Bogota Financial Corp. — Q2 2023 Form 10-Q
Business context and period. Bogota Financial is the holding company for Bogota Savings Bank, a New Jersey community bank focused on residential, commercial, and consumer lending and deposits. This unaudited filing covers the quarter and six months ended June 30, 2023; balance-sheet comparisons are with December 31, 2022. The company reported August 11, 2023.
Financial performance
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Interest income | $9.41 million | $6.91 million | $18.42 million | $13.19 million |
| Interest expense | $5.11 million | $1.21 million | $9.61 million | $2.36 million |
| Net interest income | $4.29 million | $5.71 million | $8.82 million | $10.83 million |
| Net income | $857,000 | $1.64 million | $1.85 million | $3.04 million |
| Diluted EPS | $0.07 | $0.12 | $0.14 | $0.22 |
| Net interest margin | 1.96% | 2.85% | 2.01% | 2.75% |
- Q2 net income fell 47.8%; first-half net income fell 39.2%. Higher interest income was more than offset by sharply higher funding costs. Deposit expense rose to $4.21 million in Q2 from $850,000 a year earlier; the average cost of interest-bearing deposits increased to 2.68% from 0.59%.
- Non-interest income was $283,000 in Q2 and $567,000 for the first half. Non-interest expense was $3.63 million and $7.15 million, respectively. First-half credit-loss recovery was $125,000, versus a $100,000 provision in 2022.
- At June 30, total assets were $931.0 million, down 2.1% from year-end; net loans were $705.9 million, down 1.8%. Deposits were $656.6 million, down 6.4%. Cash and cash equivalents were $29.0 million.
- Total FHLB borrowings were $127.2 million, up from $102.3 million at year-end; the weighted-average borrowing rate was 3.98%. Stockholders’ equity was $139.2 million. Accumulated other comprehensive loss was $6.65 million.
- First-half operating cash flow was $1.59 million; investing activities provided $32.20 million and financing activities used $21.62 million. Cash and cash equivalents increased $12.17 million to $29.01 million.
Material changes and notable items
- Deposit outflows were funded partly by FHLB advances. Non-interest-bearing deposits increased $18.5 million, but interest-bearing deposits declined $63.3 million. Brokered deposits were $54.8 million (8.3% of deposits); uninsured deposits were 8.2%.
- Commercial construction loans declined $13.1 million during the half. A $10.9 million Totowa, New Jersey construction loan was placed on nonaccrual; it was collateral-dependent, with a reported loan-to-value ratio of 46%. Total nonperforming assets were $13.4 million, or 1.42% of assets. The $2.8 million loan-loss allowance was 0.39% of loans and 21.1% of nonperforming loans. No charge-offs were reported.
- The company adopted CECL on January 1, 2023. Adoption reduced opening retained earnings by approximately $222,000 net of tax, increased the loan allowance by $283,000 and added $152,000 for unfunded commitments.
- Unrealized losses on available-for-sale securities were $9.9 million at June 30; held-to-maturity securities had $8.1 million of unrecognized losses. Management attributed these declines mainly to interest rates and market conditions and recorded no securities credit-loss allowance.
- The company repurchased 216,559 shares during the first half for approximately $2.2 million. A new authorization permits repurchase of up to 249,920 shares; 20,300 shares under that authorization had been repurchased by June 30.
Outlook, risks, and controls
- No numerical earnings or balance-sheet guidance was provided. Management said liquidity was adequate for expected short- and long-term needs and reported that the bank exceeded regulatory capital requirements and was well-capitalized. Its Community Bank Leverage Ratio was 13.88%.
- Liquidity sources included $330.4 million of FHLB borrowing capacity, of which $127.2 million was advanced, and $39.0 million of unused unsecured correspondent-bank lines. Certificates of deposit totaling $350.3 million, or 53.4% of deposits, mature within one year; replacement funding could cost more.
- Interest-rate simulations estimated first-year net interest income would decline 15.80% under an immediate 400-basis-point rise and 3.83% under a 100-basis-point rise. Management cautioned that simulations rely on assumptions and are not forecasts. A 400-basis-point rise reduced modeled net portfolio value by 47.64%.
- Disclosed risks include deposit stability and funding costs, interest-rate and securities-value movements, real-estate and credit quality, economic conditions, competition, regulation, and cybersecurity. Management reported effective disclosure controls and no material change in internal controls during the quarter. No material pending legal proceedings were reported.
Key investor verification points
- Track the $10.9 million nonaccrual construction loan, collateral valuation, and any further deterioration in delinquencies or nonperforming assets.
- Monitor deposit retention, uninsured and brokered deposit levels, the $350.3 million of CDs maturing within a year, and the cost and availability of replacement funding.
- Assess whether deposit and borrowing costs continue to outpace asset-yield increases and pressure net interest margin and earnings.
- Review liquidity and capital disclosures alongside the large unrealized securities losses and modeled sensitivity to rising rates.
- Verify subsequent repurchases, credit-loss estimates, and the company’s later-period results; this filing provides no forward earnings guidance.