022*
Beginning balance	$	476		$	725
New foreclosed assets		921			274
Valuation reductions from sales		—			8
Sales		(4	)		(39	)
Ending balance	$	1,393		$	968

Activity in the valuation allowance is as follows:

For the Three Months Ended September 30, For the Nine Months Ended September 30,
2017 2016 2017 2016
Beginning balance $ 308
$ 664
$ 449
$ 1,042
Additions charged to expense 227
115
301
244
Reductions from sales of other real estate owned (63 ) (170 ) (278 ) (677 )
Ending balance $ 472
$ 609
$ 472
$ 609

~~At September 30, 2017 and~~

	*For the Three Months Ended*
	*March 31,*
	*2023*		*2022*
Beginning balance	$	—	$	227
Reductions from sales		—		(8	)
Ending balance	$	—	$	219

The recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process was $5,000 atMarch 31, 2023, compared to no consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process atDecember 31, ~~2016,~~2022. At March 31, 2023, other foreclosed assets consisted of vehicles and small construction equipment collateral repossessed in connection with equipment finance leases. At March 31, 2023, the balance of OREO included no foreclosed residential real estate properties recorded as a result of obtaining physical possession of the property without title. At September 30, 2017 and December 31, 2016, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceeds were in process was $1.4 million and $1.6 million, respectively.

~~NOTE 6 - SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE~~

~~Securities sold under agreements to repurchase, included with borrowings on the consolidated balance sheet, are shown below.~~

Overnight and Continuous Up to 30 days 30 - 90 days Greater Than 90 days Total
September 30, 2017
Repurchase agreements and repurchase-to-maturity transactions $ 928
$ —
$ —
$ —
$ 928
Gross amount of recognized liabilities for repurchase agreements in Statement of Condition $ 928

December 31, 2016
Repurchase agreements and repurchase-to-maturity transactions $ 1,069
$ —
$ —
$ —
$ 1,069
Gross amount of recognized liabilities for repurchase agreements in Statement of Condition $ 1,069

Securities sold under agreements to repurchase were secured by mortgage-backed securities with a carrying amount of $4.0 million and $4.7 million at September 30, 2017 and December 31, 2016, respectively. Also included in total borrowings were advances from the FHLBC of $60.0 million at September 30, 2017 and $50.0 million at December 31, 2016, respectively.

Because security values fluctuate due to market conditions, the Company has no control over the market value of securities sold under agreements to repurchase. The Company is contractually obligated to promptly transfer additional securities to the counterparty if the market value of the securities falls below the repurchase price.

Table of Contents

BANKFINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands, except share and per share data)

NOTE ~~7 – EMPLOYEE BENEFIT PLAN~~

~~Employee Stock Ownership Plan~~. ~~On March 29, 2017, the ESOP was terminated~~6 - BORROWINGS AND SUBORDINATED NOTES

Borrowings and ~~the ESOP repaid all amounts owing under the ESOP’s Term Loan Agreement with~~subordinated notes were as follows:

	*March 31, 2023*					*December 31, 2022*
	*Contractual*					*Contractual*
	*Rate*			*Amount*		*Rate*			*Amount*
Fixed-rate advance from FHLB, due April 7, 2023		4.88	%	$	10,000		—	%	$	—
Fixed-rate advance from FHLB, due September 16, 2024		4.55	%		5,000		—	%		—
Fixed-rate advance from FHLB, due March 17, 2025		4.27	%		5,000		—	%		—
Fixed-rate advance from FHLB, due September 17, 2025		4.20	%		5,000		—	%		—
Fixed-rate advance from FHLB, due March 17, 2026		4.15	%		5,000
Fixed-rate advance from FHLB, due September 17, 2026		4.06	%		5,000		—	%		—
Subordinated notes, due May 15, 2031		3.75	%		19,645		3.75	%		19,634
Line of credit, due March 29, 2024		7.50	%		—		6.75	%		—

In 2021, the Company ~~(the “Share Acquisition Loan”~~entered into Subordinated Note Purchase Agreements with certain qualified institutional buyers and accredited investors pursuant to which the Company sold and issued $20.0 million in aggregate principal amount of its 3.75% Fixed-to-Floating Rate Subordinated Notes due May 15, 2031 (the “Notes”). The ~~ESOP repaid~~Company incurred $441,000 of issuance costs associated with the ~~Share Acquisition Loan by transferring 753,490 unallocated shares~~Notes. These issuance costs are being amortized over the 10-year life of the ~~Company’s common stock~~Notes. At March 31, 2023 and December 31, 2022, there were $355,000 and $366,000, respectively, in remaining unamortized issuance costs and they are presented in the Company's financial statements as a reduction of the principal amount of the Notes.

The Notes bear interest at a fixed annual rate of 3.75%, from and including the date of issuance to May 14, 2026, payable semi-annually in arrears. From and including May 15, 2026 but excluding the maturity date or early redemption date, as applicable, the interest rate will reset quarterly to an interest rate per annum equal to Three-Month Term SOFR (as defined in the Notes) plus 299 basis points, payable quarterly in arrears. Under the conditions specified in the Notes, the interest rate accruing during the applicable floating rate period may be determined based on a rate other than Three-Month Term SOFR. The Notes have a stated maturity date of May 15, 2031 and are redeemable, in whole or in part, on May 15, 2026, on any interest payment date thereafter, and at any time upon the occurrence of certain events.

Principal and interest payments due on the Notes are subject to acceleration only in limited circumstances in the case of certain bankruptcy and insolvency-related events with respect to the ~~Company in exchange for the full satisfaction~~Company. The Notes are unsecured, subordinated obligations of the ~~Share Acquisition Loan, using~~Company and generally rank junior in right of payment to the ~~valuation method provided~~Company’s current and future senior indebtedness. The Notes qualify as Tier 2 capital for regulatory capital purposes.

In 2020, the Company established a $5.0 million unsecured line of credit with a correspondent bank. Interest is payable at a rate of Prime Rate as published in the ~~ESOP. A total~~Wall Street Journal minus 0.50%, with a minimum rate of ~~78,362 unallocated shares remained in~~2.40%. The line of credit has been extended since its original maturity date and the ~~ESOP after the Share Acquisition Loan was repaid, and these shares were released and will be allocated to the accounts of eligible ESOP participants who were actively employed by the Bank as of~~ current maturity date is March 29, ~~2017, based on their account balances, subject to the receipt~~2024. The line of a favorable IRS determination letter. These transactions resulted in the recording of one-time, non-cash, non-tax deductible equity compensation expense of $1.1 million in the first quarter of 2017. The Share Acquisition Loancredit had no outstanding ~~principal~~ balance at ~~September 30, 2017~~March 31, 2023 and ~~an outstanding principal balance of $10.8 million at~~ December 31, ~~2016.~~2022.

The Company made the Share Acquisition Loan to the ESOP in the original principal amount of $19.6 million in connection with the Company’s mutual to stock conversion in June of 2005. The proceeds of the Share Acquisition Loan were used by the ESOP to purchase 1,957,300 shares of the Company’s common stock issued in the subscription offering at a price of $10.00 per share. The Share Acquisition Loan was secured by a pledge of the acquired shares and the ESOP made annual loan payments with funds it received from the Bank’s discretionary contributions to the ESOP in subsequent years and dividends it received on unallocated shares. As loan payments were made, the Company recorded compensation expense based on the allocation of shares released.

ESOP benefit expense was recorded based upon the fair value of the awarded shares, net of dividends and interest received on unallocated ESOP shares. ESOP benefit expense totaled $1.3 million for the year ended December 31, 2016.

~~Shares held by the ESOP were as follows:~~

September 30, 2017 December 31, 2016
Allocated to participants 1,203,810
1,125,448
Distributed to participants (317,914 ) (313,223 )
Unearned —
831,852
Total ESOP shares 885,896
1,644,077
Fair value of unearned shares $ —
$ 12,328

NOTE ~~8 – EQUITY INCENTIVE PLAN~~

On June 27, 2006, the Company’s stockholders approved the BankFinancial Corporation 2006 Equity Incentive Plan, which authorized the Human Resources Committee of the Board of Directors of the Company to grant a variety of cash- and equity-based incentive awards, including stock options, stock appreciation rights, restricted stock, performance shares and other incentive awards, to employees and directors aggregating up to 3,425,275 shares of the Company’s common stock. The Plan provides that no awards may be granted under the Plan after the ten-year anniversary of the Effective Date. Consequently, no further awards will be granted under this Plan.

~~Table of Contents~~

~~BANKFINANCIAL CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Table amounts in thousands, except share and per share data)~~

~~NOTE 8 – EQUITY INCENTIVE PLAN~~ ~~(continued)~~

As of December 31, 2016, there were 1,752,156 stock options outstanding. The Company recognized $979,000 of equity-based compensation expense relating to the granting of stock options for the year ended December 31, 2016. There was no equity-based compensation expense for the nine months ended September 30, 2017. A summary of the activity in the stock option plan for 2017 and 2016 follows:

Stock Options
Number of
Shares

Weighted
Average
Exercise Price

Weighted
Average
Remaining
Contractual
Term
(in years)

Aggregate
Intrinsic
Value ⁽¹⁾
Stock options outstanding at December 31, 2015 1,752,156
$ 12.30
1.48 $ 778
Stock options granted —
—

Stock options exercised —
—

Stock options outstanding at December 31, 2016 1,752,156
$ 12.30
0.48 $ 4,422
Stock options granted —
—

Stock options exercised (1,752,156 ) 12.30

Stock options outstanding at September 30, 2017 —
$ —
0 $ —


~~(1)~~	Stock option aggregate intrinsic value represents the number of shares subject to options multiplied by the difference (if positive) in the closing market price of the common stock underlying the options on the date shown and the weighted average exercise price.

During the nine months ended September 30, 2017, 1,752,156 stock options were exercised. All stock options were exercised on a net settlement basis, using a portion of the shares obtained upon exercise to pay the exercise price of the stock option. The net settlements resulted in the issuance of 280,554 shares of the Company's common stock. Certain employees also chose to use a portion of the net shares received upon the exercise to pay required tax withholdings. This reduced the net shares issued by 82,528 shares to 198,026 shares.

~~NOTE 9 –~~7– FAIR VALUE

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

~~Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.~~

Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

~~Level 3 – Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.~~

•

Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.


	•	Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.


	•	Level 3 – Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Company used the following methods and significant assumptions to estimate the fair value of each type of financial instrument:

Securities: The fair ~~values of marketable equity~~value for investment securities ~~are generally~~is determined by quoted market prices, ~~in active markets, for each specific security~~if available (Level ~~1). If Level~~ 1 ~~measurement inputs are not available for a marketable equity security, we determine its fair value based on the quoted price of a similar security traded in an active market (Level 2)~~). The fair values of debt securities are generally determined by matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2)2).

~~Impaired Loans:~~ The fair value of impaired loans with specific allocations of the allowance for loan losses is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available for similar loans and collateral underlying such

Table of Contents

BANKFINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands, except share and per share data)

NOTE 97 - FAIR VALUE (continued)

~~loans. Non-real estate~~

Loans Evaluated Individually: The Company does not record portfolio loans at fair value on a recurring basis. However, periodically, a loan is evaluated individually and is reported at the fair value of the underlying collateral, ~~may be valued~~less estimated costs to sell, if repayment is expected solely from the collateral. If the collateral value is not sufficient, a specific reserve is recorded. Collateral values are estimated using ~~an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted~~a combination of observable inputs, including recent appraisals, and unobservable inputs based on ~~management’s historical knowledge, changes in market conditions from~~customized discounting criteria. Due to the ~~time~~significance of ~~the valuation, and management’s expertise and knowledge~~unobservable inputs, fair values of ~~the client and client’s business, resulting in a~~individually evaluated collateral dependent loans have
been classified as Level ~~3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted in accordance with the allowance policy.~~

~~Other Real Estate Owned:~~ 3.

Foreclosed assets: Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals which are updated no less frequently than annually. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach with data from comparable properties. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. ~~Real estate owned properties~~Foreclosed assets are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

The following table sets forth the Company’s financial assets that were accounted for at fair value and are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

Fair Value Measurements Using

Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)

Significant
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Fair
Value
September 30, 2017
Securities:
Certificates of deposit $ —
$ 80,360
$ —
$ 80,360
Equity mutual fund 502
—
—
502
Mortgage-backed securities – residential —
13,188
—
13,188
Collateralized mortgage obligations – residential —
4,725
—
4,725
SBA-guaranteed loan participation certificates —
12
—
12
$ 502
$ 98,285
$ —
$ 98,787
December 31, 2016
Securities:
Certificates of deposit $ —
$ 85,938
$ —
$ 85,938
Equity mutual fund 499
—
—
499
Mortgage-backed securities - residential —
15,184
—
15,184
Collateralized mortgage obligations – residential —
5,574
—
5,574
SBA-guaranteed loan participation certificates —
17
—
17
$ 499
$ 106,713
$ —
$ 107,212

~~Table of Contents~~

~~BANKFINANCIAL CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Table amounts in thousands, except share~~

	*Fair Value Measurements Using*
	*Quoted Prices in Active Markets for Identical Assets (Level 1)*		*Significant Observable Inputs (Level 2)*		*Significant Unobservable Inputs (Level 3)*		*Fair Value*
March 31, 2023
Securities:
Certificates of deposit	$	—	$	2,977	$	—	$	2,977
Municipal securities		—		227		—		227
U.S. Treasury Notes		122,365		—		—		122,365
U.S. government-sponsored agencies		—		39,739		—		39,739
Mortgage-backed securities – residential		—		3,781		—		3,781
Collateralized mortgage obligations – residential		—		1,150		—		1,150
	$	122,365	$	47,874	$	—	$	170,239
December 31, 2022
Securities:
Certificates of deposit	$	—	$	2,233	$	—	$	2,233
Municipal securities		—		225		—		225
U.S. Treasury Notes		163,103		—		—		163,103
U.S. government-sponsored agencies		—		39,699		—		39,699
Mortgage-backed securities – residential		—		3,881		—		3,881
Collateralized mortgage obligations – residential		—		1,197		—		1,197
	$	163,103	$	47,235	$	—	$	210,338

At March 31, 2023 and ~~per share data)~~

~~NOTE 9 - FAIR VALUE~~ ~~(continued)~~

~~The following table sets forth~~December 31, 2022, the ~~Company’s assets that were measured at fair value on a non-recurring basis:~~

Fair Value Measurement Using

Quoted
Prices in
Active Markets
for Identical
Assets
(Level 1)

Significant
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Fair
Value
September 30, 2017
Other real estate owned:
One-to-four family residential real estate $ —
$ —
$ 1,421
$ 1,421
Nonresidential real estate —
—
844
844
$ —
$ —
$ 2,265
$ 2,265

December 31, 2016
Impaired loans:
Nonresidential real estate —
—
234
234
$ —
$ —
$ 234
$ 234
Other real estate owned:
One-to-four family residential real estate $ —
$ —
$ 1,282
$ 1,282
Nonresidential real estate —
—
553
553
Land —
—
47
47
$ —
$ —
$ 1,882
$ 1,882

~~At September 30, 2017 there were~~ Company had no ~~impaired~~ individually evaluated loans that were measured ~~for impairment~~ using the fair value of the collateral for collateral–dependent loans and which had specific valuation allowances, compared to one impaired loan with a carrying amount of $260,000 and having specific valuation allowance of $26,000 at December 31, 2016. The decrease in the valuation allowance resulted in a decrease in the provision for loan losses of ~~$26,000~~ ~~for the nine months ended September 30, 2017. There was a decrease in the provision for loan losses of $5,000 for the nine months ended September 30, 2016.~~

~~OREO, which is~~allowances.

Foreclosed assets are carried at the lower of cost or fair value less costs to sell, had a carrying value of $2.7 million less a valuation allowance of $429,000, or $2.3 million, at September 30, 2017, compared to a carrying value of $2.3 million less a valuation allowance of $434,000, or $1.9 million, at sell. At March 31, 2023 and December 31, ~~2016. There~~2022 there were ~~$301,000~~no foreclosed assets with valuation allowances.

In January 2023, we completed the previously disclosed closings of our Hazel Crest and Naperville branches. At the time of transfer, we recorded a $553,000 valuation ~~adjustments of OREO recorded for the nine months ended September 30, 2017. There were $244,000 of valuation adjustments of OREO recorded for the nine months ended September 30, 2016.~~

adjustment on bank premises held-for-sale.

Table of Contents

BANKFINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands, except share and per share data)

NOTE 97 - FAIR VALUE (continued)

The following table presents quantitative information, based on certain empirical data with respect to Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at September 30, 2017:

Fair Value
Valuation
Technique(s)

Significant Unobservable
Input(s)

Range
(Weighted
Average)
Other real estate owned:
One-to-four family residential real estate $ 1,421
Sales comparison Discount applied to valuation
5.6% - 6.6%
(6.5%)
Nonresidential real estate loans $ 844
Sales comparison Comparison between sales and income approaches -3.66% - 15.22%
(10.9%)
Other real estate owned $ 2,265

Fair Value
Valuation
Technique(s)

Significant Unobservable
Input(s)

Range
(Weighted
Average)
Impaired loans
Nonresidential real estate $ 234
Sales comparison Comparison between sales and income approaches -10.2%
Income approach Cap Rate 8.5%
$ 234

Other real estate owned
One-to-four family residential real estate $ 1,282
Sales comparison Discount applied to valuation
8.62% to 20.04%
(11.9%)
Nonresidential real estate 553
Sales comparison Comparison between sales and income approaches
-3.22% to
4.58%
(3.7%)
Land 47
Sales comparison Discount applied to valuation
5.74% to 31.60%
(25.2%)
$ 1,882

~~Table of Contents~~

~~BANKFINANCIAL CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Table amounts in thousands, except share and per share data)~~

~~NOTE 9 - FAIR VALUE~~ ~~(continued)~~

The carrying amount and estimated fair value of financial instruments are as follows:

Fair Value Measurements at
September 30, 2017 Using:

Carrying
Amount
Level 1 Level 2 Level 3 Total
Financial assets
Cash and cash equivalents $ 125,661
$ 10,620
$ 115,041
$ —
$ 125,661
Securities 98,787
502
98,285
—
98,787
Loans receivable, net of allowance for loan losses 1,335,631
—
1,340,957
—
1,340,957
FHLBC and FRB stock 8,290
—
—
—
N/A
Accrued interest receivable 4,569
—
4,569
—
4,569
Financial liabilities
Noninterest-bearing demand deposits $ 231,049
$ —
$ 231,049
$ —
$ 231,049
Savings deposits 158,696
—
158,696
—
158,696
NOW and money market accounts 585,316
—
585,316
—
585,316
Certificates of deposit 396,028
—
394,888
—
394,888
Borrowings 60,928
—
60,932
—
60,932
Accrued interest payable 180
—
180
—
180

Fair Value Measurements at
December 31, 2016 Using:

Carrying
Amount
Level 1 Level 2 Level 3 Total
Financial assets
Cash and cash equivalents $ 96,684
$ 13,053
$ 83,631
$ —
$ 96,684
Securities 107,212
499
106,713
—
107,212
Loans receivable, net of allowance for loan losses 1,312,952
—
1,322,713
234
1,322,947
FHLBC and FRB stock 11,650
—
—
—
N/A
Accrued interest receivable 4,381
—
4,381
—
4,381
Financial liabilities
Noninterest-bearing demand deposits $ 249,539
$ —
$ 249,539
$ —
$ 249,539
Savings deposits 160,002
—
160,002
—
160,002
NOW and money market accounts 578,237
—
578,237
—
578,237
Certificates of deposit 351,612
—
350,593
—
350,593
Borrowings 51,069
—
50,015
—
50,015
Accrued interest payable 102
—
102
—
102

~~For purposes of the above, the following assumptions were used:~~

~~Cash and Cash Equivalents~~

			*Fair Value Measurements at March 31, 2023 Using:*
	*Carrying Amount*		*Level 1*		*Level 2*		*Level 3*		*Total*
Financial assets
Cash and cash equivalents	$	77,005	$	76,432	$	573	$	—	$	77,005
Securities		170,239		122,365		47,874		—		170,239
Loans receivable, net of allowance for credit losses		1,225,288		—		—		1,185,493		1,185,493
FHLB and FRB stock		7,490		—		—		—		N /A
Accrued interest receivable		8,316		304		477		7,535		8,316
Financial liabilities
Certificates of deposit		193,365		—		189,910		—		189,910
Borrowings		35,000		—		35,088		—		35,088
Subordinated notes		19,645		—		17,000		—		17,000

			*Fair Value Measurements at December 31, 2022 Using:*
	*Carrying Amount*		*Level 1*		*Level 2*		*Level 3*		*Total*
Financial assets
Cash and cash equivalents	$	66,771	$	65,967	$	804	$	—	$	66,771
Securities		210,338		163,103		47,235		—		210,338
Loans receivable, net of allowance for credit losses		1,226,743		—		—		1,198,616		1,198,616
FHLB and FRB stock		7,490		—		—		—		N /A
Accrued interest receivable		7,338		514		477		6,347		7,338
Financial liabilities
Certificates of deposit		186,524		—		182,398		—		182,398
Subordinated notes		19,634		—		17,800		—		17,800

Loans: The ~~estimated fair values for cash~~exit price observations are obtained from an independent third-party using its proprietary valuation model and ~~cash equivalents are based on their carrying value due to the short-term nature of these assets.~~

~~Loans~~:methodology and may not reflect actual or prospective market valuations. The ~~estimated fair value for loans has been determined by calculating the present value of future cash flows~~valuation is based on the ~~current~~probability of default, loss given default, recovery delay, prepayment, and discount rate ~~the Company would charge for similar loans with similar maturities, applied for an estimated time period until the loan is assumed to be repriced or repaid.~~

~~Table of Contents~~

~~BANKFINANCIAL CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Table amounts in thousands, except share and per share data)~~

~~NOTE 9 - FAIR VALUE~~ ~~(continued)~~

~~FHLBC and FRB Stock: It is not practicable to determine the fair value of FHLBC and FRB stock due to the restrictions placed on their transferability.~~

~~Deposit Liabilities~~: The estimated fair value for certificates of deposit has been determined by calculating the present value of future cash flows based on estimates of rates the Company would pay on such deposits, applied for the time period until maturity. The estimated fair values of noninterest-bearing demand, NOW, money market, and savings deposits are assumed to approximate their carrying values as management establishes rates on these deposits at a level that approximates the local market area. Additionally, these deposits can be withdrawn on demand.

~~Borrowings~~: The estimated fair values of advances from the FHLBC and notes payable are based on current market rates for similar financing. The estimated fair value of securities sold under agreements to repurchase is assumed to equal its carrying value due to the short-term nature of the liability.

~~Accrued Interest: The estimated fair values of accrued interest receivable and payable are assumed to equal their carrying value.~~

~~Off~~-~~Balance-Sheet Instruments~~: Off-balance-sheet items consist principally of unfunded loan commitments, standby letters of credit, and unused lines of credit. The estimated fair values of unfunded loan commitments, standby letters of credit, and unused lines of credit are not material.

assumptions.

While the above estimates are based on management’s judgment of the most appropriate factors, as of the balance sheet date, there is no assurance that the estimated fair values would have been realized if the assets were disposed of or the liabilities settled at that date, since market values may differ depending on the various circumstances. The estimated fair values would also not apply to subsequent dates.

In addition, other assets and liabilities that are not financial instruments, such as premises and equipment, are not included in the above disclosures.

Table of Contents

BANKFINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands, except share and per share data)

NOTE 8 – REVENUE FROM CONTRACTS WITH CUSTOMERS

All of the Company's revenue from contracts with customers within the scope of ASC 606 is recognized within noninterest income. The following table presents the Company's sources of noninterest income. Items outside of the scope of the ASC 606 are noted as such.

	*Three Months Ended*
	*March 31,*
	*2023*			*2022*
Deposit service charges and fees	$	816		$	781
Loan servicing fees ⁽¹⁾		129			101
Trust and insurance commissions and annuities income		367			338
(Loss) earnings on bank-owned life insurance ⁽¹⁾		(84	)		28
Losses on sales of securities⁽¹⁾		(454	)		—
Valuation adjustment on bank premises held-for-sale⁽¹⁾		(553	)		—
Other ⁽¹⁾		92			196
Total noninterest income	$	313		$	1,444

⁽¹⁾Not within the scope of ASC 606

A description of the Company's revenue streams accounted for under ASC 606 follows:

Deposit service charges and fees:The Company earns fees from its deposit customers based on specific types of transactions, account maintenance and overdraft services. Transaction-based fees, which include services such as ATM use fees, stop payment charges, statement rendering, and ACH fees, are recognized at the time the transaction is executed as that is the point in time the Company fulfills the customer's request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Company satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer's account balance.

Interchange income: The Company earns interchange fees from debit cardholder transactions conducted through the Visa payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. Interchange income is included in deposit service charges and fees. Interchange income was $334,000 and $360,000 for the three months ended March 31, 2023 and 2022, respectively.

Trust and insurance commissions and annuities income: The Company earns trust, insurance commissions and annuities income from its contracts with trust customers to manage assets for investment, and/or to transact on their accounts. These fees are primarily earned over time as the Company provides the contracted monthly or quarterly services and are generally assessed based on a tiered scale of the market value of assets under management (AUM) at month-end. Fees that are transaction based, including trade execution services, are recognized at the point in time that the transaction is executed, i.e., the trade date. Other related services provided include fees the Company earns, which are based on a fixed fee schedule, are recognized when the services are rendered.

Gains/losses on sales of foreclosed assets and other assets: The Company records a gain or loss from the sale of foreclosed assets and other assets when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Company finances the sale of foreclosed assets to the buyer, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the foreclosed assets asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on the sale, the Company adjusts the transaction price and related gain (loss) on sale if a significant financing component is present. Foreclosed assets sales for the three months ended March 31, 2023 and 2022 were not financed by the Company.

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ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statement Regarding Forward-Looking Information

Forward Looking Statements

This Quarterly Report on Form 10-Q contains, and other periodic and current reports, press releases and other public stockholder communications of BankFinancial Corporation may contain, forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as ~~amended, that involve significant risks and uncertainties.~~amended. Forward-looking statements may include statements relating to our future plans, strategies and expectations, as well as our future revenues, expenses, earnings, losses, financial performance, financial condition, asset quality metrics and future prospects. Forward looking statements are generally identifiable by use of the words “believe,” “may,” “will,” “should,” “could,” “continue,” “expect,” “estimate,” “intend,” “anticipate,” “preliminary,” “project,” “plan,” or similar expressions. Forward looking statements speak only as of the date made. They are frequently based on assumptions that may or may not materialize, and are subject to numerous uncertainties that could cause actual results to differ materially from those anticipated in the forward looking statements. We intend all forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for the purpose of invoking these safe harbor provisions.

Factors that could cause actual results to differ materially from the results anticipated or projected and which could materially and adversely affect our operating results, financial condition or future prospects include, but are not limited to: (i) less than anticipated loan growth due to intense competition for high quality loans and leases, particularly in terms of pricing and credit underwriting, or a dearth of borrowers who meet our underwriting standards; (ii) the impact of re-pricing and competitors’ pricing initiatives on loan and deposit ~~products; (iii)~~products; (ii) interest rate movements and their impact on the economy, customer behavior and our net interest ~~margin;~~margin; (iii) changes in U.S. Government or State Government budgets, appropriations or funding allocation policies or practices affecting our credit exposures to U.S. Government or State governments, agencies or related entities, or borrowers dependent on the receipt of Federal or State appropriations, including but not limited to, defense, healthcare, transportation, education and law enforcement programs; (iv) less than anticipated loan and lease growth; (v) effects of the adoption of the Financial Accounting Standards Board's (FASB) Accounting Standards Codification Topic 326: Measurement of Credit Losses on Financial Instruments (“ASC 326”) on the Bank’s allowance for credit losses due to the operation of the underlying model; (vi) for any significant credit exposure, borrower-specific adverse developments with respect to the adequacy of cash flows, liquidity or collateral; (vii) the inherent credit risks of lending activities, including risks that could cause changes in the level and direction of loan delinquencies and charge-offs; (viii) adverse economic conditions in general, or specific events such as a pandemic or national or international war, act of conflict or terrorism, and in the ~~Chicago metropolitan area~~markets in ~~particular and in other market areas where~~which we ~~operate~~lend that could result in increased delinquencies in our loan portfolio or a decline in the value of our investment securities and the collateral for our ~~loans; (v)~~loans; (ix) declines in real estate values that adversely impact the value of our loan collateral, ~~OREO,~~other real estate owned ("OREO"), asset dispositions and the level of borrower equity in their ~~investments; (vi) borrowers that experience legal or financial difficulties that we do not currently foresee; (vii)~~investments; (x) results of supervisory monitoring or examinations by regulatory authorities, including the possibility that a regulatory authority could, among other things, require us to increase our allowance for ~~loan~~credit losses or adversely change our loan classifications, write-down assets, reduce credit concentrations or maintain specific capital ~~levels; (viii)~~levels; (xi) changes,

~~Table of Contents~~

disruptions or illiquidity in national or global financial markets; (ix) the credit risks of lending activities, including risks that could cause changes in the level and direction of loan delinquencies and charge-offs or changes in estimates relating to the computation of our allowance for loan losses; (x)markets; (xii) monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve ~~Board; (xi)~~Board; (xiii) factors affecting our ability to retain or access deposits or cost-effective funding, ~~and~~including changes in public confidence, withdrawals of deposits not insured by the ~~impact~~FDIC or the availability of ~~competitors' pricing initiatives on our deposit products; (xii) the impact of new legislation~~other borrowing sources for any reason; (xiv) legislative or regulatory changes ~~including the Dodd-Frank Act and Basel III,~~that have an adverse impact on our products, services, operations and operating ~~expenses; (xiii)~~expenses; (xv) higher federal deposit insurance ~~premiums; (xiv)~~premiums; (xvi) higher than expected overhead, infrastructure and compliance ~~costs; (xv)~~costs; (xvii) changes in accounting principles, policies or ~~guidelines;~~guidelines; (xviii) the effects of any federal government shutdown or failure to enact legislation related to the maximum permitted amount of U.S. Government debt obligations; and ~~(xvi)~~(xix) privacy and cybersecurity risks, including the risks of business interruption and the compromise of confidential customer information resulting from intrusions.

These risks and uncertainties, together with the Risk Factors and other information set forth in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016 and this~~2022, as well as Part II, Items 1A of our subsequent Quarterly ~~Report~~Reports on Form 10-Q, ~~as well as~~and other filings we make with the SEC, should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Forward looking statements speak only as of the date they are made. We do not undertake any obligation to update any forward-looking statement in the future, or to reflect circumstances and events that occur after the date on which the forward-looking statement was made.

Critical Accounting Policies

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and could potentially result in materially different results under different assumptions and conditions. We believe that the most critical accounting policies upon which our financial condition and results of operation depend, and which involve the most complex subjective decisions or assessments, are included in the discussion entitled “Critical Accounting Policies” in Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations,” in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016, and all amendments thereto,~~2022, as filed with the SEC.

Overview

We reported net income of $2.6 million, or $0.21 per common share for the quarter ended March 31, 2023. At March 31, 2023, the Company had total assets of $1.544 billion, total loans of $1.225 billion, total deposits of $1.315 billion and stockholders' equity of $152.4 million.

Total net loans ~~remained~~were stable during the quarter ended March 31, 2023. Total commercial loans and leases decreased by $8.8 million as a $21.6 million decline in ~~the third quarter of 2017 as strong originations~~equipment finance balances was partially offset by a $12.7 million increase in commercial ~~and industrial~~ loans and ~~multi-family~~line of credit balances. Multi-family mortgage and nonresidential real estate loans ~~were offset by higher than expected payoffs in commercial leases and investor one-to-four family residential loans. Total commercial and industrial loans~~ increased by ~~14%~~$10.9 million due to reduced loan prepayment activity during the first quarter of 2023.

Yields on ~~a linked-quarter basis consistent with our recent conversion to a national bank charter. We expect continued growth in commercial and industrial~~ loan originations ~~and multi-family lending consistent with previous quarters and a resumption of growth in commercial lease originations~~were 8.67% in the ~~last~~first quarter of ~~2017.~~

~~We recorded a decrease~~2023, compared to ~~our provision for loan losses~~6.88% in the third quarter of 2017, as recoveries on previously-charged off loans exceeded the additional loan loss provision required due to growth in commercial-related loan balances. Based on the current loan portfolio composition and activity, we expect net interest margin to trend towards 3.30% during the fourth quarter of ~~2017, without regard~~2022, reflecting the growth in commercial finance balances and higher yields on variable-rate lines of credit due to ~~any further~~the increase in the Wall Street Journal Prime Rate.
22
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Cash and interest-bearing deposits totaled $77.0 million as of March 31, 2023, compared to $66.8 million as of December 31, 2022. To provide additional liquidity during a period in which public confidence in the banking industry was uncertain, we sold $43.1 million in U.S. Government Treasury notes in March 2023 at a loss of $454,000. At March 31, 2023, the investment securities portfolio totaled $170.2 million, with an average duration of 1.34 years.
Total deposits were $1.315 billion as of March 31, 2023, a decrease of $59.7 million (4.3%) compared to December 31, 2022. Total FDIC-insured or collateralized public-funds deposits represented 84% of total deposits as of March 31, 2023. The decrease in deposits during the first quarter of 2023 was primarily due to an $18.1 million seasonal decline in balances involving collateralized public funds / tax collection depositors (compared to a $15.1 million seasonal decline in the first quarter of 2022), $19.8 million in disbursements from estate, trust, and family office accounts, $10.9 million in funds transferred from deposit accounts to our Trust Department and approximately $12.5 million in withdrawals from retail accounts due to increased rate competition for retail money market and certificate of deposit accounts.
Total borrowings increased by $35.0 million during the first quarter of 2023. To maintain appropriate asset-liability matching on new Equipment Finance and Nonresidential Real Estate loan originations during the first quarter of 2023, we borrowed $25.0 million in Federal ~~Reserve~~Home Loan Bank term advances with a weighted-average duration of 30 months at a gross interest rate ~~increases.~~

~~Non-interest~~of 4.25% during March 2023.
Net interest income increased by $2.7 million during the quarter ended March 31, 2023, due to higher yields on loans, investment securities and deposits held in other financial institutions. Our net interest margin was 3.66% as of March 31, 2023, compared to 3.59% as of December 31, 2022.
Noninterest income declined by $1.1 million during the quarter ended March 31, 2023. Deposit services and trust/insurance income increased modestly during the first quarter of 2023. In January 2023 we completed the previously announced closings of our Hazel Crest and Naperville branches. During the first quarter of 2023, we recorded a total valuation adjustment of $553,000 based on the pending offers and valuations for these locations. In addition, as noted above, we recorded $454,000 of losses on the sales of investment securities. The combined effect of the investment portfolio sales activity and the valuation adjustment related to the branch office closure activity reduced noninterest income by $0.06 per share on an after-tax basis.
Noninterest expense remained stable. Compensation and benefits increased by $189,000 compared to the fourth quarter of 2022 due ~~primarily~~ to ~~higher deposit-account related fee income, loan fee income~~$239,000 of seasonally-higher payroll tax expense. The increase in compensation expense was partially offset by decreases in information technology and other income. Additional growth in commercial and industrial lending, together with new product development within commercial leasing, multi-family/commercial real estate and trust operations, may contribute to further increases in non-interest income in future quarters.

~~Non-interest expense increased due to increased incentive compensation related to loan originations, and increased occupancy expenses primarily related to real estate tax~~ expenses.
The growth within multi-family lending, healthcare lending and direct commercial lessor finance required us to file additional state franchise tax returns; however, we expect to gain the benefit of lower state income tax rates from certain new markets in future periods. We also recognized additional advance disposition costs as we further accelerated the reduction of our remaining Other Real Estate Owned balances during the third quarter of 2017, with a goal to reduce the balance at December 31, 2017 by 40% or more of the September 30, 2017 balance. Other non-interest expenses remained well-contained.

~~Our~~Company’s ratio of nonperforming loans to total loans increased to 0.72% as of March 31, 2023, compared to 0.13% as of December 31, 2022. In February 2023, we received notice that the timely repayment of a U.S. Government finance transaction may be disrupted. The government equipment finance transaction, with an aggregate principal balance of $8.4 million as of March 31, 2023, was ~~0.19%,~~placed on nonaccrual status pending the required federal contract claim process. Our allowance for ~~commercial~~credit losses increased to 0.81% of total loans as of March 31, 2023 due to a $1.9 million increase in the allowance related to the adoption of ASC 326 and a $85,000 provision in the allowance for credit losses - loans for the ~~ratio was 0.03%, and our~~first quarter of 2023.
The Company’s capital position remained strong, with a Tier 1 leverage ratio of ~~non-performing assets~~10.03% as of March 31, 2023. The Company recorded a net reduction of retained earnings of $1.7 million upon adoption of ASC 326. The Company repurchased 48,604 of its common shares during the quarter ended March 31, 2023. The Company’s tangible book value per common share increased to ~~total assets was 0.37% at September 30, 2017. Our classified assets-to-Tier 1 Capital+ALLL ratio was 4.40%. We expect continued reductions~~$12.00 per share as of ~~the OREO balance and scheduled pending resolutions will further improve our asset quality.~~

March 31, 2023.

23

28

Table of Contents

SELECTED FINANCIAL DATA
The following summary information is derived from the consolidated financial statements of the Company. For additional information, reference is made to the Consolidated Financial Statements of the Company and related notes included elsewhere in this Quarterly Report.

September 30, 2017 December 31, 2016 Change
(Dollars in thousands)
Selected Financial Condition Data:
Total assets $ 1,654,269
$ 1,620,037
$ 34,232
Loans, net 1,335,631
1,312,952
22,679
Securities, at fair value 98,787
107,212
(8,425 )
Other real estate owned, net 3,569
3,895
(326 )
Deposits 1,371,089
1,339,390
31,699
Borrowings 60,928
51,069
9,859
Equity 199,778
204,780
(5,002 )

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 Change 2017 2016 Change
(Dollars in thousands)
Selected Operating Data:
Interest income $ 14,121
$ 12,845
$ 1,276
$ 41,132
$ 38,185
$ 2,947
Interest expense 1,615
1,014
601
4,347
2,822
1,525
Net interest income 12,506
11,831
675
36,785
35,363
1,422
Provision for (recovery of) loan losses (225 ) (525 ) 300
(15 ) 300
(315 )
Net interest income after provision for (recovery of) loan losses 12,731
12,356
375
36,800
35,063
1,737
Noninterest income 1,623
1,637
(14 ) 4,774
4,768
6
Noninterest expense 10,200
9,912
288
31,073
31,348
(275 )
Income before income tax expense 4,154
4,081
73
10,501
8,483
2,018
Income tax expense 594
1,573
(979 ) 2,488
3,240
(752 )
Net income $ 3,560
$ 2,508
$ 1,052
$ 8,013
$ 5,243
$ 2,770

29

~~Table of Contents~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Selected Financial Ratios and Other Data:
Performance Ratios:
Return on assets (ratio of net income to average total assets)⁽¹⁾
0.88 % 0.66 % 0.66 % 0.46 %
Return on equity (ratio of net income to average equity) ⁽¹⁾
7.07
4.86
5.26
3.34
Average equity to average assets 12.40
13.64
12.61
13.84
Net interest rate spread^{(1) (2)}
3.10
3.23
3.12
3.25
Net interest margin ^{(1) (3)}
3.23
3.33
3.24
3.34
Efficiency ratio⁽⁴⁾
72.19
73.60
74.77
78.11
Noninterest expense to average total assets⁽¹⁾
2.51
2.62
2.57
2.76
Average interest-earning assets to average interest-bearing liabilities 131.23
134.36
131.69
135.58
Dividends declared per share $ 0.07
$ 0.05
$ 0.20
$ 0.15
Dividend payout ratio 35.69 % 38.82 % 46.30 % 56.79 %

At September 30, 2017 At December 31, 2016
Asset Quality Ratios:
Nonperforming assets to total assets ⁽⁵⁾
0.37 % 0.44 %
Nonperforming loans to total loans 0.19
0.25
Allowance for loan losses to nonperforming loans 321.46
246.57
Allowance for loan losses to total loans 0.62
0.62
Capital Ratios:
Equity to total assets at end of period 12.08 % 12.64 %
Tier 1 leverage ratio (Bank only) 10.94 % 10.27 %
Other Data:
Number of full-service offices 19
19
Employees (full-time equivalents) 238
246

March 31, 2023

December 31, 2022

Change

(In thousands)

Selected Financial Condition Data:

Total assets
$ 1,544,110 $ 1,575,442 $ (31,332 )
Loans, net
1,225,288 1,226,743 (1,455 )
Securities, at fair value
170,239 210,338 (40,099 )
Deposits
1,315,214 1,374,934 (59,720 )
Borrowings
35,000 — 35,000
Subordinated notes, net of unamortized issuance costs
19,645 19,634 11
Equity
152,359 151,671 688

Three Months Ended

March 31,

2023

2022

$ Change

(In thousands)

Selected Operating Data:

Interest income
$ 16,160 $ 11,418 $ 4,742
Interest expense
2,660 643 2,017
Net interest income
13,500 10,775 2,725
Provision for credit losses
48 276 (228 )
Net interest income after provision for credit losses
13,452 10,499 2,953
Noninterest income
313 1,444 (1,131 )
Noninterest expense
10,292 10,289 3
Income before income taxes
3,473 1,654 1,819
Income tax expense
840 386 454
Net income
$ 2,633 $ 1,268 $ 1,365

Three Months Ended

March 31,

2023

2022

Selected Financial Ratios and Other Data:

Performance Ratios:

Return on assets (ratio of net income to average total assets) ⁽¹⁾
0.68 % 0.30 %
Return on equity (ratio of net income to average equity) ⁽¹⁾
6.96 3.24
Average equity to average assets
9.75 9.39
Net interest rate spread ^{(1) (2)}
3.41 2.66
Net interest margin ^{(1) (3)}
3.66 2.73
Efficiency ratio ⁽⁴⁾
74.51 84.20
Noninterest expense to average total assets ⁽¹⁾
2.65 2.47
Average interest-earning assets to average interest-bearing liabilities
135.85 139.03
Dividends declared per share
$ 0.10 $ 0.10
Dividend payout ratio
48.36 % 104.33 %

At March 31, 2023

At December 31, 2022

Asset Quality Ratios:

Nonperforming assets to total assets ⁽⁵⁾
0.66 % 0.13 %
Nonperforming loans to total loans
0.72 0.13
Allowance for credit losses to nonperforming loans
113.20 494.16
Allowance for credit losses to total loans
0.81 0.66
Capital Ratios:

Equity to total assets at end of period
9.87 % 9.63 %
Tier 1 leverage ratio (Bank only)
10.52 % 10.31 %
Other Data:

Number of full-service offices
18 20
Employees (full-time equivalents)
202 203
⁽¹⁾
~~(1)~~
Ratios annualized.
⁽²⁾
~~(2)~~
The net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities for the period.
⁽³⁾
~~(3)~~
The net interest margin represents net interest income divided by average total interest-earning assets for the period.
⁽⁴⁾
~~(4)~~
The efficiency ratio represents noninterest expense, divided by the sum of net interest income and noninterest income.
⁽⁵⁾
~~(5)~~
Nonperforming assets include nonperforming loans and ~~other real estate owned.~~foreclosed assets.
24
Table of Contents
Comparison of Financial Condition at ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016~~
2022
Total assets ~~increased $34.2~~decreased $31.3 million, or ~~2.1%~~2.0%, to ~~$1.654~~$1.544 billion at ~~September 30, 2017,~~March 31, 2023, from ~~$1.620~~$1.575 billion at December 31, ~~2016.~~2022. The ~~increase~~decrease in total assets was primarily due to ~~increases~~decreases in securities and loans receivable, partially offset by an increase in cash and cash ~~equivalents and loans.~~equivalents. Securities decreased $40.1 million to $170.2 million, due to the sale of $43.1 million of U.S. Treasury Notes. Cash and cash equivalents increased ~~$29.0~~$10.2 million ~~or 30.0%,~~ to ~~$125.7~~$77.0 million at ~~September 30, 2017,~~March 31, 2023, from ~~$96.7~~$66.8 million at December 31, 2016. Loans increased $22.7 million, or 1.7%, to $1.336 billion at September 30, 2017, from $1.313 billion at December 31, 2016. Partially offsetting the increases in cash and cash equivalents and loans was a decrease in securities of $8.4 million, or 7.9%, to $98.8 million at September 30, 2017, from $107.2 million at December 31, 2016.
2022.
Our loan portfolio consists primarily of investment and business loans (multi-family, nonresidential real estate, ~~commercial, construction~~ and ~~land~~commercial loans and ~~commercial~~ leases), which together totaled ~~92.0%~~98.1% of gross loans at ~~September 30, 2017. Commercial~~March 31, 2023. During the three months ended March 31, 2023, multi-family loans increased by ~~$44.0~~$7.3 million, or ~~42.7% and multi-family mortgage~~1.4%, nonresidential real estate loans increased by ~~$33.5~~$3.7 million, or ~~6.2%~~3.1%, ~~during the nine months ended September 30, 2017. Commercial~~and commercial loans and leases decreased ~~$19.4~~by $8.8 million, or ~~5.5%~~1.6%. The increase in multi-family loans was due to $17.1 million of originations, partially offset by payments and payoffs of $10.2 million. The decrease in commercial loans and leases was primarily due to decreases in government, corporate and middle market leases of $8.6 million, $8.9 million and $5.1 million, respectively.
Our primary lending area for regulatory purposes consists of the counties in the State of Illinois where our branch offices are located, and contiguous counties. We currently derive the most significant portion of our revenues from these geographic areas. We also engage in multi-family mortgage lending activities in carefully

30

~~Table of Contents~~

selected metropolitan areas outside our primary lending area, and we engage in certain types of commercial lending and ~~leasing~~commercial equipment finance activities on a nationwide basis. At ~~September 30, 2017, $281.4~~March 31, 2023, $317.6 million ~~or 48.8%~~(58.5%), of our multi-family mortgage loans were in the Chicago, Illinois Metropolitan Statistical ~~Area for Chicago, Illinois; $73.4~~Area; $75.7 million ~~or 12.7%~~(14.0%), were in ~~the Metropolitan Statistical Area for Dallas,~~ Texas; ~~$52.6~~$72.0 million ~~or 9.1%~~(13.3%), were in ~~the Metropolitan Statistical Area for Denver, Colorado; $29.6~~Florida and $28.5 million ~~or 5.1%~~(5.2%), were in ~~the Metropolitan Statistical Area for Tampa, Florida and $17.9 million, or 3.1%, were in the Metropolitan Statistical Area for Minneapolis, Minnesota.~~North Carolina.  This information reflects the location of the collateral ~~but~~for the loan and does not necessarily reflect the location of the ~~borrower.~~
borrowers.  At March 31, 2023, our concentration within the nonresidential real estate portfolio was retail shopping malls of $53.1 million (43.1%); industrial of $16.7 million (13.6%); office buildings of $16.2 million (13.2%); mixed use buildings of $14.0 million (11.4%), and single tenant commercial properties of $6.5 million (5.3%).
Total liabilities ~~increased~~ ~~$39.2~~decreased $32.0 million,, or ~~2.8%~~2.2%, to ~~$1.454~~$1.392 billion at ~~September 30, 2017,~~March 31, 2023, from ~~$1.415~~$1.424 billion at December 31, ~~2016, primarily~~2022, due to ~~increases~~a decrease in ~~interest-bearing NOW accounts and certificates of deposit. The increases were~~total deposits, partially offset by ~~decreases~~the increase in ~~noninterest-bearing accounts and money market accounts.~~borrowings. Total deposits decreased $59.7 million, or 4.3%, to $1.315 billion at March 31, 2023, from $1.375 billion at December 31, 2022. Interest-bearing NOW accounts decreased $40.0 million, or 10.0%, to $360.4 million at March 31, 2023, from $400.4 million at December 31, 2022.  Money market accounts decreased $29.6 million, or 9.8%, to $273.3 million at March 31, 2023, from $302.9 million at December 31, 2022. Savings accounts decreased $3.8 million, or 1.9%, to $200.7 million at March 31, 2023, from $204.5 million at December 31, 2022. Noninterest-bearing demand deposits increased ~~$31.7~~$6.9 million, or 2.4%, to ~~$1.371 billion~~ ~~at September 30, 2017, from $1.339 billion at December 31, 2016. Certificates of deposit increased $44.4 million, or 12.6%, to $396.0~~$287.5 million at ~~September 30, 2017,~~March 31, 2023, from ~~$351.6~~$280.6 million at December 31, ~~2016. Interest-bearing NOW accounts~~2022.  Retail certificates of deposit increased ~~$16.4~~$6.6 million, or ~~6.1%~~3.5%, to ~~$283.4~~$193.1 million at ~~September 30, 2017,~~March 31, 2023, from ~~$267.1~~$186.5 million at December 31, ~~2016. Savings accounts decreased $1.3 million, or 0.8%, to $158.7 million at September 30, 2017, from $160.0 million at December 31, 2016. Noninterest-bearing demand deposits decreased~~ ~~$18.5 million, or~~ ~~7.4%, to~~ ~~$231.0 million~~ ~~at September 30, 2017, from~~ ~~$249.5 million~~ ~~at December 31, 2016. Money market accounts decreased $9.3 million, or 3.0%, to $301.9 million at September 30, 2017, from $311.2 million at December 31, 2016.~~2022. Core deposits (which consists of savings, money market, noninterest-bearing demand and NOW accounts) ~~were~~ ~~71.1%~~ ~~and 73.7%~~represented 85.3% of total deposits at ~~September 30, 2017 and~~March 31, 2023, compared to 86.4% at December 31, ~~2016, respectively.~~
2022.
Total stockholders’ equity was ~~$199.8~~$152.4 million at ~~September 30, 2017,~~March 31, 2023, compared to ~~$204.8~~$151.7 million at December 31, ~~2016.~~2022. The ~~decrease~~increase in total stockholders’ equity ~~during the nine months ended September 30, 2017~~ was primarily due to the ~~combined impact~~net income of $2.6 million for the three months ended March 31, 2023 and a $1.5 million increase, net of tax, of accumulated other comprehensive loss on our securities portfolio, partially offset by our repurchase of ~~614,673~~48,604 shares of our common stock during the three months ended March 31, 2023 at a total cost of ~~$9.1 million,~~$502,000, our declaration and payment of cash dividends totaling ~~$3.7~~$1.3 million during the same period, and the ~~$1.2~~one-time recording of a cumulative effect of change in accounting principle with the adoption of ASC 326 of $1.7 million ~~net impact of stock option exercises. These items were partially offset by the net income of~~ ~~$8.0 million~~ ~~that we recorded for the nine months ended September 30, 2017 and the $1.1 million impact of the ESOP loan repayment that was made~~ on ~~March 29, 2017.~~January 1, 2023.
Operating Results for the Three Months Ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~
2022
Net Income.~~We had net~~ Net income of ~~$3.6 million~~ ~~for the three months ended September 30, 2017, compared to $2.5~~was $2.6 million for the three months ended ~~September 30, 2016.~~March 31, 2023, compared to $1.3 million for the three months ended March 31, 2022. Earnings per basic and fully diluted share of common stock ~~was~~ ~~$0.20~~were $0.21 for the three months ended ~~September 30, 2017,~~March 31, 2023, compared to ~~$0.13~~$0.10 for the three months ended ~~September 30, 2016.~~
March 31, 2022.
Net Interest Income. Net interest income was ~~$12.5~~$13.5 million for the three months ended ~~September 30, 2017, compared to~~ ~~$11.8~~March 31, 2023, and $10.8 million for the ~~same period~~three months ended March 31, 2022. Net interest income increased $2.7 million, primarily due to a $4.7 million increase in ~~2016.~~ interest income.
The increase in net interest income ~~reflected a~~ ~~$1.3 million, or~~ ~~9.9%, increase~~was due in ~~interest income, which was partially offset by a~~ ~~$601,000, or~~ ~~59.3%, increase in interest expense.~~
~~The increase in interest income was primarily attributable~~substantial part to anthe increase in the weighted average ~~balance of~~yield on interest-earning assets. The yield on interest-earning assets increased 150 basis points to 4.39% for the three months ended March 31, 2023, from 2.89% for the three months ended March 31, 2022. The cost of interest-bearing liabilities increased 75 basis points to 0.98% for the three months ended March 31, 2023, from 0.23% for the three months ended March 31, 2022. Total average interest-earning assets ~~increased $121.1~~decreased $106.8 million, or ~~8.6%~~6.7%, to ~~$1.536~~$1.494 billion for the three months ended ~~September 30, 2017,~~March 31, 2023, from $~~1.415~~$1.601 billion for the same period in ~~2016.~~2022. Total average interest-bearing liabilities decreased $51.6 million, or 4.5%, to $1.100 billion for the three months ended March 31, 2023, from $1.152 billion for the same period in 2022. The decrease in interest-bearing liabilities is partially attributable to the decrease in deposits of $60.6 million, partially offset by the increase in FHLB advances in the first quarter of 2023. Our net interest rate spread ~~decreased~~increased by 1375 basis points to ~~3.10%~~3.41% for the three months ended ~~September 30, 2017,~~March 31, 2023, from ~~3.23%~~2.66% for the same period in ~~2016.~~2022, due primarily to an increase in the yield on loans receivable, securities and interest-bearing deposits in other financial institutions. Our net interest margin ~~decreased~~increased by ~~ten~~93 basis points to ~~3.23%~~3.66% for the three months ended ~~September 30, 2017,~~March 31, 2023, from ~~3.33%~~2.73% for the same period in ~~2016. However, the average yield on commercial loans and leases originated~~2022, due to an increase in the ~~third quarter of 2017 was 4.46%, compared to 3.73% for commercial loans and leases originated in the third quarter of 2016. The~~ yield on interest-earning ~~assets increased four basis points to 3.65% for the three months ended September 30, 2017, from 3.61% for the same period in 2016, and the cost of interest-bearing liabilities increased~~ 17 ~~basis points to~~ ~~0.55%~~ ~~for the three months ended September 30, 2017, from~~ ~~0.38%~~ ~~for the same period in 2016.~~

assets.

25

31

Table of Contents

Average Balance Sheets
The following table sets forth average balance sheets, average yields and costs, and certain other information. No tax-equivalent yield adjustments were made, as the effect of these adjustments would not be material. Average balances are daily average balances. Nonaccrual loans are included in the computation of average balances, but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees and expenses and discounts and premiums ~~and purchase accounting adjustments~~ that are amortized or accreted to interest income or ~~expense.~~

For the Three Months Ended September 30,
2017 2016

Average
Outstanding
Balance
Interest
Yield/Rate₍₁₎

Average
Outstanding
Balance
Interest
Yield/Rate₍₁₎
(Dollars in thousands)
Interest-earning assets:
Loans $ 1,331,302
$ 13,345
3.98 % $ 1,225,480
$ 12,388
4.02 %
Securities 108,050
389
1.43
106,904
306
1.14
Stock in FHLBC and FRB 8,290
101
4.83
6,257
10
0.64
Other 88,201
286
1.29
76,095
141
0.74
Total interest-earning assets 1,535,843
14,121
3.65
1,414,736
12,845
3.61
Noninterest-earning assets 88,594
96,739

Total assets $ 1,624,437
$ 1,511,475

Interest-bearing liabilities:
Savings deposits $ 159,464
48
0.12
$ 157,036
43
0.11
Money market accounts 304,553
307
0.40
313,270
243
0.31
NOW accounts 278,389
139
0.20
257,553
95
0.15
Certificates of deposit 369,804
925
0.99
323,076
631
0.78
Total deposits 1,112,210
1,419
0.51
1,050,935
1,012
0.38
Borrowings 58,112
196
1.34
1,981
2
0.40
Total interest-bearing liabilities 1,170,322
1,615
0.55
1,052,916
1,014
0.38
Noninterest-bearing deposits 232,464
233,914

Noninterest-bearing liabilities 20,231
18,408

Total liabilities 1,423,017
1,305,238

Equity 201,420
206,237

Total liabilities and equity $ 1,624,437
$ 1,511,475

Net interest income $ 12,506
$ 11,831

Net interest rate spread ⁽²⁾
3.10 % 3.23 %
Net interest-earning assets⁽³⁾
$ 365,521
$ 361,820

Net interest margin ⁽⁴⁾
3.23 % 3.33 %
Ratio of interest-earning assets to interest-bearing liabilities 131.23 % 134.36 %
expense, however, the Company believes that the effect of these inclusions is not material.

For the Three Months Ended March 31,

2023

2022

Average Outstanding Balance

Interest

Yield/Rate (1)

Average Outstanding Balance

Interest

Yield/Rate (1)

(Dollars in thousands)

Interest-earning Assets:

Loans
$ 1,225,636 $ 14,393 4.76 % $ 1,050,668 $ 10,813 4.17 %
Securities
212,344 1,114 2.13 116,360 299 1.04
Stock in FHLB and FRB
7,490 92 4.98 7,490 85 4.60
Other
48,778 561 4.66 426,522 221 0.21
Total interest-earning assets
1,494,248 16,160 4.39 1,601,040 11,418 2.89
Noninterest-earning assets
59,197 65,046
Total assets
$ 1,553,445 $ 1,666,086
Interest-bearing Liabilities:

Savings deposits
$ 203,547 90 0.18 $ 204,080 31 0.06
Money market accounts
288,195 836 1.18 328,546 115 0.14
NOW accounts
386,509 679 0.71 390,313 132 0.14
Certificates of deposit
188,070 695 1.50 204,030 167 0.33
Total deposits
1,066,321 2,300 0.87 1,126,969 445 0.16
Borrowings and Subordinated notes
33,629 360 4.34 24,595 198 3.26
Total interest-bearing liabilities
1,099,950 2,660 0.98 1,151,564 643 0.23
Noninterest-bearing deposits
273,771 335,385
Noninterest-bearing liabilities
28,307 22,645
Total liabilities
1,402,028 1,509,594
Equity
151,417 156,492
Total liabilities and equity
$ 1,553,445 $ 1,666,086
Net interest income
$ 13,500 $ 10,775
Net interest rate spread ⁽²⁾
3.41 % 2.66 %
Net interest-earning assets ⁽³⁾
$ 394,298 $ 449,476
Net interest margin ⁽⁴⁾
3.66 % 2.73 %
Ratio of interest-earning assets to interest-bearing liabilities
135.85 % 139.03 %
⁽¹⁾
Annualized.
~~(1)~~
⁽²⁾
~~Annualized.~~
~~(2)~~
Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.
⁽³⁾
~~(3)~~
Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.
⁽⁴⁾
~~(4)~~
Net interest margin represents net interest income divided by average total interest-earning assets.

26

32

Table of Contents

Allowance and Provision for ~~Loan~~Credit Losses
~~We establish provisions~~
The ACL is a significant estimate in our unaudited consolidated financial statements, affecting both earnings and capital. The methodology adopted influences, and is influenced by, the Bank’s overall credit risk management processes. The ACL is recorded in accordance with US GAAP to provide an adequate reserve for ~~loan~~expected credit losses ~~which are~~that is reflective of management’s best estimate of what is expected to be collected. All estimates of credit losses should be based on a careful consideration of all significant factors affecting the collectability as of the evaluation date. The ACL is established through the provision for credit loss expense charged to ~~operations in order to maintain the allowance~~income.
The provision for ~~loan losses at a level we consider necessary to absorb probable incurred~~ credit losses in the loan portfolio. In determining the level of the allowance for loan losses, we consider past and current loss experience, evaluations of real estate collateral, current economic conditions, volume and type of lending, adverse situations that may affect a borrower’s ability to repay a loan and the levels of nonperforming and other classified loans. The amount of the allowance is based on estimates and the ultimate losses may vary from such estimates as more information becomes available or events change. We assess the allowance for loan losses on a quarterly basis and make provisions for loan losses in order to maintain the allowance.
A loan balance is classified as a loss and charged-off when it is confirmed that there is no readily apparent source of repayment for the portion of the loan that is classified as loss. Confirmation can occur upon the receipt of updated third-party appraisal valuation information indicating that there is a low probability of repayment upon sale of the collateral, the final disposition of collateral where the net proceeds are insufficient to pay the loan balance in full, our failure to obtain possession of certain consumer-loan collateral within certain time limits specified by applicable federal regulations, the conclusion of legal proceedings where the borrower’s obligation to repay is legally discharged (such as a Chapter 7 bankruptcy proceeding), or when it appears that further formal collection procedures are not likely to result in net proceeds in excess of the costs to collect.
~~We recorded a recovery of loan losses of~~ ~~$225,000~~- loans for the three months ended ~~September 30, 2017,~~March 31, 2023 was $85,000, compared to ~~$525,000~~$276,000 for the ~~same~~corresponding period in ~~2016.~~2022. The Company adopted the ASC 326 on January 1, 2023, and recorded a one-time increase of $1.9 million for the change in accounting principle with the adoption. The provision for ~~or recovery of~~credit losses - loans varies based primarily on forecasted unemployment rates, loan ~~losses is a function of the allowance for loan loss methodology that we use to determine the appropriate level of the allowance for inherent loan losses after~~growth, net charge-offs, ~~have been deducted. The portion of the allowance for loan losses attributable to~~collateral values associated with collateral dependent loans ~~collectively evaluated for impairment increased $252,000, or 3.1%, to~~ ~~$8.4 million~~ ~~at September 30, 2017, from $8.1 million at June 30, 2017.~~and qualitative factors.
There ~~was~~were no ~~reserve~~reserves established for loans individually evaluated ~~for impairment~~at March 31, 2023 or December 31, 2022. Net charge-offs were $89,000 for the three months ended ~~September 30, 2017 or~~March 31, 2023, compared to net charge-offs of $205,000 for the three months ended ~~June 30, 2017. Net recoveries were $477,000 for the three months ended September 30, 2017.~~
March 31, 2022.
The allowance for ~~loan~~credit losses as a percentage of nonperforming loans was ~~321.46%~~113.20% at ~~September 30, 2017,~~March 31, 2023, compared to ~~274.76%~~494.16% at ~~June 30, 2017.~~
December 31, 2022.
Noninterest Income

Three Months Ended
September 30,
2017 2016 Change
(Dollars in thousands)
Deposit service charges and fees $ 584
$ 583
$ 1
Other fee income 523
478
45
Insurance commissions and annuities income 41
53
(12 )
Gain on sale of loans, net 10
38
(28 )
Loan servicing fees 58
66
(8 )
Amortization of servicing assets (27 ) (28 ) 1
Earnings on bank owned life insurance 67
54
13
Trust income 169
167
2
Other 198
226
(28 )
Total noninterest income $ 1,623
$ 1,637
$ (14 )

Three Months Ended

March 31,

2023

2022

Change

(Dollars in thousands)

Deposit service charges and fees
$ 816 $ 781 $ 35
Loan servicing fees
129 101 28
Trust and insurance commissions and annuities income
367 338 29
(Loss) earnings on bank-owned life insurance
(84 ) 28 (112 )
Losses on sales of securities
(454 ) — (454 )
Valuation adjustment on bank premises held-for-sale
(553 ) — (553 )
Other
92 196 (104 )
$ 313 $ 1,444 $ (1,131 )
Noninterest income ~~was~~ ~~$1.6~~decreased $1.1 million, ~~for each of the three month periods ended September 30, 2017 and 2016. Deposit service charges and fees also remained stable at $584,000~~ or 78.3%, to $313,000, for the three months ended ~~September 30, 2017,~~March 31, 2023, compared to ~~$583,000~~$1.4 million for the same period in 2022, due to the sales of investment securities at a loss to improve liquidity and a valuation adjustment that we recorded on two retail branches that we closed in January 2023 to improve operating efficiency. We recorded $454,000 of losses on sales of securities for the three months ended ~~September 30, 2016. Other fee income increased $45,000, or 9.4%, to $523,000~~March 31, 2023; we also recorded a valuation adjustment of $553,000 for the three months ended ~~September 30, 2017, from $478,000 for~~March 31, 2023, at the ~~three months ended September 30, 2016, primarily due~~time of transfer of two of our retail branches to ~~increased debit card fees and other loan fees. Noninterest income for the three months ended September 30, 2017 included a~~ ~~$10,000~~ gain on sale of loans. Earnings on bank owned life insurance increased $13,000, or 24.1%, and trust income increased $2,000, or 1.2%, for the three months ended September 30, 2017. Other income decreased $28,000, or 12.4%, to $198,000 for the three months ended September 30, 2017, compared to $226,000 for the three months ended September 30, 2016.

premises held-for sale.

27

33

Table of Contents

Noninterest Expense

Three Months Ended
September 30,
2017 2016 Change
(Dollars in thousands)
Compensation and benefits $ 5,330
$ 5,315
$ 15
Office occupancy and equipment 1,693
1,487
206
Advertising and public relations 167
144
23
Information technology 638
707
(69 )
Supplies, telephone and postage 337
345
(8 )
Amortization of intangibles 123
129
(6 )
Nonperforming asset management 84
89
(5 )
Loss (gain) on sale other real estate owned 69
(15 ) 84
Valuation adjustments of other real estate owned 227
115
112
Operations of other real estate owned 107
143
(36 )
FDIC insurance premiums 150
238
(88 )
Other 1,275
1,215
60
Total noninterest expense $ 10,200
$ 9,912
$ 288

Three Months Ended

March 31,

2023

2022

Change

(Dollars in thousands)

Compensation and benefits
$ 5,555 $ 5,480 $ 75
Office occupancy and equipment
2,038 2,134 (96 )
Advertising and public relations
190 142 48
Information technology
849 851 (2 )
Professional fees
317 373 (56 )
Supplies, telephone and postage
359 347 12
FDIC insurance premiums
154 116 38
Other
830 846 (16 )
Total noninterest expense
$ 10,292 $ 10,289 $ 3
Noninterest expense ~~increased by~~ ~~$288,000, or~~ ~~2.9%, to~~ ~~$10.2 million~~ ~~for the three months ended September 30, 2017, from~~ ~~$9.9 million~~ for the same period in 2016. Compensation and benefits expense increased $15,000, primarily due to increased accruals for loan origination and business plan performance incentives. Office occupancy and equipment increased $206,000, or 13.9%, to $1.7remained at $10.3 million for the three months ended ~~September 30, 2017,~~March 31, 2023 and 2022. Compensation and benefits increased $75,000, or 1.4%, to $5.6 million for the three months ended March 31, 2023, from ~~$1.5~~$5.5 million for the same period in ~~2016, primarily due to an increase in real estate taxes~~2022.
Income Taxes
We recorded income tax expense of ~~$115,000. Advertising and public relations expense increased $23,000, or 16.0%, to $167,000~~$840,000 for the three months ended ~~September 30, 2017, from $144,000 for the same period in 2016. Information technology expense decreased $69,000, or 9.8%,~~March 31, 2023, compared to ~~$638,000~~$386,000 for the three months ended September 30, 2017, from $707,000 for the same period in 2016. Nonperforming asset management expense decreased $5,000, or 5.6%, to $84,000 for the three months ended September 30, 2017, from $89,000 for the same period in 2016, primarily due to a $39,000 reduction in legal expenses. Valuation adjustments for OREO totaled $227,000 for the three months ended September 30, 2017, compared to $115,000 for the same period in 2016, due to initiatives that we undertook to accelerate OREO dispositions. Other expenses increased $60,000, or 4.9%, to $1.3 million for the three months ended September 30, 2017, from $1.2 million for the same period in 2016, primarily due to increasedMarch 31, 2022. Our combined state ~~tax audit~~ and ~~planning and state franchise tax payments.~~
~~Income Taxes~~
For the three months ended September 30, 2017, we recorded income tax expense of $594,000, compared to $1.6 million for the three months ended September 30, 2016. Our income tax expense was reduced by $879,000 for the quarter due to an increase in the deferred tax asset related to our Illinois net operating loss carryforward. Effective in July 2017, our Illinois income tax rate increased from 7.75% to 9.5%. Ourfederal effective tax rate for the three months ended ~~September 30, 2017~~March 31, 2023 was ~~14.3%~~24.2%, compared to ~~38.5%~~23.3% for the ~~same period~~three months ended March 31, 2022.
Criticized and Classified Assets
The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, including current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. Risk ratings are updated any time the situation warrants. The following table sets forth the criticized and classified loans:

March 31, 2023

December 31, 2022

Quarter Change

(Dollars in thousands)

Criticized - Special Mention:

One-to-four family residential real estate
$ 16 $ 4 $ 12
Commercial loans and leases:

Asset-based and factored receivables
348 873 (525 )
Commercial loans and leases - Equipment finance:

Government
10,468 — 10,468
Corporate - Other
582 644 (62 )
Consumer
5 4 1
$ 11,419 $ 1,525 $ 9,894

Classified - Performing Substandard:

One-to-four family residential real estate
$ 280 $ 327 $ (47 )
Multi-family mortgage
148 — 148
Commercial loans and leases:

Asset-based and factored receivables
3,748 3,815 (67 )
Commercial loans and leases - Equipment finance:

Government
52 52 —
Corporate - Investment-rated
— 130 (130 )
Corporate - Other
46 44 2
Consumer
5 4 1
$ 4,279 $ 4,372 $ (93 )
In February 2023, we received an informal notice of non-renewal of a contract securing the repayment of a software financing transaction in ~~2016.~~

its commercial loan and leasing portfolio with a U.S. Government agency. The transaction had an aggregate principal balance of $10.5 million as of December 31, 2022 with a payment due date of March 25, 2023. We are currently waiting for either an official notification of renewal, or a formal letter of non-renewal pursuant to the underlying federal government contract, from the contracting officer. Given the uncertainty of the receipt of timely payment, we assigned a “Special Mention” credit rating as of March 31, 2023.

28

34

Table of Contents

~~Operating Results for the Nine Months EndedSeptember 30, 2017 and 2016~~
~~Net Income.~~We had net income of $8.0 million for the nine months ended September 30, 2017, compared to $5.2 million for the nine months ended September 30, 2016. The increase in net income reflects an increase in interest income of $2.9 million in 2017 and the fact that our 2016 operating results were adversely impacted by a pre-tax charge off of $1.6 million resulting from our decision to sell three performing loans to a single borrower with a total carrying value of $16.2 million. Our earnings per basic and fully diluted share of common stock were $0.44 for the nine months ended September 30, 2017, compared to $0.27 per basic and fully diluted share for the same period in 2016.
~~Net Interest Income~~. Net interest income was $36.8 million for the nine months ended September 30, 2017, compared to $35.4 million for the same period in 2016. The increase in net interest income reflected a $2.9 million increase in interest income, which was partially offset by a $1.5 million increase in interest expense.
The increase in net interest income was primarily attributable to an increase in the average balance of interest-earning assets, which increased $105.3 million, or 7.4%, to $1.519 billion for the nine months ended September 30, 2017, from $1.414 billion for the same period in 2016. Our net interest rate spread decreased by 13 basis points to 3.12% for the nine months ended September 30, 2017, compared to 3.25% for the same period in 2016. Our net interest margin decreased by ten basis point to 3.24% for the nine months ended September 30, 2017, compared to 3.34% for the same period in 2016. However the average yield on commercial loans and leases originated in the nine months of 2017 was 4.34%, compared to 3.69% for commercial loans and leases originated in the nine months of 2016. The yield on interest-earning assets increased one basis points to 3.62% for the nine months ended September 30, 2017, from 3.61% for the same period in 2016, and the cost of interest-bearing liabilities increased 14 basis points to 0.50% for the nine months ended September 30, 2017, from 0.36% for the same period in 2016.

35

~~Table of Contents~~

~~Average Balance Sheets~~
The following table sets forth average balance sheets, average yields and costs, and certain other information. No tax-equivalent yield adjustments were made, as the effect of these adjustments would not be material. Average balances are daily average balances. Nonaccrual loans are included in the computation of average balances, but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees and expenses, discounts and premiums, purchase accounting adjustments that are amortized or accreted to interest income or expense.

For the Nine Months Ended September 30,
2017 2016

Average
Outstanding
Balance
Interest
Yield/Rate₍₁₎

Average
Outstanding
Balance
Interest
Yield/Rate₍₁₎
(Dollars in thousands)
Interest-earning assets:
Loans $ 1,321,051
$ 39,061
3.95 % $ 1,224,779
$ 36,834
4.02 %
Securities 110,399
1,095
1.33
111,399
927
1.11
Stock in FHLBC and FRB 8,563
301
4.70
6,257
53
1.13
Other 79,258
675
1.14
71,516
371
0.69
Total interest-earning assets 1,519,271
41,132
3.62
1,413,951
38,185
3.61
Noninterest-earning assets 91,438
97,803

Total assets $ 1,610,709
$ 1,511,754

Interest-bearing liabilities:
Savings deposits $ 160,460
138
0.11
$ 158,671
128
0.11
Money market accounts 305,776
886
0.39
319,299
738
0.31
NOW accounts 272,149
395
0.19
251,423
278
0.15
Certificates of deposit 362,346
2,484
0.92
287,074
1,605
0.75
Total deposits 1,100,731
3,903
0.47
1,016,467
2,749
0.36
Borrowings 52,898
444
1.12
26,398
73
0.37
Total interest-bearing liabilities 1,153,629
4,347
0.50
1,042,865
2,822
0.36
Noninterest-bearing deposits 232,662
238,827

Noninterest-bearing liabilities 21,379
20,822

Total liabilities 1,407,670
1,302,514

Equity 203,039
209,240

Total liabilities and equity $ 1,610,709
$ 1,511,754

Net interest income $ 36,785
$ 35,363

Net interest rate spread ⁽²⁾
3.12 % 3.25 %
Net interest-earning assets⁽³⁾
$ 365,642
$ 371,086

Net interest margin ⁽⁴⁾
3.24 % 3.34 %
Ratio of interest-earning assets to interest-bearing liabilities 131.69 % 135.58 %
~~(1)~~ ~~Annualized.~~
~~(2)~~ ~~Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.~~
~~(3)~~ ~~Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.~~
~~(4)~~ ~~Net interest margin represents net interest income divided by average total interest-earning assets.~~

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~~Table of Contents~~

~~Provision for Loan Losses~~
We recorded a recovery of loan losses of $15,000 for the nine months ended September 30, 2017, compared to a provision of $300,000 for the same period in 2016. The portion of the allowance for loan losses attributable to loans collectively evaluated for impairment increased $273,000, or 3.4%, to $8.4 million at September 30, 2017. The reserve established for loans individually evaluated for impairment decreased $26,000 to zero at September 30, 2017.
Net recoveries were $262,000 for the nine months ended September 30, 2017, compared to net charge-offs of $1.7 million for the same period in 2016. Net charge-offs in 2016 included a $1.6 million charge-off resulting from the sale of three performing loans to a single borrower with a total carrying value of $16.2 million in the second quarter of 2016. Although the loans were well-secured and supported by adequate cash flow, the Company concluded that possible future events could increase the risk of a default and subject the Company to significant legal expenses and an extended resolution period. The Company therefore elected to pursue a resolution that would result in a finite, known consequence rather than pursue alternative resolution strategies that presented multiple uncertainties and risks that were difficult to quantify.
~~The allowance for loan losses as a percentage of nonperforming loans was 321.46% at September 30, 2017, compared to 246.57% at December 31, 2016.~~
~~Noninterest Income~~

Nine Months Ended
September 30,
2017 2016 Change
(Dollars in thousands)
Deposit service charges and fees $ 1,682
$ 1,691
$ (9 )
Other fee income 1,494
1,478
16
Insurance commissions and annuities income 170
180
(10 )
Gain on sale of loans, net 70
59
11
Gain on sales of securities —
46
(46 )
Loan servicing fees 188
214
(26 )
Amortization of servicing assets (86 ) (96 ) 10
Earnings on bank owned life insurance 196
151
45
Trust income 534
492
42
Other 526
553
(27 )
Total noninterest income $ 4,774
$ 4,768
$ 6
Noninterest income remained constant at $4.8 million for the nine month periods ended September 30, 2017 and 2016. Other fee income increased $16,000, or 1.1%. Noninterest income for the nine months ended September 30, 2017 included a $70,000 gain on sale of loans, compared to a $59,000 gain on sale of loans for the same period in 2016. Loan servicing fees decreased $26,000 compared to the same nine month period in 2016 due to a decrease in the balance of loans serviced for others.

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~~Table of Contents~~

~~Noninterest Expense~~

Nine Months Ended
September 30,
2017 2016 Change
(Dollars in thousands)
Compensation and benefits $ 16,792
$ 17,021
$ (229 )
Office occupancy and equipment 4,914
4,769
145
Advertising and public relations 807
618
189
Information technology 2,070
2,130
(60 )
Supplies, telephone and postage 1,027
1,018
9
Amortization of intangibles 374
394
(20 )
Nonperforming asset management 215
300
(85 )
Loss (gain) on sale other real estate owned 100
(15 ) 115
Valuation adjustments of other real estate owned 301
244
57
Operations of other real estate owned 460
539
(79 )
FDIC insurance premiums 462
691
(229 )
Other 3,551
3,639
(88 )
Total noninterest expense $ 31,073
$ 31,348
$ (275 )
Noninterest expense decreased by $275,000, or 0.9%, to $31.1 million for the nine months ended September 30, 2017, from $31.3 million for the same period in 2016. Compensation and benefits expense decreased $229,000, or 1.3%, due in substantial part to a decrease of $590,000 in stock-based compensation expense for the nine months ended September 30, 2017, which was partially offset by increased accruals for loan origination and business plan performance incentives. In the first quarter of 2017, we recorded a one-time, non-cash, non-tax deductible equity compensation expense of $1.1 million related to the termination of the Bank's ESOP and the repayment of the ESOP’s Share Acquisition Loan. ESOP and equity-based compensation expense for the nine months ended September 30, 2016 was $1.7 million. Expenses for office occupancy and equipment increased $145,000, or 3.0%, primarily due to increased real estate taxes and increased rent expense for the lending operations in selected metropolitan areas outside our primary lending area. Operations of OREO decreased $79,000, or 14.7%, due to decreases in legal expense and maintenance and repairs expense, partially offset by a decrease of $80,000 in rental income. Other expenses decreased $88,000, or 2.4%, primarily due to reductions in loss due to fraud in the nine months ended September 30, 2017 and the fact that we recorded an expense of $150,000 in the nine months ended September 30, 2016 for a mortgage representation and warranty reserve for mortgage loans sold and serviced for others.
~~Income Taxes~~
For the nine months ended September 30, 2017, we recorded $2.5 million of income tax expense, compared to $3.2 million for the nine months ended September 30, 2016. Our effective tax rate for the nine months ended September 30, 2017 was 23.7%, compared to 38.2% for the same period in 2016. Our effective tax rate for the nine months ended September 30, 2017 included the impact of the stock option exercises and the one-time, non-cash, non-tax deductible equity compensation expense relating to the termination of the ESOP. In addition, our income tax expense was reduced by $879,000 due to an increase in the deferred tax asset related to our Illinois net operating loss carryforward. Effective in July 2017, our Illinois income tax rate increased from 7.75% to 9.5%.
Nonperforming Loans and Assets
We review loans on a regular basis, and generally place loans on nonaccrual status when either principal or interest is 90 days or more past due. In addition, ~~the Company places~~we place loans on nonaccrual status when we do not expect to receive full payment of interest or principal. Interest accrued and unpaid at the time a loan is placed on nonaccrual status is reversed from interest income. Interest payments received on nonaccrual loans are recognized in accordance with our significant accounting policies. Once a loan is placed on nonaccrual status, the borrower must generally demonstrate at least six consecutive months of contractual payment performance before the loan is eligible to return to accrual status. We may have loans classified as 90 days or more delinquent and still accruing. Generally, we do not utilize this category of loan classification unless: (1) the loan is repaid in full shortly after the period end date; (2) the loan is well secured and there are no asserted or pending legal barriers to its collection; or (3) the borrower has remitted all scheduled payments and is otherwise in substantial compliance with the terms of the loan, but the processing of loan payments actually

38

~~Table of Contents~~

received or the renewal of the loan has not occurred for administrative reasons. At ~~September 30, 2017,~~March 31, 2023, we had no loans in this category.
We typically obtain new third–party appraisals or collateral valuations when we place a loan on nonaccrual status, conduct impairment testing or conduct a TDR analysis unless the existing valuation information for the collateral is sufficiently current to comply with the requirements of our Appraisal and Collateral Valuation Policy (“ACV Policy”). We also obtain new third–party appraisals or collateral valuations when the judicial foreclosure process concludes with respect to real estate collateral, and when we otherwise acquire actual or constructive title to real estate collateral. In addition to third–party appraisals, we use updated valuation information based on Multiple Listing Service data, broker opinions of value, actual sales prices of similar assets sold by us and approved sales prices in response to offers to purchase similar assets owned by us to provide interim valuation information for consolidated financial statement and management purposes. Our ACV Policy establishes the maximum useful life of a real estate appraisal at 18 months. Because appraisals and updated valuations utilize historical or “ask–side” data in reaching valuation conclusions, the appraised or updated valuation may or may not reflect the actual sales price that we will receive at the time of sale.
Real estate appraisals may include up to three approaches to value: the sales comparison approach, the income approach (for income-producing property) and the cost approach. Not all appraisals utilize all three approaches. Depending on the nature of the collateral and market conditions, we may emphasize one approach over another in determining the fair value of real estate collateral. Appraisals may also contain different estimates of value based on the level of occupancy or planned future improvements. “As-is” valuations represent an estimate of value based on current market conditions with no changes to the use or condition of the real estate collateral. “As-stabilized” or “as-completed” valuations assume the real estate collateral will be improved to a stated standard or achieve its highest and best use in terms of occupancy. “As-stabilized” or “as-completed” valuations may be subject to a present value adjustment for market conditions or the schedule of improvements.
As part of the asset classification process, we develop an exit strategy for real estate collateral or OREO by assessing overall market conditions, the current use and condition of the asset, and its highest and best use. For most income–producing real estate, we believe that investors value most highly a stable income stream from the asset; consequently, we perform a comparative evaluation to determine whether conducting a sale on an “as–is”, “as–stabilized” or “as–completed” basis is most likely to produce the highest net realizable value. If we determine that the “as–stabilized” or “as–completed” basis is appropriate, we then complete the necessary improvements or tenant stabilization tasks, with the applicable time value discount and improvement expenses incorporated into our estimates of the expected costs to sell. As of September 30, 2017, substantially all impaired real estate loan collateral and OREO were valued on an “as–is basis.”
Estimates of the net realizable value of real estate collateral also include a deduction for the expected costs to sell the collateral or such other deductions from the cash flows resulting from the operation and liquidation of the asset as are appropriate. For most real estate collateral subject to the judicial foreclosure process, we generally apply a 10.0% deduction to the value of the asset to determine the expected costs to sell the asset. This estimate includes one year of real estate taxes, sales commissions and miscellaneous repair and closing costs. If we receive a purchase offer that requires unbudgeted repairs, or if the expected resolution period for the asset exceeds one year, we then include, on a case-by-case basis, the costs of the additional real estate taxes and repairs and any other material holding costs in the expected costs to sell the collateral. For OREO, we generally apply a 7.0% deduction to determine the expected costs to sell, as expenses for real estate taxes and repairs are expensed when incurred.

39

~~Table of Contents~~

~~Nonperforming Assets Summary~~
The following table ~~below~~ sets forth the amounts and categories of our nonperforming loans and nonperforming ~~assets.~~

September 30, 2017 June 30, 2017 December 31, 2016 Quarter Change Nine Month Change
(Dollars in thousands)
Nonaccrual loans:
One-to-four family residential real estate $ 2,234
$ 2,585
$ 2,851
$ (351 ) $ (617 )
Multi-family mortgage 371
371
185
—
186
Nonresidential real estate —
—
260
—
(260 )
2,605
2,956
3,296
(351 ) (691 )
Other real estate owned:
One-to-four family residential 1,748
1,946
1,565
(198 ) 183
Multi-family mortgage —
357
370
(357 ) (370 )
Nonresidential real estate 1,551
1,736
1,066
(185 ) 485
Land 270
857
894
(587 ) (624 )
3,569
4,896
3,895
(1,327 ) (326 )
Total nonperforming assets $ 6,174
$ 7,852
$ 7,191
$ (1,678 ) $ (1,017 )
Ratios:
Nonperforming loans to total loans 0.19 % 0.22 % 0.25 %
Nonperforming assets to total assets 0.37
0.48
0.44

assets:

March 31, 2023

December 31, 2022

Quarter Change

(Dollars in thousands)

Nonaccrual loans:

One-to-four family residential real estate
$ 55 $ 92 $ (37 )
Commercial loans and leases - Equipment finance:

Government
8,420 — 8,420
Corporate - Investment-rated
3 — 3
Corporate - Other
— 331 (331 )
Middle market
306 891 (585 )
Small ticket
78 88 (10 )
Consumer
— 5 (5 )
8,862 1,407 7,455
Loans past due over 90 days, still accruing
— 238 (238 )

Foreclosed assets:

Foreclosed assets
472 472 —
Other foreclosed assets
921 4 917
1,393 476 917

Total nonperforming assets
$ 10,255 $ 2,121 $ 8,134

Ratios:

Allowance for credit losses to total loans
0.81 % 0.66 %
Allowance for credit losses to nonperforming loans
113.20 494.16
Nonperforming loans to total loans
0.72 0.13
Nonperforming assets to total assets
0.66 0.13
Nonaccrual loans to total loans
0.72 0.11
Nonaccrual loans to total assets
0.57 0.09
Nonperforming Assets
Nonperforming assets ~~totaled $6.2~~increased $8.1 million~~, $7.9 million, and $7.2~~ to $10.3 million at ~~September 30, 2017, June 30, 2017 and~~March 31, 2023��from $2.1 million at December 31, 2016, respectively. Nonperforming assets decreased $1.7 million, during the three months ended September 30, 2017. Although we experience occasional isolated instances of new nonaccrual loans, we believe that continuing our aggressive resolution posture will maintain the trends favoring very strong asset quality.
~~Five residential, one multi-family loan~~2022. Vehicles and ~~two nonresidential real estate loans~~small construction equipment collateral repossessed in connection with ~~an aggregate book balance of $2.0 million~~equipment finance leases were transferred from nonaccrual loans to ~~OREO~~other foreclosed assets during the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2023.
In February 2023, we received a formal notice of non-renewal of a contract securing the repayment of a software financing transaction in its commercial loan and leases portfolio with a U.S. Government military department. The transaction had an aggregate principal balance of $8.4 million as of December 31, 2022. We ~~continue to~~reviewed the financing transaction with outside counsel with experience ~~modest quantities~~in enforcing U.S. government contracts and related claims. Based on counsel’s evaluation, we believe that we have meritorious claims for recovery of ~~defaults~~the contract amounts due under the federal Contract Disputes Act. In addition, depending on ~~residential real estate loans principally~~the specific circumstances, there may also be additional claims for recovery from the prime contractor and software vendor. Accordingly, there was no provision made for an allowance for credit losses as of March 31, 2023; however, due ~~either~~ to the ~~borrower’s personal financial condition or deteriorated collateral value.~~formal confirmation of non-renewal of the federal contract and the expected duration of the claims process, we placed the credit exposure on nonaccrual status as of March 31, 2023.
29
Table of Contents
Liquidity and Capital Resources
Liquidity. The overall objective of our liquidity management is to ensure the availability of sufficient cash funds to meet all financial commitments and to take advantage of investment opportunities. We manage liquidity in order to meet deposit withdrawals on demand or at contractual maturity, to repay borrowings as they mature, and to fund new loans and investments as opportunities arise.
Our primary sources of funds are deposits, principal and interest payments on loans and securities, and, to a lesser extent, wholesale borrowings, the proceeds from maturing securities and short-term investments, ~~and the proceeds from~~ the sales of loans and securities and lease payments. The scheduled amortization of loans and securities, as well as proceeds from borrowings, are predictable sources of funds. Other funding sources, however, such as deposit inflows, mortgage prepayments and mortgage loan sales are greatly influenced by market interest rates, economic conditions and competition. We anticipate that we will have sufficient funds available to meet current loan commitments and lines of credit and maturing certificates of deposit that are not renewed or extended. We generally remain fully invested and utilize ~~FHLBC~~FHLB advances as an additional ~~sources~~source of funds. We had ~~$60.0~~$35.0 million of ~~FHLBC~~FHLB advances outstanding at ~~September 30, 2017~~March 31, 2023 and ~~$50.0 million~~none at December 31, ~~2016.~~
2022, respectively.
The Company is a separate legal entity from BankFinancial, NA. The Company must provide for its own liquidity to pay any dividends to its stockholders and to repurchase shares of its common stock, and for other corporate purposes. The Company's primary source of liquidity is dividend payments it receives from the Bank. The Bank's ability to pay dividends to the Company is subject to regulatory limitations. The Company completed the issuance of $20.0 million of subordinated notes in 2021, at a rate of 3.75% maturing on May 15, 2031.  At March 31, 2023, the Company (on an unconsolidated, stand-alone basis) had liquid assets of $11.8 million. In 2020, the Company obtained a $5.0 million unsecured line of credit with a correspondent bank to provide a secondary source of liquidity. Interest is payable at a rate of the Prime rate minus 0.50%.  The line of credit has been extended since its original maturity date and the current maturity date is March 29, 2024. The line of credit had no outstanding balance at March 31, 2023.
As of ~~September 30, 2017,~~March 31, 2023, we were not aware of any known trends, events or uncertainties that had or were reasonably likely to have a material adverse impact on our liquidity. As of ~~September 30, 2017,~~March 31, 2023, we had no other material commitments for capital expenditures.

40

~~Table of Contents~~

Capital Management - Bank. The overall objectives of our capital management are to ensure the availability of sufficient capital to support loan, deposit and other asset and liability growth opportunities and to maintain sufficient capital to absorb unforeseen losses or write-downs that are inherent in the business risks associated with the banking industry. We seek to balance the need for higher capital levels to address such unforeseen risks and the goal to achieve an adequate return on the capital invested by our stockholders.
The Bank ~~and the Company are~~is subject to regulatory capital requirements administered by the federal banking agencies. The capital adequacy guidelines and ~~additionally for banks,~~ prompt corrective action ~~regulations,~~regulation, involve the quantitative measurement of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. The failure to meet minimum capital requirements can result in regulatory actions. The final rules implementing Basel Committee on Banking Supervision's capital guidelines for U.S. banks (Basel III rules) became effective for the Company on January 1, 2015, with full compliance with all of the requirements being phased in over a multi-year schedule, and fully phased in by January 1, 2019. The net unrealized gain or loss on ~~available for sale~~available-for-sale securities is not included in computing regulatory capital.
The federal banking agencies have developed a “Community Bank Leverage Ratio” (the ratio of a bank’s tangible equity capital to average total consolidated assets) for financial institutions with assets of less than $10 billion. A “qualifying community bank” that exceeds this ratio will be deemed to be in compliance with all other capital and leverage requirements, including the capital requirements to be considered “well capitalized” under Prompt Corrective Action statutes. The federal banking agencies may consider a financial institution’s risk profile when evaluating whether it qualifies as a community bank for purposes of the capital ratio requirement. The federal banking agencies must set the minimum capital for the new Community Bank Leverage Ratio at not less than 8% and not more than 10%. A banking organization that had a leverage ratio of 9% or greater and met certain other criteria could elect to use the Community Bank Leverage Ratio framework. A financial institution can elect to be subject to this new definition, and opt-out of this new definition, at any time. As a qualifying community bank, we elected to be subject to this definition beginning in the second quarter of 2020.   As of March 31, 2023, the Bank's Community Bank Leverage Ratio was 10.52%.
Prompt corrective action regulations provide five classifications: well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If only adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. As
30
Table of September 30, 2017 and December 31, 2016, the OCC categorized the Bank as well–capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since those notifications that management believes have changed the institution’s well–capitalized status.Contents
The Company and the Bank have each adopted Regulatory Capital ~~Plans~~Policies that ~~require the Bank to maintain~~target a Tier 1 leverage ratio of at least 7.5%~~, 7.0% for common equity tier 1 captial~~ and a total risk-based capital ratio of at least 10.5% ~~(including~~at the ~~Capital Conservation Buffer ("CCB")).~~Bank. The minimum capital ratios set forth in the Regulatory Capital ~~Plans~~Policies will be increased ~~or decreased~~ and other minimum capital requirements will be established if and as necessary. In accordance with the Regulatory Capital ~~Plans, neither the Company nor~~Policies, the Bank will not pursue any acquisition or growth opportunity, declare any dividend or conduct any stock repurchase that would cause the Bank's total risk-based capital ratio and/or its Tier 1 leverage ratio to fall below the ~~established~~targeted minimum capital levels or the capital levels required for capital adequacy plus the ~~CCB.~~capital conservation buffer (“CCB”). The minimum CCB ~~at September 30, 2017~~ is ~~1.25% and will increase 0.625% annually through 2019 to~~ 2.5%. ~~In addition, the Company will continue to maintain its ability to serve as a source~~As of ~~financial strength to~~March 31, 2023 the Bank ~~by holding at least $5.0 million of cash or liquid assets~~was well-capitalized under the regulatory framework for ~~that purpose. As of September 30, 2017, the Bank and the Company were well-capitalized, with all capital ratios exceeding the well-capitalized requirement.~~prompt corrective action. There are no conditions or events that management believes have changed the Bank’s prompt corrective action capitalization category.
The Bank is subject to regulatory restrictions on the amount of dividends it may declare and pay to the Company without prior regulatory approval, and to regulatory notification requirements for dividends that do not require prior regulatory approval.

41

~~Table of Contents~~

Actual and required capital amounts and ratios ~~were:~~

Actual Required for Capital Adequacy Purposes To be Well-Capitalized under Prompt Corrective Action Provisions
Amount Ratio Amount Ratio Amount Ratio
(Dollars in thousands)
September 30, 2017
Total capital (to risk-weighted assets):
Consolidated $ 191,058
16.43 % $ 93,011
8.00 % N/A N/A
BankFinancial, NA 184,213
15.85
92,998
8.00
$ 116,247
10.00 %
Tier 1 (core) capital (to risk-weighted assets):
Consolidated 182,683
15.71
69,758
6.00
N/A N/A
BankFinancial, NA 175,838
15.13
69,748
6.00
92,998
8.00
Common Tier 1 (CET1)
Consolidated 182,683
15.71
52,319
4.50
N/A N/A
BankFinancial, NA 175,838
15.13
52,311
4.50
75,561
6.50
Tier 1 (core) capital (to adjusted average total assets):
Consolidated 182,683
11.36
64,310
4.00
N/A N/A
BankFinancial, NA 175,838
10.94
64,306
4.00
80,382
5.00

Actual Required for Capital Adequacy Purposes To be Well-Capitalized under Prompt Corrective Action Provisions
Amount Ratio Amount Ratio Amount Ratio
(Dollars in thousands)
December 31, 2016
Total capital (to risk-weighted assets):
Consolidated $ 193,845
16.96 % $ 91,414
8.00 % N/A N/A
BankFinancial, NA 168,113
14.72
91,386
8.00
$ 114,232
10.00 %
Tier 1 (core) capital (to risk-weighted assets):
Consolidated 185,718
16.25
68,560
6.00
N/A N/A
BankFinancial, NA 159,986
14.01
68,539
6.00
91,386
8.00
Common Tier 1 (CET1)
Consolidated 185,718
16.25
51,420
4.50
N/A N/A
BankFinancial, NA 159,986
14.01
51,404
4.50
74,251
6.50
Tier 1 (core) capital (to adjusted average total assets):
Consolidated 185,718
11.92
62,306
4.00
N/A N/A
BankFinancial, NA 159,986
10.27
62,303
4.00
77,879
5.00
~~Capital Management - Company.~~ Total stockholders’ equity was $199.8 million at September 30, 2017, compared to $204.8 million at December 31, 2016. The decrease in total stockholders’ equity was due to the combined impact of our repurchase of 614,673 shares of our common stock during the first nine months of 2017 at a total cost of $9.1 million, our declaration and payment of cash dividends totaling $3.7 million during the same period, and the $1.2 million net impact of stock option exercises. These items were partially offset by the net income of $8.0 million that we recorded for the ~~nine months ended September 30, 2017 and the $1.1 million impact of the ESOP loan repayment on March 29, 2017.~~
Bank were:

Actual

Required for Capital Adequacy Purposes

Amount

Ratio

Amount

Ratio

(Dollars in thousands)

March 31, 2023

Community Bank Leverage Ratio
$ 163,249 10.52 % $ 139,676 9.00 %

December 31, 2022

Community Bank Leverage Ratio
$ 165,252 10.31 % $ 144,288 9.00 %
Quarterly Cash Dividends. The Company declared cash dividends of ~~$0.20 and $0.15~~$0.10 per share for each of the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 and ~~September 30, 2016, respectively.~~

42

~~Table of Contents~~

~~Stock Repurchase Program.~~ During the quarter ending September 30, 2017, the Company repurchased 166,237 shares of its common stock. As of September 30, 2017, the Company had repurchased 2,482,879 shares of its common stock out of the 2,830,755 shares of common stock authorized under the share repurchase authorizations. The Board increased the share repurchase authorization by 250,000 shares to its current level on July 27, 2017. The share repurchase authorization will expire on DecemberMarch 31, ~~2017 unless further extended by the Board.~~2022.
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Qualitative Analysis. A significant form of market risk is interest rate risk. Interest rate risk results from timing differences in the maturity or repricing of our assets, liabilities and off balance sheet contracts (i.e., forward loan commitments), the effect of loan prepayments and deposit withdrawals, the difference in the behavior of lending and funding rates arising from the use of different indices and “yield curve risk” arising from changing rate relationships across the spectrum of maturities for constant or variable credit risk investments. In addition to directly affecting net interest income, changes in market interest rates can also affect the amount of new loan originations, the ability of borrowers to repay variable rate loans, the volume of loan prepayments and refinancings, the carrying value of investment securities classified as available-for-sale and the flow and mix of deposits.
The general objective of our interest rate risk management is to determine the appropriate level of risk given our business strategy and then manage that risk in a manner that is consistent with our policy to reduce, to the extent possible, the exposure of our net interest income to changes in market interest rates. Our Asset/Liability Management Committee (“ALCO”), which consists of certain members of senior management, evaluates the interest rate risk inherent in certain assets and liabilities, our operating environment and capital and liquidity requirements, and modifies our lending, investing and deposit gathering strategies accordingly. The Board of Directors then reviews the ALCO’s activities and strategies, the effect of those strategies on our net interest margin, and the effect that changes in market interest rates would have on the economic value of our loan and securities portfolios as well as the intrinsic value of our deposits and borrowings, and reports to the full Board of Directors.
We actively evaluate interest rate risk in connection with our lending, investing and deposit activities. In an effort to better manage ~~interest-rate~~interest rate risk, we have de-emphasized the origination of residential mortgage loans, and have increased our emphasis on the origination of nonresidential real estate loans, multi-family mortgage loans, and commercial loans and commercial leases. In addition, depending on market interest rates and our capital and liquidity position, we generally sell all or a portion of our longer-term, fixed-rate residential loans, and usually on a servicing-retained basis. Further, we primarily invest in shorter-duration securities, which generally have lower yields compared to longer-term investments. Shortening the average maturity of our interest-earning assets by increasing our investments in shorter-term loans and securities, as well as loans with variable rates of interest, helps to better match the maturities and interest rates of our assets and liabilities, thereby reducing the exposure of our net interest income to changes in market interest rates. Finally, we have classified all of our investment portfolio as available-for-sale so as to provide flexibility in liquidity management.
We utilize a combination of analyses to monitor the Bank’s exposure to changes in interest rates. The economic value of equity analysis is a model that estimates the change in net portfolio value (“NPV”) over a range of interest rate scenarios. NPV is the discounted present value of expected cash flows from assets, liabilities and ~~off-balance sheet~~off-balance-sheet contracts. In calculating changes in NPV, we assume estimated loan prepayment rates, reinvestment rates and deposit decay rates that seem most likely based on historical experience during prior interest rate changes.
31
Table of Contents
Our net interest income analysis utilizes the data derived from the dynamic GAP analysis, described below, and applies several additional elements, including actual interest rate indices and margins, contractual limitations such as interest rate floors and caps and the U.S. Treasury yield curve as of the balance sheet date. In addition, we apply consistent parallel yield curve shifts (in both directions) to determine possible changes in net interest income if the theoretical yield curve shifts occurred instantaneously. Net interest income analysis also adjusts the dynamic GAP repricing analysis based on changes in prepayment rates resulting from the parallel yield curve shifts.
Our dynamic GAP analysis determines the relative balance between the repricing of assets and liabilities over multiple periods of time (ranging from overnight to five years). Dynamic GAP analysis includes expected cash flows from loans and mortgage-backed securities, applying prepayment rates based on the differential between the current interest rate and the market interest rate for each loan and security type. This analysis identifies mismatches in the timing of asset and liability repricing but does not necessarily provide an accurate indicator of interest rate risk because it omits the factors incorporated into the net interest income analysis.

43

~~Table of Contents~~

Quantitative Analysis. The following table sets forth, as of ~~September 30, 2017,~~March 31, 2023, the estimated changes in the Bank’s NPV and net interest income that would result from the designated instantaneous parallel shift in the U.S. Treasury yield curve. Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied upon as indicative of actual results.

Estimated Decrease
in NPV

Increase (Decrease) in Estimated
Net Interest Income
Change in Interest Rates (basis points) Amount Percent Amount Percent
(Dollars in thousands)
+400 $ (19,288 ) (7.68 )% $ 4,055
7.97 %
+300 (6,644 ) (2.65 ) 3,169
6.23
+200 1,771
0.71
2,293
4.51
+100 6,259
2.49
1,231
2.42
0
-25 4,021
1.60
(791 ) (1.55 )

Estimated Increase (Decrease) in NPV

Increase (Decrease) in Estimated Net Interest Income

Change in Interest Rates (basis points)

Amount

Percent

Amount

Percent

(Dollars in thousands)

+400
$ (38,947 ) (16.49 )% $ 1,815 3.18 %
+300
(22,132 ) (9.37 ) 1,467 2.57
+200
(8,562 ) (3.62 ) 1,133 1.98
+100
(2,224 ) (0.94 ) 705 1.23
0
-100 1,306 0.55 127 0.22
-200 (8,463 ) (3.58 ) (1,171 ) (2.05 )
-300 (26,832 ) (11.36 ) (3,710 ) (6.50 )
-400 (48,705 ) (20.62 ) (6,661 ) (11.67 )
The table set forth above indicates that at ~~September 30, 2017,~~March 31, 2023, in the event of an immediate 25200 basis point decrease in interest rates, the Bank would be expected to experience a ~~1.60%~~3.58% decrease in NPV and a ~~$791,000~~$1.2 million decrease in net interest income. In the event of an immediate 200 basis point increase in interest rates, the Bank would be expected to experience a ~~0.71%~~ ~~increase~~3.62% decrease in NPV and a ~~$2.3~~$1.1 million increase in net interest income. This data does not reflect any actions that we may undertake in response to changes in interest rates, such as changes in rates paid on certain deposit accounts based on local competitive factors, which could reduce the actual impact on NPV and net interest income, if any.
Certain shortcomings are inherent in the methodology used in the above interest rate risk measurements. Modeling changes in NPV and net interest income requires that we make certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. The NPV and net interest income table presented above assumes that the composition of our interest-rate-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and, accordingly, the data does not reflect any actions that we may undertake in response to changes in interest rates, such as changes in rates paid on certain deposit accounts based on local competitive factors. The table also assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration to maturity or the repricing characteristics of specific assets and liabilities. Because of the shortcomings mentioned above, management considers many additional factors such as projected changes in loan and deposit balances and various projected forward interest rate scenarios when evaluating strategies for managing interest rate risk. Accordingly, although the NPV and net interest income table provides an indication of our sensitivity to interest rate changes at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our net interest income and will differ from actual results.

ITEM 4.
CONTROLS AND PROCEDURES
An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chairman, Chief Executive Officer and President and the Executive Vice President and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of ~~September 30, 2017.~~March 31, 2023. Based on that evaluation, the Company’s management, including the Chairman, Chief Executive Officer, and President and the Executive Vice President and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective.
During the quarter ended ~~September 30, 2017,~~March 31, 2023, there have been no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

32

44

Table of Contents

PART II
ITEM 1.
LEGAL PROCEEDINGS
The Company and its subsidiaries are subject to various legal actions arising in the normal course of business. In the opinion of management, based on currently available information, the resolution of these legal actions is not expected to have a material adverse effect on the Company’s financial condition or results of operations
ITEM 1A.
RISK FACTORS
In addition to the other information contained in this Quarterly Report on Form 10-Q, the following risk factors represent material updates and its subsidiaries are subject to various legal actions arising in the normal course of business. In the opinion of management, based on currently available information, the resolution of these legal actions is not expected to have a material adverse effect on the Company’s results of operations.
~~ITEM 1A.~~ ~~RISK FACTORS~~
~~There have been no material changes~~additions to the risk factors previously disclosed in our Annual Report on Form 10-K for the ~~Company's filings~~year ended December 31, 2022 as filed with the Securities and Exchange Commission. Additional risks not presently known to us, or that we currently deem immaterial, may also adversely affect our business, financial condition or results of operations. Further, to the extent that any of the information contained in this Quarterly Report on Form 10-Q constitutes forward-looking statements, the risk factors set forth below also are cautionary statements identifying important factors that could cause our actual results to differ materially from those expressed in any forward-looking statements made by or on behalf of us.
Our financial condition, results of operation and stock price may be negatively impacted by unrelated bank failures and negative depositor confidence in depository institutions.
Recently, certain large financial institutions with extremely high concentrations of uninsured customer deposits were closed and resolved by state and federal regulatory authorities. These bank failures led to volatility and declines in the market for bank stocks and questions about depositor confidence in depository institutions. These events have led to a greater focus by institutions, investors and regulators on the on-balance sheet liquidity of and funding sources for financial institutions, the composition of its deposits, including the amount of uninsured deposits, the amount of accumulated other comprehensive loss, capital levels and interest rate risk management. Notwithstanding our efforts to promote deposit insurance coverage with our customers and otherwise effectively manage our liquidity, deposit portfolio retention and other related matters, our financial condition, results of operation and stock price may be adversely affected by future negative events within the banking sector and adverse customer or investor responses to such events.
Material adverse changes to our deposit portfolio could adversely affect our financial condition and results of operation, and result in regulatory limits being placed upon us.
We must maintain sufficient funds to respond to the needs of depositors and borrowers. Deposits have traditionally been our primary source of funds for use in lending and investment activities. We also receive funds from loan repayments, investment maturities and income on other interest-earning assets. While we emphasize the generation of low-cost core deposits as a source of funding, there is strong competition for such deposits in our market area. Additionally, deposit balances can decrease if customers perceive alternative investments as providing a better risk/return tradeoff. Accordingly, as a part of our liquidity management, we maintain a number of secondary funding sources in addition to deposits and repayments and maturities of loans and investments. Adverse operating results or changes in industry conditions could lead to difficulty or an inability to access these additional funding sources.
If we are ever required to rely more heavily on more expensive funding sources to support our liquidity requirements, our revenues may not increase proportionately to cover our increased costs. In this case, our operating margins and profitability would be adversely affected. Any decline in our present primary or secondary funding sources could adversely impact our ability to originate loans, invest in securities, pay our expenses, or fulfill obligations such as repaying our borrowings or meeting deposit withdrawal demands, any of which could have a material adverse impact on our financial condition, results of operations, business strategy and stock price.
Our investment securities portfolio and our loan and lease portfolio include securities, loans and asset financing agreements issued or guaranteed by, or extended to, the U.S. Government, State Governments, local governments or related entities, private healthcare providers and non-profit entities, and the repayment of these credit exposures is largely dependent upon the receipt of cash payments from government programs.Consequently, the failure to address the federal debt ceiling in a timely manner, or any other interruption in the availability of funds to pay obligations by these government entities, could have a negative effect on our financial condition, results of operations, liquidity and stock price.
The repayment of these credit exposures is largely dependent on the receipt of payments and reimbursements from the U.S Government, U.S Government agencies and individual state government programs, including Medicaid, Medicare and state-level assistance programs. As a result of uncertain political, credit and financial market conditions, including the potential consequences of the federal government defaulting on its obligations for a period of time due to federal debt ceiling limitations or other unresolved political issues, investments in financial instruments or obligations directly or indirectly issued, guaranteed or reimbursed by the federal government pose credit default and liquidity risks. Given that future deterioration in the U.S. credit and financial markets is a possibility, losses or significant deterioration in the fair value of our U.S. government issued or guaranteed investment securities, loans or leases may occur. Downgrades to the U.S. credit rating could affect the stability of securities issued or guaranteed by the federal government and the valuation or liquidity of our portfolio of such investment securities and could result in our counterparties requiring additional collateral for our borrowings.
33
Table of Contents
In addition, changes to federal budgets related to federal debt ceiling restrictions may also affect the repayment of credit exposures reliant upon federal budgets and appropriations. The ability of the U.S. Government, U.S. Government agencies or State governments to timely pay obligations, perform on current contracts or exercise contract options may be reduced or eliminated by changes to the federal budget for the current or future fiscal years. The ability of borrowers to service loans we have made to them may be adversely impacted by the financial ability of the U.S Government, individual state governments or local governments to make direct reimbursement payments, or, via managed healthcare organizations operating under agreements with the federal government or individual states, to make indirect reimbursements for the services provided. The failure of a direct or indirect payor to make payments to a contractor, subcontractor or provider, or a significant delay in the making of such reimbursements, could adversely affect the ability of the operators of these facilities to repay their obligations to us.
Furthermore, some of our retail deposit customers receive Social Security, U.S. Government pension and other federal transfer payments. Any interruption of the timely remittance and receipt of such payments by our depositors could result in a decrease in our deposit portfolio balances and an increase in our liquidity requirements.
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
~~(a)~~
(a)
Unregistered Sale of Equity ~~Securities~~Securities. Not applicable.
(b)
Use of Proceeds. Not applicable.
~~(b)~~
~~Use of Proceeds. Not applicable.~~
(c)
~~(c)~~
Repurchases of Equity Securities.
The following table sets forth information in connection with purchases of our common stock made by, or on behalf of us, during the ~~third~~first quarter of ~~2017:~~

Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Maximum Number of Shares that May Yet be Purchased under the Plans or Programs ⁽¹⁾
July 1, 2017 through July 31, 2017 66,659 $ 14.97
66,659 447,454
August 1, 2017 through August 31, 2017 53,770 15.72
53,770 393,684
September 1, 2017 through September 30, 2017 45,808 15.91
45,808 347,876
166,237 166,237
2023.
Period

Total Number of Shares Purchased

Average Price Paid per Share

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs

Maximum Number of Shares that May Yet be Purchased under the Plans or Programs

January 1, 2023 through January 31, 2023
— $ — — 264,112
February 1, 2023 through February 28, 2023
48,604 10.32 48,604 215,508
March 1, 2023 through March 31, 2023
— - — 215,508
48,604 . 48,604
As of March 31, 2023, the Company had repurchased 7,852,263 shares of its common stock out of the 8,067,771 shares of common stock authorized under the current share repurchase authorization. On January 26, 2023, we extended the expiration date of the share repurchase authorization from April 28, 2023 to July 15, 2023, and increased the total number of shares currently authorized for repurchase under the Share Repurchase Program to 264,112 shares. On April 27, 2023, we extended the expiration date of the share repurchase authorization from July 15, 2023 to January 15, 2024. Pursuant to the current share repurchase authorization, there were 215,508 shares of common stock authorized for repurchase as of March 31, 2023.
⁽¹⁾
On July 27, 2017, the Board increased the total number of shares authorized by 250,000 under the Company's current share repurchase authorization which expires December 31, 2017. As of September 30, 2017, the Company had repurchased 2,482,879 shares of its common stock out of the 2,830,755 shares of common stock authorized under the share repurchase authorizations.

ITEM 3.
~~DEFAULTS~~
DEFAULT UPON SENIOR SECURITIES
None.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5.
OTHER INFORMATION
~~None.~~
~~ITEM 6.~~ ~~EXHIBITS~~

None.

34

45

Table of Contents
ITEM 6.
EXHIBITS
Exhibit Number
Exhibit ~~Number~~Description ~~Description~~
~~10.1~~
Amendment No. 2 to the Amended and Restated Employment Agreement Between BankFinancial Corporation with F. Morgan Gasior (Incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K, filed on August 1, 2017)
~~10.2~~
Amendment No. 2 to the Amended and Restated Employment Agreement Between BankFinancial Corporation with Paul A. Cloutier (Incorporated by reference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K, filed on August 1, 2017)
~~10.3~~
Amendment No. 2 to the Amended and Restated Employment Agreement Between BankFinancial Corporation with James J. Brennan (Incorporated by reference to Exhibit 10.3 to the Registrant's Current Report on Form 8-K, filed on August 1, 2017)
31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
101
The following financial statements from the BankFinancial Corporation Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2017,~~March 31, 2023, formatted in Inline Extensive Business Reporting Language ~~(XBRL)~~(iXBRL): (i) consolidated ~~statement~~statements of ~~conditions,~~financial condition, (ii) consolidated statements of operations, (iii) consolidated statements of comprehensive income, (iv) consolidated statements of changes in stockholders' equity, (v) consolidated statements of cash flows and ~~(iv)~~(vi) the notes to consolidated financial statements.

*104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

35

46

Table of Contents

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
BANKFINANCIAL CORPORATION
Dated:
May 2, 2023
By:
~~BANKFINANCIAL CORPORATION~~
~~Dated:~~ ~~October 25, 2017~~ ~~By:~~
/s/ F. Morgan Gasior
F. Morgan Gasior
Chairman of the Board, Chief Executive Officer and President
/s/ Paul A. Cloutier
Paul A. Cloutier
Executive Vice President and Chief Financial Officer

47

36



~~Maryland~~	~~75-3199276~~
~~(State or Other Jurisdiction~~ ~~of Incorporation)~~	~~(I.R.S. Employer~~ ~~Identification No.)~~

~~15W060~~ Maryland	75-3199276
(State or Other Jurisdiction of Incorporation)	(I.R.S. Employer Identification No.)

60 North Frontage Road, Burr Ridge, Illinois 60527
(Address of Principal Executive Offices)

		Page Number

		~~Page~~ ~~Number~~
	PART I

Item 1.	Financial Statements	12

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2722

Item 3.	Quantitative and Qualitative Disclosure about Market Risk	4331
~~Item 4.~~	~~Controls and Procedures~~	44

Item 4.	Controls and Procedures	32

PART II

Item 1.	Legal Proceedings	4533

Item 1A.	Risk Factors	4533

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4534
~~Item 3.~~	~~Defaults Upon Senior Securities~~	45
~~Item 4.~~	~~Mine Safety Disclosures~~	45
~~Item 5.~~	~~Other Information~~	45
~~Item 6.~~	~~Exhibits~~	45

~~Signatures~~Item 3.	47Defaults Upon Senior Securities

☒
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	September 30, 2017		December 31, 2016
Assets
Cash and due from other financial institutions	$	10,620	$	13,053
Interest-bearing deposits in other financial institutions	115,041		83,631
Cash and cash equivalents	125,661		96,684
Securities, at fair value	98,787		107,212
Loans receivable, net of allowance for loan losses: September 30, 2017, $8,374 and December 31, 2016, $8,127	1,335,631		1,312,952
Other real estate owned, net	3,569		3,895
Stock in Federal Home Loan Bank and Federal Reserve Bank, at cost	8,290		11,650
Premises and equipment, net	30,774		31,413
Accrued interest receivable	4,569		4,381
Core deposit intangible	408		782
Bank owned life insurance	22,790		22,594
Deferred taxes	20,214		22,411
Other assets	3,576		6,063
Total assets	$	1,654,269	$	1,620,037

Liabilities
Deposits
Noninterest-bearing	$	231,049	$	249,539
Interest-bearing	1,140,040		1,089,851
Total deposits	1,371,089		1,339,390
Borrowings	60,928		51,069
Advance payments by borrowers for taxes and insurance	10,683		11,041
Accrued interest payable and other liabilities	11,791		13,757
Total liabilities	1,454,491		1,415,257

Stockholders’ equity
Preferred Stock, $0.01 par value, 25,000,000 shares authorized, none issued or outstanding	—		—
Common Stock, $0.01 par value, 100,000,000 shares authorized; 18,063,623 shares issued at September 30, 2017 and 19,233,760 issued at December 31, 2016	180		192
Additional paid-in capital	155,481		173,047
Retained earnings	43,786		39,483
Unearned Employee Stock Ownership Plan shares	—		(8,318		)
Accumulated other comprehensive income	331		376
Total stockholders’ equity	199,778		204,780
Total liabilities and stockholders’ equity	$	1,654,269	$	1,620,037



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Interest and dividend income
Loans, including fees	$	13,345		$	12,388		$	39,061		$	36,834
Securities	389			306			1,095			927
Other	387			151			976			424
Total interest income	14,121			12,845			41,132			38,185
Interest expense
Deposits	1,419			1,012			3,903			2,749
Borrowings	196			2			444			73
Total interest expense	1,615			1,014			4,347			2,822
Net interest income	12,506			11,831			36,785			35,363
Provision for (recovery of) loan losses	(225		)	(525		)	(15		)	300
Net interest income after provision for (recovery of) loan losses	12,731			12,356			36,800			35,063
Noninterest income
Deposit service charges and fees	584			583			1,682			1,691
Other fee income	523			478			1,494			1,478
Insurance commissions and annuities income	41			53			170			180
Gain on sale of loans, net	10			38			70			59
Gain on sale of securities (includes $46 accumulated other comprehensive income reclassifications for unrealized net gains on available for sale securities for the nine months ended September 30, 2016)	—			—			—			46
Loan servicing fees	58			66			188			214
Amortization and impairment of servicing assets	(27		)	(28		)	(86		)	(96		)
Earnings on bank owned life insurance	67			54			196			151
Trust income	169			167			534			492
Other	198			226			526			553
Total noninterest income	1,623			1,637			4,774			4,768
Noninterest expense
Compensation and benefits	5,330			5,315			16,792			17,021
Office occupancy and equipment	1,693			1,487			4,914			4,769
Advertising and public relations	167			144			807			618
Information technology	638			707			2,070			2,130
Supplies, telephone, and postage	337			345			1,027			1,018
Amortization of intangibles	123			129			374			394
Nonperforming asset management	84			89			215			300
Operations of other real estate owned	403			243			861			768
FDIC insurance premiums	150			238			462			691
Other	1,275			1,215			3,551			3,639
Total noninterest expense	10,200			9,912			31,073			31,348
Income before income taxes	4,154			4,081			10,501			8,483
Income tax expense	594			1,573			2,488			3,240
Net income	$	3,560		$	2,508		$	8,013		$	5,243
Basic earnings per common share	$	0.20		$	0.13		$	0.44		$	0.27
Diluted earnings per common share	$	0.20		$	0.13		$	0.44		$	0.27
Weighted average common shares outstanding	18,139,659			18,788,731			18,368,742			19,114,603
Diluted weighted average common shares outstanding	18,140,109			18,789,054			18,369,170			19,114,918



	Common Stock			Additional Paid-in Capital			Retained Earnings			Unearned Employee Stock Ownership Plan Shares			Accumulated Other Comprehen-sive Income			Total
Balance at January 1, 2016	$	203		$	184,797		$	36,114		$	(9,297	)	$	547		$	212,364
Net income	—			—			5,243			—			—			5,243
Other comprehensive loss, net of tax	—			—			—			—			(74		)	(74		)
Repurchase and retirement of common stock (1,026,106 shares)	(10		)	(12,685		)	—			—			—			(12,695		)
Nonvested stock awards-stock-based compensation expense	—			875			—			—			—			875
Cash dividends declared on common stock ($0.15 per share)	—			—			(2,977		)	—			—			(2,977		)
ESOP shares earned	—			198			—			733			—			931
Balance at September 30, 2016	$	193		$	173,185		$	38,380		$	(8,564	)	$	473		$	203,667

Balance at January 1, 2017	$	192		$	173,047		$	39,483		$	(8,318	)	$	376		$	204,780
Net income	—			—			8,013			—			—			8,013
Other comprehensive loss, net of tax	—			—			—			—			(45		)	(45		)
Net exercise of stock options (198,026 shares)	2			(1,239		)	—			—			—			(1,237		)
Prepayment of ESOP Share Acquisition Loan	(8		)	(7,185		)	—			8,318			—			1,125
Repurchase and retirement of common stock (614,673 shares)	(6		)	(9,142		)	—			—			—			(9,148		)
Cash dividends declared on common stock ($0.20 per share)	—			—			(3,710		)	—			—			(3,710		)
Balance at September 30 , 2017	$	180		$	155,481		$	43,786		$	—		$	331		$	199,778



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
September 30, 2017
Certificates of deposit	$	80,360	$	—	$	—		$	80,360
Equity mutual fund	500		2		—			502
Mortgage-backed securities - residential	12,645		553		(10		)	13,188
Collateralized mortgage obligations - residential	4,728		14		(17		)	4,725
SBA-guaranteed loan participation certificates	12		—		—			12
	$	98,245	$	569	$	(27	)	$	98,787
December 31, 2016
Certificates of deposit	$	85,938	$	—	$	—		$	85,938
Equity mutual fund	500		—		(1		)	499
Mortgage-backed securities - residential	14,561		644		(21		)	15,184
Collateralized mortgage obligations - residential	5,587		15		(28		)	5,574
SBA-guaranteed loan participation certificates	17		—		—			17
	$	106,603	$	659	$	(50	)	$	107,212



	September 30, 2017
	Amortized Cost		Fair Value
Due in one year or less	$	80,360	$	80,360
Equity mutual fund	500		502
Mortgage-backed securities - residential	12,645		13,188
Collateralized mortgage obligations - residential	4,728		4,725
SBA-guaranteed loan participation certificates	12		12
	$	98,245	$	98,787



	Less than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
September 30, 2017
Mortgage-backed securities - residential	$	1,182	$	(10	)	$	—	$	—		$	1,182	$	(10	)
Collateralized mortgage obligations - residential	—		—			3,270		(17		)	3,270		(17		)
	$	1,182	$	(10	)	$	3,270	$	(17	)	$	4,452	$	(27	)

December 31, 2016
Equity Mutual Fund	$	499	$	(1	)	$	—	$	—		$	499	$	(1	)
Mortgage-backed securities - residential	1,187		(21		)	—		—			1,187		(21		)
Collateralized mortgage obligations - residential	3,691		(18		)	1,028		(10		)	4,719		(28		)
	$	5,377	$	(40	)	$	1,028	$	(10	)	$	6,405	$	(50	)



	Allowance for loan losses						Loan Balances
	Individually evaluated for impairment		Collectively evaluated for impairment		Total		Individually evaluated for impairment		Collectively evaluated for impairment		Total
September 30, 2017
One-to-four family residential real estate	$	—	$	812	$	812	$	4,616	$	100,570	$	105,186
Multi-family mortgage	—		3,872		3,872		959		575,466		576,425
Nonresidential real estate	—		1,590		1,590		—		176,301		176,301
Construction and land	—		68		68		—		2,827		2,827
Commercial loans	—		1,241		1,241		—		147,079		147,079
Commercial leases	—		769		769		—		333,120		333,120
Consumer	—		22		22		—		1,747		1,747
	$	—	$	8,374	$	8,374	$	5,575	$	1,337,110	1,342,685
Net deferred loan origination costs											1,320
Allowance for loan losses											(8,374		)
Loans, net											$	1,335,631



									Three months ended September 30, 2017				Nine months ended September 30, 2017
	Loan Balance		Recorded Investment		Partial Charge-off		Allowance for Loan Losses Allocated		Average Investment in Impaired Loans		Interest Income Recognized		Average Investment in Impaired Loans		Interest Income Recognized
September 30, 2017
With no related allowance recorded:
One-to-four family residential real estate	$	4,980	$	4,031	$	966	$	—	$	4,100	$	14	$	4,251	$	51
One-to-four family residential real estate - non-owner occupied	571		576		19		—		557		—		594		—
Multi-family mortgage - Illinois	965		961		—		—		965		10		815		31
	$	6,516	$	5,568	$	985	$	—	$	5,622	$	24	$	5,660	$	82



									Year ended December 31, 2016
	Loan Balance		Recorded Investment		Partial Charge-off		Allowance for Loan Losses Allocated		Average Investment in Impaired Loans		Interest Income Recognized
December 31, 2016
With no related allowance recorded:
One-to-four family residential real estate	$	5,379	$	4,548	$	886	$	—	$	2,947	$	70
One-to-four family residential real estate - non-owner occupied	503		386		119		—		251		9
Multi-family mortgage - Illinois	787		787		—		—		980		41
	6,669		5,721		1,005		—		4,178		120
With an allowance recorded:
Nonresidential real estate	262		260		21		26		164		—
	262		260		21		26		164		—
	$	6,931	$	5,981	$	1,026	$	26	$	4,342	$	120



	Loan Balance		Recorded Investment		Loans Past Due Over 90 Days, Still Accruing
September 30, 2017
One-to-four family residential real estate	$	3,392	$	1,658	$	—
One-to-four family residential real estate – non-owner occupied	751		576		—
Multi-family mortgage - Illinois	378		371		—
	$	4,521	$	2,605	$	—
December 31, 2016
One-to-four family residential real estate	$	2,861	$	2,483	$	—
One-to-four family residential real estate – non-owner occupied	428		368		—
Multi-family mortgage - Illinois	187		185		—
Nonresidential real estate	262		260		—
	$	3,738	$	3,296	$	—



	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Loans Not Past Due		Total
One-to-four family residential real estate loans	$	94	$	749	$	1,655	$	2,498	$	79,800	$	82,298
One-to-four family residential real estate loans – non-owner occupied	12		3		577		592		22,321		22,913
Multi-family mortgage - Illinois	—		—		371		371		288,508		288,879
Multi-family mortgage - Other	—		—		—		—		281,887		281,887
Nonresidential real estate	—		—		—		—		174,724		174,724
Construction	—		—		—		—		2,548		2,548
Land	—		—		—		—		281		281
Commercial loans:
Regional commercial banking	—		—		—		—		40,315		40,315
Health care	—		—		—		—		72,685		72,685
Direct commercial lessor	275		369		—		644		33,787		34,431
Commercial leases:
Investment rated commercial leases	—		2,225		—		2,225		230,009		232,234
Other commercial leases	—		—		—		—		102,698		102,698
Consumer	—		—		—		—		1,754		1,754
	$	381	$	3,346	$	2,603	$	6,330	$	1,331,317	$	1,337,647



	For the Nine Months Ended September 30,
	2017					2016
	Number of loans	Pre- Modification outstanding recorded investment		Post- Modification outstanding recorded investment		Number of loans	Pre- Modification outstanding recorded investment		Post- Modification outstanding recorded investment
One-to-four family residential real estate	—	$	—	$	—	1	$	63	$	63



	Due to reduction in interest rate		Due to extension of maturity date		Due to permanent reduction in recorded investment		Total

For the Nine Months Ended September 30, 2016
One-to-four family residential real estate	$	—	$	63	$	—	$	63



	Pass		Special Mention		Substandard		Nonaccrual		Total
One-to-four family residential real estate loans	$	80,401	$	—	$	257	$	1,653	$	82,311
One-to-four family residential real estate loans – non-owner occupied	22,258		—		40		577		22,875
Multi-family mortgage loans - Illinois	289,175		—		480		372		290,027
Multi-family mortgage loans - Other	286,398		—		—		—		286,398
Nonresidential real estate loans	176,139		—		162		—		176,301
Construction loans	2,543		—		—		—		2,543
Land loans	284		—		—		—		284
Commercial loans:
Regional commercial banking	40,251		—		—		—		40,251
Health care	71,633		—		982		—		72,615
Direct commercial lessor	34,213		—		—		—		34,213
Commercial leases:
Investment rated commercial leases	230,931		—		—		—		230,931
Other commercial leases	102,189		—		—		—		102,189
Consumer	1,747		—		—		—		1,747
	$	1,338,162	$	—	$	1,921	$	2,602	$	1,342,685



	September 30, 2017							December 31, 2016
	Balance		Valuation Allowance			Net OREO Balance		Balance		Valuation Allowance			Net OREO Balance
One–to–four family residential	$	1,955	$	(207	)	$	1,748	$	1,702	$	(137	)	$	1,565
Multi-family mortgage	—		—			—		370		—			370
Nonresidential real estate	1,772		(221		)	1,551		1,171		(105		)	1,066
Land	314		(44		)	270		1,101		(207		)	894
	$	4,041	$	(472	)	$	3,569	$	4,344	$	(449	)	$	3,895



	Overnight and Continuous		Up to 30 days		30 - 90 days		Greater Than 90 days		Total
September 30, 2017
Repurchase agreements and repurchase-to-maturity transactions	$	928	$	—	$	—	$	—	$	928
Gross amount of recognized liabilities for repurchase agreements in Statement of Condition									$	928

December 31, 2016
Repurchase agreements and repurchase-to-maturity transactions	$	1,069	$	—	$	—	$	—	$	1,069
Gross amount of recognized liabilities for repurchase agreements in Statement of Condition									$	1,069



	September 30, 2017			December 31, 2016
Allocated to participants	1,203,810			1,125,448
Distributed to participants	(317,914		)	(313,223		)
Unearned	—			831,852
Total ESOP shares	885,896			1,644,077
Fair value of unearned shares	$	—		$	12,328



Stock Options	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value ⁽¹⁾
Stock options outstanding at December 31, 2015	1,752,156		$	12.30	1.48	$	778
Stock options granted	—		—
Stock options exercised	—		—
Stock options outstanding at December 31, 2016	1,752,156		$	12.30	0.48	$	4,422
Stock options granted	—		—
Stock options exercised	(1,752,156	)	12.30
Stock options outstanding at September 30, 2017	—		$	—	0	$	—



	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value
September 30, 2017
Securities:
Certificates of deposit	$	—	$	80,360	$	—	$	80,360
Equity mutual fund	502		—		—		502
Mortgage-backed securities – residential	—		13,188		—		13,188
Collateralized mortgage obligations – residential	—		4,725		—		4,725
SBA-guaranteed loan participation certificates	—		12		—		12
	$	502	$	98,285	$	—	$	98,787
December 31, 2016
Securities:
Certificates of deposit	$	—	$	85,938	$	—	$	85,938
Equity mutual fund	499		—		—		499
Mortgage-backed securities - residential	—		15,184		—		15,184
Collateralized mortgage obligations – residential	—		5,574		—		5,574
SBA-guaranteed loan participation certificates	—		17		—		17
	$	499	$	106,713	$	—	$	107,212



	Fair Value Measurement Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value
September 30, 2017
Other real estate owned:
One-to-four family residential real estate	$	—	$	—	$	1,421	$	1,421
Nonresidential real estate	—		—		844		844
	$	—	$	—	$	2,265	$	2,265

December 31, 2016
Impaired loans:
Nonresidential real estate	—		—		234		234
	$	—	$	—	$	234	$	234
Other real estate owned:
One-to-four family residential real estate	$	—	$	—	$	1,282	$	1,282
Nonresidential real estate	—		—		553		553
Land	—		—		47		47
	$	—	$	—	$	1,882	$	1,882



	Fair Value		Valuation Technique(s)	Significant Unobservable Input(s)	Range (Weighted Average)
Other real estate owned:
One-to-four family residential real estate	$	1,421	Sales comparison	Discount applied to valuation	5.6% - 6.6% (6.5%)
Nonresidential real estate loans	$	844	Sales comparison	Comparison between sales and income approaches	-3.66% - 15.22% (10.9%)
Other real estate owned	$	2,265



			Fair Value Measurements at September 30, 2017 Using:
	Carrying Amount		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	125,661	$	10,620	$	115,041	$	—	$	125,661
Securities	98,787		502		98,285		—		98,787
Loans receivable, net of allowance for loan losses	1,335,631		—		1,340,957		—		1,340,957
FHLBC and FRB stock	8,290		—		—		—		N/A
Accrued interest receivable	4,569		—		4,569		—		4,569
Financial liabilities
Noninterest-bearing demand deposits	$	231,049	$	—	$	231,049	$	—	$	231,049
Savings deposits	158,696		—		158,696		—		158,696
NOW and money market accounts	585,316		—		585,316		—		585,316
Certificates of deposit	396,028		—		394,888		—		394,888
Borrowings	60,928		—		60,932		—		60,932
Accrued interest payable	180		—		180		—		180

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