BankFinancial(US:BFIN)2023-05-07 18:22Financial Data and Key Metrics Changes - The company anticipates a growth of approximately 3% from March 31 to December 31, focusing primarily on the commercial finance portfolio [7] - The average yield on originations in the first quarter was reported at 8.67%, with expectations for stabilization and potential expansion in the second half of the year [25][32] - The company experienced outflows of collateralized public funds, which were higher than the previous year due to increased taxes [10] Business Line Data and Key Metrics Changes - The healthcare sector showed less growth in utilization than expected, leading to volatility in loan balances within the commercial finance sector [9] - The Equipment Finance portfolio is expected to see muted growth due to current yield requirements not being met, with a focus on maintaining higher yields [20][28] - Real estate payoffs declined significantly, and the company expects continued paydowns in the Equipment Finance portfolio over the next few quarters [21] Market Data and Key Metrics Changes - The company noted increased competition for deposits, with approximately $12 million to $13 million in competition losses reported [23] - The deposit interest expense remains a wildcard, with potential increases due to intensified competition impacting net interest margin [25][46] - The company aims to maintain a loan-to-deposit ratio in the range of 90% to 92% by the end of the year [44] Company Strategy and Development Direction - The focus remains on developing the commercial deposit base and strengthening existing customer relationships to stabilize deposits [11][44] - The company plans to avoid diluting margins with lower-yielding assets while maintaining origination yields [46] - The strategy includes repositioning the balance sheet and utilizing cash flows from various portfolios to fund loan growth [51] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding loan growth expectations due to current market conditions and competition [19][20] - The company is optimistic about maintaining profitability in the mid to high 20s for the next couple of quarters, despite potential margin compression [38][58] - Management highlighted the importance of deposit interest expense as a key factor in future profitability and margin expansion [25][46] Other Important Information - The company is experiencing some volatility in deposits due to customers in liquidation mode, which may impact deposit stability [43] - There is a pending claims process related to a government finance portfolio, which has been placed on nonaccrual status [26][40] Q&A Session Summary Question: What are the expectations for loan growth given current trends? - Management indicated that loan growth is expected to be flatter than previously anticipated, particularly in the Equipment Finance sector due to yield curve issues [19][20] Question: How is the company addressing deposit outflows? - The company noted that deposit outflows were typical for the first quarter, with some recovery observed in April and May [10][11] Question: What is the outlook for net interest margin (NIM)? - Management stated that NIM could see some compression in the second quarter but may stabilize or expand in the latter half of the year depending on cash flows and deposit interest expenses [32][38] Question: How is the company managing expenses? - The company plans to maintain stable expenses while being cautious with variable costs, focusing on essential marketing and personnel for commercial finance [55][56] Question: What is the company's approach to share repurchases? - Management indicated that share repurchase activity is expected to be muted in the second quarter, prioritizing liquidity and stability [57]