Bogota Financial Corp. — Q1 2022 Form 10-Q
Business context and period
Unaudited results cover the three months ended March 31, 2022; balance-sheet comparisons are to December 31, 2021. The company operates Bogota Savings Bank, a New Jersey community bank focused on residential, commercial real estate and consumer lending and deposits.
Financial performance and condition
| Metric | Q1 2022 / March 31, 2022 | Comparable / prior date |
|---|---|---|
| Interest income | $6.28 million | $6.27 million in Q1 2021 |
| Net interest income | $5.12 million | $4.58 million in Q1 2021 |
| Net interest margin / spread | 2.64% / 2.48% | 2.50% / 2.28% in Q1 2021 |
| Net income; diluted EPS | $1.40 million; $0.10 | $3.01 million; $0.23 in Q1 2021 |
| Total assets | $850.7 million | $837.4 million at Dec. 31, 2021 |
| Net loans; deposits | $564.4 million; $619.9 million | $570.2 million; $597.5 million at Dec. 31, 2021 |
| Cash and cash equivalents | $69.1 million | $105.1 million at Dec. 31, 2021 |
| FHLB advances; stockholders’ equity | $78.0 million; $145.0 million | $85.1 million; $147.6 million at Dec. 31, 2021 |
| Operating / investing / financing cash flow | $8.2 million / $(57.9) million / $13.6 million | Q1 2021: $8.9 million / $42.6 million / $(5.9) million |
- Interest expense fell 31.8% to $1.16 million, helping lift net interest income 11.9%. Non-interest income fell to $344,000 from $2.32 million, principally because Q1 2021 included a $1.93 million Gibraltar acquisition bargain-purchase gain. Management said net income would have increased about $300,000 year over year excluding that gain.
- Non-interest expense rose 3.2% to $3.54 million, including higher salaries and benefits associated with Gibraltar and a new branch. No loan-loss provision was recorded, versus a $59,000 credit in Q1 2021.
- Loans declined 1.0% from year-end, while deposits rose 3.8%, including a new $20 million municipal checking relationship. Municipal deposits were $49.1 million and brokered deposits $54.7 million at quarter-end.
- Cash fell primarily as the bank invested in securities: available-for-sale securities increased to $91.6 million and held-to-maturity securities to $81.3 million. Available-for-sale securities recorded a $2.4 million after-tax unrealized loss in Q1, reducing equity through accumulated other comprehensive loss.
Outlook, risks and unusual items
- No specific earnings or growth guidance was provided. Management said it believed liquidity was adequate for short- and long-term needs and anticipated sufficient funds for current commitments.
- The Bank reported $243.5 million of FHLB borrowing capacity, of which $78.0 million was outstanding and $1.5 million supported letters of credit; it also had $51.0 million of unused correspondent-bank lines. Certificates of deposit totaling $229.0 million mature within one year, creating potential replacement-funding needs.
- The Bank reported a 17.67% Community Bank Leverage Ratio and said it exceeded regulatory capital requirements and was well capitalized. Average stockholders’ equity to average assets was 17.35%.
- Credit indicators included a $2.15 million allowance, equal to 0.38% of loans and 111.8% of nonperforming loans; nonperforming assets were $1.9 million, or 0.23% of assets. There were no charge-offs, and no loans were 90 days or more past due and still accruing.
- COVID-related modifications had been granted on 172 loans totaling $67.9 million; one residential loan of $117,000 remained on deferral. Management highlighted economic conditions, real estate values, credit quality, funding costs, interest rates, competition, cybersecurity and key-person retention as risks.
- Interest-rate models estimated a 7.92% decline in one-year net interest income under an immediate 400-basis-point rate increase; management cautioned that simulations depend on assumptions and are not forecasts. The filing says modeled NPV changes were within board policy limits.
- The company repurchased 182,001 shares for approximately $1.9 million during the quarter. Management identified no material change in risk factors, no material pending legal proceedings, and no material control changes; disclosure controls were deemed effective.
- The company expects to adopt the current expected credit loss standard (CECL) for fiscal years beginning after December 15, 2022; it had not determined the size of the initial adjustment or overall impact.
Important facts for investors to verify
- How recurring earnings develop after excluding the prior-year Gibraltar bargain-purchase gain, and whether higher funding costs pressure net interest margin.
- The sensitivity of the securities portfolio and equity to interest-rate changes, including unrealized losses on available-for-sale securities and the larger unrecognized losses on held-to-maturity securities.
- Deposit concentration and retention, including municipal and brokered deposits and the $229.0 million of certificates maturing within a year; confirm available borrowing capacity and liquidity under stress.
- Loan-quality trends, remaining COVID-related deferrals, collateral values and the adequacy of the allowance, particularly as CECL adoption approaches.
- The pace and remaining authorization of share repurchases, and the effects of compensation awards and repurchases on per-share results and equity.