BankFinancial(BFIN) - 2025 Q2 - Quarterly Report

PART I Item 1. Financial Statements BankFinancial Corporation's Q2 2025 financial statements reflect a slight asset decrease and a net loss due to a significant credit loss provision Consolidated Statements of Financial Condition Total assets slightly decreased to $1.429 billion by June 30, 2025, due to reduced loans offset by increased securities and cash Consolidated Statements of Financial Condition Summary | Account | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | Change ($ thousands) | | :--- | :--- | :--- | :--- | | Total Assets | 1,429,177 | 1,434,814 | (5,637) | | Cash and cash equivalents | 112,236 | 84,829 | 27,407 | | Securities, at fair value | 436,965 | 360,530 | 76,435 | | Loans receivable, net | 795,963 | 887,586 | (91,623) | | Total Liabilities | 1,273,135 | 1,278,437 | (5,302) | | Total deposits | 1,215,658 | 1,217,541 | (1,883) | | Total Stockholders' Equity | 156,042 | 156,377 | (335) | Consolidated Statements of Operations The company reported a Q2 2025 net loss of $359,000, primarily due to a $2.25 million provision for credit losses, contrasting with prior year's net income Consolidated Statements of Operations Summary | Metric ($ thousands) | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Net Interest Income | 11,265 | 12,576 | -10.4% | | Provision for credit losses | 2,252 | (122) | N/A | | Noninterest Income | 1,959 | 1,276 | +53.5% | | Noninterest Expense | 11,848 | 11,135 | +6.4% | | Net (Loss) Income | (359) | 2,134 | -116.8% | | Diluted (Loss) EPS | $(0.03) | $0.17 | -117.6% | Consolidated Statements of Cash Flows Net cash from operating activities was $1.8 million, with investing activities providing $33.9 million, leading to a $27.4 million increase in cash and equivalents Consolidated Statements of Cash Flows Summary | Cash Flow Activity ($ thousands) | Six Months Ended June 30, 2025 | | :--- | :--- | | Net cash from operating activities | 1,769 | | Net cash from investing activities | 33,899 | | Net cash used in financing activities | (8,261) | | Net change in cash and cash equivalents | 27,407 | | Beginning cash and cash equivalents | 84,829 | | Ending cash and cash equivalents | 112,236 | Notes to Consolidated Financial Statements Notes disclose increased securities, decreased loans, a substantial rise in ACL due to specific provisions, and a subordinated note repurchase - The securities portfolio increased to $437.0 million from $360.5 million, with U.S. Treasury Bills and Notes comprising the vast majority of the portfolio at $432.7 million[34] - The loan portfolio decreased to $805.1 million from $895.2 million, with notable reductions in Multi-family residential real estate (down $25.8M) and Commercial loans and leases (down $58.1M)[40] - The Allowance for Credit Losses (ACL) increased from $7.6 million to $9.1 million in the first six months of 2025, driven by a $2.0 million provision for credit losses. A significant portion of this provision was a $2.057 million allocation to Equipment finance - Government loans in Q2[41][43] - In March 2025, the company repurchased $500,000 of its 3.75% Subordinated Notes, recording a $42,000 gain[68] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the Q2 2025 net loss to a $2.3 million credit loss provision, while asset quality improved and capital remained strong Financial Condition Total assets decreased to $1.429 billion due to reduced loans offset by increased securities, with a slight deposit decline and shift to higher-yielding accounts - Total assets decreased by 0.4% to $1.429 billion at June 30, 2025, primarily due to a decrease in loans receivable, partially offset by an increase in securities[105] - Commercial loans and leases decreased by $58.1 million (23.4%) and multi-family residential real estate loans decreased by $25.8 million (4.9%) during the first six months of 2025[106] - Core deposits represented 79.0% of total deposits at June 30, 2025, down from 80.7% at year-end 2024[108] Results of Operations Q2 2025 saw a net loss of $359,000, driven by a $2.3 million credit loss provision and lower net interest income, despite increased noninterest income - Net interest income for Q2 2025 decreased by $1.3 million YoY to $11.3 million, as the yield on interest-earning assets fell 30 basis points to 4.77%[111][112] - A provision for credit losses of $2.3 million was recorded in Q2 2025, which included a $2.1 million specific reserve for a U.S. Government equipment finance transaction[118] - Noninterest income in Q2 2025 was boosted by a $417,000 death benefit from a bank-owned life insurance policy[121] - Noninterest expense in Q2 2025 increased primarily due to a $635,000 write-down of foreclosed assets and a $388,000 increase in professional fees[122][123] Asset Quality Asset quality improved with nonperforming assets decreasing to $12.2 million, largely due to a government contract settlement, despite a new specific reserve Asset Quality Metrics | Metric | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total Nonperforming Assets | $12.2M | $18.3M | | Nonperforming Assets to Total Assets | 0.85% | 1.28% | | Allowance for Credit Losses to Total Loans | 1.13% | 0.85% | - The company settled a $10.5 million U.S. Government Contract Disputes Act claim for $5.6 million in cash, which was received in Q2 2025[145] - For a separate, remaining U.S. Government equipment finance exposure of $8.4 million, the company deemed a settlement offer inadequate and is preparing litigation. A $2.1 million specific reserve was recorded in Q2 2025 related to this claim[146] Liquidity and Capital Resources The company maintains adequate liquidity and strong capital, with the Bank's Community Bank Leverage Ratio at 11.44%, exceeding requirements, and continued quarterly dividends - Primary sources of funds include deposits, loan and security payments, and FHLB advances, of which $15.0 million were outstanding at June 30, 2025[150] Bank Capital Ratios | Bank Capital Ratio | June 30, 2025 | Required for Adequacy | | :--- | :--- | :--- | | Community Bank Leverage Ratio | 11.44% | 9.00% | - The company declared cash dividends of $0.20 per share for the six months ended June 30, 2025[159] Item 3. Quantitative and Qualitative Disclosure about Market Risk The company manages interest rate risk using NPV and NII sensitivity models, showing a relatively balanced profile for 200 basis point rate shifts - The company's interest rate risk management aims to reduce the exposure of net interest income to changes in market rates, with strategies including originating shorter-duration commercial loans and investing in shorter-term securities[161][162] Interest Rate Sensitivity Analysis | Change in Interest Rates (bps) | Estimated Change in NPV | Estimated Change in Net Interest Income | | :--- | :--- | :--- | | +200 | -1.64% | +$2.5M (+5.25%) | | -200 | -1.85% | -$2.2M (-4.53%) | Item 4. Controls and Procedures Management concluded disclosure controls were effective as of June 30, 2025, with no material changes to internal control over financial reporting - Management concluded that the Company's disclosure controls and procedures were effective as of the end of the period[169] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[170] PART II Other Information (Items 1-6) The company reports no material legal proceedings, no changes to risk factors, no defaults, and no equity repurchases as the plan expired - The company is subject to various legal actions in the normal course of business, but management does not expect them to have a material adverse effect[172] - There have been no material changes to the risk factors previously disclosed in SEC filings[173] - No common stock was repurchased during the second quarter of 2025, and the company's share repurchase authorization plan expired on June 16, 2025[174]