UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2024
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File No. 001-39180
Bogota Financial Corp.
(Exact Name of Registrant as Specified in Its Charter)
Maryland
84-3501231
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer Identification No.)
819 Teaneck Road
Teaneck, New Jersey
07666
(Address of Principal Executive Offices)
(Zip Code)
(201) 862-0660
(Registrant’s Telephone Number, Including Area Code)
N/A
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange
on which registered
Common Stock, $0.01 par value per share
BSBK
The Nasdaq Stock Market, LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting
company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)
Large accelerated filer
☐
Accelerated filer
☐
Non-accelerated filer
☒
Smaller reporting company
☒
Emerging growth company
☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of November 12, 2024, there were 13,074,928 shares issued and outstanding of the registrant’s common stock, par value $0.01 per
share.
Table of Contents
Bogota Financial Corp.
Form 10-Q
Table of Contents
Page
PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements
1
Consolidated Statements of Financial Condition at September 30, 2024 and December 31, 2023 (unaudited)
1
Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2024 and 2023
(unaudited)
2
Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30,
2024 and 2023 (unaudited)
3
Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended September 30, 2024 and
2023 (unaudited)
4
Consolidated Statements of Cash Flows for the Nine Months Ended September30, 2024 and 2023 (unaudited)
5
Notes to Consolidated Financial Statements (unaudited)
6
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
20
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
29
Item 4.
Controls and Procedures
29
PART II. OTHER INFORMATION
Item 1.
Legal Proceedings
30
Item 1A.
Risk Factors
30
Item 2.
Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities
30
Item 3.
Defaults Upon Senior Securities
30
Item 4.
Mine Safety Disclosures
30
Item 5.
Other Information
30
Item 6.
Exhibits
31
SIGNATURES
32
i
Table of Contents
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
BOGOTA FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(unaudited)
As of
As of
September 30,
2024
December 31,
2023
Assets
Cash and due from banks
$
10,630,086
$
13,567,115
Interest-bearing deposits in other banks
10,372,434
11,362,356
Cash and cash equivalents
21,002,520
24,929,471
Securities available for sale, at fair value
108,560,811
68,888,179
Securities held to maturity, net of allowance for securities credit losses of $108,000 and zero,
respectively (fair value - $74,603,097 and $65,374,753, respectively)
80,103,753
72,656,179
Loans, net of allowance for credit losses of $2,747,949 and $2,785,949, respectively
708,896,566
714,688,635
Premises and equipment, net
7,853,076
7,687,387
Federal Home Loan Bank (FHLB) stock and other restricted securities
10,180,100
8,616,100
Accrued interest receivable
4,352,967
3,932,785
Core deposit intangibles
165,454
206,116
Bank-owned life insurance
31,635,988
30,987,851
Other assets
6,138,029
6,731,500
Total Assets
$
978,889,264
$
939,324,203
Liabilities and Equity
Non-interest bearing deposits
$
32,125,742
$
30,554,842
Interest bearing deposits
597,141,995
594,792,300
Total deposits
629,267,737
625,347,142
FHLB advances-short term
53,500,000
37,500,000
FHLB advances-long term
149,065,610
130,189,663
Advance payments by borrowers for taxes and insurance
3,265,262
2,733,709
Other liabilities
6,850,898
6,380,486
Total liabilities
841,949,507
802,151,000
Stockholders’ Equity
Preferred stock $0.01 par value 1,000,000 shares authorized, none issued and outstanding at
September 30, 2024 and December 31, 2023
—
—
Common stock $0.01 par value, 30,000,000 shares authorized, 13,092,357 issued and
outstanding at September 30, 2024 and 13,279,230 at December 31, 2023
130,923
132,792
Additional paid-in capital
55,315,875
56,149,915
Retained earnings
90,936,649
92,177,068
Unearned ESOP shares (389,674 shares at September 30, 2024 and 409,750 shares at
December 31, 2023)
(4,595,895)
(4,821,798)
Accumulated other comprehensive loss
(4,847,795)
(6,464,774)
Total stockholders’ equity
136,939,757
137,173,203
Total liabilities and stockholders’ equity
$
978,889,264
$
939,324,203
See accompanying notes to unaudited consolidated financial statements.
1
Table of Contents
BOGOTA FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2024
2023
2024
2023
Interest income
Loans, including fees
$
8,381,581
$
7,980,388
$ 24,888,377
$ 23,821,545
Securities
Taxable
1,884,276
994,791
5,247,336
3,042,389
Tax-exempt
13,137
13,159
39,409
78,293
Other interest-earning assets
341,268
301,081
980,536
771,584
Total interest income
10,620,262
9,289,419
31,155,658
27,713,811
Interest expense
Deposits
6,160,547
4,851,926
18,384,323
12,777,907
FHLB advances
1,802,387
1,220,166
4,719,056
2,900,359
Total interest expense
7,962,934
6,072,092
23,103,379
15,678,266
Net interest income
2,657,328
3,217,327
8,052,279
12,035,545
Provision (recovery) for credit losses
—
—
70,000
(125,000)
Net interest income after provision (recovery) for credit losses
2,657,328
3,217,327
7,982,279
12,160,545
Non-interest income
Fees and service charges
56,610
61,529
164,400
159,381
Gain on sale of loans
11,710
—
11,710
29,375
Bank-owned life insurance
221,122
197,873
648,137
574,073
Other
37,943
30,332
105,420
93,660
Total non-interest income
327,385
289,734
929,667
856,489
Non-interest expense
Salaries and employee benefits
2,102,993
2,274,347
6,404,946
6,737,952
Occupancy and equipment
380,714
372,626
1,118,739
1,114,170
FDIC insurance assessment
106,313
132,571
313,626
319,690
Data processing
306,167
205,721
928,292
717,913
Advertising
85,750
126,000
310,950
369,383
Director fees
159,851
159,336
467,100
478,011
Professional fees
248,420
149,251
682,517
412,519
Other
214,686
241,530
747,598
661,300
Total non-interest expense
3,604,894
3,661,382
10,973,768
10,810,938
(Loss) income before income taxes
(620,181)
(154,321)
(2,061,822)
2,206,096
Income tax (benefit) expense
(253,221)
(125,268)
(821,403)
385,801
Net (loss) income
$
(366,960) $
(29,053) $ (1,240,419) $
1,820,295
(Loss) earnings per Share - basic
$
(0.03) $
(0.00) $
(0.10) $
0.14
(Loss) earnings per Share - diluted
$
(0.03) $
(0.00) $
(0.10) $
0.14
Weighted average shares outstanding - basic
12,702,683
13,037,903
12,702,683
13,103,951
Weighted average shares outstanding - diluted
12,702,683
13,037,903
12,702,683
13,103,951
See accompanying notes to unaudited consolidated financial statements.
2
Table of Contents
BOGOTA FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2024
2023
2024
2023
Net (loss) income
$
(366,960) $
(29,053) $ (1,240,419) $
1,820,295
Other comprehensive (loss) income:
Net unrealized gain (loss) on securities available for sale:
2,880,599
(1,594,912)
2,828,529
(2,456,233)
Tax effect
(809,737)
448,330
(795,100)
690,448
Net of tax
2,070,862
(1,146,582)
2,033,429
(1,765,785)
Defined benefit retirement plans:
Reclassification adjustment for amortization of prior service cost
and net (loss) gain included in salaries and employee benefits
—
(23,016)
6,414
(69,048)
Tax effect
—
6,470
(3,309)
19,410
Net of tax
—
(16,546)
3,105
(49,638)
Derivatives:
Unrealized (loss) gain on swap contracts accounted for as cash
flow hedges
(1,303,127)
257,333
(583,606)
555,677
Tax effect
366,309
(72,336)
164,051
(156,201)
Net of tax
(936,818)
184,997
(419,555)
399,476
Total other comprehensive income (loss)
1,134,044
(978,131)
1,616,979
(1,415,947)
Comprehensive income (loss)
$
767,084
$ (1,007,184) $
376,560
$
404,348
See accompanying notes to unaudited consolidated financial statements.
3
Table of Contents
BOGOTA FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(unaudited)
Accumulated
Additional
Other
Total
Common
Common
Paid-in
Retained
Unearned
Comprehensive
Stockholder
s
Stock
Shares
Stock
Capital
Earnings
ESOP
shares
(Loss) Income
Equity
Balance January 1, 2023
13,699,016 $ 136,989 $59,099,476 $91,756,673 $(5,123,002) $
(6,211,013) $139,659,123
Adoption of ASU 326 credit
losses
—
—
—
(222,140)
—
—
(222,140)
Net income
—
—
—
992,707
—
—
992,707
Other comprehensive loss
—
—
—
—
—
(246,175)
(246,175)
Stock based compensation
—
—
233,193
—
—
—
233,193
Stock purchased and retired
(126,660)
(1,266)
(1,401,568)
—
—
—
(1,402,834)
ESOP Shares released
(25,789 shares)
—
—
(2,916)
—
75,301
—
72,385
Balance March 31, 2023
13,572,356 $ 135,723 $57,928,185 $92,527,240 $(5,047,701) $
(6,457,188) $139,086,259
Net income
—
—
—
856,641
—
—
856,641
Other comprehensive loss
—
—
—
—
—
(191,641)
(191,641)
Stock based compensation
—
—
233,193
—
—
—
233,193
Stock purchased and retired
(89,899)
(899)
(839,563)
—
—
—
(840,462)
ESOP Shares released
(25,789 shares)
—
—
(20,813)
—
75,301
—
54,488
Balance June 30, 2023
13,482,457 $ 134,824 $57,301,002 $93,383,881 $(4,972,400) $
(6,648,829) $139,198,478
Net loss
—
—
—
(29,053)
—
—
(29,053)
Other comprehensive income
—
—
—
—
—
(978,131)
(978,131)
Stock based compensation
—
—
233,193
—
—
—
233,193
Stock purchased and retired
(108,691)
(1,087)
(821,172)
—
—
—
(822,259)
ESOP Shares released
(25,789 shares)
—
—
(24,274)
—
75,301
—
51,027
Balance September 30, 2023
13,373,766 $ 133,737 $56,688,749 $93,354,828 $(4,897,099) $
(7,626,960) $137,653,255
Balance January 1, 2024
13,279,230 $ 132,792 $56,149,915 $92,177,068 $(4,821,798) $
(6,464,774) $137,173,203
Net loss
—
—
—
(440,980)
—
—
(440,980)
Other comprehensive loss
—
—
—
—
—
(300,572)
(300,572)
Restricted Stock Issuance
10,000
—
—
—
—
—
—
Stock based compensation
—
—
234,493
—
—
—
234,493
Stock purchased and retired
(33,083)
(331)
(269,364)
—
—
—
(269,695)
ESOP shares released (6,447
shares)
—
—
(25,025)
—
75,301
—
50,276
Balance March 31, 2024
13,256,147 $ 132,461 $56,090,019 $91,736,088 $(4,746,497) $
(6,765,346) $136,446,725
Net loss
—
—
—
(432,479)
—
—
(432,479)
Other comprehensive income
—
—
—
—
—
783,507
783,507
Stock based compensation
—
—
237,093
—
—
—
237,093
Stock purchased and retired
(107,323)
(1,073)
(733,660)
—
—
—
(734,733)
ESOP shares released (6,447
shares)
—
—
(31,768)
—
75,301
—
43,533
Balance June 30, 2024
13,148,824 $ 131,388 $55,561,684 $91,303,609 $(4,671,196) $
(5,981,839) $136,343,646
Net loss
—
—
—
(366,960)
—
—
(366,960)
Other comprehensive income
—
—
—
—
—
1,134,044
1,134,044
Stock based compensation
—
—
196,498
—
—
—
196,498
Stock purchased and retired
(56,467)
(465)
(414,511)
—
—
—
(414,976)
ESOP shares released (6,447
shares)
—
—
(27,796)
—
75,301
—
47,505
Balance September 30, 2024
13,092,357 $ 130,923 $55,315,875 $90,936,649 $(4,595,895) $
(4,847,795) $136,939,757
See accompanying notes to unaudited consolidated financial statements.
4
Table of Contents
BOGOTA FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For the nine months ended
September 30,
2024
2023
Cash flows from operating activities
Net (loss) income
$
(1,240,419) $
1,820,295
Adjustments to reconcile net (loss) income to net cash (used for) provided by operating
activities:
Amortization of intangible assets
44,375
(53,081)
Provision (recovery) for credit losses
70,000
(125,000)
Depreciation of premises and equipment
377,301
383,136
Amortization of deferred loan costs, net
183,775
97,891
Amortization of premiums and accretion of discounts on securities, net
17,337
4,541
Deferred tax benefit
(1,171,476)
(111,594)
Gain on sale of loans
(11,710)
(29,375)
Proceeds from sale of loans
445,393
1,875,125
Origination of loans held for sale
(433,683)
(1,845,750)
Increase in cash surrender value of bank owned life insurance
(648,137)
(574,073)
Employee stock ownership plan expense
141,314
177,900
Stock based compensation
668,084
699,579
Changes in:
Accrued interest receivable
(420,182)
293,769
Net changes in other assets
65,402
(1,518,086)
Net changes in other liabilities
394,731
566,354
Net cash (used for) provided by operating activities
(1,517,895)
1,661,631
Cash flows from investing activities
Purchases of securities held to maturity
(10,645,873)
(1,000,000)
Purchases of securities available for sale
(44,228,923)
—
Maturities, calls, and repayments of securities available for sale
7,367,482
14,121,182
Maturities, calls, and repayments of securities held to maturity
3,090,299
12,500,153
Purchase of loan pool
(10,391,872)
—
Net decrease in loans
16,621,983
8,637,206
Purchases of premises and equipment
(542,991)
(264,605)
Purchase of FHLB stock
(7,450,900)
(6,919,000)
Redemption of FHLB stock
5,886,900
5,251,500
Net cash (used in) provided by investing activities
(40,293,895)
32,326,436
Cash flows from financing activities
Net increase (decrease) in deposits
3,920,595
(56,099,671)
Net increase (decrease) in short-term FHLB advances
16,000,000
(20,000,000)
Proceeds from long-term FHLB non-repo advances
—
75,500,000
Repayments of long-term FHLB non-repo advances
18,875,947
(22,472,502)
Repurchase of common stock
(1,419,403)
(3,065,555)
Issuance of common stock
100
—
Net increase in advance payments from borrowers for taxes and insurance
507,600
286,065
Net cash provided by (used in) financing activities
37,884,839
(25,851,663)
Net (decrease) increase in cash and cash equivalents
(3,926,951)
8,136,404
Cash and cash equivalents at beginning of year
24,929,471
16,840,917
Cash and cash equivalents at September 30,
$
21,002,520
$
24,977,321
Supplemental cash flow information
Income taxes paid
$
40,000
$
1,375,000
Interest paid
23,103,379
15,261,645
Fair value change in cash flow hedges
$
(583,606) $
239,510
Fair value change in fair value hedges
(544,702)
-
See accompanying notes to unaudited consolidated financial statements.
5
Table of Contents
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations and Principles of Consolidation: On January 15, 2020, Bogota Financial Corp. (the “Company,” “we” or “our”)
became the mid-tier stock holding company for Bogota Savings Bank (the “Bank”) in connection with the reorganization of Bogota
Savings Bank into the two-tier mutual holding company structure. The Company completed its stock offering in connection with the
mutual holding company reorganization of the Bank on January 15, 2020. Shares of the Company’s common stock began trading on
January 16, 2020 on the Nasdaq Capital Market under the trading symbol “BSBK.”
The Bank maintains two subsidiaries. Bogota Securities Corp. was formed to buy, sell and hold investment securities. Bogota Properties,
LLC was inactive at September 30, 2024 and December 31, 2023.
The Bank generally originates residential, commercial and consumer loans to, and accepts deposits from, customers in New Jersey. The
debtors’ ability to repay the loans is dependent upon the region’s economy and the borrowers’ circumstances. The Bank is also subject
to the regulations of certain federal and state agencies and undergoes periodic examination by those regulatory authorities.
Reclassifications: Some items in the prior year financial statements were reclassified to conform to the current presentation.
Reclassifications had no effect on prior year net income or stockholders' equity.
(Loss) Earnings per Share: Basic (loss) earnings per share (“EPS”) is computed by dividing net income (loss) available to common
stockholders by the weighted average number of common shares outstanding during the period. For purposes of calculating basic EPS,
weighted average common shares outstanding excludes unallocated employee stock ownership plan shares that have not been committed
for release and non-vested shares of restricted stock. Diluted EPS is computed using the same method as basic EPS, except it also reflects
the potential dilution which could occur if non-vested restricted stock vested or stock options were exercised and converted into common
stock. The potentially diluted shares would then be included in the weighted average number of shares outstanding for the period using
the treasury stock method. For the three and nine months ended September 30, 2024 and September 30, 2023, options to purchase
511,119 and 523,619 common shares, respectively, with an exercise price of $10.45 were outstanding but were not included in the
computation of diluted earnings per common share because to do so would be anti-dilutive. Anti-dilutive options are those options with
exercise prices in excess of the weighted average market value for the periods presented. For the three and nine months ended September
30, 2024 and for the three and nine months ended September 30, 2023, all grants of non-vested restricted stock were excluded from the
computation of diluted earnings per share, because to include such shares would have been anti-dilutive.
The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share calculations for the
three and nine months ended September 30, 2024 and 2023.
For the three
months
ended
September
30, 2024
For the three
months
ended
September
30, 2023
For the nine
months
ended
September
30, 2024
For the nine
months
ended
September
30, 2023
Numerator
Net (loss) income
$
(366,960) $
(29,053) $ (1,240,419) $
1,820,295
Denominator:
Weighted average shares outstanding - basic
12,702,683
13,037,903
12,702,683
13,103,951
Effect of unvested restricted stock
—
—
—
—
Weighted average shares outstanding - diluted
12,702,683
13,037,903
12,702,683
13,103,951
(Loss) earnings per common share:
Basic
$
(0.03) $
(0.00) $
(0.10) $
0.14
Diluted
(0.03)
(0.00)
(0.10)
0.14
Use of Estimates: To prepare financial statements in conformity with accounting principles generally accepted in the United States of
America ("GAAP"), management makes estimates and assumptions based on available information. These estimates and assumptions
affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ under different
conditions than those assumed.
Basis of Presentation: The accompanying unaudited consolidated financial statements have been prepared in conformity with GAAP for
interim financial information and pursuant to the requirements for reporting in Article 10 of Regulation S-X of the Securities Exchange
Act of 1934, as amended. The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) contains provisions that, among other
things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company,” we may delay
adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable
to private companies. We intend to take advantage of the benefits of this extended transition period. Accordingly, our financial
statements may not be comparable to companies that comply with such new or revised accounting standards. These financial statements
include the accounts of the Company, the Bank and its subsidiaries, and all significant intercompany balances and transactions are
eliminated in consolidation.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions based on
available information. In the opinion of management, all adjustments (consisting of normal recurring adjustments) and disclosures
necessary for the fair presentation of the accompanying consolidated financial statements have been included. The results of operations
for any interim periods are not necessarily indicative of the results which may be expected for the entire year or any other period.
6
Table of Contents
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The unaudited financial statements and other financial information contained in this Quarterly Report on Form 10-Q should be read in
conjunction with the audited financial statements, and related notes, of the Company at and for the year ended December 31, 2023.
Not yet effective Accounting Pronouncements:
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (TOPIC 280): Improvements to Reportable Segment
Disclosures, which requires public entities to disclose information about their reportable segments’ significant expenses on an interim
and annual basis. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years
beginning after December 15, 2024. Early adoption is permitted. Public entities are required to adopt the changes retrospectively,
recasting each prior period disclosure for which a comparative income statement is presented in the period of adoption. This update is
not expected to have a material impact on the Company’s financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which
provides for improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information.
This guidance is effective for public business entities for annual periods beginning after December 15, 2024. This update is not
expected to have a material impact on the Company’s financial statements.
In March 2024, the FASB issued ASU 2024-01, Compensation - Stock Compensation (Topic 718), which amended the guidance in
ASC 718 to add an example showing how to apply the scope guidance to determine whether profits interest and similar awards should
be accounted for as share-based payment arrangements. For public business entities, the guidance is effective for fiscal years
beginning after December 15, 2024, and interim periods within those fiscal years. For all other entities, it is effective for fiscal years
beginning after December 15, 2025, and interim periods within those fiscal years. This update is not expected to have a significant
impact on the Company's financial statements.
7
Table of Contents
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 2 – SECURITIES AVAILABLE FOR SALE
The following table summarizes the amortized cost, fair value, and gross unrealized gains and losses of securities available for sale, by
contractual maturity, none of which had an allowance for credit losses at September 30, 2024 and December 31, 2023:
Gross
Gross
Amortized
Unrealized
Unrealized
Fair
Cost
Gains
Losses
Value
September 30, 2024
U.S. government and agency obligations
One through five years
$
6,000,000
$
—
$
(263,082) $
5,736,918
Corporate bonds due in:
Less than one year
5,325,846
—
(37,411)
5,288,435
One through five years
3,974,138
6,988
(76,147)
3,904,979
Five through ten years
5,000,000
24,560
(91,910)
4,932,650
MBS – residential
76,182,161
270,055
(4,357,505)
72,094,711
MBS – commercial
18,485,785
—
(1,882,667)
16,603,118
Total
$114,967,930
$
301,603
$ (6,708,722) $108,560,811
Gross
Gross
Amortized
Unrealized
Unrealized
Fair
Cost
Gains
Losses
Value
December 31, 2023
U.S. government and agency obligations
One through five years
6,000,000
—
(454,599)
5,545,401
Corporate bonds due in:
Less than one year
3,000,000
—
(44,230)
2,955,770
One through five years
8,264,973
—
(247,937)
8,017,036
Five through ten years
1,000,000
—
(154,050)
845,950
MBS – residential
41,105,143
5,182
(5,703,143)
35,407,182
MBS – commercial
18,753,711
—
(2,636,871)
16,116,840
Total
$ 78,123,827
$
5,182
$ (9,240,830) $ 68,888,179
All of the mortgaged-backed securities (“MBSs”) are issued by the following government sponsored agencies: Federal Home Loan
Mortgage Corporation (“FHLMC”), Federal National Mortgage Association (“FNMA”) and Government National Mortgage
Association (“GNMA”).
There were no sales of securities during the three and nine months ended September 30, 2024 or September 30, 2023.
The age of unrealized losses and the fair value of related securities as of September 30, 2024 and December 31, 2023 were as follows:
Less Than 12 Months
12 Months or More
Total
Fair
Unrealized
Fair
Unrealized
Fair
Unrealized
Value
Losses
Value
Losses
Value
Losses
September 30, 2024
U.S. government and agency
obligations
$
—
$
—
$
5,736,918
$
(263,082) $
5,736,918
$
(263,082)
Corporate bonds
1,998,738
(1,262)
8,092,155
(204,206)
10,090,893
(205,468)
MBS – residential
—
—
32,966,892
(4,357,505)
32,966,892
(4,357,505)
MBS – commercial
—
—
16,603,118
(1,882,667)
16,603,118
(1,882,667)
Total
$
1,998,738
$
(1,262) $ 63,399,083
$ (6,707,460) $ 65,397,821
$ (6,708,722)
Less Than 12 Months
12 Months or More
Total
Fair
Unrealized
Fair
Unrealized
Fair
Unrealized
Value
Losses
Value
Losses
Value
Losses
December 31, 2023
U.S. government and agency
obligations
$
—
$
—
$
5,545,401
$
(454,599) $
5,545,401
$
(454,599)
Corporate bonds
1,999,940
(60)
9,818,816
(446,157)
11,818,756
(446,217)
MBS – residential
-
-
34,829,468
(5,703,143)
34,829,468
(5,703,143)
MBS – commercial
-
-
16,116,840
(2,636,871)
16,116,840
(2,636,871)
Total
$
1,999,940
$
(60) $ 66,310,525
$ (9,240,770) $ 68,310,465
$ (9,240,830)
8
Table of Contents
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 2 – SECURITIES AVAILABLE FOR SALE (Continued)
Unrealized losses on corporate bonds available for sale are not considered to be credit losses because the bonds are of high credit quality,
management does not intend to sell and it is likely that management will not be required to sell the securities prior to their anticipated
recovery, and the decline in fair value was largely due to changes in interest rates and other market conditions. At September 30, 2024,
100% of the mortgage-backed securities were issued by U.S. government-sponsored entities and agencies, primarily FNMA and
FHLMC, institutions which the government has affirmed its commitment to support. There were 34 securities in a loss position at
September 30, 2024. Because the decline in fair value was attributable to changes in interest rates and illiquidity, and not credit quality,
and because the Bank does not have the intent to sell these mortgage-backed securities and it is likely that it will not be required to sell
the securities before their anticipated recovery, the Bank does not consider these losses to be credit-related at September 30, 2024. As
of September 30, 2024, no allowance for credit loss ("ACL") was required on available for sale securities. At September 30, 2024 and
December 31, 2023, securities available for sale with a carrying value of $98,231 and $113,415 were pledged to secure public deposits.
NOTE 3 – SECURITIES HELD TO MATURITY
The following table summarizes the amortized cost, fair value, and gross unrecognized gains and losses of securities held to maturity by
contractual maturity at September 30, 2024 and December 31, 2023:
Gross
Gross
Amortized
Unrecognized
Unrecognized
Fair
Cost
Gains
Losses
Value
September 30, 2024
U.S. Government and agency obligations due in:
Less than one year
$ 10,000,000
$
—
$
(116,890) $ 9,883,110
Five through ten years
3,000,000
—
(250,632)
2,749,368
Corporate bonds due in:
One through five years
8,099,945
59,158
(84,703)
8,074,400
Five through ten years
20,408,373
56,747
(1,816,554)
18,648,566
Greater than ten years
4,313,175
—
(6,025)
4,307,150
Municipal obligations due in:
One through five years
900,882
—
(25,695)
875,187
Five through ten years
1,588,709
158
(184,589)
1,404,278
Greater than ten years
506,960
—
(83,495)
423,465
MBS:
Residential
14,676,749
26,926
(1,108,642)
13,595,033
Commercial
16,716,960
—
(2,074,420)
14,642,540
Allowance for credit losses
(108,000)
—
—
(108,000)
Total
$ 80,103,753
$
142,989
$
(5,751,645) $ 74,495,097
Gross
Gross
Amortized
Unrecognized
Unrecognized
Fair
Cost
Gains
Losses
Value
December 31, 2023
U.S. Government and agency obligations
One through five years
$ 10,000,000
$
—
$
(314,240) $ 9,685,760
Five through ten years
3,000,000
—
(372,885)
2,627,115
Corporate bonds due in:
One through five years
6,431,007
—
(52,685)
6,378,322
Five through ten years
16,294,604
38,684
(2,074,007)
14,259,281
Greater than ten years
4,287,941
—
(441)
4,287,500
Municipal obligations due in:
One through five years
901,597
—
(55,102)
846,495
Five through ten years
1,591,199
784
(160,655)
1,431,328
Greater than ten years
507,716
—
(103,356)
404,360
MBS:
Residential
12,484,366
7,223
(1,457,104)
11,034,485
Commercial
17,157,749
—
(2,737,642)
14,420,107
Total
$ 72,656,179
$
46,691
$
(7,328,117) $ 65,374,753
Management completed an evaluation of the held to maturity securities portfolio to identify whether any ACL is required for the three
and nine months ended September 30, 2024 and 2023, the results of which are presented in the below table, which summarizes the
allowance and provision for credit losses related to the Company's held-to-maturity securities portfolio by type:
U.S.
government
and agency
obligations
Corporate
bonds
Municipal
obligations
MBS –
residential
MBS –
commercial
Total
For the three months ended
September 30, 2024
Allowance for credit losses:
Beginning balance
$
—
$
108,000
$
—
$
—
$
—
$
108,000
Provision for credit losses
—
—
—
—
—
—
Securities losses
—
—
—
—
—
—
Recoveries
—
—
—
—
—
—
Total ending allowance balance
$
—
$
108,000
$
—
$
—
$
—
$
108,000
U.S.
government
and agency
obligations
Corporate
bonds
Municipal
obligations
MBS –
residential
MBS –
commercial
Total
September 30, 2023
Allowance for credit losses:
Beginning balance
$
—
$
—
$
—
$
—
$
—
$
—
Impact of ASC 326 adoption
—
—
—
—
—
—
Provision for credit losses
—
—
—
—
—
—
Securities losses
—
—
—
—
—
—
Recoveries
—
—
—
—
—
—
Total ending allowance balance
$
—
$
—
$
—
$
—
$
—
$
—
U.S.
government
and agency
obligations
Corporate
bonds
Municipal
obligations
MBS –
residential
MBS –
commercial
Total
For the nine months ended
September 30, 2024
Allowance for credit losses:
Beginning balance
$
—
$
—
$
—
$
—
$
—
$
—
Provision for credit losses
—
108,000
—
—
—
108,000
Securities losses
—
—
—
—
—
—
Recoveries
—
—
—
—
—
—
Total ending allowance balance
$
—
$
108,000
$
—
$
—
$
—
$
108,000
U.S.
government
and agency
obligations
Corporate
bonds
Municipal
obligations
MBS –
residential
MBS –
commercial
Total
September 30, 2023
Allowance for credit losses:
Beginning balance
$
—
$
—
$
—
$
—
$
—
$
—
Impact of ASC 326 adoption
—
—
—
—
—
—
Provision for credit losses
—
—
—
—
—
—
Securities losses
—
—
—
—
—
—
Recoveries
—
—
—
—
—
—
Total ending allowance balance
$
—
$
—
$
—
$
—
$
—
$
—
All of the MBSs are issued by the following government sponsored agencies: FHLMC, FNMA and GNMA.
9
Table of Contents
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 3 – SECURITIES HELD TO MATURITY (Continued)
The credit rating and the amortized cost of related securities were as follows:
U.S.
government
and agency
obligations
Corporate
bonds
Municipal
obligations
MBS –
residential
MBS –
commercial
Total
September 30, 2024
Credit Rating
AAA/AA/A
$ 13,000,000
$
3,729,721
$
2,621,551
$ 14,676,749
$ 16,716,960
$ 50,744,981
BBB/BB/B
—
6,729,237
—
—
—
6,729,237
Lower than B
—
—
—
—
—
—
Not Rated
—
22,362,536
375,000
—
—
22,737,536
Total
$ 13,000,000
$ 32,821,494
$
2,996,551
$ 14,676,749
$ 16,716,960
$ 80,211,754
U.S.
government
and agency
obligations
Corporate
bonds
Municipal
obligations
MBS –
residential
MBS –
commercial
Total
December 31, 2023
Credit Rating
AAA/AA/A
$ 13,000,000
$ 11,860,264
$
3,000,512
$ 12,484,366
$ 17,157,749
$ 57,502,891
BBB/BB/B
—
5,403,288
—
—
—
$
5,403,288
Lower than B
—
—
—
—
—
$
—
Not Rated
—
9,750,000
—
—
—
$
9,750,000
Total
$ 13,000,000
$ 27,013,552
$
3,000,512
$ 12,484,366
$ 17,157,749
$ 72,656,179
There were 54 securities in a loss position at September 30, 2024. The fair value of the securities held to maturity is expected to recover
as the securities approach maturity. At September 30, 2024 and December 31, 2023, securities held to maturity with a carrying amount
of $1,231,090 and $1,589,747, respectively, were pledged to secure repurchase agreements at the Federal Home Loan Bank of New
York. At September 30, 2024 and December 31, 2023, securities held to maturity with a carrying value of $4,621,590 and $4,976,927,
respectively, were pledged to secure public deposits.
NOTE 4 – LOANS
Loans are summarized as follows at September 30, 2024 and December 31, 2023:
September 30,
December 31,
2024
2023
Real estate:
(unaudited)
Residential First Mortgage
$
473,492,871
$
486,052,422
Commercial Real Estate
112,899,496
99,830,514
Multi-Family Real Estate
74,697,352
75,612,566
Construction
40,243,916
49,302,040
Commercial and Industrial
10,229,503
6,658,370
Consumer
81,377
18,672
Total loans
711,644,515
717,474,584
Allowance for credit losses
(2,747,949)
(2,785,949)
Net loans
$
708,896,566
$
714,688,635
10
Table of Contents
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 4 – LOANS (Continued)
The Bank has granted loans to officers and directors of the Bank. At September 30, 2024 and December 31, 2023, such loans totaled
$2,291,851 and $1,610,688, respectively.
At September 30, 2024 and December 31, 2023, deferred loan fees were $2,633,263 and $2,873,724, respectively.
The following table presents the activity in the ACL by portfolio segment for the three and nine months ended September 30, 2024 and
2023:
Residential
First
Mortgage
Commercial
Real Estate
Multi-
Family
Real
Estate
Construction
Commercial
and
Industrial
Consumer
Total
Three months ended September 30,
2024
Allowance for credit losses:
Beginning balance
$ 1,836,909 $
456,898 $315,495 $
105,426 $
33,221 $
— $2,747,949
Provision for (recovery) of credit
losses
(10,371)
5,417
(2,274)
6,692
536
—
—
Loans charged off
—
—
—
—
—
—
—
Recoveries
—
—
—
—
—
—
—
Total ending allowance balance
$ 1,826,538 $
462,315 $313,221 $
112,118 $
33,757 $
— $2,747,949
Residential
First
Mortgage
Commercial
Real Estate
Multi-
Family
Real
Estate
Construction
Commercial
and
Industrial
Consumer
Total
Three Months Ended September 30,
2023
Allowance for credit losses:
Beginning balance
$ 1,811,547 $
539,002 $265,000 $
159,000 $
11,400 $
— $2,785,949
Provision for (recovery) of credit
losses
(17,720)
(5,505)
4,925
11,700
6,600
—
—
Loans charged off
—
—
—
—
—
—
—
Recoveries
—
—
—
—
—
—
—
Total ending allowance balance
$ 1,793,827 $
533,497 $269,925 $
170,700 $
18,000 $
— $2,785,949
Residential
First
Mortgage
Commercial
Real Estate
Multi-
Family
Real
Estate
Construction
Commercial
and
Industrial
Consumer
Total
Nine Months Ended September 30,
2024
Allowance for credit losses:
Beginning balance
$ 1,851,969 $
437,180 $317,300 $
157,500 $
22,000 $
— $2,785,949
Provision for (recovery) of credit
losses
(25,431)
25,135
(4,079)
(45,382)
11,757
—
(38,000)
Loans charged off
—
—
—
—
—
—
—
Recoveries
—
—
—
—
—
—
—
Total ending allowance balance
$ 1,826,538 $
462,315 $313,221 $
112,118 $
33,757 $
— $2,747,949
Residential
First
Mortgage
Commercial
Real Estate
Multi-
Family
Real
Estate
Construction
Commercial
and
Industrial
Consumer
Total
Nine Months Ended September 30,
2023
Allowance for credit losses:
Beginning balance
$ 1,602,534 $
381,180 $234,300 $
258,500 $
3,960 $
97,700 $2,578,174
Impact of ASC 326 adoption
113,969
141,797
25,469
1,500
40
—
282,775
Provision for (recovery) of credit
losses
77,324
10,520
10,156
(89,300)
14,000
(97,700)
(75,000)
Loans charged off
—
—
—
—
—
—
—
Recoveries
—
—
—
—
—
—
—
Total ending allowance balance
$ 1,793,827 $
533,497 $269,925 $
170,700 $
18,000 $
— $2,785,949
Since the Bank continues to have limited historical loss history, the majority of chances in the ACL noted in the above tables are driven
by changes in the balances of the related loan segments.
11
Table of Contents
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 4 – LOANS (Continued)
The following table presents the balance in the ACL and the recorded investment in loans by portfolio segments and based on impairment
method as of September 30, 2024 and December 31, 2023:
Nonaccrual
loans
beginning of
period
Nonaccrual
loans end of
period
Nonaccrual
with no
Allowance
for Credit
Loss
Loans Past
Due 90 Days
or More
Still
Accruing
Interest
recognized
on
nonaccrual
loans
September 30, 2024
Residential First Mortgage
$
1,432,072
$
1,678,469
$
1,678,469
$
—
$
—
Commercial Real Estate
450,392
1,208,325
1,208,325
—
—
Construction
10,893,713
10,893,713
10,893,713
—
—
Consumer
—
—
—
—
—
Total
$ 12,776,177
$ 13,780,507
$ 13,780,507
$
—
$
—
Nonaccrual
loans
beginning of
period
Nonaccrual
loans end of
period
Nonaccrual
with no
Allowance
for Credit
Loss
Loans Past
Due 90 Days
or More
Still
Accruing
Interest
recognized
on
nonaccrual
loans
December 31, 2023
Residential First Mortgage
$
819,590
$
1,432,072
$
1,432,072
$
—
$
—
Commercial Real Estate
—
450,392
450,392
$
—
$
—
Construction
—
10,893,713
10,893,713
—
—
Consumer
37,069
—
—
—
—
Total
$
856,659
$ 12,776,177
$ 12,776,177
$
—
$
—
Collateral - dependent loans individually evaluated with the ACL by collateral type were as follows at September 30, 2024 and
December 31, 2023:
September 30, 2024
Portfolio segment
Real estate
Other
Residential First Mortgage
$
1,678,469
$
—
Commercial Real Estate
1,208,325
—
Multi-Family Real Estate
—
—
Construction
10,893,713
—
Commercial and Industrial
—
—
Other Consumer
—
—
$
13,780,507
$
—
December 31, 2023
Portfolio segment
Real estate
Other
Residential First Mortgage
$
1,432,072
$
—
Commercial Real Estate
450,392
—
Multi-Family Real Estate
—
—
Construction
10,893,713
—
Commercial and Industrial
—
—
Other Consumer
—
—
$
12,776,177
$
—
Interest income recognized during impairment and cash-basis interest income for the three and nine months ended September 30, 2024
and 2023 was nominal.
12
Table of Contents
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 4 – LOANS (Continued)
No nonaccrual loans had specific reserves as of September 30, 2024, as they were all well-secured and in the process of collection. The
Bank had no other real estate owned at either September 30, 2024 or December 31, 2023.
The following table presents the aging of the recorded investment in past due loans as of September 30, 2024 and December 31, 2023,
by class of loans:
Greater than
30-59 Days
60-89 Days
89 Days
Total
Loans Not
Past Due
Past Due
Past Due
Past Due
Past Due
Total
September 30, 2024
Residential First
Mortgage
$
122,024
$
1,151,890
$
805,020
$
2,078,934
$
471,413,937
$
473,492,871
Commercial Real
Estate
—
7,351,070
1,208,325
8,559,395
104,340,101
112,899,496
Multi-Family Real
Estate
—
—
—
—
74,697,352
74,697,352
Construction
—
—
10,893,713
10,893,713
29,350,203
40,243,916
Commercial and
Industrial
—
—
—
—
10,229,503
10,229,503
Consumer
—
—
—
—
81,377
81,377
Total
$
122,024
$
8,502,960
$
12,907,058
$
21,532,042
$
690,112,473
$
711,644,515
Greater than
30-59 Days
60-89 Days
89 Days
Total
Loans Not
Past Due
Past Due
Past Due
Past Due
Past Due
Total
December 31, 2023
Residential First
Mortgage
$
—
$
297,118
$
964,806
$
1,261,924
$
484,790,498
$
486,052,422
Commercial Real
Estate
—
—
450,392
450,392
99,380,122
99,830,514
Multi-Family Real
Estate
—
—
—
—
75,612,566
75,612,566
Construction
—
—
10,893,713
10,893,713
38,408,327
49,302,040
Commercial and
Industrial
—
—
—
—
6,658,370
6,658,370
Consumer
-
—
—
-
18,672
18,672
Total
$
—
$
297,118
$
12,308,911
$
12,606,029
$
704,868,555
$
717,474,584
Credit Quality Indicators
The Bank categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such
as: current financial information, historical payment experience, credit documentation, public information, and current economic trends,
among other factors. The Bank analyzes loans individually by classifying the loans as to credit risk. Commercial and multi-family real
estate, commercial and industrial and construction loans are graded on an annual basis. Residential and consumer loans are primarily
evaluated based on performance. Refer to the immediately preceding table for the aging of the recorded investment of these loan
segments. The Bank uses the following definitions for risk ratings:
Special Mention – Loans classified as special mention have a potential weakness that deserves management’s close attention. If
left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the
institution’s credit position at some future date.
Substandard – Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the
obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the
liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies
are not corrected.
Doubtful – Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added
characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and
values, highly questionable and improbable.
Loans not meeting the criteria above are considered to be Pass rated loans.
13
Table of Contents
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 4 – LOANS (Continued)
The following table presents loans, by risk category, loan class and year of origination as of September 30, 2024 and December 31,
2023:
Term Loans by Origination Year
September 30, 2024
2024
2023
2022
2021
2020
Prior
Revolving
Loans
Totals
Residential First Mortgage
Pass
$17,142,403 $22,274,590 $112,519,678 $33,636,953 $27,355,815 $132,783,333 $126,141,073 $471,853,845
Special Mention
—
—
—
—
188,094
616,824
345,760
1,150,678
Substandard
—
—
—
—
—
147,528
340,820
488,348
Doubtful
—
—
—
—
—
—
—
—
Total
17,142,403
22,274,590
112,519,678
33,636,953
27,543,909
133,547,685
126,827,653
473,492,871
Gross charge-offs by vintage
—
—
—
—
—
—
—
—
Commercial Real Estate
Pass
9,944,908
11,699,559
5,397,799
2,047,869
42,826,155
40,084,642
448,172
112,449,104
Special Mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
450,392
—
450,392
Doubtful
—
—
—
—
—
—
—
—
Total
9,944,908
11,699,559
5,397,799
2,047,869
42,826,155
40,535,034
448,172
112,899,496
Gross charge-offs by vintage
—
—
—
—
—
—
—
—
Multi-Family Real Estate
Pass
672,900
12,571,571
6,636,348
11,717,025
12,810,530
26,278,704
4,010,274
74,697,352
Special Mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
—
—
Doubtful
—
—
—
—
—
—
—
—
Total
672,900
12,571,571
6,636,348
11,717,025
12,810,530
26,278,704
4,010,274
74,697,352
Gross charge-offs by vintage
—
—
—
—
—
—
—
—
Construction
Pass
—
—
—
—
—
—
29,350,203
29,350,203
Special Mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
10,893,713
10,893,713
Doubtful
—
—
—
—
—
—
—
—
Total
—
—
—
—
—
—
40,243,916
40,243,916
Gross charge-offs by vintage
—
—
—
—
—
—
—
—
Commercial and Industrial
Pass
2,511,643
211,275
—
—
366,691
—
7,139,894
10,229,503
Special Mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
—
—
Doubtful
—
—
—
—
—
—
—
—
Total
2,511,643
211,275
—
—
366,691
—
7,139,894
10,229,503
Gross charge-offs by vintage
—
—
—
—
—
—
—
—
Consumer
Pass
—
—
—
—
—
—
81,377
81,377
Special Mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
—
—
Doubtful
—
—
—
—
—
—
—
—
Total
—
—
—
—
—
—
81,377
81,377
Gross charge-offs by vintage
—
—
—
—
—
—
—
—
Total loans
$30,271,854 $46,756,995 $124,553,825 $47,401,847 $83,547,285 $200,361,423 $178,751,286 $711,644,515
14
Table of Contents
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Term Loans by Origination Year
December 31, 2023
2023
2022
2021
2020
2019
Prior
Revolving
Loans
Totals
Residential First Mortgage
Pass
$5,174,879 $111,903,094 $37,747,971 $28,952,299 $26,155,892 $114,830,194 $159,976,218 $484,740,547
Special Mention
—
—
—
191,276
169,343
389,565
107,538
857,722
Substandard
—
—
—
—
—
169,131
285,022
454,153
Doubtful
—
—
—
—
—
—
—
—
Total
5,174,879
111,903,094
37,747,971
29,143,575
26,325,235
115,388,890
160,368,778
486,052,422
Gross charge-offs by vintage
—
—
—
—
—
—
—
—
Commercial Real Estate
Pass
—
3,065,843
—
6,893,352
5,501,995
11,722,774
72,196,158
99,380,122
Special Mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
450,392
450,392
Doubtful
—
—
—
—
—
—
—
—
Total
—
3,065,843
—
6,893,352
5,501,995
11,722,774
72,646,550
99,830,514
Gross charge-offs by vintage
—
—
—
—
—
—
—
—
Multi-Family Real Estate
Pass
—
2,362,920
—
1,162,353
—
2,117,462
69,969,831
75,612,566
Special Mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
—
—
Doubtful
—
—
—
—
—
—
—
—
Total
—
2,362,920
—
1,162,353
—
2,117,462
69,969,831
75,612,566
Gross charge-offs by vintage
—
—
—
—
—
—
—
—
Construction
Pass
—
—
—
—
—
—
38,459,962
38,459,962
Special Mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
10,842,078
10,842,078
Doubtful
—
—
—
—
—
—
—
—
Total
—
—
—
—
—
—
49,302,040
49,302,040
Gross charge-offs by vintage
—
—
—
—
—
—
—
—
Commercial and Industrial
Pass
241,109
—
—
576,164
94,204
—
5,746,893
6,658,370
Special Mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
—
—
Doubtful
—
—
—
—
—
—
—
—
Total
241,109
—
—
576,164
94,204
—
5,746,893
6,658,370
Gross charge-offs by vintage
—
—
—
—
—
—
—
—
Consumer
Pass
—
—
—
—
—
—
18,672
18,672
Special Mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
—
—
Doubtful
—
—
—
—
—
—
—
—
Total
—
—
—
—
—
—
18,672
18,672
Gross charge-offs by vintage
—
—
—
—
—
—
—
—
Total loans
$5,415,988 $117,331,857 $37,747,971 $37,775,444 $31,921,434 $129,229,126 $358,052,764 $717,474,584
There were no loan modifications during the three-month period ended September 30, 2024.
15
Table of Contents
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 5 – STOCK BASED COMPENSATION
The Company maintains the Bogota Financial Corp. 2021 Equity Incentive Plan (the "2021 Plan"), which provides for the issuance of
up to 902,602 shares (257,887 restricted stock awards and 644,718 stock options) of Bogota Financial Corp. common stock.
On September 2, 2021, 226,519 shares of restricted stock were awarded, with a grant date fair value of $10.45 per share. On February 28,
2024, 10,000 shares of restricted stock were awarded, with a grant date fair value of $7.80 per share. To fund the grant of restricted
common stock, the Company issued shares from authorized but unissued shares. Restricted shares granted under the 2021 Plan vest in
equal installments, over a service period of five years, beginning one year from the date of grant. Management recognizes compensation
expense for the fair value of restricted shares on a straight-line basis over the requisite service period. During the three and nine months
ended September 30, 2024, approximately $121,000 and $363,000 in expense was recognized in regard to these awards, respectively,
compared to expense during the same periods ended September 30, 2023, of approximately $118,000 and $354,000, respectively. The
expected future compensation expense related to the 97,607 non-vested restricted shares outstanding at September 30, 2024 was
approximately $946,000, which is expected to be recognized over a weighted-average period of 2.10 years.
The following is a summary of the Company's restricted stock activity during the nine months ended September 30, 2024:
Number of
Non-vested
Restricted
Shares
Weighted
Average Grant
Date Fair Value
Outstanding, January 1, 2024
135,911
$
10.45
Granted
10,000
7.80
Vested
$
(45,304)
10.45
Forfeited
$
(3,000)
10.45
Outstanding, September 30, 2024
97,607
$
10.18
On September 2, 2021, options to purchase 526,119 shares of Company common stock were awarded, with a grant date fair value of
$4.37 per option. Stock options granted under the 2021 Plan vest in equal installments over a service period of five years beginning one
year from the date of grant. Stock options were granted at an exercise price of $10.45, which was the Company's common stock price
on the grant date and had an expiration period of 10 years.
Management recognizes expense for the fair value of these awards on a straight-line basis over the requisite service period. During
the three and nine months ended September 30, 2024, approximately $76,000 and $305,000 in expense was recognized in regard to
these awards, respectively compared to expense of approximately $112,000 and $335,000 for the three and nine months
ended September 30, 2023, respectively. The expected future compensation expense related to the 204,447 non-vested options
outstanding at September 30, 2024 was $892,000, which is expected to be recognized over a weighted-average period of 2.00 years.
Forfeitures are accounted for as they occur through reversal of the expense on non-vested shares in the period of forfeiture.
The following is a summary of the Company's option activity during the nine months ended September 30, 2024:
Number of
Stock
Options
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term (in
years)
Aggregate
Intrinsic
Value
Outstanding, January 1, 2024
523,619
$
10.45
5.5
$
—
Granted
—
Exercised
—
Forfeited
(12,500)
10.45
-
Outstanding, September 30, 2024
511,119
$
10.45
4.9
$
—
Options exercisable at September 30, 2024
332,227
$
—
The aggregate intrinsic value in the table above represents the difference between the Company's closing stock price on the last trading
day of the period and the exercise price, multiplied by the number of in-the-money options. As of September 30, 2024, there were no
in-the-money options.
NOTE 6 – EMPLOYEE STOCK OWNERSHIP PLAN
In connection with our mutual-to-stock reorganization and stock offering, the Bank established an employee stock ownership plan
(“ESOP”), which acquired 515,775 shares of the Company’s common stock equaling 3.92% of the Company's outstanding shares. The
ESOP is a tax-qualified retirement plan providing employees the opportunity to own Company stock. Bank contributions to the ESOP
are allocated to eligible participants on the basis of compensation, subject to federal tax limits. The number of shares to be allocated
annually is 25,789 through 2039. During the three and nine months ended September 30, 2024, $48,000 and $141,314 was incurred as
expense for the plan, respectively, compared to expense during the same periods ended September 30, 2023 of approximately $51,000
and $177,900, respectively. As of September 30, 2024, 126,101 shares have been allocated and 389,674 shares are unallocated with a
fair value of $3.2 million.
NOTE 7 – DERIVATIVES AND HEDGING ACTIVITES
The Company uses derivative financial instruments as components of its market risk management, principally to manage interest rate
risk. Certain derivatives may be entered into in connection with transactions with commercial customers. Derivatives are not used for
speculative purposes. All derivatives are recognized as either assets or liabilities in the Consolidated Statements of Financial Condition,
reported at fair value and presented on a gross basis. Until a derivative is settled, a favorable change in fair value results in an unrealized
gain that is recognized as an asset, while an unfavorable change in fair value results in an unrealized loss that is recognized as a liability.
16
Table of Contents
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 7 – DERIVATIVES AND HEDGING ACTIVITES (continued)
The Company generally applies hedge accounting to its derivatives used for market risk management purposes. Hedge accounting is
permitted only if specific criteria are met, including a requirement that a highly effective relationship exists between the derivative
instrument and the hedged item, both at inception of the hedge and on an ongoing basis. Changes in the fair value of effective fair value
hedges are recognized in current earnings (with the change in fair value of the hedged asset or liability also recognized in earnings).
Changes in the fair value of effective cash flow hedges are recognized in other comprehensive income (loss) until earnings are affected
by the variability in cash flows of the designated hedged item. Ineffective portions of hedge results are recognized in current earnings.
Changes in the fair value of derivatives for which hedge accounting is not applied are recognized in current earnings.
The Company formally documents at inception all relationships between the derivative instruments and the hedged items, as well as its
risk management objectives and strategies for undertaking the hedge transactions. This process includes linking all derivatives that are
designated as hedges to specific assets and liabilities, or to specific firm commitments. The Company also formally assesses, both at
inception of the hedge and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in
offsetting changes in the fair values or cash flows of the hedged items. If it is determined that a derivative is not highly effective or has
ceased to be a highly effective hedge, the Company would discontinue hedge accounting prospectively. Gains or losses resulting from
the termination of a derivative accounted for as a cash flow hedge remain in other comprehensive income (loss) and is (accreted)
amortized to earnings over the remaining period of the former hedging relationship.
Certain derivative financial instruments are offered to certain commercial banking customers to manage their risk of exposure and risk
management strategies. These derivative instruments consist primarily of currency forward contracts and interest rate swap contracts.
The risk associated with these transactions is mitigated by simultaneously entering into similar transactions having essentially offsetting
terms with a third party, i.e. back-to-back swaps. In addition, the Company executes interest rate swaps with third parties in order to
hedge the interest rate risk of short-term FHLB advances.
Interest Rate Swaps. At September 30, 2024, the Company had five cash flow interest rate swaps with notional amounts of
$65.0 million hedging certain FHLB advances and brokered deposits. The Company also had two fair value interest rate swaps with
notional amounts of $60.0 million hedging certain fixed-rate residential loans. These interest rate swaps meet the hedge accounting
requirements. Changes in the fair value of cash flow hedges are recorded in comprehensive income. Interest rate swaps designated as
cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments
over the life of the agreements without the exchange of the underlying notional amount. Interest rate swaps designated as fair value
hedges involve the payment of fixed-rate amounts to a counterparty in exchange for the Company receiving variable-rate payments over
the life of the agreement without the exchange of the underlying notional amount. The fair value hedges are recorded as components of
other assets and other liabilities on the Company’s consolidated statement of financial condition. Changes in fair value of the fair value
hedges are recorded against the basis of the asset or liability being hedged. The gain or loss on these derivatives, as well as the offsetting
loss or gain on the hedged items attributable to the hedged risk, are recognized in interest income in the Company’s consolidated
statements of operations.
At December 31, 2023, the Company had two interest rate swaps with a notional amount of $20.0 million to hedge certain FHLB
advances and brokered deposits. At both September 30, 2024 and December 31, 2023, the Company had no back-to-back interest rate
swaps in place with commercial banking customers. During the three and nine months ended September 30, 2024, the net effect on
interest expense related to cash flow hedges was a reduced expense of $258,000 and $679,000, respectively, while the net effect on
interest expense related to fair value hedge during the three and nine months ended September 30, 2024, was a reduced expense of
$240,000 and $567,000, respectively.
The table below presents the fair value of the Company’s derivative financial instruments as well as their classification in the
Consolidated Statements of Financial Condition at September 30, 2024:
September 30,
December 31,
2024
2023
Asset Derivative
Asset Derivative
Hedge Type
Consolidated Statements of Financial
Condition
Fair Value
Fair Value
Interest rate swaps
Cash Flow
Other (Liabilities) Assets
$
(344,096) $
239,510
Interest rate swaps
Fair Value
Other (Liabilities) Assets
$
(544,702) $
—
Interest rate swaps
Fair Value
Loans, net
$
563,678
$
—
Total derivative instruments
$
(325,120) $
239,510
For the nine months ended September 30, 2024, unrealized losses of $420,000 were recorded for changes in fair value of interest rate
swaps with third parties and at September 30, 2024, accrued interest was $233,000.
The Company has agreements with counterparties that contain a provision that if the Company defaults on any of its indebtedness,
including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared
in default of its derivative obligations.
NOTE 8 – FAIR VALUE
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are
three levels of inputs that may be used to measure fair values:
Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of
the measurement date.
Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted
prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3 – Significant unobservable inputs that reflect a bank’s own assumptions about the assumptions that market participants
would use in pricing an asset or liability.
The Bank used the following methods and significant assumptions to estimate the fair value of each type of financial instrument:
The Bank’s available-for-sale portfolio is carried at estimated fair value on a recurring basis, with any unrealized gains and losses, net
of taxes, reported as accumulated other comprehensive income/loss in stockholders’ equity. The securities available-for-sale portfolio
consists of corporate bonds and mortgage-backed securities. The fair values of these securities are obtained from an independent
nationally recognized pricing service. An independent pricing service provides prices which are categorized as Level 2, as quoted prices
in active markets for identical assets are generally not available for the securities.
17
Table of Contents
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 8 – FAIR VALUE (Continued)
Assets measured at fair value on a recurring basis are summarized below:
Quoted
Prices
in Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
Carrying
Assets
Inputs
Inputs
Value
(Level 1)
(Level 2)
(Level 3)
As of September 30, 2024
Assets:
Securities available for sale:
U.S. government and agency obligations
$
5,736,918
$
—
$
5,736,918
$
—
Corporate bonds
14,126,064
—
14,126,064
—
MBS - residential
72,094,711
—
72,094,711
—
MBS - commercial
16,603,118
—
16,603,118
—
Liabilities:
Cash flow and fair value hedges
888,798
—
888,798
—
$107,672,013
$
—
$107,672,013
$
—
As of December 31, 2023
Assets:
Securities available for sale:
U.S. government and agency obligations
$
5,545,401
$
—
$
5,545,401
$
—
Corporate bonds
11,818,756
—
11,818,756
—
MBS - residential
35,407,182
—
35,407,182
—
MBS - commercial
16,116,840
—
16,116,840
—
Liabilities:
Cash flow hedge
(239,510)
—
(239,510)
—
$ 69,127,689
$
—
$ 69,127,689
$
—
There were no transfers between level 1 and level 2 during the nine months ended September 30, 2024.
The carrying amounts and estimated fair values of financial instruments not measured at fair value, at September 30, 2024 and December
31, 2023, were as follows:
Carrying
Fair
Fair Value Measurement Placement
Amount
Value
(Level 1)
(Level 2)
(Level 3)
(In thousands)
September 30, 2024
Financial instruments - assets
Investment securities held-to-maturity
$
80,104
$
74,495
$
—
$
74,495
$
—
Loans
708,897
680,139
—
—
680,139
Financial instruments - liabilities
Certificates of deposit
493,780
496,477
—
496,477
—
Borrowings
202,566
203,894
—
203,894
—
Carrying
Fair
Fair Value Measurement Placement
Amount
Value
(Level 1)
(Level 2)
(Level 3)
(In thousands)
December 31, 2023
Financial instruments - assets
Investment securities held-to-maturity
$
72,656
$
65,375
$
—
$
65,375
$
—
Loans
714,687
672,347
—
—
672,347
Financial instruments - liabilities
Certificates of deposit
493,275
491,944
—
491,944
—
Borrowings
167,690
167,891
—
167,891
—
Carrying amount is the estimated fair value for cash and cash equivalents. Other balance sheet instruments such as cash and cash
equivalents, accrued interest receivable, accrued interest payable and Bank owned life insurance holding costs approximate fair value.
The fair value of off-balance sheet items is not considered material.
18
Table of Contents
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 9 – ACCUMULATED OTHER COMPREHENSIVE LOSS
The components of accumulated other comprehensive loss included in equity (net of tax) for the three and nine months ended September
30, 2024 and 2023 was as follows:
Unrealized
gain
and losses
on
available
for
sale
securities
Benefit
plans
Derivatives
Total
Three months ended
September 30, 2024
Beginning balance
$ (6,676,939) $
5,654
$
689,446
$ (5,981,839)
Other comprehensive (loss) income before reclassification
2,070,862
—
(936,818)
1,134,044
Amounts reclassified
—
—
—
—
Net period comprehensive (loss) income
2,070,862
—
(936,818)
1,134,044
Ending balance
$ (4,606,077) $
5,654
$
(247,372) $ (4,847,795)
September 30, 2023
Beginning balance
$ (7,118,869) $
22,592
$
447,448
$ (6,648,829)
Other comprehensive (loss) income before reclassification
(1,146,582)
—
184,997
(961,585)
Amounts reclassified
—
(16,546)
—
(16,546)
Net period comprehensive (loss) income
(1,146,582)
(16,546)
184,997
(978,131)
Ending balance
$ (8,265,451) $
6,046
$
632,445
$ (7,626,960)
Unrealized
gain and
losses on
available
for sale
securities
Benefit
plans
Derivatives
Total
Nine Months Ended September 30, 2024
Beginning balance
$ (6,639,506) $
2,549
$
172,183
$ (6,464,774)
Other comprehensive (loss) income before reclassification
2,033,429
—
(419,555)
1,613,874
Amounts reclassified
—
3,105
—
3,105
Net period comprehensive (loss) income
2,033,429
3,105
(419,555)
1,616,979
Ending balance
$ (4,606,077) $
5,654
$
(247,372) $ (4,847,795)
Nine Months Ended September 30, 2023
Beginning balance
$ (6,499,666) $
55,684
$
232,969
$ (6,211,013)
Other comprehensive (loss) income before reclassification
(1,765,785)
—
399,476
(1,366,309)
Amounts reclassified
—
(49,638)
—
(49,638)
Net period comprehensive (loss) income
(1,765,785)
(49,638)
399,476
(1,415,947)
Ending balance
$ (8,265,451) $
6,046
$
632,445
$ (7,626,960)
19
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
General
Management’s discussion and analysis of financial condition and results of operations at September 30, 2024 and December
31, 2023 and for the three and nine months ended September 30, 2024 and September 30, 2023 is intended to assist in understanding
the financial condition and results of operations of Bogota Financial Corp. The information contained in this section should be read in
conjunction with the unaudited financial statements and the notes thereto appearing in Part I, Item 1 of this Quarterly Report on Form
10-Q.
Cautionary Note Regarding Forward-Looking Statements
This report contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,”
“believe,” “intend,” “anticipate,” “plan,” “seek,” “expect” and words of similar meaning. These forward-looking statements include, but
are not limited to:
●
statements of our goals, intentions and expectations;
●
statements regarding our business plans, prospects, growth and operating strategies;
●
statements regarding the quality of our loan and investment portfolios; and
●
estimates of our risks and future costs and benefits.
These forward-looking statements are based on current beliefs and expectations of our management and are inherently subject
to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition,
these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to
change. The following factors, among others, could cause actual results to differ materially from the anticipated results or other
expectations expressed in the forward-looking statements:
●
general economic conditions, either nationally or in our market area, that are worse than expected, including potential
recessionary conditions;
●
changes in the amount and trend of loan delinquencies, charge-offs and non-performing and classified loans and
changes in estimates of the adequacy of and the methodology for calculating the allowance for credit losses;
●
our ability to access cost-effective funding;
●
changes in liquidity, including the size and composition of our deposit portfolio and the percentage of uninsured
deposits in the portfolio;
●
fluctuations in real estate values and both residential and commercial real estate market conditions;
●
demand for loans and deposits in our market area;
●
our ability to continue to implement our business strategies;
●
competition among depository and other financial institutions;
●
monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury and the
Board of Governors of the Federal Reserve System;
●
inflation and changes in market interest rates that reduce our margins and yields, reduce the fair value of financial
instruments or reduce our volume of loan originations, or increase the level of defaults, losses and prepayments on
loans we have made and make whether held in portfolio or sold in the secondary market;
●
changes in the securities markets;
●
changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory
fees and capital requirements;
●
our ability to manage market risk, credit risk and operational risk;
●
our ability to enter new markets successfully and capitalize on growth opportunities;
●
our ability to successfully integrate into our operations any assets, liabilities or systems we may acquire, as well as
new management personnel or customers, and our ability to realize related revenue synergies and cost savings within
expected time frames and any goodwill charges related thereto;
●
changes in consumer spending, borrowing and saving habits;
20
Table of Contents
●
changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial
Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight
Board;
●
our ability to retain key employees;
●
risks as it relates to cyber security against our information technology and those of our third-party providers and
vendors;
●
the current or anticipated impact of military conflict, terrorism or other geopolitical events;
●
our compensation expense associated with equity allocated or awarded to our employees; and
●
changes in the financial condition, results of operations or future prospects of issuers of securities that we own.
Critical Accounting Policies
Our accounting policies are described in Note 1 to the consolidated financial statements included in our Annual Report on Form
10-K for the year ended December 31, 2023. Critical accounting estimates are necessary in the application of certain accounting policies
and procedures and are particularly susceptible to significant change. Critical accounting policies are defined as those involving
significant judgments and assumptions by management that could have a material impact on the carrying value of certain assets or on
income under different assumptions or conditions. Actual results could differ from these judgments and estimates under different
conditions, resulting in a change that could have a material impact on the carrying values of our assets and liabilities and our results of
operations.
Comparison of Financial Condition at September 30, 2024 and December 31, 2023
Total Assets. Assets increased $39.6 million, or 4.2%, from $939.3 million at December 31, 2023 to $978.9 million at
September 30, 2024 primarily due to a $39.7 million, or 57.6%, increase in securities available for sale and an $7.4 million, or 10.3%,
increase in securities held-to-maturity, offset by a $5.8 million, or 0.8%, decrease in loans and a $3.9 million, or 15.8%, decrease in cash
and cash equivalents.
Cash and Cash Equivalents. Cash and cash equivalents decreased $3.9 million, or 15.8%, to $21.0 million at September 30,
2024 from $24.9 million at December 31, 2023, as excess funds from increases in borrowings and deposits were used to purchase
securities.
Securities Available for Sale. Securities available for sale increased $39.7 million, or 57.6%, to $108.6 million at September
30, 2024 from $68.9 million at December 31, 2023. The increase was primarily due to the purchase of mortgage-backed securities that
were purchased with excess funds as part of our leveraging strategy.
Securities Held to Maturity. Securities held to maturity increased $7.4 million, or 10.3%, to $80.1 million at September 30,
2024 from $72.7 million at December 31, 2023, primarily due to the purchase of mortgage-backed securities with excess funds. At
September 30, 2024, the Company's allowance for credit losses related to held-to-maturity securities totaled $108,000 or 0.13% of the
total held-to-maturity securities portfolio.
Net Loans. Net loans decreased $5.8 million, or 0.8%, to $708.9 million at September 30, 2024 from $714.7 million at
December 31, 2023. The decrease was due to a decrease of $12.6 million, or 2.6%, in one- to four-residential real estate loans to $473.5
million from $486.1 million at December 31, 2023 and a decrease of $9.1 million, or 18.4%, in construction loans to $40.2 million at
September 30, 2024 from $49.3 million at December 31, 2023, offset by a $13.1 million, or 13.1%, increase in commercial real
estate loans to $112.9 million at September 30, 2024 from $99.8 million at December 31, 2023, and by a $3.6 million, or 53.6%, increase
in commercial and industrial loans to $10.2 million at September 30, 2024 from $6.7 million at December 31, 2023. The decreases in
one- to four-residential and construction loans reflect less opportunities and decreased demand due to the higher interest rate
environment. As of September 30, 2024 and December 31, 2023, the Bank had no loans held for sale.
Delinquent loans increased $8.9 million to $21.5 million, or 3.0% of total loans, at September 30, 2024. The increase was
mostly due to four commercial real estate loans to three customers with a balance of $8.1 million. Three of the past due commercial real
estate loans are being actively managed with the customers and are expected to be brought current, while one totaling $758,000 has been
placed on nonaccrual status, but is considered well-secured with a loan-to-value of 59%. We did not record any specific reserves, or
charge-offs for these loans. During the same timeframe, non-performing assets increased from $12.8 million at December 31, 2023 to
$13.8 million, which represented 1.41% of total assets at September 30, 2024. The Company’s allowance for credit losses was 0.39%
of total loans and 19.94% of non-performing loans at September 30, 2024 compared to 0.39% of total loans and 21.81% of non-
performing loans at December 31, 2023. The Bank does not have any exposure to commercial real estate loans secured by office
space. The majority of the non-performing loans at September 30, 2024 was comprised of one construction loan for construction of a
catering hall that is 99% complete, with a balance of $10.9 million and a loan to value ratio of 45%. Based on the well-secured nature
of the loan, there was no associated specific reserve at September 30, 2024. The Company has commenced legal action against the client.
Total Liabilities. Total liabilities increased $39.7 million, or 5.0%, to $841.9 million as of September 30, 2024 from $802.2
million as of December 31, 2023, primarily due to a $3.9 million increase in deposits and a $34.9 million increase in borrowings.
21
Table of Contents
Deposits. Deposits increased $3.9 million, or 0.6%, to $629.2 million at September 30, 2024 from $625.3 million at December
31, 2023. The increase in deposits reflected an increase in interest-bearing demand deposits of $1.8 million, or 1.8%, to $103.3 million
as of September 30, 2024 from $101.5 million at December 31, 2023 due to the increases of $4.5 million, or 5.2%, in checking
and savings accounts, offset by a $2.6 million, or 18.1%, decrease in money market accounts. Certificates of deposit increased $505,000,
or 0.1%, to $493.8 million at September 30, 2024 from $493.3 million at December 31, 2023. Non-interest bearing deposits increased
$1.5 million, or 5.2%, to $32.1 million as of September 30, 2024 from $30.6 million as of December 31, 2023. The changes reflected
customers’ desire for higher-yielding accounts in the higher interest rate environment.
At September 30, 2024, municipal deposits totaled $36.0 million, which represented 5.7% of total deposits, and brokered
deposits totaled $101.1 million, which represented 16.1% of deposits. At December 31, 2023, municipal deposits totaled $57.5 million,
which represented 9.2% of deposits, and brokered deposits totaled $53.3 million, which represented 8.5% of total deposits. At September
30, 2024, uninsured deposits totaled $64.1 million, comprised of 296 account holders, which represented 10.2% of total deposits.
Borrowings. Federal Home Loan Bank of New York borrowings increased $34.9 million, or 20.8%, to $202.6 million at
September 30, 2024 from $167.7 million at December 31, 2023. Specifically short-term advances increased by $16.0 million while long-
term advances increased $18.9 million which is part of our leveraging strategy that will allow the Company to better position itself to
take advantage of potential rate cuts. The weighted average rate of borrowings was 4.62% and 4.54% as of September 30, 2024 and
December 31, 2023, respectively. Total borrowing capacity at the Federal Home Loan Bank was $297.9 million at September 30, 2024,
of which $202.6 million was advanced.
Total Equity. Stockholders’ equity decreased $233,000 to $136.9 million, primarily due to a net loss of $1.2 million and the
repurchase of 196,873 shares of stock during the nine months ended September 30, 2024 at a cost of $1.4 million, offset by a decrease
in accumulated other comprehensive loss for securities available for sale of $1.6 million and stock compensation of $668,000 for the
nine months ended September 30, 2024. At September 30, 2024, the Company’s ratio of average stockholders’ equity-to-average total
assets was 14.01%, compared to 15.24% at December 31, 2023.
Average Balance Sheets and Related Yields and Rates
The following tables present information regarding average balances of assets and liabilities, the total dollar amounts of interest
income and dividends from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing
liabilities, and the resulting annualized average yields and costs. The yields and costs for the periods indicated are derived by dividing
income or expense by the average balances of assets or liabilities, respectively, for the periods presented. Average balances have been
calculated using daily balances. Nonaccrual loans are included in average balances only. Loan fees are included in interest income on
loans and are not material.
Three Months Ended September 30,
2024
2023
Average
Balance
Interest and
Dividends
Yield/ Cost
(1)
Average
Balance
Interest and
Dividends
Yield/ Cost
(1)
(Dollars in thousands)
Assets:
(unaudited)
Cash and cash equivalents
$
10,195
$
138
5.39% $
12,764
$
168
5.21%
Loans
711,601
8,382
4.69%
710,725
7,981
4.45%
Securities
187,212
1,897
4.05%
138,479
1,008
2.91%
Other interest-earning assets
9,908
203
8.20%
6,620
132
8.04%
Total interest-earning assets
918,916
10,620
4.60%
868,588
9,289
4.25%
Non-interest-earning assets
56,061
54,179
Total assets
$
974,977
$
922,767
Liabilities and equity:
NOW and money market accounts
$
65,767
$
329
1.99% $
74,785
$
354
1.88%
Savings accounts
44,029
205
1.85%
46,177
214
1.83%
Certificates of deposit (1)
497,251
5,626
4.50%
498,082
4,284
3.41%
Total interest-bearing deposits
607,047
6,160
4.04%
619,044
4,852
3.11%
Federal Home Loan Bank advances (1)
196,885
1,803
3.64%
125,344
1,220
3.86%
Total interest-bearing liabilities
803,932
7,963
3.94%
744,388
6,072
3.24%
Non-interest-bearing deposits
31,679
38,257
Other non-interest-bearing liabilities
2,724
1,727
Total liabilities
838,335
784,372
Total equity
136,642
138,395
Total liabilities and equity
$
974,977
$
922,767
Net interest income
$
2,657
$
3,217
Interest rate spread (2)
0.66%
1.01%
Net interest margin (3)
1.15%
1.47%
Average interest-earning assets to
average interest-bearing liabilities
114.30%
116.68%
(1) Cash flow and fair value hedges are used to manage interest rate risk. During the three months ended September 30, 2024 and
2023, the net effect on interest expense on the Federal Home Loan Bank advances and certificates of deposit was a reduced expense of
$498,000 and $115,000 respectively.
(2) Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted
average cost of interest-bearing liabilities.
(3) Net
interest
margin
represents
net
interest
income
divided
by
average
total
interest-earning
assets.
22
Table of Contents
Nine Months Ended September 30,
2024
2023
Average
Balance
Interest and
Dividends
Yield/ Cost
(1)
Average
Balance
Interest and
Dividends
Yield/ Cost
(1)
(Dollars in thousands)
Assets:
Cash and cash equivalents
$
9,072
$
415
6.09% $
11,352
$
423
4.98%
Loans
711,697
24,888
4.66%
713,603
23,822
4.46%
Securities
179,818
5,287
3.92%
148,802
3,121
2.80%
Other interest-earning assets
8,903
566
8.48%
6,110
348
7.62%
Total interest-earning assets
909,490
31,156
4.57%
879,867
27,714
4.20%
Non-interest-earning assets
58,221
54,380
Total assets
$
967,711
$
934,247
Liabilities and equity:
NOW and money market accounts
$
67,628
$
993
1.96% $
91,781
$
1,089
1.59%
Savings accounts
43,824
608
1.85%
49,529
375
1.01%
Certificates of deposit (1)
510,494
16,784
4.39%
498,460
11,314
3.03%
Total interest-bearing deposits
621,946
18,385
3.95%
639,770
12,778
2.67%
Federal Home Loan Bank advances (1)
171,565
4,719
3.67%
110,875
2,900
3.50%
Total interest-bearing liabilities
793,511
23,104
3.89%
750,645
15,678
2.79%
Non-interest-bearing deposits
31,225
38,253
Other non-interest-bearing liabilities
6,154
6,351
Total liabilities
830,890
795,249
Total equity
136,821
138,998
Total liabilities and equity
$
967,711
$
934,247
Net interest income
$
8,052
$
12,036
Interest rate spread (2)
0.68%
1.41%
Net interest margin (3)
1.18%
1.82%
Average interest-earning assets to
average interest-bearing liabilities
114.62%
117.21%
(1) Cash flow and fair value hedges are used to manage interest rate risk. During the nine months ended September 30, 2024 and
2023, the net effect on interest expense on the Federal Home Loan Bank advances and certificates of deposit was a reduced expense of
$1.2 million and $254,000 respectively.
(2) Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted
average cost of interest-bearing liabilities.
(3) Net interest margin represents net interest income divided by average total interest-earning assets.
23
Table of Contents
Rate/Volume Analysis
The following table sets forth the effects of changing rates and volumes on net interest income. The rate column shows the
effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to
changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. Changes
attributable to changes in both rate and volume that cannot be segregated have been allocated proportionally based on the changes due
to rate and the changes due to volume.
Three Months Ended September 30, 2024
Nine Months Ended September 30, 2024
Compared to
Compared to
Three Months Ended September 30, 2023
Nine Months Ended September 30, 2023
Increase (Decrease) Due to
Increase (Decrease) Due to
Volume
Rate
Net
Volume
Rate
Net
(In thousands)
Interest income:
(unaudited)
Cash and cash equivalents
$
(66) $
36
$
(30) $
(123) $
115
$
(8)
Loans receivable
9
392
401
(101)
1,167
1,066
Securities
420
469
889
742
1,424
2,166
Other interest earning assets
68
3
71
175
43
218
Total interest-earning assets
432
899
1,331
692
2,750
3,442
Interest expense:
NOW and money market accounts
(128)
103
(25)
(413)
317
(96)
Savings accounts
(24)
15
(9)
(73)
306
233
Certificates of deposit
(49)
1,391
1,342
279
5,191
5,470
Federal Home Loan Bank
advances
1,032
(449)
583
1,667
152
1,819
Total interest-bearing liabilities
830
1,061
1,891
1,461
5,965
7,426
Net decrease in net interest income $
(399) $
(161) $
(560) $
(768) $
(3,216) $
(3,984)
24
Table of Contents
Comparison of Operating Results for the Three Months Ended September 30, 2024 and September 30, 2023
General. Net income decreased by $338,000 to a net loss of $367,000 for the three months ended September 30, 2024 from a
net loss of $29,000 for the three months ended September 30, 2023. This decrease was primarily due to a decrease of $560,000 in net
interest income, partially offset by a decrease of $56,000 in non-interest expense, an increase of $128,000 in income tax benefit and a
$38,000 increase in non-interest income.
Interest Income. Interest income increased $1.3 million, or 14.3%, from $9.3 million for the three months ended September
30, 2023 to $10.6 million for the three months ended September 30, 2024 primarily due to higher yields on interest-earning assets and
an increase in the average balance of securities.
Interest income on cash and cash equivalents decreased $30,000, or 17.9%, to $138,000 for the three months ended September
30, 2024 from $168,000 for the three months ended September 30, 2023 due to a $2.6 million decrease in the average balance to
$10.2 million for the three months ended September 30, 2024 from $12.8 million for the three months ended September 30,
2023, reflecting the use of excess cash to purchase securities. The decrease was offset by an 18 basis point increase in the average yield
from 5.21% for the three months ended September 30, 2023 to 5.39% for the three months ended September 30, 2024, due to the higher
interest rate environment.
Interest income on loans increased $400,000, or 5.0%, to $8.4 million for the three months ended September 30, 2024 compared
to $8.0 million for the three months ended September 30, 2023 due primarily to a 24 basis point increase in the average yield from 4.45%
for the three months ended September 30, 2023 to 4.69% for the three months ended September 30, 2024, and to a lesser extent, a
$876,000 increase in the average balance to $711.6 million for the three months ended September 30, 2024 from $710.7 million for the
three months ended September 30, 2023.
Interest income on securities increased $889,000, or 88.2%, to $1.9 million for the three months ended September 30, 2024 from
$1.0 million for the three months ended September 30, 2023 primarily due to a $48.7 million increase in the average balance to
$187.2 million for the three months ended September 30, 2024 from $138.5 million for the three months ended September 30, 2023, and
a 114 basis point increase in the average yield from 2.91% for the three months ended September 30, 2023 to 4.05% for the three months
ended September 30, 2024 due to the higher interest rate environment.
Interest Expense. Interest expense increased $1.9 million, or 31.1%, from $6.1 million for the three months ended September
30, 2023 to $8.0 million for the three months ended September 30, 2024 due to higher costs and average balances on interest-bearing
liabilities.
Interest expense on interest-bearing deposits increased $1.3 million, or 27.0%, to $6.2 million for the three months ended
September 30, 2024 from $4.9 million for the three months ended September 30, 2023. The increase was due to a 93 basis point increase
in the average cost of deposits to 4.04% for the three months ended September 30, 2024 from 3.11% for the three months ended
September 30, 2023. The increase in the average cost of deposits was due to the higher interest rate environment and a change in the
composition of the deposit portfolio to a greater concentration of higher-costing certificates of deposit. The average balances of
certificates of deposit decreased $831,000 to $497.3 million for the three months ended September 30, 2024 from $498.1 million for the
three months ended September 30, 2023. The average balance of savings accounts decreased by $2.1 million during the quarter, while
the average balance of NOW and money market accounts decreased $9.0 million for the three months ended September 30, 2024,
compared to the three months ended September 30, 2023.
Interest expense on Federal Home Loan Bank advances increased $582,000, or 47.7%, from $1.2 million for the three months
ended September 30, 2023 to $1.8 million for the three months ended September 30, 2024. The increase was due to an increase in the
average balance of $71.6 million to $196.9 million for the three months ended September 30, 2024. The increase was offset by a 22
basis point decrease in the average cost of borrowings to 3.64% for the three months ended September 30, 2024 from 3.86% for the
three months ended September 30, 2023 due to the new borrowings being at lower rates.
Net Interest Income. Net interest income decreased $560,000, or 17.4%, to $2.7 million for the three months ended September
30, 2024 from $3.2 million for the three months ended September 30, 2023. The decrease reflected a 35 basis point decrease in our net
interest rate spread to 0.66% for the three months ended September 30, 2024 from 1.01% for the three months ended September 30,
2023. Our net interest margin decreased 32 basis points to 1.15% for the three months ended September 30, 2024 from 1.47% for the
three months ended September 30, 2023.
Provision for Credit Losses. We did not record a provision for credit losses for the three months ended September 30,
2024 or September 30, 2023 due to the decrease in loans.
Non-Interest Income. Non-interest income increased by $37,000, or 13.0%, to $327,000 for the three months ended September
30, 2024 from $290,000 for the three months ended September 30, 2023. Bank-owned life insurance income increased $23,000, or
11.7%, due to higher balances during 2024, and gain on sale of loans increased $12,000 compared to no gain on sale of loans for the
three months ended September 30, 2023.
Non-Interest Expense. For the three months ended September 30, 2024, non-interest expense decreased $56,000, or 1.5%,
over the comparable 2023 period. This was due to a $171,000, or 7.5% reduction in salaries and employee benefits, which decreased
due to lower headcount, and a $40,000, or 31.9%, decrease in advertising expenses. Our FDIC insurance assessment also decreased by
$26,000, or 19.8%. These decreases were offset by an increase in professional fees of $99,000, or 70.6%, due to higher consulting
expense related to strategic business planning. Data processing expense also increased $100,000, or 48.8%, due to higher processing
costs.
Income Tax Expense. Income tax benefit increased $128,000, or 102.1%, to a benefit of $253,000 for the three months ended
September 30, 2024 from a $125,000 benefit for the three months ended September 30, 2023. The decrease was due to $466,000 of
lower taxable income.
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Table of Contents
Comparison of Operating Results for the Nine Months Ended September 30, 2024 and September 30, 2023
General. Net income decreased by $3.1 million, or 168.1%, to a net loss of $1.2 million for the nine months ended September
30, 2024 from net income of $1.8 million for the nine months ended September 30, 2023. This decrease was primarily due to a decrease
of $4.0 million in net interest income, partially offset by a decrease of $1.2 million in income tax expense.
Interest Income. Interest income increased $3.4 million, or 12.4%, from $27.7 million for the nine months ended September
30, 2023 to $31.1 million for the nine months ended September 30, 2024 due to higher yields on interest-earning assets and an increase
in the average balance of securities, partially offset by a decrease in the average balance of loans and cash and cash equivalents.
Interest income on cash and cash equivalents decreased $8,000, or 1.9%, to $415,000 for the nine months ended September 30,
2024 from $423,000 for the nine months ended September 30, 2023 due to a $2.3 million decrease in the average balance to $9.1 million
for the nine months ended September 30, 2024 from $11.4 million for the nine months ended September 30, 2023, reflecting the decrease
of liquidity due to increased securities purchases. This decrease was offset by a 111 basis point increase in the average yield from 4.98%
for the nine months ended September 30, 2023 to 6.09% for the nine months ended September 30, 2024 due to the higher interest rate
environment.
Interest income on loans increased $1.1 million, or 4.5%, to $24.9 million for the nine months ended September 30, 2024
compared to $23.8 million for the nine months ended September 30, 2023 due primarily to a 20 basis point increase in the average yield
from 4.46% for the nine months ended September 30, 2023 to 4.66% for the nine months ended September 30, 2024, offset by a
$1.9 million decrease in the average balance to $711.7 million for the nine months ended September 30, 2024 from $713.6 million for
the nine months ended September 30, 2023.
Interest income on securities increased $2.2 million, or 69.4%, to $5.3 million for the nine months ended September 30, 2024
from $3.1 million for the nine months ended September 30, 2023 primarily due to a 112 basis point increase in the average yield from
2.80% for the nine months ended September 30, 2023 to 3.92% for the nine months ended September 30, 2024, and a $31.0 million
increase in the average balance to $179.8 million for the nine months ended September 30, 2024 from $148.8 million for the nine months
ended September 30, 2023.
Interest Expense. Interest expense increased $7.4 million, or 47.4%, from $15.7 million for the nine months ended September
30, 2023 to $23.1 million for the nine months ended September 30, 2024, primarily due to higher costs and higher average balances on
certificates of deposit and borrowings.
Interest expense on interest-bearing deposits increased $5.6 million, or 43.9%, to $18.4 million for the nine months ended
September 30, 2024 from $12.8 million for the nine months ended September 30, 2023. The increase was due to a 128 basis point
increase in the average cost of deposits to 3.95% for the nine months ended September 30, 2024 from 2.67% for the nine months ended
September 30, 2023. The increase in the average cost of deposits was due to the higher interest rate environment and a change in the
composition of the deposit portfolio to a greater concentration of higher-costing certificates of deposit. The average balances of
certificates of deposit increased $12.0 million to $510.5 million for the nine months ended September 30, 2024 from $498.5 million for
the nine months ended September 30, 2023 while average NOW and money market accounts and savings accounts decreased $24.2
million and $5.7 million for the nine months ended September 30, 2024, respectively, compared to the nine months ended September
30, 2023.
Interest expense on Federal Home Loan Bank advances increased $1.8 million, or 62.7%, from $2.9 million for the nine months
ended September 30, 2023 to $4.7 million for the nine months ended September 30, 2024. The increase was due to an increase in the
average balance of $60.7 million to $171.6 million for the nine months ended September 30, 2024. The increase was also due to an
increase in the average cost of borrowings of 17 basis points to 3.67% for the nine months ended September 30, 2024 from 3.50% for
the nine months ended September 30, 2023 due to the new borrowings being at higher rates.
Net Interest Income. Net interest income decreased $3.9 million, or 33.1%, to $8.1 million for the nine months ended
September 30, 2024 from $12.0 million for the nine months ended September 30, 2023. The decrease reflected a 73 basis point decrease
in our net interest rate spread to 0.68% for the nine months ended September 30, 2024 from 1.41% for the nine months ended September
30, 2023. Our net interest margin decreased 64 basis points to 1.18% for the nine months ended September 30, 2024 from 1.82% for the
nine months ended September 30, 2023.
Provision for Credit Losses. We recorded a $70,000 provision for credit losses for the nine months ended September 30, 2024
compared to a $125,000 recovery for credit losses for the nine-month period ended September 30, 2023. The entire provision during
the period was due to a $108,000 provision for held-to-maturity securities due to an increase in corporate securities, which was offset
by a $38,000 credit to the provision for loans due to a decrease in the loan portfolio.
Non-Interest Income. Non-interest income increased by $73,000, or 8.5%, to $929,000 for the nine months ended September
30, 2024 from $856,000 for the nine months ended September 30, 2023. Bank-owned life insurance income increased $74,000, or
12.9%, due to higher balances during 2024.
Non-Interest Expense. For the nine months ended September 30, 2024, non-interest expense increased $163,000, or 1.5%,
over the comparable 2023 period. Professional fees increased $270,000, or 65.5% due to higher consulting expense related to strategic
business planning. Data processing expense increased $210,000, or 29.3%, due to higher processing costs. These were offset by a
$333,000, or 4.9%, reduction in salaries and employee benefit costs, which decreased due to lower headcount.
Income Tax Expense. Income tax expense decreased $1.2 million, or 312.9%, to a benefit of $821,000 for the nine months
ended September 30, 2024 from a $386,000 expense for the nine months ended September 30, 2023. The decrease was due to
$4.3 million of lower taxable income.
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Management of Market Risk
General. The majority of our assets and liabilities are monetary in nature. Consequently, our most significant form of market
risk is interest rate risk. Our assets, consisting primarily of loans and securities, have longer maturities than our liabilities, consisting
primarily of deposits and borrowings. As a result, a principal part of our business strategy is to manage our exposure to changes in
market interest rates. Accordingly, our board of directors has established an Asset/Liability Management Committee (the “ALCO”),
which is comprised of three members of executive management and two independent directors, which oversees the asset/liability
management processes and related procedures. The ALCO meets on at least a quarterly basis and reviews asset/liability strategies,
liquidity positions, alternative funding sources, interest rate risk measurement reports, capital levels and economic trends at both national
and local levels. Our interest rate risk position is also monitored quarterly by the board of directors.
We manage our interest rate risk to minimize the exposure of our earnings and capital to changes in market interest rates. We
have implemented the following strategies to manage our interest rate risk: originating and purchasing loans with adjustable interest
rates; promoting core deposit products; monitoring the length of our borrowings with the Federal Home Loan Bank and brokered deposits
depending on the interest rate environment; maintaining a majority of our investments as available-for-sale; diversifying our loan
portfolio; and strengthening our capital position. By following these strategies, we believe that we are better positioned to react to
changes in market interest rates.
Net Portfolio Value Simulation. We analyze our sensitivity to changes in interest rates through a net portfolio value of equity
(“NPV”) model. NPV represents the present value of the expected cash flows from our assets less the present value of the expected cash
flows arising from our liabilities, adjusted for the value of off-balance sheet contracts. The NPV ratio represents the dollar amount of
our NPV divided by the present value of our total assets for a given interest rate scenario. NPV attempts to quantify our economic value
using a discounted cash flow methodology while the NPV ratio reflects that value as a form of capital ratio. We estimate what our NPV
would be at a specific date. We then calculate what the NPV would be at the same date throughout a series of interest rate scenarios
representing immediate and permanent, parallel shifts in the yield curve. We currently calculate NPV under the assumptions that interest
rates increase 100, 200, 300 and 400 basis points from current market rates and that interest rates decrease 100, 200, 300 and 400 basis
points from current market rates.
The following table presents the estimated changes in our net portfolio value that would result from changes in market interest
rates as of September 30, 2024. All estimated changes presented in the table are within the policy limits approved by the board of
directors.
NPV as Percent of
Portfolio
NPV
Value of Assets
(Dollars in thousands)
Basis Point (“bp”) Change in
Dollar
Dollar
Percent
Interest Rates
Amount
Change
Change
NPV Ratio
Change
400 bp
$
68,323
$
(46,293)
(40.39)%
7.81%
(35.35)%
300 bp
80,478
(34,138)
(29.78)
9.01
(25.41)
200 bp
91,085
(23,531)
(20.53)
10.00
(17.22)
100 bp
102,606
(12,010)
(10.48)
11.04
(8.61)
—
114,616
—
—
12.08
—
(100) bp
126,246
11,630
10.15
13.04
7.95
(200) bp
137,156
22,540
19.67
13.89
14.98
(300) bp
147,064
32,448
28.31
14.63
21.11
(400) bp
157,813
43,197
37.69
15.40
27.48
Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurements. Modeling changes
require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market
interest rates. The table above assumes that the composition of our interest-sensitive assets and liabilities existing at the date indicated
remains constant uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly,
although the table provides an indication of our interest rate risk exposure at a particular point in time, such measurements are not
intended to and do not provide a precise forecast of the effect of changes in market interest rates on our NPV and will differ from actual
results.
Net Interest Income Analysis. We also use income simulation to measure interest rate risk inherent in our balance sheet at a
given point in time by showing the effect on net interest income over specified time frames and using different interest rate shocks and
ramps. The assumptions include management’s best assessment of the effect of changing interest rates on the prepayment speeds of
certain assets and liabilities, projections for account balances in each of the product lines offered and the historical behavior of deposit
rates and balances in relation to changes in interest rates. These assumptions are subject to change, and as a result, the model is not
expected to precisely measure net interest income or precisely predict the impact of fluctuations in interest rates on net interest income.
Actual results will differ from the simulated results due to timing, magnitude, and frequency of interest rate changes as well as changes
in the balance sheet composition and market conditions. Assumptions are supported with quarterly back testing of the model to actual
market rate shifts.
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Table of Contents
As of September 30, 2024, net interest income simulation results indicated that its exposure over one year to changing interest
rates was within our guidelines. The following table presents the estimated impact of interest rate changes on our estimated net interest
income over one year:
Changes in Interest Rates
Change in Net Interest Income Year One
(basis points)(1)
(% change from year one base)
400
(9.27)%
300
(7.06)
200
(4.52)
100
(2.05)
—
—
(100)
(0.78)
(200)
(3.46)
(300)
(7.94)
(400)
(13.32)
(1) The calculated change in net interest income assumes an instantaneous parallel shift of the yield curve.
The preceding simulation analyses do not represent a forecast of actual results and should not be relied upon as being indicative
of expected operating results. These hypothetical estimates are based upon numerous assumptions, which are subject to change,
including: the nature and timing of interest rate levels, including the yield curve shape, prepayments on loans and securities, deposit
decay rates, pricing decisions on loans and deposits, reinvestment/replacement of asset and liability cash flows, and others. Also, as
market conditions vary, prepayment/refinancing levels, the varying impact of interest rate changes on caps and floors embedded in
adjustable-rate loans, early withdrawal of deposits, changes in product preferences, and other internal/external variables will likely
deviate from those assumed.
Liquidity and Capital Resources
Liquidity. Liquidity describes our ability to meet financial obligations that arise in the ordinary course of business. Liquidity is
primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned
expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities and proceeds from calls,
maturities and sales of securities and sales of loans. We also borrow from the Federal Home Loan Bank of New York. At September
30, 2024, we had the ability to borrow up to $297.9 million, of which $202.7 million was outstanding and $1.2 million was utilized as
collateral for letters of credit issued to secure municipal deposits. At September 30, 2024, we had $54.0 million in unsecured lines of
credit with four correspondent banks with no outstanding balance.
The board of directors is responsible for establishing and monitoring our liquidity targets and strategies in order to ensure that
sufficient liquidity exists for meeting the borrowing needs and deposit withdrawals of our customers as well as unanticipated
contingencies. We believe that we had ample sources of liquidity to satisfy our short- and long-term liquidity needs as of September 30,
2024.
While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan
prepayments are greatly influenced by market interest rates, economic conditions, and competition. Our most liquid assets are cash and
cash equivalents. The levels of these assets are dependent on our operating, financing, lending and investing activities during any period.
At September 30, 2024, cash and cash equivalents totaled $21.0 million. Securities classified as available-for-sale, which provide
additional sources of liquidity, totaled $108.6 million at September 30, 2024.
We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate
we will have sufficient funds to meet our current funding commitments. Certificates of deposit due within one year of September 30,
2024 totaled $439.7 million, or 69.9% of total deposits. If these deposits do not remain with us, we will be required to seek other sources
of funds, including other deposits and Federal Home Loan Bank of New York advances. Depending on market conditions, we may be
required to pay higher rates on such deposits or borrowings than we currently pay. We believe, however, based on past experience that
a significant portion of such deposits will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates
offered.
Capital Resources. We are subject to various regulatory capital requirements administered by the New Jersey Department of
Banking and Insurance and the Federal Deposit Insurance Corporation. At September 30, 2024, we exceeded all applicable regulatory
capital requirements, and were considered “well capitalized” under regulatory guidelines. As a result of the Economic Growth,
Regulatory Relief, and Consumer Protection Act, as modified in April 2020, the federal banking agencies were required to develop a
“Community Bank Leverage Ratio” (the ratio of a bank's Tier 1 “equity capital to average total consolidated assets) for financial
institutions with less than $10 billion. A “qualifying community bank” with capital exceeding 9% will be considered compliant with all
applicable regulatory capital and leverage requirements, including the capital requirements to be considered "well capitalized” under
Prompt Corrective Action statutes. As of September 30, 2024, the Bank is reporting as a qualifying community bank with a ratio of
13.12%.
Inflation
Substantially all of the Company's assets and liabilities relate to banking activities and are monetary. The consolidated financial
statements and related financial data are presented in accordance with GAAP. GAAP currently requires the Company to measure the
financial position and results of operations in terms of historical dollars, except for securities available for sale, impaired loans, and
other real estate loans that are measured at fair value. Changes in the value of money due to inflation can cause purchasing power loss.
Management's opinion is that movements in interest rates affect the financial condition and results of operations to a greater degree than
changes in the rate of inflation. It should be noted that interest rates and inflation do affect each other but do not always move in
correlation with each other. The Company's ability to match the interest sensitivity of its financial assets to the interest sensitivity of its
liabilities in its asset/liability management may tend to minimize the effect of changes in interest rates on the Company's performance.
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Table of Contents
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Information with respect to quantitative and qualitative disclosures about market risk can be found in Item 2, “Management’s
Discussion and Analysis of Financial Condition and Results of Operation – Management of Market Risk.”
Item 4. Controls and Procedures
As required by Rule 13a-15(b) of the Exchange Act, an evaluation as of September 30, 2024 was conducted under the
supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the
effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based on this evaluation,
our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures, as of September 30,
2024 were not effective due to the previously reported material weakness described below.
Management's Report on Internal Control Over Financial Reporting
During May 2024, while finalizing the unaudited interim financial statements, it was discovered that the accounting for fair
value hedges was completed incorrectly in that instead of adjusting the fair value of loans the accumulated other comprehensive loss
was adjusted. As such, the Company concluded that a material weakness existed in its internal controls over financial reporting. The
fair value hedges were purchased in February 2024 and the error was discovered before any financial statements were issued. Corrections
were made to properly reflect the correct accounting treatments of fair value hedges. Consequently, the material weakness did not result
in any identified misstatement, and there were no changes to previously issued financial statements.
Remediation Plan for the Material Weakness
In the first quarter of 2024, corrections were made by management to properly account for the fair value hedges, which
completely remedied the material weakness. Management will continue to account for the fair value hedges in accordance with generally
accepted accounting principles going forward.
During the three months ended September 30, 2024, there have been no changes in the Company’s internal controls over
financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over
financial reporting. We believe the actions described above were sufficient to remediate the identified material weakness.
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Table of Contents
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
At September 30, 2024 we were not involved in any pending legal proceedings other than routine legal proceedings occurring
in the ordinary course of business, the outcome of which would not be material to our financial condition or results of operations.
Item 1A. Risk Factors
There have been no material changes in risk factors applicable to the Company from those disclosed in “Risk Factors” in Item
1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds, and Issuer Purchase of Equity Securities
On April 24, 2024, the Company announced it had received regulatory approval for the repurchase of up to 237,090 shares of
its common stock, or approximately 5% of its then outstanding common stock (excluding shares held by Bogota Financial, MHC). The
repurchase program does not have a scheduled expiration date and the Board of Directors has the right to suspend or discontinue
the program at any time. As of September 30, 2024, 163,790 shares have been repurchased pursuant to the program at a cost of $1.2
million.
The following table provides information on repurchases by the Company of its common stock under the Company's Board
approved program for the third quarter:
ISSUER PURCHASES OF EQUITY SECURITIES
Period
Total
Number of
Shares
Purchased
Average
Price Paid
per Share
Total
Number of
Shares
Purchased
as Part of
Publicly
Announced
Plans or
Programs
Maximum
Number of
Shares that
May Yet Be
Purchased
Under the
Plans or
Programs
July 1 - 31, 2024
17,469
$
7.21
17,469
112,298
August 1 - 31, 2024
21,604
7.31
21,604
90,694
September 1 - 30, 2024
17,394
7.54
17,394
73,300
Total
56,467
$
7.35
56,467
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
During the three months ended September 30, 2024, none of the Company’s directors or executive officers adopted or
terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the
affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement,” as that term is used in SEC
regulations.
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Table of Contents
Item 6. Exhibits
Exhibit
Number
Description
3.1
Articles of Incorporation of Bogota Financial Corp. (incorporated by reference to Exhibit 3.1 of the Company’s
Registration Statement on Form S-1, as amended (Commission File No. 333-233680))
3.2
Amended and Restated Bylaws of Bogota Financial Corp. (incorporated by reference to Exhibit 3.2 of the Company’s
Current Report on Form 8-K, as filed with the Securities and Exchange Commission on February 23, 2023 (Commission
File No. 333-233680))
4.1
Form of Common Stock Certificate of Bogota Financial Corp. (incorporated by reference to Exhibit 4 of the Company’s
Registration Statement on Form S-1, as amended (Commission File No. 333-233680))
31.1
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
101.0
The following materials for the quarter ended September 30, 2024, formatted in iXBRL (Inline Extensible Business
Reporting Language): (i) Consolidated Statements of Financial Condition, (ii) Consolidated Statements of Operations, (iii)
Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Equity, (v) Consolidated
Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements*
104
Cover Page Interactive Data File (formatted in iXBRL and contained in Exhibit 101)
* Furnished, not filed.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
BOGOTA FINANCIAL CORP.
Date: November 13, 2024
/s/ Kevin Pace
Kevin Pace
President, Chief Executive Officer and Director
Date: November 13, 2024
/s/ Brian McCourt
Brian McCourt
Executive Vice President and Chief Financial Officer
32