BankFinancial Corporation (NASDAQ:BFIN) Q4 2022 Earnings Call Transcript

BankFinancial Corporation (NASDAQ:BFIN) Q4 2022 Earnings Call Transcript January 30, 2023

Operator: Good day and thank you for standing by. Welcome to the BankFinancial Corporation Q4 and 2022 Year End Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. Please be advised today’s conference call is being recorded. I would like to turn the call over now to Mr. Gasior, CEO. Please go ahead.

F. Morgan Gasior: Good morning. And welcome to the BankFinancial fourth quarter 2022 investor conference call. Sorry for the delay. At this time, we would like to have our forward-looking statement read.

Unidentified Company Representative: The remarks made at this conference may include forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. We intend all forward-looking statements to be covered by the Safe Harbor provisions contained in the Private Securities Litigation Reform Act of 1995 and are including the statement for purposes of invoking these Safe Harbor provisions. Forward-looking statements include — involve significant risks and uncertainties and are based as — on assumptions that may or may not occur. They are often identifiable by use of the words believe, expect, intend, anticipate, estimate, project, plan or similar expressions. Our ability to predict results or the actual effects of our plans and strategies is inherently uncertain and actual results may differ from those predicted.

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

F. Morgan Gasior: Thank you. Our earnings release was completed last week, Friday. The 10-K will be filed on schedule and we are now ready for questions.

Operator: Thank you.

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Q&A Session

F. Morgan Gasior: Moderator, we are not getting a question.

Operator: Participant your line is open. Please unmute your line.

Manuel Navas: Oh! Hey. Good morning. This is Manuel Navas from Davidson.

F. Morgan Gasior: Good morning.

Manuel Navas: Hey. So I guess my first question is about loan growth for next year. You had a really strong end of the year. Multifamily was quite strong. Equipment finance kind of as expected. What are your kind of expectations for next year? You have talked about 10% last quarter. Any extra color there would be great?

F. Morgan Gasior: Well, thank you for the question. We actually had a good fourth quarter even though the fundings were delayed kind of in the last part of the quarter as the gap between the year-end numbers and the average outstanding for the fourth quarter shown. But we had a good growth for the entire year, year-over-year. So we were pleased with that. As far as 2023 is concerned, we are operating in somewhat of an unusual environment in an inverted yield curve. Federal Reserve policy, obviously, is going to dictate a lot and we have noticed that the middle part of the curve, the three-year to five-year part of the curve has actually been dropping in the last several weeks, which makes the planning even a little more interesting.

But, generally speaking, for the — for 2023, our focus is going to be between 5% to 10% loan growth. We would like to see the higher end of the range at the 10% level. But the strength of that will come, again, primarily through equipment finance and then C&I in our commercial finance areas. That’s the — those are the areas that we are going to spend the most time and focus on and given relative returns from various asset classes, the equipment finance side and the commercial finance side make the most sense, so most of the marketing attention, expansion attention will be in the equipped finance side and the commercial finance side. So, if multifamily and commercial real estate were $5 million to $10 million growth, equipment finance was somewhere between $30 million to $50 million for the year and then C&I was 30% on the low side to $75 million on the high side that gets you a range of up to 10% at the end of the year.

In terms of commercial finance, the strongest part of the portfolio will be the healthcare portfolio. We had a very good pipeline of new opportunities going into 2023, some of which have already started to fund and we saw greater utilization in the healthcare portfolio, particularly in fourth quarter, continuing on now into the first quarter and it has two dimensions. Our customers are using their excess liquidity. So you are seeing the commercial demand deposits decline, which is something that we felt would happen a year ago and it started and it’s continuing. But that also means that their line utilization will improve. So that’s where we see the bulk of the growth in C&I based on what we have right now. But we also see opportunities in commercial finance, government, finance, lessor finance and even in the Chicago Community Finance area and that will make up the bulk.

But healthcare will probably be about half of the growth from what we see right now. The other categories will be the other half based on their own individual category opportunities.

Manuel Navas: Is that kind of half the growth for the year or half for commercial finance side just clarify?

F. Morgan Gasior: Say that question again, please?

Manuel Navas: Is that half of the growth for the year in healthcare or is that half the growth in commercial finance alone?

F. Morgan Gasior: Half the growth in commercial finance.

Manuel Navas: Okay.