Bogota Financial Corp. Reports Results for the Three and Nine Months Ended September 30, 2022

Bogota Financial Corp. (NASDAQ:BSBK) (the "Company"), the holding company for Bogota Savings Bank (the "Bank"), reported net income for the three months ended September 30, 2022 of $1.9 million, compared to net income of $1.0 million for the comparable prior year period. The Company reported net income for the nine months ended September 30, 2022 of $5.0 million compared to net income of $5.5 million for the comparable prior year period. During the nine months ended September 30, 2021, the Company recorded a bargain purchase gain of $1.9 million, and merger-related expenses of $392,000, each of which was associated with the acquisition of Gibraltar Bank. Excluding the bargain purchase gain and the merger-related expenses in 2021, net income for the nine months ended September 30, 2021 was $3.9 million, compared to the $5.0 million for the current year nine-month period¹.

On April 11, 2022, the Company announced it completed its initial 5% buyback plan, purchasing 296,044 shares at an average cost of $10.82 per share. On May 25, 2022, the Company announced that it had received regulatory approval for the repurchase of up to 292,568 shares of its common stock, which was approximately 5% of its then outstanding common stock. On September 21, 2022, the Company completed the second buyback plan by repurchasing 292,568 shares at an average cost of $11.14 per share. On October 3, 2022, the Company announced that it had received regulatory approval for the repurchase of up to 556,631 shares of its common stock, which was approximately 10% of its then outstanding common stock.

Other Financial Highlights:

• Total assets increased $108.8 million, or 13.0%, to $946.2 million at September 30, 2022 from $837.4 million at December 31, 2021, due to an increase in loans and securities, which was primarily funded by cash and cash equivalents, deposits and borrowings.
• Net loans increased $136.9 million, or 24.0%, to $707.1 million at September 30, 2022 from $570.2 million at December 31, 2021.
• Total deposits were $668.2 million, increasing $70.7 million, or 11.8%, as compared to $597.5 million at December 31, 2021, primarily due to a new $27.0 million municipal deposit relationship and $78.8 million in increased certificates of deposit. The average rate paid on deposits at September 30, 2022 increased 45 basis points to 1.06% at September 30, 2022 from 0.61% at December 31, 2021, due to higher interest rates.
• Return on average assets was 0.76% for the nine-month period ended September 30, 2022 compared to 0.91% for the comparable period in 2021. Without the bargain purchase gain and merger-related expenses in 2021, the return on average assets would have been 0.65%¹ for the nine-month period ended September 30, 2021.
• Return on average equity was 4.62% for the nine-month period ended September 30, 2022 compared to 5.20% for the comparable period in 2021. Without the bargain purchase gain and merger-related expenses in 2021, the return on average equity would have been 3.74%¹ for the nine-month period ended September 30, 2021.

^[1] This number represents a non-GAAP financial measure. Please see "Reconciliation of GAAP to Non-GAAP" contained at the end of this release.

Joseph Coccaro, President and Chief Executive Officer, said, "We are pleased with our results for the first nine months of 2022. We had over $198 million in new loan originations, which increased our loan portfolio by $137 million during the year. We also continue to have strong credit quality as non-performing loans and criticized assets remain very low. We continue to see improvement in our net interest margin which rose 27 basis points and 28 basis points as compared to the three and nine months ended September 30, 2021, respectively."

Mr. Coccaro further stated, "In 2021, we completed the acquisition of Gibraltar Bank, which included a business system conversion, and opened our sixth branch location in Hasbrouck Heights. We expect loan growth to slow in the fourth quarter as interest rates increase, higher inflation and the continued low inventory in housing will slow the market. This year, we exceeded our asset goal of $900 million."

Income Statement Analysis

Comparison of Operating Results for the Three Months Ended September 30, 2022 and September 30, 2021

Net income increased by $888,000, or 85.2%, to $1.9 million for the three months ended September 30, 2022 from $1.0 million for the three months ended September 30, 2021. The increase was due to an increase in net interest income of $1.1 million and a decrease of $137,000 in non-interest expense, offset by a decrease in non-interest income of $105,000 and an increase of $150,000 in provision for loan losses.

Interest income on cash and cash equivalents decreased $2,000, or 6.1%, to $31,000 for the three months ended September 30, 2022 from $33,000 for the three months ended September 30, 2021 due to a $95.5 million decrease in the average balance of cash and cash equivalents to $5.9 million for the three months ended September 30, 2022 from $101.5 million for the three months ended September 30, 2021, reflecting the use of excess liquidity to fund loan originations and purchase investment securities. This was offset by a 192 basis point increase in the average yield on cash and cash equivalents from 0.13% for the three months ended September 30, 2021 to 2.05% for the three months ended September 30, 2022 due to the higher interest rate environment.

Interest income on loans increased $1.1 million, or 17.6%, to $7.0 million for the three months ended September 30, 2022 compared to $6.0 million for the three months ended September 30, 2021 due primarily to an $85.4 million increase in the average balance of loans to $670.1 million for the three months ended September 30, 2022 from $584.8 million for the three months ended September 30, 2021 and, to a lesser extent, due to a ten basis point increase in the average yield on loans from 4.05% for the three months ended September 30, 2021 to 4.15% for the three months ended September 30, 2022.

Interest income on securities increased $637,000, or 150.2%, to $1.1 million for the three months ended September 30, 2022 from $424,000 for the three months ended September 30, 2021 due primarily to a $94.0 million increase in the average balance of securities to $182.6 million for the three months ended September 30, 2022 from $88.6 million for the three months ended September 30, 2021, reflecting the purchase of investments with excess liquidity, and to a lesser extent, due to a 41 basis point increase in the average yield from 1.91% for the three months ended September 30, 2021 to 2.32% for the three months ended September 30, 2022.

Interest expense on interest-bearing deposits increased $209,000, or 20.1%, to $1.2 million for the three months ended September 30, 2022 from $1.0 million for the three months ended September 30, 2021. The increase was due to a seven basis point increase in the average cost of interest-bearing deposits to 0.82% for the three months ended September 30, 2022 from 0.75% for the three months ended September 30, 2021. The increase in the average cost of deposits was due to higher average balances and higher average costs of certificates of deposit. This increase was also due to a $54.2 million increase in the average balance of total deposits to $602.2 million for the three months ended September 30, 2022 from $548.0 million for the three months ended September 30, 2021.

Interest expense on Federal Home Loan Bank borrowings increased $348,000, or 94.3%, from $369,000 for the three months ended September 30, 2021 to $717,000 for the three months ended September 30, 2022. The increase was due to an increase in the average cost of borrowings of 78 basis points to 2.30% for the three months ended September 30, 2022 from 1.52% for the three months ended September 30, 2021 due to the higher borrowing rates. The increase was also due to an increase in the average balance of borrowings of $32.5 million to $128.5 million for the three months ended September 30, 2022 from $96.0 million for the three months ended September 30, 2021.

Net interest income increased $1.1 million, or 22.3%, to $6.2 million for the three months ended September 30, 2022 from $5.1 million for the three months ended September 30, 2021. The increase reflected a 25 basis point increase in our net interest rate spread to 2.68% for the three months ended September 30, 2022 from 2.43% for the three months ended September 30, 2021. The net interest margin increased 27 basis points to 2.85% for the three months ended September 30, 2022 from 2.58% for the three months ended September 30, 2021.

We recorded a $175,000 provision for loan losses for the three months ended September 30, 2022 compared to a $25,000 provision for the three-month period ended September 30, 2021. Higher balances in residential and construction loans were the reason for the provision for the three months ended September 30, 2022. The Bank continues to have a low level of delinquent and non-accrual loans in the portfolio, as well as no charge-offs.

Non-interest income decreased by $105,000, or 28.0%, to $270,000 for the three months ended September 30, 2022 from $374,000 for the three months ended September 30, 2021. Gain on sale of loans decreased $127,000 as the Bank decided to portfolio loans rather than sell loans. This decrease was offset by a $28,000, or 17.8%, increase in bank-owned life insurance to $185,000 for the three months ended September 30, 2022 from $157,000 for the three months ended September 30, 2022 due to $5.0 million purchase of bank-owned life insurance during the nine months ended September 30, 2022.

For the three months ended September 30, 2022, non-interest expense decreased $137,000, or 3.6%, over the comparable 2021 period primarily due to the $370,000 of expense related to the data processing conversion in 2021. Salaries and employee benefits increased $125,000, or 6.2%, due to the stock compensation plan established in September 2021 and due to more employees due to the acquisition and the addition of a sixth branch office. Data processing expense increased $54,000, or 21.1%, due to higher costs associated with being a larger organization. Professional fees increased $35,000, or 27.2%, due in part to the settlement of a legal case in 2022. The increase in advertising expense of $96,000, or 160.2%, was due to additional promotions for branch locations and new promotions on deposit and loan products.

Comparison of Operating Results for the Nine Months Ended September 30, 2022 and September 30, 2021

Net income decreased by $514,000, or 9.4%, to $5.0 million for the nine months ended September 30, 2022 from $5.5 million for the nine months ended September 30, 2021. The decrease was due to a decrease in non-interest income of $2.4 million, an increase in provision for loan losses of $363,000, and an increase of $412,000 in income taxes, offset by an increase in net interest income of $2.6 million. Excluding the one-time bargain purchase gain of $1.9 million that occurred in 2021 in connection with the Gibraltar Bank acquisition and the $392,000 merger-related expenses, net income was $3.9 million for the nine months ended September 30, 2021 compared to $5.0 million for the current year period¹.

Interest income on cash and cash equivalents decreased $31,000, or 26.1%, to $88,000 for the nine months ended September 30, 2022 from $119,000 for the nine months ended September 30, 2021 due to a $65.1 million decrease in the average balance of cash and cash equivalents to $32.5 million for the nine months ended September 30, 2022 from $97.6 million for the nine months ended September 30, 2021, reflecting the use of excess liquidity to fund loan originations and purchase investment securities. This was offset by a 20 basis point increase in the average yield on cash and cash equivalents from 0.16% for the nine months ended September 30, 2021 to 0.36% for the nine months ended September 30, 2022 due to the higher interest rate environment.

Interest income on loans increased $1.3 million, or 7.5%, to $18.4 million for the nine months ended September 30, 2022 compared to $17.1 million for the nine months ended September 30, 2021 due primarily to a $27.1 million increase in the average balance of loans to $612.3 million for the nine months ended September 30, 2022 from $585.2 million for the nine months ended September 30, 2021 and, to a lesser extent, due to a ten basis point increase in the average yield on loans from 3.91% for the nine months ended September 30, 2021 to 4.01% for the nine months ended September 30, 2022.

^[1] This number represents a non-GAAP financial measure. Please see "Reconciliation of GAAP to Non-GAAP" contained at the end of this release.

Interest income on securities increased $1.2 million, or 78.4%, to $2.7 million for the nine months ended September 30, 2022 from $1.5 million for the nine months ended September 30, 2021 due to a $86.2 million increase in the average balance of securities to $168.1 million for the nine months ended September 30, 2022 from $81.9 million for the nine months ended September 30, 2021, reflecting the purchase of investments with excess liquidity. The increase was offset by a 32 basis point decrease in the average yield from 2.46% for the nine months ended September 30, 2021 to 2.14% for the nine months ended September 30, 2022.

Interest expense on interest-bearing deposits decreased $430,000, or 12.8%, to $2.9 million for the nine months ended September 30, 2022 from $3.4 million for the nine months ended September 30, 2021. The decrease was due primarily to an 18 basis point decrease in the average cost of interest-bearing deposits to 0.67% for the nine months ended September 30, 2022 from 0.85% for the nine months ended September 30, 2021. The decrease in the average cost of deposits was due to a higher average balance of core deposits, offset by a decrease in the average balance and average cost of certificates of deposit. This decrease was offset by a $50.6 million increase in the average balance of deposits to $581.0 million for the nine months ended September 30, 2022 from $530.3 million for the nine months ended September 30, 2021, primarily due to a $47.4 million increase in the average balance of NOW and money market accounts from $99.3 million for the nine months ended September 30, 2021 to $146.7 million for the nine months ended September 30, 2022.

Interest expense on Federal Home Loan Bank borrowings increased $226,000, or 19.2%, from $1.2 million for the nine months ended September 30, 2021 to $1.4 million for the nine months ended September 30, 2022. The increase was due to an increase in the average cost of borrowings of 37 basis points to 1.92% for the nine months ended September 30, 2022 from 1.55% for the nine months ended September 30, 2021 due to the higher new borrowing rates. The increase was offset by a decrease in the average balance of borrowings of $3.7 million to $97.6 million for the nine months ended September 30, 2022 from $101.2 million for the nine months ended September 30, 2021.

Net interest income increased $2.6 million, or 18.1%, to $17.0 million for the nine months ended September 30, 2022 from $14.4 million for the nine months ended September 30, 2021. The increase reflected a 30 basis point increase in the net interest rate spread to 2.63% for the nine months ended September 30, 2022 from 2.33% for the nine months ended September 30, 2021. The net interest margin increased 28 basis points to 2.78% for the nine months ended September 30, 2022 from 2.50% for the nine months ended September 30, 2021.

We recorded a $275,000 provision for loan losses the nine months ended September 30, 2022 compared to a $88,000 credit for the nine months ended September 30, 2021. Higher balances in residential and construction loans were the reason for the provision for the nine months ended September 30, 2022. The Bank continues to have a low level of delinquent and non-accrual loans in the portfolio, as well as no charge-offs.

Non-interest income decreased by $2.4 million, or 73.1%, to $868,000 for the nine months ended September 30, 2022 from $3.2 million for the nine months ended September 30, 2021. For the nine months ended September 30, 2021, there was a $1.9 million bargain purchase gain recognized in the Gibraltar Bank acquisition in 2021. Gain on sale of loans decreased $560,000 or 86.6% to $87,000 for the nine months ended September 30, 2022 from $647,000 for the nine months ended September 30, 2021. Bank-owned life insurance income increased $119,000, or 30.3%, to $511,000 for the nine months ended September 30, 2022 from $392,000 for the nine months ended September 30, 2021 due to a $5.0 million purchase of bank-owned life insurance during the nine months ended September 30, 2022.

For the nine months ended September 30, 2022, non-interest expense decreased $12,000, or 0.1%, to $10.8 million, over the comparable 2021 period. Salaries and employee benefits increased $713,000, or 12.7%, due to stock compensation plan implemented in September 2021 and due to more employees due to the acquisition and the addition of a sixth branch office. Data processing expense increased $143,000, or 18.3%, due to higher data processing expense associated with a larger company. Advertising expense increased $188,000 due to additional promotions for branch locations and new promotions for loan and deposit products. Professional fees decreased $137,000, or 23.0%, due to lower consulting expense. Merger fees and core conversion costs were $1.1 million in 2021. The increase in equipment and occupancy expenses of $134,000, or 14.9%, was mainly due to the additional branch locations.

Balance Sheet Analysis

Total assets were $946.2 million at September 30, 2022, representing an increase of $108.8 million, or 13.0%, from December 31, 2021. Cash and cash equivalents decreased $91.7 million during the period primarily due to funding of loan originations and investment purchases with excess liquidity. Net loans increased $136.9 million, or 24.0%, due to new production of $198.1 million, consisting of a mainly residential real estate loans and construction real estate loans offset by $61.2 million in repayments. Securities held to maturity increased $10.1 million due to the purchase of corporate bonds and mortgage-backed securities with excess cash. Securities available for sale increased $46.3 million due to the purchase of mortgage-backed securities and corporate bonds with excess cash. Bank-owned life insurance increased $5.5 million, or 22.4%, due to a $5.0 million new purchase of bank-owned life insurance during the nine months ended September 30, 2022.

Delinquent loans decreased $544,000, or 20.7%, during the nine-month period ended September 30, 2022, finishing at $2.0 million or 0.28% of total loans. During the same timeframe, non-performing assets remained unchanged at $1.9 million and were 0.20% of total assets at September 30, 2022. The Company's allowance for loan losses was 0.36% of total loans and 128.8% of non-performing loans at September 30, 2022 compared to 0.37% of total loans and 114.20% of non-performing loans at September 30, 2021.

Total liabilities increased $115.3 million, or 16.7%, to $805.1 million mainly due to an increase in deposits, reflecting a new $27.0 million municipal relationship, a $78.8 increase in certificates of deposit and a $43.1 million increase in borrowings. Total deposits increased $70.7 million, or 11.8%, to $668.2 million at September 30, 2022 from $597.5 million at December 31, 2021. The increase in deposits reflected an increase in interest-bearing deposits of $73.4 million, or 13.1%, to $631.5 million as of September 30, 2022 from $558.2 million at December 31, 2021, primarily due to increases in certificates of deposit, which increased by $78.8 million from $366.4 million at December 31, 2021 to $445.2 million at September 30, 2022 and in NOW accounts, which increased by $11.2 million to $81.1 million from $69.9 million at December 31, 2021. These increases were offset by a decrease in non-interest bearing deposits of $2.7 million, or 6.8%, to $36.6 million as of September 30, 2022 from $39.3 million as of December 31, 2021. Federal Home Loan Bank advances increased $43.1 million, or 50.6%, due to new advances for loan funding.

Stockholders' equity decreased $6.5 million to $141.1 million, due to increased accumulated other comprehensive loss for securities available for sale of $6.4 million and the repurchase of 546,421 shares of stock during the year at a cost of $6.0 million, offset by net income of $5.0 million for the nine months ended September 30, 2022. At September 30, 2022, the Company's ratio of average stockholders' equity-to-total assets was 17.08%, compared to 17.43% at September 30, 2021.

About Bogota Financial Corp.

Bogota Financial Corp. is a Maryland corporation organized as the mid-tier holding company of Bogota Savings Bank and is the majority-owned subsidiary of Bogota Financial, MHC. Bogota Savings Bank is a New Jersey chartered stock savings bank that has served the banking needs of its customers in northern and central New Jersey since 1893. It operates from six offices located in Bogota, Hasbrouck Heights, Newark, Oak Ridge, Parsippany and Teaneck, New Jersey and operates a loan production office in Spring Lake, New Jersey.

Forward-Looking Statements

This press release contains certain forward-looking statements about the Company and the Bank. Forward-looking statements include statements regarding anticipated future events and can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as "believe," "expect," "anticipate," "estimate," and "intend" or future or conditional verbs such as "will," "would," "should," "could," or "may." Forward-looking statements, by their nature, are subject to risks and uncertainties. Certain factors that could cause actual results to differ materially from expected results include increased competitive pressures, changes in the interest rate environment, inflation, general economic conditions or conditions within the securities markets, changes in the quality of our loan and security portfolios, increases in non-performing and classified loans, and legislative, accounting and regulatory changes that could adversely affect the business in which the Company and the Bank are engaged.

In addition, the COVID-19 pandemic has had, and may continue to have, an adverse impact on the Company, its clients and the communities it serves. Given its dynamic nature, it is difficult to predict the full impact of the COVID-19 pandemic on the Company's business.

The Company undertakes no obligation to revise these forward-looking statements or to reflect events or circumstances after the date of this press release.

LOANS

Loans are summarized as follows at September 30, 2022 and December 31, 2021:

The following tables set forth the distribution of total deposit accounts, by account type, at the dates indicated.

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.

Rate/Volume Analysis

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.

BOGOTA FINANCIAL CORP.

RECONCILIATION OF GAAP TO NON-GAAP

The Company's management believes that the presentation of net income on a non-GAAP basis, excluding nonrecurring items, provides useful information for evaluating the Company's operating results and any related trends that may be affecting the Company's business. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP.

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