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Bankfinancial (BFIN)

Participants
F. Morgan Gasior Chairman and Chief Executive Officer
Paul Cloutier Chief Financial Officer and Treasurer
Kevin Reevey D.A. Davidson
Brian Martin FIG Partners
Call transcript
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Operator

Good day, ladies and gentleman. And welcome to the BankFinancial Corp Second Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time [Operator Instructions].

As a reminder, today's program is being recorded. to host like F. today's I'd now introduce for your program, And Gasior, and Morgan CEO. Chairman ahead. go Please

F. Morgan Gasior

Good to this and second to morning, welcome our quarter results call have of for reporting XXXX. statement At forward-looking time, like our I'd read. investor conference

Paul Cloutier

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

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

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

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

F. Morgan Gasior

Thank you.

are complete, As all filings ready for we questions. any are

Operator

Reevey from line Kevin D.A. first from Davidson. comes Our question the Instructions] [Operator of

Your question please.

Kevin Reevey

were How the cost came margin. It than should the we forward like and in what we margin quarters? is into as going deposit higher about question look the fourth your first around My think a lot expecting. third we looks

F. Morgan Gasior

I'll talk X. interest a and Paul bit then deposit it a about about bit. Cloutier let's divide will income little into cost talk Well, little

about income. talk interest just Let's

little flow said previous with which little margin better little we assets. the had this had mix the we we less mix of if expected more lease drop than quarter, pretty in range previous on commitments We And C&I in in utilization income in that on calls, even second call, a see a on I said first interest a utilization, depending in much would continue was a either or had that's the of a As as quarter, less and the what origination, in bit increase. to we'd we commercial happened multifamily though increased and quarter. did C&I

for good there interest factors going tend out seasonal of side, here. for income So and continued possibility utilization. the There late quarter. place a some improvement extend extend third until also quarter, And get play are in out is side those But the in as payment care we think therefore health we that some forward, to upcoming fourth. in the there are on the practices into utilization C&I, fourth will in really Medicaid changes won't receivables taking early be especially

start it'll volatility somewhat second then quarter. have in in more similar the quarter quarter smooth to will to we third and out So fourth

the on second is interest thing big level assets. The interest-earning income of

$XX higher. payoffs beginning if One you thought estate first 'XX half something of we to at of we what from half were in or of facing here that elevated Real first payoff for at compared there's see million neighborhood are -- level is the assets the the things the 'XX, considerably we're the going the of to looked example, of the year.

little refinance markets market because work It's of million. replace room business. So we now have that conditions. to a hard pricing good is our to bit we news The have little on of $XX to a change purchases in

those as more the on originations the going have the base aggressive to time little yields current refinance opportunity would focus not fourth loans come the take market on exceed levels, some we share. 'XX refinance, yields do little to these reestablish even have a get And pricing pricing for at that we we million that up So opportunities that's on $XX present a quarter. pay-offs. the do be and third But really at to the for of and for asset need

in more time, of the we Given quarter than lag would fourth expect an quarter. third impact

the a little in side? benefit C&I quarter see a lease estate for will little from up in in leases, don't fourth strength a utilization just help a in strong nice little quarter. a We will quarter also -- quarter, And say trend little but I of little originations is strongest be. quarter. fourth fourth too C&I from we'll And deposit and see third just predict would the how more to So why our soon that bit third the you more real traditionally it's it'll strength the Paul, cover quarter from we'll getting the quarter, had

Paul Cloutier

Kevin, quarter drove going deposit market have were about of a that million projected. CDs driver the main Yes, but moderates. third was, little quarter that higher out had up we that in they Xs, than we in But forward into repricing third second million and $XX thought We CDs price would quarter. in $XX.X the Xs, low the the somewhere in the we high what maturing fourth and beta had the on maturing the only

off the and rates. driver the at beta the higher X%. rollover of a CDs below much the coming of lot the were of So cases big rates in deposit They maturity at was

the So with the repricing deposit in that drove quarter. the beta second

Kevin Reevey

in C&I mentioned, had to single-digit loan you full do high do expect to be what mid- in to of Or growth and mid-to-high trend this you think kind year? given mid-area it'll Morgan, you area? year see higher, you expect the then, And the

F. Morgan Gasior

to we do $X.X that's result. giving seeing the if portfolio obviously, from result that, in can get than I at can $X.X loan even a in we better billion, better were at get think what $X.XXX a probably were $XX.XX, billion we from here where the if billion if good up range, is, an so end to we'll somewhere the point. And $X.XXX that's we range starting somewhere billion we

Kevin Reevey

you. Thank

Operator

you. Thank

Our comes of Partners. question from Martin next line Brian from FIG the

Your question please.

Brian Martin

kind the Say, one yourself And XXX(k), kind and maybe side, was it's guys comp on in or little think expense things but be X last the hires. the the mean, for of new forward, fee of -- you there on the to quarter of run kind that maybe side bit the then of accruals about you just just quarter. on I of, of in here next as this of for the side. outline you're in of could how that of X a the -- had context may quarters. thought but I And just the over expenses kind comps some just about then going the thinking expense happened income Paul, if the the talk here, some incentive or obviously the [indiscernible], rate just, and kind not the

you little thought, be helpful. could give If that'd a

F. Morgan Gasior

up thought and something move, look plan that the companies -- Sure. better as that starters, -- Well, some of for end quarter for in wound single considerable their a doing but We at to amendments really a all. determined it board gave probably get obviously and took run that the event, second a that 'XX, core a for saw -- in the so quarter. retirement associates. early done 'XX XXXX they moves at 'XX, the a one-time event. one-time to the thought, compensation gave at did would happening many be you plans XXX(k) rate the saw is We We not

incentives, originations, to a the especially had we good quarter pretty On for first compared quarter.

on to incentives at incentives and fully second ups catch had But some we now quarter. do all we're So there. the funded

August. time depending projects. run footnote, comp year, May low So between special seasonal on to million, will or the think start This And to usually said going I from summer side, $X.XX X-quarter down we a would as associates that we've staffing in as to levels. of as on $X.XX those maybe the had do projects we of number somewhere million,

here be So rolling off will they soon.

do rolling them some do some marketing, of them support them of do operations, them credit off. compliance, some functions, be they'll of Some do of but

say and time. maybe a $XXX,XXX the bit between unusual side, the more expense would fade of anywhere you I high add little in low over on So will side the $XXX,XXX on second that that quarter

little a into get originations bit, and everybody. could up you and incentives similarly that news be get but into then on happy roll if loan those we if would a on groove groove side, they'll -- Now for originations, the deposit a commercial

quarter. had Paul, is expenses… roll to in So staff that the off because of going some $X.XX rest one-time done second got would reasonable get have expenses we had and say, -- a to the that to are temporary I we range the on $X.XX

Paul Cloutier

next going $XX are to the the to What couple expense of quarters of the in million million pass lot a $XX the forward be seeing range. Overall, is cost to vendors on rate run quarters starting -- increases. X we're should for X

and taken there's things to see a invoices lot that. So up. at I'm of to some of do creep starting I've can But look that a we kind moderate

increases on. the least a can being quarters XXXX, do the think it's out for then And cost job expenses million of to I reasonable how rate those X we on year, So looking million. good for last $XX are passed a at run into $XX moderating that

F. Morgan Gasior

marketing thing. for estate add capital the commercial I'd loan We've And working the both versus trying deposits loans, new portfolio and opportunity on especially real some the one to sell for been markets.

wouldn't need little the know run on find interest-earning will capital otherwise of deep rate our estate in portfolio think, the the last advertising We the so real couple the just it weeks push on assets that given campaign that continue put is or to than harder and next given X to to surprise to back a out how go. especially me quarters. might forward, the But bit we markets will

to we get that word in will those get of and out borrowers front get the the, will extent maximum possible. We

The few is, started of different but of other early add of banking thing some changes people a with in we the discussions, commercial Chicago market, in days couple in we're the disciplines. the given I'll dialoguing

a works to growing out, all side it we the on add purpose again assets. comp if the but of side do commercial obviously banking staff might higher, little interest-earning some to that trend the would the So and

Brian Martin

do your got you side? the, guess still the guess the operating you expectation if expense the as bit Is opportunistic on be seen the on would little I the, a funding, the in expense we've the greater comments side the be add. being improving mean, think? what the, hiring. positive that growing uptick fair mean, I just, here I that than I understand to profitability And this. would leverage mean, revenue I I Certainly, about there's your

F. Morgan Gasior

the of is one absolutely would look ramp we'll position in a talk things but we an Yes, hope And up to there's are that, in what we We cases. be? some people when have obviously the to lag. interesting at would

to very very have future, either things and be to dealing that. the We pain-free of the pricing. who large to or bankers take near like now And loans on get and certain easy For have in penalties also an but that prematurely maturing, reprice credit example. there opportunity not very change where the not may you're the only be assets, advantage prepayment opportunistic for may very, on with they not and

well towards function prepared we're everything is good let everything base here that assets opportunities. right is, example. of of do do see a interest-earning and be timing How and else. Because, we the is point to pointed the to and to can we the C&I going goal. increase if a again, it? So That everything markets do us we is that

was close pipeline, least another. in a loans of August in had hopefully $XX close we're in close continuing June. good we've of that million have, supposed second to we one at delay the that but or didn't because will we close We one quarter And probably supposed

to that another have $XX may one for depending We're in but million on to HUD in million quarter, working close dollars in for another close September supposed and was $X going We one may it's October. it on third now close in close that quarter. fourth

given just new we we frustrating will lost a just somewhat that's can And forward basis. either do why we so yet assets or But into make So think up the move issues we consistent fourth quarter opportunity quarter, I see. opportunities, from from run things certainly growth stronger for people those ground. different to maybe than timing if is on third

Brian Martin

willing volume you're to little margin on, and the a percentage, interest income More the focus give get take dollars net higher. up of you

F. Morgan Gasior

building was we Especially everything else were on volume, side to the foundation on. the real replace lost because estate that the

Brian Martin

when we on you the an quarter, these you you leases you there rate kind this on at of margin, And that bit know that. Can I brought can is not quarter. impact brought what look the a are was especially next just the margin think just what sure and the leases you just this -- from brought average quarter and for are rate relative higher, about lease C&I the -- and to quarter yields yields how third on

F. Morgan Gasior

This probably quarter, in did the we leases. mid-Xs

to pipeline to be yet low Xs. in high It's of kind see. quarter looks third Xs The to the early

continuing are people. We -- the comes have down really to the mix lease And it dialogues to with being quality. of

credit spread in out investment compression For especially example, you're grade. still there, seeing some

investment grade. then BB So of we We're space tend to of tightly focus to grade and the pretty there. on want the noninvestment the BBB the space

fourth X.XX% think -- depending happens in would volumes, like quarter, that would third between go with a could fourth I X%. higher, quarter it quarter And what on So the really I We say, would quarter But mid-Xs call it, about more on average. X XX third the originations bit to be points even then little the as a on XXX X.X% second was, up stay depending on same. mix. and mix. pick for might quarter. on lease I'd or It depends basis we as much up at pick could least the XX should say,

Brian Martin

kind what guess quarter can color and payoffs, -- mean, I do -- And the give mean, -- you would I of, you just this you origination -- of, -- how low, on mean, I context you've that think some were characterize some the payoffs you or guess, in Morgan. relative but release, this both what of I [indiscernible] the the just given high the the how origination? from I versus quarter would to I just

F. Morgan Gasior

It was high.

both were quarter second and First high.

to I So real $XX half was first Commercial the the ones compared to, for the for half $XX $X.X 'XX. of $XX draw estate 'XX million million the your first X, million attention versus of real million. was estate

commercial though cash-out who the those go a net stabilized didn't service real do who -- their Now have estate reasons. operating to real for particularly refinance. Borrowers Borrowers of big didn't side, some wanted for even on strong. who income. ask Borrowers to the credit payments, we let want debt tax wasn't

in else because then million it correlates of we're payoffs probably on to had also X.XX%. -- is, went But those we X.XX% of you more than the go that Some the line just payoffs had to in commercial and million utilization. that $XXX not loans, the if quarter in and approximately going they're parameters. the to going the look from meet to quarter, $XXX drove first rate weighted second to C&I reflects credit of the not that had why thing average anything at And drop payoffs we

manage It's So us, fits great they credit their very, of rates are that's rising. how is especially but double-edge it C&I sword. careful a exposure, why opportunities a lot for in parameters, with borrowers very

the said, in moderate seeing over due expect had I will. as the they if a we're the But And that we bit. the that Those things to quarter one first and and the commercial higher in a extent thing that the C&I it difference, multifamily the second of the estate. and difference. real all, utilization lesser drove can payment little some and of time the I to point they practices to to changes down, was, were So if mix pay to payoffs secondarily drove

Brian Martin

coming you down on get more XX even obviously Maybe costs CD CDs to guys and pays what if extending maybe have or months of last increases, guys out to go then Or on? you then have what's the couple you a extending road, a a are what I one guess, are have rates dividends renewals. kind kind but of two been you Were thought guess been little out guys of if today out more Paul, it I those XX-month-type-of-money that things. or talked is at? the It's the more -- it you kind kind low you lock-in, doing? it upfront. bit you the cost of Okay, side, bit

Paul Cloutier

is spot like And retail can side, extent on before the help additional rate for out can bit. extend that sweet No. out. for XX-month wholesale occur move future. rates in the We them a customers then for the to so you maturity, little you pick your maturities we looks extend It hikes try to more out the locking the

Brian Martin

And fair. just Okay on…

F. Morgan Gasior

And bit we rates those like can. we to move little out a if

little keep us we're on really do, do bit the a term in for rate the exactly what point and you your risk It and depending of accounts. protection. core getting can't that the balanced. money match might is, markets also So out And helps the interest Fed

the and then So skewed makes is -- the commercial leases it if the sense. is sense rate, then mix mix CDs grow more floating more the more estate, if make real term and again, towards more deposits make

So to that's CD but we the factors, protection, will and in like the term the get -- market. those are working why the all we extent that's we can

Brian Martin

point, plan your betas guess, that I third would the loan and according deposit expect, the the you in guess, would Paul, quarter fourth quarter schedule to if And exceed I betas. the to goes

it the you loan are CDs to side on mix If to less towards higher point you and getting you're ongoing margin had offset higher cost change funding the that repricing, and betas the want rise.

Paul Cloutier

would That be intent. the

is raises on the loan proper Morgan's mix to Do side. beta? that in the you question the Now mix the create get

F. Morgan Gasior

out higher. works that real way whether better drives more get interest we up the then if want, more and this margin estate income And base, then we better. C&I that leasing, the pick of we utilization, interest-earning assets If some it's absolute drives

approach. -- So it's a double-barreled two a it's

Brian Martin

Yes.

the the expectations there Are on today? that are you I that here? how just that? kind am guys guess, are funds. of capital you guys is left -- Is if would missed how program then you get you at and plan? guys on about much I And I to look on Or -- you. done Got repurchase thinking where Okay. The

F. Morgan Gasior

We And this the the obviously still here on did completely have some plan. is finished ESOP, at and some bit quite point. for ESOP on room we a which

Given the trading But be that levels. X.XX are at market levels, were shares have given aggressive going we're million at the rerun or to more we conditions. trading than we'll to obviously, higher current so numbers, left,

XX repurchases they would I been, say, bigger good think ago. days use think capital. than a still might of that So be factor We have that will a is now

to of a that to I and that availability the company would holding have work expect We be factor.

we're are active. we we where but little end we'd really where if we always we at expensive, a we where be high So very the were the now, if matter degree. we'll we trade more -- And if if range something. to market in trading certainly be more XX-week like now, of doing It's of are trade the which before, gets recover a just that but will

Brian Martin

And guess guess, of guys updates your group, I there? expected any you tracking I as new just real commercial building and kind as momentum. estate would,

F. Morgan Gasior

into the for they can we'd where plateau quarter fourth can to process. obviously, get on still a no. a that appear $XXX,XXX their we'd 'XX, Right the really for our the for we process, first out that I, the but and marketing feeling go. I starting that's and second to a fourth say quarter. on of in fourth to to extent better to into and quarter, I would progress. place this summertime, for It's a are like it be, quarter would if way did $XXX,XXX quarters funders for as results. know income, making $XXX,XXX-plus be do off on through that it terms quarter. that like get to in and takes to we be be. where be is month in where on probably triple expect start And to if especially And customers to still be. on if But between that did, would us somewhere work consistent better build now, we digits us, basis we They get in it's second building quarter pipeline that getting third we into like would the They get I said, would will quarter 'XX,

have to days early on $XX,XXX, it's first a we But did they say, good So improvement a ways quarter? go. that to was

Brian Martin

March you on I the of margins meeting last guys Morgan, with and is kind for profitability half laid second what from roadmap Okay. as how the far and earnings guess you're turns based rate thought kind plan trending this I of the, it run one to in as out the way? you loan just And me, some mean, Or and as into in relative of it's that twists are about your thinking you back maybe year still plan, tracking look and the, on how shareholder 'XX? to and anything when changed trends along things obviously

F. Morgan Gasior

we drop would be Well, right threatened estate now, the the portfolios outlook. we I closer that of would mid-XXs at year. that thought And say share, a end in the the to $X.XX has real

look, we'd and basis, we did some we thought that the build we third $X.XX, and the now right And XXX(k) over if quarter. you about take out on fourth quarter. second for a to in we want $X.XX a floor things, quarter So thought core

to that levels fourth we And get with quarter, to But the, have For rates less before for would back concern. portfolio. do good $X.XX news the rebuild is, up little the just a holding to us biggest real say would really bit, we to that's we need I at to volume thought. portfolio just might did the we a our little than estate it

cost? will concern would funding be There the be there. Now what are pressures still the second for out that

have to customer. respect care customers You of and the still take

safely so but and and million $XX on keep we're we as or do and to portfolio behind assets can estate going issue as is need for real it. interest-earning issue need the biggest reestablish their secondary much to us, So the to I'd say we the we first about

that's to from 'XX intact. as work this to at But If probably year thought have beginning change assets I would biggest of you do the would say then process the some strengthen remains than thought we that we interest-earning further the largely we the do, point.

Brian Martin

bit of stay, maybe get any function So less where It's of back you reevaluating maybe need the assets still can an opportunity without kind if little not there than later the 'XX a to. you but better thought, to you in half of year. is possible year

F. Morgan Gasior

absolutely I statement. agree that with

Operator

Thank you Instructions]. [Operator

F. Morgan Gasior

Going once.

Going We twice. Three. Thanks, and talking you for to everyone, in attention BankFinancial. interest phone. for look forward their the to

Operator

Thank program. you, ladies for today's does conference. the This in participation conclude and gentlemen, your

You disconnect. now may