BankFinancial Corporation Reports Financial Results for 2023 and Will Host Conference Call and Webcast on Friday, February 2, 2024 - Seite 2

For the year ended December 31, 2023, interest income increased by $10.9 million (19.6%) due to our investment of scheduled loan and lease portfolio repayments into short-term liquidity investments and higher yields earned within the commercial loan portfolio. Interest expense increased by $9.8 million (219.7%) due to higher rates paid on deposit accounts, as certain depositors managed their funds in a way that benefited from increases in short-term market interest rates. Accordingly, the Company's net interest income before the provision for credit losses increased by $1.0 million (2.0%) in 2023.

Noninterest income decreased by $1.6 million primarily due to a $753,000 reduction in Bank-Owned Life Insurance revenues and death benefits and a $602,000 asset valuation reduction related to the closure of two branch office facilities. Trust Department income increased by $77,000 due to growth in assets under management during 2023. Noninterest expense increased by $2.1 million primarily due to increases in compensation expenses, FDIC insurance expense related to higher uniform premium rates assessed on all insured depository institutions, and other expenses.

The ratio of nonperforming loans to total loans was 2.11% and the ratio of nonperforming assets to total assets was 1.69% at December 31, 2023, primarily due to two U.S. Government equipment finance transactions totaling 1.78% of total loans and 1.27% of total assets for which the government did not remit required payments and are now subject to a federal claims process. The provision for credit losses - loans decreased by $1.4 million in 2023 primarily due to the decrease in loan portfolio balances during 2023 and the impact of the Current Expected Credit Loss accounting standard implemented in 2023. Our allowance for credit losses increased to 0.79% of total loans at December 31, 2023, compared to 0.66% at December 31, 2022.

F. Morgan Gasior, the Chairman and CEO of the Company, said: “The Company ended 2023 in good financial and operational condition. Our asset-liability management strategies enabled us to strengthen liquidity and improve interest income in a highly uncertain environment. In turn, the improvement in interest income enabled us to improve net interest income despite a significant increase in deposit interest expense due to sharply rising market interest rates. To ensure appropriate liquidity, reduce risk exposures and maintain asset-liability flexibility in a rising rate environment, we reduced commercial credit originations in our equipment finance and commercial real estate portfolios, which provided liquidity to fund the reduction in total deposits and increases in short-term investments. These actions resulted in strong liquidity and capital ratios as of December 31, 2023. The reduction in loan balances and the unexpected developments in our government equipment finance portfolio reduced the earnings benefits from our asset-liability management actions. We expect our Commercial Finance, Commercial Equipment Finance and Treasury Services originations capabilities will contribute to earnings improvements and to loan portfolio diversity in 2024. We remain committed to delivering strong financial results and contributions to our shareholders and communities.”