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

UPDATE: Harvard Savings Bank, Harvard, IL (HARI)

Oh, what a blow Duffield J. Seyller III has dealt to America's trust in Community Banking. It's been over a year since my initial review of Harvard Savings Bank, child of Harvard Illinois Bancorp, and I'm sorry to say, in that time, the condition of the institutions has gone from bruised to battered.

To his list of reckless behaviors, Seyller has added an almost unbelievably rash investment debacle that put over $18M at risk and plummeted HARI stock 60% since last April's annual shareholder meeting. What will it take for this guy to let Harvard go to someone who knows how to treat a bank, its owners, and the public trust right?

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

Prospective Buyers	First Midwest Bancorp, Itasca, IL (FMBI) Standard Bancshares, Hickory Hills, IL (private) Wintrust Financial, Rosemont, IL (WTFC)
Financial Snapshot (as of 06/30/2014)	PLEASE NOTE: While the numbers here reflect Harvard's most recently reported financial condition, they do not account for significant losses associated with the bank's misguided investment activities. Total assets: $171M Tangible book value per share: $24.77 NPAs to assets: 2.4% Price to book: 29.1% Market cap: $6M Dividend yield: 0% Trailing 12-month return on assets: 0.4% Trailing 12-month return on equity: 3.6% TARP: $0
Scoundrels	Same three characters as a year ago, but oddly, each in a different role. Duffield J. Seyller III, Chairman Donn L. Claussen, President and CEO William D. Schack, Vice Chairman of the Board
Red Flags	Maybe I've been too hard on Duffield J. Seyller III. He is not without his talents. I'm just not sure they're of the sort most folks would find consistent with good old-fashioned Midwestern American Community Banking values. Duffy is a pretty skilled pick pocket! Don't let his pretentious anti-shareholder rhetoric fool you: this stealthy guy grew his own wealth by some $1.2M in compensation over the past five years — a whopping 80% of the company's entire reported earnings — while leaving a mere $260K or so for the institution and its shareholders. Duffy can pick a fight as well as a pocket! In fact, it's looking like we can count on him to fight even the most senseless of battles "to the bitter end," even if it means taking an 80 year old institution down with him. Duffy's already blown some $800K of the bank's assets just to deny Harvard's largest shareholder the right to representation on the Board and a say in how the institution and its funds are managed. Duffy's fight has brought the bank to the brink of death. Duffy isn't afraid to bet the bank! He can't be accused of any average, conservative small town banker mindset, that's for sure. Duffy risked $18M — (14% of the deposits the community entrusted to the bank and 88% of the bank's entire shareholder equity!) — in a pool of what turned out to be non-existent-even, way-out-of-state securities promising too-good-to-be-true yields of prime plus 150%. And since Harvard's deposit base wasn't big enough to cover it, Duffy made an even bigger gamble, borrowing $8.9M from the Federal Home Loan Bank to help fund the "investment."   Duffy is one proud man! He'd rather see the bank die than let it go in a sale to new owners who'd treat it more tenderly. And Heaven Forbid, he let his most concerned shareholder-owner come in close enough to help the poor battered institution heal and avoid further life-threatening injury. Or maybe Duffy simply missed that day in Sunday School when the rest of us learned that Pride Cometh Before the Fall (Proverbs 16:18).
Sources	Harvard Savings Bank website May 2014 10-Q Crain's Chicago Business Article SNL Financial Confidential interviews with shareholders

Harvard Savings Bank, Harvard, IL (HARI)

A Case of Peculiarly Prestigious Non-Performance

Don't let the three sticks behind the CEO of this bank's name fool you: HARI is no Harvard of the banking industry, and the performance of Harvard Savings Bank is far from worthy of its prestigious name. I, for one, will be buying more stock and voting with the Stilwell Group to wrest control of this bank from Duffield J. Seyller III as needed to either turn it around or sell it.

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

Prospective Buyers	First Midwest Bancorp, Itasca, IL (FMBI) Standard Bancshares, Hickory Hills, IL (private) Wintrust Financial, Rosemont, IL (WTFC)
Financial Snapshot (as of 03/31/2013)	Total assets: $170M Tangible book value per share: $23.88 NPAs to assets: 4.4% Price to book: 58.6% Market cap: $11.6M Dividend yield: 0% Trailing 12-month return on assets: 0.53% Trailing 12-month return on equity: 4.6% TARP: $0M
Scoundrels	William D. Schack, Chairman Duffield J. Seyller III, President and CEO Donn L. Claussen, Executive VP and CFO
Red Flags	The way I see it, Duffield J. Seyller III and friends are behaving like badly bred pitbulls, biting the hands that feed them, instead of doing their job of guarding the business. I give this team at least four sticks, and zero carrots, for: Getting the bank tied up under an MOU. After losing a total of $2.7M in 2008 and 2009, Harvard management was forced to sign an MOU with the Office of Thrift Supervision, severely restricting the bank's opportunities to buy back stock and make other independent bank management decisions.  Letting the bank "go to the dogs." Under Duffy Three Sticks' leadership, HARI earned a paltry 1.9% return on equity from 2010-2012. During the same period, the average thrift of Harvard's size outperformed HARI by a factor of nearly 3x, earning a 5.4% ROE; and the similarly sized, more responsibly managed institution of Logansport Financial Group (LOGN) delivered an 8.6% ROE. Paying themselves extravagantly for trashing the place. Over the past five years, HARI's management team bled a total pre-tax net loss of $1.8M out of the bank. For this pathetic performance, Duffield and Claussen chew off over $200K each per year in "compensation," nearly twice what the high-performing execs at Logansport allot themselves. Blowing money and value on a totally unnecessary dog fight. No honest bank should have reason to disallow its largest shareholder representation on its Board. For the $800K or so Harvard is wasting on proxy battles I predict it will wind up losing in the end anyhow, the bank could have bought back nearly 7% of its outstanding shares, and nearly doubled reported earnings per share. That is, of course, had they not first gotten themselves leashed under an MOU. As you can see from the chart below comparing the two scenarios, Team Duffy's game is killing bank value. How HARI stock could have performed, had Harvard  avoided getting itself under an MOU and not fought Stilwell *According to SNL, the average Illinois thrift trades for 16x earnings
Sources	Harvard Savings Bank website May 2013 10-Q April 2013 Proxy Statement March 2013 10-K SNL Financial