Overview of Financial Performance

BankFinancial Corporation reported net income of $4.1 million for the year ended December 31, 2024, down from $9.4 million in 2023. This decrease was primarily due to a $3.4 million decline in net interest income and a $4.8 million charge-off related to the settlement of a U.S. Government contract dispute claim.

The company’s total assets decreased by $52.6 million, or 3.5%, to $1.435 billion at the end of 2024. This was driven by decreases in cash and loans, partially offset by an increase in securities. The loan portfolio declined by $163.2 million, or 15.5%, to $887.6 million, with decreases across most major loan categories.

Revenue and Profit Trends

Net interest income, the company’s primary source of revenue, decreased by 6.5% to $48.4 million in 2024. This was due to a 40.5% increase in interest expense, which offset a 3.7% increase in interest income. The net interest margin declined from 3.58% in 2023 to 3.55% in 2024.

Noninterest income increased by 31.1% to $5.8 million, driven by growth in deposit-related fees and trust income. However, this was offset by a $1.0 million, or 2.3%, increase in noninterest expense, primarily due to higher compensation and legal costs.

The provision for credit losses increased significantly to $5.1 million in 2024, compared to $395,000 in 2023. This was largely due to a $4.8 million charge-off related to the settlement of a U.S. Government contract dispute claim.

Strengths and Weaknesses

A key strength of BankFinancial is its strong capital position, with a Tier 1 leverage ratio of 10.90% as of December 31, 2024. This provides the bank with the flexibility to withstand potential economic downturns and pursue growth opportunities.

However, the bank’s loan portfolio has been shrinking, with decreases across most major loan categories. This could limit the bank’s ability to generate interest income and grow its business. The bank has also experienced an increase in nonperforming loans, with the ratio of nonperforming loans to total loans rising to 1.89% at the end of 2024.

Another weakness is the bank’s reliance on net interest income, which accounts for the majority of its revenue. This makes the bank vulnerable to changes in interest rates and the interest rate spread. The bank’s net interest margin has declined in recent years, putting pressure on profitability.

Outlook for the Future

Looking ahead to 2025, BankFinancial plans to focus on accelerating growth in commercial loan originations for small businesses and general commercial finance, while maintaining a cautious approach to multi-family residential and nonresidential real estate lending due to the interest rate environment.

The bank also intends to continue growing its commercial deposit relationships and related noninterest income services, particularly its Treasury Services products. Additionally, the bank expects to expand its Trust Department capabilities to provide further growth in noninterest income.

However, the bank acknowledges that there may be volatility in market interest rates, loan demand, and deposit balances due to changes in government and Federal Reserve policies. The bank believes it is prepared for both increases and decreases in interest rates, with an emphasis on maintaining and expanding its interest income.

Overall, BankFinancial appears to be navigating a challenging operating environment, with declining loan balances and net interest income putting pressure on profitability. The bank’s strong capital position and focus on commercial lending and deposit growth provide some optimism for the future, but the bank will need to carefully manage interest rate risk and credit quality to achieve its long-term objectives.