Bogota Financial Corp. Reports Results for the Three and Six Months Ended June 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 June 30, 2022 of $1.6 million, compared to net income of $1.4 million for the comparable prior year period. The Company reported net income for the six months ended June 30, 2022 of $3.0 million compared to net income of $4.4 million for the comparable prior year period. During the six months ended June 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 six months ended June 31, 2021 was $2.9 million, compared to the $3.0 million for the current-year period.¹

On April 11, 2022, the Company announced it completed its initial 5% buyback plan, purchasing 296,044 shares. On May 25, 2022, the Company announced that it has received regulatory approval for the repurchase of up to 292,568 shares of its common stock, which is approximately 5% of its then outstanding common stock. As of June 30, 2022, the Company had repurchased 145,582 shares under the second buyback plan.

Other Financial Highlights:

• Total assets increased $37.6 million, or 4.5%, to $874.9 million at June 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 $60.6 million, or 10.6%, to $630.8 million at June 30, 2022 from $570.2 million at December 31, 2021.
• Total deposits were $611.3 million, increasing $13.8 million, or 2.3%, as compared to $597.5 million at December 31, 2021, primarily due to a new $11.0 million municipal deposit relationship. The average rate paid on deposits at June 30, 2022 increased four basis points to 0.65% at June 30, 2022 from 0.61% at December 31, 2021.
• Return on average assets was 0.73% for the six-month period ended June 30, 2022 compared to 1.12% 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 0.74%¹ for the six-month period ended June 30, 2021.
• Return on average equity was 4.26% for the six-month period ended June 30, 2022 compared to 6.46% 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 4.24%¹ for the six-month period ended June 30, 2021.

Joseph Coccaro, President and Chief Executive Officer, said, "We are pleased with our results for the first half of 2022. We had over $100 million in new loan originations which has increased our loan portfolio over $60 million during the year, while continuing 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 29 basis points and 41 basis points as compared to the three and six months ended June 30, 2021 respectively."

Mr. Coccaro further stated, "During the last year we completed the acquisition of Gibraltar Bank including a business system conversion and opened our sixth branch location in Hasbrouck Heights. This year we expect to grow loan and deposit balances and are forecasting for assets to increase to $900 million. However, forecasted rate hikes, higher inflation and a low inventory in housing continue to present challenges."

Income Statement Analysis

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

Net income increased by $203,000, or 14.1%, to $1.6 million for the three months ended June 30, 2022 from $1.4 million for the three months ended June 30, 2021. The increase was due to an increase in net interest income of $931,000, offset by a decrease in non-interest income of $280,000 and an increase of $154,000 in provision for loan losses.

Interest income on cash and cash equivalents decreased $13,000, or 31.7%, to $28,000 for the three months ended June 30, 2022 from $41,000 for the three months ended June 30, 2021 due to a $79.2 million decrease in the average balance of cash and cash equivalents to $20.7 million for the three months ended June 30, 2022 from $100.0 million for the three months ended June 30, 2021, reflecting the use of excess liquidity to fund loan originations and purchase investment securities. This was offset by a 39 basis point increase in the average yield on cash and cash equivalents from 0.16% for the three months ended June 30, 2021 to 0.55% for the three months ended June 30, 2022 due to the higher interest rate environment.

Interest income on loans increased $164,000, or 2.9%, to $5.8 million for the three months ended June 30, 2022 compared to $5.7 million for the three months ended June 30, 2021 due to a nine basis point increase in the average yield on loans from 3.86% for the three months ended June 30, 2021 to 3.95% for the three months ended June 30, 2022 and by a $2.6 million increase in the average balance of loans to $593.7 million for the three months ended June 30, 2022 from $591.1 million for the three months ended June 30, 2021.

Interest income on securities increased $577,000, or 143.9%, to $979,000 for the three months ended June 30, 2022 from $402,000 for the three months ended June 30, 2021 due to a 29 basis point increase in the average yield from 1.86% for the three months ended June 30, 2021 to 2.15% for the three months ended June 30, 2022. The increase was also due to a $95.7 million increase in the average balance of securities to $182.3 million for the three months ended June 30, 2022 from $86.6 million for the three months ended June 30, 2021, reflecting the purchase of investments with excess liquidity.

Interest expense on interest-bearing deposits decreased $201,000, or 19.1%, to $850,000 for the three months ended June 30, 2022 from $1.1 million for the three months ended June 30, 2021. The decrease was due primarily to a 19 basis point decrease in the average cost of interest-bearing deposits to 0.59% for the three months ended June 30, 2022 from 0.78% for the three months ended June 30, 2021. The decrease in the average cost of deposits was due to lower average balances and lower average costs of certificates of deposit. This decrease was offset by a $40.3 million increase in the average balance of total deposits to $579.2 million for the three months ended June 30, 2022 from $539.0 million for the three months ended June 30, 2021.

Interest expense on Federal Home Loan Bank borrowings decreased $20,000, or 5.4%, from $376,000 for the three months ended June 30, 2021 to $356,000 for the three months ended June 30, 2022. The decrease was due to a decrease in the average balance of borrowings of $13.8 million to $86.4 million for the three months ended June 30, 2022 from $100.3 million for the three months ended June 30, 2021. The decrease was offset by an increase in the average cost of borrowings of nine basis points to 1.59% for the three months ended June 30, 2022 from 1.50% for the three months ended June 30, 2021 due to the higher rates on newer borrowings.

Net interest income increased $930,000, or 19.5%, to $5.7 million for the three months ended June 30, 2022 from $4.8 million for the three months ended June 30, 2021. The increase reflected a 45 basis point increase in our net interest rate spread to 2.73% for the three months ended June 30, 2022 from 2.28% for the three months ended June 30, 2021. Our net interest margin increased 41 basis points to 2.85% for the three months ended June 30, 2022 from 2.44% for the three months ended June 30, 2021.

We recorded a $100,000 provision for loan losses for the three months ended June 30, 2022 compared to a $54,000 credit for the three-month period ended June 30, 2021. Higher balances in residential and construction loans were the reason for the provision for the three months ended June 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 $280,000, or 52.4%, to $254,000 for the three months ended June 30, 2022 from $533,000 for the three months ended June 30, 2021. Gain on sale of loans decreased $284,000 as the Bank decided to portfolio loans rather than sell loans. This decrease was offset by a $24,000, or 16.5% increase in bank-owned life insurance to $169,000 for the three months ended June 30, 2022 from $145,000 for the three months ended June 30, 2022.

For the three months ended June 30, 2022, non-interest expense increased $17,000, or 0.5%, over the comparable 2021 period. Salaries and employee benefits increased $64,000, or 3.1%, due to the new stock compensation plan established in September 2021. Data processing expense increased $18,000, or 5.9%, due to higher data processing expense associated with being a larger organization. Professional fees decreased $57,000, or 27.5%, due in part to lower legal expense in 2022. Merger fees expenses were $74,000 in 2021. The increase in occupancy and equipment expenses of $48,000, or 16.2%, was due to increased costs for the acquired Gibraltar Bank branches and the new Hasbrouck Heights branch office.

Comparison of Operating Results for the Six Months Ended June 30, 2022 and June 30, 2021

Net income decreased by $1.4 million, or 31.5%, to $3.0 million for the six months ended June 30, 2022 from $4.4 million for the six months ended June 30, 2021. The decrease was due to a decrease in non-interest income of $2.3 million, an increase in non-interest expenses of $126,000, an increase in provision for loan losses of $213,000, and an increase of $284,000 in income taxes offset by an increase in net interest income of $1.5 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 merger related expenses, net income would have increased $139,000 for the six months ended June 30, 2022 as compared to the comparable period in 2021¹.

Interest income on cash and cash equivalents decreased $34,000, or 37.4%, to $57,000 for the six months ended June 30, 2022 from $91,000 for the six months ended June 30, 2021 due to a $49.6 million decrease in the average balance of cash and cash equivalents to $46.0 million for the six months ended June 30, 2022 from $95.6 million for the six months ended June 30, 2021, reflecting the use of excess liquidity to fund loan originations and purchase investment securities. This was offset by a six basis point increase in the average yield on cash and cash equivalents from 0.19% for the six months ended June 30, 2021 to 0.25% for the six months ended June 30, 2022 due to the higher interest rate environment.

Interest income on loans increased $236,000, or 2.1%, to $11.4 million for the six months ended June 30, 2022 compared to $11.2 million for the six months ended June 30, 2021 due to a nine basis point increase in the average yield on loans from 3.83% for the six months ended June 30, 2021 to 3.92% for the six months ended June 30, 2022 offset by a $2.5 million decrease in the average balance of loans to $582.8 million for the six months ended June 30, 2022 from $585.3 million for the six months ended June 30, 2021.

Interest income on securities increased $550,000, or 51.7%, to $1.6 million for the six months ended June 30, 2022 from $1.1 million for the six months ended June 30, 2021 due to an $82.2 million increase in the average balance of securities to $160.7 million for the six months ended June 30, 2022 from $78.5 million for the six months ended June 30, 2021, reflecting the purchase of investments with excess liquidity. The increase was offset by a 73 basis point decrease in the average yield from 2.77% for the six months ended June 30, 2021 to 2.04% for the six months ended June 30, 2022.

Interest expense on interest-bearing deposits decreased $638,000, or 27.6%, to $1.7 million for the six months ended June 30, 2022 from $2.3 million for the six months ended June 30, 2021. The decrease was due primarily to a 31 basis point decrease in the average cost of interest-bearing deposits to 0.59% for the six months ended June 30, 2022 from 0.90% for the six months ended June 30, 2021. The decrease in the average cost of deposits was due to lower average balances and lower average costs of certificates of deposit. This decrease was offset by a $48.9 million increase in the average balance of deposits to $570.2 million for the six months ended June 30, 2022 from $521.3 million for the six months ended June 30, 2021.

Interest expense on Federal Home Loan Bank borrowings decreased $122,000, or 15.1%, from $808,000 for the six months ended June 30, 2021 to $686,000 for the six months ended June 30, 2022. The decrease was due to a decrease in the average balance of borrowings of $19.5 million to $84.4 million for the six months ended June 30, 2022 from $103.9 million for the six months ended June 30, 2021. The decrease was offset by an increase in the average cost of borrowings of seven basis points to 1.64% for the six months ended June 30, 2022 from 1.57% for the six months ended June 30, 2021 due to the higher new rates on borrowings.

Net interest income increased $1.5 million, or 15.8%, to $10.8 million for the six months ended June 30, 2022 from $9.4 million for the six months ended June 30, 2021. The increase reflected a 34 basis point increase in our net interest rate spread to 2.61% for the six months ended June 30, 2022 from 2.27% for the six months ended June 30, 2021. Our net interest margin increased 29 basis points to 2.75% for the six months ended June 30, 2022 from 2.46% for the six months ended June 30, 2021.

We recorded a $100,000 provision for loan losses the six months ended June 30, 2022 compared to a $113,000 credit for the six-month period ended June 30, 2021. Higher balances in residential and construction loans were the reason for the provision for the six months ended June 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 $2.3 million, or 79.0%, to $598,000 for the six months ended June 30, 2022 from $2.9 million for the six months ended June 30, 2021. For the six months ended June 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 $433,000, or 83.3%, to $87,000 for the six months ended June 30, 2022 from $520,000 for the six months ended June 30, 2021. Bank-owned life insurance income increased $91,000, or 38.6%, to $325,000 for the six months ended June 30, 2022 from $235,000 for the six months ended June 30, 202.

For the six months ended June 30, 2022, non-interest expense increased $126,000, or 1.8%, to $7.1 million, over the comparable 2021 period. Salaries and employee benefits increased $588,000, or 16.4%, due to new stock compensation plan started in September 2021. Data processing expense increased $88,000, or 17.0%, due to higher data processing expense associated with a larger company. Advertising expense increased $92,000 due to additional promotions for branch locations and new promotions. Professional fees decreased $172,000, or 36.8%, due to lower consulting expense. Merger fees and core conversion costs were $752,000 in 2021. The increase in equipment and occupancy expenses of $126,000, or 22.4%, was mainly due to the additional branch locations.

Balance Sheet Analysis

Total assets were $874.9 million at June 30, 2022, representing an increase of $37.6 million, or 4.5%, from December 31, 2021. Cash and cash equivalents decreased $97.5 million during the period primarily due to funding of loan originations and investment purchases with excess liquidity. Net loans increased $60.6 million, or 10.6%, due to new production of $103.1 million, consisting of a mainly residential real estate loans and construction loans offset by $42.5 million in repayments. Securities held to maturity increased $12.4 million due to the purchase of corporate bonds and mortgage-backed securities with excess cash. Securities available for sale increased $55.7 million due to the purchase of mortgage-backed securities and corporate bonds with excess cash. Bank-owned life insurance increased $5.3 million or 21.7% due to a $5.0 million purchase of bank-owned life insurance during the six months ended June 30, 2022.

Delinquent loans increased $94,000, or 23.7%, during the six-month period ended June 30, 2022, finishing at $2.1 million or 0.33% of total loans. During the same timeframe, non-performing assets remained unchanged at $1.9 million and were 0.23% of total assets at June 30, 2022. The Company's allowance for loan losses was 0.36% of total loans and 120.8% of non-performing loans at June 30, 2022.

Total liabilities increased $44.7 million, or 6.5%, to $734.5 million mainly due to an increase in deposits, reflecting a new $11.0 million municipal relationship and an increase in borrowings. Total deposits increased $13.8 million, or 2.3%, to $611.3 million at June 30, 2022 from $597.5 million at December 31, 2021. The increase in deposits reflected an increase in interest-bearing deposits of $13.7 million, or 2.5%, to $571.8 million as of June 30, 2022 from $558.2 million at December 31, 2021 and an increase in non-interest bearing deposits of $125,000, or 0.3%, to $39.4 million as of June 30, 2022 from $39.3 million as of December 31, 2021. Federal Home Loan Bank advances increased $30.2 million, or 35.5%, due to new advances for loan funding.

Stockholders' equity decreased $7.1 million to $140.5 million, due to increased accumulated other comprehensive loss for securities for available for sale of $6.5 million and the repurchase of 215,948 shares of stock during the quarter at a cost of $2.4 million, offset by net income of $3.0 million for the six months ended June 30, 2022. At June 30, 2022, the Company's ratio of average stockholders' equity-to-total assets was 17.08%, compared to 17.43% at June 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 ongoing and 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 June 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.

1. Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
2. Net interest margin represents net interest income divided by average total interest-earning assets.
3. Annualized.

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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