BankFinancial(BFIN) - 2019 Q2 - Quarterly Report

Financial Performance - Net income for Q2 2019 was $807,000, or $0.05 per common share, down from $4.6 million, or $0.26 per common share in Q2 2018 [102]. - Net income for the three months ended June 30, 2019, was $807,000, compared to $4.6 million for the same period in 2018 [121]. - Net income for the six months ended June 30, 2019, was $4.4 million, compared to $8.2 million for the same period in 2018, showing a decline in profitability [139]. Interest Income and Expenses - Net interest income before provision for loan losses was stable at $13.1 million for Q2 2019, with an increase in deposit, loan, and trust fee income by $96,000, or 8.3% from the previous quarter [103]. - Net interest income was $13.1 million for the three months ended June 30, 2019, reflecting a $1.5 million, or 10.0%, increase in interest income [122]. - Net interest income was $26.3 million for the six months ended June 30, 2019, compared to $26.0 million for the same period in 2018, indicating a slight increase [140]. - The yield on interest-earning assets increased by 50 basis points to 4.54% for the three months ended June 30, 2019 [123]. - The cost of interest-bearing liabilities increased by 51 basis points to 1.24% for the three months ended June 30, 2019 [123]. - The yield on interest-earning assets increased by 53 basis points, or 13.2%, to 4.54% for the six months ended June 30, 2019, from 4.01% for the same period in 2018 [141]. - The cost of interest-bearing liabilities increased by 54 basis points to 1.22% for the six months ended June 30, 2019, from 0.68% for the same period in 2018 [141]. Asset and Liability Management - Total assets decreased by $51.4 million to $1,533.9 million as of June 30, 2019, compared to $1,585.3 million at December 31, 2018 [111]. - Total assets decreased to $1,541,213 thousand as of June 30, 2019, from $1,573,887 thousand in 2018 [144]. - Total liabilities decreased by $35.7 million, or 2.6%, to $1.362 billion at June 30, 2019, primarily due to decreases in deposits and borrowings [119]. - Total stockholders' equity was $171.5 million at June 30, 2019, a decrease from $187.2 million at December 31, 2018, primarily due to stock repurchases and cash dividends [120]. Loan Performance - Commercial loans decreased by $18.6 million (10.8%) primarily due to a non-recourse loan sale and reduced line utilization [105]. - Loans decreased by $56.3 million, or 4.3%, to $1.267 billion at June 30, 2019 [115]. - The ratio of nonperforming loans to total loans was 0.24% and non-performing assets to total assets was 0.23% as of June 30, 2019 [106]. - Nonperforming loans to total loans ratio rose to 0.24% from 0.11% in the previous quarter [159]. - Nonperforming assets increased by $764,000 to $3.5 million as of June 30, 2019, compared to $2.7 million at December 31, 2018 [160]. Provisions and Charge-offs - The provision for loan losses was $4.0 million for the three months ended June 30, 2019, compared to $23,000 for the same period in 2018, indicating a significant increase in loan loss provisions [130]. - Net charge-offs were $4.5 million for the three months ended June 30, 2019, compared to $185,000 for the same period in 2018, reflecting a substantial rise in loan defaults [130]. - Provision for loan losses was $3.9 million for the six months ended June 30, 2019, compared to a recovery of $235,000 in 2018, with net charge-offs of $4.5 million [147]. Noninterest Income and Expenses - Noninterest income decreased by $1.7 million, or 53.9%, to $1.4 million for the three months ended June 30, 2019, compared to $3.1 million for the same period in 2018 [134]. - Noninterest income decreased by $1.6 million, or 34.2%, to $3.1 million for the six months ended June 30, 2019, primarily due to a $1.4 million death benefit recorded in 2018 [148]. - Total noninterest expense decreased by $743,000, or 7.3%, to $9.5 million for the three months ended June 30, 2019, from $10.2 million for the same period in 2018 [136]. - Total noninterest expense decreased by $604,000, or 3.0%, to $19.6 million for the six months ended June 30, 2019, from $20.2 million in 2018 [150]. - Compensation and benefits expense decreased by $202,000, or 1.8%, due to a reduction in full-time equivalent employees to 231 [150]. Capital and Regulatory Compliance - The Tier 1 leverage ratio remained strong at 11.04%, with 1,107,550 common shares repurchased, representing 6.7% of the common shares outstanding at December 31, 2018 [108]. - Total capital to risk-weighted assets ratio was 14.46% as of June 30, 2019, exceeding the required minimum of 8.00% [171]. - Tier 1 capital to risk-weighted assets ratio stood at 13.78% as of June 30, 2019, above the required minimum of 6.00% [171]. - As of June 30, 2019, the Bank was categorized as well-capitalized under regulatory standards, with all capital ratios exceeding the required levels [169]. - The Company declared cash dividends of $0.20 per share for the six months ended June 30, 2019, compared to $0.17 per share for the same period in 2018 [171]. Interest Rate Risk Management - The company has de-emphasized the origination of residential mortgage loans and increased focus on nonresidential real estate loans, multi-family mortgage loans, commercial loans, and commercial leases [177]. - The dynamic GAP analysis identifies mismatches in the timing of asset and liability repricing, which helps in managing interest rate risk [180]. - The Asset/Liability Management Committee (ALCO) evaluates interest rate risk and modifies lending, investing, and deposit strategies accordingly [176]. - The company primarily invests in shorter-duration securities, which generally have lower yields compared to longer-term investments, to reduce exposure to interest rate changes [177]. - Management considers various projected forward interest rate scenarios when evaluating strategies for managing interest rate risk, acknowledging the limitations of current methodologies [184].