Bogota Financial Corp. (the "Company") (NASDAQ: BSBK), the holding company for Bogota Savings Bank (the "Bank"), reported net income for the three months ended June 30, 2020 of $1.4 million, compared to net income of $608,000 for the comparable prior year period. The Company reported net income for the six months ended June 30, 2020 of $65,000 compared to a net income of $970,000 for the comparable prior year period. The Company contributed cash and stock with a value of $2.9 million ($2.1 million after-tax) to the Bogota Charitable Foundation during the six months ended June 30, 2020. Without this contribution, net income would have been $2.0 million.
On January 15, 2020, the Company became the holding company for the Bank when it completed the reorganization of the Bank into a two-tier mutual holding company form of organization. In connection with the reorganization, the Company sold 5,657,735 shares of common stock at a price of $10 per share, for gross proceeds of $56.6 million. The Company also issued 263,150 shares of common stock and $250,000 in cash to Bogota Savings Bank Charitable Foundation, Inc., and issued 7,236,640 shares of common stock to Bogota Financial, MHC, and its New Jersey-chartered mutual holding company. Shares of the Company’s common stock began trading on January 16, 2020 on the Nasdaq Capital Market under the trading symbol "BSBK."
Other Financial Highlights:
Total assets decreased $27.9 million, or 3.6%, to $738.7 million from $766.6 million at December 31, 2019. Unfilled subscriptions of $41.5 million from the stock offering were returned following the completion of the stock offering. Excluding these funds as of December 31, 2019, total assets increased by 1.8% during the six months ended June 30, 2020.
Net loans increased $50.5 million, or 9.4%, to $587.7 million from $537.2 million at December 31, 2019.
Total deposits were $492.4 million, decreasing $5.3 million, or 1.1%, during the six months ended June 30, 2020.
Return on average assets was 0.04% for the six-month period ended June 30, 2020 compared to 0.59% for the corresponding period of 2019. Without the charitable foundation contribution, the return on average assets would have been 1.12% for the six-month period ended June 30, 2020.
Return on average equity was 0.22% for the six-month period ended June 30, 2020 compared to 5.35% for the same period of 2019. Without the charitable foundation contribution, the return on average equity would have been 6.12% for the six-month period ended June 30, 2020.
As a qualified Small Business Administration lender, we were automatically authorized to originate loans under the Paycheck Protection Program ("PPP"). As of June 30, 2020, we have received and processed 113 PPP applications totaling approximately $10.5 million.
We are also providing assistance to individuals and small business clients directly impacted by the COVID-19 pandemic by allowing borrowers to modify their loans. Through June 30, 2020, the Company granted $68.0 million of loan modifications which represented 12.0% of the total loan portfolio allowing customers who were affected by the COVID-19 pandemic to defer principal and/or interest payments. These short-term loan modifications will be treated in accordance with Section 4013 of the CARES Act and will not be treated as troubled debt restructurings during the short-term modification period if the loan was not in arrears at December 31, 2019. Furthermore, these loans will continue to accrue interest and will not be tested for impairment during the short-term modification period. Details with respect to actual loan modification are as follows:
Type of Loan
Balance as of
June 30, 2020
Percent of Total Loans as of
June 30, 2020
One- to four-family residential real estate
Commercial real estate
Multi-family real estate
Commercial and industrial
Joseph Coccaro, President and Chief Executive Officer, said, "During the first quarter we successfully converted the Bank to a two-tier mutual holding company structure. We are pleased with our continued strategy to expand our loan portfolio and the positive overall impacts of doing so on assets and income. We continue our efforts to expand our market presence, improve and expand our technology platform and offerings and manage our interest rate risk. We have been pleased with our excellent loan quality, and low loan delinquencies during the first six months of 2020."
Mr. Coccaro continued, "The COVID-19 pandemic has created turmoil around the globe. Virtually all businesses have been impacted by the mandated business closures and restrictions. Thankfully banking is an essential business and we are working very hard helping our customers with emergency funding, loan deferrals and assistance with the PPP. I am hopeful that through the funding of the PPP, most businesses will rebound and there will be a recovery. The economic impact of the COVID-19 pandemic on the Company’s operations was not material during the first six months ended June 30, 2020. However, there could be a more significant impact on the Company’s financial results going forward due to increases in loan delinquencies, problem assets or foreclosures, a decline in collateral value or an increase in allowance for loan losses. I am optimistic community banking will continue to prosper by supporting individuals and small business looking for a community bank."
Income Statement Analysis
Compared to the second quarter of 2019, net interest income increased $504,000, or 18.1%, to $3.3 million for the three months ended June 30, 2020. During the same period, our net interest margin increased from 1.75% to 1.88%, while the ratio of average interest-earning assets to average interest-bearing liabilities improved 9.8% to 122.67%. For the six months ended June 30, 2020, net interest income increased $773,000, or 13.8%, to $6.4 million. Overall, there was a 9 basis point increase in net interest margin to 1.85%, while the ratio of average interest-earning assets to average interest-bearing liabilities improved 9.5% to 121.9%. The increase in net interest margin during the three and six months ended June 30, 2020 was mostly due to the higher ratio of average interest-earning assets to average interest-bearing liabilities.
We recorded a provision for loan losses of $225,000 and $250,000 for the three and six month periods ended June 30, 2020, respectively, compared to no provision for loans losses for the same periods last year. Higher commercial real estate loan balances and increased risks factors associated with COVID 19 were the reasons for the provision.
Non-interest income was $768,000 for the three months ended June 30, 2020, an increase of $628,000, or 451.1%, compared to $139,000 in the prior year period. For the six months ended June 30, 2020, non-interest income totaled $889,000, an increase of $609,000, or 217.9%, from the prior year period. Death benefit proceeds received on our investment in Bank Owned Life Insurance was the primary reason for the increase during both periods.
For the three months ended June 30, 2020, non-interest expenses increased $45,000 to $2.2 million, over the comparable 2019 period. Professional fees increased $130,000, or 208.1%, due to additional expense associated with becoming a public company.
Salaries and employee benefits decreased $18,000, or 1.5%, attributable to deferred salary expense for increased loan volume. The reduction of other general operating expenses was mainly due to decreases in data processing costs, FDIC insurance assessment and occupancy expense.
For the six months ended June 30, 2020, non-interest expenses increased $2.6 million to $7.2 million, over the comparable 2019 period. Data processing costs decreased $426,000, or 57.8%, due to $360,000 in de-conversion expenses in 2019 in connection with the Bank’s data processing conversion. Expenses for the six months ended June 30, 2020 included a $2.9 million contribution to the Bogota Charitable Foundation that was formed during the reorganization of the Bank into a two-tier mutual holding company form of organization. The increase of other general operating expenses was mainly due to increases in professional fees associated with the expense of becoming a public company. Without the contribution to the charitable foundation in 2020 and the de-conversion expense in 2019, non-interest expenses increased $89,000 to $4.4 million compared to the same period last year.
Balance Sheet Analysis
Total assets were $738.7 million at June 30, 2020, representing a decrease of $27.9 million, or 3.6%, from December 31, 2019. Net loans increased $50.5 million or 9.4%, due to new production of $121.4 million, consisting of a relatively equal mix of real estate loans and commercial loans, which was partially offset by $70.9 million in repayments. Securities held to maturity decreased $1.5 million mostly due to maturities in municipal bonds and government agency bonds which were not replaced. Cash and due from banks decreased $76.1 million during the period primarily because of $41.5 million in offering subscriptions that were refunded due to the oversubscription of the stock offering.
Delinquent loans decreased $232,000, or 40.8%, during the six-month period ended June 30, 2020, finishing at 0.1% of total loans, or $337,000. During the same timeframe, non-performing assets increased $85,000, or 14.4%, to $675,000 and were 0.09% of total assets at June 30, 2020. Our allowance for loan losses was 0.38% of total loans and 335.87% of non-performing loans at June 30, 2020.
Total liabilities decreased $79.3 million, or 11.5%, to $612.3 million mainly due to $90.4 million in gross subscriptions that was either converted to common stock or due to the oversubscription of the stock offering. Deposits decreased $5.3 million, or 1.1%, mostly due to a decrease in certificate of deposits as the Bank had a high volume of maturities not all of which were renewed. Federal Home Loan Bank advances increased $16.0 million, or 16.5%, as borrowings were available at lower rates than deposits.
Stockholders’ equity increased $51.4 million to $126.3 million, primarily due $54.6 million of net proceeds raised in the stock offering. At June 30, 2020, the Company’s ratio of average stockholders’ equity-to-total assets was 17.25%, compared to 10.96% at December 31, 2019.
The Company was formed to serve as the mid-tier stock holding company for the Bank in connection with the reorganization of the Bank and its mutual holding company, Bogota Financial, MHC, into the two-tier mutual holding company structure. As of December 31, 2019 and for the three and six months ended June 30, 2019, the reorganization had not been completed and the Company had no assets or liabilities and had not conducted any business activities other than organizational activities. Accordingly, the unaudited financial statements and other financial information at and for the 2019 periods contained relate solely to the consolidated financial results of the Bank.
About Bogota Financial Corp.
Bogota Financial Corp. is a Maryland corporation organized as the mid-tier holding company of Bogota Savings Bank and is the majority-owned subsidiary of Bogota Financial, MHC. Bogota Savings Bank is a New Jersey chartered stock savings bank that has served the banking needs of its customers in northern and central New Jersey since 1893. It operates from two offices located in Bogota and Teaneck, New Jersey.
This press release contains certain forward-looking statements about the Company and the Bank. Forward-looking statements include statements regarding anticipated future events and can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as "believe," "expect," "anticipate," "estimate," and "intend" or future or conditional verbs such as "will," "would," "should," "could," or "may." Forward-looking statements, by their nature, are subject to risks and uncertainties. Certain factors that could cause actual results to differ materially from expected results include increased competitive pressures, changes in the interest rate environment, general economic conditions or conditions within the securities markets, and legislative and regulatory changes that could adversely affect the business in which the Company and the Bank are engaged.
Further, given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and how the economy may be reopened or remain open. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations: demand for our products and services may decline, making it difficult to grow assets and income; if the economy is unable to substantially reopen or remain open, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase; our allowance for loan losses may have to be increased if borrowers experience financial difficulties, which will adversely affect our net income; the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us. As the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0%, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin and spread and reducing net income. Our cyber security risks are increased as the result of an increase in the number of employees working remotely; and FDIC premiums may increase if the agency experience additional resolution costs.
The Company undertakes no obligation to revise these forward-looking statements or to reflect events or circumstances after the date of this press release.
BOGOTA FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
June 30, 2020
December 31, 2019
Cash and due from banks
Interest-bearing deposits in other banks
Cash and cash equivalents
Securities available for sale
Securities held to maturity (fair value of $56,100,917 and $56,582,299, respectively)
Loans, net of allowance of $2,266,174 and $2,016,174, respectively
Premises and equipment, net
Federal Home Loan Bank (FHLB) stock
Accrued interest receivable
Bank owned life insurance
Liabilities and Equity
Advance payments by borrowers for taxes and insurance
Subscription offering proceeds
Commitments and Contingencies-see note 6
Preferred stock $0.01 par value 1,000,000 shares authorized, none issued and outstanding at June 30, 2020
Common stock $0.01 par value, 30,000,000 shares authorized, 13,157,525 issued and outstanding at June 30, 2020
Additional Paid-In capital
Unearned ESOP shares (503,465 shares)
Accumulated other comprehensive loss
Total stockholders’ equity
Total liabilities and stockholders’ equity
BOGOTA FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
Three months ended
Six months ended
Other interest-earning assets
Total interest income
Total interest expense
Net interest income
Provision for loan losses
Net interest income after provision for loan losses
Fees and service charges
Bank owned life insurance
Total non-interest income
Salaries and employee benefits
Occupancy and equipment
FDIC insurance assessment
Contribution to Charitable Foundation
Total non-interest expense
Income (loss) before income taxes (benefit)
Income tax expense (benefit)
Earnings per Share
Weighted average shares outstanding
BOGOTA FINANCIAL CORP.
At or For the Three Months
Ended June 30,
At or For the Six Months
Ended June 30,
Performance Ratios (1):
Return on average assets (2)
Return on average equity (3)
Interest rate spread (4)
Net interest margin (5)
Efficiency ratio (6)
Average interest-earning assets to average interest-bearing liabilities
Net loans to deposits
Equity to assets (7)
Tier 1 capital (to adjusted total assets)
Tier 1 capital (to risk-weighted assets)
Total capital (to risk-weighted assets)
Common equity Tier 1 capital (to risk-weighted assets)
Asset Quality Ratios:
Allowance for loan losses as a percent of total loans
Allowance for loan losses as a percent of non-performing loans
Net recoveries to average outstanding loans during the period
Non-performing loans as a percent of total loans
Non-performing assets as a percent of total assets
Performance ratios are annualized.
Represents net income divided by average total assets.
Represents net income divided by average equity.
Represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost of average interest-bearing liabilities. Tax exempt income is reported on a tax equivalent basis using a combined federal and state marginal tax rate of 30%.
Represents net interest income as a percent of average interest-earning assets. Tax exempt income is reported on a tax equivalent basis using a combined federal and state marginal tax rate of 30% for 2020 and 2019.
Represents non-interest expenses divided by the sum of net interest income and non-interest income.
Represents average equity divided by average total assets.
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Joseph Coccaro – President & CEO
201-862-0660 ext. 1110