Bogota Financial Corp. — FY2022 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2022, with comparisons to FY2021. Bogota Financial Corp. is the holding company of Bogota Savings Bank, a New Jersey community bank operating six branches and a loan production office. Its lending is concentrated in New Jersey residential real estate, with commercial, multifamily and construction lending also material. The filing reports annual, not fourth-quarter-only, results.
Key financial results
| Metric | FY2022 / Dec. 31, 2022 | FY2021 / Dec. 31, 2021 |
|---|---|---|
| Total assets | $951.1 million | $837.4 million |
| Net loans | $719.0 million | $570.2 million |
| Deposits | $701.4 million | $597.5 million |
| FHLB borrowings | $102.3 million | $85.1 million |
| Net interest income | $23.1 million | $19.3 million |
| Provision (credit) for loan losses | $425,000 | ($88,000) |
| Net income | $6.9 million | $7.5 million |
| Diluted EPS | $0.51 | $0.54 |
| Operating cash flow | $10.9 million | $6.0 million |
| Cash and cash equivalents | $16.8 million | $105.1 million |
| Total stockholders’ equity | $139.7 million | $147.6 million |
- Net interest margin rose to 2.76% from 2.50%; interest-rate spread increased to 2.58% from 2.33%. The efficiency ratio improved to 59.03% from 60.85%.
- Return on average assets declined to 0.77% from 1.23%, and return on average equity declined to 4.76% from 7.06%.
- Loans were 102.5% of deposits at year-end, versus 95.4% a year earlier. Bank capital under the community bank leverage ratio was 13.44%, above the 9% qualifying threshold; the Bank was classified as well capitalized.
Changes versus FY2021
- Assets grew 13.6%, deposits 17.4%, and net loans 26.1%. Residential mortgage loans rose 45.7% to $466.1 million; construction loans rose 49.4% to $61.8 million. Commercial and multifamily real estate loans declined 7.4% to $162.3 million.
- Net interest income increased 19.7%, reflecting higher average loan and securities balances and a higher loan yield. Interest expense also rose 25.5% as deposit and borrowing costs increased.
- Net income decreased 8.6%. FY2021 included a $2.0 million bargain-purchase gain from the Gibraltar Bank acquisition and $1.1 million of merger and core-conversion costs. Management says net income would have increased about $916,000 in FY2022 excluding those FY2021 items.
- Cash fell by $88.2 million as liquidity funded loan growth and securities purchases. Operating cash flow was positive, while investing cash flow was negative $210.7 million and financing cash flow positive $111.6 million.
- Equity declined 5.4%, reflecting a $5.9 million other comprehensive loss, principally from available-for-sale securities, and $10.1 million of share repurchases, partly offset by net income.
Liquidity, funding and credit
- Year-end deposits included $492.6 million of certificates of deposit (70.2% of deposits); $291.1 million mature during 2023. Brokered deposits were $58.6 million (8.4%) and municipal deposits were $57.5 million (8.2%). Estimated uninsured deposits totaled approximately $122.5 million.
- FHLB advances totaled $102.3 million, including $59.0 million of short-term advances carrying a 4.59% weighted-average rate. The Bank reported $334.1 million of FHLB borrowing capacity, with $102.3 million outstanding and $1.5 million used to support letters of credit; it also had $51.0 million of unused correspondent-bank lines.
- Available-for-sale securities had a year-end fair value of $85.1 million, versus $94.1 million amortized cost. Held-to-maturity securities had a fair value of $70.7 million, versus $77.4 million carrying value. Management attributed the unrealized losses mainly to interest rates and said it did not intend, and was not likely required, to sell the securities before recovery.
- The allowance for loan losses was $2.58 million, or 0.36% of loans. Nonaccrual loans were $857,000 (0.12% of loans); there were no loan charge-offs or recoveries in either comparison year. Residential loans were 64.6% of the portfolio and commercial/multifamily real estate loans 22.5%.
Outlook, risks and unusual items
- No quantified earnings or balance-sheet guidance is provided. Management describes a strategy of moderate organic growth, continued residential lending, renewed emphasis on commercial and multifamily lending, core-deposit growth, expense control and consideration of opportunistic acquisitions. It also acknowledges continued intense competition and the need to manage funding costs.
- Interest-rate risk is significant. The year-end model estimated that an immediate +400 basis-point rate shock would reduce one-year net interest income by 25.91% and net portfolio value by 49.51%. These are model scenarios, not forecasts; management notes the assumptions and limitations.
- CECL became effective for the company on January 1, 2023. Management expected a one-time cumulative allowance adjustment of 10%–15% of the existing allowance, using the WARM method and qualitative factors.
- Material risks include New Jersey geographic concentration, commercial real estate and construction exposure, a high share of CDs and near-term maturities, rising deposit and borrowing costs, securities valuation losses, inflation and economic weakness, and cyber and operational risks.
- The company says it does not expect to pay cash dividends in the foreseeable future, citing the mutual holding company structure and regulatory restrictions. It repurchased 906,793 shares during 2022 for approximately $10.1 million.
- The financial statements received an unqualified audit opinion. The company reported no material legal proceedings and no unresolved SEC staff comments. The auditor did not attest to internal-control effectiveness because the company is an emerging growth company.
Important facts for investors to verify
- Track renewal and repricing of the $291.1 million of CDs maturing in 2023, deposit retention, brokered and municipal funding, and the effect on funding costs and net interest margin.
- Review the full securities disclosures and subsequent-period marks: the available-for-sale portfolio’s fair value was below amortized cost, and held-to-maturity fair value was also below carrying value.
- Assess credit trends as residential, construction and local commercial real estate exposures grow, including the performance of past-due and nonaccrual loans and the adequacy of the allowance under CECL.
- Compare actual results with the interest-rate sensitivity scenarios and review their assumptions, particularly the modeled decline in net interest income under rising rates.
- Confirm the CECL opening adjustment and subsequent allowance methodology and disclosures after adoption.
- Check the filing’s internal-control language: the management assessment states effectiveness as of December 31, 2021, while the disclosure-controls evaluation refers to the period covered by the 2022 report. The reported assessment date should be verified against the filed statements.
- Reconcile the MD&A’s description of loan commitments with the detailed commitments note, which separately reports firm loan commitments and undisbursed credit lines.