“The Bank completed its third stock repurchase program earlier this year and promptly began its fourth buyback. We remain diligent in our efforts to show confidence in our value."

Income Statement Analysis

Comparison of Operating Results for the Three Months Ended June 30, 2024 and June 30, 2023

Net income decreased by $1.3 million, or 150.5%, to a net loss of $432,000 for the three months ended June 30, 2024 from net income of $857,000 for the three months ended June 30, 2023. This decrease was primarily due to a decrease of $1.5 million in net interest income, partially offset by a decrease of $494,000 in income tax expense.

Interest income increased $1.1 million, or 11.3%, from $9.4 million for the three months ended June 30, 2023 to $10.5 million for the three months ended June 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.

Interest income on cash and cash equivalents decreased $22,000, or 14.9%, to $127,000 for the three months ended June 30, 2024 from $149,000 for the three months ended June 30, 2023 due to a $3.8 million decrease in the average balance to $8.6 million for the three months ended June 30, 2024 from $12.4 million for the three months ended June 30, 2023, reflecting the use of excess cash to purchase securities. The decrease was offset by a 110 basis point increase in the average yield from 4.80% for the three months ended June 30, 2023 to 5.90% for the three months ended June 30, 2024 due to the higher interest rate environment.

Interest income on loans increased $157,000, or 1.9%, to $8.3 million for the three months ended June 30, 2024 compared to $8.1 million for the three months ended June 30, 2023 due primarily to an 11 basis point increase in the average yield from 4.59% for the three months ended June 30, 2023 to 4.70% for the three months ended June 30, 2024, offset by a $2.1 million decrease in the average balance to $710.1 million for the three months ended June 30, 2024 from $712.2 million for the three months ended June 30, 2023.

Interest income on securities increased $843,000, or 82.9%, to $1.9 million for the three months ended June 30, 2024 from $1.0 million for the three months ended June 30, 2023 primarily due to a $39.3 million increase in the average balance to $185.5 million for the three months ended June 30, 2024 from $146.2 million for the three months ended June 30, 2023, and due to a 123 basis point increase in the average yield from 2.78% for the three months ended June 30, 2023 to 4.01% for the three months ended June 30, 2024.

Interest expense increased $2.6 million, or 51.2%, from $5.1 million for the three months ended June 30, 2023 to $7.7 million for the three months ended June 30, 2024 due to higher costs and average balances on certificates of deposit and borrowings.

Interest expense on interest-bearing deposits increased $2.0 million, or 48.5%, to $6.2 million for the three months ended June 30, 2024 from $4.2 million for the three months ended June 30, 2023. The increase was due to a 131 basis point increase in the average cost of deposits to 3.99% for the three months ended June 30, 2024 from 2.68% for the three months ended June 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. The average balances of certificates of deposit increased $23.9 million to $517.9 million for the three months ended June 30, 2024 from $494.0 million for the three months ended June 30, 2023 while the average balance of NOW/money market accounts and savings accounts decreased $20.6 million and $4.8 million for the three months ended June 30, 2024, respectively, compared to the three months ended June 30, 2023.

Interest expense on Federal Home Loan Bank advances increased $574,000, or 63.6%, from $903,000 for the three months ended June 30, 2023 to $1.5 million for the three months ended June 30, 2024. The increase was primarily due to an increase in the average balance of $49.8 million to $170.3 million for the three months ended June 30, 2024 from $120.5 million for the three months ended June 30, 2023. The increase was also due to an increase in the average cost of borrowings of 48 basis points to 3.49% for the three months ended June 30, 2024 from 3.01% for the three months ended June 30, 2023 due to the new borrowings being at higher rates. Cash flow hedges used to manage interest rate risk totaled $115.0 million at June 30, 2024. During the three months ended June 30, 2024, the use of the cash flow hedges reduced the interest expense on the Federal Home Loan Bank advances and certificates of deposit by $461,000.

Net interest income decreased $1.6 million, or 36.1%, to $2.7 million for the three months ended June 30, 2024 from $4.3 million for the three months ended June 30, 2023. The decrease reflected an 85 basis point decrease in our net interest rate spread to 0.72% for the three months ended June 30, 2024 from 1.57% for the three months ended June 30, 2023. Our net interest margin decreased 75 basis points to 1.21% for the three months ended June 30, 2024 from 1.96% for the three months ended June 30, 2023.

We recorded a $35,000 provision for credit losses for the three months ended June 30, 2024 compared to a $125,000 recovery for credit losses for the three-month period ended June 30, 2023. The entire provision in the second quarter of 2024 was due to an increase in corporate securities. In addition to the recorded provision, the Company reclassified $38,000 from the existing allowance for credit losses related to loans to the allowance for credit losses related to held-to-maturity securities to reflect the changing composition of the balance sheet and related credit risk.

Non-interest income increased by $20,000, or 7.0%, to $303,000 for the three months ended June 30, 2024 from $283,000 for the three months ended June 30, 2023. Bank-owned life insurance income increased $25,000, or 13.1%, due to higher balances during 2024, which was partially offset by a lower gain on sale of loans.

For the three months ended June 30, 2024, non-interest expense increased $94,000, or 2.6%, over the comparable 2023 period. Professional fees increased $146,000, or 128.1%, due to higher consulting expense related to strategic business planning. Data processing expense increased $83,000, or 35.5%, due to higher processing costs. Advertising expense also increased by $19,000, or 19.8%, which was related to promotions for our new branch location. This was offset by a $158,000, or 6.9% reduction in salaries and employee benefits, which decreased due to lower headcount and increased expenses in 2023 related to the retirement of the previous Chief Executive Officer.

Income tax expense decreased $494,000, or 232.1%, to a benefit of $281,000 for the three months ended June 30, 2024 from a $213,000 expense for the three months ended June 30, 2023. The decrease was due to a reduction of $1.8 million in taxable income.

Comparison of Operating Results for the Six Months Ended June 30, 2024 and June 30, 2023

Net income decreased by $2.7 million, or 147.2%, to a net loss of $873,000 for the six months ended June 30, 2024 from net income of $1.8 million for the six months ended June 30, 2023. This decrease was primarily due to a decrease of $3.4 million in net interest income, partially offset by a decrease of $1.1 million in income tax expense.

Interest income increased $2.1 million, or 11.5%, from $18.4 million for the six months ended June 30, 2023 to $20.5 million for the six months ended June 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.

Interest income on cash and cash equivalents increased $22,000, or 8.7%, to $276,000 for the six months ended June 30, 2024 from $254,000 for the six months ended June 30, 2023 due a 171 basis point increase in the average yield from 4.82% for the six months ended June 30, 2023 to 6.53% for the six months ended June 30, 2024 due to the higher interest rate environment. The increase was partially offset by a $2.1 million decrease in the average balance to $8.5 million for the six months ended June 30, 2024 from $10.6 million for the six months ended June 30, 2023, reflecting the decrease of liquidity due to increased securities purchases.

Interest income on loans increased $666,000, or 4.2%, to $16.5 million for the six months ended June 30, 2024 compared to $15.8 million for the six months ended June 30, 2023 due primarily to 19 basis point increase in the average yield from 4.45% for the six months ended June 30, 2023 to 4.64% for the six months ended June 30, 2024, offset by a $3.3 million decrease in the average balance to $711.7 million for the six months ended June 30, 2024 from $715.1 million for the six months ended June 30, 2023.

Interest income on securities increased $1.3 million, or 60.4%, to $3.4 million for the six months ended June 30, 2024 from $2.1 million for the six months ended June 30, 2023 primarily due to a 111 basis point increase in the average yield from 2.74% for the six months ended June 30, 2023 to 3.85% for the six months ended June 30, 2024, and a $22.0 million increase in the average balance to $176.1 million for the six months ended June 30, 2024 from $154.0 million for the six months ended June 30, 2023.

Interest expense increased $5.5 million, or 57.6%, from $9.6 million for the six months ended June 30, 2023 to $15.1 million for the six months ended June 30, 2024 due to higher costs and average balances on certificates of deposit and borrowings.

Interest expense on interest-bearing deposits increased $4.3 million, or 54.2%, to $12.2 million for the six months ended June 30, 2024 from $7.9 million for the six months ended June 30, 2023. The increase was due to a 145 basis point increase in the average cost of deposits to 3.91% for the six months ended June 30, 2024 from 2.46% for the six months ended June 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. The average balances of certificates of deposit increased $18.5 million to $517.2 million for the six months ended June 30, 2024 from $498.7 million for the six months ended June 30, 2023 while average NOW/money market accounts and savings accounts decreased $31.9 million and $7.5 million for the six months ended June 30, 2024, respectively, compared to the six months ended June 30, 2023.

Interest expense on Federal Home Loan Bank advances increased $1.2 million, or 73.6%, from $1.7 million for the six months ended June 30, 2023 to $2.9 million for the six months ended June 30, 2024. The increase was primarily due to an increase in the average balance of $54.2 million to $160.3 million for the six months ended June 30, 2024 from $106.1 million for the six months ended June 30, 2023. The increase was also due to an increase in the average cost of borrowings of 47 basis points to 3.66% for the six months ended June 30, 2024 from 3.19% for the six months ended June 30, 2023 due to the new borrowings being at higher rates. Cash flow hedges used to manage interest rate risk totaled $115.0 million at June 30, 2024. During the six months ended June 30, 2024, the use of the cash flow hedges reduced the interest expense on the Federal Home Loan Bank advances and certificates of deposit by $749,000.

Net interest income decreased $3.4 million, or 38.8%, to $5.4 million for the six months ended June 30, 2024 from $8.8 million for the six months ended June 30, 2023. The decrease reflected a 93 basis point decrease in our net interest rate spread to 0.68% for the six months ended June 30, 2024 from 1.61% for the six months ended June 30, 2023. Our net interest margin decreased 81 basis points to 1.20% for the six months ended June 30, 2024 from 2.01% for the six months ended June 30, 2023.

We recorded a $70,000 provision for credit losses for the six months ended June 30, 2024 compared to a $125,000 recovery for credit losses for the six-month period ended June 30, 2023. The entire provision in the first half of 2024 was due to an increase in held-to-maturity corporate securities. In addition to the recorded provision, the Company reclassified $38,000 from the existing allowance for credit losses related to loans to the allowance for credit losses related to held-to-maturity securities to reflect the changing composition of the balance sheet and related credit risk.

Non-interest income increased by $35,000, or 6.3%, to $602,000 for the six months ended June 30, 2024 from $567,000 for the six months ended June 30, 2023. Bank-owned life insurance income increased $51,000, or 13.5%, due to higher balances during 2024, which was partially offset by a lower gain on sale of loans.

For the six months ended June 30, 2024, non-interest expense increased $219,000, or 3.1%, over the comparable 2023 period. Professional fees increased $194,000, or 73.5% due to higher consulting expense related to strategic business planning. Data processing expense increased $110,000, or 21.5%, due to higher processing costs. These were offset by a $162,000, or 3.6% reduction in salaries and employee benefit, which decreased due to lower headcount and increased expenses in 2023 related to the retirement of the previous Chief Executive Officer.

Income tax expense decreased $1.1 million, or 211.2%, to a benefit of $568,000 for the six months ended June 30, 2024 from a $511,000 expense for the six months ended June 30, 2023. The decrease was due to a reduction of $3.8 million in taxable income.

Balance Sheet Analysis

Total assets were $974.7 million at June 30, 2024, representing an increase of $35.4 million, or 3.8%, from December 31, 2023. Cash and cash equivalents decreased $7.3 million during the period primarily due to the purchase of new securities offset by loan repayments. Net loans decreased $7.0 million, or 1.0%, due to $28.2 million in repayments including a $10.3 million decrease in the balance of residential loans, partially offset by new production of $21.2 million, including $11.0 million and $3.4 million of commercial real estate and commercial and industrial loans, respectively. Due to the interest rate environment, we have seen a decrease in demand for residential and construction loans, which have been primary drivers of our loan growth in recent periods. Securities held to maturity increased $8.4 million, or 11.6%, and securities available for sale increased $38.0 million or 55.1%, due to new purchases of mortgage-backed securities.

Delinquent loans increased $888,000 to $13.5 million, or 1.90% of total loans, at June 30, 2024, compared to $12.6 million at December 31, 2023. The increase was mostly due to one commercial real estate loan with a balance of $761,000, which is considered well-secured with a loan-to-value of 59%. During the same timeframe, non-performing assets increased from $12.8 million at December 31, 2023 to $13.0 million which represented 1.33% of total assets at June 30, 2024. No loans were charged-off during the three or six months ended June 30, 2024 or June 30, 2023. The Company’s allowance for credit losses related to loans was 0.39% of total loans and 21.20% of non-performing loans at June 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. At June 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.

Total liabilities increased $36.3 million, or 4.5%, to $838.4 million mainly due to a $21.0 million increase in interest bearing deposits and by an $11.8 million increase in borrowings. Total deposits increased $23.8 million, or 3.8%, to $649.1 million at June 30, 2024 from $625.3 million at December 31, 2023. The increase in deposits reflected an increase in certificate of deposit accounts, which increased by $19.3 million to $512.6 million from $493.3 million at December 31, 2023, an increase in NOW deposit accounts, which increased by $3.5 million to $44.9 million from $41.3 million at December 31, 2023, and by an increase in noninterest bearing demand accounts, which increased by $2.8 million from $30.6 million at December 31, 2023 to $33.3 million at June 30, 2024. At June 30, 2024, brokered deposits were $91.2 million or 14.1% of deposits and municipal deposits were $35.4 million or 5.5% of deposits. At June 30, 2024, uninsured deposits represented 10.7% of the Bank’s total deposits. Federal Home Loan Bank advances increased $11.8 million, or 7.0%, due to new borrowings, for which the durations have primarily been short-term in nature as we remain mindful of the changing interest rate environment and potential for interest rate cuts from the Federal Reserve. Total borrowing capacity at the Federal Home Loan Bank is $304.2 million of which $179.4 million has been advanced.

Total stockholders’ equity decreased $830,000 to $136.3 million, due to a net loss of $873,000 and the repurchase of 107,323 shares of stock at a cost of $735,000, offset by a decrease in accumulated other comprehensive loss for securities available for sale of $483,000 and stock compensation of $150,000 for the three months ended June 30, 2024. At June 30, 2024, the Company’s ratio of average stockholders’ equity-to-total assets was 13.65%, compared to 15.32% at December 31, 2023.

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 seven offices located in Bogota, Hasbrouck Heights, Upper Saddle River, 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, real estate market values in the Bank’s lending area, changes in liquidity, including the size and composition of our deposit portfolio and the percentage of uninsured deposits in the portfolio; the availability of low-cost funding; our continued reliance on brokered and municipal deposits; demand for loans in our market area; changes in the quality of our loan and security portfolios, economic assumptions or changes in our methodology, either of which may impact our allowance for credit losses calculation, increases in non-performing and classified loans, 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, a failure in or breach of the Company’s operational or security systems or infrastructure, including cyberattacks, the failure to maintain current technologies, failure to retain or attract employees and legislative, accounting and regulatory changes that could adversely affect the business in which the Company and the Bank are engaged.

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, 2024 and December 31, 2023:

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

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.

Contacts
Kevin Pace – President & CEO, 201-862-0660 ext. 1110