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Bankfinancial (BFIN)

Participants
Morgan Gasior Chairman and Chief Executive Officer
Brian Martin FIG Partners, LLC
Call transcript
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Operator

Good day, ladies and gentlemen, and welcome to the BankFinancial Corp., Q4 and Year-to-Date 2018 Review Conference Call. Currently at this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] Also as a reminder, this conference call is being recorded. At this time, I’d like to turn the call over to your host F. CEO. and Chairman Gasior, Morgan Please go ahead.

Morgan Gasior

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

Unidentified Company Representative

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

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

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

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

Morgan Gasior

are questions. ready Thank you, take we all to complete, as and are filings

Operator

Thank comes D.A. you. Kevin [Operator ahead. Our go Davidson. Instructions] first question Please from from Reevey

Unidentified Analyst

are How you? everyone. Hi,

Morgan Gasior

happy and Year. New morning Good

Unidentified Analyst

Keith] This Kevin. Year. for New actually [Chris on Happy is

Morgan Gasior

like sound I it was going didn’t say to Kevin.

Unidentified Analyst

so. It’s All voice right. a recognizable

of couple a questions. have I So

that we growth? can to see How bulk expect specifically related do the categories? on First the growth loan XXXX. of we the to Where look throughout at

Morgan Gasior

C&I in to fairly compared I would up the same at consistently do an looking opportunity thing and in we that they'll say it we're we'd similar to Managing you when pick allocation out very directions we to XXXX a market leases see C&I, to a and think of be XXXX, the grow for in I will looked little a think portfolio Leases, strong I flows the have portfolio possibly We've XXXX, XXXX. growth similar said trends. but double-digits the in cash be to if asset the but the the on bit had in the focus, within little more leases. growth XXXX. like middle

expect absolute spreads, only grade money We put to level is the any real investment that do yields. yields The into and of credit accelerate. on based continue, we possibly question leases

market in capturing Multifamily, professional we Purchase credit so we we will the that. external But among given be who So flexible do again, well probably it'll probably presence a interest down I'd is middle in one also continue say, the markets in mature, XXXX. facilities we'll in activity refinance see leasing the how a function growing slow refinances. have more of to a well focus kind continued things bit and of a have the mid-single XXXX. investors digits. will little be It in activity. portfolio of those do did where the It

So might more X%, generally, it but likely would digits, multifamily X% told. X%, mid-single I touch all say, to in

and of property some stay quality. on the some reductions see right to multi. estate, around real big credit very performing it may retail We'll not on very unless now, continued also so be by retail well, We're based portfolio not we'll is So the commercial see followed in expect our growth fans long. flat. focus opportunities We'd probably will C&I commercial hold in leases terms estate of commercial and real but

Unidentified Analyst

you. what areas increase? geographic comment, Thank are multifamily representing that that And to Great. Awesome. trail on

Morgan Gasior

an filing the XXXX at to be I XXXX shortly. if here looked Well, for you presentation, going updated think one shareholder we're

in So all Chicago continue the In in is to Chicago Illinois and I of prior. year-over-year. characteristics Chicago. good yield markets. to fourth you'll take better better was be with price we even materially would in growth But level quarter, be to at to other in demonstrate is bigger and going going had Chicago. in them county outside challenge than change in get underwriting it the the look worse is And tougher, the will markets the compare than growth performance City performance a in the and Consistently expect and than administrations in Taxation in that Chicago markets. able an the in Illinois XXXX at

bit. particularly to the throughout of impact, northern to Chicago taxes going real not suburbs a of have that you're side So in increasing going up little tax had are be estate in north flat. see the a double-digit and bills. their increases tax And go see markets much the probably expenses And rate market. will could rents as Utility

coming don't strong of Chicago. performance necessarily we a out lot of see NOI So

So flat in terms employment. you of basically risk, have

of downtown multifamily In the if outside all especially fact, area, and the continuing Whereas it Chicago, Colorado, Carolina the of Northeastern net demand of out Florida, and pockets [even Illinois multifamily, are growing then in. that are from Illinois lend South more not. affordable Texas, are of and see pockets people, markets migration means] to we Northern other for influxes places

those are we XXXX, than total. products as material for portfolio talking of We'll new reasons, $XX lending the of saw to community for those said that not the growth. million, on in growth in going some some we in million think will the outside be portfolios second in Having of rest that as you're It half inside. all market XXXX. have the We Chicago. the development more strengths of $XX be products that, good continue working for but Chicago So them

Unidentified Analyst

the squeeze and in how fourth for growth should bit and And you fee Thanks quarter. over insurance in. up color. came Can that quite the some more where from look Okay. income, a… I on if we the at just that Shifting were that on to provide Great. can one a trust commissions color

Morgan Gasior

every typically having renewals starting in the And assets. stuff trust concentrates grow through fourth released a is traction. is to insurance the We're some it again, and of The products to that trust We some quarter year. are better. seasonal. starting we cycle Trust perform go new and insurance

we remain hope So growth XXXX. and to see should income the fee modest growth trust, trust Insurance same. maybe XX% some in in about

the new premium solutions the volumes paid better property are and we – we working that product commission, casualty on should get and with However, reduce on that have might a a net therefore it premium we insurance rate but might increase. relationship

X% We about up year. the XX%. to the hope trust will up be XXXX. continue at goes in insurance insurance quarter XX% least next maybe goes for fourth But So, stuff to concentrated

Unidentified Analyst

out get in back Awesome. and All jump the right. I’ll queue. Thanks.

Operator

[Operator comes from next you. from Instructions] Thank Brian FIG Martin go Our Partners. question Please ahead.

Brian Martin

Good Morgan. Hey. morning,

Morgan Gasior

Good Year. morning. New Happy

Brian Martin

Same you. to

on Morgan. question loans, last one Just

are guess I the a growth the you pretty all the then slowing, year about – You of it the guess of similar about any and XXXX it, market of year, what are but of into if you've you if angst your is of your in tend net to there's mean anything kind of on kind look mean that market economy a I kind the forecast? that? hearing the could I growth I guess – and for the how I in down, about talk kind guess been just, boil as concerns talked growth you're in and building kind are just and of breakdown gave you where range lot versus about Or, XXXX? similar? you kind when net is Or sensing of guess, XXXX about we're Or the for of of you for just there, it, I expectations that at I you think you just your thinking kind

Morgan Gasior

little Okay, balance well, down others just helpful because it all the frame be and of will a to go me you bit either to to it. let first sheet

billion, forward, on consider pretty a opportunities. starting It more got good little for the getting overall see what again, would good a the overall to side, – for so now. loan achievement continue right a about for seeing healthcare a we $X.X Challenges loan given however the is portfolio portfolio, we So growth if the loan example, digits that mid-single net we of the to we're figure in competitive. going year market side, growth

now, are I'm So that them, number pending. certain. opportunities of XXX% one that we win we but have a hopeful they're not

receivable is inventory financed and to quantity Another loans by accounts equipment, issue healthcare focused estate The good shut down. real not healthcare ultimately HUD. A real our are going HUD estate. to financing financing is on related is and be timing. of

we average so stabilize the doing terms what given first diversity or will on. an we to very practices, up little say, early And will first better XX talking little that. or see pretty quarter but help quarter, that will being so in XX Note bit behind. different going probably don't wind probably also forth and thought up of volume we and a would be, balances, wind and until stable and little to And people. HUD’s deals utilization behind which close they'd growth we'll the be aspect. sources. be know, not late But soonest, at a) we'll a year going healthcare are important balance still So payor close I a get they because commitment average cash going to that growth those to bit as sets through more XX days flows getting be this will be on of more lending are

healthcare pretty feel good So side. we the C&I the especially growth, on about

that credit XXXX non-investment grade side, volumes a of there's On compression and more a is for because demand one, saw notice that's in grade leases lease shifted where Investment credit variety reasons. equipment. to lower the the lessor volume a of spread leasing to

the is for leasing But to of definitely just of extent One ability companies invest type that it pay equipment equipment continue use some is the to and and utilization area. thing is being that plan that. in an we're their XXXX of residuals. XXXX will residual of think We're by financing lease that's aspect good to of smaller financed cash still That kind of of greater funds, pretty seeing continue a Some – the lessors what in it as for being mark warehouse that that are to on are into the struck. repatriation lending, seeing because in will lessors I of of the accounting, especially agreements turn capital little quiet and focused nature is that investment question a was bridge a of part growth also that those some less in equipment. bit

the about If flat X% probably XXXX. portfolio. that's healthcare the of be then kind was driver again, growth, it, in XX% we to lessor feel a we that good C&I credit of X% X% but for XXXX. from performance to had C&I, saw So to return growth will bigger the But good

rate some underwriting. mid-single stronger have of inside will but opportunities community pricing the earlier growth of in and I in as We question, not And us, outside front that than stronger But to healthcare. portfolio both be saw bit Chicago. again, a we said, probably the part again multifamily of the to Chicago the the growth little probably due digits, probably in development same

Let me rate about deposits XXXX increase XXXX. We the little just expense think deposit in bit. of talk compared will to that slow a

can bit. a that little we curve think start down I to bend

the So deposits wholesale extent we'll reducing be practical. and focused to the the borrowings on

commercial commercial deposits. because some We in growth ideas some on have we've deposits seen good

but another. reduce XX that'll over we again ameliorate for think have strategy by XX, focusing the It's have in less time put on deposit We lid yield growth. useful example, down good take in hopefully than loan try we basis by have can see the of longer-term But or one And device a expense. it. deposit And the we a might points, deposit beta by for wholesale the we'll of burst be deposit beta average could the a we would where and the knocking some to to if ideas new It's increase that. portfolio reason, thing growing through on But that I think have grow sudden balances XXXX. to advantage loan the can. to we

XXXX. second in could so so of we'll And And than in again, an margin margin the XXXX. more rate successful of if side, on the expansion see deposit opportunity we're the half accelerate expansion year, the for

are little So bit get we get end on think mix There we might we XXXX. deposit that's mix, fairly quarter. right thinking. where thing the know be China, good after the into the presumably a can economy, people loan the government resolution if we'll up And more the by start outlook of the kind the first why for on – opens a quarter sounds have a about work of we'll first and like the on there broader to I we

so there's of market customer going our high temperature think that But most to on I reading the would much mostly a to of find the healthcare continue scale. uncertainty the borrow. are customers taken a in uncertainty

Some of industry consolidation is us. the benefiting certainly

smaller expect if in to going it's invest We the lessors trend businesses and to that continue. to continue even The lessees replacement are their equipment. smaller

don't they People opportunities. we a and just of level think So more sit absolute question might billings interest. to on of competitive multifamily the how of will will rates And lot the will be a it will a out be determine. continue that's trading it volume because a there. their for attract be, thing amount intact, that see while to refinance The will investor be real

Brian Martin

really That’s helpful, Morgan. Okay.

deposits, back going there minute. to going the so I for go was to a Just

that they at just the kind wholesale plan? to and CD's. the guess, the borrowings funding? we a is so of of that more improve more pretty I with of look kind funding level to Just game core you'd just Is look be like are looking on Is replace as what part low the you'd stand, the kind

Morgan Gasior

of Yes. reduce some it the very form flows cash deposits. the the coming to sources be to yielding those asset of wholesale. core mix pay deposits wholesale would commercial side two down core off replacing a and of those with principal of Use But cash commercial – low

Brian Martin

that? gave Okay. no on different built maybe That’s guess to about assumed with kind of the it what I there after thinking just you guess, And assumption not your mean and that I the is the kind on you was commentary increases that here? you color All that the margin with pause, but talk that I that the contexts Fed is Fed's when Morgan, just, – are I about it's increases, of guys does right. unpaused then the I was, guess, guess I of I extent what I about can rate helpful. kind change? I margin? how mean, seeing if your and no there's if rate talk you guess of was just kind guess of

Morgan Gasior

the year. do Well, something during we course kind they though, the of might think of

the we're a So that not it midpoint going took But a while, that half first a shapes if but little they do or we're first going you quarter, the assumption they're cut. appears and is up. just to wait they'll patient, the next saying, drawn see thing done how to be necessarily have line

of on points So or at the originations have maybe example, that, of assume yield portfolio the during said in to on year. X/XX. the yield chain the increase quarter originations the than fourth the one the you one course leases, somewhere basis end XXX for Having was lease higher

been, then curve. as and improvements interest income we we even current have in reposition we're in portfolios get some optimize natural if the going continue the So to to

of the five-year-part not lot So either lucky, a if get unlucky, little at of way. a continues increased curve XX absolute really increase And points expecting up of basis in December. of based from the down. help we're trends increased even we on to trend by portfolio points, we and terms basis three C&I yields, the little a If get an that it X/XX. to course whole in multifamily XX was some yield

can margin things in mellow if lot cash whole trend higher see rates. increases, where little out to we that's think continue without down even deposit a reposition the a mind, little have flows interest at we a those all expansion bit, we of bit, yields. with So changes do And to in opportunities expense

Brian Martin

the you Morgan. think leases? Okay. guess, money That's investment guys actually what's split just between you don't on the helpful there I leases, number? given And breakdown, but grade those in the I – the a market release, do the and have the breakdown

Morgan Gasior

quarter in It's the five supplement.

Brian Martin

get I have Okay. I I'll it. missed may it. All apologize. right.

Morgan Gasior

trends. X and it Page you on It’s gives the

increase So other and consistent a the of what reduction consistent you'll category. see a in grade investment is

Brian Martin

– then maybe in like bit was mean I right. at maybe is in maybe intact quarter All jumping minute. was that higher guess there we and Okay. $XX outlook And quarter? just about thought some just– items all unusual I maybe how kind was a to but for of I looked your fourth change it the or thought of there. picture, south as a fourth your for XXXX, in it bigger thinking million expenses is still a than somewhere just what you're

Morgan Gasior

for to expenses do Yes. million $XX hope around Well, get let's We'd XXXX. XXXX.

that as having opportunities get looking some million a the one commercial first the trust in the absolutely things, was and bankers extra Now for is couple of achieve loan said $XX the enough had through away in some we for XXXX. fourth we opportunities, in match that good create of invest may of of advantage create reserves to growth. four months we run But expenses may organized. take But around those the to expense. or to to we'll designed say and was in rate In you such quarter activity little we that, loan other new just fourth XXXX had loan then of see loan lower if and year a that, feather think quarter, we're loss the growth put to we'll do for timing example, growth things in a

because volatility you're to a reserve that bit points there about assets, little mentioned risk was be, XX putting higher it we more XX little right, them. is on which you this a think I points, around earlier what notice XXXX, or ratio so, in would the thought

course, pay to And related accruals originations Two, had income in some full-year we but we fourth both we away loan on first the to especially in the expense quarter. interest fourth quarter. more side, the money the for for in quarter, business we So comp, performance for did put that and in of for plan, the will them. so the incentive

catch to up, a in do we it So of had kind all happened December. November,

little occupancy is that during a in building about estate the right course now XXX,XXX. we the accruals concerned bit question, our an The bridge little We're a main a of So that the taxes. about down for quarter as only settle had higher reposition but occupancy and occupancy alone. should expenses the especially total We was incentive year. utility expenses we're real bit,

As in soon, I to already see appeal it's them. all tax rates going in properties them going we and anytime said, commercial even we after affect pretty We down have Chicago the don't area. our high markets

have So expense to side, again, million it should the that $XX everything given side, probably we $XX do. as the keep between we're as compensation things – million, million, else can $XX to somewhere going and the and we flat

Brian Martin

I fair Okay. increases no year And first it? higher to think the guess, highest that the based – quarter about and on not, for being what is the of kind

Morgan Gasior

accruals payroll to Yes, caps quarter, reach the the but open. in first of I'd taxes. so, say They start second especially because is for quarter wide

we all lots quarter, have snowing. a still plus, to always the the plow have it and in So first keeps expenses higher bit little we

Brian Martin

Morgan. Okay. for All right. Last me, two

give you’re today? the thinking Paul and how you and buyback of just maybe kind on the could about of things kind the an authorization Just where update – or if

Morgan Gasior

repurchase. I think them trading said and current we Right soon and we fully about going Board giving in would XXX,XXX the carefully now, expect it. to to very quarter, Well, have last the that expect is as shares interested remain remaining I expand we share activity, I consider that especially very

results now does by good some appear the for XXXX. and we'll if X pretty around of good And some soon. for But improve We'd environment, right then pop net standby, buybacks somewhere we share good shares. a that have shareholders. percentage we pretty it, about if the about retire expect $XX think do front another between on that's terms to expenses points and earnings have So year. the opportunity news margin think like you this during dollars, get pretty million a And X% could to it I per interest operating, in in X%

Brian Martin

you're the provide Morgan, in about just thinking I you I I shareholder And maybe Okay. as guess, execute with we you where later of sure the you've just see guess, of that. note, as as of if ROA? you agree plans here. this about guess far just, got kind talk you'll I'm think I the kind your of some through guidance mean, get I do – guess I how kind year about in think as some you

a fourth quarter at you look type in as rate you achievable? where of as If it's ROA run think far

Morgan Gasior

case mix, somewhere on of a in key and yields away parts XXX. a us, and XXX, XXX if have of between We’d probably the place. certainly of moment probably the parts time. good scenario moving XXX we best moving I'd there's closings, points. here to credit that touching it'd put pretty reserves hope is lot say in that's north on we're in given for much how Obviously XXX, we're any maybe spreads, be timing credit But

So revenues, noting income keeping considered residential fact mortgage we of taking certainly direction have doing and a get on going environment. banking out XXX, to pretty XXX, in we no volatility that so franchise in the this the non-interest and and without things this really construction though good both equation, we're exposure if all the think that credit we're – no job taking we

Brian Martin

said Okay. just the but Morgan, this getting just the you're that remind in getting. then – that you you're back maybe yield rates run on me, pickup And new

to said parts portfolio XXXX, grow you're going the So the in you and…? of C&I multifamily the

Morgan Gasior

of off portfolio. the Yes, relatively yields continue leases of enjoy because advantage low the the coming to greatest

obviously and to for on just was will the XXX But mix. change for just review repositions. originations portfolio the as that time lease the over in quarter, points the quarter basis the numbers briefly, X/XX over fourth close the approximately at rate reflects yield fourth Now gap that the portfolio

XXXX C&I Fed of is from biggest to admittedly well, leases had that in think will not good next then XX more of increases. quite And one continue out I benefit think your still the located multifamily lines C&I after basis the pop Fed And increase it two, benefit a expect many we the December. as on You credit? reposition multifamily. because and the within where you're And most have as rate point it? not portfolio. that quite borrowers as we we going are the are a What the have showing is will it Or are advantage portfolio. right, maybe the depend as perform loans the We and Of mix Is more to to get the where basic doing first will would next that liens? doing? continue

Brian Martin

And pickup? C&I XX great, XX better to about points are was about basis multifamily so Okay. basis XX roughly It’s C&I and the in points? the

Morgan Gasior

XX was basis basis points. points, was C&I multifamily XX

Brian Martin

right. All That's Okay. very helpful.

Okay. I you Well, look quarter. you've answered I'll appreciate to everything, to next talking Morgan. forward and it

Morgan Gasior

lucky, get we Thanks. if And [indiscernible].

Operator

the to session. Instructions] you. this remarks. Q&A concludes go F. This for Please Morgan call to the closing turn [Operator time, Thank Mr. At like I'd ahead. Gasior

Morgan Gasior

to BankFinancial. look to we everyone Well, wish for later in good we interest spring. forward their everybody and in thank talking a We XXXX you

Operator

conference. and ladies for attending the This you, concludes program. gentlemen today's Thank

all Good may You disconnect. day.