Bogota Financial Corp. — Q1 2024 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 months ended March 31, 2024; balance-sheet comparisons are with December 31, 2023, and operating comparisons are with Q1 2023.
Key financial metrics
| Metric | Q1 2024 / March 31, 2024 | Comparable period / prior date |
|---|---|---|
| Total assets | $960.9 million | $939.3 million at December 31, 2023 |
| Interest income | $10.1 million | $9.0 million in Q1 2023 |
| Net interest income | $2.65 million | $4.52 million in Q1 2023 |
| Net interest margin | 1.18% | 2.05% in Q1 2023 |
| Net income (loss) | $(441,000); diluted loss per share $(0.03) | $993,000; diluted EPS $0.08 in Q1 2023 |
| Operating cash flow | $(2.88) million | $1.22 million provided in Q1 2023 |
| Cash and cash equivalents | $14.4 million | $24.9 million at December 31, 2023 |
| Net loans | $708.3 million | $714.7 million at December 31, 2023 |
| Total deposits | $665.5 million | $625.3 million at December 31, 2023 |
| FHLB advances | $149.3 million | $167.7 million at December 31, 2023 |
| Stockholders’ equity | $136.4 million | $137.2 million at December 31, 2023 |
Non-interest income was $299,000 and non-interest expense was $3.64 million. The company recorded a $35,000 provision for credit losses on securities; the loan allowance remained $2.79 million, or 0.40% of total loans. Investing cash flow was $(29.1) million, principally reflecting securities purchases; financing cash flow was $21.8 million, primarily from deposit growth.
Material changes versus comparable periods
- Net interest income declined 41.4% year over year. The net interest spread narrowed to 0.68% from 1.68%, as funding costs rose faster than asset yields. Average interest-bearing deposit cost increased to 3.82% from 2.25%; average borrowing cost rose to 3.78% from 3.27%.
- Total interest income rose 11.6%, but interest expense increased 64.9% to $7.41 million. The resulting net loss contrasts with Q1 2023 net income.
- Assets rose 2.3% from year-end as available-for-sale securities increased $33.1 million and held-to-maturity securities increased $3.8 million. Cash and cash equivalents fell $10.5 million, with management attributing the decline primarily to securities purchases.
- Deposits increased $40.2 million, while FHLB advances declined $18.4 million. Brokered deposits rose to $90.3 million, or 13.6% of deposits, from $53.5 million, or 8.5%, at year-end.
- Loans declined $6.4 million overall: residential first mortgages and construction loans fell, partly offset by growth in commercial real estate loans.
Outlook, risks and unusual items
- The filing gives no specific earnings or financial guidance. Management said it believed liquidity was ample and that funding commitments could be met. Certificates of deposit totaling $439.9 million, or 66.1% of deposits, mature within one year; management expects a significant portion to remain, but replacement funding could cost more.
- Liquidity sources include $14.4 million of cash and cash equivalents, $102.0 million of available-for-sale securities, $167.2 million of stated remaining FHLB borrowing capacity, and $54.0 million of unused unsecured correspondent-bank lines. The filing says $1.5 million of FHLB capacity was used to support municipal-deposit letters of credit.
- Delinquent loans totaled $13.4 million, or 1.89% of loans, up from $12.6 million at year-end; non-performing assets were $12.4 million, or 1.29% of assets. Construction loans included $10.9 million on nonaccrual, unchanged from year-end. The Bank reported no office-secured commercial real estate exposure and no specific reserves on nonaccrual loans.
- Available-for-sale securities had $10.3 million of gross unrealized losses at quarter-end; held-to-maturity securities had $7.8 million of gross unrecognized losses. Management attributed available-for-sale declines primarily to interest rates and market conditions, not credit, and reported no allowance for credit losses on that portfolio.
- Interest-rate simulations estimated that a parallel 400-basis-point increase would reduce year-one net interest income by 11.20% and NPV by 37.04%; a 400-basis-point decrease would reduce year-one net interest income by 14.77%. Management cautioned that these are model estimates, not forecasts.
- Disclosure controls were deemed ineffective as of March 31, 2024 because of a material weakness in accounting for fair-value hedges. The error was found before the interim statements were issued, corrected, and did not cause an identified misstatement or change previously issued statements. Management said the weakness was remedied in Q1.
- The Bank exceeded applicable regulatory capital requirements and reported a 13.23% Community Bank Leverage Ratio, qualifying as well capitalized. The filing reports no material change in risk factors and no material pending litigation.
Most important facts for investors to verify
- Whether deposit growth is sustainable and how the large near-term certificate maturities, brokered deposits and deposit pricing affect funding costs.
- Whether net interest margin stabilizes after its substantial year-over-year decline, including the effect of rates on deposits, borrowings and asset yields.
- Developments in nonperforming construction and other delinquent loans, collateral values, and the adequacy of the loan-loss allowance.
- Changes in securities’ unrealized losses, liquidity needs and the potential impact of interest-rate movements on earnings and capital.
- Whether controls over hedge accounting remain effective following the disclosed material weakness and remediation.