BankFinancial Corp. :BFIN-US: Earnings Analysis: 2016 By the Numbers : March 13, 2017

BankFinancial Corp. reports financial results for the year ended December 31, 2016.

We analyze the earnings along side the following peers of BankFinancial Corp. – First Defiance Financial Corp., TFS Financial Corporation, Bank Mutual Corporation and United Community Bancorp (FDEF-US, TFSL-US, BKMU-US and UCBA-US) that have also reported for this period.

Highlights

  • Net interest income margins widened from 87.01% to 87.44% compared to the same period last year.
  • Net loan assets changed 6.55% compared to same period last year and 6.55% from previous period, total deposits changed 10.43% compared to same period last year and 10.43% from previous period.
  • Year-on-year change in operating cash flow of 24.10% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings grew despite decline in operating margins and pre-tax margins compared to same period last year.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2016 2015 2014 2013 2012
Relevant Numbers (Annual)
Revenues 53.71 53.04 53.12 53.94 63.36
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 7.5 8.68 40.61 3.3 -27.11
Earnings Growth (YOY) -13.52 -78.64 1131.47 112.17 44.33
Net Margin 13.97 16.36 76.46 6.11 -42.79
EPS 0.39 0.44 2.01 0.16 -1.36
Return on Equity 3.6 4.05 20.73 1.89 -14.55
Return on Assets 0.48 0.58 2.78 0.22 -1.78

Access our Ratings and Scores for BankFinancial Corp.

Earnings Growth Analysis

{arg3)’s earnings declined year-on-year because of the increases in loan loss provisions. Its net interest income after provisions margins went from 93.05% to 87.88%. The fall in earnings would have been worse were it not for the fact that the company’s net interest income margins improved, from 87.01% to 87.44%. For comparison, net interest income margins were 87.01% and net interest income after provisions margins 93.05% in the immediate last period.

Net Interest Income Margin Versus Loan Loss Provisions Margin

Quadrant label definitions. Hover to know more

High Risk; High Reward Loans, Risky Loan Portfolio, Conservative Loan Portfolio, Safer Loan Portfolio
Net Interest Income Margin History
Loan Loss Provisions Margin History

Net Loans and Total Deposits

A financial institution’s core operations represented by Net Interest Income and Net Interest Income after Provisions are dependent on both the growth and quality of its deposits as well as the growth and quality of its loans. A firm could boost its interest income in the short-term by just increasing its loan assets with less concern about their quality – but this would eventually lead to greater loan loss provisions. Similarly a drive to increase deposits could result in higher interest expenses and eventually effect the firm’s equity. It is thus important to understand net interest income performance in context to loan loss provisions, loan assets and deposits.

Loan Assets Growth Rate History (HY YOY)
Total Deposits Growth Rate History (HY YOY)

The firm’s improvement in net interest income margins was influenced by both the relative increase in the levels of net loan assets and the level of total deposits as a percentage of equity. On an absolute basis, net loan assets changed 6.55% compared to the same period last year and 6.55% from the previous period. Total deposits changed 10.43% compared to the same period last year and 10.43% from the previous period.

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

BFIN-US‘s change in operating cash flow of 24.10% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

Despite a decline in operating’s margins as well as a decline in pretax margins, the company’s earnings rose.

EBIT Margin History
PreTax Margin History
EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables

Access our Ratings and Scores for BankFinancial Corp.

Company Profile

BankFinancial Corp. operates as holding company for BankFinancial, FSB, which provides commercial, family, and personal banking services in Illinois. It offers a variety of financial products and services that are related or ancillary to loans and deposits, including cash management, funds transfers, bill payment and other online banking transactions, automated teller machines, safe deposit boxes, wealth management and general insurance agency services. The company’s loan portfolio consists of multi-family mortgage loans, nonresidential real estate loans, commercial and consumer loans, construction and land loans and commercial leases, as well as one to four-family residential mortgage loans, including home equity loans and lines of credit, and other second mortgage loans. The company was founded in 2004 and is headquartered in Burr Ridge, IL.

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