Bogota Financial Corp. 10-Q

bsbk20230930_10q.htm     Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549   FORM 10-Q   ☒          QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934   For the quarterly period ended  September 30, 2023   OR   ☐          TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934   For the transition period from _______________ to _______________   Commission File No. 001-39180   Bogota Financial Corp. (Exact Name of Registrant as Specified in Its Charter)   Maryland 84-3501231 (State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)     819 Teaneck Road Teaneck , New Jersey 07666 (Address of Principal Executive Offices) (Zip Code)   ( 201 ) 862-0660 (Registrant ’ s Telephone Number, Including Area Code)   N/A (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)   Securities registered pursuant to Section 12(b) of the Act:   Title of each class   Trading Symbol(s)   Name of each exchange on which registered Common Stock, $0.01 par value per share   BSBK   The Nasdaq Stock Market, LLC   Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days.   Yes    ☒   No   ☐   Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes    ☒   No   ☐   Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)   Large accelerated filer ☐ Accelerated filer ☐         Non-accelerated filer ☒ Smaller reporting company ☒             Emerging growth company ☒   If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐   Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes   ☐    No   ☒   As of November 10, 2023, there were 13,327,266  shares issued and outstanding of the registrant’s common stock, par value $0.01 per share.       Table of Contents     Bogota Financial Corp. Form 10-Q   Table of Contents       Page PART I. FINANCIAL INFORMATION       Item 1. Financial Statements 1         Consolidated Statements of Financial Condition at September 30, 2023 (unaudited) and December 31, 2022. 1         Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 and 2022 (unaudited) 2         Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2023 and 2022 (unaudited) 3         Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended September 30, 2023 and 2022 (unaudited) 4         Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022 (unaudited) 5         Notes to Consolidated Financial Statements (unaudited) 6       Item 2. Management ’ s Discussion and Analysis of Financial Condition and Results of Operations 20       Item 3. Quantitative and Qualitative Disclosures About Market Risk 28       Item 4. Controls and Procedures 28       PART II. OTHER INFORMATION       Item 1. Legal Proceedings 29       Item 1A. Risk Factors 29       Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities 29       Item 3. Defaults Upon Senior Securities 29       Item 4. Mine Safety Disclosures 29       Item 5. Other Information 29       Item 6. Exhibits 30         SIGNATURES 31   i Table of Contents     PART I – FINANCIAL INFORMATION   Item 1. Financial Statements   BOGOTA FINANCIAL CORP. CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (unaudited)       As of     As of       September 30, 2023     December 31, 2022   Assets                 Cash and due from banks   $ 7,213,903     $ 8,160,028   Interest-bearing deposits in other banks     17,763,418       8,680,889   Cash and cash equivalents     24,977,321       16,840,917   Securities available for sale, at fair value     68,518,624       85,100,578   Securities held to maturity (fair value of $ 57,033,705 and $ 70,699,651 , respectively)     65,927,156       77,427,309   Loans, net of allowance of $ 2,785,949 and $ 2,578,174 , respectively     710,292,859       719,025,762   Premises and equipment, net     7,765,804       7,884,335   Federal Home Loan Bank (FHLB) stock and other restricted securities     7,158,400       5,490,900   Accrued interest receivable     3,672,882       3,966,651   Core deposit intangibles     220,661       267,272   Bank-owned life insurance     30,780,398       30,206,325   Other assets     7,714,828       4,888,954   Total Assets   $ 927,028,933     $ 951,099,003   Liabilities and Equity                 Non-interest bearing deposits   $ 33,420,666     $ 38,653,349   Interest bearing deposits     611,857,823       662,758,100   Total deposits     645,278,489       701,411,449   FHLB advances-short term     39,000,000       59,000,000   FHLB advances-long term     96,314,543       43,319,254   Advance payments by borrowers for taxes and insurance     3,460,726       3,174,661   Other liabilities     5,321,920       4,534,516   Total liabilities     789,375,678       811,439,880                     Stockholders’ Equity                 Preferred stock $ 0.01 par value 1,000,000 shares authorized, none issued and outstanding at September 30, 2023 and December 31, 2022     —       —   Common stock $ 0.01 par value, 30,000,000 shares authorized, 13,373,766 issued and outstanding at September 30, 2023 and 13,699,016 at December 31, 2022     133,737       136,989   Additional paid-in capital     56,688,749       59,099,476   Retained earnings     93,354,828       91,756,673   Unearned ESOP shares ( 416,491 shares at September 30, 2023 and 436,945 shares at December 31, 2022)     ( 4,897,099 )     ( 5,123,002 ) Accumulated other comprehensive loss     ( 7,626,960 )     ( 6,211,013 ) Total stockholders’ equity     137,653,255       139,659,123   Total liabilities and stockholders’ equity   $ 927,028,933     $ 951,099,003     See accompanying notes to unaudited consolidated financial statements.     1 Table of Contents     BOGOTA FINANCIAL CORP. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)       Three Months Ended     Nine Months Ended       September 30,     September 30,       2023     2022     2023     2022   Interest income                                 Loans, including fees   $ 7,980,388     $ 7,018,200     $ 23,821,545     $ 18,403,802   Securities                                 Taxable     994,791       1,013,034       3,042,389       2,582,869   Tax-exempt     13,159       48,027       78,293       115,305   Other interest-earning assets     301,081       96,139       771,584       263,634   Total interest income     9,289,419       8,175,400       27,713,811       21,365,610   Interest expense                                 Deposits     4,851,926       1,249,693       12,777,907       2,925,685   FHLB advances     1,220,166       716,705       2,900,359       1,402,741   Total interest expense     6,072,092       1,966,398       15,678,266       4,328,426   Net interest income     3,217,327       6,209,002       12,035,545       17,037,184   Provision (recovery) for credit losses     —       175,000       ( 125,000 )     275,000   Net interest income after provision (recovery) for credit losses     3,217,327       6,034,002       12,160,545       16,762,184   Non-interest income                                 Fees and service charges     61,529       47,090       159,381       136,886   Gain on sale of loans     —       —       29,375       86,913   Bank-owned life insurance     197,873       185,085       574,073       510,527   Other     30,332       37,336       93,660       133,325   Total non-interest income     289,734       269,511       856,489       867,651   Non-interest expense                                 Salaries and employee benefits     2,274,347       2,154,654       6,737,952       6,316,898   Occupancy and equipment     372,626       347,036       1,114,170       1,033,846   FDIC insurance assessment     132,571       54,000       319,690       162,000   Data processing     205,721       311,106       717,913       920,293   Advertising     126,000       156,145       369,383       368,435   Director fees     159,336       189,424       478,011       607,749   Professional fees     149,251       163,500       412,519       459,253   Other     241,530       262,890       661,300       905,428   Total non-interest expense     3,661,382       3,638,755       10,810,938       10,773,902   (Loss) income before income taxes     ( 154,321 )     2,664,758       2,206,096       6,855,933   Income tax (benefit) expense     ( 125,268 )     734,152       385,801       1,882,423   Net (loss) income   $ ( 29,053 )   $ 1,930,606     $ 1,820,295     $ 4,973,510   Earnings (loss) per Share - basic   $ ( 0.00 )   $ 0.14     $ 0.14     $ 0.36   Earnings (loss) per Share - diluted   $ ( 0.00 )   $ 0.14     $ 0.14     $ 0.36   Weighted average shares outstanding - basic     13,037,903       13,468,751       13,103,951       13,661,851   Weighted average shares outstanding - diluted     13,037,903       13,529,857       13,103,951       13,704,688     See accompanying notes to unaudited consolidated financial statements.   2 Table of Contents     BOGOTA FINANCIAL CORP. CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (unaudited)       Three Months Ended     Nine Months Ended       September 30,     September 30,       2023     2022     2023     2022   Net (loss) income   $ ( 29,053 )   $ 1,930,606     $ 1,820,295     $ 4,973,510   Other comprehensive (loss) income:                                 Net unrealized loss on securities available for sale:     ( 1,594,912 )     ( 316,044 )     ( 2,456,233 )     ( 9,416,506 ) Tax effect     448,330       88,840       690,448       2,646,981   Net of tax     ( 1,146,582 )     ( 227,204 )     ( 1,765,785 )     ( 6,769,525 ) Defined benefit retirement plans:                                 Reclassification adjustment for amortization of prior service cost and net (loss) gain included in salaries and employee benefits     ( 23,016 )     57,850       ( 69,048 )     173,550   Tax effect     6,470       ( 16,261 )     19,410       ( 48,783 ) Net of tax     ( 16,546 )     41,589       ( 49,638 )     124,767   Derivatives:                                 Unrealized gain on swap contracts accounted for as cash flow hedges     257,333       364,332       555,677       364,332   Tax effect     ( 72,336 )     ( 102,414 )     ( 156,201 )     ( 102,414 ) Net of tax     184,997       261,918       399,476       261,918   Total other comprehensive (loss) income     ( 978,131 )     76,303       ( 1,415,947 )     ( 6,382,840 ) Comprehensive income (loss) income   $ ( 1,007,184 )   $ 2,006,909     $ 404,348     $ ( 1,409,330 )   See accompanying notes to unaudited consolidated financial statements.   3 Table of Contents     BOGOTA FINANCIAL CORP. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (unaudited)                                               Accumulated                               Additional                     Other     Total       Common     Common     Paid-in     Retained     Unearned     Comprehensive     Stockholders       Stock Shares     Stock     Capital     Earnings     ESOP shares     Loss     Equity   Balance January 1, 2022     14,605,809     $ 146,057     $ 68,247,204     $ 84,879,812     $ ( 5,424,206 )   $ ( 272,656 )   $ 147,576,211   Net income     —       —       —       1,400,897       —       —       1,400,897   Other comprehensive loss     —       —       —       —       —       ( 2,358,399 )     ( 2,358,399 ) Stock based compensation     —       —       233,193       —       —       —       233,193   Stock purchased and retired     ( 180,501 )     ( 1,805 )     ( 1,890,310 )     —       —       —       ( 1,892,115 ) ESOP Shares released ( 25,789 shares)     —       —       ( 9,156 )     —       75,301       —       66,145   Balance March 31, 2022     14,425,308     $ 144,252     $ 66,580,931     $ 86,280,709     $ ( 5,348,905 )   $ ( 2,631,055 )   $ 145,025,932   Net income     —       —       —       1,642,007       —       —       1,642,007   Other comprehensive loss     —       —       —       —       —       ( 4,100,744 )     ( 4,100,744 ) Stock based compensation     —       —       233,193       —       —       —       233,193   Stock purchased and retired     ( 217,448 )     ( 2,174 )     ( 2,407,889 )     —       —       —       ( 2,410,063 ) ESOP Shares released ( 25,789 shares)     —       —       ( 4,832 )     —       75,301       —       70,469   Balance June 30, 2022     14,207,860     $ 142,078     $ 64,401,403     $ 87,922,716     $ ( 5,273,604 )   $ ( 6,731,799 )   $ 140,460,794   Net income     —       —       —       1,930,606       —       —       1,930,606   Other comprehensive income     —       —       —       —       —       76,303       76,303   Stock based compensation     —       —       233,193       —       —       —       233,193   Stock purchased and retired     ( 148,472 )     ( 1,485 )     ( 1,652,461 )     —       —       —       ( 1,653,946 ) ESOP Shares released ( 25,789 shares)     —       —       ( 3,892 )     —       75,301       —       71,409   Balance September 30, 2022     14,059,388     $ 140,593     $ 62,978,243     $ 89,853,322     $ ( 5,198,303 )   $ ( 6,655,496 )   $ 141,118,359                                                             Balance January 1, 2023     13,699,016     $ 136,989     $ 59,099,476     $ 91,756,673     $ ( 5,123,002 )   $ ( 6,211,013 )   $ 139,659,123   Adoption of ASU 326 credit losses     —       —       —       ( 222,140 )     —       —       ( 222,140 ) Net income     —       —       —       992,707       —       —       992,707   Other comprehensive loss     —       —       —       —       —       ( 246,175 )     ( 246,175 ) Stock based compensation     —       —       233,193       —       —       —       233,193   Stock purchased and retired     ( 126,660 )     ( 1,266 )     ( 1,401,568 )     —       —       —       ( 1,402,834 ) ESOP shares released ( 25,789 shares)     —       —       ( 2,916 )     —       75,301       —       72,385   Balance March 31, 2023     13,572,356     $ 135,723     $ 57,928,185     $ 92,527,240     $ ( 5,047,701 )   $ ( 6,457,188 )   $ 139,086,259   Net income     —       —       —       856,641       —       —       856,641   Other comprehensive loss     —       —       —       —       —       ( 191,641 )     ( 191,641 ) Stock based compensation     —       —       233,193       —       —       —       233,193   Stock purchased and retired     ( 89,899 )     ( 899 )     ( 839,563 )     —       —       —       ( 840,462 ) ESOP shares released ( 25,789 shares)     —       —       ( 20,813 )     —       75,301       —       54,488   Balance June 30, 2023     13,482,457     $ 134,824     $ 57,301,002     $ 93,383,881     $ ( 4,972,400 )   $ ( 6,648,829 )   $ 139,198,478   Net loss     —       —       —       ( 29,053 )     —       —       ( 29,053 ) Other comprehensive loss     —       —       —       —       —       ( 978,131 )     ( 978,131 ) Stock based compensation     —       —       233,193       —       —       —       233,193   Stock purchased and retired     ( 108,691 )     ( 1,087 )     ( 821,172 )     —       —       —       ( 822,259 ) ESOP shares released ( 25,789 shares)     —       —       ( 24,274 )     —       75,301       —       51,027   Balance September 30, 2023     13,373,766     $ 133,737     $ 56,688,749     $ 93,354,828     $ ( 4,897,099 )   $ ( 7,626,960 )   $ 137,653,255                                                               See accompanying notes to unaudited consolidated financial statements.   4 Table of Contents     BOGOTA FINANCIAL CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)       For the nine months ended       September 30,       2023     2022   Cash flows from operating activities                 Net income   $ 1,820,295     $ 4,973,510   Adjustments to reconcile net income to net cash provided by operating activities:                 Amortization of intangible assets     ( 53,081 )     ( 163,818 ) (Recovery) provision for credit losses     ( 125,000 )     275,000   Depreciation of premises and equipment     383,136       358,290   Amortization (accretion) of deferred loan (fees) costs, net     97,891       ( 78,649 ) Amortization of premiums and accretion of discounts on securities, net     4,541       38,625   Deferred income tax (benefit) expense     ( 111,594 )     201,580   Gain on sale of loans     ( 29,375 )     ( 86,913 ) Proceeds from sale of loans     1,875,125       4,640,081   Origination of loans held for sale     ( 1,845,750 )     ( 3,400,668 ) Increase in cash surrender value of bank owned life insurance     ( 574,073 )     ( 497,830 ) Employee stock ownership plan expense     177,900       208,023   Stock based compensation     699,579       699,579   Changes in:                 Accrued interest receivable     293,769       ( 698,724 ) Net changes in other assets     ( 1,518,086 )     1,939,009   Net changes in other liabilities     566,354       670,602   Net cash provided by operating activities     1,661,631       9,077,697   Cash flows from investing activities                 Purchases of securities held to maturity     ( 1,000,000 )     ( 23,120,238 ) Purchases of securities available for sale     —       ( 69,461,181 ) Maturities, calls, and repayments of securities available for sale     14,121,182       13,753,509   Maturities, calls, and repayments of securities held to maturity     12,500,153       13,044,952   Net decrease (increase) in loans     8,637,206       ( 137,038,853 ) Purchase of Bank Owned Life Insurance     —       ( 5,000,000 ) Purchases of premises and equipment     ( 264,605 )     ( 184,748 ) Purchase of FHLB stock     ( 6,919,000 )     ( 7,027,200 ) Redemption of FHLB stock     5,251,500       5,215,000   Net cash provided by (used in) investing activities     32,326,436       ( 209,818,759 ) Cash flows from financing activities                 Net (decrease) increase in deposits     ( 56,099,671 )     70,767,453   Net (decrease) increase in short-term FHLB advances     ( 20,000,000 )     74,000,000   Proceeds from long-term FHLB non-repo advances     75,500,000       —   Repayments of long-term FHLB non-repo advances     ( 22,472,502 )     ( 30,879,039 ) Repurchase of common stock     ( 3,065,555 )     ( 5,956,124 ) Net increase in advance payments from borrowers for taxes and insurance     286,065       1,065,760   Net cash (used in) provided by financing activities     ( 25,851,663 )     108,998,050   Net increase (decrease) in cash and cash equivalents     8,136,404       ( 91,743,012 ) Cash and cash equivalents at beginning of year     16,840,917       105,068,785   Cash and cash equivalents at September 30,   $ 24,977,321     $ 13,325,773   Supplemental cash flow information                 Income taxes paid   $ 1,375,000     $ 1,275,000   Interest paid     15,261,645       4,064,492     See accompanying notes to unaudited consolidated financial statements.       5 Table of Contents BOGOTA FINANCIAL CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)     NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES   Nature of Operations and Principles of Consolidation : On January 15, 2020, Bogota Financial Corp. (the “Company,” “we” or “our”) became the mid-tier stock holding company for Bogota Savings Bank (the “Bank”) in connection with the reorganization of Bogota Savings Bank into the two -tier mutual holding company structure.  The Company completed its stock offering in connection with the mutual holding company reorganization of the Bank on January 15, 2020. Shares of the Company’s common stock began trading on January 16, 2020 on the Nasdaq Capital Market under the trading symbol “BSBK.”   The Bank maintains two subsidiaries. Bogota Securities Corp. was formed for the purpose of buying, selling and holding investment securities. Bogota Properties, LLC was inactive at September 30, 2023 and December 31, 2022 .   The Bank generally originates residential, commercial and consumer loans to, and accepts deposits from, customers in New Jersey. The debtors’ ability to repay the loans is dependent upon the region’s economy and the borrowers’ circumstances. The Bank is also subject to the regulations of certain federal and state agencies and undergoes periodic examination by those regulatory authorities.   Reclassifications : Some items in the prior year financial statements were reclassified to conform to the current presentation. Reclassifications had no effect on prior year net income or stockholders' equity.   Earnings per Share: Basic earnings per share (“EPS”) is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. For purposes of calculating basic EPS, weighted average common shares outstanding excludes unallocated employee stock ownership plan shares that have not been committed for release and non-vested shares of restricted stock. Diluted EPS is computed using the same method as basic EPS, except it also reflects the potential dilution which could occur if stock options were exercised and converted into common stock. The potentially diluted shares would then be included in the weighted average number of shares outstanding for the period using the treasury stock method. For the  three and nine months ended September 30, 2023 and September 30, 2022 , options to purchase 523,619 common shares with an exercise price of $ 10.45 were outstanding but were not included in the computation of diluted earnings per common share because to do so would be anti-dilutive. Anti-dilutive options are those options with exercise prices in excess of the weighted average market value for the periods presented.   The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share calculations for the three and nine months ended September 30, 2023 and 2022 .       For the three months ended September 30, 2023     For the three months ended September 30, 2022     For the nine months ended September 30, 2023     For the nine months ended September 30, 2022   Numerator                                 Net (loss) income   $ ( 29,053 )   $ 1,930,606     $ 1,820,295     $ 4,973,510   Denominator:                                 Weighted average shares outstanding - basic     13,037,903       13,468,751       13,103,951       13,661,851   Effect of stock options     —       61,106       —       42,837   Weighted average shares outstanding - diluted     13,037,903       13,529,857       13,103,951       13,704,688   Earnings per common share:                                 Basic   $ ( 0.00 )   $ 0.14     $ 0.14     $ 0.36   Diluted     ( 0.00 )     0.14       0.14       0.36     Use of Estimates : To prepare financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP"), management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ under different conditions than those assumed.   Basis of Presentation : The accompanying unaudited consolidated financial statements have been prepared in conformity with GAAP for interim financial information and pursuant to the requirements for reporting in Article 10 of Regulation S- X of the Securities Exchange Act of 1934, as amended. The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company,” we may delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We intend to take advantage of the benefits of this extended transition period. Accordingly, our financial statements may not be comparable to companies that comply with such new or revised accounting standards. These financial statements include the accounts of the Company, the Bank and its subsidiaries, and all significant intercompany balances and transactions are eliminated in consolidation.   The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions based on available information. In the opinion of management, all adjustments (consisting of normal recurring adjustments) and disclosures necessary for the fair presentation of the accompanying consolidated financial statements have been included. The results of operations for any interim periods are not necessarily indicative of the results which may be expected for the entire year or any other period.   6 Table of Contents BOGOTA FINANCIAL CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)   NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)   The unaudited financial statements and other financial information contained in this Quarterly Report on Form 10 -Q should be read in conjunction with the audited financial statements, and related notes, of the Company at and for the year ended December 31, 2022 .   Allowance for Credit Losses - Loans and Leases : The current expected credit loss (“CECL”) model requires an estimate of the credit losses expected over the life of an exposure (or pool of exposures). It replaces the incurred loss model that delayed the recognition of a credit loss until it was probable that a loss event was incurred.   The estimate of expected credit losses is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. Historical loss experience is generally the starting point for estimating expected credit losses. The Company then considers whether the historical loss experience should be adjusted for asset-specific risk characteristics or current conditions at the reporting date that did not exist over the historical period used. The Company considers future economic conditions and portfolio performance as part of a reasonable and supportable forecast.   Portfolio segment is defined as the level at which an entity develops and documents a systematic methodology to determine its allowance for credit losses (“ACL”). The Company has designated six portfolio segments, which are residential, commercial real estate, multi-family, construction, commercial and industrial and consumer. These portfolio segments are further disaggregated into classes, which represent loans and leases of similar type, risk characteristics, and methods for monitoring and assessing credit risk.   The Company has minimal history of credit losses and therefore uses the Weighted Average Remaining Maturity (WARM) method for all segments and relies on the use of qualitative factors to determine future credit losses.   The Company considers the impact of current environmental factors at the reporting date that did not exist over the period from which historical experience was used. Relevant factors include, but are not limited to, concentrations of credit risk (geographic, large borrower, and industry), economic trends and conditions, changes in underwriting standards, experience and depth of lending staff, trends in delinquencies, and the level of criticized loans.   The Company also incorporates a one -year reasonable and supportable loss forecast period to account for the effect of forecasted economic conditions and other factors on the performance of the commercial portfolio, which could differ from historical loss experience. The Company performs a quarterly asset quality review, which includes a review of forecasted gross charge-offs and recoveries, non-performing assets, criticized loans and leases, and risk rating migration. The asset quality review is reviewed by management and the results are used to consider a qualitative overlay to the quantitative baseline. After the one -year reasonable and supportable loss forecast period, this overlay adjustment assumes an immediate reversion to historical loss rates for the remaining loan life period.   The Company establishes a specific reserve for individually evaluated loans which do not share similar risk characteristics with the loans included in the quantitative baseline. These individually evaluated loans are removed from the pooling approach discussed above for the quantitative baseline, and include non-accrual loans, and other loans as deemed appropriate by management.   A financial asset is considered collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. For all classes of loans deemed collateral-dependent, the Company elected the practical expedient to estimate expected credit losses based on the collateral’s fair value less cost to sell. In most cases, the Company records a partial charge-off to reduce the loan’s carrying value to the collateral’s fair value less cost to sell. Substantially all of the collateral consists of various types of real estate including: residential properties; commercial properties, such as retail centers, office buildings, and lodging; agriculture land; and vacant land.   The reserve for unfunded commitments (the “Unfunded Reserve”) represents the expected credit losses on off-balance sheet commitments such as unfunded commitments to extend credit and standby letters of credit. However, a liability is not recognized for commitments unconditionally cancellable by the Company. The Unfunded Reserve is recognized as a liability (other liabilities in the consolidated statements of condition), with adjustments to the reserve recognized in other noninterest expense in the consolidated statements of income. The Unfunded Reserve is determined by estimating future draws and applying the expected loss rates on those draws. Future draws are based on historical averages of utilization rates (i.e., the likelihood of draws taken). To estimate future draws on unfunded balances, current utilization rates are compared to historical utilization rates. If current utilization rates are below historical utilization rates, the rate difference is applied to the committed balance to estimate the future draw. Loss rates are estimated by utilizing the same loss rates calculated for the allowance general reserves.   7 Table of Contents BOGOTA FINANCIAL CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)   NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)   Adoption of Accounting Standards: In June 2016, the FASB issued ASU 2016 - 13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (ASC 326 ), which changes the impairment model for most financial assets. This Update is intended to improve financial reporting by requiring more timely recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The underlying premise of the Update is that financial assets measured at amortized cost should be presented at the net amount expected to be collected, through an ACL that is deducted from the amortized cost basis. The ACL should reflect management’s current estimate of credit losses that are expected to occur over the remaining life of a financial asset. The income statement was affected for the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. With certain exceptions, transition to the new requirements will be through a cumulative-effect adjustment to opening retained earnings as of the beginning of the first reporting period in which the guidance was adopted. This Update was effective for Securities and Exchange Commission (“SEC”) filers that qualify as smaller reporting companies, non-SEC filers, and all other companies, for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company has no history of credit losses and therefore uses the WARM method and relies on the use of qualitative factors to determine future credit losses. Upon adoption of the CECL method of calculating the ACL on January 1, 2023, the Bank recorded a one -time decrease, net of tax, in retained earnings of $ 222,000 , an increase to the ACL of $ 157,000 and, an increase in the reserve for unfunded liabilities of $ 152,000 . No adjustment was made for the available-for-sale securities portfolio. See note 4 for additional information. The table below includes $ 125,775  of credit l osses on purchased credit impaired (“PCI”) loans that have been added to ACL as per the adoption of ASU 326.   The Bank adopted the provisions of ASC 326 related to financial assets purchased with credit deterioration (“PCD”) that were previously classified as PCI loans and accounted for under ASC 310 - 30 using the prospective transition approach. In accordance with the standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption. On January 1, 2023, the amortized cost basis of the PCD assets were adjusted to reflect the addition of $ 125,775  to the ACL.   The Bank adopted the provisions of ASC 326 related to presenting other-than-temporary impairment on available-for-sale debt securities prior to January 1, 2023 using the prospective transition approach, though no such charges had been recorded on the securities held by the Bank as of the date of adoption.   The effect of the adoption of ASC 326 on the loan portfolio segments and the ACL by portfolio segment was:       Pre Adoption     The effect of adoption     Post Adoption   Real estate:   (unaudited)   Residential First Mortgage   $ 466,100,627     $ 29,589,213     $ 495,689,840   Commercial and Multi-Family Real Estate     162,338,669       ( 162,338,669 )     —   Commercial Real Estate     —       96,030,721       96,030,721   Multi-Family Real Estate     —       66,400,713       66,400,713   Construction     61,825,478       —       61,825,478   Commercial and Industrial     1,684,189       —       1,684,189   Consumer:                         Home Equity and Other Consumer     29,654,973       ( 29,654,973 )     —   Consumer     —       98,770       98,770   Total loans     721,603,936       125,775       721,729,711   Allowance for credit losses     ( 2,578,174 )     ( 282,775 )     ( 2,860,949 ) Net loans   $ 719,025,762     $ ( 157,000 )   $ 718,868,762         Pre Adoption     The effect of adoption     Post Adoption   Assets   (unaudited)   ACL on loans                         Residential First Mortgage   $ 1,602,534     $ 211,669     $ 1,814,203   Commercial and Multi-Family Real Estate     615,480       ( 615,480 )     —   Commercial Real Estate     —       522,977       522,977   Multi-Family Real Estate     —       259,769       259,769   Construction     258,500       1,500       260,000   Commercial and Industrial     3,960       40       4,000   Home Equity and Other Consumer     97,700       ( 97,700 )     —   Liabilities                         ACL for unfunded commitments     —       152,000       152,000   Total   $ 2,578,174     $ 434,775     $ 3,012,949     In March 2022, the FASB issued ASU No. 2022 - 02, "Financial Instruments - Credit Losses (Topic 326 ): Troubled Debt Restructurings and Vintage Disclosures." The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted CECL and enhance the disclosure requirements for modifications of receivables made with borrowers experiencing financial difficulty. In addition, the amendments require disclosure of current period gross write-offs by year of origination for financing receivables and net investment in leases in the existing vintage disclosures. This ASU became effective on January 1, 2023 for the Company. The adoption of this ASU resulted in updated disclosures within our financial statements but otherwise did not have a material impact on the Company’s financial statements.   8 Table of Contents BOGOTA FINANCIAL CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)     NOTE 2 – SECURITIES AVAILABLE FOR SALE   The following table summarizes the amortized cost, fair value, and gross unrealized gains and losses of securities available for sale, by contractual maturity, at September 30, 2023 and December 31, 2022 :               Gross     Gross               Amortized     Unrealized     Unrealized     Fair       Cost     Gains     Losses     Value   September 30, 2023                                 U.S. government and agency obligations                                 One through five years   $ 6,000,000     $ —     $ ( 611,727 )   $ 5,388,273   Corporate bonds due in:                                 Less than one year     1,001,146       —       ( 3,524 )     997,622   One through five years     11,230,530       —       ( 428,667 )     10,801,863   Five through ten years     1,000,000       —       ( 157,130 )     842,870   MBSs – residential     41,981,115       2,247       ( 7,040,552 )     34,942,810   MBSs – commercial     18,803,192       —       ( 3,258,006 )     15,545,186   Total   $ 80,015,983     $ 2,247     $ ( 11,499,606 )   $ 68,518,624                 Gross     Gross               Amortized     Unrealized     Unrealized     Fair       Cost     Gains     Losses     Value   December 31, 2022                                 U.S. treasury bills   $ 4,971,310     $ —     $ ( 43,702 )   $ 4,927,608   U.S. government and agency obligations                                 One through five years     6,000,000       —       ( 534,846 )     5,465,154   Corporate bonds due in:                                 Less than one year     3,022,044       —       ( 37,230 )     2,984,814   One through five years     12,182,364       554       ( 585,085 )     11,597,833   Five through ten years     1,000,000       —       ( 76,600 )     923,400   MBSs – residential     44,879,199       2,146       ( 5,232,300 )     39,649,045   MBSs – commercial     22,086,788       —       ( 2,534,064 )     19,552,724   Total   $ 94,141,705     $ 2,700     $ ( 9,043,827 )   $ 85,100,578     All of the mortgaged-backed securities (“MBSs”) are issued by the following government sponsored agencies: Federal Home Loan Mortgage Corporation (“FHLMC”), Federal National Mortgage Association (“FNMA”) and Government National Mortgage Association (“GNMA”).   There were no sales of securities during the nine months ended September 30, 2023 or September 30, 2022 .   The age of unrealized losses and the fair value of related securities as of  September 30, 2023 and  December 31, 2022 were as follows:       Less Than 12 Months     12 Months or More     Total       Fair     Unrealized     Fair     Unrealized     Fair     Unrealized       Value     Losses     Value     Losses     Value     Losses   September 30, 2023                                                 U.S. government and agency obligations   $ —     $ —     $ 5,388,273     $ ( 611,727 )   $ 5,388,273     $ ( 611,727 ) Corporate bonds     —       —       12,642,355       ( 589,321 )     12,642,355       ( 589,321 ) MBSs – residential     1,914,159       ( 200,739 )     32,886,252       ( 6,839,813 )     34,800,411       ( 7,040,552 ) MBSs – commercial     -       -       15,545,186       ( 3,258,006 )     15,545,186       ( 3,258,006 ) Total   $ 1,914,159     $ ( 200,739 )   $ 66,462,066     $ ( 11,298,867 )   $ 68,376,225     $ ( 11,499,606 )       Less Than 12 Months     12 Months or More     Total       Fair     Unrealized     Fair     Unrealized     Fair     Unrealized       Value     Losses     Value     Losses     Value     Losses   December 31, 2022                                                 U.S treasury bills   $ 4,927,608     $ ( 43,702 )   $ —     $ —     $ 4,927,608     $ ( 43,702 ) U.S. government and agency obligations     2,758,248       ( 241,752 )     2,706,906       ( 293,094 )     5,465,154       ( 534,846 ) Corporate bonds     11,859,089       ( 392,367 )     2,647,402       ( 306,548 )     14,506,491       ( 698,915 ) MBSs – residential     16,474,573       ( 1,557,718 )     22,801,879       ( 3,674,582 )     39,276,452       ( 5,232,300 ) MBSs – commercial     9,449,159       ( 857,122 )     10,103,565       ( 1,676,942 )     19,552,724       ( 2,534,064 ) Total   $ 45,468,677     $ ( 3,092,661 )   $ 38,259,752     $ ( 5,951,166 )   $ 83,728,429     $ ( 9,043,827 )   9 Table of Contents BOGOTA FINANCIAL CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)   NOTE 2 – SECURITIES AVAILABLE FOR SALE (Continued)   Unrealized losses on corporate bonds available for sale are not considered to be credit losses because the issuer bonds are of high credit quality, management does not intend to sell and it is likely that management will not be required to sell the securities prior to their anticipated recovery, and the decline in fair value was largely due to changes in interest rates and other market conditions. At September 30, 2023 , 100% of the mortgage-backed securities were issued by U.S. government-sponsored entities and agencies, primarily FNMA and FHLMC, institutions which the government has affirmed its commitment to support. Because the decline in fair value was attributable to changes in interest rates and illiquidity, and not credit quality, and because the Bank does not have the intent to sell these mortgage-backed securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Bank does not consider these losses to be credit-related at September 30, 2023 . As of September 30, 2023 , no ACL was required on available-for-sale securities. At  December 31, 2022 the Bank did not consider these securities to be other-than-temporary impaired. At September 30, 2023 and December 31, 2022 , securities available for sale with a carrying value of $ 114,221  and $ 126,662 were pledged to secure public deposits. There were 47  securities in a loss position at September 30, 2023 .     NOTE 3 – SECURITIES HELD TO MATURITY   Effective January 1, 2023, the Company adopted ASC 326, which requires management to complete an evaluation of the held-to-maturity securities portfolio to identify whether any ACL is required. Management completed an evaluation as of the adoption date and determined the ACL on the held-to-maturity portfolio was not significant. This determination was based on financial review of securities and ratings of each security.                                                                  The following table summarizes the amortized cost, fair value, and gross unrecognized gains and losses of securities held to maturity by contractual maturity at September 30, 2023 and December 31, 2022 :               Gross     Gross               Amortized     Unrecognized     Unrecognized     Fair       Cost     Gains     Losses     Value   September 30, 2023                                 U.S. Government and agency obligations                                 One through five years   $ 10,000,000     $ —     $ ( 476,670 )   $ 9,523,330   Five through ten years     3,000,000       —       ( 486,441 )     2,513,559   Corporate bonds due in:                                 One through five years     2,453,761       —       ( 67,353 )     2,386,408   Five through ten years     17,288,710       —       ( 2,370,801 )     14,917,909   Municipal obligations due in:                                 One through five years     901,836       —       ( 74,403 )     827,433   Five through ten years     375,000       —       ( 12,934 )     362,066   Greater than ten years     1,724,997       —       ( 356,062 )     1,368,935   MBSs:                                 Residential     12,909,061       7,620       ( 1,776,289 )     11,140,392   Commercial     17,273,791       —       ( 3,280,118 )     13,993,673   Total   $ 65,927,156     $ 7,620     $ ( 8,901,071 )   $ 57,033,705                 Gross     Gross               Amortized     Unrecognized     Unrecognized     Fair       Cost     Gains     Losses     Value   December 31, 2022                                 U.S. Government and agency obligations                                 One through five years   $ 10,000,000     $ —     $ ( 456,850 )   $ 9,543,150   Five through ten years     3,000,000       —       ( 466,866 )     2,533,134   Corporate bonds due in:                                 One through five years     2,444,729       1,269       ( 55,836 )     2,390,162   Five through ten years     15,825,262       54,738       ( 1,045,557 )     14,834,443   Municipal obligations due in:                                 Less than one year     7,706,402       —       ( 36,250 )     7,670,152   One through five years     902,545       —       ( 84,742 )     817,803   Five through ten years     375,000       1,286       —       376,286   Greater than ten years     1,728,184       —       ( 346,586 )     1,381,598   MBSs:                                 Residential     14,425,827       410       ( 1,431,861 )     12,994,376   Commercial     21,019,360       —       ( 2,860,813 )     18,158,547   Total   $ 77,427,309     $ 57,703     $ ( 6,785,361 )   $ 70,699,651     All of the MBSs are issued by the following government sponsored agencies: FHLMC, FNMA and GNMA.   10 Table of Contents BOGOTA FINANCIAL CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)   NOTE 3 – SECURITIES HELD TO MATURITY (Continued)   The age of unrecognized losses and the fair value of related securities were as follows:       Less Than 12 Months     12 Months or More     Total       Fair     Unrecognized     Fair     Unrecognized     Fair     Unrecognized       Value     Losses     Value     Losses     Value     Losses   September 30, 2023                                                 U.S. government and agency obligations   $ —     $ —     $ 12,036,889     $ ( 963,111 )   $ 12,036,889     $ ( 963,111 ) Corporate bonds     2,833,496       ( 118,025 )     14,470,822       ( 2,320,129 )     17,304,318       ( 2,438,154 ) Municipal bonds     362,066       ( 12,934 )     2,196,368       ( 430,465 )     2,558,434       ( 443,399 ) MBSs – residential     34,596       ( 2 )     10,050,189       ( 1,776,287 )     10,084,785       ( 1,776,289 ) MBSs – commercial     —       —       13,993,672       ( 3,280,118 )     13,993,672       ( 3,280,118 ) Total   $ 3,230,158     $ ( 130,961 )   $ 52,747,940     $ ( 8,770,110 )   $ 55,978,098     $ ( 8,901,071 )       Less Than 12 Months     12 Months or More     Total       Fair     Unrecognized     Fair     Unrecognized     Fair     Unrecognized       Value     Losses     Value     Losses     Value     Losses   December 31, 2022                                                 U.S. government and agency obligations   $ 9,543,150     $ ( 456,850 )   $ 2,533,134     $ ( 466,866 )   $ 12,076,284     $ ( 923,716 ) Corporate bonds     11,464,282       ( 680,447 )     3,329,054       ( 420,946 )     14,793,336       ( 1,101,393 ) Municipal bonds     7,670,152       ( 36,250 )     2,199,401       ( 431,328 )     9,869,553       ( 467,578 ) MBSs – residential     2,008,303       ( 101,341 )     10,809,648       ( 1,330,520 )     12,817,951       ( 1,431,861 ) MBSs – commercial     7,383,822       ( 282,984 )     10,774,725       ( 2,577,829 )     18,158,547       ( 2,860,813 ) Total   $ 38,069,709     $ ( 1,557,872 )   $ 29,645,962     $ ( 5,227,489 )   $ 67,715,671     $ ( 6,785,361 )   No ACL on the securities above has been recorded because the issuers of the securities are of high credit quality and the decline in fair value was due to changes in interest rates and other market conditions. The fair value is expected to recover as the securities approach maturity. At September 30, 2023 and December 31, 2022 , securities held to maturity with a carrying amount of $ 1,709,280  and $ 5,293,804 , respectively, were pledged to secure repurchase agreements at the Federal Home Loan Bank of New York. There were 55  securities in a loss position at September 30, 2023 . At  December 31, 2022 the Bank did not consider these securities to be other-than-temporary impaired. At September 30, 2023 and December 31, 2022 , securities held to maturity with a carrying value of $ 5,079,376  and $ 5,293,804 , respectively, were pledged to secure public deposits.     NOTE 4 – LOANS   In conjunction with the adoption of ASC 326, the Company made certain loan portfolio segment reclassifications to conform to the new ACL methodology. Loans and these related reclassifications, are summarized as follows at September 30, 2023 and December 31, 2022 :               Pre Adoption             Post Adoption       September 30,     December 31,     The effect of     December 31,       2023     2022     adoption     2022   Real estate:   (unaudited)   Residential First Mortgage   $ 488,056,539     $ 495,689,840     $ 29,589,213     $ 466,100,627   Commercial and Multi-Family Real Estate     —       —       ( 162,338,669 )     162,338,669   Commercial Real Estate     99,503,713       96,030,721       96,030,721       —   Multi-Family Real Estate     68,264,208       66,400,713       66,400,713       —   Construction     51,537,604       61,825,478       —       61,825,478   Commercial and Industrial     5,697,696       1,684,189       —       1,684,189   Consumer:                                 Home Equity and Other Consumer     —       —       ( 29,654,973 )     29,654,973   Consumer     19,048       98,770       98,770       —   Total loans     713,078,808       721,729,711       125,775       721,603,936   Allowance for credit losses     ( 2,785,949 )     ( 2,860,949 )     ( 282,775 )     ( 2,578,174 ) Net loans   $ 710,292,859     $ 718,868,762     $ ( 157,000 )   $ 719,025,762     11 Table of Contents BOGOTA FINANCIAL CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)   NOTE 4 – LOANS (Continued)   The Bank has granted loans to officers and directors of the Bank. At September 30, 2023 and December 31, 2022 , such loans totaled $ 1,629,412  and $ 1,739,725 , respectively. At September 30, 2023 and December 31, 2022 , deferred loan fees were $ 3,012,686  and $ 3,078,612 , respectively.       Residential First Mortgage     Commercial Real Estate     Multi-Family Real Estate     Construction     Commercial and Industrial     Consumer     Total   Three months                                                         September 30, 2023                                                         Allowance for credit losses:                                                         Beginning balance   $ 1,811,547     $ 539,002     $ 265,000     $ 159,000     $ 11,400     $ —     $ 2,785,949   Provision for (recovery) of credit losses     ( 17,720 )     ( 5,505 )     4,925       11,700       6,600       —       —   Loans charged off     —       —             —       —       —       —   Recoveries     —       —             —       —       —       —   Total ending allowance balance   $ 1,793,827     $ 533,497     $ 269,925     $ 170,700     $ 18,000     $ —     $ 2,785,949         Residential First Mortgage     Commercial and Multi-Family Real Estate     Construction     Commercial and Industrial     Home Equity & Other     Total   September 30, 2022                                                 Allowance for loan losses:                                                 Beginning balance   $ 1,251,924     $ 680,000     $ 232,000     $ 7,000     $ 82,250     $ 2,253,174   Provision for (recovery) of loan losses     161,850       ( 32,000 )     36,500       ( 1,100 )     9,750       175,000   Loans charged off     —       —       —       —       —       —   Recoveries     —       —       —       —       —       —   Total ending allowance balance   $ 1,413,774     $ 648,000     $ 268,500     $ 5,900     $ 92,000     $ 2,428,174     Nine Months Ended September 30, 2023     Residential First Mortgage       Commercial Real Estate       Multi-Family Real Estate       Construction       Commercial and Industrial       Home Equity & Other       Total                                                             Allowance for credit losses:                                                         Beginning balance   $ 1,602,534     $ 381,180     $ 234,300     $ 258,500     $ 3,960     $ 97,700     $ 2,578,174   Impact of ASC 326 adoption     113,969       141,797       25,469       1,500       40       —       282,775   Provision for (recovery) of credit losses     77,324       10,520       10,156       ( 89,300 )     14,000       ( 97,700 )     ( 75,000 ) Loans charged off     —       —       —       —       —       —       —   Recoveries     —       —       —       —       —       —       —   Total ending allowance balance   $ 1,793,827     $ 533,497     $ 269,925     $ 170,700     $ 18,000     $ —     $ 2,785,949         Residential First Mortgage     Commercial and Multi-Family Real Estate     Construction     Commercial and Industrial     Home Equity & Other     Total   September 30, 2022                                                 Allowance for loan losses:                                                 Beginning balance   $ 1,092,474     $ 768,600     $ 195,000     $ 9,400     $ 87,700     $ 2,153,174   Provision for (recovery) of loan losses     321,300       ( 120,600 )     73,500       ( 3,500 )     4,300       275,000   Loans charged off     —       —       —       —       —       —   Recoveries     —       —       —       —       —       —   Total ending allowance balance   $ 1,413,774     $ 648,000     $ 268,500     $ 5,900     $ 92,000     $ 2,428,174     12 Table of Contents BOGOTA FINANCIAL CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)   NOTE 4 – LOANS (Continued)   The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segments and based on impairment method as of December 31, 2022 :       Residential First Mortgage     Commercial and Multi-Family Real Estate     Construction     Commercial and Industrial     Home Equity & Other consumer     Total   December 31, 2022                                                 Allowance for loan losses:                                                 Ending allowance balance attributable to loans:                                                 Individually evaluated for impairment   $ 33,000     $ —     $ —     $ —     $ —     $ 33,000   Collectively evaluated for impairment     1,569,534       615,480       258,500       3,960       97,700       2,545,174   Total ending allowance balance   $ 1,602,534     $ 615,480     $ 258,500     $ 3,960     $ 97,700     $ 2,578,174   Loans:                                                 Loans individually evaluated for impairment   $ 819,590     $ —     $ —     $ —     $ 37,069     $ 856,659   Loans collectively evaluated for impairment     462,439,940       160,990,186       61,825,478       1,684,189       29,586,787       716,526,580   Loans acquired with deteriorated credit quality     2,841,097       1,348,483       —       —       31,117       4,220,697   Total ending loan balance   $ 466,100,627     $ 162,338,669     $ 61,825,478     $ 1,684,189     $ 29,654,973     $ 721,603,936     Impaired loans as of  December 31, 2022 were as follows:                               Amount of       Loans             Average     allowance for       With no related     Loans with an     of individually     loan losses       allowance recorded     allowance recorded     Impaired loans     allocated   Residential First Mortgage   $ 1,199,278     $ 171,616     $ 1,300,615     $ 33,000   Commercial and Multi-Family Real Estate     488,222       —       488,196       —   Construction     —       —       —       —   Commercial and Industrial     —       —       —       —   Home Equity and Other Consumer     37,069       —       26,298       —       $ 1,724,569     $ 171,616     $ 1,815,109     $ 33,000     Collateral - dependent loans individually evaluated with the ACL by collateral type were as follows at September 30, 2023 :   Portfolio segment   Real estate     Other   Residential First Mortgage   $ —     $ —   Commercial Real Estate     —       —   Multi-Family Real Estate     —       —   Construction     10,955,010       —   Commercial and Industrial     —       —   Other Consumer     —       —       $ 10,955,010     $ —     Interest income recognized on impaired loans for the  nine months ended September 30, 2022 was nominal.   The following table presents the recorded investment in nonaccrual and loans past due 90 days or more and still on accrual, by class of loans as of December 31, 2022 :               Loans Past               Due 90 Days               or More Still       Nonaccrual     Accruing   December 31, 2022                 Residential First Mortgage   $ 819,590     $ —   Home Equity and Other Consumer     37,069       —   Total   $ 856,659     $ —     13 Table of Contents BOGOTA FINANCIAL CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)   NOTE 4 – LOANS (Continued)   No nonaccrual loans have specific reserves as of September 30, 2023 and the Bank had no other real estate owned at either September 30, 2023 or December 31, 2022 .       Nonaccrual loans beginning of period     Nonaccrual loans end of period     Nonaccrual with no Allowance for Credit Loss     Loans Past Due 90 Days or More Still Accruing     Interest recognized on nonaccrual loans   September 30, 2023                                         Residential First Mortgage   $ 819,590     $ 1,322,554     $ 1,322,554     $ —     $ —   Commercial Real Estate             495,273       495,273                   Construction     —       10,955,010       10,955,010       —       —   Consumer     37,069       —       —       —       —   Total   $ 856,659     $ 12,772,837     $ 12,772,837     $ —     $ —     The following table presents the aging of the recorded investment in past due loans as of September 30, 2023 and December 31, 2022 , by class of loans:                       Greater than                               30-59 Days     60-89 Days     89 Days     Total     Loans Not               Past Due     Past Due     Past Due     Past Due     Past Due     Total   September 30, 2023                                                 Residential First Mortgage   $ —     $ 301,093     $ 950,620     $ 1,251,713     $ 486,804,826     $ 488,056,539   Commercial Real Estate     —       6,856,465       454,076       7,310,541       92,193,172       99,503,713   Multi-Family Real Estate     —       —       —       —       68,264,208       68,264,208   Construction     —       —       10,893,713       10,893,713       40,643,891       51,537,604   Commercial and Industrial     —       —       —       —       5,697,696       5,697,696   Consumer     —       —       —       —       19,048       19,048   Total   $ —     $ 7,157,558     $ 12,298,409     $ 19,455,967     $ 693,622,841     $ 713,078,808                         Greater than                                       30-59 Days     60-89 Days     89 Days     Total     Loans Not                       Past Due     Past Due     Past Due     Past Due     Past Due     PCI loans     Total   December 31, 2022                                                         Residential First Mortgage   $ —     $ 360,849     $ 279,515     $ 640,364     $ 462,619,166     $ 2,841,097     $ 466,100,627   Commercial and Multi-Family Real Estate     —       —       —       —       160,990,186       1,348,483       162,338,669   Construction     —       —       —       —       61,825,478       —       61,825,478   Commercial and Industrial     —       —       —       —       1,684,189       —       1,684,189   Home Equity and Other Consumer     92,977       —       19,122       112,099       29,511,757       31,117       29,654,973   Total   $ 92,977     $ 360,849     $ 298,637     $ 752,463     $ 716,630,776     $ 4,220,697     $ 721,603,936     Loans greater than 89 days past due and loans on non-accrual are considered to be nonperforming.   Credit Quality Indicators   The Bank categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Bank analyzes loans individually by classifying the loans as to credit risk. Commercial and multi-family real estate, commercial and industrial and construction loans are graded on an annual basis. Residential and consumer loans are primarily evaluated based on performance. Refer to the immediately preceding table for the aging of the recorded investment of these loan segments. The Bank uses the following definitions for risk ratings:   Special Mention – Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.   Substandard – Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.   Doubtful – Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.   Loans not meeting the criteria above are considered to be Pass rated loans.   14 Table of Contents BOGOTA FINANCIAL CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)   NOTE 4 – LOANS (Continued)   Based on the most recent analysis performed, the risk category of loans by class is as follows:       Term Loans by Origination Year   September 30, 2023   2023     2022     2021     2020     2019     Prior     Revolving Loans     Totals   Residential First Mortgage                                                                 Pass   $ 4,145,356     $ 112,861,904     $ 38,626,930     $ 29,173,605     $ 26,785,339     $ 119,544,930     $ 155,600,451     $ 486,738,515   Special Mention     —       —       —       191,892       170,249       391,785       107,538       861,464   Substandard     —       —       —       —       —       170,615       285,945       456,560   Doubtful     —       —       —       —       —       —       —       —   Total     4,145,356       112,861,904       38,626,930       29,365,497       26,955,588       120,107,330       155,993,934       488,056,539   Gross charge-offs by vintage     —       —       —       —       —       —       —       —                                                                     Commercial Real Estate                                                                 Pass     —       3,083,244       —       6,431,819       5,537,490       11,964,001       72,033,083       99,049,637   Special Mention     —       —       —       —       —       —       454,076       454,076   Substandard     —       —       —       —       —       —       —       —   Doubtful     —       —       —       —       —       —       —       —   Total     —       3,083,244       —       6,431,819       5,537,490       11,964,001       72,487,159       99,503,713   Gross charge-offs by vintage     —       —       —       —       —       —       —       —                                                                     Multi-Family Real Estate                                                                 Pass     —       2,387,471       —       1,175,917       —       2,159,199       62,541,621       68,264,208   Special Mention     —       —       —       —       —       —       —       —   Substandard     —       —       —       —       —       —       —       —   Doubtful     —       —       —       —       —       —       —       —   Total     —       2,387,471       —       1,175,917       —       2,159,199       62,541,621       68,264,208   Gross charge-offs by vintage     —       —       —       —       —       —       —       —                                                                     Construction                                                                 Pass     —       —       —       —       —       —       40,643,891       40,643,891   Special Mention     —       —       —       —       —       —       —       —   Substandard     —       —       —       —       —       —       10,893,713       10,893,713   Doubtful     —       —       —       —       —       —       —       —   Total     —       —       —       —       —       —       51,537,604       51,537,604   Gross charge-offs by vintage     —       —       —       —       —       —       —       —                                                                     Commercial and Industrial                                                                 Pass     253,500       —       221,671       627,290       149,854       —       4,445,381       5,697,696   Special Mention     —       —       —       —       —       —       —       —   Substandard     —       —       —       —       —       —       —       —   Doubtful     —       —       —       —       —       —       —       —   Total     253,500       —       221,671       627,290       149,854       —       4,445,381       5,697,696   Gross charge-offs by vintage     —       —       —       —       —       —       —       —                                                                     Consumer                                                                 Pass     —       —       —       —       —       —       19,048       19,048   Special Mention     —       —       —       —       —       —       —       —   Substandard     —       —       —       —       —       —       —       —   Doubtful     —       —       —       —       —       —       —       —   Total     —       —       —       —       —       —       19,048       19,048   Total loans   $ 4,398,856     $ 118,332,619     $ 38,848,601     $ 37,600,523     $ 32,642,932     $ 134,230,530     $ 347,024,747     $ 713,078,808                 Special                       Pass     Mention     Substandard     Totals   December 31, 2022                                 Residential First Mortgage   $ 465,089,495     $ 555,965     $ 455,167     $ 466,100,627   Commercial and Multi-Family Real Estate     162,338,669       —       —       162,338,669   Construction     61,825,478       —       —       61,825,478   Commercial and Industrial     1,684,189       —       —       1,684,189   Home Equity and Other Consumer     29,617,904       19,122       17,947       29,654,973   Total   $ 720,555,735     $ 575,087     $ 473,114     $ 721,603,936     There were no loan modifications for the nine -month period ended  September 30, 2023 .    15 Table of Contents BOGOTA FINANCIAL CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)     NOTE 5 – STOCK BASED COMPENSATION   At the annual meeting held on May 27, 2021, stockholders of the Company approved the Bogota Financial Corp. 2021 Equity Incentive Plan ( "2021 Plan"), which provides for the issuance of up to 902,602 shares ( 257,887 restricted stock awards and 644,718 stock options) of the Company common stock.   On September 2, 2021, 226,519 shares of restricted stock were awarded, with a grant date fair value of $ 10.45 per share. Grants of restricted common stock were issued from authorized but unissued shares. Restricted shares granted under the 2021 Plan vest in equal installments, over a service period of five years, beginning one year from the date of grant. Management recognizes compensation expense for the fair value of restricted shares on a straight-line basis over the requisite service period. During the  three and nine months ended September 30, 2023 and September 30, 2022 , approximately $ 118,000 and $ 354,000  in expense was recognized in regard to these awards, respectively. The expected future compensation expense related to the 135,911  non-vested restricted shares outstanding at September 30, 2023 was approximately $ 1.6  million over a period of four years.   The following is a summary of the Company's restricted stock activity during the nine months ended September 30, 2023 :       Number of Non-vested Restricted Shares     Weighted Average Grant Date Fair Value   Outstanding, January 1, 2023     181,215     $ 10.45   Granted     —       —   Vested     45,304       10.45   Forfeited     —       —   Outstanding, September 30, 2023     135,911     $ 10.45     On September 2, 2021, options to purchase 526,119 shares of Company common stock were awarded, with a grant date fair value of $ 4.37 per option. Stock options granted under the 2021 Plan vest in equal installments over a service period of five years beginning one year from the date of grant. Stock options were granted at an exercise price of $ 10.45 , which was the Company's common stock price on the grant date and have an expiration period of 10 years.   Management recognizes expense for the fair value of these awards on a straight-line basis over the requisite service period. During the  three and nine months ended September 30, 2023 and September 30, 2022 , approximately $ 115,000 and $ 345,000 in expense was recognized in regard to these awards, respectively. The expected future compensation expense related to the 314,171  non-vested options outstanding at September 30, 2023 was $ 1.5  million over the vesting period of four years.   The following is a summary of the Company's option activity during the nine months ended September 30, 2023 :       Number of Stock Options     Weighted Average Exercise Price     Weighted Average Remaining Contractual Term (in years)     Aggregate Intrinsic Value   Outstanding, January 1, 2023     523,619     $ 10.45       6.5     $ —   Granted     —                           Exercised     —                           Forfeited     —                           Outstanding, September 30, 2023     523,619     $ 10.45       5.6     $ —   Options exercisable at September 30, 2023     209,448                     $ —     The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value, the difference between the Company's closing stock price on the last trading day of the period and the exercise price, multiplied by the number of in-the-money options.     NOTE 6 – EMPLOYEE STOCK OWNERSHIP PLAN   In connection with our mutual-to-stock reorganization and stock offering, the Bank established an employee stock ownership plan (“ESOP”), which acquired 515,775 shares of the Company’s common stock equaling 3.92 % of the Company's outstanding shares. The ESOP is a tax-qualified retirement plan providing employees the opportunity to own Company stock. Bank contributions to the ESOP are allocated to eligible participants on the basis of compensation, subject to federal tax limits. The number of shares to be allocated annually is 25,789 through 2039. During the three months ended September 30, 2023 and 2022 , $ 51,000  and $ 71,000  was incurred as expense for the plan, respectively. During the nine months ended September 30, 2023 and 2022 , $178,000 and $208,000  was incurred as expense for the plan, respectively. As of September 30, 2023 , 107,128  shares have been allocated and 416,491  shares are unallocated with a fair value of $ 3.5  million.     NOTE 7 – DERIVATIVES AND HEDGING ACTIVITES   The Company uses derivative financial instruments as components of its market risk management, principally to manage interest rate risk. Certain derivatives may be entered into in connection with transactions with commercial customers. Derivatives are not used for speculative purposes. All derivatives are recognized as either assets or liabilities in the Consolidated Statements of Financial Condition, reported at fair value and presented on a gross basis. Until a derivative is settled, a favorable change in fair value results in an unrealized gain that is recognized as an asset, while an unfavorable change in fair value results in an unrealized loss that is recognized as a liability.   16 Table of Contents BOGOTA FINANCIAL CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)   NOTE 7 – DERIVATIVES AND HEDGING ACTIVITES (continued)   The Company generally applies hedge accounting to its derivatives used for market risk management purposes. Hedge accounting is permitted only if specific criteria are met, including a requirement that a highly effective relationship exists between the derivative instrument and the hedged item, both at inception of the hedge and on an ongoing basis. Changes in the fair value of effective fair value hedges are recognized in current earnings (with the change in fair value of the hedged asset or liability also recognized in earnings). Changes in the fair value of effective cash flow hedges are recognized in other comprehensive income (loss) until earnings are affected by the variability in cash flows of the designated hedged item. Ineffective portions of hedge results are recognized in current earnings. Changes in the fair value of derivatives for which hedge accounting is not applied are recognized in current earnings.   The Company formally documents at inception all relationships between the derivative instruments and the hedged items, as well as its risk management objectives and strategies for undertaking the hedge transactions. This process includes linking all derivatives that are designated as hedges to specific assets and liabilities, or to specific firm commitments. The Company also formally assesses, both at inception of the hedge and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in the fair values or cash flows of the hedged items. If it is determined that a derivative is not highly effective or has ceased to be a highly effective hedge, the Company would discontinue hedge accounting prospectively. Gains or losses resulting from the termination of a derivative accounted for as a cash flow hedge remain in other comprehensive income (loss) and is (accreted) amortized to earnings over the remaining period of the former hedging relationship.   Certain derivative financial instruments are offered to certain commercial banking customers to manage their risk of exposure and risk management strategies. These derivative instruments consist primarily of currency forward contracts and interest rate swap contracts. The risk associated with these transactions is mitigated by simultaneously entering into similar transactions having essentially offsetting terms with a third party. In addition, the Company executes interest rate swaps with third parties in order to hedge the interest rate risk of short-term FHLB advances.   Interest Rate Swaps. At September 30, 2023 , the Company had two  interest rate swaps with a notional amounts of $ 20.0  million hedging on certain FHLB advances and brokered deposits. These interest rate swaps meet the cash flow hedge accounting requirements. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without the exchange of the underlying notional amount. At December 31, 2022 , the Company had one interest rate swap with a notional amount of $ 10.0 million to hedge certain FHLB advances. At both September 30, 2023 and December 31, 2022 , the Company had no interest rate swaps in place with commercial banking customers.   The table below presents the fair value of the Company’s derivative financial instruments as well as their classification in the Consolidated Statements of Financial Condition at September 30, 2023 :         September 30,     December 31,         2023     2022         Asset Derivative     Asset Derivative     Consolidated Statements of Financial Condition   Fair Value     Fair Value   Interest rate swaps Other Assets   $ 879,740     $ 324,062   Total derivative instruments   $ 879,740     $ 324,062     For the nine months ended September 30, 2023 , unrealized gains of $ 879,740  were recorded for changes in fair value of interest rate swaps with third parties and at September 30, 2023 , accrued interest was $ 70,000 . For the nine months ended September 30, 2023, the net effect on interest expense was a reduced expense of $254,000.   The Company has agreements with counterparties that contain a provision that if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default of its derivative obligations.     NOTE 8 – FAIR VALUE   Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:   Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.   Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.   Level 3 – Significant unobservable inputs that reflect a bank’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.   The Bank used the following methods and significant assumptions to estimate the fair value of each type of financial instrument:   The Bank’s available-for-sale portfolio is carried at estimated fair value on a recurring basis, with any unrealized gains and losses, net of taxes, reported as accumulated other comprehensive income/loss in stockholders’ equity. The securities available-for-sale portfolio consists of corporate bonds and mortgage-backed securities. The fair values of these securities are obtained from an independent nationally recognized pricing service. An independent pricing service provides prices which are categorized as Level 2, as quoted prices in active markets for identical assets are generally not available for the securities.   17 Table of Contents BOGOTA FINANCIAL CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)   NOTE 8 – FAIR VALUE (Continued)   Assets measured at fair value on a recurring basis are summarized below:               Quoted Prices                               in Active     Significant                       Markets for     Other     Significant               Identical     Observable     Unobservable       Carrying     Assets     Inputs     Inputs       Value     (Level 1)     (Level 2)     (Level 3)   As of September 30, 2023                                 Securities available for sale:                                 U.S. government and agency obligations   $ 5,388,273     $ —     $ 5,388,273     $ —   Corporate bonds     12,642,355       —       12,642,355       —   Cash flow hedge     879,740             879,740       —   MBSs - residential     34,942,810       —       34,942,810       —   MBSs - commercial     15,545,186       —       15,545,186       —       $ 69,398,364     $ —     $ 69,398,364     $ —   As of December 31, 2022                                 Securities available for sale:                                 U.S. treasury bills   $ 4,927,608     $ 4,927,608     $ —     $ —   U.S. government and agency obligations     5,465,154       —       5,465,154       —   Corporate bonds     15,506,047       —       15,506,047       —   Cash flow hedge     324,062             324,062       —   MBSs - residential     39,649,045       —       39,649,045       —   MBSs - commercial     19,552,724       —       19,552,724       —       $ 85,424,640     $ 4,927,608     $ 80,497,032     $ —     There were no transfers between level 1 and level 2 during the nine months ended September 30, 2023 .   The carrying amounts and estimated fair values of financial instruments not measured at fair value, at September 30, 2023 and December 31, 2022 , were as follows:       Carrying     Fair     Fair Value Measurement Placement       Amount     Value     (Level 1)     (Level 2)     (Level 3)       (In thousands)   September 30, 2023                                         Financial instruments - assets                                         Investment securities held-to-maturity   $ 65,927     $ 57,034     $ —     $ 57,034     $ —   Loans and loans held for sale     710,293       623,859       —       —       623,859   Financial instruments - liabilities                                         Certificates of deposit     498,918       494,739       —       494,739       —   Borrowings     135,315       131,613       —       131,613       —         Carrying     Fair     Fair Value Measurement Placement       Amount     Value     (Level 1)     (Level 2)     (Level 3)       (In thousands)   December 31, 2022                                         Financial instruments - assets                                         Investment securities held-to-maturity   $ 77,427     $ 70,700     $ —     $ 70,700     $ —   Loans and loans held for sale     719,026       658,250       —       —       658,250   Financial instruments - liabilities                                         Certificates of deposit     492,593       491,638       —       491,638       —   Borrowings     102,319       98,885       —       98,885       —     Carrying amount is the estimated fair value for cash and cash equivalents. The fair value of loans is determined using an exit price methodology. Certificates of deposits fair value is estimated by using a discounted cash flow approach. Fair value of FHLB advances is based on current rates for similar financing. Other balance sheet instruments such as cash and cash equivalents, accrued interest receivable, accrued interest payable and Bank owned life insurance holding costs approximate fair value. The fair value of off-balance sheet items is not considered material.   18 Table of Contents BOGOTA FINANCIAL CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)     NOTE 9 – ACCUMULATED OTHER COMPREHENSIVE LOSS   The components of accumulated other comprehensive loss included in equity (net of tax) for the  three and nine months ended September 30, 2023 and 2022 was as follows:       Unrealized gain                               and losses on                               available for                               sale securities     Benefit plans     Derivatives     Total   Three months ended                                 September 30, 2023                                 Beginning balance   $ ( 7,118,869 )   $ 22,592     $ 447,448     $ ( 6,648,829 ) Other comprehensive (loss) income before reclassification     ( 1,146,582 )     —       184,997       ( 961,585 ) Amounts reclassified     —       ( 16,546 )     —       ( 16,546 ) Net period comprehensive (loss) income     ( 1,146,582 )     ( 16,546 )     184,997       ( 978,131 ) Ending balance   $ ( 8,265,451 )   $ 6,046     $ 632,445     $ ( 7,626,960 )                                   September 30, 2022                                 Beginning balance at July 1, 2022   $ ( 6,525,164 )   $ ( 206,635 )   $ —     $ ( 6,731,799 ) Other comprehensive (loss) income before reclassification     ( 227,204 )     —       261,918       34,714   Amounts reclassified     —       41,589       —       41,589   Net period comprehensive (loss) income     ( 227,204 )     —       261,918       76,303   Ending balance at September 30, 2022   $ ( 6,752,368 )   $ ( 165,046 )   $ 261,918     $ ( 6,655,496 )       Unrealized gain and losses on available for sale securities     Benefit plans     Derivatives     Total   Nine months ended September 30, 2023                                 Beginning balance   $ ( 6,499,666 )   $ 55,684     $ 232,969     $ ( 6,211,013 ) Other comprehensive (loss) income before reclassification     ( 1,765,785 )     —       399,476       ( 1,366,309 ) Amounts reclassified     —       ( 49,638 )     —       ( 49,638 ) Net period comprehensive (loss) income     ( 1,765,785 )     ( 49,638 )     399,476       ( 1,415,947 ) Ending balance   $ ( 8,265,451 )   $ 6,046     $ 632,445     $ ( 7,626,960 )                                   September 30, 2022                                 Beginning balance   $ 17,158     $ ( 289,814 )   $ —     $ ( 272,656 ) Other comprehensive (loss) income before reclassification     ( 6,769,526 )     —       261,918       ( 6,507,608 ) Amounts reclassified     —       124,768       —       124,768   Net period comprehensive (loss) income     ( 6,769,526 )     124,768       261,918       ( 6,382,840 ) Ending balance   $ ( 6,752,368 )   $ ( 165,046 )   $ 261,918     $ ( 6,655,496 )   19 Table of Contents BOGOTA FINANCIAL CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)        Item 2.           Management ’ s Discussion and Analysis of Financial Condition and Results of Operations   General   Management’s discussion and analysis of financial condition and results of operations at September 30, 2023 and December 31, 2022 and for the three and nine months ended September 30, 2023 and September 30, 2022 is intended to assist in understanding the financial condition and results of operations of Bogota Financial Corp. The information contained in this section should be read in conjunction with the unaudited financial statements and the notes thereto appearing in Part I, Item 1, of this Quarterly Report on Form 10-Q.   Cautionary Note Regarding Forward-Looking Statements   This report contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect” and words of similar meaning. These forward-looking statements include, but are not limited to:     ● statements of our goals, intentions and expectations;     ● statements regarding our business plans, prospects, growth and operating strategies;     ● statements regarding the quality of our loan and investment portfolios; and     ● estimates of our risks and future costs and benefits.   These forward-looking statements are based on current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:     ● general economic conditions, either nationally or in our market area, that are worse than expected including potential recessionary conditions;     ● changes in the level and direction of loan delinquencies, charge-offs and non-performing and classified loans and changes in estimates of the adequacy of the allowance for credit losses;     ● our ability to access cost-effective funding;     ● changes in liquidity, including the size and composition of our deposit portfolio, including the percentage of uninsured deposits in the portfolio;     ● fluctuations in real estate values and both residential and commercial real estate market conditions;     ● demand for loans and deposits in our market area;     ● our ability to continue to implement our business strategies;     ● competition among depository and other financial institutions;     ● inflation and changes in market interest rates that reduce our margins and yields, reduce the fair value of financial instruments or reduce our volume of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and make whether held in portfolio or sold in the secondary market;     ● adverse changes in the securities markets;     ● changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements;     ● our ability to manage market risk, credit risk and operational risk;     ● our ability to enter new markets successfully and capitalize on growth opportunities;     ● our ability to successfully integrate into our operations any assets, liabilities or systems we may acquire, as well as new management personnel or customers, and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto;     ● changes in consumer spending, borrowing and savings habits;   20 Table of Contents     ● changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board;   ●             a potential government shutdown     ● our ability to retain key employees;     ● risks as it relates to cyber security against our information technology and those of our third-party providers and vendors;     ● the current or anticipated impact of military conflict, terrorism or other geopolitical events;     ● our compensation expense associated with equity allocated or awarded to our employees; and     ● changes in the financial condition, results of operations or future prospects of issuers of securities that we own.   Critical Accounting Policies   Our accounting policies are described in Note 1 to the consolidated financial statements included in our Annual Report on Form 10-K at and for the year ended December 31, 2022. Critical accounting estimates are necessary in the application of certain accounting policies and procedures and are particularly susceptible to significant change. Critical accounting policies are defined as those involving significant judgments and assumptions by management that could have a material impact on the carrying value of certain assets or on income under different assumptions or conditions. Actual results could differ from these judgments and estimates under different conditions, resulting in a change that could have a material impact on the carrying values of our assets and liabilities and our results of operations. See Note 1, "Basis of Presentation" for additional information on the adoption of ASC 326, which changed the methodology under which management calculates its reserve for loans and investment securities, now referred to as the allowance for credit losses. Management considers the measurement of the allowance for credit losses to be a critical accounting policy. Other than the adoption of ASC 326, there have been no significant changes to the Company's critical accounting policies since December 31, 2022.   Comparison of Financial Condition at September 30, 2023 and December 31, 2022   Total Assets. Assets decreased $24.1 million, or 2.5%, from $951.1 million at  December 31, 2022 to $927.0 million at September 30, 2023 primarily due to a $8.7 million, or 1.2%, decrease in loans, a $16.6 million, or 19.5%, decrease in securities available for sale and a $11.5 million, or 14.9%, decrease in securities held to maturity, offset by a $8.1 million, or 48.3%, increase in cash and cash equivalents.   Cash and Cash Equivalents. Cash and cash equivalents increased $8.1 million, or 48.3%, to $25.0 million at September 30, 2023 from $16.8 million at December 31, 2022. The increase was primarily due to loan and investment repayments and excess cash from the increase in long-term FHLB advances during the nine months ended September 30, 2023.   Securities Available for Sale. Securities available for sale decreased $16.6 million, or 19.5%, to $68.5 million at September 30, 2023 from $85.1 million at December 31, 2022. The decrease was due to a $4.9 million decrease in U.S treasury bills, a $2.9 million decrease in corporate bonds and a $8.7 million decrease in mortgage-backed securities.   Securities Held to Maturity. Securities held to maturity decreased $11.5 million, or 14.9%, to $65.9 million at September 30, 2023 from $77.4 million at December 31, 2022, due to a $7.7 million decrease in municipal bonds and a $5.3 million decrease in mortgage-backed securities offset by the purchase of a $1.5 million corporate bond.   Net Loans.  Net loans decreased $8.7 million, or 1.2%, to $710.3 million at September 30, 2023 from $719.0 million at December 31, 2022. The decrease was due to a decrease of $7.6 million, or 1.5%, in one- to four-residential real estate loans to $488.1 million from $495.7 million at December 31, 2022 and a decrease of $10.3 million, or 16.6%, in construction loans to $51.5 million at September 30, 2023 from $61.8 million at December 31, 2022, offset by a $4.0 million, or 238.3%, increase in commercial and industrial loans to $5.7 million at September 30, 2023 from $1.7 million as of December 31, 2022, an increase of $3.5 million, or 3.6%, in commercial real estate loans to $99.5 million at September 30, 2023 from $96.0 million at December 31, 2022 and an increase of $1.9 million, or 2.8%, in multi-family real estate loans to $68.3 million at September 30, 2023 from $66.4 million at December 31, 2022. The decrease in one- to four-residential and construction loans reflect less opportunities and decreased demand due to the higher interest rate environment.  As of September 30, 2023 and December 31, 2022, the Bank had no loans held for sale. Upon adoption of the CECL method of calculating the allowance for credit losses on January 1, 2023, the Bank recorded a one-time decrease, net of tax, in retained earnings of $220,000, an increase to the allowance for credit losses of $157,000 and an increase in the reserve for unfunded liabilities of $152,000.     Delinquent loans increased $18.0 million to $19.5 million, or 2.74% of total loans, at September 30, 2023. The increase was mostly due to one commercial construction loan located in Totowa New Jersey with a balance of $10.9 million with a loan to value ratio of 46%. During the same timeframe, non-performing assets increased to $12.3 million and were 1.33% of total assets at September 30, 2023. The Company’s allowance for credit losses was 0.39% of total loans and 22.62% of non-performing loans at September 30, 2023 compared to 0.36% of total loans and 136.3% of non-performing loans at December 31, 2022.  The Bank does not have any exposure to commercial real estate loans secured by office space.   Total Liabilities. Total liabilities decreased $22.1 million, or 2.7%, to $789.4 million as of September 30, 2023 from $811.4 as of December 31, 2022, mainly due to a $56.1 million decrease in deposits, offset by a $33.0 million increase in borrowings.   21 Table of Contents   Deposits. Deposits decreased $56.1 million, or 8.0%, to $645.3 million at September 30, 2023 from $701.4 million at December 31, 2022. The decrease in deposits reflected a decrease in interest-bearing deposits of $50.9 million, or 7.7%, to $611.9 million as of September 30, 2023 from $662.8 million at December 31, 2022 due to decreases in checking, savings and money market accounts, offset by an increase in certificates of deposit.  Non-interest bearing deposits also decreased $5.2 million, or 13.5%, to $33.4 million as of September 30, 2023 from $38.7 million as of December 31, 2022.  The decreases in reflected customers’ desire to see higher-yielding accounts in the higher interest rate environment.   At September 30, 2023, municipal deposits totaled $41.9 million, which represented 6.5% of total deposits, and brokered deposits totaled $55.0 million, which represented 8.5% of deposits. At December 31, 2022, municipal deposits totaled $57.5 million, which represented 8.2% of deposits, and brokered deposits totaled $58.6 million, which represented 8.4% of total deposits. At September 30, 2023, uninsured deposits represented 6.6% of deposits.   Borrowings. Federal Home Loan Bank of New York borrowings increased $33.0 million, or 32.2%, to $135.3 million at September 30, 2023 from $102.3 million at December 31, 2022, as long-term advances increased $53.0 million, offset by a decrease in short-term advances of $20.0 million. The weighted average rate of borrowings was 4.37% and 3.36% as of September 30, 2023 and December 31, 2022, respectively. The increase in advances was used to offset withdrawals on deposits. Total borrowing capacity at the Federal Home Loan Bank was $320.2 million at September 30, 2023, of which $135.3 million was advanced.   Total Equity. Stockholders’ equity decreased $2.0 million to $137.7 million, primarily due to the repurchase of 325,250 shares of stock during the nine months ended September 30, 2023 at a cost of $3.1 million and increased accumulated other comprehensive loss for securities available for sale of $1.4 million, offset by $1.8 million of net income for the nine months ended September 30, 2023. At September 30, 2023, the Company’s ratio of average stockholders’ equity-to-total assets was 14.88%, compared to 15.61% at December 31, 2022.   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.       Three Months Ended September 30,       2023     2022       Average Balance     Interest and Dividends     Yield/ Cost     Average Balance     Interest and Dividends     Yield/ Cost       (Dollars in thousands)   Assets:   (unaudited)   Cash and cash equivalents   $ 12,764     $ 168       5.21 %   $ 5,912     $ 31       2.05 % Loans     710,725       7,981       4.45 %     670,145       7,019       4.15 % Securities     138,479       1,008       2.91 %     182,626       1,061       2.32 % Other interest-earning assets     6,620       132       8.04 %     6,629       65       3.99 % Total interest-earning assets     868,588       9,289       4.25 %     865,312       8,176       3.75 %                                                   Non-interest-earning assets     54,179                       51,273                   Total assets   $ 922,767                     $ 916,585                   Liabilities and equity:                                                 NOW and money market accounts   $ 74,785     $ 354       1.88 %   $ 138,015     $ 173       0.50 % Savings accounts     46,177       214       1.83 %     60,912       40       0.26 % Certificates of deposit     498,082       4,284       3.41 %     403,223       1,037       1.02 % Total interest-bearing deposits     619,044       4,852       3.11 %     602,150       1,250       0.82 %                                                   Federal Home Loan Bank advances (1)     125,344       1,220       3.86 %     128,534       717       2.30 % Total interest-bearing liabilities     744,388       6,072       3.24 %     730,684       1,967       1.08 % Non-interest-bearing deposits     38,257                       40,028                   Other non-interest-bearing liabilities     1,727                       4,232                   Total liabilities     784,372                       774,944                                                                     Total equity     138,395                       141,641                   Total liabilities and equity   $ 922,767                     $ 916,585                   Net interest income           $ 3,217                     $ 6,209           Interest rate spread (2)                     1.01 %                     2.68 % Net interest margin (3)                     1.47 %                     2.85 % Average interest-earning assets to average interest-bearing liabilities     116.68 %                     118.42 %                   (1)         Cash flow hedges are used to manage interest rate risk. During the three months ended September 30, 2023, the net effect on interest expense on the Federal Home Loan Bank advances was a reduced expense of $115,000. (2)         Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities. (3)         Net interest margin represents net interest income divided by average total interest-earning assets.   22 Table of Contents       Nine Months Ended September 30,       2023     2022       Average Balance     Interest and Dividends     Yield/ Cost     Average Balance     Interest and Dividends     Yield/ Cost       (Dollars in thousands)   Assets:                                                 Cash and cash equivalents   $ 11,352     $ 423       4.98 %   $ 32,485     $ 88       0.36 % Loans     713,603       23,822       4.46 %     612,252       18,404       4.01 % Securities     148,802       3,121       2.80 %     168,081       2,698       2.14 % Other interest-earning assets     6,110       348       7.62 %     5,458       175       4.30 % Total interest-earning assets     879,867       27,714       4.20 %     818,276       21,365       3.49 % Non-interest-earning assets     54,380                       52,040                   Total assets   $ 934,247                     $ 870,316                   Liabilities and equity:                                                 NOW and money market accounts   $ 91,781     $ 1,089       1.59 %   $ 146,653     $ 610       0.56 % Savings accounts     49,529       375       1.01 %     64,509       126       0.26 % Certificates of deposit     498,460       11,314       3.03 %     369,808       2,189       0.79 % Total interest-bearing deposits     639,770       12,778       2.67 %     580,970       2,925       0.67 % Federal Home Loan Bank advances (1)     110,875       2,900       3.50 %     97,571       1,403       1.92 % Total interest-bearing liabilities     750,645       15,678       2.79 %     678,541       4,328       0.85 % Non-interest-bearing deposits     38,253                       44,256                   Other non-interest-bearing liabilities     6,351                       3,705                   Total liabilities     795,249                       726,502                   Total equity     138,998                       143,814                   Total liabilities and equity   $ 934,247                     $ 870,316                   Net interest income           $ 12,036                     $ 17,037           Interest rate spread (2)                     1.41 %                     2.63 % Net interest margin (3)                     1.82 %                     2.78 % Average interest-earning assets to average interest-bearing liabilities     117.21 %                     120.59 %                   (1)     Cash flow hedges are used to manage interest rate risk. During the nine months ended September 30, 2023, the net effect on interest expense on the Federal Home Loan Bank advances was a reduced expense of $254,000. (2)     Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities. (3)     Net interest margin represents net interest income divided by average total interest-earning assets.   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.       Three Months Ended September 30, 2023     Nine Months Ended September 30, 2023       Compared to     Compared to       Three Months Ended September 30, 2022     Nine Months Ended September 30, 2022       Increase (Decrease) Due to     Increase (Decrease) Due to       Volume     Rate     Net     Volume     Rate     Net       (In thousands)   Interest income:   (unaudited)   Cash and cash equivalents   $ 59     $ 79     $ 138     $ (129 )   $ 463     $ 334   Loans receivable     439       523       962       3,229       2,189       5,418   Securities     (1,076 )     1,023       (53 )     (487 )     910       423   Other interest earning assets     (1 )     68       67       23       150       173   Total interest-earning assets     (579 )     1,693       1,114       2,636       3,712       6,348                                                     Interest expense:                                                 NOW and money market accounts     (517 )     698       181       (430 )     909       479   Savings accounts     (67 )     241       174       (54 )     303       249   Certificates of deposit     296       2,951       3,247       997       8,128       9,125   Federal Home Loan Bank advances     (124 )     627       503       213       1,284       1,497   Total interest-bearing liabilities     (412 )     4,517       4,105       726       10,624       11,350   Net increase (decrease) in net interest income   $ (167 )   $ (2,824 )   $ (2,991 )   $ 1,910     $ (6,912 )   $ (5,002 )   23 Table of Contents   Comparison of Operating Results for the Three Months Ended September 30, 2023 and September 30, 2022   General. Net income decreased by $2.0 million, or 101.5%, to a net loss of $29,000 for the three months ended September 30, 2023 from net income of $1.9 million for the three months ended September 30, 2022.   This decrease was primarily due to a decrease of $3.0 million in net interest income, partially offset by a decrease of $175,000 in the provision for credit losses and a decrease of $859,000 in income tax expense.   Interest Income. Interest income increased $1.1 million, or 13.6%, from $8.2 million for the three months ended September 30, 2022 to $9.3 million for the three months ended September 30, 2023 due to increases in the average balances of loans and higher yields on interest-earning assets.   Interest income on cash and cash equivalents increased $138,000, or 441.9%, to $168,000 for the three months ended September 30, 2023 from $31,000 for the three months ended September 30, 2022 due a 316 basis point increase in the average yield from 2.05% for the three months ended September 30, 2022 to 5.21% for the three months ended September 30, 2023 due to the higher interest rate environment.  The increase was also due to a $6.9 million increase in the average balance to $12.8 million for the three months ended September 30, 2023 from $5.9 million for the three months ended September 30, 2022, reflecting an increase in liquidity due to lower loan originations.   Interest income on loans increased $962,000, or 13.7%, to $8.0 million for the three months ended September 30, 2023 compared to $7.0 million for the three months ended September 30, 2022 due primarily to $40.6 million increase in the average balance to $710.7 million for the three months ended September 30, 2023 from $670.1 million for the three months ended September 30, 2022 and a 30 basis point increase in the average yield from 4.15% for the three months ended September 30, 2022 to 4.45% for the three months ended September 30, 2023. The increase was offset by a $348,000 reserve for nonaccrual interest on a delinquent construction loan.   Interest income on securities decreased $53,000, or 5.0%, to $1.0 million for the three months ended September 30, 2023 from $1.1 million for the three months ended September 30, 2022  primarily due to a $44.1 million decrease in the average balance to $138.5 million for the three months ended September 30, 2023 from $182.6 million for the three months ended September 30, 2022  offset by a 59 basis point increase in the average yield from 2.32% for the three months ended September 30, 2022 to 2.91% for the three months ended September 30, 2023.   Interest Expense. Interest expense increased $4.1 million, or 208.7%, from $2.0 million for the three months ended September 30, 2022 to $6.1 million for the three months ended September 30, 2023 primarily due to increases in the average balance of and higher costs on interest -bearing liabilities.   Interest expense on interest-bearing deposits increased $3.6 million, or 288.2%, to $4.9 million for the three months ended September 30, 2023 from $1.3 million for the three months ended September 30, 2022. The increase was due to a 229 basis point increase in the average cost of deposits to 3.11% for the three months ended September 30, 2023 from 0.82% for the three months ended September 30, 2022. 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 to a greater concentration of higher-costing certificates of deposit.  The average balances of certificates of deposit increased $94.9 million to $498.1 million for the three months ended September 30, 2023 from $403.2 million for the three months ended September 30, 2022 while NOW and money market accounts and savings accounts decreased $63.2 million and $14.7 million for the three months ended September 30, 2023, respectively, compared to the three months ended September 30, 2022.   Interest expense on Federal Home Loan Bank borrowings increased $503,000, or 70.2%, from $717,000 for the three months ended September 30, 2022 to $1.2 million for the three months ended September 30, 2023. The increase was due to an increase in the average cost of 156 basis points to 3.86% for the three months ended September 30, 2023 from 2.30% for the three months ended September 30, 2022 due to higher rate borrowings at higher rates. The increase was partially offset by a decrease in the average balance of borrowings of $3.2 million to $125.3 million for the three months ended September 30, 2023 from $128.5 million for the three months ended September 30, 2022.   Net Interest Income. Net interest income decreased $3.0 million, or 48.2%, to $3.2 million for the three months ended September 30, 2023 from $6.2 million for the three months ended September 30, 2022.  The decrease reflected a 167 basis point decrease in our net interest rate spread to 1.01% for the three months ended September 30, 2023 from 2.68% for the three months ended September 30, 2022. Our net interest margin decreased 138 basis points to 1.47% for the three months ended September 30, 2023 from 2.85% for the three months ended September 30, 2022.   Provision for Credit Losses. We recorded no provision for credit losses for the three months ended September 30, 2023 compared to a $175,000 provision for credit losses for the three-month period ended September 30, 2022 due to a decrease in the loan portfolio and the absence of charge-offs, offset by increases in delinquent and nonaccrual loans.   Non-Interest Income. Non-interest income increased by $20,000, or 7.5%, to $290,000 for the three months ended September 30, 2023 from $270,000 for the three months ended September 30, 2022.  Bank-owned life insurance income increased $13,000, or 7.0%, due to higher balances during 2023. The increase was also due to an increase in fee and service charges of $14,000, or 29.7%, due to a higher collection of late charges.   Non-Interest Expense. For the three months ended September 30, 2023, non-interest expense increased $23,000, or 0.6%, over the comparable 2022 period. Salaries and employee benefits increased $120,000, or 5.6%, due to a higher employee count. Director fees decreased $30,000, or 15.9%, due to lower pension expense. FDIC insurance premiums increased $79,000, or 145.5%, due to a higher assessment rate in 2023. The decrease in advertising expense of $30,000, or 19.3%, was due to reduced promotions for branch locations and less promotions on deposit and loan products. Data processing expense decreased $105,000, or 33.9%, due to lower processing costs. Professional fees decreased $14,000, or 8.7%, due to lower legal expense. Other expense decreased $21,000, or 8.1%, due to lower deferred compensation expense and other various expenses.   Income Tax Expense. Income tax expense decreased $859,000, or 117.1%, to a benefit of $125,000 for the three months ended September 30, 2023 from a $734,000 expense for the three months ended September 30, 2022. The decrease was due to $2.8 million of lower taxable income.    24 Table of Contents   Comparison of Operating Results for the Nine Months Ended  September 30, 2023 and September 30, 2022   General. Net income decreased by $3.2 million, or 63.4%, to $1.8 million for the nine months ended September 30, 2023 from $5.0 million for the nine months ended September 30, 2022. This decrease was primarily due to a decrease of $5.0 million in net interest income, offset by a decrease of $400,000 in the provision for credit losses and a decrease of $1.5 million in income tax expense.   Interest Income. Interest income increased $6.3 million, or 29.7%, from $21.4 million for the nine months ended September 30, 2022 to $27.7 million for the nine months ended September 30, 2023 due to increases in the average balances of loans and higher yields on interest-earning assets.   Interest income on cash and cash equivalents increased $335,000, or 380.7%, to $423,000 for the nine months ended September 30, 2023 from $88,000 for the nine months ended September 30, 2022 due a 462 basis point increase in the average yield from 0.36% for the nine months ended September 30, 2022 to 4.98% for the nine months ended September 30, 2023 due to the higher interest rate environment. This was offset by a $21.1 million decrease in the average balance to $11.4 million for the nine months ended September 30, 2023 from $32.5 million for the nine months ended September 30, 2022, reflecting the use of excess liquidity to fund loan originations and purchase investment securities.   Interest income on loans increased $5.4 million, or 29.4%, to $23.8 million for the nine months ended September 30, 2023 compared to $18.4 million for the nine months ended September 30, 2022 due primarily to a $101.4 million increase in the average balance to $713.6 million for the nine months ended September 30, 2023 from $612.3 million for the nine months ended September 30, 2022 and a 45 basis point increase in the average yield from 4.01% for the nine months ended September 30, 2022 to 4.46% for the nine months ended September 30, 2023. The increase was offset by a $1.0 million reserve for nonaccrual interest on a delinquent construction loan.   Interest income on securities increased $423,000, or 15.7%, to $3.1 million for the nine months ended September 30, 2023 from $2.7 million for the nine months ended September 30, 2022 due primarily to a 66 basis point increase in the average yield from 2.14% for the nine months ended September 30, 2022 to 2.80% for the nine months ended September 30, 2023. The increase was offset by a $19.3 million decrease in the average balance of securities to $148.8 million for the nine months ended September 30, 2023 from $168.1 million for the nine months ended September 30, 2022.   Interest Expense. Interest expense increased $11.4 million, or 262.2%, from $4.3 million for the nine months ended September 30, 2022 to $15.7 million for the nine months ended September 30, 2023 primarily due to increases in the average balance of certificates of deposit and higher costs on interest-bearing liabilities.   Interest expense on interest-bearing deposits increased $9.9 million, or 336.7%, to $12.8 million for the nine months ended September 30, 2023 from $2.9 million for the nine months ended September 30, 2022. The increase was due to a 200 basis point increase in the average cost of interest-bearing deposits to 2.67% for the nine months ended September 30, 2023 from 0.67% for the nine months ended September 30, 2022. 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 to a greater concentration of higher-costing certificates of deposit. The average balances of certificates of deposit increased $128.7 million to $498.5 million for the nine months ended September 30, 2023 from $369.8 million for the nine months ended September 30, 2022 while NOW and money market accounts and savings accounts decreased $54.9 million and $15.0 million for the nine months ended September 30, 2023, respectively, compared to the nine months ended September 30, 2022.   Interest expense on Federal Home Loan Bank borrowings increased $1.5 million, or 106.7%, from $1.4 million for the nine months ended September 30, 2022 to $2.9 million for the nine months ended September 30, 2023. The increase was due to an increase in the average cost of 158 basis points to 3.50% for the nine months ended September 30, 2023 from 1.92% for the nine months ended September 30, 2022 due to higher rate borrowings. The increase was also due to an increase in the average balance of borrowings of $13.3 million to $110.9 million for the nine months ended September 30, 2023 from $97.6 million for the nine months ended September 30, 2022.   Net Interest Income. Net interest income decreased $5.0 million, or 29.4%, to $12.0 million for the nine months ended September 30, 2023 from $17.0 million for the nine months ended September 30, 2022.  The increase reflected a 122 basis point decrease in our net interest rate spread to 1.41% for the nine months ended September 30, 2023 from 2.63% for the nine months ended September 30, 2022. Our net interest margin decreased 96 basis points to 1.82% for the nine months ended September 30, 2023 from 2.78% for the nine months ended September 30, 2022.   Provision for Credit Losses. We recorded a $125,000 recovery of credit losses for the nine months ended September 30, 2023 compared to a $275,000 provision for loan losses for the nine-month period ended September 30, 2022 due a decrease in the loan portfolio and the absence of charge-offs, offset by increased delinquent and non-performing loans.  As of January 1, 2023 the Bank adopted CECL and recorded a one-time adjustment of $157,000 to the allowance for credit losses.   Non-Interest Income.  Non-interest income decreased by $11,000, or 1.3%, to $856,000 for the nine months ended September 30, 2023 from $868,000 for the nine months ended September 30, 2022. Gain on sale of loans decreased $58,000, or 66.2%, as loan originations were lower in 2023 due to the higher interest rate environment and the decision to be more selective with loan production for loans that meet the Bank’s risk and pricing parameters. Other income decreased $40,000 or 29.8%. These decreases were partially offset by an increase in income from bank-owned life insurance of $64,000, or 12.5%, due to higher balances during 2023.   Non-Interest Expense. For the nine months ended September 30, 2023, non-interest expense increased $37,000, or 0.3%, over the comparable 2022 period. Salaries and employee benefits increased $421,000, or 6.7%, due to a higher employee count. Director fees decreased $130,000, or 21.3%, due to lower pension expense. FDIC insurance premiums increased $158,000, or 97.3%, due to a higher assessment rate in 2023. Data processing decreased $202,000, or 22.0%, due to the timing of invoices. Other expense decreased $244,000, or 27.0%, due to lower deferred compensation expense and other various expenses.   Income Tax Expense. Income taxes decreased $1.5 million, or 79.5%, to $386,000 for the nine months ended September 30, 2023 from $1.9 million for the nine months ended September 30, 2022. The decrease was due to $4.7 million, or 67.8%, of lower taxable income. The effective tax rate for the three and nine months ended September 30, 2023 and 2022 was 17.49% and 27.46%, respectively.   25 Table of Contents   Management of Market Risk   General. The majority of our assets and liabilities are monetary in nature. Consequently, our most significant form of market risk is interest rate risk. Our assets, consisting primarily of loans and securities, have longer maturities than our liabilities, consisting primarily of deposits and borrowings. As a result, a principal part of our business strategy is to manage our exposure to changes in market interest rates. Accordingly, our board of directors has established an Asset/Liability Management Committee (the “ALCO”), which is comprised of three members of executive management and two independent directors, which oversees the asset/liability management processes and related procedures. The ALCO meets on at least a quarterly basis and reviews asset/liability strategies, liquidity positions, alternative funding sources, interest rate risk measurement reports, capital levels and economic trends at both national and local levels. Our interest rate risk position is also monitored quarterly by the board of directors.   We manage our interest rate risk to minimize the exposure of our earnings and capital to changes in market interest rates. We have implemented the following strategies to manage our interest rate risk: originating and purchasing loans with adjustable interest rates; promoting core deposit products; monitoring the length of our borrowings with the Federal Home Loan Bank and brokered deposits depending on the interest rate environment; maintaining a portion of our investments as available-for-sale; diversifying our loan portfolio; and strengthening our capital position. By following these strategies, we believe that we are better positioned to react to changes in market interest rates.   Net Portfolio Value Simulation. We analyze our sensitivity to changes in interest rates through a net portfolio value of equity (“NPV”) model. NPV represents the present value of the expected cash flows from our assets less the present value of the expected cash flows arising from our liabilities, adjusted for the value of off-balance sheet contracts. The NPV ratio represents the dollar amount of our NPV divided by the present value of our total assets for a given interest rate scenario. NPV attempts to quantify our economic value using a discounted cash flow methodology while the NPV ratio reflects that value as a form of capital ratio. We estimate what our NPV would be at a specific date. We then calculate what the NPV would be at the same date throughout a series of interest rate scenarios representing immediate and permanent, parallel shifts in the yield curve. We currently calculate NPV under the assumptions that interest rates increase 100, 200, 300 and 400 basis points from current market rates and that interest rates decrease 100, 200, 300 and 400 basis points from current market rates.   The following table presents the estimated changes in our net portfolio value that would result from changes in market interest rates as September 30, 2023. All estimated changes presented in the table are within the policy limits approved by the board of directors.                                 NPV as Percent of Portfolio         NPV     Value of Assets         (Dollars in thousands)                   Basis Point (“bp”) Change in     Dollar     Dollar     Percent                   Interest Rates     Amount     Change     Change     NPV Ratio     Change   400 bp     $ 46,966     $ (58,325 )     (55.39 )%     5.91 %     (49.44 )% 300 bp       61,481       (43,810 )     (41.61 )     7.51       (35.76 ) 200 bp       76,018       (29,273 )     (27.80 )     9.01       (22.93 ) 100 bp       91,871       (13,420 )     (12.75 )     10.54       (9.84 ) —       105,291       —       —       11.69           (100) bp       114,803       9,512       9.03       12.36       5.73   (200) bp       129,650       24,359       23.14       13.58       16.17   (300) bp       148,404       43,113       40.95       15.13       29.43   (400) bp       167,414       62,123       59.00       16.64       42.34     Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurements. Modeling changes require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. The table above assumes that the composition of our interest-sensitive assets and liabilities existing at the date indicated remains constant uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the table provides an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our NPV and will differ from actual results.   Net Interest Income Analysis. We also use income simulation to measure interest rate risk inherent in our balance sheet at a given point in time by showing the effect on net interest income, over specified time frames and using different interest rate shocks and ramps. The assumptions include management’s best assessment of the effect of changing interest rates on the prepayment speeds of certain assets and liabilities, projections for account balances in each of the product lines offered and the historical behavior of deposit rates and balances in relation to changes in interest rates. These assumptions are subject to change, and as a result, the model is not expected to precisely measure net interest income or precisely predict the impact of fluctuations in interest rates on net interest income. Actual results will differ from the simulated results due to timing, magnitude, and frequency of interest rate changes as well as changes in the balance sheet composition and market conditions. Assumptions are supported with quarterly back testing of the model to actual market rate shifts.   26 Table of Contents   As of September 30, 2023, net interest income simulation results indicated that its exposure over one year to changing interest rates was within our guidelines. The following table presents the estimated impact of interest rate changes on our estimated net interest income over one year:   Changes in Interest Rates     Change in Net Interest Income Year One   (basis points) (1)     (% change from year one base)   400       (23.04 )% 300       (17.52 ) 200       (11.93 ) 100       (5.82 ) —       —   (100 )     7.01   (200 )     101.60   (300 )     33.14   (400 )     41.75       (1) The calculated change in net interest income assumes an instantaneous parallel shift of the yield curve.   The preceding simulation analyses does not represent a forecast of actual results and should not be relied upon as being indicative of expected operating results. These hypothetical estimates are based upon numerous assumptions, which are subject to change, including: the nature and timing of interest rate levels including the yield curve shape, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, reinvestment/replacement of asset and liability cash flows, and others. Also, as market conditions vary, prepayment/refinancing levels, the varying impact of interest rate changes on caps and floors embedded in adjustable-rate loans, early withdrawal of deposits, changes in product preferences, and other internal/external variables will likely deviate from those assumed.   Liquidity and Capital Resources   Liquidity. Liquidity describes our ability to meet financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities and proceeds from calls, maturities and sales of securities and sales of loans. We also borrow from the Federal Home Loan Bank of New York. At September 30, 2023, we had the ability to borrow up to $320.2 million, of which $135.3 million was outstanding and $1.5 million was utilized as collateral for letters of credit issued to secure municipal deposits. At September 30, 2023, we had $39.0 million in unsecured lines of credit with three correspondent banks with no outstanding balance.   The board of directors is responsible for establishing and monitoring our liquidity targets and strategies in order to ensure that sufficient liquidity exists for meeting the borrowing needs and deposit withdrawals of our customers as well as unanticipated contingencies. We believe that we had ample sources of liquidity to satisfy our short- and long-term liquidity needs as of September 30, 2023.   While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by market interest rates, economic conditions, and competition. Our most liquid assets are cash and cash equivalents. The levels of these assets are dependent on our operating, financing, lending and investing activities during any period. At September 30, 2023, cash and cash equivalents totaled $25.0 million. Securities classified as available-for-sale, which provide additional sources of liquidity, totaled $68.5 million at September 30, 2023.   We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate we will have sufficient funds to meet our current funding commitments. Certificates of deposit due within one year of September 30, 2023 totaled $438.1 million, or 67.9% of total deposits. If these deposits do not remain with us, we will be required to seek other sources of funds, including other deposits and Federal Home Loan Bank of New York advances. Depending on market conditions, we may be required to pay higher rates on such deposits or borrowings than we currently pay. We believe, however, based on past experience that a significant portion of such deposits will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.   Capital Resources. We are subject to various regulatory capital requirements administered by the New Jersey Department of Banking and Insurance and the Federal Deposit Insurance Corporation. At September 30, 2023, we exceeded all applicable regulatory capital requirements, and were considered “well capitalized” under regulatory guidelines. As a result of the Economic Growth, Regulatory Relief, and Consumer Protection Act, as modified in April 2020, the federal banking agencies were required to develop a “Community Bank Leverage Ratio” (the ratio of a bank's Tier 1 “equity capital to average total consolidated assets) for financial institutions with less than $10 billion. A “qualifying community bank” with capital exceeding 9% will be considered compliant with all applicable regulatory capital and leverage requirements, including the capital requirements to be considered "well capitalized” under Prompt Corrective Action statutes. As of September 30, 2023, the Bank is reporting as a qualifying community bank with a ratio of 14.06%.   Inflation   Substantially all of the Company's assets and liabilities relate to banking activities and are monetary. The consolidated financial statements and related financial data are presented following GAAP. GAAP currently requires the Company to measure the financial position and results of operations in terms of historical dollars, except for securities available for sale, impaired loans, and other real estate loans that are measured at fair value. Changes in the value of money due to rising inflation can cause purchasing power loss. Management's opinion is that movements in interest rates affect the financial condition and results of operations to a greater degree than changes in the rate of inflation. It should be noted that interest rates and inflation do affect each other but do not always move in correlation with each other. The Company's ability to match the interest sensitivity of its financial assets to the interest sensitivity of its liabilities in its asset/liability management may tend to minimize the effect of changes in interest rates on the Company's performance.   27 Table of Contents   Item 3.           Quantitative and Qualitative Disclosures About Market Risk   Information with respect to quantitative and qualitative disclosures about market risk can be found in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operation – Management of Market Risk.”   Item 4.           Controls and Procedures   An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of September 30, 2023. Based on that evaluation, the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective.   During the three months ended September 30, 2023, there have been no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.   28 Table of Contents     PART II – OTHER INFORMATION   Item 1.           Legal Proceedings   At September 30, 2023 we were not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business, the outcome of which would not be material to our financial condition or results of operations.   Item 1A.       Risk Factors   Except noted below, there have been no material changes in risk factors applicable to the Company from those disclosed in “Risk Factors” in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 and in Item 1A of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023.   Item 2.           Unregistered Sales of Equity Securities and Use of Proceeds, and Issuer Purchase of Equity Securities   On May 24, 2023, the Company announced it had received regulatory approval for the repurchase of up to 249,920 shares of its common stock, which was approximately 5% of its then outstanding common stock (excluding shares held by Bogota Financial, MHC). The program does not have a scheduled expiration date and the Board of Directors has the right to suspend or discontinue the program at any time. As of September 30, 2023, 122,301 shares have been repurchased at a cost of $938,000.   The following table provides information on repurchases by the Company of its common stock under the Company's Board approved programs for the third quarter:   ISSUER PURCHASES OF EQUITY SECURITIES   Period   Total Number of Shares Purchased     Average Price Paid per Share     Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs     Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs   July 1 - 31, 2023     8,000     $ 9.75       8,000       221,620   August 1 - 31, 2023     14,500       8.02       14,500       207,120   September 1 - 30, 2023     79,501       8.11       79,501       127,619   Total     102,001     $ 8.23       102,001             Item 3.           Defaults Upon Senior Securities   None.   Item 4.           Mine Safety Disclosures   Not applicable.   Item 5.           Other Information   None.   29 Table of Contents   Item 6.           Exhibits   Exhibit Number   Description         3.1   Articles of Incorporation of Bogota Financial Corp. (incorporated by reference to Exhibit 3.1 of the Company’s Registration Statement on Form S-1, as amended (Commission File No. 333-233680))         3.2   Bylaws of Bogota Financial Corp. (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K, as filed with the Securities and Exchange Commission on February 23, 2023)         4.1   Form of Common Stock Certificate of Bogota Financial Corp. (incorporated by reference to Exhibit 4 of the Company’s Registration Statement on Form S-1, as amended (Commission File No. 333-233680))       31.1   Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002       31.2   Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002       32.1   Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002       101.0   The following materials for the quarter ended September 30, 2023, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Consolidated Statements of Financial Condition, (ii) Consolidated Statements of (Loss) Income, (iii) Consolidated Statements of Comprehensive (Loss) Income, (iv) Consolidated Statements of Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements*       104   Cover Page Interactive Data File (formatted in XBRL and contained in Exhibit 101)   *         Furnished, not filed.   30 Table of Contents   SIGNATURES   Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.     BOGOTA FINANCIAL CORP.         Date: November 13, 2023 /s/ Joseph Coccaro   Joseph Coccaro   President and Chief Executive Officer             Date: November 13, 2023 /s/ Brian McCourt   Brian McCourt   Executive Vice President and Chief Financial Officer   31