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BFIN Bankfinancial

Participants
F. Morgan Gasior Chairman & Chief Executive Officer
David Konrad DA Davidson
Brian Martin Jamie Montgomery
Call transcript
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Operator

Good morning ladies and gentlemen, and welcome to the BankFinancial Corp, Q4, and year-to-date 2020 review. 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] As a reminder this conference call is being recorded. I would now like to turn the conference over to your host F. CEO. and Chairman Gasior, Morgan

F. Morgan Gasior

Good morning. Year I'd XXXX Full Fourth to to Investor Conference the read. XXXX statement time, our Quarter Call. have and forward-looking Welcome At like this

Unidentified Company Representative

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

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

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

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

F. Morgan Gasior

Thank you.

schedule post release. our We or at along the Form in XXXX The press further annual At financial information XX-K have have will this our provide. no to FIVE-quarter filed later filed with time, quarter. report be supplement, we

So we're questions. happy to answer

Operator

DA Davidson. is question in first lineup the Konrad Your Instructions] with David [Operator

David Konrad

Hey, good morning, Morgan.

fees. the in be income to It's as prepayment hard but PPP, of then in prepayments know multifamily. and would just great? maybe there predict Obviously and maybe a left terms help and with questions into any us on some bit little normalization loan I a there sort NII. fees of couple unearned what's balances of on just out volatility And prepayment fee Just well

F. Morgan Gasior

do let's this. Well,

Your some closer rate between non-interest and fees, in received if non-interest for terms of the million the amortize in process, fees. the to fees essentially to forgiveness. years. are loan goal you loans the now $X emerged the five very loans round now you to $X mention that, income, $X know, went fund. has other loans this And unearned little to is of now to worth done run our PPP inclusive back PPP of somewhere And Right we've of Probably in somewhere $X 'XX actual to normal we've and million. do little also a million approximately and accounting two 'XX in opportunity was life have of the over income doctrine for are those right two PPP about loans some the years taking over started and million

more We program sure of PPPX of also of all moderate probably And biggest uncertainty loan forgiveness. put that that the on certainly income income, tracts participation behind PPP to drive make wasn't volume the right businesses community, pace a strong. PPP small now low marketing reached the as is and census could especially the where parts PPP we but

less of back. $X our than $XX We forgiveness. million original we've And of million over for have submitted received, forgiveness that XX%

to borrowers as up which forgiveness. to further PPPX, it two quarter, on drive could second are apply early So for quarter and some little PPPX latter we get forgiveness Obviously, going into of faster first for a bit make 'XX. we'll have into in to I forgiveness of choppy, that's on hope rate income think to to acceleration of 'XX rules a what's the the then part would see then the what and [ph]

we principally we XX% sure pre time. to has on some that the of we're to apply that making this borrowers receive the receipts outside income, and upfront, Chicago, due we of of have income when aspect another to information gross that's of Prepayment appreciation were for the the managed. PPPX necessary forgiveness property. collect it's So the be so payments from pre markets payments In

a after Some time borrowers rate strong that income penalty the prepay relatively the very almost such the expired property in in their the other customer at were XX refinance one in prepayment value properties. minor did had we talking One just was year points day writing cases, precisely, check In about period customers a them. cost. had for doubled to where a we that three a one transaction appreciation prepayment in that was below

be So there really will hard do think to they there also sales, get to much due of as continued cash that We project to out these it's can. predict are as people prepays properties income. trying prepayment

year. incomes hard prepayment improvement XX% the over say see to normalize, in is I'd about So year we trust income, did some

picked like build activity we're going to some AUM. build assets management We 'XX little of resources be the markets, a course all to that some up adding the further the notwithstanding to So in see the department ’XX we'd bit. to during probably in under trust

well. try right latter we're they going interest if them will lucky, 'XX, the additional in they'll to Treasury second seeing XX,XXX and But how services as market latter to during part. completely trust added perform contribute And the between, officers in of on interest, the month run is XX% So improvement obviously dependent the to say to probably of finally, rate somewhere robustly you see But XX,XXX getting we there. I to quarter they in some half a get XX,XXX XX% or the a of non we that towards begin operations, could maybe departments that influences year, a income the we're more to know, and XXX,XXX. XXXX,

noninterest little But than then year closer we with why So be with higher be we'll we'll income, commercial total to these finance into to to maybe try for $X we add seven. would that sustain in a said, somewhere as things million XXXX. all that hope think we more that's going capabilities, PPP, around the bit

David Konrad

you. thank Great,

Operator

of next from Your Brian with the line Montgomery. is Instructions] Jamie question [Operator Martin

Brian Martin

Hey, Morgan. you through Is through morning, The non-interest or income? flows the that about good the Morgan, income spread made your flowing the that expectation is PPP. comment

F. Morgan Gasior

interest going margin non-interest through that's Brian, income. net --

Brian Martin

Okay, included so that's in the spread.

XXXX, Okay, you're whatnot the of growth And this how the how and little you and perfect. back kind how recent thinking about you're to the Thanks. Morgan, trends we've that factor quarter, but you about just how size maybe, sheet to the in kind targeted where and about growth guess kind goals just a just are, of, of think just talk today and the payoffs of can and I about of get bit in kind seen given thinking of of your the kind 'XX, it? balance earnings

F. Morgan Gasior

$XXX year. in without million market department compared originations Well, momentum under year. middle half small that did And the right department off in ticket relatively some they for of million the $XXX the to just really was finance, contributing late pretty Equipment the in the the or in in 'XX. get because that bat, second and good about we started have 'XX originations much

So originations will 'XX. be finance for equipment leader

CNI, on to for see kind rapid lease. it and we healthcare if that. saw including did little number the some bit just between a for a both also 'XX. capabilities added in and market see Commercial healthcare. didn't We've of 'XX, one of prior the in especially in execution of quarter about exactly it, for at of the producers And is middle number, discounting amortization and which expect the credit think that less million million equipment builds do justice momentum somewhere on little in volume But the is we had of starting of of activity could quarter. expanding end are to of activity going 'XX we build funding see beyond on fourth growth finance, that that on $XXX But bit $XXX a ticket. formal be $XX we that of because notwithstanding but lease, to portfolio, other week. of We that growth Not the out even based part in on the we lending work can of we growth to small new we're side a asset every that we we the of million draws, much

Chicago. bankers in of if 'XX, in think, better $XX real we we than the We you another we million put between in card, of $XXX to commercial growth do million strengthen finance. finance, strengthen $XXX is did then wild $XXX two, there commercial we equipment million the about so In originations. million are originations. know, new or of estate, finance, real to outside hope Chicago; we markets around seeing million and So stronger $XX estate more that, And do we'd maybe

So good see scenario in multifamily. million to I think our million $XX to us be for $XX of would growth

all be middle if million contributing, that more market equipment in of bit $X if terms with look position the we small leverage. ticket market in to do positive it's in million And the rate a all contribution are million, depends you less, about could charge. gives the $XX do in around governmental around of given mix interest million So our slightly us of terms the a number small most more be higher. told are finance, cash finance corporate ticket yields $X $X.X already gets if $XXX $XXX these fact and probably so we in, pretty income leading a run and could of million. million expenses at on Equipment little that Multifamily middle that with operating that forward closer do

to of and non-interest David's bit So back going income. little added then he question, a add

in the won't growth year. that side, expenses. low much on And like again, side to the expect million side, we'd high somewhere we see million So $X the and on change income $X total for the between the

we forward terms pretty why that's in view think of a leverage. we good operating have So

Brian Martin

in to and million. million million. $XX to $XX that just And And you to the of commercial $XX in you're finance $XXX to be $XX million million group, equipment what the thinking Got million part then I $XX the the of it then guess, and net was $XXX was I the what was catch the, million you. clear growth in said didn't the growth, more

F. Morgan Gasior

I mean real estate total. all

Brian Martin

you. Got real Okay, estate.

Okay.

F. Morgan Gasior

real in buildings really selling And prepayments money. estate, can't a the you that's predict principally we making are people know, lot because of still

them replacing outside of And some of assets multifamily. the are

a of, a building, borrowers real asset he cap a to money he [ph] bought turned rates and Obviously, So investors multifamily other loan of not ton one into that's commercial on of are in that tenant of on of bit And a X.X Did want goods, kind moving things. range. their cap to example sector building, little station. go estate to around single because the volume. replace a gas money X the eights. were sporting multifamily not that's taking as our professional who made in back couldn't our the of an But some rotation, class bought and

think see the year. they right So can about we In of typical; That's that's commercial the the lesser the place. finance, at prepayment million we then credit the the could grow also downs why in will customers last putting $XX that year, leases two be had we we in lying of been still have of but pay discount volatile. end weeks

you the benefit of of balances decline the at quarter. quarter. But often the get end income the right the you during So see the

not We're couple we're as less or three that's growing on the different might average or balances first in our growth would nicely quarter proposals Adding And working could less in or much right consistent a for see. or time But as theme. for rather years. a context two one almost new million. the balances base So the But $XX two or show less another. or three a end now you again increase. otherwise period

XX skew amortization So we our little segment. market that feel more And months. optimistic equipment the tends that's is particular biggest just XX to bit about a the challenge, to there finance, of why rapid Middle portfolio.

So down cash it coming the cut amortization and flows does the back.

tends be government shorter hand, other the term. On to

a that XX months, us maybe balance And all told. months, XX so probably there's around takes

comes And so work of back. growth opportunities the annual some again, appropriations we choppy also payments. there. rapid other and just But see tends cash one is that that's And government part annual amount on this in to cases by some tempered of

as governmental, because lease sudden relatively low annual you'll might on payment We've of terms over a portfolio, payment the in a a month. spike, and tried choppier you have that one But quarter payments come it'll little quarter of lease more at quarter. then account So that. see we do one in get to all see you'll for of and a

Brian Martin

you. Got

Okay, that's helpful.

thinking talked combination I liquidity, long the leases, is about, of investment growth any Just point, quarter, some loan there kind of liquidity to the as change the and growth beyond the you're I how just excess mean, a you as Morgan, you grade liquidity the think putting of about can outline well this But you're of at loan are on into some else last kind anything deploying there doing? point -- the growth.

F. Morgan Gasior

Yes.

deploy finance is our fourth for Our But don't commercial still in enough excess yet to Because resources liquidity extra excess quarter, numbers a numbers in necessary on the finance we -- busy we have there. it equipment didn't the the focus were us. liquidity. priority

on not yields Now, those let's assets that say exciting. particularly are also the

pursue it. overall pursue bit months, we did what's not. want start it. But I in only to that until XX performance, make You going to but nonetheless, delivering know, would We're better to yields not 'XX, income, pursuing as certainly had transactions. predictions we it to we continue there. to into But we and I've seen is going And actually continue under go beneficial it. don't the a will have little we I will hoped ones X% for low about

quarter. first run for talk on the focus a rate, some next the put numbers a better second get in in now I'm it's And once to more quarter. conversation. handle and first flow So a quarter can about up we our we then in hopeful

Brian Martin

update some the were where deferrals guess, just And end? you. can provide update deferrals, you at year on Got I on the

F. Morgan Gasior

due as have the ’XX collected, investors was investors. in with real achieved plan interest in for estate All differed of the one an the for under estate possibly due that as in deferrals little issue And the the the One are programs preview, smaller on In goal. estate a really for And will principle goal, could from the to $XX two much investors. We $XX,XXX be due to total But smaller just ’XX. that we of to a 'XX given plan million. we XX-K. for The achieved balance the not in real that with out we detail we collect as principal was was BankFinancial. were larger there, flexibility is total was more all real loans that was 'XX, $XXX,XXX. loan put

ACH position collecting de-minimis as feeds the absolutely going portfolio. us an it's So around we continue during the 'XX, maintain for money, focus in growth we of quality now, strong And cleaning opposed don't gives amount. up everything on and a the problem anticipate to The actually any rest year customers payments then that just clear on. as fact the problems very asset despite into to the a

Brian Martin

we've from the level, if at criticize seen about this much I I of kind we Okay. quarter previewed criticize the on to in guess, think is figured trends how back to what least not the based saw from I assuming material? changed supplement third just kind quarter, look guess, guess, assets in of I'm were, I you

F. Morgan Gasior

we it. that customer their covenants. to I there with a are with a anticipate don't really be And not we in but one go have through to Well, we to deal problem, through working have is commercial compliance it process that.

do elected with to And or Beyond anything not with customer. have has it their I that, covenants think a it's CNI anything don't Chicago else. deliberately. They just comply pandemic a to

their increase the in, trends income, net beyond annual see, annual obviously wouldn't see service for -- you as income, a XXX-XXX the 'XX, some in nature for some therefore, if, reporting At of a reviews so half, wouldn't same as wouldn't happened. might and of they strong. a strong debt in weakened rental and be And we or just had see it classified cash loan vacancies flow. their So could customers they had service the into underwriting had to that they what in could but annual and danger some assets, surprised violating collection portfolio have enough cash their of issues, that, some was the result available example, operating be they recovered comes criticized their just were reporting; covenants, We in had going XXXX. the where the necessarily be time, debt the customer in but as it's second negative certainly it

income in comes we're of depend especially So results; asset may estate on focus anticipating really the the of significant real of of choose we'll sometimes in. they try worth be to but see some validate making seeing financial this the noting, versus to feel tend trends but a capitalized reporting not problem not now be we the now, we'll that report call it any accordingly. that quality, manage do the how those expense mindful annual they're the expenses it's capitalized right reporting But expenses of have continue we we the tax distorts will right how to portfolio, and to vary. portfolio, to should what on expenses planning, that reporting, borrowers we actual in or results and about we're sure it good And

Brian Martin

Gotcha.

level, about last quality, you're your in of guess, of Okay. those and you see kind capital; and then just how the -- how just credit and and different capital at of with it -- there -- reserve the trending years components growth the the of kind for Morgan, 'XX? I factoring deployment, talk on about you as And reserves just just can you quality level thinking the the couple reserve look towards in

F. Morgan Gasior

and then first, we'll a Sure. Well, let's capital. [ph] go do AL triple into

take particularly risks portfolio, release, the to with the As in loan and again, year, estate so the particularly, Chicago. and in the so, respect in the in you precautionary we measures throughout to real press and portfolio, continue noted inherent

Just the that cases, to will Therefore, again, of and inherent impossible. really risks. we reserves as of those put growth. would or us is some some to overall be on we balance right levels But then those surprise it those change; traditional decided general of just it that to would they seeing same growth; impact assets. about need now available harder, put because always reserves of so on finance don't restrictions And us loan and loan into reserves precautionary a things almost more landlords equipment the evictions, so mix those we maybe less. the away of redeploy loss not it stays those reserves, our fund The reserves wouldn't for could of normalize, more, little collections, are bit reserves goal have same, the hopefully maybe in the a makes little amount -- huge about bit a set

real we So the the grown would And fundamentally, about if that dollar the goes have might balance it recovered terms. reserve will extent slightly real those the of finance balance, some commercial we further, hope fund equipment and bit and the portfolio about like same, way of lower we've precautionary we but a stays growth. the we've the stay reserves, we'd like to. to therefore the -- in have the everything same the then estate allocation see hopefully finance To deployed little a estate portfolio

Brian Martin

Gotcha.

Okay.

F. Morgan Gasior

is strong good and our position ahead this The obviously advantage holding one, as position. we that to of to take expect Russell much the and do and company in market As we're of XXXX banks to feasible. cash as going a far obviously, especially, of Russell the volume a be there ourselves us. rebalancing; And is result year on ended looming some including as best for as the capital concerned,

of there. get repurchase in not might share but much we mindful to kind quarter, see activity out the for So ready husbanding first rebalancing we're certainly Russell resources very what's

best through. the But what's have as there, and wonder our and is certainly nonetheless, the devote to week GameStop getting valuable know we're when You world to to out feasible pause last changed. we company it in XXXX the to manage most that has going do through Russell resources

Brian Martin

Gotcha.

outlook just expense any -- on takes the the -- what -- as this Okay. just expenses any the guess, expense look, point or XXXX just on far from or and In as at standpoint? an the puts I -- front, for I mean adding how people

F. Morgan Gasior

of was XXXX; that and it closing Well, producers almost million the with production million in new we worth or $X added credit offset whether originators, in cost reductions. and we support approximately support, -- $X worth or of analysts,

we've already of So this my again, XX%-plus point the made growth. generate we amount investments leverage; it to of goes about about asset to need operating

finance, keep week, commercial this trimmed other also a here manager also this lending healthcare, added Chicago, expenses new a we outside neutral. banker asset-based of added equipment general market focused we but finance in for department we who is middle in places Just about on to have

expenses first So cleaning, of especially more like protocols; expenses, still we security, first generally, because second for COVID, trend, for quarter. in are and the health with to expect to couple million quarters, quarter I'd $X.XX

of have business data of put currently also over carrier quarter, are of revamp -- overlap process in moving in voice the we infrastructure. a the to about we're online communications new our a way just in fourth but our we're digital We've our in communications, We technology XX% mode. banking and through complete

the they and be do is year, of the to going branches; out of on the the branch looking we want, properties the and we're during occupancy expenses to it. using at One, then back customers the services half customers still when that facilities cost is still going our to our second to to real we're ways the in unfavorable year, of some the the want so first that deliver reduce the development best the coming estate going Chicago. figure can half also increase seeing year. there the taxes continued we're But course just So of be during in

have completely about interest the momentum that get the the we're two of liked yet, income, then closer part a XXXX, you of we is glad by of first to don't say Brian, might fourth for net so have the the side, million half back the margin we try on interest And $X.XX see all we million we're our the going goal the these our year employed the that get going the asset $X.XX net at bit little on range; 'XX the trust and take all year -- it's to help in -- time these services $XX beginning if resources more whichever rate more or ability when the story or million into in, million to side; we we back that column it. the already Treasury quarter. generation, I'd are But can by operating whether pure that if end rate, run but $X.XX from into hit; the is work the not year, additional in first a is in income, $X.X good the we you the this of at feeling that activities; range down to to expenses from EPS take momentum pandemic provide and to have thought we've better. run year asset PPP we into -- we're challenges leverage, the results it's So, quality quarters, on to finished to to execution going still the beginning we're the the And the be about fronts. going of just

and we're [ph] the XXXX. with to to at tune think our on go the to we back in it original why a build able end something try of goals, in there get So the to that's year,

Brian Martin

Is think of Gotcha. didn't share on That's with the of the 'XX, target? that. helpful, guess, million guess the kind $XX the of as I a the little think your far all -- change around of hoping the on you for Morgan. the And you accomplish expectation share and the it all in somewhere it still kind repurchases range. the where Just bit last talked of last just the Russell to some maybe -- the Russell? -- changes I getting me rebalance I were where with I really the quarter kind was as kind -- one of of just share was that outlook countdown timing timing dynamics about

F. Morgan Gasior

a that's Russell a dynamic It But to rebalancing it different surprise is to certainly and the discussion does is beyond create wouldn't we're the that the recent want wouldn't than go me level. account. been into a right I now. originally we I board completely taking target. obviously, planning, it; at board commit that

Brian Martin

Gotcha.

Okay, in perfect. in color with forward all I you -- up appreciate look and XX the couple I a days. to catching

F. Morgan Gasior

all very you appreciate Brian. Thank much. and processes, questions the thought We

Operator

questions time. I and turn am Chairman at showing to Gasior, no now this further would Morgan I CEO. F. conference like back to the

F. Morgan Gasior

for look end to XXXX into in support you the your Assuming to call, XXXX, the forward no and our other continued their of questions, to talking next we and We'll of thank everybody at we quarter. BankFinancial. continue interest had build on momentum we

Operator

today's your Thank wonderful this conference. gentlemen, a participation. and for Ladies Have you concludes day.

disconnect. may You all