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): February 23, 2009

 

 

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 February 23, 2009, the Company issued a press release announcing the filing of its Annual Report on Form 10-K for the year ended December 31, 2008 and the Fourth Quarter 2008 Quarterly Financial and Statistical Supplement for the latest five quarters. The press release also reported earnings for the year ended December 31, 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 February 23, 2009
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: February 23, 2009     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 Financial Results

for the Fourth Quarter of 2008 and the Full Year of 2008

Burr Ridge, Illinois—(February 23, 2009) BankFinancial Corporation (Nasdaq – BFIN) (“BankFinancial”) reported net income of $7.9 million and basic earnings per share of $0.40 for the three months ended December 31, 2008, compared to net income of $929,000 and basic earnings per share of $0.05 for the three months ended December 31, 2007.

BankFinancial’s operating results for the fourth quarter of 2008 included a pre-tax charge of $2.0 million on the early extinguishment of borrowings, in accordance with Emerging Issues Task Force 96-19, Debtor’s Accounting for a Modification or Exchange of Debt Instruments. The Bank elected to pursue certain balance sheet restructuring strategies as a result of the historically low interest rate environment. The restructuring consisted of retiring a $25.0 million Federal Home Loan Bank of Chicago (“FHLBC”) term advance and replacing it with a new FHLBC advance with an adjustable interest rate and a maturity of approximately one month. BankFinancial also recorded a tax benefit of $10.1 million related to Freddie Mac preferred stock impairment losses that it recorded as of September 30, 2008, but because the Emergency Economic Stabilization Act of 2008 was not enacted until October 3, 2008, the tax benefit was applied to BankFinancial’s results of operations for the quarter ending December 31, 2008.

For the year ended December 31, 2008, BankFinancial reported a net loss of $19.4 million and basic loss per share of $0.98, compared to net income of $7.2 million and basic earnings per share of $0.35 for the year ended December 31, 2007. Net income for the year ended December 31, 2008 included a $35.9 million pre-tax impairment loss on BankFinancial’s Freddie Mac preferred stocks. Additional factors affecting the change in net income from year to year included a $2.0 million pre-tax loss on the early extinguishment of borrowings relating to the prepayment of the $25 million FHLBC term advance. In addition, increased our general loan loss reserves for performing loans by $1.8 million due to national and local economic factors, increased our specific loan loss reserves for non-performing loans by $1.9 million and recorded net loan charge-offs of $1.4 million.

At December 31, 2008, BankFinancial had total assets of $1.555 billion, total loans of $1.268 billion, total deposits of $1.070 billion and stockholders’ equity of $267 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 of 14.69%, a Tier 1 capital to risk weighted assets ratio of 13.79%, and a Tier 1 capital to adjusted total assets ratio of 12.08% at December 31, 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%.

BankFinancial filed its Annual Report on Form 10-K for the year ended December 31, 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 fourth quarter and full year 2008 results in a conference call and webcast for stockholders and analysts on Tuesday, February 24, 2009 at 9:30 a.m. Central Standard Time (CST). The conference call may be accessed by calling (866) 314-5232 and using participant passcode 43348772. 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. CST on March 10, 2009 on BankFinancial’s 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.

This release includes “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. A variety of factors could cause BankFinancial’s actual results to differ from those expected at the time of this release. For a discussion of some of the factors that may cause actual results to differ from expectations, please refer to BankFinancial’s most recent Quarterly Report on Form 10-Q and Annual Report on Form 10-K as filed with the SEC. Investors are urged to review all information contained in these reports, including the risk factors discussed therein. 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. Forward looking statements speak only as of the date they are made, and we do not undertake to update them to reflect changes.

 

For Further Information Contact:   
Shareholder, Analyst and Investor Inquiries:    Media Inquiries:
Elizabeth A. Doolan,    Gregg T. Adams,
Senior Vice President – Controller    Executive Vice President – Marketing & Sales
BankFinancial Corporation    BankFinancial F.S.B.
Telephone: 630-242-7151    Telephone: 630-242-7234
Quarterly Financial and Statistical Supplement

Exhibit 99.2

BANKFINANCIAL CORPORATION

FOURTH 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)

 

      2008     2007  
   IVQ     IIIQ     IIQ     IQ     IVQ  

PERFORMANCE MEASUREMENTS:

          

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

     2.14 %     (6.93 )%     (1.49 )%     0.87 %     0.25 %

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

     11.81       (35.24 )     (7.46 )     4.37       1.23  

Net interest rate spread (1)

     3.49       3.29       3.31       3.29       3.02  

Net interest margin (1)

     3.90       3.80       3.88       3.93       3.80  

Efficiency ratio

     98.24       253.46       160.33       73.57       92.05  

Noninterest expense to average total assets (1)

     4.00       10.32       6.39       3.60       3.86  

Average interest-earning assets to average interest-bearing liabilities

     124.32       128.92       129.40       128.96       130.01  

Offices

     18       18       18       18       18  

Employees (full time equivalents)

     393       395       397       404       425  
      2008     2007  
   IVQ     IIIQ     IIQ     IQ     IVQ  

SUMMARY STATEMENT OF OPERATIONS:

          

Total interest income

   $ 19,082     $ 18,749     $ 19,387     $ 20,742     $ 21,925  

Total interest expense

     5,810       5,983       6,405       7,469       8,880  
                                        

Net interest income before provision

     13,272       12,766       12,982       13,273       13,045  

Provision (credit) for loan losses

     3,487       1,406       250       (51 )     10  
                                        

Net interest income

     9,785       11,360       12,732       13,324       13,035  

Noninterest income

     1,789       1,968       1,521       4,706       2,502  

Noninterest expense

     14,796       37,345       23,253       13,228       14,311  
                                        

Income (loss) before income tax

     (3,222 )     (24,017 )     (9,000 )     4,802       1,226  

Income tax expense (benefit)

     (11,130 )     1,065       (3,593 )     1,610       297  
                                        

Net income (loss)

   $ 7,908     $ (25,082 )   $ (5,407 )   $ 3,192     $ 929  
                                        

Basic earnings (loss) per common share

   $ .40     $ (1.27 )   $ (0.27 )   $ 0.16     $ 0.05  
                                        

Diluted earnings (loss) per common share

   $ .40     $ (1.26 )   $ (0.27 )   $ 0.16     $ 0.05  
                                        
      2008     2007  
   IVQ     IIIQ     IIQ     IQ     IVQ  

NONINTEREST INCOME AND EXPENSE:

          

Noninterest Income:

          

Deposit service charges and fees

   $ 920     $ 989     $ 837     $ 825     $ 915  

Other fee income

     349       533       587       475       484  

Insurance commissions and annuities income

     188       158       202       246       287  

Gain on sales of loans

     8       23       17       70       34  

Gain on sales of securities

     —         —         —         1,385       —    

Gain on unredeemed VISA Stock

     —         —         —         1,240       —    

Gain (loss) on disposition of premises and equipment

     —         —         (311 )     9       (4 )

Loan servicing fees

     184       190       184       213       204  

Amortization and impairment of servicing assets

     84       (119 )     (178 )     (311 )     (64 )

Operations of real estate owned

     (121 )     (139 )     (163 )     (11 )     (13 )

Earnings on Bank Owned Life Insurance

     29       153       187       217       231  

Other

     148       180       159       348       428  
                                        

Total noninterest income

   $ 1,789     $ 1,968     $ 1,521     $ 4,706     $ 2,502  
                                        

Noninterest Expense:

          

Compensation and benefits

   $ 7,265     $ 7,544     $ 7,506     $ 8,220     $ 8,020  

Office occupancy and equipment

     1,864       1,481       1,582       1,947       1,615  

Advertising and public relations

     515       373       309       164       320  

Information technology

     1,005       963       790       904       848  

Supplies, telephone and postage

     506       545       497       522       572  

Amortization of intangibles

     440       446       446       452       464  

Visa litigation

     —         —         —         —         1,240  

Loss on impairment of securities available for sale

     —         24,844       11,075       —         —    

Loss on early extinguishment of borrowings

     1,975       —         —         —         —    

Other

     1,226       1,149       1,048       1,019       1,232  
                                        

Total noninterest expenses

   $ 14,796     $ 37,345     $ 23,253     $ 13,228     $ 14,311  
                                        

 

(1) Annualized

 

Page 2


BANKFINANCIAL CORPORATION

SELECTED QUARTERLY FINANCIAL AND STATISTICAL DATA

Latest Five Quarters

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

 

      2008     2007  
   IVQ     IIIQ     IIQ     IQ     IVQ  

SUMMARY BALANCE SHEET:

          

ASSETS:

          

Cash and due from other financial institutions

   $ 29,213     $ 21,258     $ 27,915     $ 25,530     $ 28,279  

Interest-bearing deposits and short-term investments

     116       15,030       6,297       3,611       669  

Securities available-for-sale, at fair value

     124,919       75,865       78,030       73,545       77,049  

Loans held-for-sale

     872       1,264       702       1,786       173  

Loans receivable, net

     1,267,968       1,216,185       1,225,115       1,246,983       1,253,999  

Stock in Federal Home Loan Bank, at cost

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

Premises and equipment, net

     34,565       34,448       34,013       34,014       34,487  

Intangible assets

     28,551       28,991       29,437       29,883       30,335  

Bank Owned Life Insurance

     20,171       20,142       19,989       19,802       19,585  

Other assets

     32,728       19,908       19,716       24,316       20,370  
                                        

Total assets

   $ 1,554,701     $ 1,448,689     $ 1,456,812     $ 1,475,068     $ 1,480,544  
                                        

LIABILITIES AND EQUITY:

          

Deposits

   $ 1,069,855     $ 1,046,104     $ 1,080,986     $ 1,057,613     $ 1,073,650  

Borrowings

     200,350       101,935       70,633       112,020       96,433  

Other liabilities

     17,705       39,023       17,030       15,850       19,324  
                                        

Total liabilities

     1,287,910       1,187,062       1,168,649       1,185,483       1,189,407  

Stockholders’ equity

     266,791       261,627       288,163       289,585       291,137  
                                        

Total liabilities and stockholders’ equity

   $ 1,554,701     $ 1,448,689     $ 1,456,812     $ 1,475,068     $ 1,480,544  
                                        
      2008     2007  
   IVQ     IIIQ     IIQ     IQ     IVQ  

CAPITAL RATIOS:

          

BankFinancial Corporation:

          

Equity to total assets (end of period)

     17.16 %     18.06 %     19.78 %     19.63 %     19.66 %

Tangible equity to tangible total assets (end of period)

     15.48       16.47       17.99       18.11       17.95  

BankFinancial FSB:

          

Risk-based total capital ratio

     14.69       15.72       16.59       16.55       16.54  

Risk-based tier 1 capital ratio

     13.79       14.87       15.79       15.77       15.74  

Tier 1 leverage ratio

     12.08       13.17       14.13       14.20       13.95  

Stock repurchases - $ (000’s)

   $ 1,272     $ 1,404     $ 1,162     $ 3,899     $ 5,273  

Stock repurchases - shares

     117,700       101,200       76,000       254,800       335,900  
      2008     2007  
   IVQ     IIIQ     IIQ     IQ     IVQ  

COMMON STOCK AND DIVIDENDS:

          

Stock Prices:

          

Close

   $ 10.19     $ 14.68     $ 13.01     $ 15.91     $ 15.82  

High

     14.99       15.98       16.16       16.44       16.67  

Low

     9.07       12.70       13.00       13.66       14.54  

Book value per share

   $ 12.30     $ 12.00     $ 13.15     $ 13.17     $ 13.09  

Tangible book value per share

   $ 10.98     $ 10.67     $ 11.81     $ 11.81     $ 11.72  

Cash dividends paid

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

DEPOSITS:

          

Non-interest-bearing demand

   $ 109,056     $ 108,110     $ 108,530     $ 112,557     $ 111,554  

Savings

     94,802       96,489       101,532       99,718       97,280  

Money market accounts

     205,768       196,050       183,180       224,078       250,682  

Interest-bearing NOW

     285,737       309,482       364,106       318,355       306,517  

Certificates of deposit - Retail

     339,771       330,390       316,761       301,990       305,610  

Certificates of deposit - Wholesale

     34,721       5,583       6,877       915       2,007  
                                        

Total certificates of deposit

     374,492       335,973       323,638       302,905       307,617  
                                        

Total deposits

   $ 1,069,855     $ 1,046,104     $ 1,080,986     $ 1,057,613     $ 1,073,650  
                                        

 

Page 3


BANKFINANCIAL CORPORATION

SELECTED QUARTERLY FINANCIAL AND STATISTICAL DATA

Latest Five Quarters

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

 

     2008     2007  
     IVQ     IIIQ     IIQ     IQ     IVQ  

LOANS:

          

One- to four-family residential real estate

   $ 323,713     $ 323,897     $ 329,575     $ 340,439     $ 345,245  

Multi-family mortgage loans

     305,318       303,516       306,209       301,957       291,395  

Nonresidential real estate

     342,276       331,629       323,555       327,542       325,885  

Construction and land loans

     49,511       45,728       52,785       60,020       64,483  

Commercial loans

     77,559       70,129       68,168       76,164       83,233  

Commercial leases

     175,804       144,856       146,714       142,069       144,841  

Consumer loans

     2,655       2,757       2,809       3,408       3,506  

Other loans (including municipal)

     4,120       4,120       4,334       4,334       4,544  
                                        

Total loans

     1,280,956       1,226,632       1,234,149       1,255,933       1,263,132  

Loans in process

     (154 )     (139 )     (165 )     (161 )     (168 )

Net deferred loan origination costs

     1,912       1,957       2,031       2,041       2,086  

Allowance for loan losses

     (14,746 )     (12,265 )     (10,900 )     (10,830 )     (11,051 )
                                        

Loans, net

   $ 1,267,968     $ 1,216,185     $ 1,225,115     $ 1,246,983     $ 1,253,999  
                                        
      2008     2007  
   IVQ     IIIQ     IIQ     IQ     IVQ  

CREDIT QUALITY RATIOS:

          

Nonperforming Loans and Assets:

          

Nonperforming loans

   $ 13,658     $ 12,497     $ 11,248     $ 8,737     $ 12,058  

Real estate owned

     955       931       937       899       820  
                                        

Nonperforming assets

   $ 14,613     $ 13,428     $ 12,185     $ 9,636     $ 12,878  
                                        

Asset Quality Ratios:

          

Nonperforming assets to total assets

     0.94 %     0.93 %     0.84 %     0.65 %     0.87 %

Nonperforming loans to total loans

     1.07       1.02       0.91       0.70       0.95  

Allowance for loan losses to nonperforming loans

     107.97       98.14       96.91       123.96       91.65  

Allowance for loan losses to total loans

     1.15       1.00       0.89       0.86       0.87  

Net charge-off ratio (1)

     0.32       0.01       0.06       0.05       0.01  
      2008     2007  
   IVQ     IIIQ     IIQ     IQ     IVQ  

ALLOWANCE FOR LOAN LOSSES:

          

Beginning balance

   $ 12,265     $ 10,900     $ 10,830     $ 11,051     $ 11,080  

Provision (credit) for loan losses

     3,487       1,406       250       (51 )     10  

Loans charged off

     (1,016 )     (42 )     (182 )     (173 )     (46 )

Recoveries

     10       1       2       3       7  
                                        

Ending balance

   $ 14,746     $ 12,265     $ 10,900     $ 10,830     $ 11,051  
                                        

 

(1) Annualized

 

Page 4


BANKFINANCIAL CORPORATION

SELECTED QUARTERLY FINANCIAL AND STATISTICAL DATA

Latest Five Quarters

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

 

      2008     2007  
   IVQ     IIIQ     IIQ     IQ     IVQ  

SELECTED AVERAGE BALANCES:

          

Average total assets

   $ 1,478,893     $ 1,447,499     $ 1,454,496     $ 1,471,387     $ 1,484,541  

Average earning assets

     1,354,221       1,337,304       1,346,496       1,358,390       1,362,890  

Average total loans

     1,251,180       1,224,472       1,233,586       1,257,089       1,277,238  

Average investment securities

     83,352       94,459       86,855       83,536       64,097  

Average FHLB stock

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

Average other earning assets

     4,091       2,775       10,457       2,167       5,957  

Average interest-bearing deposits

     933,207       945,892       958,071       943,549       966,082  

Average total borrowings

     156,107       91,452       82,502       109,791       82,220  

Average interest-bearing liabilities

     1,089,314       1,037,344       1,040,573       1,053,340       1,048,302  

Average total stockholders’ equity

     267,862       284,695       289,988       292,353       301,911  
      2008     2007  
   IVQ     IIIQ     IIQ     IQ     IVQ  

SELECTED YIELDS AND COST OF FUNDS (1):

          

Average earning assets

     5.61 %     5.58 %     5.79 %     6.14 %     6.38 %

Average total loans

     5.74       5.86       5.98       6.26       6.46  

Average investment securities

     4.96       2.97       4.64       5.52       6.47  

Average other earning assets

     —         2.01       2.01       3.34       4.66  

Average interest-bearing deposits

     2.13       2.15       2.36       2.69       3.22  

Average total borrowings

     2.06       3.79       3.86       4.25       5.04  

Average interest-bearing liabilities

     2.12       2.29       2.48       2.85       3.36  

Interest rate spread

     3.49       3.29       3.31       3.29       3.02  

Net interest margin

     3.90       3.80       3.88       3.93       3.80  
      2008     2007  
   IVQ     IIIQ     IIQ     IQ     IVQ  

EARNINGS PER SHARE COMPUTATIONS:

          

Net income (loss)

   $ 7,908     $ (25,082 )   $ (5,407 )   $ 3,192     $ 929  
                                        

Average common shares outstanding

     21,736,312       21,829,118       21,952,967       22,101,410       22,429,477  

Less: Unearned ESOP shares

     (1,622,932 )     (1,647,532 )     (1,679,927 )     (1,704,262 )     (1,728,813 )

Less: Unvested restricted stock

     (387,837 )     (434,550 )     (434,550 )     (434,801 )     (575,800 )
                                        

Weighted average common shares outstanding

     19,725,543       19,747,036       19,838,490       19,962,347       20,124,864  

Plus: Dilutive common shares equivalents

     —         101,318       61,010       5,657       —    
                                        

Weighted average dilutive shares outstanding

     19,725,543       19,848,354       19,899,500       19,968,004       20,124,864  
                                        

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

     2,334,804       2,336,803       2,336,803       2,336,803       1,597,400  

Weighted average exercise price of anti-dilutive option shares

   $ 16.51     $ 16.51     $ 16.51     $ 16.51     $ 17.40  

Earnings (loss) per basic share

   $ .40     $ (1.27 )   $ (0.27 )   $ 0.16     $ 0.05  
                                        

Earnings (loss) per diluted share

   $ .40     $ (1.26 )   $ (0.27 )   $ 0.16     $ 0.05  
                                        

N.A. = Not Applicable

          

 

(1) Annualized

 

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BANKFINANCIAL CORPORATION

NON-GAAP FINANCIAL MEASURES

BankFinancial Corporation, a Maryland corporation (“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 Litigation. The Company believes that the exclusion of this 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. Any deferred tax valuation reserve related to the loss on impairment will also be excluded from net income (loss).

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.

 

Page 6


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.

 

Page 7


BANKFINANCIAL CORPORATION

NON-GAAP FINANCIAL MEASURES

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

 

FOR THE QUARTERS AND YEARS ENDED

DECEMBER 31, 2008 AND 2007

   Three months ended
December 31,
    Year ended
December 31,
 
   2008     2007     2008     2007  

Core Operating Income:

        

Net Income (Loss)

   $ 7,908     $ 929     $ (19,389 )   $ 7,155  

Adjustments:

        

Equity-based compensation and benefits

     833       1,219       4,636       5,084  

Amortization of core deposit intangible

     440       464       1,784       1,879  

Gain on sale of VISA stock

     —         1,240       (1,385 )     1,240  

Gain on unredeemed Visa stock

     —         —         (1,240 )     —    

Loss on impairment of securities

     —         —         35,919       —    

Tax effect on adjustments assuming 39.745% tax rate

     (506 )     (1,162 )     (16,277 )     (3,260 )

Deferred tax valuation reserve on loss on impairment

of securities

     (10,087 )     —         —         —    
                                

Core Operating Income (Loss)

   $ (1,412 )   $ 2,690     $ 5,288     $ 12,098  
                                

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

     2.14 %     0.25 %     (1.33 )%     0.47 %

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

     (0.38 )%     0.72 %     0.36 %     0.79 %

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

     11.81 %     1.23 %     (6.84 )%     2.30 %

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

     (2.11 )%     3.56 %     1.86 %     3.88 %

Diluted earnings (loss) per common share

   $ 0.40     $ 0.05     $ (0.98 )   $ 0.35  

Core dilutive earnings per common share

   $ (0.07 )   $ 0.13     $ 0.27     $ 0.59  

Core Noninterest Expenses:

        

Noninterest Expenses

   $ 14,796     $ 14,311     $ 88,622     $ 52,482  

Adjustments:

        

Equity-based compensation and benefits

     (833 )     (1,219 )     (4,636 )     (5,084 )

Amortization of core deposit intangible

     (440 )     (464 )     (1,784 )     (1,879 )

Visa litigation

     —         (1,240 )       (1,240 )

Loss on impairment of securities

     —         —         (35,919 )     —    
                                

Core Noninterest Expenses

   $ 13,523     $ 11,388     $ 46,283     $ 44,279  
                                

Noninterest expense to average total assets (1)

     4.00 %     3.86 %     6.06 %     3.42 %

Core noninterest expense to average total assets (1)

     3.66 %     3.07 %     3.16 %     2.89 %

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

     98.24 %     92.05 %     142.30 %     82.91 %

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

     89.79 %     73.25 %     77.59 %     69.95 %

 

(1) Annualized for the three-month periods.

 

Page 8


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

Core Operating Income:

          

Net Income (Loss)

   $ 7,908     $ (25,082 )   $ (5,407 )   $ 3,192     $ 929  

Adjustments:

          

Equity-based compensation and benefits

     833       1,350       1,179       1,249       1,219  

Amortization of core deposit intangible

     440       446       446       452       464  

Gain on sale of VISA stock

     —         —         —         (1,385 )     —    

Gain on unredeemed Visa stock

     —         —         —         (1,240 )     1,240  

Loss on impairment of securities

     —         24,844       11,075       —         —    

Tax effect on adjustments assuming 39.745% tax rate

     (506 )     (10,588 )     (5,047 )     367       (1,162 )

Deferred tax valuation reserve on loss on impairment

of securities

     (10,087 )     10,087       —         —         —    
                                        

Core Operating Income (Loss)

   $ (1,412 )   $ 1,057     $ 2,246     $ 2,635     $ 2,690  
                                        

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

     2.14 %     (6.93 )%     (1.49 )%     0.87 %     0.25 %

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

     (0.38 )%     0.29 %     0.62 %     0.72 %     0.72 %

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

     11.81 %     (35.24 )%     (7.46 )%     4.37 %     1.23 %

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

     (2.11 )%     1.48 %     3.10 %     3.61 %     3.56 %

Diluted earnings (loss) per common share

   $ 0.40     $ (1.26 )   $ (0.27 )   $ 0.16     $ 0.05  

Core dilutive earnings (loss) per common share

   $ (0.07 )   $ 0.05     $ 0.11     $ 0.13     $ 0.13  

Core Operating Expenses:

          

Noninterest Expenses

   $ 14,796     $ 37,345     $ 23,253     $ 13,228     $ 14,311  

Adjustments:

          

Equity-based compensation and benefits

     (833 )     (1,350 )     (1,179 )     (1,249 )     (1,219 )

Amortization of core deposit intangible

     (440 )     (446 )     (446 )     (452 )     (464 )

Visa litigation

     —         —         —         —         (1,240 )

Loss on impairment of securities

     —         (24,844 )     (11,075 )     —         —    
                                        

Core Noninterest Expenses

   $ 13,523     $ 10,705     $ 10,553     $ 11,527     $ 11,388  
                                        

Noninterest expense to average total assets (1)

     4.00 %     10.32 %     6.39 %     3.60 %     3.86 %

Core noninterest expense to average total assets (1)

     3.66 %     2.96 %     2.90 %     3.13 %     3.07 %

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

     98.24 %     253.46 %     160.33 %     73.57 %     92.05 %

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

     89.79 %     72.66 %     72.77 %     75.08 %     73.25 %

 

(1) Annualized for the three-month periods.

 

Page 9