Form 8-K

 

 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF

THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): July 28, 2008

 

 

BANKFINANCIAL CORPORATION

(Exact Name of Registrant as Specified in Charter)

 

 

 

Maryland   0-51331   75-3199276

(State or Other Jurisdiction

of Incorporation)

  (Commission File No.)  

(I.R.S. Employer

Identification No.)

 

15W060 North Frontage Road, Burr Ridge, Illinois   60527
(Address of Principal Executive Offices)   (Zip Code)

Registrant’s telephone number, including area code: (800) 894-6900

Not Applicable

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 8.01. Other Events.

On July 28, 2008, the Company issued a press release announcing the filing of its Quarterly Report on Form 10-Q for the three and six months ended June 30, 2008 and a Quarterly Financial and Statistical Supplement. The press release also reported earnings for the three and six months ended June 30, 2008. The press release and Quarterly Financial and Statistical Supplement are included as Exhibits 99.1 and 99.2 to this report.

The information in the preceding paragraph, as well as Exhibits 99.1 and 99.2, is considered to be “furnished” under the Securities Exchange Act of 1934, and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933.

 

Item 9.01. Financial Statements and Exhibits.

 

  (a) Not Applicable.

 

  (b) Not Applicable.

 

  (c) Exhibits.

 

Exhibit No.

 

Description

99.1

  Press Release dated July 28, 2008

99.2

  Quarterly Financial and Statistical Supplement


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

 

  BANKFINANCIAL CORPORATION
Date: July 28, 2008   By:  

/s/ F. MORGAN GASIOR

    F. Morgan Gasior
    Chairman of the Board, Chief Executive Officer and President

 

3

Press Release

Exhibit 99.1

LOGO

FOR IMMEDIATE RELEASE

BankFinancial Corporation Reports Second Quarter

2008 Financial Results and Filing of Quarterly

Report on Form 10-Q and Quarterly Financial and Statistical

Supplement with the Securities and Exchange Commission

Burr Ridge, Illinois—(July 28, 2008) BankFinancial Corporation (Nasdaq – BFIN) (“BankFinancial”) reported a net loss of $5.4 million for the second quarter of 2008, or $0.27 per share, which included a $6.7 million, or $0.34 per share, after-tax impairment charge on the preferred stocks of Freddie Mac, a government sponsored entity, that BankFinancial holds in its investment portfolio. BankFinancial’s net loss for the six months ended June 30, 2008, was $2.2 million, or $0.11 per share, compared to net income of $4.0 million, or $0.19 per share, for the six months ended June 30, 2007. The net loss for the six months ended June 30, 2008 included the above impairment charge.

BankFinancial determined that the Freddie Mac preferred stocks were other-than-temporarily impaired at June 30, 2008 in accordance with the guidance set forth in Securities and Exchange Commission Codification of Staff Accounting Bulletins, Topic 5: Miscellaneous Accounting – Item M, Other Than Temporary Impairment of Certain Investments in Debt and Equity Securities, due to the extent and continuous duration of the unrealized losses that existed with respect to these securities, the inability to forecast a full recovery of their adjusted carrying cost in future periods in the number of interest rate scenarios required by BankFinancial’s valuation methodology, and issuer-specific factors concerning Freddie Mac.

At June 30, 2008, BankFinancial had total assets of $1.46 billion, total loans of $1.23 billion, total deposits of $1.08 billion and stockholders’ equity of $288 million. Its wholly-owned subsidiary, BankFinancial, F.S.B., is considered well capitalized under applicable banking laws and regulations, with a total capital to risk weighted assets ratio was 16.59%, a Tier 1 capital to risk weighted assets ratio of 15.79%, and a Tier 1 capital to adjusted total assets ratio of 14.13% at June 30, 2008. The minimum capital requirements that must be met to be considered well capitalized are a total capital to risk weighted assets ratio of at least 10%, a Tier 1 capital to risk weighted assets ratio of at least 6%, and a Tier 1 capital to adjusted total assets ratio of at least 5%.

During the six months ended June 30, 2008, BankFinancial repurchased 330,800 shares of its common stock at an aggregate cost of approximately $5.1 million. The current share repurchase authorization is scheduled to expire on November 15, 2008.

BankFinancial will file its Quarterly Report on Form 10-Q for the quarter ended June 30, 2008 and a Quarterly Financial and Statistical Supplement on Form 8-K with the SEC today. Both reports will be available on BankFinancial’s website, www.bankfinancial.com on the “Stockholder Information” page, and through the EDGAR database on the SEC’s website, www.sec.gov. The Quarterly Financial and Statistical Supplement includes comparative GAAP and non-GAAP performance data and financial measures for the most recent five quarters.

BankFinancial’s management will review second quarter 2008 results in a conference call and webcast for stockholders and analysts on Wednesday, July 30, 2008 at 9:30 a.m. Central Daylight Time (CDT). The conference call may be accessed by calling (800) 901-5218 and using participant passcode 56138932. The conference call will be simultaneously webcast at www.bankfinancial.com, on the Stockholder Information page. For those persons unable to participate in the conference call, the webcast will be archived through 5:00 p.m. CDT on August 13, 2008 on our website.


BankFinancial Corporation is the holding company for BankFinancial, F.S.B., a full-service, community-oriented bank providing financial services to individuals, families and businesses through 18 full-service banking offices, located in Cook, DuPage, Lake and Will Counties, Illinois. BankFinancial Corporation became a publicly-traded company on June 24, 2005, and its common stock trades on the Nasdaq Global Select Market under the symbol BFIN. Additional information may be found at the company’s website.

“Forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995 may be included in this release. A variety of factors could cause BankFinancial Corporation’s actual results to differ from those expected at the time of this release. Investors are urged to carefully review and consider the various disclosures made by BankFinancial Corporation in its periodic reports filed with the Securities and Exchange Commission, including the risk factors and other information disclosed in BankFinancial Corporation’s Annual Report on Form 10-K for the most recently ended fiscal year. Copies of these filings are available at no cost on the SEC’s website at http://www.sec.gov or on BankFinancial’s website at http://www.bankfinancial.com.

 

For Further Information Contact:   
Shareholder, Analyst and Investor Inquiries:    Media Inquiries:

Elizabeth A. Doolan,

Senior Vice President – Controller

BankFinancial Corporation

Telephone: 630-242-7151

  

Gregg T. Adams,

Executive Vice President – Marketing & Sales

BankFinancial Corporation

Telephone: 630-242-7234

Quarterly Financial and Statistical Supplement

Exhibit 99.2

BANKFINANCIAL CORPORATION

SECOND QUARTER 2008

QUARTERLY FINANCIAL AND STATISTICAL SUPPLEMENT

FOR THE LATEST FIVE QUARTERS

Note: Certain reclassifications have been made in the prior period’s financial statements and reflected in the Selected Quarterly Financial and Statistical Data tables to conform with the current period’s presentation.

The information and statistical data contained herein have been prepared by BankFinancial Corporation and have been derived or calculated from selected quarterly and period-end historical financial statements prepared in accordance with accounting principles generally accepted in the United States. BankFinancial Corporation is under no obligation to update, keep current or continue to provide the information contained herein. This information is provided solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or establish any business relationships with BankFinancial Corporation or its subsidiary.


BANKFINANCIAL CORPORATION

SELECTED QUARTERLY FINANCIAL AND STATISTICAL DATA

Latest Five Quarters

(Dollars in thousands; except per share) – (Unaudited)

 

PERFORMANCE MEASUREMENTS:    2008     2007  
     IIQ     IQ     IVQ     IIIQ     IIQ  

Return on assets (ratio of net income (loss) to average total assets) (1)

     (1.49 )%     0.87 %     0.25 %     0.59 %     0.61 %

Return on equity (ratio of net income (loss) to average equity (1)

     (7.46 )     4.37       1.23       2.90       3.01  

Net interest rate spread (1)

     3.31       3.29       3.02       2.91       2.88  

Net interest margin (1)

     3.88       3.93       3.80       3.76       3.74  

Efficiency ratio

     160.33       73.57       92.05       77.38       80.79  

Noninterest expense to average total assets (1)

     6.39       3.60       3.86       3.26       3.28  

Average interest-earning assets to average interest-bearing liabilities

     129.40       128.96       130.01       130.11       131.30  

Offices

     18       18       18       18       18  

Employees (full time equivalents)

     397       404       425       416       418  
SUMMARY INCOME STATEMENT:    2008     2007  
     IIQ     IQ     IVQ     IIIQ     IIQ  

Total interest income

   $ 19,387     $ 20,742     $ 21,925     $ 23,124     $ 23,111  

Total interest expense

     6,405       7,469       8,880       9,899       9,760  
                                        

Net interest income before provision

     12,982       13,273       13,045       13,225       13,351  

Provision (credit) for loan losses

     250       (51 )     10       460       (354 )
                                        

Net interest income

     12,732       13,324       13,035       12,765       13,705  

Noninterest income

     1,521       4,706       2,502       2,777       2,327  

Noninterest expense

     23,253       13,228       14,311       12,383       12,666  
                                        

Income (loss) before income tax

     (9,000 )     4,802       1,226       3,159       3,366  

Income tax expense (benefit)

     (3,593 )     1,610       297       922       1,028  
                                        

Net income (loss)

   $ (5,407 )   $ 3,192     $ 929     $ 2,237     $ 2,338  
                                        

Basic earnings (loss) per common share

   $ (0.27 )   $ 0.16     $ 0.05     $ 0.11     $ 0.11  
                                        

Diluted earnings (loss) per common share

   $ (0.27 )   $ 0.16     $ 0.05     $ 0.11     $ 0.11  
                                        
NONINTEREST INCOME AND EXPENSE:    2008     2007  
     IIQ     IQ     IVQ     IIIQ     IIQ  

Noninterest Income:

          

Deposit service charges and fees

   $ 837     $ 825     $ 915     $ 938     $ 918  

Other fee income

     587       475       484       495       499  

Insurance commissions and annuities income

     202       246       287       251       225  

Gain on sales of loans, net

     17       70       34       43       1  

Gain on sales of investment securities

     —         1,385       —         399       —    

Gain on unredeemed VISA Stock

     —         1,240       —         —         —    

Gain (loss) on disposition of premises and equipment

     (311 )     9       (4 )     —         7  

Loan servicing fee income

     184       213       204       182       214  

Amortization and impairment of servicing assets

     (178 )     (311 )     (64 )     (131 )     (106 )

REO operations

     (163 )     (11 )     (13 )     (4 )     —    

Earnings on bank-owned life insurance

     187       217       231       219       135  

Other

     159       348       428       385       434  
                                        

Total noninterest income

   $ 1,521     $ 4,706     $ 2,502     $ 2,777     $ 2,327  
                                        

Noninterest Expense:

          

Compensation and benefits

   $ 7,506     $ 8,220     $ 8,020     $ 7,773     $ 7,860  

Office occupancy and equipment

     1,582       1,947       1,615       1,428       1,399  

Advertising

     309       164       320       409       455  

Data processing

     790       904       848       821       823  

Supplies, telephone and postage

     497       522       572       485       484  

Amortization of intangibles

     446       452       464       469       469  

Visa settlement

     —         —         1,240       —         —    

Loss on impairment of securities available for sale

     11,075       —         —         —         —    

Other

     1,048       1,019       1,232       998       1,176  
                                        

Total noninterest expenses

   $ 23,253     $ 13,228     $ 14,311     $ 12,383     $ 12,666  
                                        

 

(1) Annualized

 

Page 2


BANKFINANCIAL CORPORATION

SELECTED QUARTERLY FINANCIAL AND STATISTICAL DATA

Latest Five Quarters

(Dollars in thousands; except per share) – (Unaudited)

 

SUMMARY BALANCE SHEET:    2008     2007  
     IIQ     IQ     IVQ     IIIQ     IIQ  

ASSETS:

          

Cash

   $ 27,915     $ 25,530     $ 28,279     $ 30,694     $ 32,071  

Interest-bearing deposits and short-term investments

     6,297       3,611       669       14,003       33,887  

Securities available for sale, net

     78,030       73,545       77,049       67,686       69,085  

Loans held for sale

     702       1,786       173       2,031       620  

Loans receivable, net

     1,225,115       1,246,983       1,253,999       1,276,303       1,282,645  

Federal Home Loan Bank stock

     15,598       15,598       15,598       15,598       15,598  

Premises and equipment

     34,013       34,014       34,487       34,171       34,437  

Intangible assets

     29,437       29,883       30,335       30,799       31,268  

Investment in bank-owned life insurance

     19,989       19,802       19,585       19,354       19,135  

Other assets

     19,716       24,316       20,370       14,157       13,182  
                                        

Total assets

   $ 1,456,812     $ 1,475,068     $ 1,480,544     $ 1,504,796     $ 1,531,928  
                                        

LIABILITIES AND EQUITY:

          

Deposits

   $ 1,080,986     $ 1,057,613     $ 1,073,650     $ 1,098,541     $ 1,105,237  

Borrowings

     70,633       112,020       96,433       81,138       100,862  

Other liabilities

     17,030       15,850       19,324       21,496       18,917  
                                        

Total liabilities

     1,168,649       1,185,483       1,189,407       1,201,175       1,225,016  

Stockholders’ equity

     288,163       289,585       291,137       303,621       306,912  
                                        

Total liabilities and stockholders’ equity

   $ 1,456,812     $ 1,475,068     $ 1,480,544     $ 1,504,796     $ 1,531,928  
                                        
CAPITAL RATIOS:    2008     2007  
     IIQ     IQ     IVQ     IIIQ     IIQ  

BankFinancial Corporation:

          

Equity to total assets (end of period)

     19.78 %     19.63 %     19.66 %     20.18 %     20.03 %

Tangible equity to tangible total assets (end of period)

     17.99       18.11       17.95       18.51       18.37  

BankFinancial FSB:

          

Risk-based total capital ratio

     16.59       16.55       16.54       19.07       20.26  

Risk-based tier 1 capital ratio

     15.79       15.77       15.74       18.22       19.43  

Tier 1 leverage ratio

     14.13       14.20       13.95       15.16       15.94  

Stock repurchases – $ (000’s)

   $ 1,161     $ 3,899     $ 5,273     $ 5,643     $ 3,780  

Stock repurchases – shares

     76,000       254,800       335,900       377,406       232,643  
COMMON STOCK AND DIVIDENDS:    2008     2007  
     IIQ     IQ     IVQ     IIIQ     IIQ  

Stock Prices:

          

Close

   $ 13.01     $ 15.91     $ 15.82     $ 15.82     $ 15.45  

High

     16.16       16.44       16.67       16.39       16.75  

Low

     13.00       13.66       14.54       13.01       15.45  

Cash dividends paid

   $ 0.07     $ 0.07     $ 0.07     $ 0.07     $ 0.07  
DEPOSITS:    2008     2007  
     IIQ     IQ     IVQ     IIIQ     IIQ  

Non-interest-bearing demand

   $ 108,530     $ 112,557     $ 111,554     $ 111,772     $ 126,304  

Interest-bearing NOW

     364,106       318,355       306,517       297,589       282,300  

Money market

     183,180       224,078       250,682       266,737       262,265  

Savings

     101,532       99,718       97,280       101,176       107,030  

Certificates of deposit – Retail

     316,761       301,990       305,610       314,450       317,946  

Certificates of deposit – Wholesale

     6,877       915       2,007       6,817       9,392  
                                        

Total certificates of deposit

     323,638       302,905       307,617       321,267       327,338  
                                        

Total deposits

   $ 1,080,986     $ 1,057,613     $ 1,073,650     $ 1,098,541     $ 1,105,237  
                                        

 

Page 3


BANKFINANCIAL CORPORATION

SELECTED QUARTERLY FINANCIAL AND STATISTICAL DATA

Latest Five Quarters

(Dollars in thousands; except per share) – (Unaudited)

 

     2008     2007  
     IIQ     IQ     IVQ     IIIQ     IIQ  

LOANS:

          

One- to four-family residential real estate

   $ 329,575     $ 340,439     $ 345,245     $ 373,830     $ 381,447  

Multi-family mortgage loans

     306,209       301,957       291,395       288,883       291,963  

Nonresidential real estate

     323,555       327,542       325,885       326,368       321,943  

Construction and land loans

     52,785       60,020       64,483       61,482       68,024  

Commercial loans

     68,168       76,164       83,233       80,358       84,410  

Commercial leases

     146,714       142,069       144,841       145,761       134,217  

Consumer loans

     2,809       3,408       3,506       4,009       4,697  

Other loans (including municipal)

     4,334       4,334       4,544       4,544       4,544  
                                        

Total loans

     1,234,149       1,255,933       1,263,132       1,285,235       1,291,245  

Loans in process

     (165 )     (161 )     (168 )     (63 )     (87 )

Net deferred loan origination costs

     2,031       2,041       2,086       2,211       2,266  

Allowance for loan losses

     (10,900 )     (10,830 )     (11,051 )     (11,080 )     (10,779 )
                                        

Loans, net

   $ 1,225,115     $ 1,246,983     $ 1,253,999     $ 1,276,303     $ 1,282,645  
                                        
CREDIT QUALITY RATIOS:    2008     2007  
     IIQ     IQ     IVQ     IIIQ     IIQ  

Nonperforming Loans and Assets:

          

Nonperforming loans

   $ 11,248     $ 8,737     $ 12,058     $ 9,557     $ 9,720  

Real estate owned

     937       899       820       252       —    
                                        

Nonperforming assets

   $ 12,185     $ 9,636     $ 12,878     $ 9,809     $ 9,720  
                                        

Asset Quality Ratios:

          

Nonperforming assets to total assets

     0.84 %     0.65 %     0.87 %     0.65 %     0.63 %

Nonperforming loans to total loans

     0.91       0.70       0.95       0.74       0.75  

Allowance for loan losses to nonperforming loans

     96.91       123.96       91.65       115.94       110.90  

Allowance for loan losses to total loans

     0.89       0.86       0.87       0.86       0.83  

Net charge-off ratio (1)

     0.06       0.05       0.01       0.05       0.00  
ALLOWANCE FOR LOAN LOSSES:    2008     2007  
     IIQ     IQ     IVQ     IIIQ     IIQ  

Beginning balance

   $ 10,830     $ 11,051     $ 11,080     $ 10,779     $ 11,122  

Provision (credit) for loan losses

     250       (51 )     10       460       (354 )

Loans charged off

     (182 )     (173 )     (46 )     (159 )     (3 )

Recoveries

     2       3       7       —         14  
                                        

Ending balance

   $ 10,900     $ 10,830     $ 11,051     $ 11,080     $ 10,779  
                                        

 

(1) Annualized

 

Page 4


BANKFINANCIAL CORPORATION

SELECTED QUARTERLY FINANCIAL AND STATISTICAL DATA

Latest Five Quarters

(Dollars in thousands; except per share) – (Unaudited)

 

SELECTED AVERAGE BALANCES:    2008     2007  
     IIQ     IQ     IVQ     IIIQ     IIQ  

Average total assets

   $ 1,454,496     $ 1,471,387     $ 1,484,541     $ 1,518,670     $ 1,543,985  

Average earning assets

     1,346,496       1,358,390       1,362,890       1,397,286       1,432,238  

Average total loans

     1,233,586       1,257,089       1,277,238       1,291,593       1,297,583  

Average investment securities

     86,855       83,536       64,097       73,370       98,791  

Average FHLB stock

     15,598       15,598       15,598       15,598       15,598  

Average other earning assets

     10,457       2,167       5,957       16,725       20,266  

Average interest-bearing deposits

     958,071       943,549       966,082       986,113       978,601  

Average total borrowings

     82,502       109,791       82,220       87,782       112,209  

Average interest-bearing liabilities

     1,040,573       1,053,340       1,048,302       1,073,895       1,090,810  

Average total stockholders’ equity

     289,988       292,353       301,911       308,041       310,219  
SELECTED YIELDS AND COST OF FUNDS (1):    2008     2007  
     IIQ     IQ     IVQ     IIIQ     IIQ  

Average earning assets

     5.79 %     6.14 %     6.38 %     6.57 %     6.47 %

Average total loans

     5.98       6.26       6.46       6.67       6.60  

Average investment securities

     4.64       5.52       6.47       5.90       5.66  

Average FHLB stock

     —         —         —         2.77       2.75  

Average other earning assets

     2.01       3.34       4.66       5.08       5.30  

Average interest-bearing deposits

     2.36       2.69       3.22       3.55       3.48  

Average total borrowings

     3.86       4.25       5.04       4.81       4.51  

Average interest-bearing liabilities

     2.48       2.85       3.36       3.66       3.59  

Interest rate spread

     3.31       3.29       3.02       2.91       2.88  

Net interest margin

     3.88       3.93       3.80       3.76       3.74  
EARNINGS PER SHARE COMPUTATIONS:    2008     2007  
     IIQ     IQ     IVQ     IIIQ     IIQ  

Net income (loss)

   $ (5,407 )   $ 3,192     $ 929     $ 2,237     $ 2,338  
                                        

Average common shares outstanding

     21,952,967       22,101,410       22,429,477       22,692,613       23,124,955  

Less: Unearned ESOP shares

     (1,679,927 )     (1,704,262 )     (1,728,813 )     (1,753,480 )     (1,777,881 )

Less: Unvested restricted stock

     (434,550 )     (434,801 )     (575,800 )     (619,385 )     (618,600 )
                                        

Weighted average common shares outstanding

     19,838,490       19,962,347       20,124,864       20,319,748       20,728,474  

Plus: Dilutive common shares equivalents

     61,010       5,657       —         97,765       26,049  
                                        

Weighted average dilutive shares outstanding

     19,899,500       19,968,004       20,124,864       20,417,513       20,754,523  
                                        

Number of antidilutive stock options excluded from the diluted earnings per share calculation

     2,336,803       2,336,803       1,597,400       1,576,200       1,557,500  

Weighted average exercise price of anti-dilutive option shares

   $ 16.51     $ 16.51     $ 17.40     $ 17.34     $ 17.36  

Earnings (loss) per basic share

   $ (0.27 )   $ 0.16     $ 0.05     $ 0.11     $ 0.11  
                                        

Earnings (loss) per diluted share

   $ (0.27 )   $ 0.16     $ 0.05     $ 0.11     $ 0.11  
                                        

N.A. = Not Applicable

          

 

(1) Annualized

 

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BANKFINANCIAL CORPORATION

NON-GAAP FINANCIAL MEASURES

The Company utilizes a number of different financial measures, both GAAP and non-GAAP, in making operating, budgeting and planning decisions for future periods. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles in the United States of America, or GAAP. The Company believes that the use of the non-GAAP financial measures described below provides the Board of Directors and management, and may provide some investors, with a more complete understanding of the Company’s operating results and trends, and facilitate comparisons to historical and peer performance. The Company’s non-GAAP financial measures should be considered supplemental in nature and should not be considered in isolation, or as superior to or a substitute for, financial measures that are prepared in accordance with GAAP. In addition, the Company’s non-GAAP financial measures may differ from similar non-GAAP financial measures that are used by other companies, thus limiting their usefulness as a comparative tool.

Equity-based Compensation. The Company believes that the exclusion of equity-based compensation expense from its net income (loss) facilitates the comparison of the Company’s operating results to the Company’s historical performance, including the prior periods in which it operated as a mutual institution and had no stock outstanding. In addition, the Company believes that this non-GAAP measure facilitates the comparison of the Company’s performance to the performance of other financial institutions that have different or more seasoned equity-based compensation plans, including plans pursuant to which stock option awards vested prior to the effective date of SFAS No. 123R.

Amortization of Intangibles Expense. The Company believes that the exclusion from its net income (loss) of expense for the amortization of the core deposit intangible assets resulting from its acquisition of Success Bancshares and University National Bank facilitates the comparison of the Company’s operating results to the Company’s historical performance and to the performance of other financial institutions with different acquisition histories. In addition, the level of amortization of core deposit intangible assets arising from an acquisition can vary significantly depending on the valuation methodology used and the interest rate environment that existed at the time of the acquisition.

Gain on sale of Visa stock and Gain on unredeemed Visa stock. The Company believes that the exclusion of these gains, related to the completion of Visa’s IPO in March of 2008, from its net income (loss) facilitates the comparison of the Company’s operating results to the Company’s historical performance.

Visa Settlement. The Company believes that the exclusion of this one-time litigation expense due to our proportionate share of Visa litigation charges from its net income (loss) facilitates the comparison of the Company’s operating results to the Company’s historical performance.

Loss on Impairment of Securities. The Company believes that the exclusion from its net income (loss) of the impairment loss on our Freddie Mac preferred stocks, based on our determination that the unrealized loss that existed with respect to these securities constituted an other-than-temporary impairment, facilitates the comparison of the Company’s operating results to the Company’s historical performance.

Core Return on Assets. The Company believes that adjusting the calculation of its return on assets to exclude the equity-based compensation expense, the amortization of intangibles expenses, the Visa gains and settlement expense, and the loss on impairment furthers the purposes described above. Thus, the Company calculates core return on assets by dividing net income (loss) for a period, adjusted to exclude these items, by its average assets for the period.

Core Return on Equity. The Company believes that adjusting the calculation of its return on equity to exclude the equity-based compensation expense, the amortization of intangibles expenses, the Visa gains and settlement expense, and the loss on impairment furthers the purposes described above. Thus, the Company calculates core return on equity by dividing average stockholders’ equity for a period by net income (loss), adjusted to exclude these items, for the period.

 

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Core Dilutive Earnings per Share. The Company believes that adjusting the calculation of its dilutive earnings per share to exclude the equity-based compensation expense, the amortization of intangibles expenses, the Visa gains and settlement expense, and the loss on impairment furthers the purposes described above. Thus, the Company calculates core dilutive earnings per share by net income (loss), adjusted to exclude these items, for the period by the weighted average dilutive common shares outstanding, for the period.

Core Noninterest Expense to Average Total Assets. The Company believes that adjusting the calculation of its noninterest expense to average total assets to exclude the equity-based compensation expense, the amortization of intangibles expenses, the Visa settlement expense, and the loss on impairment furthers the purposes described above. Thus, the Company calculates noninterest expense to average total assets by dividing noninterest expense, adjusted to exclude these expenses, by average total assets for the period.

Core Efficiency Ratio. The Company believes that adjusting the calculation of its efficiency ratio to exclude the equity-based compensation expense, the amortization of intangibles expenses, the Visa gains and settlement expense, and the loss on impairment the purposes described above. Thus, the Company calculates core efficiency ratio by dividing noninterest expense, adjusted to exclude these expenses, by the sum of net interest income and noninterest income, adjusted to exclude these gains.

There are inherent limitations associated with the use of each of the above non-GAAP financial measures as an analytical tool. In particular, these non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles and reflect the exclusion of items that are recurring and will be reflected in the Company’s financial results in the future. The Company has further highlighted these and the other limitations described above by providing a reconciliation of the GAAP amounts that have been excluded from these non-GAAP financial measures.

 

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BANKFINANCIAL CORPORATION

NON-GAAP FINANCIAL MEASURES

(Dollars in thousands; except per share) – (Unaudited)

 

FOR THE QUARTERS AND SIX MONTH PERIODS ENDED JUNE 30, 2008 AND 2007    Three months ended
June 30,
    Six months ended
June 30,
 
     2008     2007     2008     2007  

Core Operating Income:

        

Net income (loss)

   $ (5,407 )   $ 2,338     $ (2,215 )   $ 3,989  

Adjustments:

        

Equity-based compensation and benefits

     1,179       1,294       2,427       2,555  

Amortization of core deposit intangible

     446       469       898       946  

Gain on sales of investment securities

     —         —         (1,385 )     —    

Gain on unredeemed Visa stock

     —         —         (1,240 )     —    

Loss on impairment of securities

     11,075       —         11,075       —    

Tax effect on adjustments assuming 39.745% tax rate

     (5,047 )     (701 )     (4,680 )     (1,391 )
                                

Core Operating Income

   $ 2,246     $ 3,400     $ 4,880     $ 6,099  
                                

Return on assets (ratio of net income (loss) to average total assets) (1)

     (1.49 )%     0.61 %     (0.30 )%     0.51 %

Core return on assets (ratio of core operating income to average total assets) (1)

     0.62 %     0.88 %     0.67 %     0.78 %

Return on equity (ratio of net income (loss) to average equity) (1)

     (7.46 )%     3.01 %     (1.52 )%     2.51 %

Core return on equity (ratio of core operating income to average equity) (1)

     3.10 %     4.38 %     3.35 %     3.84 %

Diluted earnings (loss) per common share

   $ (0.27 )   $ 0.11     $ (0.11 )   $ 0.19  

Core dilutive earnings per common share

   $ 0.11     $ 0.16     $ 0.24     $ 0.29  

Core Noninterest Expenses:

        

Noninterest Expenses

   $ 23,253     $ 12,666     $ 36,481     $ 25,788  

Adjustments:

        

Equity-based compensation and benefits

     (1,179 )     (1,294 )     (2,427 )     (2,555 )

Amortization of core deposit intangible

     (446 )     (469 )     (898 )     (946 )

Loss on impairment of securities

     (11,075 )     —         (11,075 )     —    
                                

Core Noninterest Expenses

   $ 10,553     $ 10,903     $ 22,081     $ 22,287  
                                

Noninterest expense to average total assets (1)

     6.39 %     3.28 %     4.99 %     3.30 %

Core noninterest expense to average total assets (1)

     2.90 %     2.82 %     3.02 %     2.85 %

Efficiency ratio (ratio of noninterest expense to net interest income plus noninterest income)

     160.33 %     80.79 %     112.31 %     81.23 %

Core efficiency ratio (ratio of core noninterest expense to net interest income plus core noninterest income)

     72.77 %     69.54 %     73.95 %     70.20 %

 

(1) Annualized for the three-month periods.

 

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FOR THE LATEST FIVE QUARTERS    2008     2007  
     IIQ     IQ     IVQ     IIIQ     IIQ  

Core Operating Income:

          

Net Income (Loss)

   $ (5,407 )   $ 3,192     $ 929     $ 2,237     $ 2,338  

Adjustments:

          

Equity-based compensation and benefits

     1,179       1,249       1,219       1,311       1,294  

Amortization of core deposit intangible

     446       452       464       469       469  

Gain on sales of investment securities

     —         (1,385 )     —         —         —    

Gain on unredeemed Visa stock

     —         (1,240 )     1,240       —         —    

Loss on impairment of securities

     11,075       —         —         —         —    

Tax effect on adjustments assuming 39.745% tax rate

     (5,047 )     367       (1,162 )     (707 )     (701 )
                                        

Core Operating Income

   $ 2,246     $ 2,635     $ 2,690     $ 3,310     $ 3,400  
                                        

Return on assets (ratio of net income (loss) to average total assets) (1)

     (1.49 )%     0.87 %     0.25 %     0.59 %     0.61 %

Core return on assets (ratio of core operating income to average total assets) (1)

     0.62 %     0.72 %     0.72 %     0.87 %     0.88 %

Return on equity (ratio of net income (loss) to average equity) (1)

     (7.46 )%     4.37 %     1.23 %     2.90 %     3.01 %

Core return on equity (ratio of core operating income to average equity) (1)

     3.10 %     3.61 %     3.56 %     4.30 %     4.38 %

Diluted earnings (loss) per common share

   $ (0.27 )   $ 0.16     $ 0.05     $ 0.11     $ 0.11  

Core dilutive earnings per common share

   $ 0.11     $ 0.13     $ 0.13     $ 0.16     $ 0.16  

Core Operating Expenses:

          

Noninterest Expenses

   $ 23,253     $ 13,228     $ 14,311     $ 12,383     $ 12,666  

Adjustments:

          

Equity-based compensation and benefits

     (1,179 )     (1,249 )     (1,219 )     (1,311 )     (1,294 )

Amortization of core deposit intangible

     (446 )     (452 )     (464 )     (469 )     (469 )

Visa settlement

     —         —         (1,240 )     —         —    

Loss on impairment of securities

     (11,075 )     —         —         —         —    
                                        

Core Noninterest Expenses

   $ 10,553     $ 11,527     $ 11,388     $ 10,603     $ 10,903  
                                        

Noninterest expense to average total assets (1)

     6.39 %     3.60 %     3.86 %     3.26 %     3.28 %

Core noninterest expense to average total assets (1)

     2.90 %     3.13 %     3.07 %     2.79 %     2.82 %

Efficiency ratio (ratio of noninterest expense to net interest income plus noninterest income)

     160.33 %     73.57 %     92.05 %     77.38 %     80.79 %

Core efficiency ratio (ratio of core noninterest expense to net interest income plus core noninterest income)

     72.77 %     75.08 %     73.25 %     66.26 %     69.54 %

 

(1) Annualized for the three-month periods.

 

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