UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2021
OR
For the transition period from _____________ to _______________
Commission File Number: 001-39180
Bogota Financial Corp.
(Exact Name of Registrant as Specified in its Charter)
Maryland
(State or other jurisdiction of incorporation or organization
84-3501231
(I.R.S. Employer Identification Number)
819 Teaneck Road, Teaneck, New Jersey
(Address of principal executive offices)
07666
(Zip code)
(201) 862-0660
(Registrant’s telephone number, including area code)
Title of each class
Common Stock, $0.01 par value per share
Securities registered pursuant to Section 12(b) of the Act: None
Trading Symbol(s)
BSBK
Securities registered pursuant to Section 12(g) of the Act: None
Name of each exchange on which registered
The Nasdaq Stock Market, LLC
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒
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 reports), and (2) has been subject to such filing
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 (§232.405 of this chapter) during the preceding 12 months (or 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.
Large accelerated filer
Non-accelerated filer
☐
☒
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 ☒
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. ☐
As of June 30, 2021, the aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant was $50.0 million.
As of March 29, 2022 there were 14,461,555 outstanding shares of the registrant’s common stock, of which 8,504,556 shares are owned by Bogota
Financial, MHC.
1.
Portions of the Proxy Statement for the 2022 Annual Meeting of Stockholders (Part III)
DOCUMENTS INCORPORATED BY REFERENCE
TABLE OF CONTENTS
PAGE
PART I
ITEM 1.
ITEM 1A.
ITEM 1B.
ITEM 2.
ITEM 3.
ITEM 4.
PART II
ITEM 5.
ITEM 6.
ITEM 7.
ITEM 7A.
ITEM 8.
ITEM 9.
ITEM 9A.
ITEM 9B.
ITEM 9C.
PART III
ITEM 10.
ITEM 11.
ITEM 12.
ITEM 13.
ITEM 14.
PART IV
ITEM 15.
ITEM 16.
SIGNATURES
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Reserved
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Exhibits and Financial Statement Schedules
Form 10-K Summary
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Forward Looking Statements
This Annual Report on Form 10-K contains forward-looking statements, which can be identified by the use of words
such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “assume,” “plan,” “seek,” “expect,” “will,” “may,” “should,”
“indicate,” “would,” “contemplate,” “continue,” “potential,” “target” 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 the current beliefs and expectations of our management and are
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. Accordingly, you should not place undue reliance on such statements. We are
under no duty to and do not take any obligation to update any forward-looking statements after the date of this Annual Report
on Form 10-K.
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;
changes in the level and direction of loan delinquencies and charge-offs and changes in estimates of the
adequacy of the allowance for loan losses;
our ability to access cost-effective funding;
fluctuations in real estate values and both residential and commercial real estate market conditions;
demand for loans and deposits in our market area;
changes in monetary or fiscal policies of the U.S. government, including policies of the U.S. Treasury and the
Federal Reserve Board;
our ability to continue to implement our business strategies;
competition among depository and other financial institutions;
cyber attacks, computer viruses and other technological risks that may breach the security of our website or
other systems or those of third parties upon which we rely to obtain unauthorized access to confidential
information and destroy data or disable our systems;
technological changes that may be more difficult or expensive than expected;
the ability of third-party providers to perform their obligations to us;
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;
1
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;
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;
our ability to retain key employees;
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.
Further, given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 pandemic on
our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the
coronavirus can be controlled and abated. As the result of the COVID-19 pandemic and the related adverse local and national
economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect
on our business, financial condition, liquidity, and results of operations: demand for our products and services may decline,
making it difficult to grow assets and income; if the economy worsens, loan delinquencies, problem assets, and foreclosures
may increase, resulting in increased charges and reduced income; collateral for loans, especially real estate, may decline in
value, which could cause loan losses to increase; our allowance for loan losses may have to be increased if borrowers
experience financial difficulties, which will adversely affect our net income; the net worth and liquidity of loan guarantors
may decline, impairing their ability to honor commitments to us; our cyber security risks are increased as the result of an
increase in the number of employees working remotely; and FDIC premiums may increase if the agency experience
additional resolution costs.
Because of these and a wide variety of other uncertainties, our actual future results may be materially different from
the results indicated by these forward-looking statements. Please also see “Item 1A. Risk Factors.”
2
ITEM 1. Business
Bogota Financial Corp.
PART I
Bogota Financial Corp. is a Maryland corporation that was formed in September 2019 to become the bank holding
company of Bogota Savings Bank as part of the mutual holding company reorganization of Bogota Savings Bank. Since
being incorporated, other than holding the common stock of Bogota Savings Bank, Bogota Financial Corp. retaining
approximately 50% of the net cash proceeds of the stock offering, making a loan to the employee stock ownership plan of
Bogota Savings Bank and issuing shares in connection with the acquisition of Gibraltar Bank. Bogota Financial Corp. has
not engaged in any other business activities. Bogota Financial Corp.’s executive offices are located at 819 Teaneck Road,
Teaneck, New Jersey 07666, and its telephone number is (201) 862-0660.
Bogota Financial Corp. completed its stock offering in connection with the mutual holding company reorganization
of Bogota Savings Bank on January 15, 2020. The Company sold 5,657,735 shares of common stock at $10.00 per share for
gross proceeds of $56.6 million. In connection with the reorganization, the Company also issued 263,150 shares of common
stock and $250,000 in cash to Bogota Savings Bank Charitable Foundation, Inc., and 7,236,640 shares of common stock to
Bogota Financial, MHC, its New Jersey-chartered mutual holding company. Shares of the Company’s common stock began
trading on January 16, 2020 on The NASDAQ Capital Market under the trading symbol “BSBK.”
Bogota Financial Corp., as the holding company of Bogota Savings Bank, is authorized to pursue other business
activities permitted by applicable laws and regulations, which may include the acquisition of banking and financial services
companies. We currently have no agreements to acquire other financial institutions or financial services companies, although
we may determine to do so in the future.
Bogota Financial Corp.’s cash flows will depend on earnings from the investment of the net offering proceeds and
from any dividends it receives from Bogota Savings Bank. Bogota Savings Bank is subject to regulatory limitations on the
amount of dividends that it may pay. Initially, Bogota Financial Corp. will not own or lease any property, but instead will
pay Bogota Savings Bank for the use of its premises, furniture and equipment. We intend to employ as officers of Bogota
Financial Corp. only persons who are officers of Bogota Savings Bank. However, we will use the support staff of Bogota
Savings Bank from time to time. We will pay Bogota Savings Bank for the time Bogota Savings Bank employees devote to
Bogota Financial Corp.; however, these individuals will not be separately compensated by Bogota Financial Corp. Bogota
Financial Corp. may hire additional employees, as appropriate, to the extent it expands its business in the future.
Bogota Financial, MHC
Bogota Financial, MHC was formed in January 2020 as a New Jersey-chartered mutual holding company in
connection with the reorganization of Bogota Savings Bank into the “two-tier” mutual holding company form of
organization. Bogota Financial, MHC will, for as long as it is in existence, own a majority of the outstanding shares of
Bogota Financial Corp.’s common stock. As a mutual holding company, Bogota Financial, MHC is a non-stock company.
Bogota Financial, MHC’s principal assets are the common stock of Bogota Financial Corp. it received in the
reorganization and offering and $50,000 cash in initial capitalization. Presently, it is expected that the only business activity
of Bogota Financial, MHC will be to own a majority of Bogota Financial Corp.’s common stock. Bogota Financial, MHC is
authorized, however, to engage in any other business activities that are permissible for mutual holding companies under New
Jersey law, including investing in loans and securities. Bogota Financial, MHC is subject to comprehensive regulation and
examination by the New Jersey Department of Banking and Insurance (the “NJDBI”) and the Federal Reserve Board.
Bogota Savings Bank
Founded in 1893, Bogota Savings Bank is a New Jersey-chartered savings bank that operates from six offices
located in Bogota, Hasbrouck Heights, Newark, Oak Ridge, Parsippany and Teaneck, New Jersey and a loan production
office in Spring Lake, New Jersey and the surrounding areas are our primary market area for our business operations. We
attract deposits from the general public and municipalities and use those funds along with advances from the Federal Home
Loan Bank of New York and funds generated from operations to originate one- to four-family residential real estate loans and
commercial real estate and multi-family loans and, to a lesser extent, consumer loans, commercial and industrial loans and
construction loans. We also invest in securities, which have historically consisted primarily of U.S. Government and agency
obligations, municipal obligations, corporate bonds and mortgage-backed securities. We offer a variety of deposit accounts,
including demand accounts, savings accounts, money market accounts and certificate of deposit accounts.
3
At December 31, 2021, we had consolidated total assets of $837.4 million, total deposits of $597.5 million and total
equity of $147.6 million. Bogota Savings Bank is subject to comprehensive regulation and examination by the NJDBI and
the Federal Deposit Insurance Corporation (the “FDIC”). Our website address is www.bogotasavingsbank.com. Information
on this website is not and should not be considered a part of this Annual Report on Form 10-K.
Acquisition of Gibraltar Bank
On February 28, 2021, the Company completed its acquisition of Gibraltar Bank. As a result of the merger, we
acquired three branch offices located in Morris and Essex Counties in New Jersey. In addition, as part of the transaction, the
Company issued 1,267,916 shares of its common stock to Bogota Financial, MHC. The conversion and consolidation of data
processing platforms, systems and customer files occurred on August 16, 2021.
Market Area
Our branches, including our corporate office, are located in Bergen, Morris and Essex Counties, although we
consider our lending area to generally also encompass Monmouth and Ocean Counties in New Jersey and the surrounding
areas. Bergen County ranks as the most populous county in New Jersey (out of 21 counties) with a population of
approximately 950,000 compared to an estimated population of 799,000 for Essex County, 630,000 for Monmouth County,
577,000 for Ocean County, 492,000 for Morris County and 9.0 million for the entire state as of December 31, 2021 according
to US Bureau of Labor Statistics. The economy in our primary market area has benefited from being varied and diverse,
with a broad economic base. Bergen, Essex, Monmouth, Ocean and Morris Counties have a median household income of
approximately $101,000, $63,000, $98,000, $68,000 and $146,000, respectively, as of December 31, 2021, according to US
Bureau of Labor Statistics. The median household income for New Jersey is approximately $83,000 and the median
household income is approximately $63,000 for the United States. As of December 2021, the unemployment rate was 6.8%
for Bergen County, 9.5% for Essex County, 6.4% for Monmouth County, 6.8% for Ocean County and 5.9% for Morris
County, compared to 7.7% for New Jersey and a national rate of 6.2% according to US Bureau of Labor Statistics.
We believe that we have developed products and services that will meet the financial needs of our current and future
customer base; however, we plan, and believe it is necessary, to expand the range of products and services that we offer to be
more competitive in our market area. Our marketing strategies focus on the strength of our knowledge of local consumer and
small business markets, as well as expanding relationships with current customers and reaching out to develop new,
profitable business relationships.
Competition
We face significant competition for deposits and loans. Our most direct competition for deposits has come
historically from the numerous financial institutions operating in our market area (including other community banks and
credit unions), many of which are significantly larger than we are and have greater resources. We also face competition for
investors’ funds from other sources such as brokerage firms, money market funds and mutual funds, as well as from
securities offered by the federal government, such as Treasury bills. Based on FDIC data at June 30, 2021 (the latest date for
which information is available), we had 0.78% of the FDIC-insured deposit market share in Bergen County, which was the
21th largest market share among the 46 institutions with offices in the county. Based on FDIC data at June 30, 2021 (the
latest date for which information is available), we had 0.05% of the FDIC-insured deposit market share in Essex County,
which was the 30th largest market share among the 31 institutions with offices in the county. Based on FDIC data at June 30,
2021 (the latest date for which information is available), we had 0.12% of the FDIC-insured deposit market share in Morris
County, which was the 26th largest market share among the 31 institutions with offices in the county. Money center banks,
such as Bank of America, JP Morgan Chase, Wells Fargo and Citi, and large regional banks, such as TD Bank, M&T Bank
and PNC Bank, have a significant presence in Bergen County and the other markets that we serve.
Our competition for loans comes primarily from the competitors referenced above and from other financial service
providers, such as mortgage companies and mortgage brokers. Competition for loans also comes from the increasing number
of non-depository financial service companies participating in the mortgage market, such as insurance companies, securities
firms, financial technology companies, specialty finance firms and technology companies.
We expect competition to remain intense in the future as a result of legislative, regulatory and technological changes
and the continuing consolidation trend in the financial services industry. Technological advances, for example, have lowered
barriers to entry, allowed banks to expand their geographic reach by providing services over the internet and made it possible
for non-depository institutions, including financial technology companies, to offer products and services that traditionally
have been provided by banks. Competition for deposits and loans could limit our growth in the future.
4
Lending Activities
Historically, our lending activities have emphasized one- to four-family residential real estate loans, and such loans
continue to comprise the largest portion of our loan portfolio. Other areas of lending include commercial real estate and
multi-family loans and, to a much lesser extent, consumer loans, consisting primarily of home equity loans and lines of
credit, commercial and industrial loans and construction loans. Subject to market conditions and our asset-liability analysis,
we expect to continue to focus on commercial real estate and multi-family lending as part of our effort to diversify the loan
portfolio and increase the overall yield earned on our loans. We compete for loans by offering high quality personalized
service, providing convenience and flexibility, providing timely responses on loan applications, and by offering competitive
pricing.
Loan Portfolio Maturities. The following tables set forth the contractual maturities of our total loan portfolio at
December 31, 2021. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported
as being due in one year or less. The table presents contractual maturities and does not reflect repricing or the effect of
prepayments. Actual maturities may differ.
Residential
Real Estate
Loans
Commercial
and Multi-
Family Real
Estate Loans
At December 31, 2021
Construction
Loans
Commercial
and Industrial
Loans
(In thousands)
Consumer
Loans
Total Loans
Amounts due in:
One year or less
More than one year through five
years
More than five years through
fifteen years
More than fifteen years
Total
$
$
—
$
6,986
$
1,637
$
—
$
—
$
8,623
12,042
4,721
1,028
86,079
221,847
319,968
$
108,947
54,721
175,375
$
38,150
570
41,385
$
958
6,078
870
7,906
428
19,177
9,939
17,362
27,729
$
249,193
295,370
572,363
$
The following table sets forth our fixed and adjustable-rate loans at December 31, 2021 that are contractually due
after December 31, 2022.
Residential real estate loans
Commercial and multi-family real estate loans
Construction loans
Commercial and industrial loans
Consumer loans
Total
Fixed Rates
$
$
268,303
24,766
—
7,767
5,446
306,282
Floating or
Adjustable
Rates
(In thousands)
51,665
143,623
39,748
139
22,283
257,458
$
$
Total
319,968
168,389
39,748
7,906
27,729
563,740
$
$
Residential Real Estate Loans. Our one- to four-family residential loan portfolio consists of mortgage loans that
enable borrowers to purchase or refinance existing homes, most of which serve as the primary residence of the borrower. At
December 31, 2021, one- to four-family residential real estate loans totaled $320.0 million, or 55.9% of our total loan
portfolio, and consisted of $268.3 million of fixed-rate loans and $51.7 million of adjustable-rate loans. Most of these one- to
four-family residential properties are located in our primary market area.
We offer fixed-rate and adjustable-rate residential real estate loans with maturities up to 30 years. The one- to four-
family residential mortgage loans that we originate are generally underwritten according to Fannie Mae and Freddie Mac
guidelines, and we refer to loans that conform to such guidelines as “conforming loans.” Loans to be sold to other approved
investors or secondary market sources are underwritten to their specific requirements. We generally originate both fixed- and
adjustable-rate mortgage loans in amounts up to the maximum conforming loan limits. We also originate loans above the
conforming limits up to a maximum amount of $2.5 million, which are referred to as “jumbo loans.” We generally
underwrite jumbo loans, whether originated or purchased, in a manner similar to conforming loans. Loans originated for
sale, which totaled $1.2 million at December 31, 2021 are not included in the total above and are classified as held for sale on
the consolidated balance sheet.
5
Our adjustable-rate residential real estate loans have interest rates that are fixed for an initial period ranging from
one to ten years. After the initial fixed period, the interest rate on adjustable-rate residential real estate loans is generally
reset every year based on a contractual spread or margin above the average yield on U.S. Treasury securities. Our adjustable-
rate residential real estate loans have initial and periodic caps of 2% on interest rate changes, with a current cap of 5% over
the life of the loan.
We will originate one- to four-family residential mortgage loans with loan-to-value ratios of up to 80% of the
appraised value, depending on the size of the loan. Additionally, we will originate residential mortgage loans on townhouses
or condominiums with loan-to-value ratios of up to 75% of the appraised value, depending on the size of the loan. Our
conforming residential real estate loans may be for up to 90% of the appraised value of the property provided the borrower
obtains private mortgage insurance. Additionally, mortgage insurance is required for all mortgage loans that have a loan-to-
value ratio greater than 80%. The required coverage amount varies based on the loan-to-value ratio and term of the loan. We
only permit borrowers to purchase mortgage insurance from companies that we have approved.
We generally do not offer “interest only” mortgage loans on one- to four-family residential properties or loans that
provide for negative amortization of principal, such as “Option ARM” loans, where the borrower can pay less than the
interest owed on the loan, resulting in an increased principal balance during the life of the loan. Additionally, we do not offer
“subprime loans” (loans that are made with low down-payments to borrowers with weakened credit histories typically
characterized by payment delinquencies, previous charge-offs, judgments, bankruptcies, or borrowers with questionable
repayment capacity as evidenced by low credit scores or high debt-burden ratios) or Alt-A loans (defined as loans having less
than full documentation).
Commercial and Multi-Family Real Estate Loans. At December 31, 2021, we had $175.4 million in commercial
and multi-family real estate loans, representing 30.6% of our total loan portfolio. Our commercial real estate loans are
secured primarily by office buildings, industrial facilities, retail facilities and other commercial properties, substantially all of
which are located in our primary market area. At December 31, 2021, commercial real estate loans totaled $121.4 million, of
which $38.6 million was owner-occupied real estate and $82.8 million was secured by income producing, or non-owner-
occupied real estate.
We generally originate commercial real estate loans with maximum terms of ten years based on a 25-year
amortization schedule, and loan-to-value ratios of up to 70% of the appraised value of the property for loans that are
originated in-house and 60% of the appraised value of the property for loans received from brokers. Our commercial real
estate loans are offered with fixed or adjustable interest rates. Interest rates on our adjustable-rate loans generally adjust
every three, five, seven and ten years and the interest rate is indexed to the Federal Home Loan Bank advance rate, plus a
margin, subject to an interest rate floor. All of our commercial real estate loans are subject to our underwriting procedures
and guidelines, including requiring borrowers to generally have three months of operating expenses and loan payment
reserves in a liquid account with us. At December 31, 2021, our largest commercial real estate loan totaled $13.2 million and
was secured by an office building located in our primary market area. At December 31, 2021, this loan was performing in
accordance with its original terms.
We consider a number of factors in originating commercial real estate loans. We evaluate the qualifications,
experience and financial condition of the borrower (including credit history), as well as the value and condition of the
mortgaged property securing the loan. When evaluating the qualifications of the borrower, we consider the financial
resources of the borrower, the borrower’s experience in owning or managing similar property and the borrower’s payment
history with us and other financial institutions. In evaluating the property securing the loan, among other factors we consider
the net operating income of the mortgaged property before debt service and depreciation, the debt service coverage ratio (the
ratio of net operating income to debt service) to ensure that it is at least 1.25x of the monthly debt service, and the ratio of the
loan amount to the appraised value of the mortgaged property. Our commercial real estate loans are generally appraised by
outside independent appraisers approved by the board of directors. Personal guarantees are often obtained from commercial
real estate borrowers. Each borrower’s financial information on such loans is monitored on an ongoing basis by requiring
periodic financial statement updates.
At December 31, 2021, multi-family real estate loans totaled $54.0 million representing 9.4% of our total loan
portfolio. Our multi-family real estate loans are generally secured by properties consisting of five or more rental units within
our market area. We originate multi-family real estate loans with fixed interest rates or with a variety of adjustable interest
rates with terms and amortization periods generally of up to 25 years. Interest rates on our adjustable-rate multi-family real
estate loans adjust and the interest rate is generally indexed to the Federal Home Loan Bank advance rate, plus a margin. At
December 31, 2021, our largest multi-family real estate loan had an outstanding balance of $4.8 million and was secured by
6
an apartment building located in our primary market area. At December 31, 2021, this loan was performing according to its
original terms.
In underwriting multi-family real estate loans, we require a debt service coverage ratio of at least 1.20x and consider
several factors, including the age and condition of the collateral, the financial resources and income level of the borrower and
the borrower’s experience in owning or managing similar properties. Multi-family residential real estate loans have loan-to-
value ratios of up to 75% of the appraised value of the property securing the loans for loans that are originated in-house and
60% of the appraised value of the property for loans received from brokers. All of our multi-family real estate loans are
subject to our underwriting procedures and guidelines, including requiring borrowers to generally have three months of
operating expenses and loan payment reserves in a liquid account with us. The borrower’s financial information on such
loans is monitored on an ongoing basis by requiring periodic financial statement updates.
Consumer Loans. We offer consumer loans to customers residing in our primary market area. Our consumer loans
consist primarily of home equity loans and lines of credit. At December 31, 2021, consumer loans totaled $27.7 million, or
4.8% of our total loan portfolio.
Home equity loans and lines of credit are multi-purpose loans used to finance various home or personal needs,
where a one- to four-family primary or secondary residence serves as collateral. We generally originate home equity loans
and lines of credit of up to $500,000 with a maximum loan-to-value ratio of 70% (75% if Bogota Savings Bank holds the first
lien position) and $300,000, with a maximum loan-to-value ratio of 80% and terms of up to 30 years. Home equity lines of
credit have adjustable rates of interest that are based on the prime interest rate published in The Wall Street Journal, plus a
margin, and reset monthly. Home equity lines of credit are secured by residential real estate in a first or second lien position.
The procedures for underwriting consumer loans include assessing the applicant’s payment history on other
indebtedness, the applicant’s ability to meet existing obligations and payments on the proposed loan, and the loan-to-value
ratio. Although the applicant’s creditworthiness is a primary consideration, the underwriting process also includes a
comparison of the value of the collateral, if any, to the proposed loan amount.
Construction Loans. We also originate loans to finance the construction of one- to four-family residential
properties. At December 31, 2021, residential construction loans totaled $41.4 million, or 7.2% of our total loan portfolio.
Most of these loans are secured by properties located in our primary market area.
Our residential land and acquisition loans are generally structured as two-year interest-only balloon loans. The
interest rate is generally a fixed rate based on an index rate, plus a margin. Our construction-to-permanent loans are
generally structured as interest-only, adjustable-rate loans with a duration of six to twelve months for the construction phase.
The interest rate on these loans is based on the prime interest rate as published in The Wall Street Journal, plus a margin.
Construction loan-to-value ratios for one- to four-family residential properties generally will not exceed 80% of the appraised
value of the property on a completed basis, while loan-to-value ratios for land acquisition financing will not exceed 50% of
the value of the land for an unimproved lot and 75% of the value of the land for an improved lot. Once the construction
project is satisfactorily completed, we look to provide permanent financing.
We also offer loans primarily to established local developers to finance the construction of commercial and multi-
family properties or to acquire land for development of commercial and multi-family properties. We also provide
construction loans primarily to local developers for the construction of one- to four-family residential developments. At
December 31, 2021, we had a single commercial construction loan that totaled $11.0 million, or 1.9% of our total loan
portfolio. This loan was secured by an office building located in our primary market area. At December 31, 2021, this loan
was performing according to its original terms. We also had undrawn amounts on the commercial construction loan totaling
$36.9 million at December 31, 2021.
Historically, our commercial construction loans are generally interest-only loans that provide for the payment of
interest during the construction phase, which is usually between 12 to 24 months. The interest rate is generally adjustable
based on an index rate, typically the prime interest rate as published in The Wall Street Journal, plus a margin. At the end of
the construction phase, the loan generally converts to a permanent commercial real estate mortgage loan, but in some cases it
may be payable in full. However, our construction loans for the construction of one- to four-family residential properties
may convert to permanent residential real estate loans. Loans can be made with a maximum loan-to-value ratio of 75% of the
appraised market value upon completion of the project or a maximum loan-to-value ratio of 50% for raw land.
Before making a commitment to fund a commercial construction loan, we require an appraisal of the property by an
independent licensed appraiser. The construction phase is carefully monitored to minimize our risk. All construction
projects must be completed in accordance with approved plans and approved by the municipality in which they are located.
7
Loan proceeds are disbursed periodically in increments as construction progresses and as inspections by our approved
inspectors warrant.
Commercial and Industrial Loans. We offer commercial loans and adjustable-rate lines of credit up to $500,000 to
small and medium-sized businesses in our market area. These loans are generally secured by accounts receivable, inventory
or other business assets, and we may support this collateral with liens on real property. At December 31, 2021, commercial
and industrial loans totaled $7.9 million, or 1.4% of total loans, which consisted of 43 commercial and industrial loans that
totaled $2.1 million and 50 loans under the Paycheck Protection Program ("PPP") that totaled $5.8 million.
Commercial lending products include revolving lines of credit and term loans. Our commercial lines of credit are
typically made with adjustable interest rates, indexed to the prime interest rate published in The Wall Street Journal, plus a
margin, and we can demand repayment of the amount due at any time after it is due. Term loans are generally made with
fixed interest rates, indexed to the comparable Federal Home Loan Bank of New York amortizing advance indications, plus a
margin, and are for terms up to seven years.
When making commercial and industrial loans, we require a debt service coverage ratio of at least 1.25x and we
review and consider the financial statements of the borrower, our lending history with the borrower, the borrower’s debt
service capabilities, the projected cash flows of the business and the value of the collateral, accounts receivable, inventory
and equipment. Depending on the collateral used to secure the loans, commercial and industrial loans are made up to 70% of
the value of the collateral securing the loan. We generally do not make unsecured commercial and industrial loans. Personal
guarantees are obtained from commercial and industrial borrowers.
During 2020, as a result of the COVID-19 global health crisis, the U.S. government and regulatory agencies took
several actions to provide support to the U.S. economy. The Coronavirus Aid, Relief and Economic Security Act (the
“CARES Act”) was signed into law on March 27, 2020 as a $2 trillion legislative package. The CARES Act authorized the
Small Business Administration (the “SBA”) to temporarily guarantee loans under the PPP. Eligible businesses could apply
for a PPP loan up to a greater of: (1) 2.5 times its average monthly “payroll costs;” or (2) $10.0 million. PPP loans have: (a)
an interest rate of 1.0%, (b) a five-year loan term to maturity for loans made on or after June 5, 2020 (loans made prior to
June 5, 2020 have a two-year term, however borrowers and lenders may mutually agree to extend the maturity for such loans
to five years); and (c) principal and interest payments deferred for six months from the date of disbursement. The SBA
guarantees 100% of the PPP loans made to eligible borrowers. The entire principal amount of a borrower’s PPP loan,
including any accrued interest, is eligible to be forgiven under the PPP if employee and compensation levels of the business
are maintained and 75% of the loan proceeds are used for payroll expenses, with the remaining 25% of the loan proceeds
used for other qualifying expenses.
Loan Underwriting Risks
Adjustable-Rate Loans. While we anticipate that adjustable-rate loans will better offset the adverse effects of an
increase in interest rates as compared to fixed-rate loans, an increased monthly payment required of adjustable-rate loan
borrowers in a rising interest rate environment could cause an increase in delinquencies and defaults. The marketability of
the underlying property also may be adversely affected in a high interest rate environment. In addition, although adjustable-
rate loans make our asset base more responsive to changes in interest rates, the extent of this interest sensitivity is somewhat
limited by the annual and lifetime interest rate adjustment limits on adjustable-rate residential real estate loans.
Commercial and Multi-Family Real Estate Loans. Loans secured by commercial and multi-family real estate
generally have larger balances and involve a greater degree of risk than one- to four-family residential real estate loans. Of
primary concern in commercial and multi-family real estate lending is the borrower’s creditworthiness and the feasibility and
cash flow potential of the project. Payments on loans secured by income properties often depend on the successful operation
and management of the properties. As a result, repayment of such loans may be subject to adverse conditions in the real
estate market or the economy to a greater extent than residential real estate loans. To monitor cash flows on income
properties, we require borrowers and loan guarantors, if any, to provide annual financial statements on commercial and multi-
family real estate loans. In reaching a decision whether to make a commercial or multi-family real estate loan, we consider
and review a global cash flow analysis of the borrower and consider the net operating income of the property, the borrower’s
expertise and credit history and the value of the underlying property. We generally have required that the properties securing
these real estate loans have debt service coverage ratios (the ratio of earnings before debt service to debt service) of at least
1.25x. We require a Phase 1 environmental report when we believe a possibility exists that hazardous materials may have
existed on the site, or the site may have been impacted by adjoining properties that handled hazardous materials.
8
Consumer Loans. Consumer loans may entail greater risk than residential mortgage loans, particularly in the case
of consumer loans that are unsecured or secured by assets that depreciate rapidly. Repossessed collateral for a defaulted
consumer loan may not provide an adequate source of repayment for the outstanding loan and a small remaining deficiency
often does not warrant further substantial collection efforts against the borrower. Consumer loan collections depend on the
borrower’s continuing financial stability, and therefore are likely to be adversely affected by various factors, including job
loss, divorce, illness or personal bankruptcy. Furthermore, the application of various federal and state laws, including federal
and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans.
Construction Loans. Our construction loans are based upon our estimates of costs to complete a project and the
value of the completed project. Underwriting is focused on the borrowers’ financial strength, credit history and demonstrated
ability to produce a quality product and effectively market and manage its operations. All construction loans for which the
builder does not have a binding purchase agreement must be approved by our internal loan committee.
Construction lending involves additional risks when compared to permanent residential lending because funds are
advanced upon the security of the project, which is of uncertain value before its completion. Because of the uncertainties
inherent in estimating construction costs, it is difficult to evaluate accurately the total funds required to complete a project
and the related loan-to-value ratio. This type of lending also typically involves higher loan principal amounts and is often
concentrated with a small number of builders. In addition, generally during the term of a construction loan, interest may be
funded by the borrower or disbursed from an interest reserve set aside from the construction loan budget. These loans often
involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project
and the ability of the borrower to sell or lease the property or obtain permanent take-out financing, rather than the ability of
the borrower or guarantor to repay principal and interest. If the appraised value of a completed project proves to be
overstated, we may have inadequate security for the repayment of the loan upon completion of construction of the project and
may incur a loss. We use a discounted cash flow analysis to determine the value of any construction project of five or more
units. Our ability to continue to originate a significant amount of construction loans is dependent on the strength of the
housing market in our market areas.
Commercial and Industrial Loans. Unlike residential real estate loans, which generally are made on the basis of
the borrower’s ability to make repayment from his or her employment or other income, and which are secured by real
property whose value tends to be readily ascertainable, commercial business loans have higher risk and typically are made on
the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business, and the collateral
securing these loans may fluctuate in value. Our commercial business loans are originated primarily based on the identified
cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. Most often, this collateral
consists of real estate, accounts receivable, inventory or equipment. Credit support provided by the borrower for most of
these loans and the probability of repayment is based on the liquidation value of the pledged collateral and enforcement of a
personal guarantee, if any. As a result, the availability of funds for the repayment of commercial business loans may depend
substantially on the success of the business itself. Further, any collateral securing such loans may depreciate over time, may
be difficult to appraise and may fluctuate in value.
Originations, Purchases and Participations of Loans
Lending activities are conducted by our loan personnel operating at our main office, branch office locations and loan
production office. We also obtain referrals from existing or past customers and from accountants, real estate brokers,
builders and attorneys. All loans that we originate or purchase are underwritten pursuant to our policies and procedures,
which incorporate Fannie Mae underwriting guidelines to the extent applicable for residential loans. We originate both
adjustable-rate and fixed-rate loans. Our ability to originate fixed or adjustable-rate loans depends upon the relative customer
demand for such loans, which is affected by current market interest rates as well as anticipated future market interest rates.
Our loan origination and purchase activity may be adversely affected by a rising interest rate environment, which typically
results in decreased loan demand.
As a supplement to our in-house loan originations of one- to four-family residential real estate loans, beginning in
2013, we entered into agreements with unaffiliated mortgage brokers as a source for additional residential real estate loans.
We currently work with five different mortgage brokers, none of which we have an ownership interest in or any common
employees or directors. Three of the mortgage brokers are located in Morris County, New Jersey, and one mortgage broker
is located in each of Hudson and Ocean County, New Jersey. These mortgage brokers fund the one- to four-family
residential real estate loans and then sell them to Bogota Savings Bank following our underwriting analysis. We use the
same parameters in evaluating these loans as we do for our in-house loan originations of one- to four-family residential real
estate loans.
9
For each purchased loan, we generally pay a fixed fee based on the loan balance. For the years ended December 31,
2021 and 2020, we purchased for our portfolio $18.0 million and $37.9 million, respectively, of loans from these mortgage
brokers. As part of purchasing the loans, we acquire the servicing rights to the loans. The purchased loans are acquired from
these mortgage brokers without recourse or any right to require the mortgage broker to repurchase the loans. The fixed
aggregate fee we pay to acquire the loan and servicing rights are added to the loan balance and amortized over the contractual
life of the loan under the interest method.
We purchase for our portfolio both fixed and adjustable interest rate one- to four-family real estate loans, with
maturities up to 30 years, with a per loan limit of $1.0 million.
We generally do not purchase whole loans from third parties other than the one- to four-family residential real estate
loans described above. However, we purchase participation interests primarily in commercial real estate and multi-family
loans where we are not the lead lender. We underwrite our participation interest in the loans that we purchase according to
our own underwriting criteria and procedures. At December 31, 2021, the outstanding balances of our loan participations
where we are not the lead lender totaled $9.0 million, all of which were commercial or multi-family real estate loans. All
such loans were performing according to their original terms at December 31, 2021.
Loan Approval Procedures and Authority
Pursuant to New Jersey law, the aggregate amount of loans that Bogota Savings Bank is permitted to make to any
one borrower or a group of related borrowers is generally limited to 15% of Bogota Savings Bank’s capital, surplus fund and
undivided profits (25% if the amount in excess of 15% is secured by “readily marketable collateral”). At December 31, 2021,
based on the 15% limitation, Bogota Savings Bank’s loans-to-one-borrower limit was approximately $18.2 million. On the
same date, Bogota Savings Bank had no borrowers with outstanding balances in excess of this amount. At December 31,
2021, our largest loan relationship with a single borrower was for $13.2 million, which consisted of four loans secured by
various commercial real estate and multi-family properties in our primary market area. The underlying loans were performing
in accordance with their terms on that date.
Our lending activities follow written, non-discriminatory, underwriting standards and loan origination procedures
established by our board of directors and management. The board of directors has granted loan approval authority to certain
officers up to prescribed limits, depending on the officer’s title and experience and the type of loan.
Loans in excess of individual officers’ lending limits require approval of our Internal Loan Committee, which is
comprised of our President and Chief Executive Officer, Executive Vice President and Chief Financial Officer and Executive
Vice President and Chief Lending Officer. The Internal Loan Committee can approve individual loans of up to prescribed
limits, depending on the type of loan. Loans that involve policy exceptions also must be approved by the Internal Loan
Committee and ratified by the board of directors.
Loans in excess of the Internal Loan Committee’s loan approval authority require the approval of the board of
directors.
Allowance for Loan Losses The allowance for loan losses is maintained at a level which, in management’s
judgment, is adequate to absorb probable credit losses inherent in the loan portfolio. The amount of the allowance is based
on management’s evaluation of the collectability of the loan portfolio, including the size and composition of the portfolio,
delinquency statistics, geographic and industry concentrations, the adequacy of the underlying collateral, the financial
strength of borrowers, results of internal loan reviews, trends in historical loss experience, specific impaired loans, and
economic conditions and other qualitative and quantitative factors which could affect potential credit losses. Allowances for
loans that are individually classified as impaired are generally determined based on collateral values or the present value of
estimated cash flows. The allowance is increased by a provision for loan losses, which is charged to expense and reduced by
full and partial charge-offs, net of recoveries. Changes in the allowance relating to impaired loans are charged or credited to
the provision for loan losses.
In addition, the NJDBI and the Federal Deposit Insurance Corporation periodically review our allowance for loan
losses and as a result of such reviews, they may require us to adjust our allowance for loan losses or recognize loan charge-
offs.
10
Allowance for Loan Losses. The following table sets forth activity in our allowance for loan losses and certain asset
quality ratios for the periods indicated.
Total loans
Net loans
Average loans
Non-performing loans
Allowance at beginning of year
Provision (credit) for loan losses
Charge offs:
Residential real estate loans
Commercial and multi-family real estate loans
Construction loans
Consumer loans
Total charge-offs
Recoveries:
Residential real estate loans
Commercial and multi-family real estate loans
Construction loans
Consumer loans
Total recoveries
Net recoveries
At or for the Years Ended December 31,
2021
2020
$
$
(Dollars in thousands)
573,515
570,210
583,362
865
2,241
(88 )
559,932
557,691
563,769
693
2,016
200
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
25
—
—
—
25
25
Allowance for loan losses at end of period
$
2,153
$
2,241
Allowance for loan losses to non-performing loans at
end of period
Allowance for loan losses to total loans outstanding at
end of period
Non-performing loans to total loans
Net recoveries to average loans outstanding during period
Net recoveries to average residential real estate loans outstanding during period
Net recoveries to average commercial and multi-family real estate loans
outstanding during period
Net recoveries to average construction loans outstanding during period
Net recoveries to average commercial and industrial loans outstanding
during period
Net recoveries to average consumer loans outstanding during period
248.90 %
323.38 %
0.38 %
0.15 %
— %
— %
— %
— %
— %
— %
0.40 %
0.12 %
— %
0.01 %
— %
— %
— %
— %
11
Allocation of Allowance for Loan Losses. The following tables sets forth the allowance for loan losses allocated by
loan category and the percent of the allowance in each category to the total allocated allowance at the dates indicated. The
allowance for loan losses allocated to each category is not necessarily indicative of future losses in any particular category
and does not restrict the use of the allowance to absorb losses in other categories.
At December 31,
2021
Percent of
Allowance
in Category
to Total
Allocated
Allowance
Allowance
for Loan
Losses
$
1,092
50.72 %
769
195
9
88
2,153
35.72
9.06
0.42
4.09
100.00 %
$
Residential real estate loans
Commercial and multi-family
real estate loans
Construction loans
Commercial and industrial
loans
Consumer loans
Total
Investment Activities
Percent
of Loans
in Each
Category
to Total
Loans
Allowance
for Loan
Losses
(Dollars in thousands)
$
55.90 %
1,254
2020
Percent of
Allowance
in Category
to Total
Allocated
Allowance
Percent
of Loans
in Each
Category
to Total
Loans
55.96 %
60.72 %
30.64
7.23
841
45
37.53
2.01
1.38
4.84
100.00 %
$
14
87
2,241
0.62
3.88
100.00 %
30.65
1.77
2.44
4.41
100.00 %
General. Our board of directors is responsible for approving and overseeing our investment policy, which is
reviewed at least annually by the board. This policy dictates that investment decisions be made based on liquidity needs,
potential returns, consistency with our interest rate risk management strategy and the need for an adequate diversification of
assets. An investment committee, consisting of authorized officers, selected by the board of directors, oversees our investing
activities and strategies. The authorized officers are our President and Chief Executive Officer, Executive Vice President and
Compliance Officer and Executive Vice President and Chief Financial Officer. The board has designated our Executive Vice
President and Chief Financial Officer as our investment officer, who is primarily responsible for daily investment activities.
All purchases and sales of securities must be authorized by two officers on the investment committee. Security purchases are
limited to no more than $10.0 million a day and cannot amount to more than 25% of the investment portfolio in any given
month, in each case without the unanimous approval of the members of the investment committee. The board of directors
reviews the activities of the investment committee at each of its meetings.
Our current investment policy authorizes us to invest in various types of investment securities and liquid assets,
including U.S. Treasury obligations, securities of various government-sponsored enterprises, residential mortgage-backed
securities, commercial mortgage-backed securities collateralized mortgage obligations and real estate mortgage investment
conduits, municipal securities (limited to no more than 7.5% of our capital), overnight deposits and federal funds, bond
anticipation notes with the Borough of Bogota or the Township of Teaneck (limited to no more than 10.0% of our capital),
investment grade corporate bonds (limited to no more than 10.0% of our capital), investment grade banker’s acceptances and
commercial paper with a maturity of no more than 270 days (limited to no more than 5.0% of our capital), certificates of
deposit of federally insured institutions and depositor institution senior debt and capital securities (limited to no more than
10.0% of our capital and no more than 3.0% of our capital with a single issuer). We also are required to maintain an
investment in Federal Home Loan Bank of New York stock, which investment is based on the level of our Federal Home
Loan Bank borrowings. We do not engage in any investment hedging activities or trading activities, nor do we purchase any
high-risk mortgage derivative products, corporate junk bonds, and certain types of structured notes.
Debt securities investment accounting guidance requires that at the time of purchase we designate a security as held
to maturity, available for sale, or trading, depending on our ability and intent.
Portfolio Maturities and Yields. The composition and maturities of the investment securities portfolio at December
31, 2021 are summarized in the following table. The weighted average yield is calculated by dividing income, which has not
been tax effected on tax-exempt obligations, within each contractual maturity range by the outstanding amount of the related
12
investment. Maturities are based on the final contractual payment dates, and do not reflect the effect of scheduled principal
repayments, prepayments, or early redemptions that may occur.
One Year or Less
Amortized
Cost
Weighted
Average
Yield
More than One Year
through Five Years
Weighted
Average
Yield
Amortized
Cost
More than Five
Years through Ten
Years
Amortized
Cost
Weighted
Average
Yield
(Dollars in thousands)
More than Ten Years
Weighted
Average
Yield
Amortized
Cost
Total
Amortized
Cost
Fair
Value
Weighted
Average
Yield
Securities held-to-maturity:
U.S. government and agency
obligations
Municipal securities
Corporate bonds
Mortgage-backed
securities – residential
Mortgage-backed
securities – commercial
Total
Sources of Funds
$
—
4,006
—
— % $
0.78
—
—
903
13,681
— % $
1.00
3.89
3,000
375
—
2.00 % $
3.00
—
—
1,733
—
— % $
1.87
—
3,000 $
7,017
13,681
3,000
7,048
14,052
2.00 %
1.20
3.89
—
—
—
—
2,636
1.06
14,278
1.29
16,914
16,748
1.25
2,328
6,334
$
2.24
1.32 % $
11,760
26,344
2.25
3.06 % $
16,743
22,754
1.39
1.46 % $
2,610
18,621
1.46
1.37 % $
33,441
74,053 $
33,233
74,081
1.76
2.01 %
General. Deposits have traditionally been our primary source of funds for our lending and investment activities. We
also use borrowings, primarily Federal Home Loan Bank of New York advances, to supplement cash flows, as needed. In
addition, funds are derived from scheduled loan payments, investment maturities, loan sales, loan prepayments, retained
earnings and income on earning assets. While scheduled loan payments and income on earning assets are relatively stable
sources of funds, deposit inflows and outflows can vary widely and are influenced by prevailing interest rates, market
conditions and competition.
Deposit Accounts. The substantial majority of our deposits are from depositors who reside in our primary market
area. We access deposit customers by offering a broad selection of deposit instruments for individuals, businesses and
municipalities. At December 31, 2021, municipal deposits totaled $31.5 million, which represented 5.3% of total deposits.
Deposit account terms vary according to the minimum balance required, the time period that funds must remain on
deposit, and the interest rate, among other factors. In determining the terms of our deposit accounts, we consider the rates
offered by our competition, our liquidity needs, profitability, and customer preferences and concerns. We generally review
our deposit pricing on a weekly basis and continually review our deposit mix. Our deposit pricing strategy has generally
been to offer competitive rates, but generally not the highest rates offered in the market, and to periodically offer special rates
to attract deposits of a specific type or with a specific term.
Also, when rates and terms are favorable, we supplement customer deposits with brokered deposits. At December
31, 2021, we had $52.9 million of brokered deposits, which represented 8.9% of total deposits at December 31, 2021 with
such funds having a weighted average remaining term to maturity of 36 months. In a rising rate environment, we may be
unwilling or unable to pay competitive rates. To the extent that such deposits do not remain with us, they may need to be
replaced with borrowings, which could increase our cost of funds and negatively impact our interest rate spread, financial
condition and results of operations.
The flow of deposits is influenced significantly by general economic conditions, changes in money market and other
prevailing interest rates and competition. The variety of deposit accounts offered allows us to be competitive in obtaining
funds and responding to changes in consumer demand. Based on experience, we believe that our deposits are relatively
stable. However, the ability to attract and maintain deposits and the rates paid on these deposits has been and will continue to
be significantly affected by market conditions.
13
The following table sets forth the distribution of total deposit accounts, by account type, and the weighted average
rate paid at the dates indicated.
Noninterest bearing demand
accounts
NOW accounts
Money market accounts
Savings accounts
Certificates of deposit
Total
At December 31,
2021
2020
Amount
Percent
Average
Rate
Amount
Percent
Average
Rate
(Dollars in thousands)
$
$
39,318
69,940
57,541
64,285
366,396
597,480
6.58 %
11.74
9.63
10.76
61.32
100.00 %
— %
$
0.82
0.34
0.26
0.74
0.61 % $
27,062
28,672
58,114
31,761
356,364
501,973
5.39 %
5.71
11.58
6.33
70.99
100.00 %
— %
0.74
0.47
0.25
1.33
1.06 %
As of December 31, 2021, the aggregate amount of uninsured deposits (deposits in amounts greater than $250,000,
which is the maximum amount for federal deposit insurance) for noninterest bearing demand accounts, NOW accounts and
money market accounts, savings accounts and certificates of deposit was $43.2 million, $5.9 million and $41.6 million
respectively. As of December 31, 2020, the aggregate amount of uninsured deposits (deposits in amounts greater than or
equal to $250,000, which is the maximum amount for federal deposit insurance) for noninterest bearing demand accounts,
NOW accounts and money market accounts, savings accounts and certificates of deposit was $62.3 million, $7.6 million and
$94.2 million respectively. The amount of uninsured deposits is estimated on a per account basis, actual uninsured deposits
may vary when accounts are combined to a single owner. The following table sets forth the maturity of the portion of our
certificate of deposit that are in excess of the Federal Deposit Insurance Corporation insurance limit as of December 31,
2021.
Maturity Period:
Three months or less
Over three through six months
Over six through twelve months
Over twelve months
Total
At December 31,
2021
(In thousands)
$
$
18,211
8,978
7,387
6,991
41,567
Employees and Human Capital Resources
As of December 31, 2021, we had 73 full-time employees and two part-time employees. Our employees are not
represented by any collective bargaining group. Management believes that we have a good working relationship with our
employees.
We encourage and support the growth and development of our employees and, wherever possible, seek to fill
positions by promotion and transfer from within the organization. Continual learning and career development is advanced
through quarterly performance and development conversations with employees, internally developed training programs,
customized corporate training engagements and educational reimbursement programs. Reimbursement is available to
employees enrolled in pre-approved degree or certification programs at accredited institutions that teach skills or knowledge
relevant to our business, in compliance with Section 127 of the Internal Revenue Code, and for seminars, conferences, and
other training events employees attend in connection with their job duties.
The safety, health and wellness of our employees is a top priority. The COVID-19 pandemic presented a unique
challenge with regard to maintaining employee safety while continuing successful operations. Through teamwork and the
adaptability of our management and staff, we were able to transition, over a short period of time, 75% of our employees to
effectively working from remote locations and ensure a safely-distanced working environment for employees performing
customer facing activities, at branches and operations centers. All employees were asked not to come to work when they
experience signs or symptoms of a possible COVID-19 illness and have been provided additional paid time off to cover
compensation during such absences. On an ongoing basis, we further promote the health and wellness of our employees by
strongly encouraging work-life balance, offering flexible work schedules, keeping the employee portion of health care
14
premiums to a minimum and sponsoring various wellness programs, whereby employees are compensated for incorporating
healthy habits into their daily routines.
Employee retention helps us operate efficiently and achieve one of our business objectives, which is being a low-
cost provider. We believe our commitment to living out our core values, actively prioritizing concern for our employees’
well-being, supporting our employees’ career goals, offering competitive wages and providing valuable fringe benefits aids
in retention of our top-performing employees. In addition, nearly all of our employees are stockholders of the Company
through participation in our Employee Stock Ownership Plan, which aligns associate and stockholder interests by providing
stock ownership on a tax-deferred basis at no investment cost to our associates. At December 31, 2021, 38% of our current
staff had been with us for five years or more.
Subsidiaries
Bogota Securities Corp. is a New Jersey investment corporation subsidiary formed in 2014 to buy, sell and hold
investment securities. The income earned on Bogota Securities Corp.’s investment securities is subject to a lower state tax
than that assessed on income earned on investment securities maintained at Bogota Savings Bank.
In 1999, Bogota Savings Bank established Bogota Properties, LLC, a New Jersey-chartered limited liability
company to secure, manage and hold foreclosed assets. Bogota Properties, LLC was inactive at December 31, 2021.
General
Regulation and Supervision
As a New Jersey-chartered savings bank, Bogota Savings Bank is subject to comprehensive regulation by the
NJDBI, as its chartering authority, and by the Federal Deposit Insurance Corporation. Bogota Savings Bank is a member of
the Federal Home Loan Bank of New York and its deposits are insured up to applicable limits by the Federal Deposit
Insurance Corporation. Bogota Savings Bank is required to file reports with, and is periodically examined by, the Federal
Deposit Insurance Corporation and the NJDBI concerning its activities and financial condition and must obtain regulatory
approvals before entering into certain transactions, including mergers with or acquisitions of other financial institutions. This
regulatory structure is intended primarily for the protection of the insurance fund and depositors. The regulatory structure
also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and
examination policies, including policies regarding classifying assets and establishing an adequate allowance for loan losses
for regulatory purposes.
As a New Jersey-chartered mutual holding company and a bank holding company, Bogota Financial, MHC is
regulated and subject to examination by the NJDBI and the Federal Reserve Board. As a mutual holding company, Bogota
Financial Corp. is also required to comply with the rules and regulations of the Federal Reserve Board and the NJDBI. It is
required to file certain reports with the Federal Reserve Board and the NJDBI and is subject to examination by, and the
enforcement authority of, the Federal Reserve Board and the NJDBI. Bogota Financial Corp. is also subject to the rules and
regulations of the Securities and Exchange Commission under the federal securities laws.
Set forth below is a brief description of material regulatory requirements that are applicable to Bogota Savings
Bank, Bogota Financial Corp. and Bogota Financial, MHC. The description is limited to the material aspects of certain
statutes and regulations, and is not intended to be a complete list or description of such statutes and regulations and their
effects on Bogota Savings Bank, Bogota Financial Corp. and Bogota Financial, MHC.
New Jersey Banking Laws and Supervision
Activity Powers. Bogota Savings Bank derives its lending, investment and other activity powers primarily from the
New Jersey Banking Act and its related regulations. Under these laws and regulations, savings banks, including Bogota
Savings Bank, generally may invest in:
real estate mortgages;
consumer and commercial loans;
specific types of debt securities, including certain corporate debt securities and obligations of federal, state and
local governments and agencies;
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certain types of corporate equity securities; and
certain other assets.
A savings bank may also make other investments pursuant to “leeway” authority that permits investments not
otherwise permitted by the New Jersey Banking Act. Leeway investments must comply with a number of limitations on the
individual and aggregate amounts of leeway investments. A savings bank may also exercise trust powers upon approval of
the NJDBI. New Jersey savings banks also may exercise those powers, rights, benefits or privileges authorized for national
banks or out-of-state banks or for federal or out-of-state savings banks or savings associations, provided that before
exercising any such power, right, benefit or privilege, prior approval by the NJDBI by regulation or by specific authorization
is required. The exercise of these lending, investment and activity powers is limited by federal law and regulations. See “—
Federal Bank Regulation—Activities and Investments” below.
Loan-to-One-Borrower Limitations. With certain specified exceptions, a New Jersey-chartered savings bank may
not make loans or extend credit to a single borrower or to entities related to the borrower in an aggregate amount that would
exceed 15% of the bank’s capital funds. A savings bank may lend an additional 10% of the bank’s capital funds if secured by
collateral meeting the requirements of the New Jersey Banking Act. Bogota Savings Bank currently complies with applicable
loan-to-one-borrower limitations.
Dividends. Under the New Jersey Banking Act, a stock savings bank may declare and pay a dividend on its capital
stock only to the extent that the payment of the dividend would not impair the capital stock of the savings bank. In addition, a
stock savings bank may not pay a dividend unless the savings bank would, after the payment of the dividend, have a surplus
of not less than 50% of its capital stock, or alternatively, the payment of the dividend would not reduce the surplus. Federal
law may also limit the amount of dividends that may be paid by Bogota Savings Bank. See “—Federal Bank Regulation—
Prompt Corrective Regulatory Action” below.
Minimum Capital Requirements. Regulations of the NJDBI impose on New Jersey-chartered depository
institutions, including Bogota Savings Bank, minimum capital requirements similar to those imposed by the Federal Deposit
Insurance Corporation on insured state banks. See “—Federal Bank Regulation—Capital Requirements.”
Examination and Enforcement. The NJDBI may examine Bogota Savings Bank whenever it considers an
examination advisable. The NJDBI examines Bogota Savings Bank at least every two years. The NJDBI may order any
savings bank to discontinue any violation of law or unsafe or unsound business practice and may direct any director, officer,
attorney or employee of a savings bank engaged in an objectionable activity, after the NJDBI has ordered the activity to be
terminated, to show cause at a hearing before the NJDBI why such person should not be removed. The NJDBI also has
authority to appoint a conservator or receiver for a savings bank under certain circumstances such as insolvency or unsafe or
unsound condition to transact business.
Federal Bank Regulation
Supervision and Enforcement Authority. Bogota Savings Bank is subject to extensive regulation, examination and
supervision by the Federal Deposit Insurance Corporation as the insurer of its deposits. This regulatory structure is intended
primarily for the protection of the insurance fund and depositors.
Bogota Savings Bank must file reports with the Federal Deposit Insurance Corporation concerning its activities and
financial condition in addition to obtaining regulatory approvals before entering into certain transactions such as mergers
with, or acquisitions of, other financial institutions. There are periodic examinations by the Federal Deposit Insurance
Corporation to evaluate Bogota Savings Bank’s safety and soundness and compliance with various regulatory requirements.
The regulatory structure also gives the Federal Deposit Insurance Corporation extensive discretion in connection
with its supervisory and enforcement activities and examination policies, including policies with respect to the classification
of assets and the establishment of an adequate allowance for loan losses for regulatory purposes. The enforcement authority
includes, among other things, the ability to assess civil money penalties, issue cease and desist orders and remove directors
and officers. In general, these enforcement actions may be initiated in response to violations of laws and regulations,
breaches of fiduciary duty and unsafe or unsound practices. The Federal Deposit Insurance Corporation may also appoint
itself as conservator or receiver for an insured bank under specified circumstances, including: (1) insolvency; (2) substantial
dissipation of assets or earnings through violations of law or unsafe or unsound practices; (3) the existence of an unsafe or
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unsound condition to transact business; (4) insufficient capital; or (5) the incurrence of losses that will deplete substantially
all of the institution’s capital with no reasonable prospect of replenishment without federal assistance.
Capital Requirements. Federal regulations require federally insured depository institutions to meet several minimum
capital standards: Tier 1 capital to average assets of 4.00%, Common equity tier 1 capital to risk weighted assets of 4.50%,
Tier 1 capital to risk weighted assets of 6.00% and Total capital to risk weighted assets of 8.00%.
Common equity tier 1 capital, Tier 1 capital, Total capital, risk weighted assets and average assets are defined in the
Basel III rules. The Bogota Savings Bank opted to exclude accumulated other comprehensive income components from
common equity Tier 1 and Total regulatory capital. Failure to meet the minimum capital requirements can result in certain
mandatory and possibly additional discretionary actions by the Federal Deposit Insurance Corporation that, if undertaken,
could have a direct material effect on Bogota Savings Bank.
In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and
certain discretionary bonus payments to management if the institution does not hold a “capital conservation buffer”
consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets above the amount necessary to meet its minimum
risk-based capital requirements. The capital conservation buffer requirement was fully implemented at 2.5% on January 1,
2019.
The Economic Growth, Regulatory Relief, and Consumer Protection Act required the federal banking agencies,
including the Federal Deposit Insurance Corporation, to establish a community bank leverage ratio (“CBLR”) for financial
institutions and financial institution holding companies that have less than $10 billion in total consolidated assets and meet
other qualifying criteria (“qualifying community banking organizations”). The federal banking agencies adopted a final rule
that established 9% as the CBLR, effective January 1, 2020. The Coronavirus Aid, Relief, and Economic Security Act
(“CARES Act”) temporarily lowered the CBLR requirement to 8.0%, with federal regulation making the reduced ratio
effective April 23, 2020. Another rule was issued to transition back to the 9.0% CBLR by increasing the ratio to 8.5% for
calendar year 2021 and to 9.0% thereafter.
Qualifying community banking organizations may opt into and out of the CBLR framework on their quarterly call
reports. Qualifying community banking organizations that elect to use the CBLR framework and that meet the specified
capital requirement, which starting in 2022 is maintaining a leverage ratio of greater than 9%, are considered to have satisfied
the generally applicable risk-based and leverage capital requirements in the agencies’ capital rules and will be considered to
have met the well capitalized ratio requirements under the prompt corrective action statutes. The agencies reserved the
authority to disallow the use of the CBLR framework by a financial institution or holding company, based on the risk profile
of the organization.
Bogota Savings Bank elected to use the CBLR framework as of December 31, 2021. Bogota Savings Bank’s capital
management policy is designed to build and maintain capital levels that exceed regulatory standards and appropriately
provide for growth. The leverage ratio of Bogota Savings Bank at December 31, 2021 was 14.55%; see note 13 for more
information.
Standards for Safety and Soundness. As required by statute, the federal banking agencies have adopted final
regulations and Interagency Guidelines Establishing Standards for Safety and Soundness. The guidelines set forth the safety
and soundness standards the federal banking agencies use to identify and address problems at insured depository institutions
before capital becomes impaired. The guidelines address internal controls and information systems, internal audit systems,
credit underwriting, loan documentation, interest rate exposure, asset growth, asset quality, earnings and compensation, fees
and benefits. The agencies have also established standards for safeguarding customer information. If the appropriate federal
banking agency determines that an institution fails to meet any standard prescribed by the guidelines, the agency may require
the institution to submit to the agency an acceptable plan to achieve compliance with the standard.
Activities and Investments. Federal law provides that a state-chartered bank insured by the Federal Deposit
Insurance Corporation generally may not engage as a principal in any activity not permissible for a national bank to conduct
or make any equity investment of a type or in an amount not authorized for national banks, notwithstanding state law, subject
to certain exceptions. For example, state-chartered banks may, with Federal Deposit Insurance Corporation approval,
continue to exercise state authority to invest in common or preferred stocks listed on a national securities exchange or the
Nasdaq Market and to invest in the shares of an investment company registered under the Investment Company Act of 1940.
The maximum permissible investment is 100% of Tier 1 Capital, as specified by the Federal Deposit Insurance Corporation’s
regulations, or the maximum amount permitted by New Jersey law, whichever is less.
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In addition, the Federal Deposit Insurance Corporation is authorized to permit state-chartered banks and savings
banks to engage in state-authorized activities or investments not permissible for national banks (other than non-subsidiary
equity investments) if they meet all applicable capital requirements and it is determined that such activities or investments do
not pose a significant risk to the Deposit Insurance Fund. The Federal Deposit Insurance Corporation has adopted procedures
for institutions seeking approval to engage in such activities or investments. In addition, a nonmember bank may control a
subsidiary that engages in activities as principal that would only be permitted for a national bank to conduct in a “financial
subsidiary” if a bank meets specified conditions and deducts its investment in the subsidiary for regulatory capital purposes.
Interstate Banking and Branching. Federal law permits well capitalized and well managed bank holding
companies to acquire banks in any state, subject to Federal Reserve Board approval, certain concentration limits and other
specified conditions. Interstate mergers of banks are also authorized, subject to regulatory approval and other specified
conditions. In addition, banks may establish de novo branches on an interstate basis at any location where a bank chartered
under the laws of the branch location host state may establish a branch.
Prompt Corrective Regulatory Action. Federal law requires, among other things, that federal bank regulatory
authorities take “prompt corrective action” with respect to banks that do not meet minimum capital requirements. For these
purposes, the law establishes five capital categories: well capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized and critically undercapitalized.
The Federal Deposit Insurance Corporation has adopted regulations to implement the prompt corrective action
legislation. An institution is considered “well capitalized” if it has a CBLR ratio of 9.0% or greater, starting in 2022, or a
total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, a leverage ratio of 5.0%
or greater and a common equity Tier 1 ratio of 6.5% or greater. At December 31, 2021, Bogota Savings Bank was classified
as a “well capitalized” institution.
At each successive lower capital category, an insured depository institution is subject to more restrictions and
prohibitions, including restrictions on growth, interest rates paid on deposits, payment of dividends, and acceptance of
brokered deposits. Furthermore, if an insured depository institution is classified in one of the undercapitalized categories, it
is required to submit a capital restoration plan to the appropriate federal banking agency, and the holding company must
guarantee the performance of that plan in an amount equal to the lesser of 5.0% of the institution’s total assets when deemed
undercapitalized or the amount necessary to achieve the status of adequately capitalized. Based upon its capital levels, a bank
that is classified as well-capitalized, adequately capitalized, or undercapitalized may be treated as though it were in the next
lower capital category if the appropriate federal banking agency, after notice and opportunity for hearing, determines that an
unsafe or unsound condition, or an unsafe or unsound practice, warrants such treatment. If an “undercapitalized” bank fails
to submit an acceptable plan, it is treated as if it is “significantly undercapitalized.” “Significantly undercapitalized” banks
must comply with one or more of a number of additional restrictions, including an order by the Federal Deposit Insurance
Corporation to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets, cease receipt
of deposits from correspondent banks or dismiss directors or officers, and restrictions on interest rates paid on deposits,
compensation of executive officers and capital distributions by the parent holding company. “Critically undercapitalized”
institutions are subject to additional measures including, subject to a narrow exception, the appointment of a receiver or
conservator within 270 days after it is determined to be critically undercapitalized.
As noted above, federal legislation has modified the Basel III requirements for qualifying banks with less than $10.0
billion in assets who elect to follow the CBLR framework. Institutions that exceed the CBLR will be considered “well
capitalized” for purposes of prompt corrective action.
Transaction with Affiliates and Regulation W of the Federal Reserve Regulations. Transactions between banks
and their affiliates are governed by federal law. Generally, Section 23A of the Federal Reserve Act and the Federal Reserve
Board’s Regulation W prohibit a bank and its subsidiaries from engaging in a “covered transaction” if the aggregate amount
of covered transactions outstanding with the affiliate, including the proposed transaction, would exceed an amount equal to
10.0% of the bank’s capital stock and surplus, or if the aggregate amount of covered transactions outstanding with all
affiliates, including the proposed transaction, would exceed an amount equal to 20.0% of the bank’s capital stock and surplus.
Section 23B applies to “covered transactions” as well as to certain other transactions and requires that all such transactions be
on terms substantially the same, or at least as favorable, to the institution or subsidiary as prevailing market terms for
transaction with or involving a non-affiliate. The term “covered transaction” includes making loans to, purchasing assets
from, and issuing guarantees to, an affiliate, and other similar transactions. Section 23B transactions also include the bank’s
providing services and selling assets to an affiliate. In addition, loans or other extensions of credit by a bank to an affiliate
are required to be collateralized according to the requirements set forth in Section 23A of the Federal Reserve Act.
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A bank’s loans to its executive officers, directors, any owner of 10% or more of its stock (each, an insider) and any
of certain entities affiliated with any such person (an insider’s related interest) as well as loans to insiders of affiliates and
such insiders’ related interests are subject to the conditions and limitations imposed by Section 22(h) of the Federal Reserve
Act and its implementing regulations. Under these restrictions, the aggregate amount of the loans to any insider and the
insider’s related interests may not exceed the loans-to-one-borrower limit applicable to national banks, which is comparable
to the loans-to-one-borrower limit applicable to Bogota Savings Bank’s loans. See “New Jersey Banking Regulation—Loans-
to-One Borrower Limitations.” All loans by a bank to all insiders and insiders’ related interests in the aggregate may not
exceed the bank’s unimpaired capital and unimpaired surplus. With certain exceptions, loans to an executive officer, other
than loans for the education of the officer’s children and certain loans secured by the officer’s residence, may not exceed the
lesser of (1) $100,000 or (2) the greater of $25,000 or 2.5% of the bank’s unimpaired capital and surplus. Federal regulation
also requires that any proposed loan to an insider or a related interest of that insider be approved in advance by a majority of
the Board of Directors of the bank, with any interested directors not participating in the voting, if such loan, when aggregated
with any existing loans to that insider and the insider’s related interests, would exceed either (1) $250,000 or (2) the greater
of $25,000 or 5% of the bank’s unimpaired capital and surplus. Generally, such loans must be made on substantially the same
terms as, and follow credit underwriting procedures that are not less stringent than, those that are prevailing at the time for
comparable transactions with other persons., see note 5 for more information.
An exception is made for extensions of credit made pursuant to a benefit or compensation plan of a bank that is
widely available to employees of the bank and that does not give any preference to insiders of the bank over other employees
of the bank.
In addition, federal law prohibits extensions of credit to a bank’s insiders and their related interests by any other
institution that has a correspondent banking relationship with the bank, unless such extension of credit is on substantially the
same terms as those prevailing at the time for comparable transactions with other persons and does not involve more than the
normal risk of repayment or present other unfavorable features.
Provisions of the New Jersey Banking Act impose conditions and limitations on the liabilities to a savings bank of
its directors and executive officers and of corporations and partnerships controlled by such persons, that are comparable in
many respects to the conditions and limitations imposed on the loans and extensions of credit to insiders and their related
interests under federal law, as discussed above. The New Jersey Banking Act also provides that a savings bank that is in
compliance with federal law is deemed to be in compliance with such provisions of the New Jersey Banking Act.
Federal Insurance of Deposit Accounts. Bogota Savings Bank is a member of the Deposit Insurance Fund, which
is administered by the Federal Deposit Insurance Corporation. Deposit accounts in Bogota Savings Bank are insured up to a
maximum of $250,000 for each separately insured depositor. Insurance of deposits may be terminated by the Federal Deposit
Insurance Corporation upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or
unsound condition to continue operations or has violated any applicable law, regulation, rule order or regulatory condition
imposed in writing. We do not know of any practice, condition or violation that might lead to termination of Bogota Savings
Bank’s deposit insurance, see note 8 for more information.
Privacy Regulations. A regulation issued by the Consumer Financial Protection Bureau generally requires that
Bogota Savings Bank disclose its privacy policy, including identifying with whom it shares a customer’s “non-public
personal information,” to customers at the time of establishing the customer relationship. In addition, financial institutions
are generally required to furnish their customers a privacy notice annually, but a provision of the Fixing America’s Surface
Transportation Act enacted in 2015 provides an exception from the annual notice requirement if a financial institution does
not share non-public personal information with non-affiliated third parties (other than as permitted under certain exceptions)
and its policies and practices regarding disclosure of non-public personal information have not changed since the last
distribution of its policies and practices to its customers. In addition, Bogota Savings Bank is required to provide its
customers with the ability to “opt-out” of having their personal information shared with unaffiliated third parties and to not
disclose account numbers or access codes to non-affiliated third parties for marketing purposes.
Community Reinvestment Act. Under the Community Reinvestment Act, or “CRA,” as implemented by Federal
Deposit Insurance Corporation, a state non-member bank has a continuing and affirmative obligation, consistent with its safe
and sound operation, to help meet the credit needs of its entire community, including low- and moderate-income
neighborhoods. The CRA does not establish specific lending requirements or programs for financial institutions nor does it
limit an institution’s discretion to develop the types of products and services that it believes are best suited to its particular
community, consistent with the CRA. The CRA requires the Federal Deposit Insurance Corporation, in connection with its
examination of each state non-member bank, to assess the institution’s record of meeting the credit needs of its community
and to take such record into account in its evaluation of certain applications by such institution, including applications to
acquire branches and other financial institutions. The CRA requires the Federal Deposit Insurance Corporation to provide a
written evaluation of an institution’s CRA performance utilizing a four-tiered descriptive rating system. Bogota Savings
Bank’s most recent Federal Deposit Insurance Corporation CRA rating in November 2020 was “Satisfactory.”
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Consumer Protection and Fair Lending Regulations. Bogota Savings Bank is subject to a variety of federal and
New Jersey statutes and regulations that are intended to protect consumers and prohibit discrimination in the granting of
credit. These statutes and regulations provide for a range of sanctions for non-compliance with their terms, including
imposition of administrative fines and remedial orders, and referral to the Attorney General for prosecution of a civil action
for actual and punitive damages and injunctive relief. Certain of these statutes, including Section 5 of the Federal Trade
Commission Act, which prohibits unfair and deceptive acts and practices against consumers, authorize private individual and
class action lawsuits and the award of actual, statutory and punitive damages and attorneys’ fees for certain types of
violations. Federal laws also prohibit unfair, deceptive or abusive acts or practices against consumers, which can be enforced
by the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation and state attorneys general.
Federal Home Loan Bank System
Bogota Savings Bank is a member of the Federal Home Loan Bank System, which consists of 11 regional Federal
Home Loan Banks. The Federal Home Loan Banks provide a central credit facility primarily for member institutions.
Bogota Savings Bank, as a member of the Federal Home Loan Bank of New York, is required to acquire and hold shares of
capital stock in the Federal Home Loan Bank of New York. Bogota Savings Bank was in compliance with this requirement
at December 31, 2021.
Holding Company Regulation
Federal Holding Company Regulation. Bogota Financial, MHC and Bogota Financial Corp. are bank holding
companies registered with the Federal Reserve Board and are subject to regulations, examination, supervision and reporting
requirements applicable to bank holding companies. In addition, the Federal Reserve Board has enforcement authority over
Bogota Financial, MHC and Bogota Financial Corp. and their non-savings bank subsidiaries. Among other things, this
authority permits the Federal Reserve Board to restrict or prohibit activities that are determined to be a serious risk to the
subsidiary savings bank.
A bank holding company is generally prohibited from engaging in non-banking activities, or acquiring direct or
indirect control of more than 5% of the voting securities of any company engaged in non-banking activities. One of the
principal exceptions to this prohibition is for activities the Federal Reserve Board determines to be so closely related to
banking or managing or controlling banks as to be a proper incident thereto. Some of the principal activities that the Federal
Reserve Board has determined by regulation to be so closely related to banking are: (1) making or servicing loans; (2)
performing certain data processing services; (3) providing discount brokerage services; (4) acting as fiduciary, investment or
financial advisor; (5) leasing personal or real property; (6) making investments in corporations or projects designed primarily
to promote community welfare; and (7) acquiring a savings and loan association whose direct and indirect activities are
limited to those permitted for bank holding companies.
The Gramm-Leach-Bliley Act of 1999 authorizes a bank holding company that meets specified conditions, including
that its depository institution subsidiaries are “well capitalized” and “well managed,” to opt to become a “financial holding
company.” A “financial holding company” may engage in a broader range of financial activities than a bank holding
company. Such activities may include insurance underwriting and investment banking. Bogota Financial Corp. has not
elected “financial holding company” status at this time.
Capital. Bank holding companies with greater than $3 billion in total consolidated assets are subject to consolidated
regulatory capital requirements. However, pursuant to federal legislation, bank holding companies with less than $3.0 billion
in consolidated assets generally are not subject to the consolidated capital requirements unless otherwise advised by the
Federal Reserve Board.
Dividends and Stock Repurchases. A bank holding company is generally required to give the Federal Reserve
Board prior written notice of any purchase or redemption of its outstanding equity securities if the gross consideration for the
purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the
preceding 12 months, is equal to 10% or more of the company’s consolidated net worth. The Federal Reserve Board may
disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe and unsound practice,
or would violate any law, regulation, Federal Reserve Board order or directive, or any condition imposed by, or written
agreement with, the Federal Reserve Board. There is an exception to this approval requirement for well-capitalized bank
holding companies that meet certain other conditions.
The Federal Reserve Board has issued a policy statement regarding capital distributions, including dividends, by
bank holding companies. In general, the policy provides that dividends should be paid only from current earnings and only if
the prospective rate of earnings retention by the bank holding company appears consistent with the organization’s capital
needs, asset quality and overall financial condition. The policy also requires that a bank holding company serve as a source
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of financial strength to its subsidiary banks by standing ready to use available resources to provide adequate capital funds to
those banks during periods of financial stress or adversity, and by maintaining the financial flexibility and capital-raising
capacity to obtain additional resources for assisting its subsidiary banks where necessary. Additionally, under the prompt
corrective action laws, the ability of a bank holding company to pay dividends may be restricted if a subsidiary bank becomes
undercapitalized. In addition, the Federal Reserve has issued guidance that requires consultation with supervisory staff prior
to a bank holding company’s payment of dividends or repurchases of stock under certain circumstances. These regulatory
policies could affect the ability of Bogota Financial Corp. to pay dividends, engage in stock repurchases or otherwise engage
in capital distributions.
Waivers of Dividends by Bogota Financial, MHC. Bogota Financial Corp. may pay dividends on its common stock
to public stockholders. If it does, it is also required to pay the same dividends per share to Bogota Financial, MHC, unless
Bogota Financial, MHC elects to waive the receipt of dividends. Bogota Financial, MHC must receive the prior approval of
the Federal Reserve Board before it may waive the receipt of any dividends from Bogota Financial Corp., and current Federal
Reserve Board policy prohibits any mutual holding company that is regulated as a bank holding company, such as Bogota
Financial, MHC, from waiving the receipt of dividends paid by its subsidiary holding company.
Because of the foregoing Federal Reserve Board restrictions on the ability of a mutual holding company, such as
Bogota Financial, MHC, to waive the receipt of dividends declared by its subsidiary mid-tier stock holding company, it is
unlikely that Bogota Financial, MHC will waive the receipt of any dividends declared by Bogota Financial Corp. Moreover,
since Bogota Financial Corp. sold only a minority of its shares to the public and contributed the remaining shares to Bogota
Financial, MHC, Bogota Financial Corp. raised significantly less capital than would have been the case if it had sold all its
shares to the public. As a result, paying dividends to Bogota Financial, MHC, an entity that did not pay for the shares of
Bogota Financial Corp. common stock it received in connection with the offering, may be inequitable to public stockholders
and not in their best financial interests. Therefore, unless Federal Reserve Board regulations and policy change by allowing
Bogota Financial, MHC to waive the receipt of dividends declared by Bogota Financial Corp. without diluting minority
stockholders, it is unlikely that Bogota Financial Corp. will pay any dividends.
Possible Conversion of Bogota Financial, MHC to Stock Form. In the future, Bogota Financial, MHC may
convert from the mutual to capital stock form of ownership in a transaction commonly referred to as a “second-step
conversion.” Any second-step conversion of Bogota Financial, MHC would require the approval of the NJDBI and the
Federal Reserve Board, as well as the approval of the members of Bogota Financial, MHC.
Acquisition. Federal laws and regulations and the New Jersey Banking Act provide that no person may acquire
control of a bank holding company, such as Bogota Financial Corp., without the prior non-objection or approval of the
Federal Reserve Board and the NJDBI. Control, as defined under the Change in Bank Control Act and applicable federal
regulations, means the power, directly or indirectly, to direct the management or policies of the company or to vote 25% or
more of any class of voting securities of the company. Acquisition of 10% or more of any class of a bank holding company’s
voting securities constitutes a rebuttable presumption of control under certain circumstances, including where, as will be the
case with Bogota Financial Corp., the issuer has registered securities under Section 12 of the Securities Exchange Act of
1934.
In addition, the Bank Holding Company Act of 1956, as amended, provides that no company may acquire control of
a bank or bank holding company within the meaning of that Act without having first obtained the approval of the Federal
Reserve Board. Control, as defined under the Bank Holding Company Act and applicable Federal Reserve Board
regulations, means ownership, control or power to vote 25% or more of any class of voting stock, control in any manner over
the election of a majority of the company’s directors, or a determination by the regulator that the acquirer has the power to
exercise, directly or indirectly, a controlling influence over the management or policies of the company. Effective September
30, 2020, the Federal Reserve Board amended its regulations concerning when a company exercises a controlling influence
over a bank or bank holding company for purposes of the Bank Holding Company Act. A company that acquires control of a
bank or bank holding company for purposes of the Bank Holding Company Act becomes a “bank holding company” subject
to registration, examination and regulation by the Federal Reserve Board.
New Jersey Holding Company Regulation. Bogota Financial, MHC and Bogota Financial Corp. are subject to
regulation under New Jersey banking law. Under the New Jersey Banking Act, a company owning or controlling a savings
bank is regulated as a bank holding company. The New Jersey Banking Act defines the terms “company” and “bank holding
company” as such terms are defined under the federal Bank Holding Company Act. Each bank holding company controlling
a New Jersey-chartered bank or savings bank must file certain reports with the NJDBI and is subject to examination by the
NJDBI.
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Federal Securities Laws
Bogota Financial Corp.’s common stock is registered with the Securities and Exchange Commission. As such
Bogota Financial Corp. is subject to the information, proxy solicitation, insider trading restrictions and other requirements
under the Securities Exchange Act of 1934.
The registration under the Securities Act of 1933 of shares of common stock issued in the offering does not cover
the resale of those shares. Shares of common stock purchased by persons who are not affiliates of Bogota Financial Corp.
may be resold without registration. Shares purchased by an affiliate of Bogota Financial Corp. will be subject to the resale
restrictions of Rule 144 under the Securities Act of 1933. If Bogota Financial Corp. meets the current public information
requirements of Rule 144, each affiliate that complies with the other conditions of Rule 144, including those that require the
affiliate’s sale to be aggregated with those of other persons, would be able to sell in the public market without registration, a
number of shares not to exceed, in any three-month period, the greater of 1% of the outstanding shares of Bogota Financial
Corp., or the average weekly volume of trading in the shares during the preceding four calendar weeks.
Emerging Growth Company Status. Under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), a
company with pre-IPO total annual gross revenues of less than $1.07 billion during its most recently completed fiscal year
qualifies as an “emerging growth company.” Bogota Financial Corp. qualifies as an emerging growth company under the
JOBS Act.
An “emerging growth company” may choose not to hold stockholder votes to approve annual executive
compensation (more frequently referred to as “say-on-pay” votes) or executive compensation payable in connection with a
merger (more frequently referred to as “say-on-golden parachute” votes). An emerging growth company also is not subject
to the requirement that its auditors attest to the effectiveness of the company’s internal control over financial reporting, and
can provide scaled disclosure regarding executive compensation; however, Bogota Financial Corp. will also not be subject to
additional executive compensation disclosure so long as it remains a “smaller reporting company” under Securities and
Exchange Commission regulations (generally less than $250 million of voting and non-voting equity held by non-affiliates).
Finally, an emerging growth company may elect to comply with new or amended accounting pronouncements in the same
manner as a private company, but must make such election when the company is first required to file a registration statement.
Such an election is irrevocable during the period a company is an emerging growth company. Bogota Financial Corp. has
elected to comply with new or amended accounting pronouncements in the same manner as a private company.
A company loses emerging growth company status on the earlier of: (1) the last day of the fiscal year of the
company during which it had total annual gross revenues of $1.07 billion or more; (2) the last day of the fiscal year of the
issuer following the fifth anniversary of the date of the first sale of common equity securities of the company pursuant to an
effective registration statement under the Securities Act of 1933; (3) the date on which such company has, during the
previous three-year period, issued more than $1.0 billion in non-convertible debt; or (4) the date on which such company is
deemed to be a “large accelerated filer” under Securities and Exchange Commission regulations (generally, a “large
accelerated filer” is defined as a corporation with at least $700 million of voting and non-voting equity held by non-
affiliates).
Sarbanes-Oxley Act of 2002
The Sarbanes-Oxley Act of 2002 is intended to improve corporate responsibility, provide for enhanced penalties for
accounting and auditing improprieties at publicly traded companies and protect investors by improving the accuracy and
reliability of corporate disclosures pursuant to the securities laws. Bogota Financial Corp. has in place policies, procedures
and systems designed to comply with these regulations, and Bogota Financial Corp. will review and document such policies,
procedures and systems to ensure continued compliance with these regulations.
The CARES Act
The CARES Act, which became law on March 27, 2020, provided over $2 trillion to combat COVID-19 and stimulate
the economy. The law had several provisions relevant to depository institutions, including:
Allowing institutions not to characterize loan modifications relating to the COVID-19 pandemic as troubled debt
restructurings and also allowing them to suspend the corresponding impairment determination for accounting
purposes;
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The ability of a borrower of a federally-backed mortgage loan experiencing financial hardship due to the COVID-19
pandemic, to request forbearance from paying their mortgage. Such a forbearance could be granted for up to 180
days, subject to extension for an additional 180-day period upon the request of the borrower. During that time, no
fees, penalties or interest beyond the amounts scheduled or calculated as if the borrower made all contractual
payments on time and in full under the mortgage contract could accrue on the borrower’s account. Except for
vacant or abandoned property, the servicer of a federally-backed mortgage was prohibited from taking any
foreclosure action, including any eviction or sale action, for not less than the 60-day period beginning March 18,
2020, which period has subsequently been extended several times by administrative action.
The ability of a borrower of a multi-family federally backed mortgage loan that was current as of February 1, 2020,
to submit a request for forbearance because of financial hardship during the COVID-19 emergency. A forbearance
could be granted for up to 30 days, which could be extended for up to two additional 30-day periods upon the
request of the borrower. Later extensions were made available, for a total of six months, for certain federally backed
multi-family mortgage loans. During the time of the forbearance, the multi-family borrower could not evict or
initiate the eviction of a tenant or charge any late fees, penalties or other charges to a tenant for late payment of rent.
Additionally, a multi-family borrower that received a forbearance could not require a tenant to vacate a dwelling
unit before a date that is 30 days after the date on which the borrower provided the tenant notice to vacate and may
not issue a notice to vacate until after the expiration of the forbearance.
The Paycheck Protection Program
The Paycheck Protection Program (“PPP”), established as part of the CARES Act, provided 100% federally
guaranteed loans (principal and interest) to eligible small businesses through the SBA’s 7(a) loan guaranty program for
amounts up to 2.5 times the average monthly “payroll costs” of the business. The entire principal amount of the borrower’s
PPP loan, including any accrued interest, is eligible for PPP loan forgiveness so long as, during the applicable loan
forgiveness covered period, employee and compensation levels of the business are maintained and 60% of the loan proceeds
are used for payroll expenses, with the remaining 40% of the loan proceeds used for other qualifying expenses, including, but
not limited to, mortgage interest, rent and utilities. In May 2021, the SBA announced that PPP funding has been exhausted
and the SBA stopped accepting new loan applications.
Federal Taxation
Taxation
General. Bogota Financial Corp. and Bogota Savings Bank are subject to federal income taxation in the same
general manner as other corporations, with some exceptions discussed below. The following discussion of federal taxation is
intended only to summarize material federal income tax matters and is not a comprehensive description of the tax rules
applicable to Bogota Financial Corp. and Bogota Savings Bank.
Method of Accounting. For federal income tax purposes, Bogota Savings Bank currently reports its income and
expenses on the accrual method of accounting and uses a tax year ending December 31 for filing its federal income tax
returns.
Net Operating Loss Carryovers. Effective with the passage of the Tax Cuts and Jobs Act, net operating loss
carrybacks are no longer permitted, and net operating losses are allowed to be carried forward indefinitely. Net operating
loss carryforwards arising from tax years beginning after January 1, 2018 are limited to offset a maximum of 80% of a future
year’s taxable income. See Note 10 in the Notes to consolidated financial statements that appear in this Annual Report on
Form 10-K for additional information. At December 31, 2021, Bogota Savings Bank had net operating loss carryovers
assumed from the Gibraltar merger.
Capital Loss Carryovers. Generally, a financial institution may carry back capital losses to the preceding three
taxable years and forward to the succeeding five taxable years. Any capital loss carryback or carryover is treated as a short-
term capital loss for the year to which it is carried. As such, it is grouped with any other capital losses for the year to which it
is carried and is used to offset any capital gains. Any loss remaining after the five-year carryover period that has not been
deducted is no longer deductible. At December 31, 2021, Bogota Savings Bank had no capital loss carryovers.
Corporate Dividends. We may generally exclude from our income 100% of dividends received from Bogota
Savings Bank as a member of the same affiliated group of corporations.
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Audit of Tax Returns. Bogota Savings Bank’s federal income tax returns and New Jersey State income tax returns
have not been audited in the last three years.
State Taxation
In 2014, tax legislation was enacted that changed the manner in which financial institutions and their affiliates are
taxed in New Jersey. Taxable income is apportioned to New Jersey based on the location of the taxpayer’s customers, with
special rules for income from certain financial transactions. The location of the taxpayer’s offices and branches are not
relevant to the determination of income apportioned to New Jersey. The statutory tax rate is currently 6.5%. An alternative
tax on apportioned capital, capped at $5.0 million for a tax year, is imposed to the extent that it exceeds the tax on
apportioned income. The New Jersey alternative tax rate was 0.05% for 2019, 0.025% for 2020 and completely phased out
as of January 1, 2021. Qualified community banks and thrift institutions that maintain a qualified loan portfolio are entitled
to a specially computed modification that reduces the income taxable to New Jersey.
ITEM 1A. Risk Factors
The material risks that management believes affect the Company are described below. You should carefully consider the
risks as described below, together with all of the information included herein. The risks described below are not the only risks
the Company faces. Additional risks not presently known also may have a material adverse effect on the Company’s results
of operations and financial condition.
Risks Related to the COVID-19 Pandemic
The economic impact of the COVID-19 pandemic could adversely affect our financial condition and results of
operations.
Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the full impact of the COVID-
19 pandemic on our business. The extent of such impact will depend on future developments, which are highly uncertain,
including when the coronavirus can be controlled and abated and when and how the economy may be reopened. As the result
of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of
the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and
results of operations:
demand for our products and services may decline, making it difficult to grow assets and income;
if the economy worsens, loan delinquencies, problem assets, and foreclosures may increase, resulting in
increased charges and reduced income;
collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase;
our allowance for loan losses may have to be increased if borrowers experience financial difficulties beyond
forbearance periods, which will adversely affect our net income;
the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us;
our cyber security risks are increased as the result of an increase in the number of employees working remotely;
we rely on third party vendors for certain services and the unavailability of a critical service due to the COVID-
19 pandemic could have an adverse effect on us; and
Federal Deposit Insurance Corporation premiums may increase if the agency experience additional resolution
costs.
Moreover, our future success and profitability substantially depends on the management skills of our executive
officers and directors, many of whom have held officer and director positions with us for many years. The unanticipated loss
or unavailability of key employees due to the outbreak could harm our ability to operate our business or execute our business
strategy. We may not be successful in finding and integrating suitable successors in the event of key employee loss or
unavailability.
Risks Related to our Lending Activities
The geographic concentration of our loan portfolio makes us vulnerable to a downturn in the local economy.
At December 31, 2021, approximately $320.0 million, or 55.9% of our total loan portfolio, was secured by real
estate, most of which is located in our primary lending market of Bergen, Essex, Morris, Monmouth and Ocean Counties in
New Jersey. Unlike larger financial institutions that are more geographically diversified, our profitability depends primarily
on the general economic conditions in our primary market area. Local economic conditions have a significant impact on our
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lending, including the ability of borrowers to repay these loans and the value of the collateral securing these loans. Future
declines in the real estate values in northern and central New Jersey could significantly impair the value of the collateral
securing our loans and our ability to sell the collateral upon foreclosure for an amount necessary to satisfy the borrower’s
obligations to us. This could require increasing our allowance for loan losses, which could have a material adverse effect on
our business, financial condition, results of operations and growth prospects.
Our strategy of increasing the amount of commercial and multi-family real estate loans we originate may expose us to
increased lending risks.
At December 31, 2021, $175.4 million, or 30.6% of our loan portfolio, consisted of commercial and multi-family
real estate loans. We are committed to increasing our commercial lending. However, commercial and multi-family real
estate loans generally expose a lender to a greater risk of loss than one- to four-family residential loans. Repayment of
commercial and multi-family real estate loans generally depends, in large part, on sufficient income from the property or
business to cover operating expenses and debt service. Commercial and multi-family real estate loans typically involve
larger loan balances to single borrowers or groups of related borrowers compared to one- to four-family residential mortgage
loans. Changes in economic conditions that are beyond the control of the borrower and lender could impact the value of the
security for the loan or the future cash flows of the affected property. Additionally, any decline in real estate values may
affect commercial and multi-family real estate properties more than residential properties. Also, many of our commercial and
multi-family real estate borrowers have more than one loan outstanding with us. Consequently, an adverse development with
respect to one loan or one credit relationship can expose us to a significantly greater risk of loss compared to an adverse
development with respect to a residential mortgage loan.
Our allowance for loan losses may not be sufficient to cover actual loan losses.
We maintain an allowance for loan losses, which is established through a provision for loan losses that represents
management’s best estimate of probable incurred losses within our loan portfolio. We make various assumptions and
judgments about the collectability of loans in our portfolio, including the creditworthiness of borrowers and the value of the
real estate and other assets serving as collateral for the repayment of loans. In determining the adequacy of the allowance for
loan losses, we rely on our experience and our evaluation of economic and other conditions. If our assumptions prove to be
incorrect, our allowance for loan losses may not be sufficient to cover losses inherent in our loan portfolio, and adjustments
may be necessary to address different economic conditions or adverse developments in the loan portfolio. Consequently, a
problem with one or more loans could require us to significantly increase our provision for loan losses. In addition, the
NJDBI and the Federal Deposit Insurance Corporation review our allowance for loan losses and as a result of such reviews,
they may require us to adjust our allowance for loan losses or recognize loan charge-offs. Material additions to the allowance
would materially decrease our net income.
The Financial Accounting Standards Board has delayed the effective date of the implementation of Current
Expected Credit Losses, or CECL, standard. CECL will be effective for CFSB Bancorp, Inc. on January 1, 2023. CECL will
require financial institutions to determine periodic estimates of lifetime expected credit losses on loans, and recognize the
expected credit losses as allowances for credit losses. This will change the current method of providing allowances for loan
losses that are incurred or probable, which would likely require us to increase our allowance for credit losses, and to greatly
increase the types of data we would need to collect and review to determine the appropriate level of the allowance for credit
losses.
We are subject to environmental liability risk associated with lending activities.
A significant portion of our loan portfolio is secured by real estate, and we could become subject to environmental
liabilities with respect to one or more of these properties. During the ordinary course of business, we may foreclose on and
take title to properties securing defaulted loans. In doing so, there is a risk that hazardous or toxic substances could be found
on these properties. In such event, we may be liable for remediation costs, as well as for personal injury and property
damage, civil fines and criminal penalties regardless of when the hazardous conditions or toxic substances first affected any
particular property. Environmental laws may require us to incur substantial expenses to address unknown liabilities and may
materially reduce the affected property’s value or limit our ability to use or sell the affected property. In addition, future laws
or more stringent interpretations or enforcement policies with respect to existing laws may increase our exposure to
environmental liability. Although we have policies and procedures to perform an environmental review before initiating any
foreclosure on nonresidential real property, these reviews may not be sufficient to detect all potential environmental hazards.
The remediation costs and any other financial liabilities associated with an environmental hazard could have a material
adverse effect on us.
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Risks Related to Market Interest Rates
Changes in interest rates may reduce our profits.
Our profitability, like that of most financial institutions, depends to a large extent upon our net interest income,
which is the difference between our interest income on interest-earning assets, such as loans and securities, and our interest
expense on interest-bearing liabilities, such as deposits and borrowed funds. Accordingly, our results of operations depend
largely on movements in market interest rates and our ability to manage our interest rate-sensitive assets and liabilities in
response to these movements. Factors such as inflation, recession and instability in financial markets, among other factors
beyond our control, may affect interest rates.
As a result of our historical focus on one- to four-family residential real estate loans, the majority of our loans have
fixed interest rates. This can create significant earnings volatility because of changes in market interest rates. In a period of
rising interest rates, the interest income earned on our assets, such as loans and investments, may not increase as rapidly as
the interest paid on our liabilities, such as deposits, which have shorter durations. In a period of declining interest rates, the
interest income earned on our assets may decrease more rapidly than the interest paid on our liabilities, as borrowers prepay
mortgage loans, thereby requiring us to reinvest these cash flows at lower interest rates.
Furthermore, increases in interest rates may adversely affect the ability of borrowers to make loan repayments on
adjustable-rate loans, as the interest owed on such loans would increase as interest rates increase.
Any substantial, unexpected or prolonged change in market interest rates could have a material adverse effect on our
financial condition, liquidity and results of operations. While we pursue an asset/liability strategy designed to mitigate our
risk from changes in interest rates, changes in interest rates can still have a material adverse effect on our financial condition
and results of operations. Changes in interest rates also may negatively affect our ability to originate real estate loans, the
value of our assets and our ability to realize gains from the sale of our assets, all of which ultimately affect our earnings.
Also, our interest rate risk modeling techniques and assumptions cannot fully predict or capture the impact of actual interest
rate changes on our balance sheet or projected operating results. For further discussion of how changes in interest rates could
impact us, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Management of
Market Risk.”
Risks Related to Economic Conditions
A deterioration in economic conditions could reduce demand for our products and services and/or result in a decrease
in our asset quality, which could have an adverse effect on our results of operations.
A deterioration in economic conditions could result in the following consequences, any of which could have a
material adverse effect on our business, financial condition, liquidity and results of operations:
demand for our products and services may decrease;
loan delinquencies, problem assets and foreclosures may increase;
collateral for loans, especially real estate, may decline in value, thereby reducing customers’ future borrowing
power, and reducing the value of assets and collateral associated with existing loans;
the value of our securities portfolio may decrease; and
the net worth and liquidity of loan guarantors may decrease, thereby impairing their ability to honor
commitments made to us.
Moreover, a significant decline in general economic conditions, caused by a pandemic, inflation, recession, acts of terrorism,
an outbreak of hostilities or other international or domestic calamities, unemployment or other factors beyond our control
could further negatively affect our financial performance.
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Risks Related to Our Funding
Our inability to generate core deposits could have an adverse effect on our net interest margin and profitability or
may cause us to rely more heavily on wholesale funding strategies for liquidity needs.
Certificates of deposit comprised $366.4 million or 61.3% of our total deposits at December 31, 2021. Certificates of
deposit due within one year of December 31, 2021 totaled $254.3 million, or 42.6% of total deposits. This included $52.9
million of brokered deposits, which represented 8.9% of total deposits. While part of our business strategy is to emphasize
generating transaction accounts, we cannot guarantee if and when this will occur. Further, the considerable competition for
deposits in our market area will also make it difficult for us to obtain reasonably-priced deposits. If we are not able to
increase our lower-cost transactional deposits, we may be forced to continue to pay higher costs for certificates of deposit,
which would adversely affect our operating margins and profitability, or to seek other sources of funds, including other
certificates of deposit, Federal Home Loan Bank advances, brokered deposits and lines of credit to meet the borrowing and
deposit withdrawal requirements of our customers.
If our banking deposits that we receive from municipalities were lost within a short period of time, it could negatively
impact our liquidity and earnings.
As of December 31, 2021, we held $31.5 million of deposits from municipalities in our primary market area in New
Jersey. These deposits may be more volatile than other deposits and generally are larger than our retail or business deposits.
If a significant amount of these deposits were withdrawn within a short period of time, it could have a negative impact on our
short-term liquidity and have an adverse impact on our earnings.
Risks Related to Our Business Strategy
Building market share through de novo branching may cause our expenses to increase faster than revenues.
We are considering building market share by opening de novo branches in contiguous markets. There are
considerable costs involved in de novo branching as new branches generally require time to generate sufficient revenues to
offset their initial start-up costs, especially in areas in which we do not have an established presence. Accordingly, any new
branch can be expected to negatively impact our earnings until the branch attracts a sufficient number of deposits and loans to
offset expenses. We cannot assure you that if we open new branches, they will be successful even after they have been
established.
Acquisitions may disrupt our business and dilute shareholder value.
Our business strategy includes pursuing acquisition opportunities of other financial institutions. We would seek
acquisition partners that offer us either significant market presence or the potential to expand our market footprint and
improve profitability through economies of scale or expanded services. Acquiring other banks may have an adverse effect on
our financial results and may involve various other risks commonly associated with acquisitions, including, among other
things: difficulty in estimating the value of the target institution; payment of a premium over book and market values that
may dilute our tangible book value and earnings per share in the short and long term; potential exposure to unknown or
contingent tax or other liabilities; exposure to potential asset quality problems; difficulty and expense of integrating the
operations and personnel of the target institution; risk that the acquired business will not perform according to management’s
expectations because of our inability to realize projected revenue increases, cost savings, improved geographic or product
presence, or other projected benefits; potential disruptions to our business; potential diversion of our management 's time and
attention; and the possible loss of key employees and customers of the target institution.
Our business strategy contemplates moderate organic growth, and our financial condition and results of operations
may be adversely affected if we fail to grow or fail to manage our growth effectively.
Our assets increased $96.4 million, or 13.0%, from $740.9 million at December 31, 2020 to $837.4 million at
December 31, 2021, primarily due to increases in loans receivable. Over the next several years, we expect to experience
moderate organic growth in our total assets and deposits, and the scale of our operations. Achieving our organic growth
targets requires us to attract customers that currently bank at other financial institutions in our market. Our ability to grow
successfully will depend on a variety of factors, including our ability to attract and retain experienced bankers, the
availability of attractive business opportunities, competition from other financial institutions in our market area and our
ability to manage our growth. While we believe we have the management resources and internal systems in place to
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successfully manage our future growth, there can be no assurance growth opportunities will be available or that we will
successfully manage our growth. If we do not manage our growth effectively, we may not be able to achieve our business
plan, which would have an adverse effect on our financial condition and results of operations.
Risks Related to Our Securities Portfolio
Our investments in corporate and municipal debt securities obligations expose us to additional credit risks, which
could adversely affect our financial condition and results of operations.
Our investment portfolio historically has consisted primarily of mortgage-backed securities insured or guaranteed by
the United States or agencies thereof. We also have invested in bank-qualified municipal obligations and corporate bonds that
are not backed by the federal government and expose us to a greater credit risk than U.S. agency securities. Any decline in
the credit quality of these securities exposes us to the risk that the market value of the securities could decrease that may
require us to write down their value and could lead to a possible default in payment.
Changes in the valuation of our securities portfolio may reduce our profits and our capital levels.
Our securities portfolio may be affected by fluctuations in market value, potentially reducing accumulated other
comprehensive income or earnings. Fluctuations in market value may be caused by changes in market interest rates, lower
market prices for securities and limited investor demand. Management evaluates securities for other-than-temporary
impairment on a quarterly basis, with more frequent evaluation for selected issues. In analyzing a debt issuer’s financial
condition, management considers whether the securities are issued by the federal government or its agencies, whether
downgrades by bond rating agencies have occurred, industry analysts’ reports and spread differentials between the effective
rates on instruments in the portfolio compared to risk-free rates. If this evaluation shows impairment to the actual or
projected cash flows associated with one or more securities, we may take a charge to earnings to reflect such impairment.
Changes in interest rates may also have an adverse effect on our financial condition, as our available-for-sale securities are
reported at their estimated fair value, and therefore are affected by fluctuations in interest rates. We increase or decrease our
stockholders’ equity by the amount of change in the estimated fair value of the available-for-sale securities, net of taxes.
Declines in market value may result in other-than-temporary impairments of these assets, which may lead to accounting
charges that could have a material adverse effect on our net income and stockholders’ equity.
Risks Related to Our Operations
We are a community bank and our ability to maintain our reputation is critical to the success of our business and the
failure to do so may materially adversely affect our performance.
We are a community bank, and our reputation is one of the most valuable components of our business. A key
component of our business strategy is to rely on our reputation for customer service and knowledge of local markets to
expand our presence by capturing new business opportunities from existing and prospective customers in our market area and
contiguous areas. As such, we strive to conduct our business in a manner that enhances our reputation. This is done, in part,
by recruiting, hiring and retaining employees who share our core values of being an integral part of the communities we
serve, delivering superior service to our customers and caring about our customers and employees. If our reputation is
negatively affected by the actions of our employees, by our inability to conduct our operations in a manner that is appealing
to current or prospective customers, or otherwise, our business and, therefore, our operating results may be materially
adversely affected.
Our success depends on retaining certain key personnel.
Our performance largely depends on the talents and efforts of our experienced senior management team. We rely on
key personnel to manage and operate our business, including major revenue generating functions such as loan and deposit
generation. The loss of key staff may adversely affect our ability to maintain and manage these functions effectively, which
could negatively affect our income. In addition, loss of key personnel could result in increased recruiting and hiring
expenses, which would reduce our net income. Our continued ability to compete effectively depends on our ability to attract
new employees and to retain and motivate our existing employees.
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Systems failures or breaches of our network security could adversely affect our financial condition and results of
operation and subject us to increased operating costs as well as litigation and other liabilities.
Our operations depend upon our ability to protect our computer systems and network infrastructure against damage
from physical theft, fire, power loss, telecommunications failure or a similar catastrophic event, as well as from security
breaches, denial of service attacks, cyber attacks, and viruses, worms and other disruptive problems caused by hackers. Any
damage or failure that causes an interruption in our operations could have a material adverse effect on our financial condition
and results of operations. Computer break-ins, phishing and other disruptions could also jeopardize the security of
information stored in and transmitted through our computer systems and network infrastructure, which may result in
significant liability to us and may cause existing and potential customers to refrain from doing business with us. Although
we, with the help of third-party service providers, intend to continue to implement security technology and establish
operational procedures designed to prevent such damage, our security measures may not be successful. In addition, advances
in computer capabilities, new discoveries in the field of cryptography or other developments could result in a compromise or
breach of the algorithms we and our third-party service providers use to encrypt and protect customer transaction data. A
failure of such security measures could have a material adverse effect on our financial condition and results of operations.
Our risk and exposure to cyber attacks or other information security breaches remains heightened because of, among
other things, the evolving nature of these threats. There continues to be a rise in security breaches and cyber attacks within
the financial services industry. For example, financial institutions continue to be the target of various evolving and adaptive
cyber attacks, including malware, ransomware and denial-of-service, as part of an effort to disrupt the operations of financial
institutions, potentially test their cybersecurity capabilities, or obtain confidential, proprietary or other information. As cyber
threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance
our protective measures or to investigate and remediate any information security vulnerabilities.
Disruptions or failures in the physical infrastructure or operating systems that support our businesses and customers,
or cyber attacks or security breaches of the networks, systems or devices that our customers use to access our products and
services could result in customer attrition, financial losses, the inability of our customers to transact business with us,
violations of applicable privacy and other laws, regulatory fines, penalties or intervention, reputational damage,
reimbursement or other compensation costs, and/or additional compliance costs, any of which could materially adversely
affect our results of operations or financial condition.
Natural disasters, acts of terrorism, global market disruptions and other external events could harm our business.
Natural disasters can disrupt our operations, result in damage to our properties, reduce or destroy the value of the
collateral for our loans and negatively affect the economies in which we operate, which could have a material adverse effect
on our results of operations and financial condition. A significant natural disaster, such as a tornado, hurricane, earthquake,
fire or flood, could have a material adverse impact on our ability to conduct business, and our insurance coverage may be
insufficient to compensate for losses that may occur. Acts of terrorism, war, civil unrest, violence or human error could cause
disruptions to our business or the economy as a whole. While we have established and regularly test disaster recovery
procedures, the occurrence of any such event could have a material adverse effect on our business, operations and financial
condition. Additionally, global markets may be adversely affected by natural disasters, the emergence of widespread health
emergencies or pandemics, cyber attacks or campaigns, military conflict, terrorism or other geopolitical events. Global
market disruptions may affect our business liquidity. Also, any sudden or prolonged market downturn in the U.S. or abroad,
as a result of the above factors or otherwise could result in a decline in revenue and adversely affect our results of operations
and financial condition, including capital and liquidity levels.
Our risk management framework may not be effective in mitigating risk and reducing the potential for significant
losses.
Our risk management framework is designed to minimize risk and loss to us. We try to identify, measure, monitor,
report and control our exposure to risk, including strategic, market, liquidity, compliance and operational risks. While we use
broad and diversified risk monitoring and mitigation techniques, these techniques are inherently limited because they cannot
anticipate the existence or future development of currently unanticipated or unknown risks. Recent economic conditions and
heightened legislative and regulatory scrutiny of the financial services industry, among other developments, have increased
our level of risk. Accordingly, we could suffer losses if we fail to properly anticipate and manage these risks.
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Risks Related to Competition
Strong competition within our market area may reduce our profits and slow growth.
We face strong competition in making loans and attracting deposits. Price competition for loans and deposits
sometimes requires us to charge lower interest rates on our loans and pay higher interest rates on our deposits, and may
reduce our net interest income. Competition also makes it more difficult and costly to attract and retain qualified employees.
Many of our competitors have substantially greater resources and lending limits than we have and may offer services that we
do not provide. Our competitors often aggressively price loan and deposit products when they enter into new lines of
business or new market areas. If we are unable to effectively compete in our market area, our profitability would be
negatively affected. The greater resources and broader offering of deposit and loan products of some of our competitors may
also limit our ability to increase our interest-earning assets. For more information about our market area and the competition
we face, see “Business of Bogota Savings Bank—Market Area” and “—Competition.”
Risks Related to Laws and Regulations and Their Enforcement
We may be adversely affected by recent changes in U.S. tax laws.
The Tax Cuts and Jobs Act, which became effective January 1, 2018, enacted limitations on certain deductions
including (1) a lower limit on the deductibility of mortgage interest on single-family residential mortgage and home equity
loans, (2) a limit on the deductibility of business interest expense and (3) a limit on the deductibility of property taxes and
state and local income taxes. These changes in the tax laws may have an adverse effect on the market for, and valuation of,
residential properties, and on the demand for residential mortgage loans, and could make it harder for borrowers to make their
loan payments. These changes in the tax laws also have a disproportionate effect on taxpayers in states with higher state and
local taxes, like New Jersey. If home ownership becomes less attractive, demand for mortgage loans could decrease. The
value of the properties securing loans in our loan portfolio may be adversely impacted as a result of the changing economics
of home ownership, which could require an increase in our provision for loan losses. This would reduce our profitability and
could materially adversely affect our business, financial condition and results of operations.
Changes in laws and regulations and the cost of regulatory compliance with new laws and regulations may adversely
affect our operations and/or increase our costs of operations.
We are subject to extensive regulation, supervision and examination by our banking regulators. Such regulation and
supervision govern the activities in which a financial institution and its holding company may engage and are intended
primarily for the protection of insurance funds and the depositors and borrowers of Bogota Savings Bank rather than for the
protection of our stockholders. Regulatory authorities have extensive discretion in their supervisory and enforcement
activities, including the ability to impose restrictions on our operations, classify our assets and determine the level of our
allowance for loan losses. These regulations, along with the currently existing tax, accounting, securities, deposit insurance
and monetary laws, rules, standards, policies, and interpretations, control the ways financial institutions conduct business,
implement strategic initiatives, and prepare financial reporting and disclosures. Any change in such regulation and oversight,
whether in the form of regulatory policy, new regulations, legislation or supervisory action, may have a material impact on
our operations.
We are subject to stringent capital requirements, which may adversely impact our return on equity, require us to
raise additional capital, or restrict us from paying dividends or repurchasing shares.
Federal regulations establish minimum capital requirements for insured depository institutions, including minimum
risk-based capital and leverage ratios and define what constitutes “capital” for calculating these ratios. The minimum capital
requirements, including a “capital conservation buffer” of 2.5%, result in the following minimum ratios: (1) a common equity
Tier 1 capital ratio of 7.0%, (2) a Tier 1 to risk-based assets capital ratio of 8.5%, and (3) a total capital ratio of 10.5%. An
institution will be subject to limitations on paying dividends, repurchasing its shares, and paying discretionary bonuses, if its
capital levels fall below the buffer amount.
The federal banking agencies adopted a rule, effective January 1, 2020, that authorizes institutions with assets of less
than $10 billion and that meet other specified criteria, to elect to comply with a “community bank leverage ratio” (the ratio of
a bank’s Tier 1 equity capital to average total consolidated assets) of 9% in lieu of the generally applicable leverage and risk-
based capital requirements under Basel III. A “qualifying community bank” with capital exceeding 9% that exercises the
30
election will be considered compliant with all applicable regulatory capital and leverage requirements, including the
requirement to be “well capitalized.” The community bank leverage ratio was temporarily reduced to 8% in 2020 pursuant to
federal legislation enacted to address economic conditions resulting from COVID-19. We elected to comply with the
community bank leverage ratio.
The application of these more stringent capital requirements, among other things, could result in lower returns on
equity and result in regulatory actions if we were unable to comply with such requirements.
Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or
sanctions.
The USA PATRIOT and Bank Secrecy Acts require financial institutions to develop programs to prevent financial
institutions from being used for money laundering and terrorist activities. If such activities are detected, financial institutions
are obligated to file suspicious activity reports with the U.S. Treasury’s Office of Financial Crimes Enforcement Network.
These rules require financial institutions to establish procedures for identifying and verifying the identity of customers that
open new financial accounts. Failure to comply with these regulations could result in fines or sanctions, including
restrictions on conducting acquisitions or establishing new branches. While we have developed policies and procedures
designed to assist in compliance with these laws and regulations, these policies and procedures may not be effective in
preventing violations of these laws and regulations.
Changes in accounting standards could affect reported earnings.
The bodies responsible for establishing accounting standards, including the Financial Accounting Standards Board,
the Securities and Exchange Commission and bank regulators, periodically change the financial accounting and reporting
guidance that governs the preparation of our financial statements. These changes can be hard to predict and can materially
impact how we record and report our financial condition and results of operations. In some cases, we could be required to
apply new or revised guidance retroactively.
Risks Related to Ownership of Our Common Stock
Federal Reserve Board regulations and policy effectively prohibit Bogota Financial, MHC from waiving the receipt of
dividends, which will likely preclude us from paying any dividends on our common stock.
Bogota Financial Corp.’s board of directors has the authority to declare dividends on our common stock subject to
statutory and regulatory requirements. We currently intend to retain all our future earnings, if any, for use in our business
and do not expect to pay any cash dividends on our common stock in the foreseeable future. Any future determination to pay
cash dividends will be made by our board of directors and will depend upon our financial condition, results of operations,
capital requirements, restrictions under Federal Reserve Board regulations and policy, our business strategy and other factors
that our board of directors deems relevant.
Under current Federal Reserve Board regulations and policy, if Bogota Financial Corp. pays dividends to its public
stockholders, it also would be required to pay dividends to Bogota Financial, MHC, unless Bogota Financial, MHC waives
the receipt of such dividends. Current Federal Reserve Board policy has been to prohibit mutual holding companies that are
regulated as bank holding companies, such as Bogota Financial, MHC, from waiving the receipt of dividends and the Federal
Reserve Board’s regulations implemented after the enactment of the Dodd-Frank Act effectively prohibit mutual holding
companies from waiving dividends declared by their subsidiaries. See “Supervision and Regulation—Holding Company
Regulation—Waivers of Dividends by Bogota Financial, MHC” for a further discussion of the applicable requirements
related to the potential waiver of dividends by a mutual holding company. Unless Federal Reserve Board regulations or
policy change by allowing Bogota Financial, MHC to waive the receipt of dividends declared by Bogota Financial Corp.
without diluting minority stockholders, it is unlikely that Bogota Financial Corp. will pay any dividends.
Our common stock is not heavily traded, and the stock price may fluctuate significantly.
Our common stock is traded on The NASDAQ Capital Market. Certain brokers currently make a market in the
common stock, but such transactions are infrequent and the volume of shares traded is relatively small. Management cannot
predict whether these or other brokers will continue to make a market in our common stock. Prices on stock that is not
heavily traded can be more volatile than heavily traded stock. Factors such as our financial results, the introduction of new
products and services by us or our competitors, publicity regarding the banking industry, and various other factors affecting
the banking industry may have a significant impact on the market price of the shares the common stock. Management also
cannot predict the extent to which an active public market for our common stock will develop or be sustained in the future.
31
Accordingly, stockholders may not be able to sell their shares of our common stock at the volumes, prices, or times that they
desire.
Bogota Financial, MHC’s majority control of our common stock enables it to exercise voting control over most
matters put to a vote of stockholders and will prevent stockholders from forcing a sale or a second-step conversion
transaction you may find advantageous.
Bogota Financial, MHC owns a majority of Bogota Financial Corp.’s common stock and, through its board of
directors, is able to exercise voting control over most matters put to a vote of stockholders. The votes cast by Bogota
Financial, MHC may not be in your personal best interests as a stockholder. For example, Bogota Financial, MHC may
exercise its voting control to defeat a stockholder nominee for election to the board of directors of Bogota Financial Corp.
and will be able to elect all of the directors of Bogota Financial Corp. Some stockholders may desire a sale or merger
transaction, since stockholders typically receive a premium for their shares. Stockholders may also desire a second-step
conversion transaction, since most fully stock institutions tend to trade at higher multiples of book value than mutual holding
companies. However, stockholders will not be able to force a merger or a second-step conversion transaction without the
consent of Bogota Financial, MHC since such transactions also require, under New Jersey and federal law, the approval of a
majority of all of the outstanding voting stock, which can only be achieved if Bogota Financial, MHC votes to approve such
transactions.
We are an emerging growth company and have elected to comply only with the reduced reporting and disclosure
requirements applicable to emerging growth companies. As such, our common stock may be less attractive to
investors.
We are an emerging growth company and for as long as we continue to be an emerging growth company, we plan to
take advantage of exemptions from various reporting requirements applicable to other public companies, including reduced
disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from
the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden
parachute payments not previously approved. Investors may find our common stock less attractive as we rely on these
exemptions.
Even if we no longer qualify as an emerging growth company, as a smaller reporting company, we would still be
eligible to use reduced disclosure requirements, which may make our common stock less attractive to investors.
Even if we no longer qualify as an emerging growth company, we may still qualify as a smaller reporting company.
As such, we plan to take advantage of reduced disclosure obligations, including regarding executive compensation, in our
periodic reports and proxy statements. As a result, investors may find our common stock less attractive. As a smaller
reporting company that is a non-accelerated filer, we also will not be subject to Section 404(b) of the Sarbanes-Oxley Act,
which would require that our independent auditors review and attest to the effectiveness of our internal control over financial
reporting.
Various factors may make takeover attempts more difficult to achieve.
Stock banks or their holding companies, as well as individuals, may not acquire control of a mutual holding
company, such as Bogota Financial Corp. As result, the only persons that may acquire control of a mutual holding company
are other mutual savings institutions or mutual holding companies. Accordingly, it is very unlikely, that Bogota Financial
Corp. would be subject to any takeover attempt by activist stockholders or other financial institutions. There also are
provisions in our articles of incorporation and bylaws that may be used to delay or block a takeover attempt, including a
provision that prohibits any person, other than Bogota Financial, MHC, from voting more than 10% of the shares of common
stock outstanding. In addition, state and federal banking laws, including regulatory approval requirements, could make it
more difficult for a third party to acquire control of Bogota Financial Corp. without our board of directors’ prior approval.
Under Federal Reserve Board regulations, for a period of three years following completion of our initial public
offering, no person may directly or indirectly acquire or offer to acquire beneficial ownership of more than 10% of our
common stock without prior approval of the Federal Reserve Board. In addition, under federal law, subject to certain
exemptions, a person, entity or group must notify the Federal Reserve Board before acquiring control of a bank holding
company. Acquisition of 10% or more of any class of voting stock of a bank holding company creates a rebuttable
presumption that the acquirer “controls” the bank holding company. Also, a bank holding company must obtain the prior
approval of the Federal Reserve Board and the NJDBI before, among other things, acquiring direct or indirect ownership or
control of more than 5% of any class of voting shares of any bank, including Bogota Savings Bank.
32
ITEM 1B. Unresolved Staff Comments
None.
33
ITEM 2. Properties
As of December 31, 2021, the net book value of our land, building and equipment was $5.7 million. The following
table sets forth information regarding our offices as of December 31, 2021:
Location
Leased or Owned
Year Acquired or Leased
Net Book Value of Real
Property
(In thousands)
Branch Offices:
819 Teaneck Road
Teaneck, NJ 07666
60 East Main Street
Bogota, NJ 07603
181 Boulevard
Hasbrouck Heights, NJ 07604
1719 Route 10 East
Parsippany, NJ 07054
5527 Berkshire Valley Road
Oak Ridge, NJ 000
1039 South Orange Road
Newark, NJ 07106
Other Offices:
510 Warren Ave 07762
Spring Lake, NJ 000
655 Pomander Walk(1)
Teaneck, NJ 07666
Owned
Owned
Owned
Leased
Owned
Owned
Leased
Leased
2004
1941
2020
2021
2021
2021
2021
2010
$3,887
$208
$2,451
$131
$159
$1,212
$158
$3
(1) Private location for facility residences and employees.
We believe that the current facilities are adequate to meet our present and foreseeable needs, subject to possible
future expansion.
ITEM 3. Legal Proceedings
We are not involved in any pending legal proceedings as a defendant other than routine legal proceedings in the
ordinary course of business. At December 31, 2021, we were not involved in any legal proceedings the outcome of which
management believes would be material to our financial condition or results of operations.
ITEM 4. Mine Safety Disclosures
Not applicable.
34
PART II
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Market for Registrant’s Common Equity
The common stock of Bogota Financial Corp. has been listed on The NASDAQ Capital Market under the symbol
“BSBK” since January 16, 2020. At March 26, 2022, Bogota Financial Corp. had approximately 2,016 stockholders of
record.
Bogota Financial Corp. currently does not anticipate paying a dividend to its stockholders. The payment and
amount of any dividend payments will be subject to statutory and regulatory limitations, and will depend upon a number of
factors, including the following: regulatory capital requirements; our financial condition and results of operations; our other
uses of funds for the long-term value of stockholders; tax considerations; the Federal Reserve Board’s current regulations
restricting the waiver of dividends by mutual holding companies; and general economic conditions.
There were no sales of unregistered securities or repurchases of shares of common stock during the quarter ended
December 31, 2021.
On June 16, 2021, the Company’s Board of Directors approved the repurchase of 296,044 shares of its common stock,
which is approximately 5% of its 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.
The following table provides information on repurchase by the Company of its common stock under the Company's
Board approved program.
ISSUER PURCHASES OF EQUITY SECURITIES
Total Number
of Shares
Purchased as
Part of
Publicly
Announced
Plans or
Programs
Total Number
of Shares
Purchased
Average Price
Paid per
Share
15,268 $
5,035
5,567
25,870 $
10.40
10.16
10.27
10.33
15,268
5,035
5,567
25,870
Maximum
Number of
Shares that
May Yet Be
Purchased
Under the
Plans or
Programs
260,495
255,460
249,893
Period
October 1 - 31, 2021
November 1 - 30, 2021
December 1 - 31, 2021
Total
ITEM 6. RESERVED
35
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This discussion and analysis reflects the information contained in our consolidated financial statements and other
relevant statistical data, and is intended to enhance your understanding of our financial condition and results of operations.
Certain of the information in this section has been derived from the consolidated financial statements, which appear
elsewhere in this Annual Report on Form 10-K. You should read the information in this section in conjunction with the other
business and financial information provided in this Annual Report on Form 10-K.
Overview
Net Interest Income. Our primary source of income is net interest income. Net interest income is the difference
between interest income, which is the income we earn on our loans and investments, and interest expense, which is the
interest we pay on our deposits and borrowings.
Provision for Loan Losses. The allowance for loan losses is a valuation allowance for probable incurred credit
losses. The allowance for loan losses is increased through the provision for loan losses. Loans are charged against the
allowance when management believes that the collectability of the principal loan amount is not probable. Recoveries on
loans previously charged-off, if any, are credited to the allowance for loan losses when realized.
Non-interest Income. Our primary sources of non-interest income are banking fees and service charges, net gains in
cash surrender value of bank-owned life insurance, a bargain purchase gain recorded in 2021 and miscellaneous income.
Non-Interest Expenses. Our non-interest expenses consist of salaries and employee benefits, net occupancy and
equipment, data processing, federal deposit insurance premiums, advertising, directors fees, professional fees, a contribution
to our charitable foundation in 2020 and other general and administrative expenses.
Salaries and employee benefits consist primarily of salaries and wages paid to our employees, payroll taxes, and
expenses for worker’s compensation and disability insurance, health insurance, retirement plans, our employee stock
ownership plan, our equity incentive plan and other employee benefits, as well as other incentives.
Occupancy and equipment expenses, which are the fixed and variable costs of buildings and equipment, consist
primarily of depreciation charges, rental expenses, furniture and equipment expenses, maintenance, real estate taxes and costs
of utilities. Depreciation of premises and equipment is computed using a straight-line method based on the estimated useful
lives of the related assets or the expected lease terms, if shorter.
Federal deposit insurance premiums are payments we make to the Federal Deposit Insurance Corporation for
insurance of our deposit accounts.
Data processing expenses are fees we pay to third parties for use of their software and for processing customer
information, deposits and loans.
Advertising includes most marketing expenses, including multi-media advertising (public and in-store), promotional
events and materials, civic and sales-focused memberships, and community support.
Professional fees include legal, accounting, auditing, risk management and payroll processing expenses.
Directors fees consist of the fees we pay to our directors for their service on our board of directors, as well as the
costs associated with the directors’ retirement plan and grants to directors under our equity incentive plan.
Other expenses include expenses for office supplies, postage, telephone, insurance and other miscellaneous
operating expenses.
Income Tax Expense. Our income tax expense is the total of the current year income tax due or refundable and the
change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the
temporary differences between the carrying amounts and the tax basis of assets and liabilities, computed using enacted tax
rates. A valuation allowance, if needed, reduces deferred tax assets to the amounts expected to be realized.
36
Business Strategy
Our business strategy is to operate as a well-capitalized and profitable community bank dedicated to providing
personal service to individuals and businesses. We believe that we have a competitive advantage in the markets we serve
because of our 128-year history in the community, our knowledge of the local marketplace and our long-standing reputation
for providing superior, relationship-based customer service. We believe we can distinguish ourselves by maintaining the
culture of a local community bank. The following are the key elements of our business strategy:
Continue to focus on residential real estate lending. We have been, and will continue to be, primarily a one- to
four-family residential real estate lender in our market area. As of December 31, 2021, $320.0 million, or 56.1% of our total
loan portfolio, consisted of one- to four-family residential real estate loans. We expect that one- to four-family residential real
estate lending will remain our primary lending activity.
Continue to emphasize commercial and multi-family real estate lending. We have increased our commercial real
estate and multi-family loan portfolio to $175.4 million, or 30.6% of total loans, at December 31, 2021, from $171.6 million,
or 30.7% of total loans, at December 31, 2020. We view the growth of commercial real estate and multi-family lending as a
means of increasing our interest income and the yield on our loan portfolio, and reducing the average term to repricing of our
loans. We believe that local banking consolidation has created opportunities to attract talent with experience originating
commercial real estate loans within our market area. Further, the additional capital raised in the offering enabled us to
increase our commercial real estate and multi-family loan originations in our market area, and originate loans with larger
balances.
Commercial and multi-family real estate loans generally expose a lender to a greater risk of loss than one- to four-
family residential loans. Repayment of commercial and multi-family estate loans generally depends, in large part, on
sufficient income from the property or business to cover operating expenses and debt service. Commercial and multi-family
real estate loans typically involve larger loan balances to single borrowers or groups of related borrowers compared to one- to
four-family residential mortgage loans. Changes in economic conditions that are beyond the control of the borrower and
lender could impact the value of the security for the loan or the future cash flows of the affected property. Additionally, any
decline in real estate values may affect commercial and multi-family real estate properties more than residential properties.
Also, many of our commercial and multi-family real estate borrowers have more than one loan outstanding with us.
Consequently, an adverse development with respect to one loan or one credit relationship can expose us to a significantly
greater risk of loss compared to an adverse development with respect to a residential mortgage loan.
Increase lower-cost core deposits. We continue to emphasize offering core deposits (demand deposit accounts,
savings accounts and money market accounts) to individuals, businesses and municipalities. We attract and retain transaction
accounts by offering competitive products and rates and providing quality customer service. At December 31, 2021, core
deposits comprised 38.7% of our total deposits compared to 29.0% of our total deposits at December 31, 2020. Core deposits
are our least costly source of funds, which improves our interest rate spread and also contributes non-interest income from
account related services.
Grow through opportunistic bank or branch acquisitions. We opened a new branch in Hasbrouck Heights during
the second quarter of 2021 and we completed the acquisition of Gibraltar Bank in February 2021, which increased our
footprint by three branches and added a loan production office in central New Jersey. We will consider other acquisition
opportunities that may enhance the value of our franchise and yield potential financial benefits for our stockholders.
Although we believe opportunities exist to increase our market share in our market, we expect to continue to expand into
contiguous markets. The capital we raised in the offering will also provide us the opportunity to acquire smaller institutions
or fee-based businesses located in or contiguous to our market area.
Continue to emphasize operating efficiencies and cost controls. We are focused on controlling expenses while
increasing our net income. We are disciplined in managing non-interest expenses by identifying cost savings opportunities
such as renegotiating key third-party contracts and reducing other operating expenses. Our efficiency ratio was 60.85% for
the year ended December 31, 2021. While our non-interest expenses increased when we became a public company, we will
continue to monitor and control expenses as we focus on growth. To support our growth in a cost-effective way, we plan to
continue to invest prudently in technology to help improve our operational infrastructure.
37
Maintain disciplined underwriting. We emphasize a disciplined credit culture based on intimate knowledge of the
market, close ties to our customers, sound underwriting standards and experienced loan officers. We are committed to
actively monitoring and managing all segments of our loan portfolio in an effort to proactively identify and mitigate credit
risks within the portfolio. At December 31, 2021, non-performing assets totaled $865,000, which represented 0.10% of total
assets. At December 31, 2020, there were $693,000 of non-performing assets which represented 0.09% of total assets.
Increase in Non-Interest Expense
Following the January 2020 completion of the reorganization and stock offering, our non-interest expenses increased
because of the increased costs associated with operating as a public company. Compensation expenses further increased due
to the implementation of our employee stock ownership plan expenses and our equity incentive plan.
Critical Accounting Policies
The discussion and analysis of the financial condition and results of operations are based on our financial
statements, which are prepared in conformity with U.S. generally accepted accounting principles. The preparation of these
financial statements requires management to make estimates and assumptions affecting the reported amounts of assets and
liabilities, income and expenses and disclosure of contingent assets and liabilities. We consider the accounting policy
discussed below to be a critical accounting policy, which is presented in the notes to the consolidated financial statements.
The estimates and assumptions that we use are based on historical experience and various other factors that we believe are
reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or
conditions, resulting in a change that could have a material impact on the carrying value of our assets and liabilities and our
results of operations.
The JOBS Act, which was enacted in 2012, contains provisions that, among other things, reduce certain reporting
requirements for qualifying public companies. As an “emerging growth company,” we plan to 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 fully comparable to public companies that comply with such new or revised accounting standards.
The following represents our critical accounting policy:
Allowance for Loan Losses. The allowance for loan losses is the amount estimated by management as necessary to
absorb credit losses incurred in the loan portfolio that are both probable and reasonably estimable at the relevant balance
sheet date. The amount of the allowance is based on significant estimates, and the ultimate losses may vary from such
estimates as more information becomes available or conditions change. The methodology for determining the allowance for
loan losses is considered a critical accounting policy by management due to the high degree of judgment involved, the
subjectivity of the assumptions used and the potential for changes in the economic environment that could result in changes
to the amount of the recorded allowance for loan losses.
As a substantial percentage of our loan portfolio is collateralized by real estate, appraisals of the underlying value of
property securing loans are critical in determining the amount of the allowance required for specific loans. Assumptions are
instrumental in determining the value of properties. Overly optimistic assumptions or negative changes to assumptions could
significantly affect the valuation of a property securing a loan and the related allowance. Management reviews the
assumptions supporting such appraisals to determine that the resulting values reasonably reflect amounts realizable on the
related loans.
Management performs an evaluation of the adequacy of the allowance for loan losses at least quarterly. We consider
a variety of factors in establishing this estimate including current economic conditions, delinquency statistics, geographic
concentrations, and the adequacy of the underlying collateral, the financial strength of the borrower, results of internal loan
reviews and other relevant factors. This evaluation is inherently subjective as it requires material estimates by management
that may be susceptible to significant change based on changes in economic and real estate market conditions.
The evaluation has specific and general components. The specific component relates to loans that are deemed to be
impaired and classified as special mention, substandard, doubtful, or loss. For such loans that are also classified as impaired,
an allowance is generally established when the collateral value of the impaired loan is lower than the carrying value of that
loan. The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative
factors.
38
Actual loan losses may be significantly more than the allowance we have established which could have a material
negative effect on our financial results. See Note 1 to the Notes to the consolidated financial statements for a complete
discussion of the allowance for loan losses.
The following tables set forth selected historical financial and other data for Bogota Financial Corp. and Bogota
Savings Bank at and for the periods indicated. The following information is only a summary and should be read in
conjunction with our consolidated financial statements and the notes thereto beginning on page 47 of this Annual Report on
Form 10-K. The information at and for the years ended December 31, 2021 and 2020 is derived in part from the audited
consolidated financial statements appearing in this Annual Report on Form 10-K.
Selected Financial Condition Data:
Total assets
Cash and cash equivalents
Securities held-to-maturity
Securities available-for-sale
Loans receivable, net
Bank owned life insurance
Total liabilities
Deposits
Borrowings
Total equity
Selected Operating Data:
Interest income
Interest expense
Net interest income
Provision for loan losses
Net interest income after provision for loan losses
Non-interest income
Non-interest expenses
Income before income taxes
Income taxes
Net income
Performance Ratios:
Return on average assets (1)
Return on average equity (2)
Interest rate spread (3)
Net interest margin (4)
Efficiency ratio (5)
Average interest-earning assets to average interest-
bearing liabilities
Loans to deposits
Equity to assets (6)
Capital Ratios: (Bank only)
Tier 1 capital (to adjusted total assets)
Other Data:
Number of offices
Number of full-time equivalent employees
39
At December 31,
2021
2020
(In thousands)
837,362 $
105,069
74,053
41,839
570,210
24,524
689,785
597,480
85,052
147,576
740,905
80,386
57,504
11,871
557,691
16,916
612,437
501,973
104,291
128,468
For the Year Ended December 31,
2021
2020
(In thousands)
25,068 $
5,791
19,277
(88 )
19,365
4,494
14,464
9,395
1,875
7,520 $
23,276
9,679
13,597
200
13,397
1,106
11,998
2,505
437
2,068
$
$
$
$
At or For the Year Ended December 31,
2021
2020
1.23 %
7.06 %
2.33 %
2.50 %
60.85 %
122.40 %
95.44 %
17.55 %
0.28 %
1.66 %
1.63 %
1.93 %
81.60 %
122.01 %
111.10 %
16.97 %
17.88 %
22.50 %
6
74
2
45
(1) Represents net income divided by average total assets.
(2) Represents net income divided by average equity.
(3) Represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost on average interest-
bearing liabilities. Tax exempt income is reported on a tax equivalent basis using a combined federal and state marginal tax rate of 30% for 2021 and
2020.
(4) Represents net interest income as a percent of average interest-earning assets. Tax exempt income is reported on a tax equivalent basis using a
combined federal and state marginal tax rate of 30% for 2021 and 2020.
(5) Represents non-interest expense divided by the sum of net interest income and non-interest income.
(6) Represents average equity divided by average total assets.
Average Balance Sheets
The following tables set forth average balances, average yields and costs, and certain other information for the years
indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are
daily average balances. Non-accrual loans are included in the computation of average balances. The yields set forth below
include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest
expense, as applicable.
2021
Interest
and
Dividends
Average
Balance
Yield/
Cost
Average
Balance
2020
Interest
and
Dividends
Yield/Cost
Average
Balance
2019
Interest
and
Dividends
Yield/
Cost
For the Years Ended December 31,
(Dollars in thousands)
99,842 $
583,362
86,035
151
22,672
1,971
$
0.15 %
3.89
2.29
68,553 $
563,769
65,871
449
20,871
1,615
$
0.65 %
3.70
2.45
31,978 $
534,249
72,558
681 2.13 %
20,230 3.79
1,920 2.65
5,606
273
4.87
6,008
341
5.68
5,225
311 5.96
774,845
25,067
3.24
704,201
23,276
3.31
644,010
23,142 3.59
42,252
817,097
$
104,945
58,880
373,490
625
127
3,519
0.60
0.22
0.94
$
$
28,804
733,005
59,984
30,005
382,696
530
77
7,155
0.88
0.26
1.87
$
$
27,871
671,881
60,876
29,967
397,314
767 1.26
77 0.26
9,066 2.28
537,315
4,271
0.79
472,685
7,762
1.64
488,157
9,910 2.03
97,621
1,519
1.56
104,479
1,916
1.83
85,400
2,063 2.42
634,936
5,790
0.91
577,164
9,678
1.68
573,557
11,973 2.09
30,952
8,822
674,710
142,387
817,097
$
22,109
9,371
608,644
124,361
13,687
11,003
598,247
73,634
19,277
$
733,005
$
13,598
$
671,881
$
11,169
2.33 %
2.50 %
1.63 %
1.93 %
1.51 %
1.73 %
$
139,909
$
127,037
$
70,453
Assets:
Cash and cash equivalents $
Loans
Securities
Other interest-earning
assets
Total interest-earning
assets
Non-interest-earning
assets
Total assets
$
Liabilities and Equity:
NOW and money market
accounts
Savings accounts
Certificates of deposit
Total interest-bearing
deposits
Federal Home Loan Bank
advances
Total interest-bearing
liabilities
Non-interest-bearing
deposits
Other non-interest-bearing
liabilities
Total liabilities
Total equity
Total liabilities and
equity
$
Net interest income
Interest rate spread (1)
Net interest margin (2)
Average interest-earning
assets to
average interest-bearing
liabilities
(1)
Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-
bearing liabilities.
(2) Net interest margin represents net interest income divided by average total interest-earning assets.
40
Rate/Volume Analysis
The following table presents the effects of changing rates and volumes on our net interest income for the periods
indicated. 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
total column represents the sum of the prior two columns. For purposes of this table, changes attributable to both rate and
volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes
due to volume.
Interest income:
Cash and cash equivalents
Loans receivable
Securities
Other interest-earning assets
Total interest-earning assets
Year Ended December 31, 2021 vs. 2020
Year Ended December 31, 2020 vs. 2019
Increase (Decrease) Due
to
Increase (Decrease) Due
to
Volume
Rate
Net
Volume
Rate
Net
(In thousands)
$
47 $
762
462
(20 )
1,251
(345 ) $
1,039
(106 )
(48 )
540
(298 ) $
1,801
356
(68 )
1,791
238 $
1,092
(164 )
45
1,211
(470 ) $
(451 )
(141 )
(15 )
(1,077 )
(232 )
641
(305 )
30
134
Interest expense:
NOW and money market accounts
Savings accounts
Certificate of deposit
Federal Home Loan Bank advances
Total interest-bearing liabilities
396
8
(172 )
(126 )
106
(301 )
42
(3,464 )
(271 )
(3,994 )
95
50
(3,636 )
(397 )
(3,888 )
(8 )
—
(272 )
355
75
(229 )
—
(1,638 )
(502 )
(2,369 )
(237 )
—
(1,910 )
(147 )
(2,294 )
Net increase (decrease) in net
interest income
$
1,145
$
4,534
$
5,679
$
1,136
$
1,292
$
2,428
Comparison of Financial Condition at December 31, 2021 and December 31, 2020
Total Assets. Total assets increased $96.5 million, or 13.0%, to $837.4 million at December 31, 2021 from $740.9
million at December 31, 2020. The increase was primarily due to $106.8 million in assets acquired from the Gibraltar Bank
acquisition.
Cash and Cash Equivalents. Total cash and cash equivalents increased $24.7 million, or 30.7%, to $105.1 million
at December 31, 2021 from $80.4 million at December 31, 2020. This increase was primarily due to the $19.4 million in
cash from the Gibraltar acquisition and a $95.5 million increase in deposits, offset by purchases of debt and security
payments.
Securities Available for Sale. Total securities available for sale increased $30.0 million, or 252.5%, to $41.8
million at December 31, 2021 from $11.9 million. The increase was due to increases of $26.0 million in mortgage-backed
securities, $3.0 million in agency bonds and $1.0 million in corporate bonds.
Securities Held to Maturity. Total securities held to maturity increased $16.5 million, or 28.8%, to $74.1 million at
December 31, 2021 from $57.5 million at December 31, 2020, primarily due to a $5.0 million increase in corporate bonds, a
$2.5 million increase in municipal securities, a $7.2 million increase in mortgage-backed securities and a $3.0 million
increase in U.S. government agency obligations.
Net Loans. Net loans increased $12.5 million, or 2.2%, to $570.2 million at December 31, 2021 from $557.7
million at December 31, 2020. The increase in loans was primarily due to the $76.8 million of loans acquired from Gibraltar
Bank, which was offset by $127.0 million in loan repayments and the sale of $25.0 million of residential loans. The increase
was due to a $3.8 million, or 2.2%, increase in commercial and multi-family real estate loans to $175.4 million at December
31, 2021 from $171.6 million at December 31, 2020, an increase of $31.5 million, or 318.2%, in construction real estate loans
to $41.4 million at December 31, 2021 from $9.9 million at December 31, 2020 and an increase of $3.0 million, or 12.2%, in
consumer loans to $27.7 million at December 31, 2021 from $24.7 million at December 31, 2020, offset by a decrease of
$20.0 million, or 5.9%, in one-to four-residential real estate loans to $320.0 million at December 31, 2021 from $340.0
million at December 31, 2020 and a decrease of $5.8 million, or 42.3%, in commercial and industrial loans to $7.9 million at
December 31, 2021 from $13.7 million as of December 31, 2020. The decrease in commercial and industrial loans was due to
41
the forgiveness and repayment of $9.2 million in PPP loans that were originated in 2021 and 2020. As of December 31,
2021, the Bank had $1.2 million in loans held for sale compare the no loans held for sale as of December 31, 2020.
Bank-owned life insurance. Bank-owned life insurance increased $7.6 million, or 45.0%, to $24.5 million at
December 31, 2021 from $16.9 million at December 31, 2020. The increase in bank-owned life insurance was due to $8.0
million in new bank-owned life insurance offset by the collection of death proceeds.
Deposits. Total deposits increased $95.5 million, or 19.0%, to $597.5 million at December 31, 2021 from $502.0
million at December 31, 2020 primarily due to the $81.9 million of deposits acquired from Gibraltar Bank. The increase in
deposits reflected an increase in interest bearing deposits of $83.3 million, or 17.5%, to $558.2 million as of December 31,
2021 from $474.9 million at December 31, 2020 and an increase in non-interest bearing deposits of $12.3 million, or 45.3%,
to $39.3 million as of December 31, 2021 from $27.1 million as of December 31, 2020.
At December 31, 2021, municipal deposits totaled $31.5 million, which represented 5.3% of total deposits, and brokered
deposits totaled $52.9 million, which represented 8.9% of total deposits. At December 31, 2020, municipal deposits totaled
$37.6 million, which represented 7.5% of total deposits, and brokered deposits totaled $54.2 million, which represented 10.8%
of total deposits.
Borrowings. Federal Home Loan Bank of New York borrowings decreased $19.2 million, or 18.4%, to $85.1
million at December 31, 2021 from $104.3 million at December 31, 2020, as maturities of $31.4 million of FHLB advances
were offset by $10.0 million of borrowings that were assumed from Gibraltar Bank. The weighted average rate of borrowings
was 1.69% and 1.64% as of December 31, 2021 and December 31, 2020, respectively.
Total Equity. Stockholders’ equity increased $19.1 million or 14.9% to $147.6 million from $128.5 million at
December 31, 2020, primarily due to the $11.5 million of stock issued in connection with the acquisition of Gibraltar Bank
and the $7.5 million of net income for the twelve months ended December 31, 2021. At December 31, 2021, the Company’s
ratio of average stockholders’ equity-to-total assets was 17.55%, compared to 16.97% at December 31, 2020.
Comparison of Operating Results for the Years Ended December 31, 2021 and 2020
General. Net income increased by $5.5 million to $7.5 million for the twelve months ended December 31, 2021
from $2.1 million for the twelve months ended December 31, 2020. The increase was due to increases in net interest income
of $5.7 million, a decrease in the provision (credit) for loan losses of $288,000 and an increase in non-interest income of $3.4
million, offset by increases in non-interest expense of $2.5 million and income tax expense of $1.4 million.
Interest Income. Interest income on cash and cash equivalents decreased $298,000, or 66.4%, to $151,000 for the
twelve months ended December 31, 2021 from $449,000 for the twelve months ended December 31, 2020 due to a 50 basis
point decrease in the average yield on cash and cash equivalents from 0.65% for the twelve months ended December 31,
2020 to 0.15% for the twelve months ended December 31, 2021 due to the lower interest rate environment. The decrease was
offset by a $31.3 million increase in the average balance of cash and cash equivalents to $99.8 million for the twelve months
ended December 31, 2021 from $68.6 million for the twelve months ended December 31, 2020, reflecting excess liquidity as
deposit growth exceeded loan growth.
Interest income on loans increased $1.8 million, or 8.6%, to $22.7 million for the twelve months ended December 31,
2021 from $20.9 million for the twelve months ended December 31, 2020 due to a $19.6 million increase in the average balance
of loans to $583.4 million for the twelve months ended December 31, 2021 from $563.8 million for the twelve months ended
December 31, 2020. The increase in the average balance of loans reflected our continued efforts to increase our loan
originations and the loans acquired from Gibraltar Bank. The increase was supplemented by a 19 basis point increase in the
average yield on loans from 3.70% for the twelve months ended December 31, 2020 to 3.89% for the twelve months ended
December 31, 2021.
Interest income on securities increased $356,000, or 22.1%, to $2.0 million for the twelve months ended December
31, 2021 from $1.6 million for the twelve months ended December 31, 2020 due to a $20.2 million increase in the average
balance of securities to $86.0 million for the twelve months ended December 31, 2021 from $65.9 million for the twelve months
ended December 31, 2020 offset by a 16 basis point decrease in the average yield from 2.45% for the twelve months ended
December 31, 2020 to 2.29% for the twelve months ended December 31, 2021, reflecting the purchase of investment securities
at lower interest rates with excess liquidity as deposit growth exceeded loan growth.
42
Interest Expense. Interest expense decreased $3.9 million, or 40.2%, to $5.8 million for the year ended December
31, 2021 from $9.7 million for the year ended December 31, 2020. The decrease primarily reflected an 85 basis point
decrease in the average cost of interest-bearing liabilities to 0.79% for the year ended December 31, 2021 from 1.67% for the
year ended December 31, 2020, offset by a $64.6 million increase in the average balance of interest-bearing liabilities.
Interest expense on interest-bearing deposits decreased $3.5 million, or 45.0%, to $4.3 million for the twelve months
ended December 31, 2021 from $7.8 million for the twelve months ended December 31, 2020. The decrease was due primarily
to 85 basis point decrease in the average cost of interest-bearing deposits to 0.79% for the twelve months ended December 31,
2021 from 1.64% for the twelve months ended December 31, 2020. The decrease in the average cost of deposits was due to the
lower interest rate environment, an increase in the average balance of lower-cost transaction accounts and a decrease in the
average balance of higher cost certificates of deposit. This decrease was offset by a $64.6 million increase in the average
balance of deposits to $537.3 million for the twelve months ended December 31, 2021 from $472.7 million for the twelve
months ended December 31, 2020.
Interest expense on Federal Home Loan Bank borrowings decreased $397,000, or 20.7%, from $1.9 million for the twelve
months ended December 31, 2020 to $1.5 million for the twelve months ended December 31, 2021. The decrease was primarily
due to the lower interest rate environment, as the average cost of borrowings decreased 27 basis point to 1.56% for the twelve
months ended December 31, 2021 from 1.83% for the twelve months ended December 31, 2020.
Net Interest Income. Net interest income increased $5.7 million, or 41.8%, to $19.3 million for the twelve months
ended December 31, 2021 from $13.6 million for the twelve months ended December 31, 2020. The increase reflected a 70
basis point increase in our net interest rate spread to 2.33% for the twelve months ended December 31, 2021 from 1.63% for
the twelve months ended December 31, 2020. Our net interest margin increased 57 basis points to 2.50% for the twelve
months ended December 31, 2021 from 1.93% for the twelve months ended December 31, 2020.
Provision for Loan Losses. We recorded a credit for loan losses of $88,000 for the twelve months ended December
31, 2021 compared to a provision for loan losses of $200,000 for the twelve months ended December 31, 2020. Lower
balances in residential loans following the sale of $25.0 million of such loans, a more positive economic environment and
continued strong asset quality metrics were the reasons for the credit during the twelve months ended December 31, 2021.
The Bank continues to have a low level of delinquent and non-accrual loans in the portfolio, as well as no charge-offs.
Non-Interest Income. Non-interest income increased by $3.4 million or 306.4%, to $4.5 million for the twelve
months ended December 31, 2021 from $1.1 million for the twelve months ended December 31, 2020. The increase was due
to a $2.0 million bargain purchase gain for the Gibraltar merger in 2021, a $786,000 gain on sale of $25.0 million residential
loans sold during the twelve months ended December 31, 2021, and $409,000 higher income on bank owned life insurance
due to the purchase of $8.0 million of bank-owned life insurance and collection of $891,000 death benefits proceeds on bank
owned life insurance.
Non-Interest Expenses. For the twelve months ended December 31, 2021, non-interest expense increased $2.5
million or 20.6% to $14.5 million. Salaries and employee benefits increased $2.6 million, or 50.9%, attributable to adding the
new Gibraltar employees, additional branch offices and normal merit increases. Data processing expense increased
$322,000, or 45.1%, due to higher data processing expense from maintaining two core systems until the data processing
conversion was completed in August. Professional fees decreased $130,000, or 15.0%, due to lower legal and consulting fees.
Merger expenses were $392,000 in 2021 associated with the Gibraltar Bank acquisition. Occupancy expense increased
$602,000 or 91.4% due to new branch building and building expense associated with acquired buildings from the merger.
The increase of other general operating expenses was mainly due to increased occupancy costs for the acquired Gibraltar
Bank branches and the branch location in Hasbrouck Heights, which opened in August. During the twelve months ended
December 31, 2020, the Bank made a $2.9 million contribution to the Bogota Charitable Foundation and there was no
contribution for the twelve months ended December 31, 2021.
Income Tax Expense. Income tax expense increased $1.4 million, or 328.8% to $1.9 million for the year ended
December 31, 2021 from $437,000 for the year ended December 31, 2020. The increase was due primarily to a $6.9 million
increase in pre-tax income. The effective tax rate for 2021 and 2020 was 19.96% and 17.45% respectively.
43
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, have longer maturities than our liabilities,
consisting primarily of deposits. 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 process 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 mitigate 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 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 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 December 31, 2021. All estimated changes presented in the table are within the policy limits
approved by the board of directors.
Basis Point (“bp”) Change in Interest
Rates
400 bp
300 bp
200 bp
100 bp
0
(100) bp
Dollar
Amount
$ 132,308 $
137,361
140,704
140,828
133,887
137,894
NPV
(Dollars in thousands)
Dollar
Change
NPV as Percent of Portfolio
Value of Assets
Percent
Change
NPV Ratio
Change
(1,579 )
3,474
6,817
6,941
—
4,007
(1.18 )%
2.60
5.09
5.18
—
12.93
17.47 %
17.69
17.64
17.17
15.88
15.94
(2.58 )%
0.03
0.11
0.08
—
0.00
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 above table 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
44
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.
As of December 31, 2021, 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 (basis points)(1)
400 bp
300 bp
200 bp
100 bp
0
(100) bp
Change in Net Interest Income
Year One
(% change from year one base)
-1.27
-1.02
0.46
0.04
—
(1.45)
_________________
(1)
The calculated change in net interest income assumes an instantaneous parallel shift of the yield curve.
The preceding simulation analysis 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 the financial obligations that arise in the ordinary course of
business. Liquidity is primarily needed to meet our borrowing needs 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. We also have the ability to borrow from the
Federal Home Loan Bank of New York. At December 31, 2021, we had the ability to borrow up to $247.0 million, of which
$85.1 million was outstanding and $1.5 million was utilized as collateral for letters of credit issued to secure municipal
deposits. At December 31, 2021, we had $51.0 million in unsecured lines of credit with four correspondent banks with no
outstanding balances.
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 enough sources of liquidity to satisfy our short- and long-term liquidity
needs as of December 31, 2021.
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 December 31, 2021, cash and cash equivalents totaled $105.1 million. Securities
classified as available-for-sale, which provide additional sources of liquidity, totaled $41.8 million at December 31, 2021.
We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis.
We anticipate that we will have sufficient funds to meet our current funding commitments. Certificates of deposit due within
one year of December 31, 2021 totaled $254.3 million, or 42.6%, 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.
45
Capital Resources. We are subject to various regulatory capital requirements administered by NJDBI and the
Federal Deposit Insurance Corporation. At December 31, 2021, we exceeded all applicable regulatory capital requirements,
and were considered “well capitalized” under regulatory guidelines. See Note 13 in the Notes to the consolidated financial
statements.
The net offering proceeds significantly increased our liquidity and capital resources. Over time, the initial level of
liquidity will be reduced as net offering proceeds are used for general corporate purposes, including funding loans. Our
financial condition and results of operations will be enhanced by the net offering proceeds, resulting in increased net interest-
earning assets and net interest income. However, due to the increase in equity resulting from the net offering proceeds, as
well as other factors associated with the offering, our return on equity will remain lower until we can successfully deploy the
offering proceeds.
Off-Balance Sheet Arrangements and Aggregate Contractual Obligations
Off-Balance Sheet Arrangements. We are a party to financial instruments with off-balance sheet risk in the normal
course of business to meet the financing needs of our customers. The financial instruments include commitments to originate
loans, unused lines of credit and standby letters of credit, which involve elements of credit and interest rate risk in excess of
the amount recognized in the consolidated balance sheets. Our exposure to credit loss is represented by the contractual
amount of the instruments. We use the same credit policies in making commitments as we do for on-balance sheet
instruments.
At December 31, 2021, we had $13.1 million of commitments to originate loans, comprised of $1.4 million of
commitments under commercial loans and lines of credit (including $32.6 million of unadvanced portions of commercial
construction loans), $48.0 million of commitments under home equity loans and lines of credit and $7.9 million of unfunded
commitments under consumer lines of credit. See Note 14 in the Notes to the consolidated financial statements for further
information.
Contractual Obligations. In the ordinary course of our operations, we enter into certain contractual obligations.
Such obligations include data processing services, operating leases for premises and equipment, agreements with respect to
borrowed funds and deposit liabilities.
Recent Accounting Pronouncements
Please refer to Note 1 in the Notes to the consolidated financial statements that appear starting on page 58 of this
Annual Report on Form 10-K for a description of recent accounting pronouncements that may affect our financial condition
and results of operations.
46
Impact of Inflation and Changing Prices
The financial statements and related data presented herein have been prepared in accordance with U.S. GAAP,
which requires the measurement of financial position and operating results in terms of historical dollars without considering
changes in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our
operations is reflected in increased operating costs. Unlike most industrial companies, virtually all of the assets and liabilities
of a financial institution are monetary in nature. As a result, market interest rates generally have a more significant impact on
a financial institution’s performance than inflation. Interest rates do not necessarily move in the same direction or to the
same extent as the prices of goods and services.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
For information regarding market risk, see Item 7. “Management’s Discussion and Analysis of Financial Conditions
and Results of Operations—Management of Market Risk.”
ITEM 8. Financial Statements and Supplementary Data
2021 Auditor firm PCAOB number: 74 Auditor name: S. R. Snodgrass P.C. Auditor location: Cranbury Township, PA
2020 Auditor firm PCAOB number: 173 Auditor name : Crowe LLP Auditor location: New York, NY
47
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Bogota Financial Corp.
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial condition of Bogota Financial Corp. and subsidiary (the
“Company”) as of December 31, 2021; the related consolidated statements of income, comprehensive income, equity, and cash flows
for the year then ended; and the related notes to the consolidated financial statements (collectively, the financial statements). In our
opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31,
2021, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally
accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (PCAOB) and are required to be independent, with respect to the Company, in accordance with U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As
part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no
such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe
that our audit provides a reasonable basis for our opinion.
We have served as the Company’s auditor since 2021.
/s/S.R. Snodgrass, P.C.
Cranberry Township, Pennsylvania
March 29, 2022
48
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Stockholders and the Board of Directors of
Bogota Financial Corp.
Teaneck, New Jersey
Opinion on the Financial Statements
We have audited the accompanying consolidated statement of financial condition of Bogota Financial Corp. (the
"Company") as of December 31, 2020, the related consolidated statements of income, comprehensive income, equity,
and cash flows for the year ended December 31, 2020, and the related notes (collectively referred to as the "financial
statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the
Company as of December 31, 2020 and the results of its operations and its cash flows for the year ended December 31,
2020, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the
Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect
to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an
audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of
internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating
the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Crowe LLP
We served as the Company's auditor from 2009 to 2021.
New York, New York
March 26, 2021
49
BOGOTA FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31, 2021 and 2020
ASSETS
Cash and due from banks
Interest-bearing deposits in other banks
Cash and cash equivalents
2021
2020
$
$
14,446,792
90,621,993
105,068,785
5,957,564
74,428,175
80,385,739
Securities available for sale
Securities held to maturity (fair value of $74,081,059 and $58,872,451 respectively)
Loans held for sale
Loans, net of allowance $2,153,174 and $2,241,174, respectively
Premises and equipment, net
Federal Home Loan Bank (“FHLB”) stock
Accrued interest receivable
Core deposit intangibles
Bank owned life insurance
Other assets
$
$
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Non-interest bearing
Interest bearing
FHLB advances
Advance payments by borrowers for taxes and insurance
Other liabilities
Total liabilities
Commitments & Contingencies
Stockholders' Equity
41,838,798
74,053,099
1,152,500
570,209,669
8,127,979
4,851,300
2,712,605
336,364
24,524,122
4,486,366
837,361,587
$
11,870,508
57,504,443
—
557,690,853
5,671,097
5,858,100
2,855,425
—
16,915,637
2,153,076
740,904,878
$
39,317,500
558,162,278
597,479,778
27,061,629
474,911,402
501,973,031
85,051,736
2,856,120
4,397,742
689,785,376
104,290,920
2,560,089
3,612,762
612,436,802
Preferred stock $0.01 par value 1,000,000 shares authorized, none issued
and outstanding at December 31, 2021 and 2020
Common stock $0.01 par value, 30,000,000 shares authorized, 14,605,809
issued and outstanding at December 31, 2021 and $13,157,525 issued and
outstanding at December 31, 2020
Additional Paid-In capital
Retained earnings
Unearned ESOP shares (463,239 shares as of December 31, 2021 and 489,983
shares as of December 31, 2020)
Accumulated other comprehensive loss
Total stockholders' equity
Total liabilities and stockholders' equity
—
—
146,057
68,247,204
84,879,812
131,575
56,975,187
77,359,737
(5,424,206 )
(272,656 )
147,576,211
837,361,587
$
(5,725,410 )
(273,013 )
128,468,076
740,904,878
$
See accompanying notes to consolidated financial statements
50
BOGOTA FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 2021 and 2020
Interest income
Loans
Securities
Taxable
Tax-exempt
Other interest-earning assets
Total interest income
Interest expense
Deposits
FHLB of New York advances
Total interest expense
Net interest income
Provision (credit) for loan losses
2021
2020
$
22,672,097
$
20,870,655
1,912,146
58,888
424,539
25,067,670
4,271,109
1,519,302
5,790,411
1,563,721
50,853
791,033
23,276,262
7,762,642
1,915,991
9,678,633
19,277,259
13,597,629
(88,000 )
200,000
Net interest income after provision (credit) for loan losses
19,365,259
13,397,629
Non-interest income
Fees and service charges
Gain on sale of loans
Bargain purchase gain
Bank owned life insurance
Other
Total non-interest income
Non-interest expenses
Salaries and employee benefits
Occupancy and equipment
Federal Deposit Insurance Corporation (“FDIC”) insurance assessment
Data processing
Advertising
Director fees
Professional fees
Merger costs
Core conversion costs
Contribution to Charitable Foundation
Other
Total non-interest expenses
Income before income taxes
Income tax expense
Net income
Earnings per share - basic
Earnings per share - diluted
Weighted average shares outstanding
Weighted average shares outstanding - diluted
136,211
786,424
1,950,970
1,436,453
183,454
4,493,512
7,743,694
1,261,306
217,300
1,036,203
276,665
873,008
735,067
392,197
730,000
—
1,198,081
14,463,521
58,946
—
—
1,027,703
18,986
1,105,635
5,132,372
658,854
161,000
714,109
177,773
733,102
865,209
—
—
2,881,500
673,815
11,997,734
9,395,250
2,505,530
1,875,175
437,305
$
$
$
$
$
$
7,520,075
0.55
0.54
13,725,884
13,897,645
2,068,225
0.17
0.17
12,170,610
12,170,610
See accompanying notes to consolidated financial statements
51
BOGOTA FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years ended December 31, 2021 and 2020
Net income
Other comprehensive (loss) income:
Unrealized gains/losses on securities available for sale:
Unrealized holding loss arising during the period
Tax effect
Net of tax
Defined benefit retirement plans:
Net loss arising during the period including changes in assumptions
Reclassification adjustment for amortization of prior service cost and net
gain/loss included in salaries and employee benefits
Tax effect, income tax benefit
Net of tax
Total other comprehensive income
2021
7,520,075
$
2020
2,068,225
$
(116,026 )
32,615
(15,751 )
4,428
(83,411 )
(11,323 )
(39,131 )
(74,789 )
155,653
(32,754 )
83,768
147,087
(20,323 )
51,975
357
40,652
Comprehensive income
$
7,520,432
$
2,108,877
See accompanying notes to consolidated financial statements
52
BOGOTA FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF EQUITY
Years ended December 31, 2021 and 2020
Balance January 1, 2020
Net income
Other comprehensive income
Issuance of common stock for initial public
offering, net of expenses
Issuance of common stock to the Charitable
Foundation
Stock purchase by the ESOP
ESOP shares released
Balance December 31, 2020
Net income
Stock based compensation
Other comprehensive loss
Issuance of common stock to Bogota MHC
Issuance of common stock equity plan
Stock purchased and retired
ESOP shares released
Balance December 31, 2021
Common
Stock Shares
Common
Stock
Paid-in
Capital
$
—
—
—
$
—
—
—
Retained
Earnings
$ 75,291,512
2,068,225
—
—
—
—
Accumulated
Other
Comprehensive
Income (Loss)
$
(313,665 )
—
40,652
12,894,375
128,943
54,425,094
—
—
Unearned
ESOP shares
$
—
—
—
—
263,150
—
—
13,157,525
—
—
—
1,267,916
226,519
(46,151 )
—
14,605,809
$
$
2,632
—
—
131,575
—
—
—
12,679
2,265
(462 )
—
146,057
2,628,868
—
(78,775 )
$ 56,975,187
—
310,924
—
11,487,321
(2,265 )
(481,006 )
(42,957 )
$ 68,247,204
—
—
—
$ 77,359,737
7,520,075
—
—
—
—
—
—
$ 84,879,812
$
$
—
—
—
(273,013 )
—
—
357
—
—
—
—
(272,656 )
—
(6,022,899 )
297,489
$ (5,725,410 )
—
—
—
—
—
—
301,204
$ (5,424,206 )
Total
Equity
$ 74,977,847
2,068,225
40,652
54,554,037
2,631,500
(6,022,899 )
218,714
$ 128,468,076
7,520,075
310,924
357
11,500,000
—
(481,468 )
258,247
$ 147,576,211
See accompanying notes to consolidated financial statements
BOGOTA FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 2021 and 2020
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities
Bargain purchase gain
Amortization of intangible assets
(Credit) provision for loan losses
Depreciation of premises and equipment
Amortization of deferred loan fees
Amortization of premiums and accretion of discounts on securities, net
Deferred income tax benefit
Contribution to the charitable foundation
Gain on sale of loans
Increase in cash surrender value of bank owned life insurance
Employee stock ownership plan
Stock based compensation
Changes in
Accrued interest receivable
Net changes in other assets
Net changes in other liabilities
Net cash provided by operating activities
Cash flows from investing activities
Purchases of securities available for sale
Purchases of securities held to maturity
Maturities, calls, and repayments of securities available for sale
Maturities, calls, and repayments of securities held to maturity
Proceeds from sale of loans
Loans purchased
Net (increase) decrease in loans
Purchase of bank owned life insurance
Net cash acquired in merger
Death benefits proceeds from bank owned life insurance
Purchases of premises and equipment
Purchase of FHLB stock
Redemption of FHLB stock
Net cash provided by (used in) investing activities
Cash flows from financing activities
Net increase in deposits
Net increase (decrease) increase in short-term FHLB advances
Net increase in advance payments from borrowers for taxes and insurance
Proceeds from long-term FHLB non-repo advances
Repayments of long-term FHLB non-repo advances
Loan to ESOP
Stock offering expenses
Return of unfilled stock offering subscriptions
Common stock issuance
Repurchase of common stock
Net cash used in financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents – beginning of year
Cash and cash equivalents – end of year
Supplemental cash flow information
Subscription offering proceeds used to purchase common stock
Income taxes paid
Interest paid
Non-cash investment and financing activities
Fair value of assets acquired, net of cash and cash equivalents acquired
Fair Value of liabilities assumed
Death benefit recorded as other asset
2021
2020
$
7,520,075
$
2,068,225
(1,950,970 )
(759,054 )
(88,000 )
416,953
555,721
161,191
261,277
—
(786,424 )
(544,610 )
258,247
310,924
445,747
(827,519 )
201,487
5,175,045
(33,988,744 )
(43,966,888 )
3,975,789
34,460,182
25,409,776
—
38,476,501
(8,000,000 )
19,393,090
—
(1,456,720 )
(733,900 )
2,364,200
35,933,286
13,788,152
(6,000,000 )
(350,631 )
8,000,000
(31,381,338 )
—
—
—
—
(481,468 )
(16,425,285 )
—
—
200,000
272,562
723,529
178,202
(837,306 )
2,631,500
—
(369,813 )
218,714
—
(834,065 )
1,118,377
434,135
5,804,060
—
(25,501,413 )
1,684,100
24,090,287
—
(1,869,667 )
(19,587,498 )
—
—
863,921
(1,746,906 )
(1,104,100 )
918,700
(22,252,576 )
4,223,579
1,000,000
(631,617 )
15,000,000
(8,801,564 )
(6,022,899 )
(1,973,312 )
(41,505,998 )
7,683,507
—
(31,028,304 )
24,683,046
(47,476,820 )
80,385,739
105,068,785
$
127,862,559
80,385,739
—
1,705,000
5,920,581
$
$
$
48,843,842
1,160,000
9,678,633
87,370,327
93,312,447
1,827,968
—
—
$
$
$
$
$
$
$
See accompanying notes to consolidated financial statements
54
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
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 Bank maintains two subsidiaries Bogota Securities Corp. which was formed for the purpose of buying, selling and
holding investment securities. Bogota Properties, LLC was inactive at December 31, 2021 and December 31, 2020.
The Bank generally originates residential, commercial and consumer loans to, and accepts deposits from, customers in New
Jersey. The debtors’ ability to repay loans is dependent upon the region’s economy and the borrowers’ circumstances. The
Bank is also subject to the regulations of and examinations by certain federal and state regulatory agencies.
Bogota Financial Corp. completed its stock offering in connection with the mutual holding company reorganization of
Bogota Savings Bank on January 15, 2020. The Company sold 5,657,735 shares of common stock at $10.00 per share in its
subscription offering for gross proceeds of $56.6 million. In connection with the reorganization, the Company also issued
263,150 shares of common stock and $250,000 in cash to Bogota Savings Bank Charitable Foundation, Inc., and 7,236,640
shares of common stock to Bogota Financial, MHC, its New Jersey-chartered mutual holding company. Shares of the
Company’s common stock began trading on January 16, 2020 on The Nasdaq Capital Market under the trading symbol
“BSBK.”
Acquisition of Gibraltar Bank: On February 28, 2021, the Company completed its acquisition of Gibraltar Bank. As a result of
the merger, we acquired three branch offices located in Morris and Essex Counties in New Jersey. In addition, as part of the
transaction, the Company issued 1,267,916 shares of its common stock to Bogota Financial, MHC. The conversion and
consolidation of data processing platforms, systems and customer files occurred on August 16, 2021.
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 equity.
Earnings per Share: Basic earnings per share (“EPS”) is computed by dividing net income available to common shareholders
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. Diluted EPS is computed using the same method as basic EPS and reflects the potential dilution which
could occur if stock options shares 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 twelve-month period ended December 31, 2021, options to purchase 526,119 common shares with an exercise price of
$10.45 were outstanding but were not included in the calculation of diluted EPS because the options were anti-dilutive. The
Company did not have any outstanding stock options or shares of restricted stock for the year ended December 31, 2020.
55
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The following is a reconciliation of the numerators and denominators of the basic earnings per share calculations for the
twelve ended December 31, 2021.
Net income
Basic earnings per share:
Weighted average shares outstanding - basic
Weighted average shares outstanding - diluted
Dilutive securities
Basic earnings per share - basic
Basic earnings per share - diluted
For the twelve months
ended December 31,
2021
For the twelve months
ended December 31,
2020
$
7,520,075 $
2,068,225
13,725,884
13,897,645
171,761
0.55 $
0.54 $
12,170,610
12,170,610
—
0.17
0.17
$
$
Use of Estimates: To prepare financial statements in conformity with accounting principles generally accepted in the United
States of America, 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.
Cash Flows: Cash and cash equivalents include cash and deposits with other banks with maturities within one year. Net cash
flows are reported for customer loan and deposit transactions and short-term FHLB advances.
Interest-Bearing Deposits in Other Banks: Interest-bearing deposits in other banks mature within one year and are carried at
cost.
Securities: Debt securities are classified as held to maturity and carried at amortized cost when management has the positive
intent and ability to hold them to maturity. Debt securities are classified as available for sale when they might be sold before
maturity. Securities available for sale are carried at fair value, with unrealized holding gains and losses reported in other
comprehensive income (loss), net of tax.
Interest income includes amortization of purchase premium or discount. Premiums and discounts on securities are amortized
on the level-yield method without anticipating prepayments, except for mortgage-backed securities (“MBSs”) where
prepayments are anticipated. Gains and losses on sales are recorded on the trade date and determined using the specific
identification method.
Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more
frequently when economic or market conditions warrant such an evaluation. For securities in an unrealized loss position,
management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of
the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a
security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or
requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through
earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two
components as follows: 1) OTTI related to credit loss, which must be recognized in the income statement and 2) OTTI
related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference
between the present value of the cash flows expected to be collected and the amortized cost basis.
Loans: Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are
reported at the principal balance outstanding, net of deferred loan fees and costs, and an allowance for loan losses. Interest
income is accrued on the unpaid principal balance. The Bank originates real estate, commercial and consumer loans. A
substantial portion of the loan portfolio is represented by loans in northern New Jersey. The ability of the Bank’s debtors to
honor their contracts is dependent upon the real estate values and general economic conditions in this area. Loan origination
fees, net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method
without anticipating prepayments.
56
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Interest income on real estate, commercial and consumer loans is discontinued at the time the loan is 90 days delinquent
unless the loan is well-secured and in process of collection. Past due status is based on the contractual terms of the loan. In
all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered
doubtful. Nonaccrual loans and loans past due 90 days and still on accrual include both smaller balance homogeneous loans
that are collectively evaluated for impairment and individually classified impaired loans. A loan is moved to nonaccrual
status in accordance with the Bank’s policy, typically after 90 days of non-payment.
All interest accrued but not received for loans placed on nonaccrual is reversed against interest income. Interest received on
such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are
returned to accrual status when all the principal and interest amounts contractually due are brought current and future
payments are reasonably assured.
Allowance for Loan Losses: The allowance for loan losses is a valuation allowance for probable incurred credit losses. The
allowance for loan losses is increased by provisions for loan losses charged to operations. Losses are charged to the
allowance when all or a portion of a loan is deemed to be uncollectible. Subsequent recoveries of loans previously charged
off are credited to the allowance for loan losses when realized. Allocations of the allowance may be made for specific loans,
but the entire allowance is available for any loan that, in management’s judgment, should be charged off. The allowance
consists of specific and general components.
The specific component relates to loans that are individually classified as impaired. A loan is considered impaired when,
based on current information and events, it is probable that the Bank will be unable to collect all principal and interest
contractually due. Loans for which the terms have been modified resulting in a concession, and for which the borrower is
experiencing financial difficulties, are considered troubled debt restructurings and classified as impaired. Factors considered
by management in determining impairment include payment status, collateral value, and the probability of collecting
scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment
shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment
shortfalls on a case-by-case basis, taking into consideration the circumstances surrounding the loan and the borrower,
including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the
shortfall in relation to the principal and interest owed.
The Bank reviews loans for impairment that are individually evaluated for collectability in accordance with the Bank’s
normal loan review procedures. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net,
at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment
is expected solely from the collateral. Large groups of smaller balance homogeneous loans, such as consumer and residential
real estate loans, are collectively evaluated for impairment, and accordingly, they are not separately identified for impairment
disclosures.
Troubled debt restructurings are separately identified for impairment disclosures and are measured at the present value of
estimated future cash flows using the loan’s effective rate at inception. If a troubled debt restructuring is considered to be a
collateral dependent loan, the loan is reported, net, at the fair value of the collateral. For troubled debt restructurings that
subsequently default, the Bank determines the amount of reserve in accordance with the accounting policy for the allowance
for loan losses.
The general component covers non-impaired loans and is based on historical loss experience, adjusted for current factors.
The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the
Bank over the most recent two years. This actual loss experience is supplemented with other economic factors based on the
risks present for each portfolio segment. These economic factors include consideration of the following: levels of and trends
in delinquencies and impaired loans; levels of and trends in charge-offs and recoveries; trends in loans originated and terms
of loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures,
and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic
trends and conditions; industry conditions; and effects of changes in credit concentrations. The Bank consistently applies this
methodology to all portfolio segments. The following portfolio segments have been identified: Residential First Mortgage,
Commercial and Multi-Family Real Estate, Construction, Commercial and Industrial and Consumer.
57
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Acquired Loans: Loans acquired including loans that have evidence of deterioration of credit quality since origination and
for which it is probable, at acquisition, that the Company will be unable to collect all contractually required payments
receivable, are initially recorded at fair value (as determined by the present value of expected future cash flows or the fair
value of the loan's collateral value if the loan is collateral dependent) with no valuation allowance and are referred to as
purchase credit impaired (PCI). Loans are evaluated individually to determine if there is evidence of deterioration of credit
quality since origination. The difference between the undiscounted cash flows expected at acquisition and the investment in
the loan, or the “accretable yield,” is recognized as interest income on a level-yield method over the life of the loan.
Contractually required payments for interest and principal that exceed the undiscounted cash flows expected at acquisition, or
the “non-accretable difference,” are not recognized as a yield adjustment or as a loss accrual or a valuation allowance.
Increases in expected cash flows subsequent to the initial investment are recognized prospectively through adjustment of the
yield on the loan over its remaining estimated life. Decreases in expected cash flows are recognized immediately as
impairment. Any valuation allowances on these impaired loans reflect only losses incurred after the acquisition.
For acquired purchased loans that are not PCI loans at acquisition, credit discounts representing the principal losses expected
over the life of the loan are a component of the initial fair value. Loans may be aggregated and accounted for as a pool of
loans if the loans being aggregated have common risk characteristics. Subsequent to the acquisition date, the methods utilized
to estimate the required allowance for credit losses for these loans is similar to originated loans; however, the Company
records a provision for loan losses only when the required allowance exceeds any remaining credit discounts. The remaining
differences between the purchase price and the unpaid principal balance at the date of acquisition are recorded in interest
income over the life of the loans.
Residential First Mortgage Loans – Residential first mortgage loans are generally made on the basis of the borrower’s ability
to make repayment from his or her employment and other income, but are secured by real property whose value tends to be
more easily ascertainable. Credit risk for these types of loans is generally influenced by general economic conditions, the
characteristics of individual borrowers and the nature of the loan collateral.
Commercial Real Estate Loans – Commercial real estate loans generally have larger balances and involve a greater degree of
risk than residential real estate loans, inferring higher potential losses on an individual customer basis. Loan repayment is
often dependent on the successful operation and management of the properties and/or businesses occupying the properties, as
well as on the collateral securing the loan. Economic events or conditions in the real estate market could have an adverse
impact on the cash flows generated by the properties securing the Bank’s commercial real estate loans and on the value of
such properties.
Construction Loans – Construction financing is generally considered to involve a higher degree of risk of loss than long-term
financing on improved, occupied real estate. Risk of loss on a construction loan depends largely upon the accuracy of the
initial estimate of the property’s value at completion of construction and the estimated cost of construction. During the
construction phase, a number of factors could result in delays and cost overruns. If the estimate of construction costs proves
to be inaccurate, additional funds may be required to be advanced in excess of the amount originally committed to permit
completion of the building. If the estimate of value proves to be inaccurate, the value of the building may be insufficient to
assure full repayment if liquidation is required. If foreclosure is required on a building before or at completion due to a
default, there can be no assurance that all of the unpaid balance of, and accrued interest on, the loan as well as related
foreclosure and holding costs will be recovered.
Commercial and Industrial Loans - A commercial and industrial loan is a loan to a business rather than a loan to an
individual consumer. These short-term loans generally have an interest rate based on the prime rate and are secured by
collateral owned by the business requesting the loan.
Consumer Loans – Consumer loans include home equity lines of credit and home equity loans, which exhibit many of the
same credit risk characteristics as residential real estate loans. The amount of home equity line of credit is generally limited to
a certain percentage of the appraised value of the property less the balance of the first mortgage.
58
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Mortgage Loan Sales: The Bank has a partnership through the Federal Home Bank of New York (“FHLBNY”) to sell loans
within the Mortgage Partnership Finance (“MPF”) Program. The MPF Program gives the Bank another alternative to
funding mortgages which may increase profits. It allows the Bank to be competitive in all the fixed-rate products. In addition,
the MPF structure capitalizes on the Bank's credit expertise. MPF combines that expertise with the FHLBNY's expertise in
handling interest-rate risk. FHLBNY manages the interest rate, the liquidity and the prepayment risks, while the Bank
manages the credit and servicing risks. The result involves the member receiving a very competitive price for loans plus fees
over time for managing the credit and servicing risks. Loans are sold at origination; gains or losses on the sale of mortgage
loans are recognized at the settlement date and are determined by the difference between the net proceeds and the amortized
cost. All loans are sold with servicing being retained by the Bank. The outstanding principal balances sold and serviced by
the Bank under the program were $4,706,056 and $10,181,727 at December 31, 2021 and 2020 respectively. Under the
program, the first layer of losses is paid by the FHLBNY up to 100 basis points of the total funded amount of loans sold. (the
“First Loss Account”).
The Bank then provides a second loss credit enhancement obligation, which is equivalent to “AA” credit risk less the First
Loss Account. Loan losses beyond the first and second layers are absorbed by the FHLBNY. There are no losses to date on
the loans sold under the program. Mortgage servicing rights were $523 and $5,293 as of December 31, 2021 and 2020,
respectively and reported as other assets. Servicing fees totaled $4,770 and $15,627 for the years ended December 31, 2021
and 2020, respectively. Late fees and ancillary fees related to loan servicing are not material.
Premises and Equipment: Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation.
Building and related components are depreciated using the straight-line method with useful lives ranging from fifteen to 39
years. Furniture, fixtures and equipment are depreciated using the straight-line method with useful lives ranging from one to
ten years. Leasehold improvements are amortized over the shorter of the terms of the respective leases or the estimated lives
of the improvements.
Federal Home Loan Bank (“FHLB”) Stock: FHLB stock is restricted stock, which is carried at cost, and periodically
evaluated for impairment based on ultimate recovery of par value. Federal law requires a member institution of the FHLB to
hold stock according to a predetermined formula. Dividends are recorded as income on the consolidated statement of
financial condition.
Bank Owned Life Insurance: The Bank has purchased life insurance policies on certain key employees. Bank owned life
insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the
cash surrender value adjusted for other charges or other amounts due that are probable at settlement.
Intangible Assets: Intangible assets, other than goodwill, include core deposit intangibles and mortgage servicing rights
(MSRs). Core deposit intangibles are a measure of the value of consumer demand and savings deposits acquired in business
combinations accounted for as purchases. The core deposit intangibles are being amortized over 10 years using the sum-of-
the-years digits method of amortization, while the covenant not to compete was amortized over four years on a straight line
basis.
MSRs arise from the Company originating certain loans for the express purpose of selling such loans in the secondary
market. The Company maintains all servicing rights for these loans. The loans held for sale are carried at lower of cost or
market. Originated MSRs are recorded by allocating total costs incurred between the loan and servicing rights based on their
relative fair values. MSRs are amortized in proportion to the estimated servicing income over the estimated life of the
servicing portfolio and measured annually for impairment.
The recoverability of the carrying value of intangible assets is evaluated on an ongoing basis, and permanent declines in
value, if any, are charged to expense.
59
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Advertising Costs: Advertising costs are expensed as incurred. Any direct response advertising conducted by the Bank is
immaterial and has not been capitalized. Advertising costs are included in “non-interest expenses” in the consolidated
statements of income.
Off-Balance-Sheet Financial Instruments: In the ordinary course of business, the Bank enters into off-balance-sheet financial
instruments consisting of commitments to extend credit. Such financial instruments are recorded in the consolidated
statement of financial condition when funded.
Income Taxes: Income tax expense is the total of the current year income tax due or refundable and the change in deferred
tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences
between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if
needed, reduces deferred tax assets to the amount expected to be realized.
A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax
examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit
that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not”
test, no tax benefit is recorded. The Bank had no unrecognized tax positions as of December 31, 2021 and 2020.
The Bank recognizes interest and/or penalties related to income tax matters in income tax expense.
Retirement Plans: Pension expense is the net of service and interest cost and amortization of gains and losses not
immediately recognized. Employee 401(k) plan expense is the amount of matching and safe harbor contributions. Profit
sharing expense is based on the amount of contributions made by the Bank as determined by the Board of Directors.
Director’s retirement plan expense allocates the benefits over years of service. Supplemental Retirement Plan expense
allocates the benefits over years of service.
Stock Based Compensation: Compensation cost is recognized for stock options and restricted stock awards issued to
employees and directors, based on the fair value of these awards at the grant date. A Black-Scholes model is utilized to
estimate the fair value of stock options, while the market price of the Company’s common shares at the date of the grant is
used for restricted shares. Compensation cost is recognized over the required service period, generally defined as the vesting
period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service
period for the entire award.
60
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Comprehensive Income: Comprehensive income consists of net income and other comprehensive income (loss). Other
comprehensive income (loss) includes net unrealized holding gains and losses on securities available for sale and net
unrealized gains and losses on the pension plan which are also recognized as separate components of equity.
Loss Contingencies: Loss contingencies, including claims and legal actions arising in the ordinary course of business, are
recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated.
Management does not currently believe that such matters that will have a material effect on the consolidated financial
statements.
Fair Value of Financial Instruments: Fair values of financial instruments are estimated using relevant market information and
other assumptions, as more fully disclosed in a separate note. Fair value estimates involve uncertainties and matters of
significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad
markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates.
Operating Segments: While the chief decision-makers monitor the revenue streams of the various products and services,
operations are managed and financial performance is evaluated on a Bank-wide basis. Management does not separately
allocate expenses, including the cost of funding loan demand, between the commercial and retail operations of the Bank. As
such, discrete financial information is not available and segment reporting would not be meaningful.
New Accounting Pronouncements:
Not yet effective Accounting Pronouncements: In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842),
which will supersede the current lease requirements in Topic 840. The ASU requires lessees to recognize a right of use asset
and related lease liability for all leases, with a limited exception for short-term leases. Leases will be classified as either
finance or operating, with the classification affecting the pattern of expense recognition in the statement of income.
Currently, leases are classified as either capital or operating, with only capital leases recognized on the balance sheet. The
reporting of lease related expenses in the statements of operations and cash flows will be generally consistent with the current
guidance. In May 2020, FASB amended the effective date of the new guidance on Leases. The amendment and related new
guidance on Leases are effective for the Company for the fiscal years beginning after December 15, 2021 and interim periods
within fiscal years beginning after December 15, 2022. The Company is currently evaluating the effect on the financial
statements when adopted.
61
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
In January 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of
Reference Rate Reform on Financial Reporting, March 2020, to provide temporary optional expedients and exceptions to the
U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected
market transition from LIBOR and other interbank offered rates to alternative reference rates, such as the Secured Overnight
Financing Rate. Entities can elect not to apply certain modification accounting requirements to contracts affected by what the
guidance calls “reference rate reform” if certain criteria are met. An entity that makes this election would not have to
remeasure the contracts at the modification date or re assess previous accounting determination. Also, entities can elect
various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected
by reference rate reform if certain criteria are met, and can make a one-time election to sell and/or reclassify held-to-maturity
debt securities that reference an interest rate affected by reference rate reform. The amendments in this ASU are effective for
all entities upon issuance through December 31, 2022. The Company is currently evaluating the impact the adoption of the
standard will have on the Company’s financial position and results of operations.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses. ASU 2016-13 requires entities to report
“expected” credit losses on financial instruments and other commitments to extend credit rather than the current “incurred
loss” model. These expected credit losses for financial assets held at the reporting date are to be based on historical
experience, current conditions, and reasonable and supportable forecasts. This ASU will also require enhanced disclosures to
help investors and other financial statement users better understand significant estimates and judgments used in estimating
credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio. These disclosures include
qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial
statements.
The effective date of ASU 2016-13 for the Company is the fiscal year beginning on January 1, 2023 and interim periods
thereafter. The Company does not plan to early adopt, but will continue to review factors that might indicate that the full
deferral time period should not be used. The Company continues to evaluate the impact the new standard will have on the
accounting for credit losses, but the Company may recognize a one-time cumulative-effect adjustment to the allowance for
loan losses as of the beginning of the first reporting period in which the new standard is effective, consistent with regulatory
expectations set forth in interagency guidance issued at the end of 2016. The Company cannot yet determine the magnitude
of any such one-time cumulative adjustment or of the overall impact of the new standard on its consolidated financial
condition or results of operations.
NOTE 2 – ACQUISITION OF GIBRALTAR BANK
On February 28, 2021, the Company completed its acquisition of Gibraltar Bank, pursuant to which Gibraltar Bank merged
with and into the Bank, with the Bank as the surviving entity. Under the terms of the merger agreement, depositors of Gibraltar
Bank became depositors of the Bank and have the same rights and privileges in Bogota Financial MHC as if their accounts had
been established at the Bank on the date established at Gibraltar Bank. The Company issued 1,267,916 shares of its common
stock to Bogota Financial, MHC in conjunction with the acquisition for no cash consideration.
62
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
NOTE 2 – ACQUISITION OF GIBRALTAR BANK (Continued)
The assets acquired and liabilities assumed have been accounted for under the acquisition method of accounting. The assets
and liabilities, both tangible and intangible, were recorded at their fair values as of February 28, 2021 based on management’s
best estimate using the information available as of the merger date. The application of the acquisition method of accounting
resulted in the recognition of bargain purchase gain of $2.0 million and a core deposit intangible of $400,000.
Merger-related expenses of $392,000 for 2021 are recorded in the Consolidated Statements of Income and were expensed as
incurred. The following table sets forth assets acquired and liabilities assumed in the acquisition of the Gibraltar Bank, at their
estimated fair values as of the closing date of the transaction:
As recorded
by
Gibraltar
Bank
Fair value
adjustments
As recorded
at acquisition
$ 11,500,000
Fair value of equity acquired
Assets Acquired
Cash and cash equivalents
Securities held to maturity
Federal Home Loan Bank stock and other restricted stock
Loans receivable
Allowance for loan loss
Accrued interest receivable
Premises and equipment, net
Core deposit intangible
Deferred taxes
Other assets
$ 19,393,090 $
7,250,000
603,500
77,683,903
(640,232 )
302,927
348,714
—
913,303
362,636
Total assets acquired
$ 106,217,841 $
Liabilities assumed
Deposits
Borrowings
Advance payments by borrowers for taxes and insurance
Accrued expenses and other liabilities
Total liabilities assumed
Net assets acquired
Bargain purchase gain recorded at merger
$ 81,558,612 $
10,000,000
646,661
446,588
$ 92,651,861 $
(208,051 ) (a)
—
(920,497 ) (b)
640,232 (c)
—
— $ 19,393,090
7,041,949
603,500
76,763,406
—
302,927
1,428,361
400,000
745,903
84,281
$ 106,763,417
1,079,647 (d)
400,000 (e)
(167,400 ) (f)
(278,355 ) (g)
545,576
(i)
—
—
386,865 (h) $ 81,945,477
10,273,721
273,721
646,661
446,588
660,586 $ 93,312,447
$ 13,450,970
1,950,970
Explanation of certain fair value related adjustments:
(a)
(b)
Represents the fair value adjustments on investment securities at the acquisition date.
Represents the fair value adjustments on the net book value of loans, which includes an interest rate mark and credit mark adjustment and the reversal
of deferred fees/costs which will be amortized over the remaining life of the loans.
Represents the elimination of Gibraltar Bank allowance for loan losses.
Represents the fair value adjustments to reflect the fair value of land and buildings and premises and equipment, which will be amortized on a straight-
line basis over the estimated useful lives of the individual assets.
Represents the intangible assets recorded to reflect the fair value of core deposits. The core deposit asset was recorded as an identifiable intangible
asset and will be amortized on an accelerated basis over the estimated average life of the deposit base.
Represents an adjustment to net deferred tax assets resulting from the fair value adjustments related to the acquired assets, liabilities assumed and
identifiable intangible assets recorded.
Represents an adjustment to other assets acquired.
Represents fair value adjustments on time deposits, which will be treated as a reduction of interest expense over the remaining term of the time deposits.
Represents FHLB borrowing calculation to prepay borrowings, which will be treated as a reduction of interest expense over the remaining life of the
debt
(c)
(d)
(e)
(f)
(g)
(h)
(i)
63
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
NOTE 2 – ACQUISITION OF GIBRALTAR BANK (Continued)
The fair value of loans acquired from Gibraltar Bank was estimated using cash flow projections based on the remaining maturity
and repricing terms. Cash flows were adjusted by estimating future credit losses and the rate of prepayments. Projected monthly
cash flows were then discounted to present value using a risk-adjusted market rate for similar loans. There was no carryover of
Gibraltar Bank's allowance for loan losses associated with the loans that were acquired. The core deposit intangible asset
recognized is being amortized over its estimated useful life of approximately 10 years utilizing the sum-of-the-years digits
method (see Note 7 for details). The acquisition was accounted for under the acquisition method of accounting in accordance
with ASC Topic 805, Business Combinations. Accordingly, the Company recognizes amounts for identifiable assets acquired
and liabilities assumed at their estimated acquisition date fair value. Due to the complexity in valuing the assets acquired and
liabilities assumed, and the significant amount of data inputs required, the valuation of the assets and liabilities acquired is not
yet final. Fair value estimates are based on the information available at the reporting date and are subject to change for up to
one year after the closing date of the acquisition as additional information relative to the closing date fair values becomes
available.
The fair value of PCI loans was $6.1 million on the date of acquisition. The gross contractual amounts receivable relating to
the PCI loans was $8.3 million.
Certain PCI loans, for which specific credit-related deterioration was identified, are recorded at fair value, reflecting the present
value of the amounts expected to be collected. Income recognition on these loans is based on a reasonable expectation of the
timing and amount of cash flows to be collected. The timing of the sale of loan collateral was estimated for acquired loans
deemed impaired and considered collateral dependent. For these collateral dependent impaired loans, the excess of the future
expected cash flows over the present value of the future expected cash flows represents the accretable yield, which will be
accreted into interest income over the estimated liquidation period using the effective interest method.
The following table details the PCI loans that are accounted for in accordance with FASB ASC 310-30 as of March 1, 2021:
(in thousands)
Contractually required principal and interest at acquisition
Contractual cash flows not expected to be collected (nonaccretable difference)
Expected cash flows at acquisition
Interest component of expected cash flows (accretable discount)
Fair value of acquired PCI loans
The following table details the acquired loans that are not PCI as of March 1, 2021
Contractually required principal at acquisition
Contractual cash flows not expected to be collected (credit mark)
Expected cash flows at acquisition
Interest component of expected cash flows (accretable premium)
Fair value of acquired loans accounted for under FASB ASC 310-30
$
$
$
$
8,346
(1,412 )
6,934
(846 )
6,088
91,906
(9,978 )
81,928
143
82,071
Changes in the amortizable yield for purchased credit-impaired loans were as follows for the twelve months ended December
31, 2021:
Balance at beginning of period
Addition of purchased credit-impaired loans
Accretion
Balance at end of period
$
—
217,789
(47,714 )
170,075
64
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
NOTE 2 – ACQUISITION OF GIBRALTAR BANK (Continued)
The following table presents actual operating results attributable to Gibraltar Bank since the March 1, 2021 acquisition date
through December 31, 2021. This information does not include purchase accounting adjustments or acquisition integration
costs.
Net interest income
Non-interest income
Non-interest expense
Pre-tax income
Income tax expense
Net Income
Gibraltar March 1, 2021
to December 31, 2021
$
$
1,479
1,050
357
2,172
611
1,561
The fair value of retail demand and interest bearing deposit accounts was assumed to approximate the carrying value as these
accounts have no stated maturity and are payable on demand. The fair value of time deposits was estimated by discounting the
contractual future cash flows using market rates offered for time deposits of similar remaining maturities. The fair value of
borrowings was based on the FHLB calculation to prepay borrowings with associated penalties.
NOTE 3 – SECURITIES AVAILABLE FOR SALE
The following table summarizes the amortized cost, fair value, and gross unrealized gains and losses of securities available
for sale at December 31, 2021 and 2020:
December 31, 2021
U.S. government and agency obligations
Corporate bonds due in:
Less than one year
One through five years
Five through ten years
MBS – residential
MBS – commercial
Total
December 31, 2020
Corporate bonds due in:
Less than one year
One through five years
Five through ten years
MBS – residential
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
$
3,000,000 $
— $
(18,270 ) $
2,981,730
—
6,375,068
1,002,542
21,695,539
9,741,782
—
17,594
3,050
89,297
—
$
—
(636 )
—
(24,591 )
(42,577 )
—
6,392,026
1,005,592
21,760,245
9,699,205
$ 41,814,931 $
109,941 $
(86,074 ) $ 41,838,798
$
1,001,354 $
5,369,527
—
5,359,734
954 $
31,407
—
114,426
$
—
(4,186 )
—
(2,708 )
1,002,308
5,396,748
-
5,471,452
Total
$ 11,730,615 $
146,787 $
(6,894 ) $ 11,870,508
All of the MBS 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”).
65
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
NOTE 3 – SECURITIES AVAILABLE FOR SALE (Continued)
There were no sales of securities during the years ended December 31, 2021 and 2020.
The age of unrealized losses and the fair value of related securities as of December 31, 2021 and 2020 were as follows:
Less than 12 Months
More than 12 Months
Total
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
December 31, 2021
U.S. government and
agency obligations
Corporate bonds
MBS – residential
MBS – commercial
Total
December 31, 2020
MBS – residential
Corporate bonds
Total
$ 2,981,730 $($18,270)
(636 )
(22,652 )
(42,577 )
(84,135 )
1,006,523
10,000,558
9,699,205
$ 23,688,016 $
$
$
— $
—
250,581
-
250,581 $
—
—
(1,939 )
(1,939 )
$ 2,981,730 $($18,270)
(636 )
(24,591 )
(42,577 )
(86,074 )
1,006,523
10,251,139
9,699,205
$ 23,938,597 $
Less than 12 Months
More than 12 Months
Total
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
$
$
271,340 $
—
271,340 $
(2,708 )
—
(2,708 )
$
— $
2,005,441
$ 2,005,441 $
—
(4,186 )
(4,186 )
$
271,340 $
2,005,441
$ 2,276,781 $
(2,708 )
(4,186 )
(6,894 )
Unrealized losses on corporate bonds available for sale have not been recognized into income 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 is largely due to changes in interest rates and other
market conditions. The Bank has 14 securities in a loss position and does not consider these securities to be other-than-
temporary impaired at December 31, 2021.
At December 31, 2021 and 2020, securities available for sale with a carrying value of $0 and $214,229, respectively, were
pledged to secure public deposits.
66
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
NOTE 4 – SECURITIES HELD TO MATURITY
The following table summarizes the amortized cost, fair value, and gross unrecognized gains and losses of securities held to
maturity at December 31, 2021 and 2020:
December 31, 2021
U.S. government and agency obligations
Corporate Bonds due in:
Less than one year
Five through ten years
Municipal obligations due in:
Less than one year
One through five years
More than five years through ten years
Greater than ten years
MBS –
Residential
Commercial
December 31, 2020
Corporate Bonds due in:
Less than one year
One through five years
Municipal obligations due in:
Less than one year
One through five years
Five through ten years
MBS –
Residential
Commercial
Amortized
Cost
Gross
Unrecognized
Gains
Gross
Unrecognized
Losses
Fair Value
$ 3,000,000 $
— $
—
$ 3,000,000
—
13,681,053
—
410,726
—
(39,870 )
4,006,006
903,483
375,000
1,732,386
12,668
—
27,353
9,527
(2,776 )
(15,399 )
—
—
16,913,787
33,441,384
75,094
287,278
(240,797 )
(495,844 )
-
14,051,909
-
4,015,898
888,084
402,353
1,741,913
-
16,748,084
33,232,818
$ 74,053,099 $
822,646 $($794,686)
$ 74,081,059
$ 1,501,179 $
8,635,831
13,616 $
221,716
—
(2,520 )
$ 1,514,795
8,855,027
2,764,079
1,057,609
375,000
4,944
30,492
32,201
(141 )
—
—
2,768,882
1,088,101
407,201
11,906,884
31,263,861
144,863
997,319
(15,440 )
(59,042 )
12,036,307
32,202,138
$ 57,504,443 $ 1,445,151 $($77,143)
$ 58,872,451
Mortgage-backed securities include Freddie Mac, Fannie Mae and Ginnie Mae securities, all of which are U.S. government
sponsored agencies.
67
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
NOTE 4 – SECURITIES HELD TO MATURITY (Continued)
The age of unrecognized losses and the fair value of related securities were as follows:
Less than 12 Months
More than 12 Months
Total
Fair Value
Unrecognized
Losses
Fair Value
Unrecognized
Losses
Fair Value
Unrecognized
Losses
December 31, 2021
Corporate bonds
Municipal obligations
MBS – residential
MBS – commercial
Total
December 31, 2020
Corporate bonds
Municipal obligations
MBS – residential
MBS – commercial
Total
$ 3,710,130 $($39,870) $
3,835,309
10,720,544
7,898,509
$ 26,164,492 $
(18,175 )
(141,726 )
(197,720 )
(397,491 ) $ 7,354,709 $
— $
—
2,701,345
4,653,364
— $ 3,710,130 $($39,870)
(18,175 )
—
(240,797 )
(99,071 )
(495,844 )
(298,124 )
(794,686 )
(397,195 ) $ 33,519,201 $
3,835,309
13,421,889
12,551,873
747,480 $($2,520) $
$
1,436,454
2,403,485
2,652,666
$ 7,240,085 $
(141 )
(15,440 )
(59,042 )
(77,143 ) $
— $
—
—
—
— $
— $
1,436,454
—
2,403,485
—
—
2,652,666
— $ 7,240,085 $
747,480 $($2,520)
(141 )
(15,440 )
(59,042 )
(77,143 )
Unrecognized losses have not been recognized into income because the issuers of the securities are of high credit quality,
management does not intend to sell and it is not more likely than not that management would be required to sell the securities
prior to their anticipated recovery, and the decline in fair value is largely due to changes in interest rates and other market
conditions. The fair value is expected to recover as the securities approach maturity. The Bank has 18 securities in a loss
position as of December 31, 2021.
At December 31, 2021 and 2020, securities held to maturity with a carrying amount of $8,363,997 and $11,057,973,
respectively, were pledged to secure repurchase agreements at the FHLB of New York (see Note 9).
At December 31, 2021 and 2020, securities held to maturity with a carrying value of $3,976,629 and $4,327,429 respectively,
were pledged to secure public deposits.
NOTE 5 – LOANS
Loans are summarized as follows at December 31:
Real estate:
Residential First Mortgage
Commercial and Multi-Family Real Estate
Construction
Commercial & Industrial
Consumer:
Home equity and other
Total loans
Allowance for loan losses
2021
2020
$ 319,968,234
175,375,419
41,384,687
7,905,524
$ 340,000,989
171,634,451
9,930,959
13,652,248
27,728,979
24,713,380
572,362,843
559,932,027
(2,153,174 )
$ 570,209,669
(2,241,174 )
$ 557,690,853
68
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
NOTE 5 - LOANS (Continued)
The Bank has granted loans to executive officers and directors of the Bank. At December 31, 2021 and 2020, such loans
totaled $577,143 and $748,662, respectively. At December 31, 2021 and December 31, 2020 deferred loan fees were
$1,249,332 and $1,844,233 respectively.
PCI loans are loans acquired at a discount primarily due to deteriorated credit quality. These loans are initially recorded at
fair value at acquisition, based upon the present value of expected future cash flows, with no related allowance for loan
losses. PCI loans acquired in the Gibraltar acquisition totaled $5.6 million at December 31, 2021.
As a qualified Small Business Administration lender, the Bank was automatically authorized to originate loans under the
Paycheck Protection Program (“PPP”). During 2020, the Bank received and processed 113 PPP applications totaling
approximately $10.5 million. The Bank participated in the second round of PPP loans and during the first half of 2021, the
Bank received and processed 54 applications totaling $6.9 million. All outstanding PPP loans are included in the previous
loan table under commercial and industrial loans. Since origination, the Bank has processed forgiveness applications for
$11.6 million and the outstanding balance at December 31, 2021 was $5.8 million.
The following table presents the activity in the allowance for loan losses by portfolio segments for the year ending December
31, 2021 and 2020:
Residential
First
Mortgage
Commercial
& Multi-
Family
Real Estate
Construction
Commercial
& Industrial
Home
Equity
& Other
Total
December 31, 2021
Allowance for loan losses:
Beginning balance
Provision for loan losses (credit)
Loans charged-off
Recoveries
$ 1,254,174
(161,700 )
—
—
$ 841,000
(72,400 )
—
—
$
45,000 $
150,000
—
—
$
14,000
(4,600 )
—
—
87,000 $ 2,241,174
(88,000 )
—
—
700
—
—
Total ending allowance balance
$ 1,092,474
$ 768,600
$ 195,000 $
9,400
$
87,700 $ 2,153,174
December 31, 2020
Allowance for loan losses:
Beginning balance
Provision for loan losses (credit)
Loans charged-off
Recoveries
$ 1,383,174
(154,000 )
—
25,000
$ 512,000
329,000
—
—
$
$
26,000 $
19,000
—
—
9,000
5,000
—
—
86,000 $ 2,016,174
200,000
1,000
—
—
25,000
—
Total ending allowance balance
$ 841,000
The provision fluctuations during the years ended December 31, 2021 and 2020 are due to increases or decreases in loan
balances in different loans types and economic conditions related to the pandemic.
$ 1,254,174
45,000 $
87,000 $ 2,241,174
14,000
$
$
69
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
NOTE 5 – 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, 2021 and 2020:
Residential
First
Mortgage
Commercial
& Multi-
Family
Real Estate
Construction
Commercial
& Industrial
Home Equity
& Other
Total
December 31, 2021
Allowance for loan losses:
Ending allowance balance
attributable
to loans:
Individually evaluated for
impairment
Collectively evaluated for
impairment
$
35,859 $
— $
— $
— $
— $
35,859
1,056,615
768,600
195,000
9,400
87,700
2,117,315
Total ending allowance balance
$ 1,092,474 $
768,600
$ 195,000
$
9,400 $
87,700
$ 2,153,174
Loans:
Loans individually evaluated for
impairment
Loans collectively evaluated for
impairment
Loans acquired with deteriorated
credit quality
$ 1,099,793 $
— $
— $
— $
18,507 $ 1,118,300
314,754,870 173,962,424 41,384,687 7,866,263 27,710,472 565,678,716
4,113,571
1,412,995
—
39,261
—
5,565,827
Total ending loans balance
$ 319,968,234 $ 175,375,419 $ 41,384,687 $ 7,905,524 $ 27,728,979 $ 572,362,843
70
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
NOTE 5 – LOANS (Continued)
Residential
First
Mortgage
Commercial
& Multi-
Family
Real Estate
Construction
Commercial
& Industrial
Home Equity
& Other
Total
December 31, 2020
Allowance for loan
losses:
Ending allowance
balance
attributable to loans:
Individually
evaluated for
impairment
Collectively
evaluated for
impairment
Total ending
allowance balance
Loans:
Loans individually
evaluated for
impairment
Loans collectively
evaluated for
impairment
Total ending loans
balance
$
35,859 $
— $
— $
— $
— $
35,859
1,218,315
841,000
45,000
14,000
87,000
2,205,315
$
1,254,174 $
841,000
$
45,000
$
14,000
$
87,000
$ 2,241,174
$
1,082,371 $
223,352 $
— $
— $
19,044 $ 1,324,767
338,918,618 171,411,099 9,930,959 13,652,248 24,694,336 558,607,260
$ 340,000,989 $ 171,634,451 $ 9,930,959 $ 13,652,248 $ 24,713,380 $ 559,932,027
71
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
NOTE 5 – LOANS (Continued)
Impaired loans as of and for the year ended December 31, 2021 were as follows:
Residential first mortgages
Commercial and Multi-Family
Construction
Commercial & Industrial
Home equity & other consumer
Residential first mortgages
Commercial and Multi-Family
Construction
Commercial & Industrial
Home equity & other consumer
Loans
With no related
allowance
recorded
$
$
1,486,469
488,003
—
—
18,507
1,992,979
$
$
Loans with a
allowance
recorded
174,776
—
—
—
—
174,776
Average
Of individually
Impaired loans
Amount of
allowance for
loan losses
allocated
$
$
1,195,600
111,676
—
—
18,776
35,859
—
—
—
—
$
1,326,052
$
35,859
Impaired loans as of and for the year ended December 31, 2020 were as follows:
Residential first mortgages
Commercial and Multi-Family
Construction
Commercial & Industrial
Home equity & other consumer
Residential first mortgages
Commercial and Multi-Family
Construction
Commercial & Industrial
Home equity & other consumer
Loans
With no related
allowance
recorded
Loans with a
allowance
recorded
$
$
904,730
223,352
—
—
19,044
177,641
—
—
—
—
$
1,147,126
$
177,641
Average
Of individually
Impaired loans
Amount of
allowance for
loan losses
allocated
$
$
922,950
225,691
—
—
19,231
35,859
—
—
—
—
$
1,167,872
$
35,859
72
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
NOTE 5 – LOANS (Continued)
Interest income recognized during impairment and cash-basis interest income recognized in both 2021 and 2020 was
nominal.
The Bank has not committed to lend additional amounts as of December 31, 2021 and 2020 to customers with outstanding
loans that are classified as troubled debt restructurings. There were no loans modified as TDRs during 2021 and 2020. There
was no TDR and one TDRs in payment default within twelve months following the modification during the years ended
December 31, 2021 and 2020, respectively.
Nonaccrual loans and loans past due 90 days or more still on accrual include both smaller balance homogeneous loans that
are collectively evaluated for impairment and individually classified impaired loans.
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, 2021 and 2020, excluding PCI loans:
December 31, 2021
Residential first mortgage
Commercial and multi-family
Construction
Commercial & Industrial
Home equity and other consumer
Total
December 31, 2020
Residential first mortgage
Commercial and multi-family
Construction
Commercial & Industrial
Home equity and other consumer
Total
Nonaccrual
Loans Past Due
90 Days or More
Still Accruing
$
$
846,037
—
—
—
18,507
$
864,544
$
$
$
673,539
—
—
—
19,044
$
692,583
$
—
—
—
—
—
—
—
—
—
—
—
—
73
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
NOTE 5 – LOANS (Continue)
The following table presents the aging of the recorded investment in past due loans as of December 31, 2021 and 2020, by
class of loans:
30 – 59 Days
Past Due
60 – 89 Days
Past Due
Greater than
89 Days
Past Due
Total
Past Due
Loans Not
Past Due
PCI loans
Total
December 31, 2021
Residential first
mortgage
Commercial and Multi-
Family
Construction
Commercial &
Industrial
Home equity and other
consumer
$
— $ 312,616 $ 857,676 $ 1,170,292 $ 314,684,371 $ 4,113,571 $ 319,968,234
—
—
—
—
—
— 469,492
— 173,962,424
469,492 40,915,195
1,412,995
—
175,375,419
41,384,687
—
—
—
7,905,524
—
7,905,524
27,529
—
—
27,529 27,662,189
39,261
27,728,979
Total
$ 27,529 $ 312,616 $ 1,327,168 $ 1,667,313 $ 565,129,703 $ 5,565,827 $ 572,362,843
December 31, 2020
Residential first
mortgage
Commercial and Multi-
Family
Construction
Commercial &
Industrial
Home equity and other
consumer
$
— $ 702,497 $ 24,628 $ 727,125 $ 339,273,864 $
— $ 340,000,989
—
—
—
160,382
—
—
—
—
—
—
—
— 171,634,451
9,930,959
—
—
—
171,634,451
9,930,959
— 13,652,248
—
13,652,248
—
160,382 24,552,998
—
24,713,380
Total
$ 160,382 $ 702,497 $ 24,628 $ 887,507 $ 559,044,520 $
— $ 559,932,027
Loans greater than 89 days past due 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 real estate, commercial and industrial and construction loans are graded on an annual basis. Residential real
estate and consumer loans are primarily evaluated based on performance. Refer to the table on the prior page 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.
74
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
NOTE 5 – LOANS (Continued)
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.
Based on the most recent analysis performed, the risk category of loans by class is as follows:
Pass
Special Mention
Substandard
Doubtful
December 31, 2021
Residential first mortgage
Commercial and Multi-Family
Construction
Commercial & Industrial
Home equity and other consumer
$
$
318,868,440
174,173,925
41,384,687
7,905,524
27,710,472
$
383,034
—
—
—
—
$
716,760
1,201,494
—
—
18,507
Total
$
570,043,048
$
383,034
$
1,936,761
$
December 31, 2020
Residential first mortgage
Commercial and Multi-Family
Construction
Commercial & Industrial
Home equity and other consumer
$
$
338,786,939
170,181,704
9,930,959
13,652,248
24,694,336
$
567,766
—
—
—
—
$
646,284
1,452,747
—
—
19,044
Total
$
557,246,186
$
567,766
$
2,118,075
$
—
—
—
—
—
—
—
—
—
—
—
—
75
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
NOTE 6 – PREMISES AND EQUIPMENT
Premises and equipment consists of the following at December 31:
Land
Buildings and improvements
Furniture, fixtures and equipment
Accumulated depreciation
$
$
2021
2,402,995
6,750,167
3,351,720
12,504,882
(4,376,903 )
2020
2,332,911
4,865,741
2,596,354
9,795,006
(4,123,909 )
$
8,127,979
$
5,671,097
Depreciation expense was $416,953 and $272,562 for the years ended December 31, 2021 and 2020, respectively.
NOTE 7 – INTANGIBLE ASSETS
Core deposit intangible carrying amounts were $336,364 for the year ended December 31, 2021. Core deposit accumulated
amortization and amortization expense totaled $64,636 for the year ended December 31, 2021.
Core deposit intangible assets are amortized to their estimated residual values over their expected useful lives, commonly ten
years. The estimated aggregate future amortization expense for core deposit intangible assets as of December 31, 2021, was
as follows:
Remaining 2022
2023
2024
2025
2026
Thereafter
NOTE 8 – DEPOSITS
$
$
69,091
61,157
53,223
45,289
37,355
70,248
336,363
The aggregate amount of certificates of deposit with a minimum denomination of $250,000 was approximately $92,878,700
and $81,138,052 at December 31, 2021 and 2020, respectively.
Officers and directors of the Bank have deposits at the Bank. At December 31, 2021 and 2020, such deposits totaled
approximately $1,927,000 and $2,857,000, respectively.
The Bank had $52,867,000 and $54,191,000 of brokered deposits as of December 31, 2021 and 2020, respectively, which
were primarily included in certificate of deposit accounts.
The scheduled maturities of certificates of deposits at December 31, 2021, are as follows:
2022
2023
2024
2025
2026
2027
76
$ 254,301,188
72,547,767
31,660,830
2,925,510
4,806,633
154,432
$ 366,396,359
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
NOTE 9 – ADVANCES FROM THE FEDERAL HOME LOAN BANK (“FHLB”) OF NEW YORK
There were short-term advances as of December 31, 2021 totaling $6,000,000 with a weighted average interest rate of 0.48%
that mature within one year. There were short-term advances as of December 31, 2020 totaling $12,000,000 with a weighted
average interest rate of 0.49% that mature within one year.
Long-term advances at December 31 were as follows:
Amortizing:
Maturing in:
2022
2025
2026
Non-repo advances
Maturing in:
2021
2022
2023
2024
2025
Weighted
Average Rate
at December
31, 2022
2021
2020
1.90 % $
0.73 %
0.80 %
572,976 $
7,663,756
4,672,850
-
1,600,877
9,690,043
0.81 % $ 12,909,582 $ 11,290,920
$
—
— $ 23,000,000
2.01 % 32,081,840 28,000,000
2.03 % 23,037,169 21,000,000
6,000,000
6,019,839
1.99 %
3,000,000
5,003,306
1.52 %
1.98 % $ 66,142,154 $ 81,000,000
At December 31, 2021 and 2020, securities held to maturity and available for sale with a carrying amount of $8,363,997 and
$11,057,973, respectively, were pledged to secure repurchase agreements. Change in the fair value of pledged collateral may
require the Bank to pledge additional securities.
Non-repo and amortizing advances are secured by the FHLB stock owned by the Bank, and a blanket assignment of
qualifying loans at December 31, 2021 and 2020 amounted to $239,039,288 and $218,297,386, respectively.
The Bank had available additional borrowing potential of $160,449,349 and $123,217,630, with the FHLB as of December
31, 2021 and 2020, respectively. The Bank also had outstanding lines of credit of $51,000,000 with four correspondent banks
as of December 31, 2021 and $51,000,000 as of December 31, 2020. There were no outstanding balances against these lines
as of December 31, 2021 and 2020.
Payments over the next five years are as follows:
$ 38,654,816
23,037,168
6,019,839
12,667,062
4,672,851
$ 85,051,736
2022
2023
2024
2025
2026
77
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
NOTE 10 – INCOME TAXES
Income tax expense (benefit) was as follows:
Current expense
Federal
State
Deferred expense (benefit)
Federal
State
2021
2020
$
$
1,016,179
597,719
1,613,898
843,986
430,625
1,274,611
200,147
61,130
261,277
(572,520 )
(264,786 )
(837,306 )
$
1,875,175
$
437,305
Total income tax expense differed from the amounts computed by applying the federal income tax rate of 21% to income
before income taxes as a result of the following for the years ended December 31:
Expected income tax expense at federal tax rate
Increase (decrease) in taxes resulting from:
State income tax, net of federal income tax effect
Bank Owned Life Insurance
Bargain purchase gain
Merger expenses
Tax exempt interest, net
Other, net
2021
1,973,002 $
2020
526,161
$
520,491
(301,655 )
(409,704 )
82,361
(12,366 )
23,046
1,875,175 $
131,012
(215,818 )
—
—
(10,679 )
6,629
437,305
$
78
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
NOTE 10 – INCOME TAXES (Continued)
Year-end deferred tax assets and liabilities were due to the following:
$
Deferred tax assets:
Allowance for loan losses
Deferred compensation
Directors’ and officers’ retirement plans
ESOP plans
Stock equity plans
Federal NOL carryforward
Depreciation
Charitable Foundation Contribution
Other
Deferred tax liabilities:
Loan fees/costs
Purchase accounting
Net unrealized gain on securities available for sale
Net deferred tax asset
$
2021
2020
605,257
818,588
113,322
56,603
75,659
398,701
42,535
552,997
41,186
2,704,848
633,792
182,992
6,709
823,493
1,881,355
$
$
629,994
706,899
146,077
—
—
—
13,952
691,365
26,694
2,214,981
537,069
—
39,324
576,393
1,638,588
Included in retained earnings at December 31, 2021 and 2020, was approximately $2,558,000 in bad debt reserves for which
no deferred income tax liabilities have been recorded. The amount represents allocations of income to bad debt deductions
for tax purposes only. Reduction of these reserves for purposes other than tax bad-debt losses would create income for tax
purposes only, which would be subject to the then current corporate income tax rate. There were no unrecognized tax
benefits at December 31, 2021 and 2020. The Bank does not expect the total amount of unrecognized tax benefits to
significantly increase or decrease in the next twelve months. There was no material interest or penalties recorded in the
income statement or accrued during the years ended December 31, 2021 and 2020. The Bank is subject to U.S. federal
income tax as well as income tax of the State of New Jersey. The Bank is no longer subject to federal and state examination
by taxing authorities for years before 2018 and 2016, respectively.
NOTE 11 – 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 Bogota Financial Corp. 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. To
fund the grant of restricted common stock, the Company issued shares from authorized but unissued shares. Restricted shares
granted under the 2021 Plan vest in equal installments, over the service periods 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 twelve months ended December 31, 2021 approximately $158,000 of expense was
recognized in regard to these awards. There was no restricted stock expense recorded for the twelve months ended December
31, 2020. The expected future compensation expense related to the 226,519 non-vested restricted shares outstanding at
December 31, 2021 is approximately $2.4 million over a weighted average period of 4.85 years.
The following is a summary of the Company's restricted stock activity during the twelve months ended December 31, 2021:
79
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
NOTE 11 – STOCK BASED COMPENSATION (Continued)
Outstanding, January 1, 2021
Granted
Outstanding, December 31, 2021
Number of
Restricted Shares
Weighted Average
Grant Date Fair
Value
—
226,519
226,519
$
$
—
10.45
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 the 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 represents
the fair value of the Company's common stock price on the grant date based on the closing market price, and have an expiration
period of 10 years.
The fair value of stock options granted was estimated utilizing the Black-Scholes option pricing model using the following
assumptions: expected life of 6.5 years, risk-free rate of return of 0.904%, volatility of 41.10%, and a dividend yield of 0.00%.
The expected life of the options represents the period of time that stock options are expected to be outstanding and is estimated
using the simplified approach, which assumes that all outstanding options will be exercised at the midpoint of the vesting date
and full contractual term. The risk-free rate of return is based on the rates on the grant date of a U.S. Treasury Note with a term
equal to the expected option life. Since the Company recently converted to a public Company and does not have sufficient
historical price data, the expected volatility is based on the historical daily stock prices of a peer group of similar entities based
on factors such as industry, stage of life cycle, size and financial leverage. The Company has not paid any cash dividends on
its common stock.
Management recognizes expense for the fair value of these awards on a straight line basis over the requisite service period.
During the twelve months ended December 31, 2021, approximately $153,000 in expense was recognized in regard to these
awards. There was no stock option expense recorded for the twelve months ended December 31, 2020. The expected future
compensation expense related to the 526,119 non-vested options outstanding at December 31, 2021 is $2.3 million over the
weighted average remaining vesting period of 4.85 years.
The following is a summary of the Company's option activity during the twelve months ended December 31, 2021:
Outstanding, January 1, 2021
Granted
Forfeited
Outstanding, December 31, 2021
Options exercisable at December 31, 2021
Weighted
Average
$
Exercise Price
—
10.45
10.45
10.45
Number of
Stock Options
—
526,119
(2,500 )
523,619
—
Weighted
Average
Remaining
Contractual
Term (in
years)
Aggregate
Intrinsic
Value
$
6.5
—
100,000
6.5
$
100,000
—
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 12 – BENEFIT PLANS
401(k) Plan: The Bank has a 401(k) retirement plan covering substantially all employees. The Bank matches 100% of
contributions up to the first 6% of salary that the employee defers to the retirement plan. The Bank also contributes a safe
harbor contribution of 3% of the employee’s salary. In addition, on an annual basis, the Board of Directors may elect to
make discretionary employer contributions. Bank contributions to the plan for the years ended December 31, 2021 and 2020
were $383,000 and $303,000, respectively.
80
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
NOTE 12 – BENEFIT PLANS (Continued)
Directors’ Retirement Plan: The Bank has an unfunded, non-qualified pension plan (the “Plan”) to provide post-retirement
benefits to each non-employee director of the Bank. The Monthly Retirement Benefit is 100% of a director's average annual
retainer paid over a three year period (not necessarily consecutive) during which the highest annual retainer was received and
payable for the same number of months the director served on the Board, up to a period of 120 months.
The measurement dates used in the Plan valuations were December 31 for plan years 2021 and 2020, respectively. The
following table sets forth the Plan’s funded status at December 31, 2021 and 2020:
Projected benefit obligation - beginning
$
Service cost
Interest cost
Actuarial (gain) loss
Annuity payments
Projected benefit obligation – ending
Changes in Plan assets
Employer contributions
Annuity payments
$
2021
2,286,321
194,326
53,705
(7,680 )
(96,577 )
2,430,095
2020
2,108,344
140,750
65,948
54,321
(83,042 )
2,286,321
96,577
(96,577 )
83,042
(83,042 )
Funded status and accrued pension cost included in other liabilities
$
2,430,095
$
2,286,321
Amounts recognized in accumulated other comprehensive income at December 31 consist of:
Net actuarial loss
Prior service cost
$
2021
114,024
188,537
$
2020
143,831
294,367
$
302,561
$
438,198
Components of net periodic benefit cost and other amounts recognized in other comprehensive income:
Service cost
Interest cost
Amortization of unrecognized past service liability
Net periodic benefit cost
Net loss (gain)
Amortization of prior service cost
Total recognized in other comprehensive income
$
2021
2020
$
194,326
53,705
128,126
376,157
(7,680 )
(128,126 )
(135,806 )
140,750
65,948
124,353
331,051
54,321
(124,353 )
(70,032 )
Total recognized in net periodic benefit cost and other
comprehensive loss
$
240,351
$
261,019
Assumptions
Weighted-average assumptions used to determine pension benefit obligations at year end:
Discount rate
2021
2.90%
2020
2.30%
81
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
NOTE 12 – BENEFIT PLANS (Continued)
Weighted-average assumptions used to determine net periodic pension cost:
Discount rate
Amortization period
2021
2.90%
5.8 years
2020
2.30%
4.9 years
At December 31, 2021, Plan-related amounts totaling $302,561 (unrecognized past service liability of $188,537 plus
unrecognized actuarial loss of $114,024) have been recorded, net of $85,048 in deferred income tax, in accumulated other
comprehensive loss. For the year ended December 31, 2022, $130,821 of the unrecognized past service liability is expected
to be included in net periodic plan cost.
At December 31, 2020, Plan-related amounts totaling $438,198 (unrecognized past service liability of $294,367 plus
unrecognized actuarial loss of $143,831) have been recorded, net of $123,223 in deferred income tax, in accumulated other
comprehensive loss. For the year ended December 31, 2021, $128,126 of the unrecognized past service liability is expected
to be included in net periodic plan cost.
The Monthly Retirement Benefit was changed from 100% of a director's average annual retainer paid over a three-year period
(not necessarily consecutive) during which the highest annual retainer was received and payable for the same number of
months the director served on the Board, up to a period of 120 months to be 15% of the final three-year average annual
compensation paid in twelve equal installments, up to a period of 120 months. The change in the Monthly Retirement Benefit
had no material change on the financial statements.
For the year ended December 31, 2022, the Bank expects to contribute $165,644 to the Plan.
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid as of year
ending December 31:
2022
2023
2024
2025
2026 - 2028
$ 165,644
196,317
204,373
292,989
738,844
Employee Stock Ownership Plan (“ESOP”): Effective upon the consummation of the Bank's reorganization in January 2020,
an ESOP was established for all eligible employees. The ESOP used $6.0 million in proceeds from a twenty year term loan
obtained from the Company to purchase 515,775 shares of Company common stock. The term loan principal is payable in
installments through January 2039. Interest on the term loan is fixed at a rate of 4.75%.
Each year, the Bank makes discretionary contributions to the ESOP, which are equal to principal and interest payments
required on the term loan. Shares purchased with the loan proceeds were initially pledged as collateral for the term loan and
is held in a suspense account for future allocation among participants. Contributions to the ESOP and shares released from
the suspense account are allocated among the participants on the basis of compensation, as described by the ESOP, in the
year of allocation.
The ESOP shares pledged as collateral are reported as unearned ESOP shares in the Consolidated Statements of Financial
Condition. As shares are committed to be released from collateral, the Bank reports compensation expense equal to the
average market price of the shares during the year, and the shares become outstanding for basic net income per common
share computations. ESOP compensation expense for the year ended December 31, 2021 was $258,247.
82
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
NOTE 12 – BENEFIT PLANS (Continued)
The ESOP shares were as follows:
Allocated shares
Unearned shares
Total ESOP shares
Fair value of unearned ESOP shares
$
2021
52,536
463,239
515,775
4,715,773
$
2020
25,792
489,983
515,775
4,365,749
Supplemental Executive Retirement Plan (“SERP”): In 2014, the Bank adopted an unfunded, non-qualified Supplemental
Executive Retirement Plan (“SERP”) for the benefit of its senior officers. On May 20, 2016, the SERP was amended and
restated as of January 1, 2016. The SERP provides the Bank with the opportunity to supplement the retirement income of the
President and CEO to achieve equitable wage replacement at retirement.
As of December 31, 2021, the accrued SERP obligation was $885,136. The expense was $199,044 during 2021. At
December 31, 2021, the amount recognized in accumulated other comprehensive loss was $100,583. As of December 31,
2020, the accrued SERP obligation was $666,809. The expense was $150,774 during 2020. At December 31, 2020, the
amount recognized in accumulated other comprehensive loss was $81,300.
NOTE 13 – REGULATORY CAPITAL MATTERS
Banks are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines
and prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance-sheet
items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative
judgments by regulators. A capital conservation buffer of 2.5%, which was fully phased on January 1, 2019 resulted in the
Bank effectively having the following minimum capital to risk-weighted assets ratios: a) 7.0% based on CET1; b) 8.5% based
on tier 1 capital; and c) 10.5% based on total regulatory capital. The net unrealized gain or loss on available for sale
securities is not included in computing regulatory capital. Failure to meet capital requirements can initiate regulatory action.
Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial
condition. If only adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized,
capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At year-end
2021 and 2020, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory
framework for prompt corrective action.
In accordance with the Economic Growth, Regulatory Relief, and Consumer Protection Act, the federal banking agencies
adopted, effective January 1, 2020, a final rule whereby financial institutions and financial institution holding companies that
have less than $10 billion in total consolidated assets and meet other qualifying criteria, including a leverage ratio of greater
than 9% (“qualifying community banking organizations”), are eligible to opt into a community bank leverage ratio (“CBLR”)
framework. Qualifying community banking organizations that elect to use the CBLR framework and that maintain a leverage
ratio of greater than 9% are considered to have satisfied the generally applicable risk-based and leverage capital requirements
83
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
NOTE 13 – REGULATORY CAPITAL MATTERS (Continued)
in the agencies’ capital rules and will be considered to have met the well capitalized ratio requirements under the PCA
statutes
The agencies reserved the authority to disallow the use of the CBLR framework by a financial institution or holding
company, based on the risk profile of the organization.
The Bank elected to adopt the CBLR framework. As a qualifying community banking organization, the Company and the
Bank may opt out of the CBLR framework in any subsequent quarter by completing its regulatory agency reporting using the
traditional capital rules. In April 2020, the federal banking agencies issued interim final rules pursuant to section 4012 of the
CARES Act, temporarily lowering the CBLR requirement to 8.00% through the end of 2020, 8.50% for calendar year 2021
and 9.00% in 2022. The CARES Act also provides that, during the same time period, if a qualifying community banking
organization falls no more than 1% below the CBLR, it will have a two-quarter grace period to satisfy the CBLR.
The Bank excludes accumulated OCI components from Tier 1 and Total regulatory capital.
The Bank’s actual and required capital amounts and ratios under the CBLR rules at December 31, 2021 and the Basel III
rules at December 31, 2020 are presented in the tables below.
2021
Tier 1 capital to average assets:
Bank
2020
Tier 1 capital to average assets:
Bank
Actual Capital
Required
For Capital
Adequacy Purposes
Amount
Ratio
Amount
Ratio
121,233
14.55
67,006
8.0
101,667
13.63
59,662
8.0
NOTE 14 – COMMITMENTS AND CONTINGENCIES
The Bank is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing
needs of its customers and to reduce its own exposure to fluctuations in interest rates. These financial instruments primarily
include commitments to extend credit. Such instruments involve, to varying degrees, elements of credit and interest rate risk
in excess of the amount recognized in the consolidated statements of financial condition. The contractual amounts of these
instruments reflect the extent of involvement the Bank has in those particular classes of financial instruments.
The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instruments for
commitments to extend credit is represented by the contractual amount of those instruments. The Bank uses the same credit
policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.
The Bank had outstanding firm commitments, all of which expire within two months, to originate, or purchase participation
interests in, loans at December 31, 2021 and 2020 is as follows:
84
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
NOTE 14 – COMMITMENTS AND CONTINGENCIES ((Continued)
Fixed Rate
Residential mortgage loans
Commercial real estate
Commercial & Industrial
Home equity line of credit
Variable Rate
Residential mortgage loans
Construction loans
Home equity loans
Commercial real estate
$
$
$
2021
2020
$
$
$
2,986,250
—
—
170,000
3,156,250
—
7,522,375
1,060,000
1,400,000
8,524,000
1,830,000
—
2,135,000
12,489,000
1,500,000
—
—
4,675,000
$
9,982,375
$
6,175,000
Commitments to make loans are generally made for periods of 90 days or less. The fixed rate loan commitments have
interest rates ranging from 2.99% to 4.00% and maturities ranging from 10 years to 30 years.
At December 31, 2021 and 2020, undisbursed funds from approved lines of credit under a homeowners’ equity lending
program amounted to approximately $48,028,579 and $41,774,944, respectively. At December 31, 2021 and 2020,
undisbursed funds from approved lines of credit under a business line of credit program amounted to $7,938,797 and
$427,827, respectively. Unless they are specifically cancelled by notice from the Bank, these funds represent firm
commitments available to the respective borrowers on demand.
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition
established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require
payment of a fee. Since some of the commitments are expected to expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a
case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on
management’s credit evaluation of the counterparty. Collateral held varies but primarily includes commercial and residential
real estate. The Bank leases certain Bank properties and equipment under operating leases. Rent expense was $152,725 and
$39,195 for 2021 and 2020, respectively.
NOTE 15 – 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.
85
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
NOTE 15 – FAIR VALUE (Continued)
The Bank used the following methods and significant assumptions to estimate the fair value of each type of financial
instrument:
The fair value for investment securities are determined by quoted market prices, if available (Level 1). For securities where
quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2).
Assets measured at fair value on a recurring basis are summarized below:
December 31, 2021
Securities available for sale:
U.S. government and agency obligations
Corporate bonds
MBS – residential
MBS – commercial
December 31, 2020
Securities available for sale:
Corporate bonds
MBS – residential
Carrying
Value
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
$
$
2,981,730
7,397,618
21,760,245
9,699,205
41,838,798
$
$
— $
—
—
—
— $
2,981,730
7,397,618
21,760,245
9,699,205
41,838,798
$
$
$
$
6,399,056
5,471,452
11,870,508
$
$
— $
—
— $
6,399,056
5,471,452
11,870,508
$
$
—
—
—
—
—
—
—
—
No assets were measured at fair value on a non-recurring basis at December 31, 2021 and 2020.
86
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
NOTE 15 – FAIR VALUE (Continued)
The carrying amounts and estimated fair values of financial instruments, at December 31, 2021 and December 31, 2020 are
as follows:
Carrying
Amount
Fair
Value
Fair Value Measurement Placement
(Level 2)
(Level 3)
(Level 1)
(In thousands)
December 31, 2021
Financial instruments -assets
Investment securities held-to-
maturity
Loans
Financial instruments - liabilities
Certificates of deposit
Borrowings
December 31, 2020
Financial instruments -- assets
Investment securities held-to-
maturity
Loans
Financial instruments - liabilities
Certificates of deposit
Borrowings
$
74,053
571,363
$
74,081
569,845
$
366,396
85,052
365,452
86,657
$
57,504
557,691
$
58,872
544,392
$
356,364
104,291
359,465
106,159
—
—
—
—
—
—
—
—
$
74,081
—
$
—
569,845
365,452
86,657
—
—
$
58,872
—
$
—
544,392
359,465
106,159
—
—
The methods and assumptions, not previously presented, used to estimate fair values are described as follows:
Carrying amount is the estimated fair value for cash and cash equivalents. With the adoption of the fair value standard, the
fair value of financial instruments 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. The fair value of off-balance sheet items is not considered material. Other financial instruments including cash
and cash equivalents and non-maturity deposits have a fair value that approximates the carrying amount.
87
BOGOTA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
NOTE 16 – ACCUMULATED OTHER COMPREHENSIVE LOSS
The components of accumulated other comprehensive loss included in equity as of December 31 is as follows:
Beginning balance
Other comprehensive income loss before reclassification
Amounts reclassified from other comprehensive income
(loss)
Net current period other comprehensive income (loss)
Ending balance
Year ended December 31, 2021
Unrealized loss in
investments
Defined benefit plan
$($373,582) $
83,768
-
83,768
$($289,814) $
100,569
42,115
(125,526 )
(83,411 )
17,158
Total
$($273,013)
125,883
(125,526 )
357
$($272,656)
Details about other comprehensive accumulated loss
components
Realized gains on sales of securities
Year ended
December 31, 2021
Amortization of estimated defined benefit pension plan
losses
Total reclassifications for the period
$
$
$
$
$
—
—
—
174,609 other expense
provision for
income taxes
(49,083 )
125,526
125,526
88
NOTE 17 – PARENT-ONLY FINANCIAL INFORMATION
Condensed Statements of Financial Condition
(Dollar amounts in thousands)
2021
ASSETS
Cash and due from banks
Investment in subsidiary bank
Loan from Bogota Savings Bank
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Other liabilities
Total liabilities
Total stockholders' equity
Total liabilities and stockholders' equity
(Dollar amounts in thousands)
Condensed Statements of Income
Interest income
Loans
Total interest income
Non-interest expenses
Merger costs
Total non-interest expenses
Income(loss) before income taxes
Income tax expense
Net income before undistributed earnings of subsidiaries
Undistibuted earnings of subsidiaries
Net income
Condensed Statements of Cash Flows
Cash flows from operating activities
Net income before undistributed earnings of subsidiaries
Undistributed earnings of subsidiaries
Net changes in other liabilities
Net cash used in operating activities
Cash flows from investing activities
Net decrease in loans
Net cash provided by (used in) investing activities
Cash flows from financing activities
Repurchase of common stock
Net cash used in financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents – beginning of year
Cash and cash equivalents – end of year
89
$
$
$
$
$
$
$
2021
2021
20,736
121,233
5,626
147,595
19
19
147,576
147,595
276
276
392
392
(116 )
133
(249 )
7,769
7,520
7,520
(7,769 )
(11 )
(260 )
195
195
(482 )
(482 )
(547 )
21,283
20,736
ITEM 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
None.
ITEM 9A. Controls and Procedures
(a) Evaluation of disclosure controls and procedures
Under the supervision and with the participation of our management, including our Principal Executive Officer
and Principal Financial Officer, Bogota Financial Corp. evaluated the effectiveness of the design and operation
of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act)
as of the end of the period covered by this report. Based upon that evaluation, the principal executive officer and
principal financial officer concluded that, as of the end of the period covered by this report, our disclosure
controls and procedures were effective.
(b) Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining effective internal control over financial
reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the
participation of our management, including our Principal Executive Officer and Principal Financial Officer, we
evaluated the effectiveness of our internal control over financial reporting based on criteria established in
“Internal Control — Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). Based on this assessment, management, including our Principal Executive
Officer and Principal Financial Officer, concluded that our internal control over financial reporting was effective
and met the criteria of the “Internal Control — Integrated Framework (2013)” as of December 31, 2021.
(c) Attestation Report of the Registered Public Accounting Firm
Not applicable because the Company is an emerging growth company.
(d) Changes in Internal Controls.
There were no changes made in our internal controls during the quarter ended December 31, 2021 that have
materially affected, or are reasonably likely to materially affect, Bogota Financial Corp.’s internal control over
financial reporting.
ITEM 9B. Other Information
None.
ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not Applicable.
90
ITEM 10. Directors, Executive Officers and Corporate Governance
PART III
Information regarding directors, executive officers and corporate governance of the Company is presented under the
headings “Proposal 1 — Election of Directors,” “Corporate Governance — Code of Ethics for Senior Officers” and “—
Committees of the Board of Directors — Audit Committee” in the Company’s definitive Proxy Statement for the 2021
Annual Meeting of Stockholders (the “Proxy Statement”) and is incorporated herein by reference. Additionally, no directors
or officers of Bogota Financial Corp failed to file on a timely basis any reports required by Section 16(a) of the Exchange Act
during 2021.
Bogota Financial Corp. has adopted a Code of Ethics that applies to its principal executive officer, principal
financial officer and principal accounting officer or controller or persons performing similar functions. A copy of the Code of
Ethics is available on Bogota Financial Corp.’s website at www.bogotasavingsbank.com under “Investor Relations.”
ITEM 11. Executive Compensation
Information regarding executive compensation is presented under the headings “Executive Compensation,” and
“Corporate Governance — Director Compensation” in the Proxy Statement and is incorporated herein by reference.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
(a) Securities Authorized for Issuance under Stock-Based Compensation Plans
The following table sets forth information regarding outstanding options and shares under equity compensation
plans at December 31, 2021:
Plan Category
(a)
(b)
Number of
Securities to be
Issued Upon
Exercise of
Outstanding
Options,
Warrants and
Rights
Weighted-
Average
Exercise Price
of Outstanding
Options,
Warrants and
Rights
Equity compensation plan approved by security holders
Equity compensation plan not approved by security holders
Total
$
10.45
752,638
149,968
902,606
(c)
Number of
Securities
Remaining
Available for
Future
Issuance Under
Equity
Compensation
Plans
(Excluding
Securities
Reflected in
Column (a))
—
149,968
149,968
(b) Security Ownership of Certain Beneficial Owners
The information required by this item is incorporated herein by reference to the section captioned “Stock
Ownership” in the Proxy Statement.
(c) Security Ownership of Management
The information required by this item is incorporated herein by reference to the section captioned “ Stock
Ownership” in the Proxy Statement.
(d) Changes in Control
91
Management of Bogota Financial Corp. knows of no arrangements, including any pledge by any person of securities
of Bogota Financial Corp., the operation of which may at a subsequent date result in a change in control of the registrant.
ITEM 13. Certain Relationships and Related Transactions, and Director Independence
Information regarding certain relationships and related transactions, and director independence is presented under
the heading “Corporate Governance — Director Independence” and “— Other Information Relating to Directors and
Executive Officers Transactions with Certain Related Persons” in the Proxy Statement and is incorporated herein by
reference.
ITEM 14. Principal Accountant Fees and Services
The information required by this item is incorporated herein by reference to the section captioned “Proposal 2 –
Ratification of the Appointment of Independent Registered Public Accountants” of the Proxy Statement.
92
ITEM 15. Exhibits and Financial Statement Schedules
PART IV
3.1
3.2
4.1
4.6
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
Articles of Incorporation of Bogota Financial Corp. (incorporated by reference to Exhibit 3.1 to the Registration
Statement on Form S-1 of Bogota Financial Corp. (File No. 333-233680), initially filed with the Securities and
Exchange Commission on September 9, 2019, as amended)
Bylaws of Bogota Financial Corp. (incorporated by reference to Exhibit 3.2 to the Registration Statement on Form
S-1 of Bogota Financial Corp. (File No. 333-233680), initially filed with the Securities and Exchange Commission
on September 9, 2019, as amended)
Form of Common Stock Certificate of Bogota Financial Corp. (incorporated by reference to Exhibit 4 to the
Registration Statement on Form S-1 of Bogota Financial Corp. (File No. 333-233680), initially filed with the
Securities and Exchange Commission on September 9, 2019, as amended)
Description of Bogota Financial Corp.’s Securities (incorporated by reference to Exhibit 4.6 to the Annual Report on
Form 10-K of Bogota Financial Corp. (File No. 001-39180), filed with the Securities and Exchange Commission on
March 30, 2020)
Employment Agreement between Bogota Savings Bank and Joseph Coccaro (incorporated by reference to Exhibit
10.1 to the Current Report on Form 8-K of Bogota Financial Corp. (File No. 001-39180), filed with the Securities
and Exchange Commission on January 15, 2020) †
Change in Control Agreement between Bogota Savings Bank and Brian McCourt (incorporated by reference to
Exhibit 10.2 to the Current Report on Form 8-K of Bogota Financial Corp. (File No. 001-39180), filed with the
Securities and Exchange Commission on January 15, 2020)†
Change in Control Agreement between Bogota Savings Bank and Kevin Pace (incorporated by reference to Exhibit
10.3 to the Current Report on Form 8-K of Bogota Financial Corp. (File No. 001-39180), filed with the Securities
and Exchange Commission on January 15, 2020)†
Bogota Savings Bank Director’s Retirement Plan (incorporated by reference to Exhibit 10.3 to the Registration
Statement on Form S-1 of Bogota Financial Corp. (File No. 333-233680), initially filed with the Securities and
Exchange Commission on September 9, 2019, as amended) †
Bogota Savings Bank Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.4 to the
Registration Statement on Form S-1 of Bogota Financial Corp. (File No. 333-233680), initially filed with the
Securities and Exchange Commission on September 9, 2019, as amended) †
Form of Bogota Savings Bank Executive Bonus Plan (incorporated by reference to Exhibit 10.5 to the Registration
Statement on Form S-1 of Bogota Financial Corp. (File No. 333-233680), initially filed with the Securities and
Exchange Commission on September 9, 2019, as amended) †
Bogota Financial Corp. 2021 Equity Incentive Plan (incorporated by reference to Appendix A to the definitive proxy
statement (File No. 001-39180, filed on April 22, 2021) †
Form of Incentive Stock Option Award Agreement (incorporated by reference to Exhibit 10.3 to the Registration
Statement on Form S-8 (File No. 333-258064) , filed on July 21, 2021) †
Form of Non-Qualified Stock Option Award Agreement (incorporated by reference to Exhibit 10.4 to the
Registration Statement on Form S-8 (File No. 333-258064) , filed on July 21, 2021) †
10.10 Form of Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.2 to the Registration Statement
21
23.1
23.2
31.1
31.2
32.1
101
on Form S-8 (File No. 333-258064) , filed on July 21, 2021) †
Subsidiaries of Registrant
Consent of Independent Public Accounting Firm – S.R. Snodgrass, P.C.
Consent of Independent Public Accounting Firm – Crowe LLP
Certification of President and Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of
1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Senior Vice President and Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities
Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of President and Chief Executive Officer and the Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
The following materials from the Company’s Annual Report on Form 10-K for the fiscal year ended December 31,
2021, formatted in Inline XBRL: (i) Balance Sheets, (ii) Statements of Income, (iii) Statements of Comprehensive
Income, (iv) Consolidated Statements of Equity, (v) Statements of Cash Flows and (vi) Notes to the Financial
Statements.
Cover Page Interactive Data File (formatted in XBRL and contained in Exhibit 101)
104
________________
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† Management contract or compensation plan or arrangement.
ITEM 16. Form 10-K Summary
Not applicable.
94
Pursuant to the requirements of Section 13 or 15(d) 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.
SIGNATURES
Date: March 29, 2022
BOGOTA FINANCIAL CORP.
By:
/s/ Joseph Coccaro
Joseph Coccaro
President and Chief Executive Officer
(Duly Authorized Representative)
Pursuant to the requirements of the Securities Exchange of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signatures
Title
/s/ Joseph Coccaro
Joseph Coccaro
President, Chief Executive Officer and Director
(Principal Executive Officer)
Date
March 29, 2022
/s/ Brian McCourt
Brian McCourt
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
March 29, 2022
/s/ Steven M. Goldberg
Steven M. Goldberg
/s/ Gary Gensheimer
Gary Gensheimer
/s/ John Masterson
John Masterson
/s/ John G. Reiner
John G. Reiner
Chairman of the Board
March 29, 2022
Director
Director
Director
March 29, 2022
March 29, 2022
March 29, 2022
95