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BFIN Bankfinancial

Participants
F. Morgan Gasior Chairman and CEO
Manuel Navas D.A. Davidson
Brian Morgan Janney Montgomery
Call transcript
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Operator

Good day and thank you for standing by. Welcome to the BankFinancial Corp Q3 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. now today hand F. would to conference I speaker your Instructions] like the to over [Operator Morgan Gasior. ahead. go Please

F. Morgan Gasior

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

Unidentified Company Representative

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

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

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

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

F. Morgan Gasior

you. Thank

As all filings are ready Please we complete, questions. are for proceed.

Operator

line Davidson. from is D.A. the question of Manuel first with Navas Your

Manuel Navas

morning. Good

F. Morgan Gasior

morning. Good

Manuel Navas

what expected higher than forward, are talk your and are two new hires. lines about of you it had producers, they And on? expenses expenses quarter. I a you I those some quarterly if run bit One, looks and maybe you are in? similar and they're Can like investing to what going last hires expected coming rate, some questions, new have expectations -- guess, we were

F. Morgan Gasior

types XX bit a probably on spend fee but commercial and be commercial high we'll make somewhere on improvements be and and interest in on the commercial asset certain types in the We'll depending compensation, expenses a some between side, other of specifically little the side to volatile. generation range, will income. and one, Well, deposit of will compensation, generation Okay. low Compensation seasonality. money

we're So, sort think further, range. bit for again, much, seasonally, in range, year a part could that's see example, could it'll either drops and a occupancy plowing putting of I way, with quite little for an some it And as spike incentive and be compensation. but that. winter something It could little like bit. of of not we compensation or that's that the snow example, things If, in go a a early the

on continues be like as the I originations. investing would say people, far focus to As C&I in

in see. third And added months, we're estate, end accounts and shows scoreboard you Specifically in is little their balance lending, in side, asset-based The glad C&I finance government finance, we'll the the had the commercial the also finance, with and results on stronger which It asset the seeing, utilization, commercial the equipment to nine and follows less now areas originations, C&I followed well. plan. we're we right the to first facilities. transaction, and at But and business the finance by by people the last focus stronger where get quarter. basic based capabilities, as or on in followed multifamily equipment the finance quarter receivable finance, factor lending bit especially we've real the healthcare the that that third look in at continue factoring factoring a

Manuel Navas

That's with we're a amount. good up originations, loan growth great. Shifting helpful. That's over to

that drove Can So, talk payoffs. trends about those with you both increases?

F. Morgan Gasior

Yeah.

growth see the to segments. we across First at pleased least board certain in on originations, were

multifamily helps loans And it grew And originations. the that we So, like obviously it's to payoffs. their consecutive in for the see in actually example, that fifth we multifamily fight growth quarterly a grow important growth, had not to loans. originations. And a category huge by multifamily based it's lot, on slightly. real we though but commercial focus, we the even strong. was not Again, very grew quarter, finance Lessor estate stronger did note

I quarter, customers we're get contribute thought seeing with be utilization. to and commitments third book continue new think It quarter. in for And start now the stronger quarter. healthcare will some actually healthcare new commitments. some we Healthcare, But still is also new volatile, the payoff. was transactions fourth We we'd third would coming it some and it would in draws late thought new here we somewhat on to than

transactions So, happen right -- of we'll get and they good down. discount, and pay same a at ready cash it, they slug and get quarter, the look need They'll that'll for then then might in The to true have money, quarter. of they activity the lessor at the is it finance. end but during draw

of that changing. is some And activity

in But $X example, portfolio paydown, about got customers paydown finance he one million For that lessor his of fourth quarter. usually and he third organized third instead done our the did happens a deal quarter got of quarter, in in December.

as we would lot and out far forward, some I of market timing are payoffs as change So, issues in say the really there don't multifamily. as a going there see well.

twice these to payoffs finance, -- to we're could continue we big for expected that or multifamily. a rates, capital a off. this unusual levels, more environment changes ago remains, less the but just as truly offered being activity. In would had just seeing may we they prices months he for a XX at see, borrower long it expect little we especially never again, sell for predict fact, now And and a and pay motivated about who those building, downshift gains rate and by and change, In what in paid as necessarily on buildings payoffs in us equipment people for wouldn't be approximately more they're not

was leases prepayment again, a has bank, the elected a that our that because bank some now. right things it bank doesn't to and shows of happen considerable make independent unusual all sold market a kind the day. you going liquidity, are every But and excess One the the on of of the payoff in to lessors discounted

that I some So, think for And also amortization activity we about we'll continued some $XX than would more see payoff We'll do see activity. see quarter. we'll probably at fourth have otherwise. least million the

government in for fourth the the historically activity a federal in So, September portfolio, quarter. some quarter, -- equipment -- lot the typically year--end quarter is of and -- year-end government XXth, for the calendar third in finance for example, finance third gotten booked government

you in, well. those naturally coming see payments periods the So as in

in So, second for were in quarter. million more approximately example, than in government equipment finance were third schedule -- they the payments the $XX

that's So critical so for the why volumes us and that's putting we're origination's people. why the into are money

the payoffs. down we've coming So overcome stronger in to than goes grow as got see really a growth and then portfolio the and we'll little there. moderate the the flow on time environment And rates payoff bit, slows some as that one, the average

Manuel Navas

wrap the growth you or great changes XXXX? That's year it If of of towards end detail. to we your up, into is the go outlook as any there kind

F. Morgan Gasior

we've worked I'm on with consistently. the rest numbers going to

million growth close Our to goal an X%. every is $XX average is at -- as to of quarter of yield do

do because primarily the we did that line payments yield and So, -- some weren't because of in paydowns scheduled the of less originations draws. on third But had growth XXX, quarter, and in we a expecting. we all

the payoffs in So, the were quarter the in of favorable. favorable control was to level originations mix was quarter overall we The can't And the unfavorable third third just originations of payoffs. factor.

grow to mix originations, the So, if the to change. yield continue our goal could to -- continue but for is diversify

but For of not are our might of under of We're supply getting the and get investment yields it's the example, And it delivered. corporate And The equipment an be liquidity in equipment's to focus, corporate another the chain. third third those there in floor might equipment portfolios, quarter finance. the and was during finance. X% weak it grade. corporate. yields below be was in spot But Part into opportunity part the back put might with probably moves excess be try in we especially to think going and that rates corporate quarter, mid-twos. part for

portfolio. the change So, therefore where under the example, yield, the X%. finance our But $XX there is could most, million you equipment It's see control thing the would it's mix C&I and might for better and in focus quality, diversify originations. continue the lower see you portfolio on but be a the to can we yield

quarter example, some they So, our total quarter. of in equipment into are fourth pleased and environment, achieve goals going diversity credit making ticket for yields. goals pipelines have a originations. originations help moves in small flattening. potential we and you They we're helpful. third Those quite The that middle rate of both are yields help good especially may our and be also finance for see average and XX% C&I rising were were XXXX, achieve to strong for market And going if but risks on

Manuel Navas

back That's other have I step can and questions. you. great. Thank

F. Morgan Gasior

you. Thank

Operator

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

Brian Morgan

Hey, good morning.

F. Morgan Gasior

sir. morning, Good

Brian Morgan

minute. find wanted out going for I Hey, back Morgan, to -- maybe the hires to a just

what be you -- Are kind are adding? are? kind opportunistic, -- or you still you're -- you made -- I about as what there can quarter far your how your with are places as other you'll on you that? round your guess, you say complete of I there last is I Or were capabilities guess but of talked largely you know always expectations progress what out have Your still full of today, kind hiring expectations. you still

F. Morgan Gasior

some of but probably shape. we're be. in we're they underwriting. are markets, But some won't finance could finance tremendous be benefit to now go both the pretty resources of better say again, resources, close some And for reposition good involved be We're both two pretty real Government originations is finance making and are should close in terms the in commercial but a results. of I Healthcare selective by in potentially dollars and terms stable equipment resources estate, the around pretty horn, We it right from producers around. controls of now. to amount we for to money. want for I'd moving to or where movement full. is the if one Again, where moves

on to in say the to is producing. the The complete So, are XX% if resources and build-out. sure focus invested you we're course, of shifting making between I'd outreach marketing, we've it XX% and add somewhere up, all

Brian Morgan

Gotcha.

give level by high already $XX the the -- expect what of color coming greatest kind components think million a looking segment, some what's about from on Okay. your you I That's driving growth just where's -- on, the on you're as from? the just the as far then just your bogey, of what guess mean, or at, growth briefly, front, kind And as I you helpful. can target, growth

F. Morgan Gasior

along Yeah. that's obviously little next, equipment finance commercial bigger, Then scheduled portfolio C&I of We'll see see it finance should C&I harder of gets grow. the area in with so and finance also first, part lessor the portfolio is the equipment after lessor the some payoffs has and payoffs, prepayments the finance, finance multifamily portfolio But the and healthcare. side it be you rest that government, to the will then see Equipment most. and gets the then a in that. as of volatility you portfolio of finance Again, story. the some

message also of work seeing is market starting underwriting think from pretty is make to see have refinances. but is the months same rich time deals for that they're window there's and next an We rates forward. get lock volume been And where perhaps an harder transactions if on well. or right priced just selling, still the planning We investors refinance not it's purchases, move refinances the maybe now, historically the Perhaps up open the perspective. But in in to now. six the convinced a rate. the to the have that And not multifamily. still going market to point so, You're on

rates think lower. could wait go I because I'll

C&I, healthcare that finance, them, and us, in we have order. to window the for for nine finance -- six perhaps months multifamily and equipment but closing C&I So, another in that equipment still is

Brian Morgan

Gotcha.

what talked in in a of far you then, giving And at you people about kind I the look I sustainable staff, side. -- mean, the what's that are I control originations as level when were great what conditions of added payoffs, Okay. what's as this can't mean, how go expectations originations -- of and a given we line. at of least current kind lot origination monitor on kind you quarter. kind or the guess the your mind, you've or targeting you

F. Morgan Gasior

me for early it's put little a think, I to that too out there.

for now, I fourth be me a quarter. next about Right talk that'll our good think question call. let

seen pipelines the going time good quite strongest that's lessor fourth the among and that quarter, growth probably positive. some have we've given portfolio, into a in finance We in

the good estate very good market opportunities well. we multifamily and commercial real that seeing have We're We October originations for a to had originations fourth in seemed few going actually be Chicago workable. the into as quarter a

talking it the Probably we on process, too put from we'll So, favorable. it that also we some you I ahead portfolio, to that the bidding to than we're lessors. look right what government do certainly out early It's get do. think expected now, pipeline to through Equipment is hard that finance, months on four a but as where at. about we've run but also much more to additional been hope grow would to rate

so quarter, -- will equipment to market, improve. outstanding, about, be we -- door after not ask next be fine, commercial put Corporate, right But, category. Middle I one for more we'll I'd So, better for get I get look think our we finance quarter the the like a still I'm ticket handle that really now, transaction good, small fourth then good and next finance. but probably Government get concerned think, we I'd it maybe to marketing origination far. a finance year. to If we booked year in good. corporate will continue say out on government probably

good. pushed fourth of XXXX judgment and look to rates the see out what I'd line, more reserve on actually marketing look So, like. we door bottom until the response the quarter originations like

Brian Morgan

didn't like Gotcha. That's just we was bit guess, category then a fourth -- just the come could more fourth when And some net are that give payoffs in net number in next the growth -- just and to but quarter you higher. little it helpful. and the I Understood. quarter, but I clearly, mean, sounded quarter be -- thinking maybe on next of I I you year one touch about a guess, -- big on mean, in guess and or today? growth, it look fourth picture, hear I year, growth able kind just how you're have to color I you net

F. Morgan Gasior

finance the paydowns. I going I'm said for we then in the to portfolio, larger fourth with and guess go I paydowns -- the earlier, quarter, have, multifamily equipment as

for But third originations million our for already we're so, our you make payoffs I who stronger thought apologetic next than getting quarter have we're these saying, deal. penalty, on could the fourth I do -- to quarter. And the overcome plus look, never in were believe get XX which paydowns I'll the but fourth selling prices. don't from really in I We're that, I'm getting calls this means want quarter. again, $XX are originations year. building. take about prepayment and they borrowers pay your predictions calls to I'd are I

to achieve put didn't be before. to are said the $XX the year. quarter. resources that place prefer like, certainly wild fourth we strengthen have what with per question, why to it. the That's stick net payoffs in reserve will And looks the grow And additional to that. X%. to the quarter million earlier we the help What do for at I'd probably in million number to to from originations going further But Payoffs what in next they I'm $XX So, card. goal is

think And to for paydowns also I million in you very good can't see it. we're $XX not be I more result, any big fourth assumption right us, we that now. that's but the very, overcome tell a that we million think this assumes going valid grew actually can If quarter, $XX quarter. a I would to

Brian Morgan

Yeah. Gotcha.

that Okay. And the was just, by about how the is margin dollars, I and guess, lot margin dollars about the here driven how -- next quarter you're of two? mix, how and thinking but far just all you Helpful. -- percentage about the are as the the or the quarter your I interest net it's -- margin in interest margin stable this guess relatively net mix or certainly thinking

F. Morgan Gasior

I for up rise before income continue glad bit. we in Well, point yields were starters, quite payoff we as interest up and interest you fell well. to margin up And -- see think and the net a to a out, we the on point and stable little were did income picked provision originations spread. The bit picked deals a picked the

up the even us So, in actually much X% can cash And even margin I'm we of and pick income some the going hopeful if actually sitting there, bit. that obviously range, to increase assets forward stabilized how and lower for that the has a picks out given the was contribute marginal interest mix some yielding up.

think long I the a originations We're interest time. income continue, changes So, up as absolute level expense Therefore, go a increasing lot of and the of expecting now. little over up. interest margin as good feeling we're should right originations, pretty in bit really goes not

Brian Morgan

Is any yield into curve of it's at maintain originations where going where Gotcha. liquidity it point, higher? to is securities continue to you that to into with the expectation trend as this any see still or there the kind -- loans the given go deploy at of

F. Morgan Gasior

started. question. a conversation good It's That Yeah. has

world. than could securities Obviously, us bit potentially of a terms unquote in thinking. both you Reserve, into in earlier focus bringing the putting the people little more increases Federal a now with see quote parts funds there's of fed moving and think shorter I into taper were lot duration right

up and and work that. to just Nothing higher. other leaving duration, would relatively area, picking and it it still maturity to there's even and possibility holding when relatively about reposition arrive short-term a short there at but a cash. some fancy, stay all it I up for yield, put bucks there's think then So, -- cash the might some move we do in maturities the be some securities of then worked just some complicated, nothing some few but have those pick off we've opportunity can And we

might've yield protocol sense. environment. So, rising make I the in point a curve gotten rate where a think might standard investment the And baseline to

Brian Morgan

Gotcha.

one Okay. two for just me. makes last And sense. That or

expectations, I reserve given in the the still here? for more guess the should just how they this quarter, we the recapture levels reserved on some growth, growth reserve about for think had Just you on oriented commercial other areas, particularly businesses but general,

F. Morgan Gasior

away what happened. or glad and of Well, would reserved have we it. more for that's from And put to recovery been off had C&I, charged were The we getting collected to due that because that. cash -- growth loans we that reserves either been like and do to was

So, about going we're is to too. provision that forward there glad reserves, say COVID. remaining I related some about excess would still

the So reserve as strong. you've far, seen is quality remains ratio very very asset strong. The is coverage

then reserve in I loan recapture recovery say growth some a the a but So, bit that the as and reserve based the a the provisioning to out on overcome given quite we're provisional period in will potentially mellow in have reserves, fourth should we be of after we I that we'd would of that, quarter, see. from probably reserves there possibly year, should that next growth. much just we that provisional have whether fourth expect recovery that after would to to release of net loan quarter as hoping have be we'll can, possibly and again, growth soon consume But

Brian Morgan

Gotcha. Okay.

be burned of you've of couple line once year. couple here should Once you've bit the quarters? what the next burned through you a got a next little -- growth positive So, through provision --

F. Morgan Gasior

would objective. Yeah. be your That

Brian Morgan

about just the deployment dividend just -- either the or this best buyback this then at are And still just or it, how kind capital purchases should you and the share just about on were strong front, thinking there's of point of how Okay. think capital -- we quarter, disseminate potential obviously lastly, the that?

F. Morgan Gasior

limits capital's timing I buyback say remain perspective. regulatory stable. nearing limits We're on from relatively to a going would --

regulatory kind used not of And perspective. not of capability will our that'll really volumes through they from next year. M&A the of now. of most looking right buyback as before. So, as -- a We're our quarter We've continue be first all excess strong at were

on focused remains to if asset say would focus origination be Our growth. the do organic I area. in it's we going M&A,

they payoff payoff buying finance the got equipment the we are asset discount and finance, a example, off For equipment $XX lease was they paying bank in equipment want unexpectedly due originations. corporate of an million a to exposure someone the independent lessor,

that there's another sale. So, could example an lessor a of we do. And we something maybe of have exploring know we

that So obviously We expect -- But on prefer that working on resources side. We activities like seeing focus to to like I growth, out activity to our additional growth. is that's resources we'd don't M&A deposit our also income, focus material progress. make area. now short-term, resources right growing And in our starting relatively treasury we We'd focus any business really early any the the we're not to deposits. on now services need I on organic trust would in and some there. -- signs which have organic some

remain stable couple that big of expect So, not would any to expect capital quarters. right of would I know now. over the changes I we next

Brian Morgan

Gotcha.

will Okay. Thanks questions, for step taking the Morgan. I back.

F. Morgan Gasior

Thank Appreciate your you. time.

Operator

[Operator Morgan Instructions] this no time. back call will over now turn I Gasior. to There at questions further the are

F. Morgan Gasior

on the a what are of question customer we're branches. couple before that One, asked about terms what's been branches. and But asked about is facilities. in interest with going of we things thinking Thank wasn't it's facilities, you. seeing branch One continued branch about in

review, at focused going the announcements expect head with offices. that would about on of services. are to have I and how some the We're deposits of looking not those portfolio, especially nearing within how -- at C&I on fact those also And customers that the we couple quarters, we're looking working We end they are the we're in the customers. next increasingly business changing, business brand we'll in are branch use are customers at branch in to how look facilities, technology dependent and with growing where

points us telecommunication services, more and of and the diversity less So, services, towards deposit that base continues, bricks-and-mortar. electronic the

home those over work a and your I we're of how we'll to working we But of trends happy three next world a base factors interest imagine some both BankFinancial. continue you diversification our brave about be deposits. all have the we this in new would customers broader to season six in of evaluated. months, further announcements no So, going holiday talk and thank We and will to of you everyone upcoming, from in questions, With geographic for the wish XXXX. to

Operator

this gentlemen, participating. conference and Ladies today's you concludes Thank for call.

You may disconnect. now