Bogota Financial Corp. — Q1 2021 Form 10-Q
Business context and reporting period
Unaudited results cover the three months ended March 31, 2021, compared with Q1 2020; balance-sheet comparisons are with December 31, 2020. The company operates Bogota Savings Bank, which primarily serves New Jersey. On February 28, 2021, the Bank acquired Gibraltar Bank. The filing reports the acquired business’s assets and liabilities at estimated fair value; valuations remain preliminary and may be adjusted for up to one year after closing.
Key financial metrics
| Metric | Q1 2021 / March 31, 2021 | Comparable period / December 31, 2020 |
|---|---|---|
| Total assets | $843.9 million | $740.9 million |
| Interest income | $6.27 million | $5.92 million in Q1 2020 |
| Net interest income | $4.58 million | $3.08 million in Q1 2020 |
| Net interest margin | 2.50% | 1.79% in Q1 2020 |
| Net income (loss) | $3.01 million; $0.23 per share | $(1.34) million; $(0.13) per share in Q1 2020 |
| Cash and cash equivalents | $126.0 million | $80.4 million |
| Deposits | $584.4 million | $502.0 million |
| FHLB advances | $107.8 million | $104.3 million |
| Stockholders’ equity | $143.1 million | $128.5 million |
- Net income improved by $4.34 million year over year. Non-interest income was $2.32 million, including a $1.93 million bargain-purchase gain and a $236,000 gain on loan sales. Non-interest expense was $3.43 million; the prior-year quarter included a $2.88 million charitable foundation contribution.
- Interest expense fell to $1.69 million from $2.83 million, helping lift net interest income 48.5%. The average cost of interest-bearing liabilities declined to 1.14% from 2.00%; the net interest rate spread rose to 2.28% from 1.42%.
- The company recorded a $59,000 credit for loan losses, versus a $25,000 provision in Q1 2020. The allowance was $2.18 million; reported nonperforming assets were $966,000, or 0.11% of assets. No charge-offs were reported in the quarter.
- Cash flow from operations was $8.90 million; investing activities provided $42.57 million, including $19.39 million of net cash acquired in the merger; financing activities used $5.87 million. Cash and cash equivalents increased $45.59 million.
- Management reported the Bank as well capitalized, with a 17.09% Community Bank Leverage Ratio. FHLB borrowing capacity was $276.9 million, with $107.8 million outstanding and $1.5 million used to collateralize letters of credit; $51.0 million of correspondent-bank credit lines was undrawn.
Material changes versus prior periods
- Assets increased $103.0 million, or 13.9%, from year-end, mainly reflecting the Gibraltar acquisition. Deposits rose $82.4 million and gross loans rose to $611.9 million from $559.9 million; acquired Gibraltar balances contributed materially to both increases.
- Q1 2021 profitability includes the one-time $1.93 million bargain-purchase gain. Q1 2020 results included the $2.88 million foundation contribution and a $555,000 income-tax benefit, so the year-over-year earnings comparison reflects unusual items in both periods.
- The company issued 1,267,916 shares to Bogota MHC in the acquisition. Shares outstanding were 14,425,441 at March 31, versus 13,157,525 at year-end.
- At March 31, municipal deposits were $26.6 million and brokered deposits were $53.2 million. Certificates of deposit totaling $291.4 million, or 50.0% of deposits, were due within one year.
Outlook, risks and contingencies
No quantified earnings or revenue guidance is provided. Management expected conversion of Gibraltar’s data-processing platforms, systems and customer files on or about August 16, 2021. Management said liquidity was sufficient for short- and long-term needs and that interest-rate simulation results were within policy limits; these modeled sensitivities are not forecasts.
- COVID-19 remains a source of uncertainty for borrowers, credit quality, collateral values, fees, liquidity and results. At quarter-end, $67.9 million of loans had received pandemic-related modifications; only five loans, totaling $708,000, remained on deferral.
- Interest-rate, funding, real-estate and credit risks are important. The filing highlights that loan-loss estimates rely on judgment and could prove inadequate if economic or property-market conditions worsen.
- Outstanding loan commitments included $8.73 million fixed-rate and $2.80 million variable-rate commitments. Undisbursed approved home-equity lines totaled $46.6 million; business lines totaled $415,000. Commitments may not all be drawn.
- The filing reports no material pending legal proceedings and no material changes to previously disclosed risk factors. Disclosure controls were assessed as effective.
Important facts for investors to verify
- Assess whether post-acquisition earnings can be sustained excluding the bargain-purchase gain, and track merger integration costs and the planned systems conversion.
- Review final acquisition-date fair values and the acquired loan portfolio, including purchased credit-impaired assets and associated assumptions.
- Monitor loan delinquency, nonaccruals, remaining COVID-related deferrals, allowance adequacy and concentrations in real-estate lending.
- Evaluate deposit retention and repricing needs given the $291.4 million of certificates due within one year, and the company’s use of brokered deposits and FHLB funding.
- Reconcile the loan balance presentation: the balance-sheet line reports loans net of allowance of $606.3 million, while the loan note and MD&A show net loans of approximately $609.8 million. The filing text does not provide a clear reconciliation.