Bogota Financial : January 30, 2023

Bogota Financial Corp. Reports Results for the

Three and Twelve Months Ended December 31, 2022

NEWS PROVIDED BY

Bogota Financial Corp.

Teaneck, New Jersey, January 30, 2023 - Bogota Financial Corp. (NASDAQ: BSBK) (the "Company"), the holding company for Bogota Savings Bank (the "Bank"), reported net income for the three months ended December 31, 2022 of $1.9 million or $0.14 per basic and diluted share, compared to net income of $2.0 million or $0.15 per basic and $0.14 per diluted share for the comparable prior year period. The Company reported net income for the twelve months ended December 31, 2022 of $6.9 million or $0.51 per basic and diluted share compared to net income of $7.5 million, or $0.55 per basic and $0.52 per diluted share, for the prior year. During the twelve months ended December 31, 2021, the Company recorded a bargain purchase gain of $2.0 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 twelve months ended December 31, 2021 was $6.0 million or $0.43 per basic and $0.42 per diluted share.1

On April 12, 2022, the Company announced it completed its initial stock repurchase plan, repurchasing 296,044 shares, or approximately 5% of its then outstanding common stock (excluding shares held by Bogota Financial, MHC), at an average cost of $10.82 per share. On September 21, 2022, the Company completed its second stock repurchase plan by repurchasing 292,568 shares, or approximately 5% of its then outstanding common stock (excluding shares held by Bogota Financial, MHC), at an average cost of $11.14 per share. On October 3, 2022, the Company announced 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 (excluding shares held by Bogota Financial, MHC). As of December 31, 2022, 360,372 shares have been repurchased.

Other Financial Highlights:

1. • Total assets increased $113.7 million, or 13.6%, to $951.1 million at December 31, 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 $148.8 million, or 26.1%, to $719.0 million at December 31, 2022 from $570.2 million at December 31, 2021.
   • Total deposits were $701.4 million, increasing $103.9 million, or 17.4%, as compared to $597.5 million at December 31, 2021, primarily due to a new $38.2 million municipal deposit relationship and $126.2 million in increased certificates of deposit. The average rate paid on deposits at December 31, 2022 increased 121 basis points to 1.82% at December 31, 2022 from 0.61% at December 31, 2021 due to higher interest rates and a larger percentage of deposits consisting of higher-costing certificates of deposit.
   • Return on average assets was 0.77% for the twelve-month period ended December 31, 2022 compared to 1.23% for 2021. Without the bargain purchase gain and merger-related expenses, the return on average assets would have been 0.98%1 for the twelve-month period ended December 31, 2021.
   • Return on average equity was 4.76% for the twelve-month period ended December 31, 2022 compared to 7.06% for 2021. Without the bargain purchase gain and merger-related expenses, the return on average equity would have been 5.60%1 for the twelve-month period ended December 31, 2021.
2. 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 2022. We had over $225 million in new loan originations, which increased our loan portfolio by $149 million during the year. We continue to have strong credit quality as non-performing loans and criticized assets remain low. We continue to see improvement in our net interest margin which rose 24 basis points and 26 basis points as compared to the three and twelve months ended December 31, 2021, respectively."

Mr. Coccaro further stated, "We are pleased to report continued consistent earnings and exceptional loan growth during a challenging economic environment in 2022. We expect loan growth to slow in the first quarter as interest rates continue to increase, higher inflation and the continued low inventory in housing will slow the market. Increased interest rate liability costs may impact future earnings."

Income Statement Analysis

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

Net income decreased by $130,000, or 6.4%, to $1.9 million for the three months ended December 31, 2022 from $2.0 million for the three months ended December 31, 2021. The decrease was due to an increase of $150,000 in the provision for loan losses, a decrease in non-interest income of $1.0 million and an increase in income tax expense of $328,000, offset by an increase in net interest income of $1.2 million and a decrease of $167,000 in non-interest expense.

Interest income on cash and cash equivalents decreased $7,000, or 18.9%, to $30,000 for the three months ended December 31, 2022 from $37,000 for the three months ended December 31, 2021 due to a $103.4 million decrease in the average balance of cash and cash equivalents to $3.0 million for the three months ended December 31, 2022 from $106.4 million for the three months ended December 31, 2021, reflecting the use of excess liquidity to fund loan originations and purchase investment securities. This was offset by a 384 basis point increase in the average yield on cash and cash equivalents from 0.14% for the three months ended December 31, 2021 to 3.98% for the three months ended December 31, 2022 due to the higher interest rate environment.

Interest income on loans increased $2.3 million, or 41.5%, to $7.9 million for the three months ended December 31, 2022 compared to $5.6 million for the three months ended December 31, 2021 due primarily to an $139.4 million increase in the average balance of loans to $717.1 million for the three months ended December 31, 2022 from $577.7 million for the three months ended December 31, 2021 and due to a 54 basis point increase in the average yield on loans from 3.81% for the three months ended December 31, 2021 to 4.35% for the three months ended December 31, 2022.

Interest income on securities increased $521,000, or 113.4%, to $980,000 for the three months ended December 31, 2022 from $459,000 for the three months ended December 31, 2021 due primarily to a $69.4 million increase in the average balance of securities to $167.7 million for the three months ended December 31, 2022 from $98.3 million for the three months ended December 31, 2021, reflecting the purchase of investments with excess liquidity, and to a lesser extent, due to a 47 basis point increase in the average yield from 1.87% for the three months ended December 31, 2021 to 2.34% for the three months ended December 31, 2022.

Interest expense on interest-bearing deposits increased $1.3 million, or 138.0%, to $2.2 million for the three months ended December 31, 2022 from $916,000 for the three months ended December 31, 2021. The increase was due to a 69 basis point increase in the average cost of interest-bearing deposits to 1.34% for the three months ended December 31, 2022 from 0.65% for the three months ended December 31, 2021. The increase in the average cost of deposits was due to the higher interest rate environment and higher average balances of certificates of deposit. The increased expense on interest-bearing deposits was also due to an $89.7 million increase in the average balance of total deposits to $647.3 million for the three months ended December 31, 2022 from $557.6 million for the three months ended December 31, 2021.

Interest expense on Federal Home Loan Bank borrowings increased $417,000, or 121.9%, from $342,000 for the three months ended December 31, 2021 to $759,000 for the three months ended December 31, 2022. The increase was due to an increase in the average cost of borrowings of 91 basis points to 2.47% for the three months ended December 31, 2022 from 1.56% for the three months ended December 31 2021 due to the new borrowings at higher rates. The increase was also due to an increase in the average balance of borrowings of $35.1 million to $122.0 million for the three months ended December 31, 2022 from $86.9 million for the three months ended December 31, 2021.

Net interest income increased $1.2 million, or 24.6%, to $6.0 million for the three months ended December 31, 2022 from $4.8 million for the three months ended December 31, 2021. The increase reflected a 17 basis point increase in our net interest rate spread to 2.47% for the three months ended December 31, 2022 from 2.30% for the three months ended December 31, 2021. Our net interest margin increased 24 basis points to 2.68% for the three months ended December 31, 2022 from 2.44% for the three months ended December 31, 2021.

We recorded a $150,000 provision for loan losses for the three months ended December 31, 2022 compared to no provision for the three-month period ended December 31, 2021. Higher balances in residential and construction loans were the reason for the provision for the three months ended December 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-interest income decreased by $1.0 million, or 79.8%, to $256,000 for the three months ended December 31, 2022 from $1.3 million for the three months ended December 31, 2021. Gain on sale of loans decreased $139,000 as the Bank decided to portfolio loans rather than sell loans and bank-owned life insurance decreased $860,000, or 82.4%, due to the collections of $1.8 million in death proceeds in the three months ended December 31, 2021.

For the three months ended December 31, 2022, non-interest expense decreased $167,000, or 4.5%, over the comparable 2021 period. Salaries and employee benefits decreased $22,000, or 1.0%, due to a lower employee count. Data processing expense decreased $46,000, or 17.8%, due to lower costs. Professional fees decreased $52,000, or 37.5%, due to lower legal expense. The increase in advertising expense of $28,000, or 28.7%, was due to additional promotions for branch locations and new promotions on deposit and loan products.

Income tax expense increased $328,000, or 81.1%, to $730,000 for the three months ended December 31, 2022 from $404,000 for the three months ended December 31, 2021. The increase was due to $1.0 million of higher taxable income. The effective tax rate for the three months ended December 31, 2022 and 2021 were 27.78% and 16.59%, respectively. For the three-month period ended December 31, 2021 there was $860,000 of additional proceeds from bank owned life insurance which resulted in a lower effective tax rate.

Comparison of Operating Results for the Twelve Months Ended December 31, 2022 and December 31, 2021

Net income decreased by $643,000, or 8.6%, to $6.9 million for the twelve months ended December 31, 2022 from $7.5 million for the twelve months ended December 31, 2021. The decrease was due to a decrease in non-interest income of $3.4 million, an increase in provision for loan losses of $513,000, and an increase of $739,000 in income taxes offset by an increase in net interest income of $3.8 million and a decrease in non-interest expense of $179,000. Excluding the onetime bargain purchase gain of $2.0 million that occurred in 2021 in connection with the Gibraltar Bank acquisition and the $392,000 merger-related expenses, net income would have increased $916,000 for the twelve months ended December 31, 2022 as compared to 2021.1

Interest income on cash and cash equivalents decreased $34,000, or 22.5%, to $117,000 for the twelve months ended December 31, 2022 from $151,000 for the twelve months ended December 31, 2021 due to a $74.8 million decrease in the average balance of cash and cash equivalents to $25.0 million for the twelve months ended December 31, 2022 from $99.8 million for the twelve months ended December 31, 2021, reflecting the use of excess liquidity to fund loan originations and purchase investment securities. This was offset by a 32 basis point increase in the average yield on cash and cash equivalents from 0.15% for the twelve months ended December 31, 2021 to 0.47% for the twelve months ended December 31, 2022 due to the higher interest rate environment.

Interest income on loans increased $3.6 million, or 15.8%, to $26.3 million for the twelve months ended December 31, 2022 compared to $22.7 million for the twelve months ended December 31, 2021 due primarily to a $55.3 million increase in the average balance of loans to $638.7 million for the twelve months ended December 31, 2022 from $583.4 million for the twelve months ended December 31, 2021 and due to a 22 basis point increase in the average yield on loans from 3.89% for the twelve months ended December 31, 2021 to 4.11% for the twelve months ended December 31, 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 $1.7 million, or 86.6%, to $3.7 million for the twelve months ended December 31, 2022 from $2.0 million for the twelve months ended December 31, 2021 due to a $82.0 million increase in the average balance of securities to $168.0 million for the twelve months ended December 31, 2022 from $86.0 million for the twelve months ended December 31, 2021, reflecting the purchase of investments with excess liquidity. The increase was offset by a 10 basis point decrease in the average yield from 2.29% for the twelve months ended December 31, 2021 to 2.19% for the twelve months ended December 31, 2022.

Interest expense on interest-bearing deposits increased $836,000, or 19.6%, to $5.1 million for the twelve months ended December 31, 2022 from $4.3 million for the twelve months ended December 31, 2021. This increase was due to a $60.4 million increase in the average balance of deposits to $597.7 million for the twelve months ended December 31, 2022 from $537.3 million for the twelve months ended December 31, 2021, primarily due to a $35.6 million increase in the average balance of NOW and money market accounts from $104.9 million for the twelve months ended December 31, 2021 to $140.5 million for the twelve months ended December 31, 2022. The increase was also due to a six basis point increase in the average cost of interest-bearing deposits to 0.85% for the twelve months ended December 31, 2022 from 0.79% for the twelve months ended December 31, 2021.

Interest expense on Federal Home Loan Bank borrowings increased $643,000, or 42.3%, from $1.5 million for the twelve months ended December 31, 2021 to $2.2 million for the twelve months ended December 31, 2022. The increase was due to an increase in the average cost of borrowings of 55 basis points to 2.11% for the twelve months ended December 31, 2022 from 1.56% for the twelve months ended December 31, 2021 due to the higher rates on new borrowings. The increase was also due to an increase in the average balance of borrowings of $4.9 million to $102.5 million for the twelve months ended December 31, 2022 from $97.6 million for the twelve months ended December 31, 2021.

Net interest income increased $3.8 million, or 19.7%, to $23.1 million for the twelve months ended December 31, 2022 from $19.3 million for the twelve months ended December 31, 2021. The increase reflected a 26 basis point increase in our net interest rate spread to 2.59% for the twelve months ended December 31, 2022 from 2.33% for the twelve months ended December 31, 2021. Our net interest margin increased 26 basis points to 2.76% for the twelve months ended December 31, 2022 from 2.50% for the twelve months ended December 31, 2021.

We recorded a $425,000 provision for loan losses for the twelve months ended December 31, 2022 compared to a $88,000 credit for the twelve months ended December 31, 2021. Higher balances in residential and construction loans were the reason for the provision for the twelve months ended December 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-interest income decreased by $3.4 million, or 75.0%, to $1.1 million for the twelve months ended December 31, 2022 from $4.5 million for the twelve months ended December 31, 2021. For the twelve months ended December 31, 2021, there was a $2.0 million bargain purchase gain recognized in the Gibraltar Bank acquisition in 2021. Gain on sale of loans decreased $700,000 or 88.9% to $87,000 for the twelve months ended December 31, 2022 from $786,000 for the twelve months ended December 31, 2021. Bank-owned life insurance income decreased $742,000 or 51.6% to $695,000 for the twelve months ended December 31, 2022 from $1.4 million for the twelve months ended December 31, 2021 due to death proceeds collected during the twelve months ended December 31, 2021.

For the twelve months ended December 31, 2022, non-interest expense decreased $179,000, or 1.2%, to $14.3 million, over 2021. Salaries and employee benefits increased $691,000, or 8.9%, due to the new stock compensation plan adopted in September 2021 and due to more employees associated with the Gibraltar Bank acquisition and the addition of a sixth branch office. Data processing expense increased $97,000, or 9.3%, due to higher data processing expense associated with a larger company. Advertising expense increased $216,000 due to additional promotions for branch locations and new promotions for loan and deposit products. Professional fees decreased $189,000, or 25.7%, due to lower consulting and legal expense. Merger fees and core conversion costs were $1.1 million in 2021. The increase in equipment and occupancy expenses of $129,000, or 10.3%, was mainly due to the additional branch locations.