Bogota Financial (BSBK) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited consolidated financial statements and detailed notes on accounting policies and financial instruments Item 1. Financial Statements This section presents the company's unaudited consolidated financial statements and detailed notes on accounting policies, acquisitions, and financial instruments Consolidated Statements of Financial Condition This statement provides a snapshot of the company's assets, liabilities, and equity at specific points in time | Metric | March 31, 2022 | December 31, 2021 | | :----------------------------------- | :------------- | :---------------- | | Assets | | | | Cash and cash equivalents | $69,054,254 | $105,068,785 | | Securities available for sale | $91,591,740 | $41,838,798 | | Securities held to maturity | $81,314,630 | $74,053,099 | | Loans, net | $564,426,841 | $570,209,669 | | Total Assets | $850,690,141 | $837,361,587 | | Liabilities | | | | Total Deposits | $619,932,548 | $597,479,778 | | FHLB advances | $78,003,974 | $85,051,736 | | Total liabilities | $705,664,209 | $689,785,376 | | Equity | | | | Total stockholders' equity | $145,025,932 | $147,576,211 | | Total liabilities and stockholders' equity | $850,690,141 | $837,361,587 | Consolidated Statements of Income This statement details the company's revenues, expenses, and net income over specific reporting periods | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Total interest income | $6,279,010 | $6,274,097 | | Total interest expense | $1,156,017 | $1,694,807 | | Net interest income | $5,122,993 | $4,579,290 | | Provision (credit) for loan losses | $0 | ($59,000) | | Total non-interest income | $344,423 | $2,318,606 | | Total non-interest expense | $3,541,275 | $3,432,446 | | Income before income taxes | $1,926,141 | $3,524,450 | | Income tax expense | $525,244 | $518,143 | | Net income | $1,400,897 | $3,006,307 | | Earnings per Share - basic | $0.10 | $0.23 | | Earnings per Share - diluted | $0.10 | $0.23 | Consolidated Statements of Comprehensive (Loss) Income This statement presents net income and other comprehensive income items, reflecting total changes in equity from non-owner sources | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net income | $1,400,897 | $3,006,307 | | Other comprehensive (loss) income, net of tax | ($2,358,399) | $42,932 | | Comprehensive (loss) income | ($957,502) | $3,049,239 | Consolidated Statements of Equity This statement outlines changes in the company's equity components, including common stock, retained earnings, and other comprehensive loss | Metric | March 31, 2022 | December 31, 2021 (January 1, 2022) | | :----------------------------------- | :------------- | :---------------------------------- | | Common Stock | $144,252 | $146,057 | | Additional paid-in capital | $66,580,931 | $68,247,204 | | Retained earnings | $86,280,709 | $84,879,812 | | Unearned ESOP shares | ($5,348,905) | ($5,424,206) | | Accumulated other comprehensive loss | ($2,631,055) | ($272,656) | | Total stockholders' equity | $145,025,932 | $147,576,211 | - Total stockholders' equity decreased by $2.55 million from December 31, 2021, to March 31, 2022, primarily due to a significant increase in accumulated other comprehensive loss and common stock repurchases, partially offset by net income[9][17] Consolidated Statements of Cash Flows This statement categorizes cash flows into operating, investing, and financing activities, showing changes in cash and cash equivalents | Cash Flow Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $8,207,700 | $8,895,895 | | Net cash (used in) provided by investing activities | ($57,870,061) | $42,567,969 | | Net cash provided by (used in) financing activities | $13,647,830 | ($5,869,378) | | Net (decrease) increase in cash and cash equivalents | ($36,014,531) | $45,594,486 | | Cash and cash equivalents at end of period | $69,054,254 | $125,980,225 | Notes to Consolidated Financial Statements These notes provide detailed explanations and disclosures supporting the consolidated financial statements, clarifying accounting policies and specific transactions NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines the company's operations, accounting principles, and the potential impact of new accounting pronouncements - Bogota Financial Corp. became the mid-tier stock holding company for Bogota Savings Bank on January 15, 2020, following a reorganization. The Bank primarily originates residential, commercial, and consumer loans and accepts deposits in New Jersey[27][29] - The company is an 'emerging growth company' and intends to use the extended transition period for complying with new or revised financial accounting standards, which may affect comparability with other public companies[2][36] - The company is evaluating the impact of ASU 2020-04 (Reference Rate Reform) and expects to recognize a one-time cumulative-effect adjustment to the allowance for loan losses upon adoption of ASU 2016-13 (CECL) after December 15, 2022, though the magnitude is not yet determinable[41][42] NOTE 2 – ACQUISITION OF GIBRALTAR BANK This note details the acquisition of Gibraltar Bank on February 28, 2021, resulting in a bargain purchase gain of $1.9 million and a core deposit intangible of $400,000 - On February 28, 2021, Bogota Financial Corp. completed the acquisition of Gibraltar Bank, issuing 1,267,916 shares of common stock to Bogota Financial, MHC[43] - The acquisition was accounted for using the acquisition method, resulting in a bargain purchase gain of $1.9 million and a core deposit intangible of $400,000 in 2021[44] | Metric | Fair Value at Acquisition (Feb 28, 2021) | | :----------------------------------- | :----------------------------------- | | Total assets acquired | $106,745,844 | | Total liabilities assumed | $93,312,447 | | Net assets acquired | $13,433,397 | | Bargain purchase gain recorded | $1,933,397 | NOTE 3 – SECURITIES AVAILABLE FOR SALE This note summarizes securities available for sale, including their amortized cost, fair value, and unrealized gains and losses, with no other-than-temporarily impaired securities | Metric | March 31, 2022 | December 31, 2021 | | :----------------------------------- | :------------- | :---------------- | | Amortized Cost | $94,906,290 | $41,814,931 | | Gross Unrealized Gains | $55,190 | $109,941 | | Gross Unrealized Losses | ($3,369,740) | ($86,074) | | Fair Value | $91,591,740 | $41,838,798 | - Unrealized losses on corporate bonds and mortgage-backed securities available for sale were not recognized into income as they were primarily due to interest rate changes, and management does not intend to sell these securities prior to anticipated recovery[56] NOTE 4 – SECURITIES HELD TO MATURITY This note summarizes securities held to maturity, including amortized cost, fair value, and unrecognized gains and losses, with no other-than-temporarily impaired securities | Metric | March 31, 2022 | December 31, 2021 | | :----------------------------------- | :------------- | :---------------- | | Amortized Cost | $81,314,630 | $74,053,099 | | Gross Unrecognized Gains | $266,460 | $822,646 | | Gross Unrecognized Losses | ($3,166,584) | ($794,686) | | Fair Value | $78,414,506 | $74,081,059 | - Unrecognized losses on securities held to maturity were not recognized into income because the issuers are of high credit quality, and the decline in fair value is largely due to changes in interest rates, with no intent or requirement to sell prior to anticipated recovery[63] NOTE 5 – LOANS This note details the loan portfolio composition, allowance for loan losses, impaired loans, and credit quality indicators, highlighting a decrease in PPP loans | Loan Type | March 31, 2022 | December 31, 2021 | | :----------------------------------- | :------------- | :---------------- | | Residential | $316,657,570 | $319,968,234 | | Commercial and multi-family real estate | $177,225,830 | $175,375,419 | | Construction | $43,639,387 | $41,384,687 | | Commercial and industrial | $3,494,447 | $7,905,524 | | Consumer | $25,562,781 | $27,728,979 | | Total loans | $566,580,015 | $572,362,843 | | Allowance for loan losses | ($2,153,174) | ($2,153,174) | | Net loans | $564,426,841 | $570,209,669 | - Outstanding PPP loans decreased significantly from $5.8 million at December 31, 2021, to $1.4 million at March 31, 2022, due to forgiveness applications[66] | Allowance for Loan Losses Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Beginning balance | $2,153,174 | $2,241,174 | | (Credit) provision for loan losses | $0 | ($59,000) | | Total ending allowance balance | $2,153,174 | $2,182,174 | | Impaired Loans | March 31, 2022 | December 31, 2021 | | :----------------------------------- | :------------- | :---------------- | | Loans with no related allowance recorded | $1,751,664 | $1,992,979 | | Loans with an allowance recorded | $173,925 | $174,776 | | Amount of allowance for losses allocated | $35,859 | $35,859 | | Total Nonaccrual Loans | $879,014 | $864,544 | - The Bank categorizes loans into risk categories (Special Mention, Substandard, Doubtful, Pass) based on borrower's ability to service debt, financial information, payment history, and economic trends[88][89][90][91] NOTE 6 – STOCK BASED COMPENSATION This note details the 2021 Equity Incentive Plan, including restricted stock and stock option awards, their vesting schedules, and recognized compensation expense - The 2021 Equity Incentive Plan, approved on May 27, 2021, authorized the issuance of up to 902,602 shares (257,887 restricted stock awards and 644,718 stock options)[95] - 226,519 shares of restricted stock were awarded on September 2, 2021, with a grant date fair value of $10.45 per share, vesting over five years, recognizing approximately $118,000 in expense during Q1 2022[96] - Options to purchase 526,119 shares were awarded on September 2, 2021, with a grant date fair value of $4.37 per option and an exercise price of $10.45, vesting over five years, recognizing approximately $115,000 in expense during Q1 2022[100][103] NOTE 7 – EMPLOYEE STOCK OWNERSHIP PLAN This note describes the Employee Stock Ownership Plan (ESOP) established during the company's reorganization, including shares acquired and expense incurred - An ESOP was established, acquiring 515,775 shares (3.92% of outstanding shares) of the Company's common stock during the mutual-to-stock reorganization[104] - The ESOP allocates 25,789 shares annually through 2039, with an expense of $66,000 for Q1 2022 and $61,000 for Q1 2021[104] NOTE 8 – COMMITMENTS AND CONTINGENCIES This note outlines the Bank's off-balance sheet risks, primarily commitments to extend credit, and details undisbursed funds and operating lease expenses | Loan Commitments | March 31, 2022 | December 31, 2021 | | :----------------------------------- | :------------- | :---------------- | | Fixed Rate Commitments | $34,972,575 | $3,156,250 | | Variable Rate Commitments | $2,924,500 | $9,982,375 | | Total Commitments | $37,897,075 | $13,138,625 | - Undisbursed funds from approved homeowners' equity lending programs amounted to $49.3 million at March 31, 2022, and business lines of credit amounted to $7.9 million[114] - Rent expense for operating leases was $43,815 for Q1 2022, an increase from $25,751 in Q1 2021[116] NOTE 9 – FAIR VALUE This note defines the fair value measurement hierarchy and presents fair values for financial instruments, distinguishing between recurring and non-recurring measurements - Fair value is categorized into three levels: Level 1 (quoted prices in active markets for identical assets), Level 2 (significant other observable inputs), and Level 3 (significant unobservable inputs)[117][118][121] | Securities Available for Sale (Fair Value) | March 31, 2022 | December 31, 2021 | | :----------------------------------- | :------------- | :---------------- | | U.S. treasury bills (Level 1) | $5,073,448 | $0 | | U.S. government and agency obligations (Level 2) | $5,750,586 | $2,981,730 | | Corporate bonds (Level 2) | $17,952,224 | $7,397,618 | | MBSs - residential (Level 2) | $46,061,169 | $21,760,245 | | MBSs - commercial (Level 2) | $16,754,313 | $9,699,205 | | Total Securities Available for Sale | $91,591,740 | $41,838,798 | | Financial Instruments Not Measured at Fair Value | Carrying Amount (March 31, 2022) | Fair Value (March 31, 2022) | | :----------------------------------- | :------------------------------- | :-------------------------- | | Cash and due from banks | $69,504,000 | $69,504,000 | | Investment securities held-to-maturity | $81,315,000 | $78,415,000 | | Loans | $564,877,000 | $547,123,000 | | Certificates of deposit | $339,933,000 | $340,655,000 | | Borrowings | $78,004,000 | $78,000,000 | NOTE 10 – ACCUMULATED OTHER COMPREHENSIVE LOSS This note details the components of accumulated other comprehensive loss, including unrealized gains and losses on available-for-sale securities and benefit plans | Component | Beginning Balance (Jan 1, 2022) | Net Period Comprehensive (Loss) Income | Ending Balance (Mar 31, 2022) | | :----------------------------------- | :------------------------------ | :------------------------------------- | :---------------------------- | | Unrealized gain and losses on available for sale securities | ($289,814) | ($2,399,988) | ($2,689,802) | | Benefit plans | $17,158 | $41,589 | $58,747 | | Total Accumulated Other Comprehensive Loss | ($272,656) | ($2,358,399) | ($2,631,055) | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and operating results, including critical accounting policies, market risk, and liquidity General This subsection introduces forward-looking statements and outlines various business, economic, and competitive uncertainties, including the ongoing impact of COVID-19 - Forward-looking statements are subject to significant business, economic, and competitive uncertainties, including general economic conditions, loan delinquencies, interest rate fluctuations, regulatory changes, and the ability to manage various risks[131][132] - The COVID-19 pandemic continues to pose risks, potentially leading to declining demand, increased loan delinquencies, reduced collateral values, higher allowance for loan losses, and increased cybersecurity risks[135] Acquisition of Gibraltar This subsection reiterates the completion of the Gibraltar Bank acquisition in February 2021, highlighting the issuance of common stock and asset integration - The acquisition of Gibraltar Bank was completed on February 28, 2021, involving the issuance of 1,267,916 shares of common stock to Bogota Financial, MHC[138] - Gibraltar Bank had $106.2 million in assets, $77.7 million in loans, and $81.6 million in deposits at the time of acquisition, operating from three New Jersey offices[139] Critical Accounting Policies This subsection identifies the Allowance for Loan Losses as the most critical accounting policy due to significant judgment and estimates involved - The Allowance for Loan Losses is considered a critical accounting policy due to the high degree of judgment, subjectivity of assumptions, and potential for significant change based on economic and real estate market conditions[140][142] - The methodology for determining the allowance involves specific components for classified loans and general components for non-classified loans based on historical loss experience and qualitative factors[143] COVID-19 This subsection discusses the ongoing impact of the COVID-19 pandemic on fee income, loan modifications, and Paycheck Protection Program (PPP) loans - The company's fee income has been reduced due to COVID-19, as fees were waived for affected customers in line with regulatory guidance[147] - The Bank granted 172 loan modifications totaling $67.9 million (11.6% of the loan portfolio) due to COVID-19, with only one residential loan ($117,000) remaining on deferral as of March 31, 2022[148] - Outstanding PPP loans decreased to $1.4 million at March 31, 2022, from $10.5 million in 2020 and $6.9 million in 2021, following forgiveness applications[150][151] Comparison of Financial Condition at March 31, 2022 and December 31, 2021 This subsection analyzes changes in key balance sheet items, including increases in total assets, securities, and deposits, and decreases in cash and net loans | Metric | March 31, 2022 | December 31, 2021 | Change (Absolute) | Change (%) | | :----------------------------------- | :------------- | :---------------- | :---------------- | :--------- | | Total Assets | $850.7 million | $837.4 million | $13.3 million | 1.6% | | Cash and Cash Equivalents | $69.1 million | $105.1 million | ($36.0 million) | (34.3%) | | Securities Available for Sale | $91.6 million | $41.8 million | $49.8 million | 118.9% | | Securities Held to Maturity | $81.3 million | $74.1 million | $7.3 million | 9.8% | | Net Loans | $564.4 million | $570.2 million | ($5.8 million) | (1.0%) | | Total Deposits | $619.9 million | $597.5 million | $22.5 million | 3.8% | | FHLB Borrowings | $78.0 million | $85.1 million | ($7.0 million) | (8.3%) | | Total Equity | $145.0 million | $147.6 million | ($2.6 million) | (1.8%) | - The decrease in net loans was primarily driven by a $4.4 million (55.8%) decrease in commercial and industrial loans due to PPP loan forgiveness and repayments, and a $3.3 million (1.0%) decrease in residential real estate loans[157] - The increase in deposits was largely due to a new $20.0 million interest-bearing checking municipal relationship[158] Average Balance Sheets and Related Yields and Rates This subsection presents average balances for assets and liabilities, along with interest income/expense and annualized yields/costs, for insights into net interest margin | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Average Interest-Earning Assets | $787,000,000 | $743,266,000 | | Yield on Interest-Earning Assets | 3.21% | 3.42% | | Average Interest-Bearing Liabilities | $643,343,000 | $603,838,000 | | Cost of Interest-Bearing Liabilities | 0.73% | 1.14% | | Net Interest Income | $5,123,000 | $4,579,000 | | Interest Rate Spread | 2.48% | 2.28% | | Net Interest Margin | 2.64% | 2.50% | Rate/Volume Analysis This subsection analyzes the impact of changes in interest rates and volumes on net interest income for the three months ended March 31, 2022, versus 2021 | Component | Change Due to Volume (in thousands) | Change Due to Rate (in thousands) | Net Change (in thousands) | | :----------------------------------- | :---------------------------------- | :-------------------------------- | :------------------------ | | Interest Income | | | | | Cash and cash equivalents | ($8) | ($12) | ($20) | | Loans receivable | ($136) | $208 | $72 | | Securities | $1,715 | ($1,743) | ($28) | | Total interest-earning assets | $1,558 | ($1,553) | $5 | | Interest Expense | | | | | NOW and money market accounts | $76 | $35 | $111 | | Savings accounts | $15 | $6 | $21 | | Certificates of deposit | ($47) | ($523) | ($570) | | Federal Home Loan Bank advances | ($91) | ($10) | ($101) | | Total interest-bearing liabilities | ($47) | ($492) | ($539) | | Net increase (decrease) in net interest income | $1,605 | ($1,061) | $544 | Comparison of Operating Results for the Three Months Ended March 31, 2022 and March 31, 2021 This subsection compares the company's operating results, including net income, interest income/expense, provision for loan losses, and non-interest items - Net income decreased by $1.6 million (53.4%) to $1.4 million for Q1 2022, primarily due to a $2.0 million decrease in non-interest income, partially offset by a $544 thousand increase in net interest income[168] - Net interest income increased by $544,000 (11.9%) to $5.1 million for Q1 2022, driven by a 20 basis point increase in net interest rate spread to 2.48% and a 14 basis point increase in net interest margin to 2.64%[177] - No provision for loan losses was recorded for Q1 2022, compared to a $59,000 credit in Q1 2021, attributed to lower residential loan balances, a positive economic environment, and strong asset quality[178] - Non-interest income decreased by $2.0 million (85.1%) to $344,000, mainly due to a $1.9 million decrease in bargain purchase gain recognized from the Gibraltar acquisition in 2021[179] - Non-interest expense increased by $109,000 (3.2%) to $3.5 million, primarily due to a $524,000 increase in salaries and employee benefits from new employees and branches, and a $70,000 increase in data processing expense from the merger[180] Management of Market Risk This subsection details the company's approach to managing interest rate risk, including ALCO's role, strategies, and results of NPV and NII simulations - The company's primary market risk is interest rate risk, managed by the Asset/Liability Management Committee (ALCO) through strategies like originating adjustable-rate loans, promoting core deposits, and diversifying the loan portfolio[183][184] | Basis Point Change in Interest Rates | NPV Dollar Amount (in thousands) | Percent Change in NPV | NPV Ratio (%) | | :----------------------------------- | :------------------------------- | :-------------------- | :------------ | | 400 bp | $126,690 | 0.48% | 16.86% | | 300 bp | $131,826 | 4.48% | 17.07% | | 200 bp | $134,625 | 6.70% | 16.93% | | 100 bp | $133,559 | 5.85% | 16.30% | | 0 bp | $126,173 | 0% | 14.93% | | (100) bp | $127,641 | 1.16% | 14.68% | | Changes in Interest Rates (basis points) | Change in Net Interest Income Year One (% change from year one base) | | :--------------------------------------- | :------------------------------------------------------------------- | | 400 | (7.92)% | | 300 | (5.99)% | | 200 | (4.09)% | | 100 | (1.94)% | | 0 | 0% | | (100) | (0.17)% | Liquidity and Capital Resources This subsection assesses the company's liquidity position and capital resources, detailing funding sources, borrowing capacity, and compliance with regulatory capital requirements - Primary liquidity sources include deposits, loan/security payments, and proceeds from security sales. The company had $243.5 million in FHLB borrowing capacity ($78.0 million outstanding) and $51.0 million in unsecured lines of credit at March 31, 2022[192] - Cash and cash equivalents totaled $69.1 million, and securities available-for-sale totaled $91.6 million at March 31, 2022, providing additional liquidity[195] - The Bank is considered 'well capitalized' under regulatory guidelines, reporting a Community Bank Leverage Ratio of 17.67% at March 31, 2022, exceeding the 9% requirement[197] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section cross-references Item 2, 'Management's Discussion and Analysis of Financial Condition and Results of Operation – Management of Market Risk,' for all market risk disclosures - Information on quantitative and qualitative disclosures about market risk is cross-referenced to Item 2, 'Management's Discussion and Analysis of Financial Condition and Results of Operation – Management of Market Risk'[198] Item 4. Controls and Procedures This section confirms the effectiveness of disclosure controls and procedures and reports no material changes to internal controls over financial reporting - Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2022[198] - There were no changes in the company's internal controls over financial reporting that materially affected, or are reasonably likely to materially affect, these controls during the three months ended March 31, 2022[199] PART II. OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, and equity sales Item 1. Legal Proceedings This section states that as of March 31, 2022, the company was not involved in any material legal proceedings beyond routine business operations - As of March 31, 2022, the company was not involved in any pending legal proceedings that would be material to its financial condition or results of operations, other than routine matters[201] Item 1A. Risk Factors This section indicates that there have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes in risk factors have occurred since those disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2021[202] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section provides information on the company's common stock repurchase program, including shares purchased and average price paid during Q1 2022 - The Board of Directors approved a program to repurchase 296,044 shares of common stock (approximately 5% of outstanding shares excluding those held by Bogota Financial, MHC)[203] | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :----------------------------------- | :------------------------------- | :--------------------------- | | January 1 - 31, 2022 | 8,001 | $10.45 | | February 1 - 28, 2022 | 44,875 | $10.43 | | March 1 - 31, 2022 | 129,125 | $10.51 | | Total (Q1 2022) | 182,001 | $10.49 | Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities - No defaults upon senior securities were reported[205] Item 4. Mine Safety Disclosures This section indicates that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable to the company[206] Item 5. Other Information This section states that there is no other information to report - No other information was reported[207] Item 6. Exhibits This section lists the exhibits filed as part of the Form 10-Q, including organizational documents, certifications, and XBRL data - Exhibits include Articles of Incorporation, Bylaws, Common Stock Certificate Form, CEO and CFO certifications (Sections 302 and 906 of Sarbanes-Oxley Act), and XBRL formatted financial statements[209] SIGNATURES This section contains the signatures of the authorized officers, Joseph Coccaro and Brian McCourt, certifying the report - The report is signed by Joseph Coccaro, President and Chief Executive Officer, and Brian McCourt, Executive Vice President and Chief Financial Officer, on May 13, 2022[214]