Bogota Financial Corp. — Q2 2022 Form 10-Q
Business context and reporting period
Unaudited results for the three and six months ended June 30, 2022; balance-sheet comparisons are with December 31, 2021. Bogota Financial is a New Jersey-focused community banking company. The 2021 comparative period includes the Gibraltar Bank acquisition, completed February 28, 2021.
Financial performance and condition
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Net interest income | $5.71m | $4.77m | $10.83m | $9.35m |
| Net interest margin | 2.85% | 2.44% | 2.75% | 2.46% |
| Net income | $1.64m | $1.44m | $3.04m | $4.45m |
| EPS, diluted | $0.12 | $0.10 | $0.22 | $0.33 |
- Q2 revenue improvement was driven by higher net interest income; quarterly net income rose 14.1%. Six-month net income fell 31.5%, mainly because the prior-year period included a $1.93m bargain-purchase gain from Gibraltar and higher loan-sale gains.
- At June 30, assets were $874.9m, up 4.5% from year-end. Net loans were $630.8m, up 10.6%; deposits were $611.3m, up 2.3%. Loans grew primarily in residential mortgages and construction.
- Cash and cash equivalents fell to $7.6m from $105.1m, as the company funded loan growth and securities purchases. Available-for-sale securities were $97.5m and held-to-maturity securities were $86.4m.
- Six-month cash flows: operating activities provided $6.3m; investing activities used $144.1m, including loan growth and securities purchases; financing activities provided $40.4m. Cash and cash equivalents decreased $97.5m.
- FHLB advances were $115.3m, versus $85.1m at year-end. Total equity was $140.5m, down $7.1m, largely reflecting a $6.5m after-tax securities-related comprehensive loss and $4.3m of share repurchases, partly offset by earnings.
- Interest-rate and market movements drove available-for-sale unrealized losses: accumulated other comprehensive loss reached $6.7m versus $0.3m at year-end. Management said securities losses were not credit-related and it did not intend, nor expect to be required, to sell before recovery.
Credit, liquidity, outlook, and risks
- The loan-loss provision was $100,000 in both Q2 and the first six months of 2022; prior-year periods had provision credits. The allowance was $2.25m, or 0.36% of loans. Management reported no charge-offs and low delinquency levels; nonperforming assets were $1.9m, or 0.21% of assets. Nonaccrual loans were $851,000, with no loans 90 days past due still accruing.
- Liquidity sources included $97.5m of available-for-sale securities, FHLB borrowing capacity of up to $260m (about $115m outstanding and $1.5m used for municipal-deposit letters of credit), and $51m of unsecured correspondent-bank lines with no balance outstanding. Management stated liquidity was sufficient, while noting $206.1m of certificates of deposit mature within one year and could require replacement funding at higher rates.
- The Bank reported a 17.50% Community Bank Leverage Ratio and said it exceeded applicable regulatory capital requirements and was “well capitalized.”
- Interest-rate simulations estimate that a 400-basis-point rate increase would reduce one-year net interest income 15.09%; these are modeled scenarios, not forecasts. Management cited interest-rate, credit, real-estate, funding, competition, economic, operational and cybersecurity risks, among others.
- At June 30, COVID-related modifications covered 172 loans totaling $67.9m (11.6% of the loan portfolio); they continued to accrue interest under the reported treatment. Loan-originating commitments included $57.4m of fixed- and variable-rate commitments, plus undisbursed home-equity and business credit lines.
- No specific earnings or business guidance was provided. Management expects to adopt the current expected credit loss standard (CECL) on January 1, 2023; the size of the opening allowance adjustment and overall impact were not yet determinable. Management reported effective disclosure controls and no material changes in internal control over financial reporting; no material legal proceedings or material risk-factor changes were reported.
Most important facts for investors to verify
- Whether the rapid loan growth and funding mix remain sustainable, especially with low cash balances, higher FHLB advances and substantial certificates of deposit maturing within a year.
- Whether widening net interest margin persists as market rates, deposit pricing and borrowing costs change; review the filing’s sensitivity assumptions alongside actual results.
- Whether securities valuation losses remain temporary and whether any liquidity needs could require securities sales before recovery.
- Loan quality, concentrations and allowance adequacy as residential and construction lending expand; track modifications, delinquency trends and CECL implementation estimates.
- Buyback execution and equity effects: 217,448 shares were repurchased in Q2 for $2.4m; the company reported 379,949 shares repurchased during the first six months for $4.3m.