BankFinancial Corp (BFIN) 2010 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to your Second Quarter 2010 BankFinancial Corp Earnings Conference Call. My name is Tanya, and I will be your event manager today. (Operator Instructions.) I'd now like to hand the conference over to Mr. F. Morgan Gasior, Chairman and CEO. Go ahead, please.

Good morning. Welcome to our Second Quarter 2010 Conference Call. Before we proceed, I'd like to read our forward-looking statement by Senior Vice President, Susan Chambers.

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 the Safe Harbor provisions.

Forward-looking statements involve significant risks and uncertainties, and are based on assumptions that may or may not occur. They are often identifiable by the use of the words believe, expect, intend, anticipate, estimate, project, plan or similar expressions. Our ability to predict results, or the actual effect of our plans and strategies, is inherently uncertain and actual results may differ significantly from those predicted.

For further details on the risks and uncertainties that could impact our financial condition and the results of operations, please consult the forward-looking statements declaration and the 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 statement in the future.

And now, I'll turn the call over to Chairman and CEO, F. Morgan Gasior.

Thank you, Susan. As all filings are complete and we have no new information to add this morning, I'd be happy to answer any questions that are out there. We are ready for our first question.

(Operator Instructions.) We have a question from the line of Mark Zahorik with CAMCO. Please proceed with your question.

Good morning. I noticed that after a period of about a year of not buying back any stock, during the quarter in early June it looks like you resumed that buy program and bought back some 300,000 shares or so--356,000, if I'm reading this correctly. Am I to infer that there's still about 800,000 remaining under the authorization? That's question number one. And question number two is, what was your thought process about reinitiating that buyback after the one year period of really not doing anything?

Well, first of all, you're correct about the remaining authorization at approximately 800,000 shares. And second of all, as we've discussed before, the parameters for share repurchases are set by the Board and reviewed and they're fairly objective and when the market conditions fall within the parameters that are set by the Board after their review, then you'll see activity. And so, in the second quarter you saw market conditions fall within parameters that they had preset and on that basis the activity proceeded.

All right. Switching gears a little bit, or actually, let me get back to that question. So am I to also assume that with the stock essentially where it's been throughout the month of June, that you would still be active with this buyback once the earnings period has passed?

I would not necessarily make projections or run trends. I think you can really just look at where we are on cash, what opportunities we might have in acquisition, how earnings have been, looking at forward dividend policies. There are any number of factors that go into this decision, so as we've said before, we were for activity and really we've taken the position of if there was a significant activity in between quarterly reporting we'll put out an 8-K at the end of a monthly reporting grid to keep the market apprised of activity. But I would run no trends whatsoever from that activity.

Okay, thank you. Again, switching gears, I read your commentary about your general outlook. I was wondering if you could give maybe a little bit more color there. In listening to some conference calls from some of your larger Chicago community bank peers, MB Financial, PrivateBank, this morning, WinTrust, I'm really getting mixed signals, some showing some deterioration, some showing some improvement. Do you have anything else to add there? Is there areas of encouragement, areas of things that you really continue to be discouraged by? Anything that you could add would be helpful.

Certainly. Well, I think the things that bear the most watching for us are just the isolated instances of individual borrowing issues, either in one to four family or in multi-family. With the economy still somewhat weak and unemployment still fairly high, especially in certain segments of the market, the lower income communities, lower income segments, making the monthly mortgage payments and making rental payments are still an issue on an isolated basis. And that's why we wouldn't run a trend line. We were up a little bit in multi-family this quarter. We wouldn't run that trend line in the upward direction and if I were to be a little bit positive, I would say that we're probably more leaning toward the trend line in the downward direction of multi-family over the next couple of quarters.

We're seeing people get their vacancies back up, resolve some issues. Rentals are still effective. Rents are still fairly weak. But they're managing to make do and keep the buildings relatively occupied and dealing with the expenses and dealing with their own personal finances as they need to. So we saw a bill in the second quarter and in both residential and multi--I don't necessarily want to say that--blow the all clear signal. But I would say even in the last couple of weeks, we know one or two cases that are out there that won't really be material. But we are starting to see a little bit more stabilization then than we have. So I guess we'll be cautiously optimistic on multi-family going forward over the next couple quarters. Residential, the second quarter trends weren't as favorable as we would like, but the early third quarter trends have seemed to resume that somewhat downward trend we were seeing a little bit earlier in the year. So multi-family residential we're still watching and it won't surprise us to see a case here and a case there come up.

Commercial real estate still remains stable. There are weaknesses out there and interest in that competition for tenants is out there, so effective rents are still under pressure. But it remains stable at the moment. We also have not seen an exodus of tenants due to general business conditions as yet. And I think that's also somewhat encouraging that the small businesses still seem to be hanging on, making the rental payments, and continuing to move forward. But that will bear watching as time goes on. That, of course, indexed to retail sales. Retail sales have been mixed, so I think our results are probably consistent with the economy. Construction lending, we're pretty much down to the end of that. Projects are just about finished off. And they're going to term loans, so they're paying off. Really not much left in that portfolio.

Leasing, we're very pleased with the credit performance. That portfolio is designed to be a high quality portfolio and it's done exceptionally well, so we're optimistic about that. The challenge in that portfolio really has been growth. With rates this low and we tend to work in the upper echelon of credit in the commercial leasing area and corporations are sitting on an enormous amount of cash that is earning them very little. So as a result, we tend to be competing with cash when companies are thinking about capital investments. The leverage doesn't make sense when they're earning five basis points on their excess liquidity. But overall, I would say that generally things were stable. The blips that we saw second quarter, first in residential and multi-family, appear to be ameliorating. It won't surprise us to see we're going to wind up with one or the other borrower with issues. We'll continue to work with them.

And as we said in the overview, we are starting to see some investor interest in some of the non-performing assets, particularly the multi-family buildings. Just to give you an example, we had contracts to sell three buildings. The borrower had issues. The buyer had issues. He was ready to go. Then he was thinking about things. And in two days we had successor contracts for as much or more on the sales price and we were able to execute on that. So we are starting to see a certain amount of depth of investor interest in the multi-sector, less so in the commercial real estate sector, and the land side there's really nobody investing at that point. There's a lot of inventory out there. So we kind of gauge how loan volume is going to be, how portfolio performance is going to be in part by who's out there doing deals and looking at assets at current levels. It tends to be a proxy for what's going to happen next.

Is that helpful to you?

It is. Thank you. That's all I've got.

(Operator Instructions.) We have no questions registered at this time.

Okay. Well, always like to give the going once, going twice, going three times opportunity. It's certainly available if anybody has any further questions. Well, farewell. Thank you for attending our Second Quarter 2010 Conference Call. Enjoy your summer and we'll speak to you in the fall.

Thank you for attending today's conference. This concludes the presentation. You may now disconnect and have a great day.