Bogota Financial Corp. Reports Results for the Three Months Ended March 31, 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 March 31, 2022 of $1.4 million, compared to net income of $3.0 million for the comparable prior year period. During the three months ended March 31, 2021, the Company recorded a bargain purchase gain of $1.9 million, and merger-related expenses of $318,000, 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 three months ended March 31, 2021 was $1.4 million, which equals the comparable current year period¹.

On April 11, 2022, the Company announced it completed its initial 5% buyback plan, purchasing 296,044 shares. The Company's Board of Directors has approved another 5% buyback plan, which is subject to regulatory approval.

Other Financial Highlights:

• Total assets increased $13.3 million, or 1.6%, to $850.7 million at March 31, 2022 from $837.4 million at December 31, 2021, due to an increase in securities, which was primarily funded by cash and cash equivalents.
• Net loans decreased $5.8 million, or 1.0%, to $564.4 million at March 31, 2022 from $570.2 million at December 31, 2021.
• Total deposits were $619.9 million, increasing $22.5 million, or 3.8%, as compared to $597.5 million at December 31, 2021, primarily due to a new $20.0 million municipal deposit relationship. The average rate paid on deposits at March 31, 2022 decreased nine basis points from 0.61% at March 31, 2021 to 0.52% at December 31, 2021.
• Return on average assets was 0.68% for the three-month period ended March 31, 2022 compared to 1.57% 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 0.68%¹ and 0.73%¹ for the three-month periods ended March 31, 2022 and 2021, respectively.
• Return on average equity was 3.88% for the three-month period ended March 31, 2022 compared to 9.11% 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 3.88%¹ and 4.59%¹ for the three-month period ended March 31, 2022 and 2021, respectively.

Joseph Coccaro, President and Chief Executive Officer, said, "We are pleased with our results for the quarter. We continue to enjoy 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 14 basis points year over year."

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 will make this challenging."

Income Statement Analysis

Comparison of Operating Results for the Three Months Ended March 31, 2022 and March 31, 2021

Net income decreased by $1.6 million, or 53.4%, to $1.4 million for the three months ended March 31, 2022 from $3.0 million for the three months ended March 31, 2021. The decrease was due to a decrease in non-interest income of $2.0 million offset by an increase in net interest income of $544 thousand. Excluding the one-time bargain purchase gain of $1.9 million that occurred in 2021 in connection with the Gibraltar Bank acquisition, net income would have increased $300,000 for the three months ended March 31, 2022 as compared to the comparable period in 2021.

Interest income on cash and cash equivalents decreased $20,000, or 40.8%, to $29,000 for the three months ended March 31, 2022 from $49,000 for the three months ended March 31, 2021 due to a six basis point decrease in the average yield on cash and cash equivalents from 0.23% for the three months ended March 31, 2021 to 0.17% for the three months ended March 31, 2022 due to the lower interest rate environment. The decrease was also due to a $16.8 million decrease in the average balance of cash and cash equivalents to $71.5 million for the three months ended March 31, 2022 from $88.3 million for the three months ended March 31, 2021, reflecting the use of excess liquidity to purchase investment securities.

Interest income on loans increased $72,000, or 1.3%, to $5.5 million for the three months ended March 31, 2022 compared to $5.5 million for the three months ended March 31, 2021 due to a nine basis point increase in the average yield on loans from 3.81% for the three months ended March 31, 2021 to 3.90% for the three months ended March 31, 2022 offset by a $2.2 million decrease in the average balance of loans to $571.8 million for the three months ended March 31, 2022 from $574.1 million for the three months ended March 31, 2021.

Interest income on securities decreased $28,000, or 4.1%, to $658,000 for the three months ended March 31, 2022 from $686,000 for the three months ended March 31, 2021 due to a 182 basis point decrease in the average yield from 3.72% for the three months ended March 31, 2021 to 1.90% for the three months ended March 31, 2022. The decrease was offset by a $64.0 million increase in the average balance of securities to $138.8 million for the three months ended March 31, 2022 from $74.8 million for the three months ended March 31, 2021, reflecting the purchase of investments with excess liquidity as deposit growth exceeded loan growth.

Interest expense on interest-bearing deposits decreased $437,000, or 34.6%, to $826,000 for the three months ended March 31, 2022 from $1.3 million for the three months ended March 31, 2021. The decrease was due primarily to a 43 basis point decrease in the average cost of interest-bearing deposits to 0.60% for the three months ended March 31, 2022 from 1.03% for the three months ended March 31, 2021. The decrease in the average cost of deposits was due to the lower interest rate environment and an increase in the average balance of lower-cost transaction accounts compared to a decrease in the average balance of higher cost certificates of deposit. This decrease was offset by a $61.7 million increase in the average balance of deposits to $561.1 million for the three months ended March 31, 2022 from $499.4 million for the three months ended March 31, 2021.

Interest expense on Federal Home Loan Bank borrowings decreased $101,000, or 23.5%, from $431,000 for the three months ended March 31, 2021 to $330,000 for the three months ended March 31, 2022. The decrease was due to a decrease in the average cost of borrowings of four basis points to 1.63% for the three months ended March 31, 2022 from 1.67% for the three months ended March 31, 2021 due to the lower interest rate environment and a decrease in the average balance of borrowings of $22.2 million to $82.3 million for the three months ended March 31, 2022 from $104.4 million for the three months ended March 31, 2021.

Net interest income increased $544,000, or 11.9%, to $5.1 million for the three months ended March 31, 2022 from $4.6 million for the three months ended March 31, 2021. The increase reflected a 20 basis point increase in our net interest rate spread to 2.48% for the three months ended March 31, 2022 from 2.28% for the three months ended March 31, 2021. Our net interest margin increased 14 basis points to 2.64% for the three months ended March 31, 2022 from 2.50% for the three months ended March 31, 2021.

We recorded no provision for loan losses the three months ended March 31, 2022 and recorded a $59,000 credit for the three-month period ended March 31, 2021. Lower balances in residential loans, a more positive economic environment and continued strong asset quality metrics were the reasons for the absence of a provision for the three months ended March 31, 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-performing assets were $1.9 million, or 0.23% of total assets, at March 31, 2022. The allowance for loan losses was $2.2 million, or 0.38% of loans outstanding and 111.8% of nonperforming loans, at March 31, 2022.

Non-interest income decreased by $2.0 million, or 85.1%, to $344,000 for the three months ended March 31, 2022 from $2.3 million for the three months ended March 31, 2021. Gain on sale of loans decreased $149,000 offset by a $66,000 increase in bank-owned life insurance. The decrease was due to a $1.9 million decrease in the bargain purchase gain recognized in the Gibraltar Bank acquisition in 2021.

For the three months ended March 31, 2022, non-interest expense increased $109,000, or 3.2% to $3.5 million, over the comparable 2021 period. Salaries and employee benefits increased $524,000, or 34.1%, attributable to adding the new Gibraltar employees and the new Hasbrouck Heights branch office. Data processing expense increased $70,000, or 33.6%, due to higher data processing expense from the merger. Professional fees decreased $115,000, or 44.3%, due in part to lower legal expense associated with the merger in 2021. Merger fees and core conversion expenses decreased $678,000 due to the merger in 2021. The increase of other general operating expenses was mainly due to increase occupancy costs for the acquired Gibraltar Bank branches and the new Hasbrouck Heights branch office.

Balance Sheet Analysis

Total assets were $850.7 million at March 31, 2022, representing an increase of $13.3 million, or 1.6%, from December 31, 2021. Cash and cash equivalents decreased $36.0 million during the period primarily due to investment purchases with excess liquidity. Net loans decreased $5.8 million, or 1.0%, due to $26.4 million in repayments, offset by new production of $20.6 million, consisting of a relatively equal mix of residential real estate loans and commercial real estate loans. Securities held to maturity increased $7.3 million due to the purchase of corporate bonds and mortgage-backed securities with excess cash. Securities available for sale increased $49.8 million due to the purchase of mortgage-backed securities and corporate bonds with excess cash.

Delinquent loans increased $100,000, or 87.9%, during the three-month period ended March 31, 2022, finishing at $1.8 million or 0.30% of total loans. During the same timeframe, non-performing assets remained unchanged at $1.9 million and were 0.23% of total assets at March 31, 2022. The Company's allowance for loan losses was 0.38% of total loans and 111.8% of non-performing loans at March 31, 2022.

Total liabilities increased $15.9 million, or 2.3%, to $705.7 million mainly due to an increase in deposits reflecting a new $20.0 million municipal relationship, offset by a decrease in borrowings. Total deposits increased $22.5 million, or 3.8%, to $619.9 million at March 31, 2022 from $597.5 million at December 31, 2021. The increase in deposits reflected an increase in interest-bearing deposits of $18.8 million, or 3.4%, to $577.0 million as of March 31, 2022 from $558.2 million at December 31, 2021 and an increase in non-interest bearing deposits of $3.6 million, or 9.2%, to $42.9 million as of March 31, 2022 from $39.3 million as of December 31, 2021. Federal Home Loan Bank advances decreased $7.0 million, or 8.3%, due to maturing advances.

Stockholders' equity decreased $2.6 million to $145.0 million, due to increased accumulated other comprehensive loss for securities for available sale of $2.4 million and the repurchase of 182,001 shares of stock during the quarter at a cost of $1.9 million, offset by net income of $1.4 million for the three months ended March 31, 2022. At March 31, 2022, the Company's ratio of average stockholders' equity-to-total assets was 17.35%, compared to 17.93% at March 31, 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.

Further, 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 extent of such impact will depend on future developments, which are highly uncertain, including if the coronavirus can continue to be controlled and abated. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, the Company could be subject to any of the following risks, any of which could have a material, adverse effect on the Company's business, financial condition, liquidity, and results of operations: demand for the Company's products and services may decline, making it difficult to grow assets and income; if the economy worsens, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase; the Company's allowance for loan losses may have to be increased if borrowers experience financial difficulties, which will adversely affect the Company's net income; the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; the Company's cyber security risks are increased as the result of an increase in the number of employees working remotely; and FDIC premiums may increase if the agency experience additional resolution costs.

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 (unaudited)

Loans are summarized as follows at March 31, 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

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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