BankFinancial Corp Reports Mixed Results Amid Strategic Shifts in 2023

• Net Income: BankFinancial Corp recorded a net income of $9.4 million for the year 2023.

• Earnings Per Share: Basic and diluted earnings per common share stood at $0.74 for the year and $0.17 for Q4.

• Asset Decline: Total assets decreased by 5.6% to $1.487 billion compared to the previous year.

• Loan Portfolio Reduction: Total net loans saw a decrease of 14.3% due to strategic business plan changes.

• Deposit Decrease: Total deposits fell by 8.2%, with core deposits representing 82.4% of the total.

• Capital Strength: The Tier 1 leverage ratio remained strong at 10.54% as of year-end.

• Interest Income and Expense: Interest income increased by 19.6%, while interest expense rose by 219.7%.

On January 31, 2024, BankFinancial Corp (NASDAQ:BFIN) released its 8-K filing, detailing its financial results for the year ended December 31, 2023. The company, a full-service national bank engaged in commercial, family, and personal banking, reported a net income of $9.4 million for the year, translating to $0.74 earnings per share. Despite a challenging environment, BankFinancial Corp managed to increase its interest income and maintain a strong capital position.

Financial Performance and Strategic Adjustments

BankFinancial Corp's total assets experienced a decline of 5.6% to $1.487 billion, while cash and interest-bearing deposits surged by 167.3% to $178.5 million. The bank's loan to deposit ratio decreased to 83.3%, reflecting a strategic shift towards increasing liquidity and reducing credit risk. Notably, total commercial loans and leases decreased by 28.9%, driven by a significant decline in the equipment finance portfolio.

Deposits also saw a reduction, primarily due to retail and commercial depositors' usage of funds and competitive pressures for interest-bearing accounts. However, the bank maintained a robust core deposit base, with noninterest-bearing demand deposits accounting for 20.7% of total deposits.

Capital Position and Shareholder Value

The bank's capital position remained strong, with a Tier 1 leverage ratio of 10.54%. BankFinancial Corp continued its quarterly dividend payments at $0.10 per common share and repurchased over 266,000 common shares during the year. The book value per share increased from $11.90 at the end of 2022 to $12.45 at the end of 2023.

Income Statement Highlights

Interest income for the year rose by 19.6% due to strategic investments in short-term liquidity and higher yields within the commercial loan portfolio. However, interest expense also increased significantly by 219.7% due to higher rates paid on deposit accounts. Net interest income before the provision for credit losses saw a modest increase of 2.0%.

Noninterest income decreased by $1.6 million, affected by reductions in Bank-Owned Life Insurance revenues and asset valuation adjustments. Conversely, Trust Department income improved due to growth in assets under management. Noninterest expenses increased by $2.1 million, reflecting higher compensation and FDIC insurance expenses.

Asset Quality and Credit Loss Provision

The ratio of nonperforming loans to total loans stood at 2.11%, and nonperforming assets to total assets were 1.69%, primarily due to two problematic U.S. Government equipment finance transactions. The provision for credit losses decreased by $1.4 million, thanks to a reduction in loan portfolio balances and the implementation of the Current Expected Credit Loss accounting standard.

The Company ended 2023 in good financial and operational condition. Our asset-liability management strategies enabled us to strengthen liquidity and improve interest income in a highly uncertain environment. - F. Morgan Gasior, Chairman and CEO of BankFinancial Corp

BankFinancial Corp's management will further discuss the 2023 results in a conference call and webcast on February 2, 2024. The company remains focused on delivering strong financial results and contributions to shareholders and communities, with expectations for earnings improvements and loan portfolio diversity in 2024.

For more detailed information, BankFinancial Corp's Quarterly Financial and Statistical Supplement is available on the company's website and the SEC's EDGAR database.

Explore the complete 8-K earnings release (here) from BankFinancial Corp for further details.

This article first appeared on GuruFocus.