Bogota Financial Corp. — Q3 2023 Form 10-Q
Business context and reporting period. Bogota Financial Corp. is the holding company for Bogota Savings Bank, which primarily serves New Jersey customers through residential, commercial and consumer lending and deposit-taking. This unaudited filing covers the three and nine months ended September 30, 2023; balance-sheet comparisons are with December 31, 2022.
Financial performance and position
| Metric | Q3 2023 / September 30, 2023 | Comparable period / prior date |
|---|---|---|
| Interest income | $9.29 million for the quarter; $27.71 million for nine months | Quarter: $8.18 million; nine months: $21.37 million |
| Net interest income | $3.22 million for the quarter; $12.04 million for nine months | Quarter: $6.21 million; nine months: $17.04 million |
| Net income | Quarter: loss of $29,000; nine months: $1.82 million | Quarter: income of $1.93 million; nine months: $4.97 million |
| Net interest margin | Quarter: 1.47%; nine months: 1.82% | Quarter: 2.85%; nine months: 2.78% |
| Total assets | $927.0 million | $951.1 million at December 31, 2022 |
| Net loans | $710.3 million | $719.0 million at December 31, 2022 |
| Deposits | $645.3 million | $701.4 million at December 31, 2022 |
| FHLB advances | $135.3 million; weighted-average rate 4.37% | $102.3 million; 3.36% at December 31, 2022 |
| Cash and cash equivalents | $25.0 million | $16.8 million at December 31, 2022 |
| Stockholders’ equity | $137.7 million | $139.7 million at December 31, 2022 |
For the nine months, operating cash flow was $1.66 million, investing activities provided $32.33 million, and financing activities used $25.85 million. Cash and cash equivalents increased $8.14 million from year-end. The filing does not provide a clear standalone revenue measure beyond interest and non-interest income.
Material changes and management commentary
- Quarterly net interest income fell 48.2% year over year, and nine-month net interest income fell 29.4%. Higher asset yields and loan balances lifted interest income, but sharply higher deposit and borrowing costs more than offset that benefit. The quarterly average cost of interest-bearing deposits rose to 3.11% from 0.82% a year earlier; certificates of deposit became a larger share of funding.
- Quarterly net loss was approximately $29,000, versus $1.93 million profit a year earlier. Nine-month net income declined 63.4%. Lower net interest income was the principal driver; lower credit-loss provision/recovery and lower income-tax expense partly offset the decline.
- Total deposits decreased $56.1 million, while borrowings increased $33.0 million, primarily to offset deposit withdrawals. Management attributed deposit outflows to customers seeking higher-yielding accounts. At quarter-end, brokered deposits were $55.0 million (8.5% of deposits), municipal deposits $41.9 million (6.5%), and uninsured deposits 6.6% of deposits.
- Loans declined $8.7 million from year-end, with residential and construction balances lower; commercial real estate and multifamily loans grew. Management cited weaker demand for residential and construction lending amid higher rates and said it was selective in loan production.
- Delinquent loans were $19.5 million, or 2.74% of loans. Nonperforming assets were $12.3 million, or 1.33% of assets, including a $10.9 million commercial construction loan in Totowa, New Jersey, with a reported 46% loan-to-value ratio. The allowance for credit losses was 0.39% of loans and 22.62% of nonperforming loans. Management reported no office-property commercial real estate exposure.
- Available-for-sale securities had $11.50 million of gross unrealized losses at September 30; held-to-maturity securities had $8.90 million of unrecognized losses. Management attributed declines principally to interest rates and market conditions, not credit quality, and reported no required allowance on available-for-sale securities.
Outlook, risks and contingencies
- The filing gives no specific earnings, revenue or margin guidance. Management said it believed liquidity was ample and expected to meet current funding commitments, while noting that $438.1 million of certificates of deposit—67.9% of deposits—were due within one year. Replacing deposits could require higher-cost deposits or borrowings.
- At September 30, the Bank had $320.2 million of FHLB borrowing capacity, of which $135.3 million was outstanding; $39 million of correspondent-bank credit lines were undrawn. Management reported the Bank was well capitalized under regulatory guidelines, with a Community Bank Leverage Ratio of 14.06%.
- Interest-rate exposure is material: the company’s one-year net interest income simulation estimated a 23.04% decline under an immediate 400-basis-point increase and a 41.75% increase under a 400-basis-point decrease. Management cautioned that these are hypothetical model estimates, not forecasts. Its NPV analysis estimated a 55.39% decline in NPV under a 400-basis-point increase.
- The company adopted CECL on January 1, 2023, recording an approximately $0.22 million after-tax reduction to opening retained earnings and increases to loan and unfunded-commitment reserves. Credit-loss estimates depend on forecasts and management judgments.
- The company repurchased 325,250 shares for $3.1 million during the nine months. A 2023 authorization covered up to 249,920 shares; 122,301 had been repurchased under that program by September 30, with 127,619 remaining at quarter-end.
- Management identified economic and regional conditions, loan delinquencies and credit quality, deposit funding and liquidity, real estate values, interest rates, competition, regulation, and cybersecurity among risks that could cause results to differ from forward-looking statements. No material pending legal proceedings were reported. Management concluded disclosure controls were effective and reported no material quarterly change in internal control over financial reporting.
Investor facts to verify
- Whether deposit outflows and certificate-of-deposit renewals lead to further reliance on FHLB or other higher-cost funding.
- Performance, collateral and repayment status of the $10.9 million delinquent construction loan, and trends in total delinquencies and nonperforming assets.
- Whether net interest margin stabilizes as deposit pricing and funding mix adjust; compare actual results with the filing’s interest-rate sensitivity assumptions.
- How unrealized securities losses and CECL assumptions evolve, including any effects on capital or liquidity if securities must be sold.
- Whether loan demand, portfolio mix, share repurchases and regulatory capital remain consistent with management’s stated priorities and capacity.