BankFinancial, Burr Ridge, IL (BFIN)

An 18-Year Old Prodigal Bank Conversion

Under the leadership of Chairman and CEO Morgan Gasior, BankFinancial has been squandering assets with the arrogance of inherited affluence for nearly two decades.

Despite his repeated promises, in no year has Gasior produced "peer-like" returns, and this prodigal son shows no signs of changing his ways. 

Clearly, BankFinancial's Board of Directors needs a serious kick in the pants, which any shareholder who meets the SEC Rule §240.14a-8 criteria can deliver by submitting a proposal recommending the bank be sold to a more mature operator. 

Per BankFinancial's April 2023 Proxy, the deadline to submit a shareholder proposal is December 13, 2023.

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Disclosure: As of this posting, I own shares of BFIN and may subsequently either dispose of them or purchase more.

Prospective Buyers	Any of these neighboring banks would have no trouble putting BankFinancial's assets to better use if they could acquire the franchise at a small premium to book value. Byline Bancorp, Chicago, IL (BY) Old Second Bancorp, Aurora, IL (OSBC) Wintrust Financial, Rosemont, IL (WTFC)
Financial Snapshot †as of 09/30/2023	Total assets: $1.5B† Tangible book value per share:    $12.25† NPAs to assets: 1.6%† Price to book: 74% Market cap: $113M Dividend yield: 4.4% Trailing 12-month ROA: 0.69%† Trailing 12-month ROE: 7%†
Scoundrels	F. Morgan Gasior, Chairman, President, and CEO John M. Hausmann, Director since 1990 Terry R. Wells, Director since 1994 Glen R. Wherfel, Director since 2001
Red Flags	In preparation for publishing this review, I re-read all 18 years of transcripts from BankFinancial’s quarterly conference calls.    In those transcripts, Gasior tosses glowing projections for future performance like a kid with confetti.  Over the past 18 years, Gasior took nearly $13M in total compensation from BankFinancial. That money was real. The projections — mostly fairy dust.  Since BankFinancial’s conversion in 2005, both its stock price and book value have declined. Share price is down 34%. Book value per share is down 5%. During that same period, the NASDAQ Bank Index has climbed by 15%. Under Gasior, BankFinancial has flagrantly underperformed its peers, year after year after year.  All of this surprises me so much less now that I know Gasior was just 19 years old when his father, CEO Frank Gasior, made him a Bank Director, and just 24 years old when Dad appointed him COO. It's also no mystery now why Gasior has kept BankFinancial's Board of Directors so small. Perhaps Gasior can't be expected to treat this publicly traded institution responsibly, but that's why banks have Boards of Directors.  BankFinancial is publicly traded. Its board has a legally binding fiduciary responsibility to its shareholders. BankFinancial directors are accountable for hiring and firing the bank's CEO. Given BankFinancial's dreadful performance, its directors are obligated to either replace the CEO or sell the bank.
Sources	BankFinancial website BFIN Earnings Call Transcripts SEC Rule §14a-8 Denver Law Review of SEC Rule §14a-8 Confidential interviews with shareholders and analysts

Town Center Bank, New Lenox, IL (TCNB)

Illinois Clan Throws Founding Shareholders Under the Bus

If you're ever tempted to invest in a de novo bank, I really hope you'll consider the case of Town Center Bank, which sold founding shares of TCNB for $10 in 2006 only to dilute trusting shareholders by 19% six years later, mismanage the bank for another eight years, and leave its patient founders holding a stock that's down 62%. Cumulative losses are half of all the money raised in the IPO. Splat!

Based on the recent sale of Ben Franklin Financial (BFFI), a similarly situated Chicagoland bank, also run for the benefit of its management, Town Center Bank could probably sell today for $7. If the bank doesn't sell, I can't see TCNB trading above current $6 DTA-enhanced book value any time soon.

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Disclosure: As of this posting, I own shares of TCNB and may subsequently either dispose of them or purchase more.

Prospective Buyers	I don’t even know if any of the following banks in the area of New Lenox, Illinois would care to buy TCNB and pull shareholders out from under the bus, but I know I would be better off and would gladly swap my TCNB shares for theirs. Bank Financial, Burr Ridge, IL (BFIN) Marquette National Corporation, Chicago, IL (MNAT) Old Second Bancorp, Aurora, IL (OSBC)
Financial Snapshot †as of 12/31/2019	Total assets: $106.8M† Tangible book value per share:    $6.09† NPAs to assets: 0.2%† Price to book: 60.7% Market cap: $8.6M Dividend yield: 0% Trailing 12-month ROA: 0.2%† Trailing 12-month ROE: 2.4%†
Scoundrels	Michael D. Perry, Chairman and CEO, former bus company owner Daniel Regan, President and Chief Lending Officer All 8 "Independent" Bank Directors* currently on the bus *In a first for Timyan Bank Alert, I’m calling the entire clan of directors at Town Center Bank scoundrels. They loaded this bus up with absurd loss levels, parked it over their shareholders, and picked their hostages pockets. Since the bank's founding, these scoundrels have granted and re-granted themselves options to buy over 18% of TCNB at a fraction of the price they charged shareholders.
Red Flag	Besides being a good reminder to think twice before investing in a de novo bank, Town Center Bank presents a textbook case of poor corporate governance. I have serious issues with the drivers of this bus and how the bus is being driven. ✔  This isn't the only bus Perry and his clan are driving The CEO of Town Center Bank is also CEO of 21CFS Innovative Banking, which has provided data processing technology to at least a couple of banks since he took the driver's seat there. Coincidentally, Perry became CEO of 21CFS in 2006, the same year he participated in the founding of TCNB. Reported revenues insofar as anything can be gleaned about them seem mysteriously close to the amounts billed to Town Center Bank — $278K in 2017 and $251K in 2018. Only in an auditor's note in Town Center Bank's annual report can you discover that some of the bank's directors are also shareholders and directors of 21CFS, but nowhere does the bank or 21CFS disclose which ones or for how much. ✔  Michael Perry is a reckless and self-serving driver Town Center Bank CEO Michael Perry owned a bus company in Minnesota named Positive Connections at the time he was helping to organize TCNB. He had no other banking experience as far as shareholders could discern, but we now know he happened to be acquiring a banking tech services company at the time. Perry proceeded to install himself as Chairman of Town Center Bank's Executive Committee, Nominating Committee, Capital Planning Committee, and Loan Committee. He also "sits on" the bank's Asset / Liability Committee. Then, according to plan, apparently, Perry converted Town Center Bank into a profit center for his bank technology business, and cut other directors in on the action. Town Center Bank's board can exercise no oversight of this CEO under these circumstances. ✔  Current and prior drivers exaggerated on their resumes  Former Town Center Bank President Andrew Bernhardt still claims on his LinkedIn page to be not "an," but "the" Owner of Town Center Bank, which in actual reality is publicly traded. Former Director Lino Canaria is listed in the 2006 offering prospectus as owner of Brian Keith Advertising, "the largest specialty advertising firm in the Midwest." BKA has no website and looks like a very small business to me. In 21CFS marketing material, Perry makes a delusional claim about Town Center Bank's performance under his leadership: “through economic storms and regulatory pressures," he says, "Town Center Bank remains strong and responsive to the community needs.” Truth is, half the money the bank raised in its IPO has been squandered. In spite of their carefully crafted resumes, this entire clan of Frankfort, Illinois bankers has only been able to attract 3% of their own town's deposits for Town Center Bank. ✔  They took TCNB on a joyride with total disregard for passengers Right out of the gate, de novo Town Center Bank was leaking oil. Losses grew to over $4M a year by the end of four years. Six years into the ride, NPAs exceeded 10%, even after the bank recorded large chargeoffs. That's when this clan got the bright idea to cut the strike price of their options on 432,000 shares from the $10 they charged their founding investors to $3, thereby stuffing 19% of shares outstanding into their own lunch boxes. Ten years into the ride, the clan's ill-gotten options were supposed to expire, so they extended the maturity on them another 10 years out. Today, even in these best of times for the US economy, in a “good” quarter, Town Center Bank earns barely 0.2 % on assets and 2% on equity.
Sources	Town Center Bank website April 2019 Proxy Statement 2018 Annual Report Dun & Bradstreet for 21CFS Undated Article in 21CSF Innovative Banking (a publication owned by Town Center Bank Chairman and CEO Michael Perry) August 28, 2015 Article in Chicago Tribune S&P Global Market Intelligence Confidential interviews with shareholders and analysts