Executive Summary

Reported a revised Q3 2023 net loss of $2.275M and diluted EPS of -$0.52 due primarily to an additional ~$3.1M provision for a single commercial real estate credit placed on non-accrual as of September 30, 2023 .
Net interest margin compressed to 2.66% (vs 3.31% in Q3 2022) as deposit and borrowing costs rose faster than asset yields amid a liability-sensitive balance sheet .
Nonperforming assets increased to $9.927M (1.71% of total assets) from $4.243M (0.74%), driven by one large nonperforming CRE loan; ACL coverage stood at 84.5% of nonaccruals .
Merger with CBOA: exchange ratio raised from 0.24 to 0.2628 shares and outside closing date extended to June 28, 2024; management targets shareholder approvals and closing in Q1 2024 (catalyst) .

What Went Well and What Went Wrong

What Went Well

Capital strengthened: stockholders’ equity rose to $60.4M from $49.2M on capital raises despite YTD losses; the bank remained well-capitalized with Tier 1 leverage at 11.80% and CET1 at 14.00% .
Funding strategy executed: growth in brokered CDs and high-yield savings diversified funding sources and reduced reliance on short-term FHLB borrowings, helping manage interest rate risk .
Management commitment and M&A momentum: “The excitement is high amongst our team members as we prepare for this next chapter as a combined best in class bank,” CEO Jim Crotty, with the merger exchange ratio improved and timeline extended .

What Went Wrong

Credit event: approximately $3.0M of Q3 provision tied to one deteriorated CRE credit after updated due diligence and collateral reassessment; placed on non-accrual at quarter-end .
Margin and earnings pressure: net interest income fell $860K YoY in Q3 and NIM declined 65 bps YoY as liability costs rose materially with rate hikes .
Asset quality metrics worsened: nonperforming assets jumped to 1.71% of assets with nonperforming loans at 2.06% of gross loans, largely from one large NOO CRE loan .

Financial Results

Quarterly Income Statement and Profitability

Metric	Q3 2022	Q3 2023
Total interest income ($000)	$6,062	$7,172
Total interest expense ($000)	$1,498	$3,468
Net interest income ($000)	$4,564	$3,704
Provision for credit losses ($000)	$125	$3,146
Total noninterest income ($000)	$142	$164
Total noninterest expense ($000)	$3,256	$3,600
Pre-tax income ($000)	$1,325	$(2,878)
Provision for income taxes ($000)	$321	$(603)
Net income ($000)	$1,004	$(2,275)
Diluted EPS ($)	$0.42	$(0.52)
Net Interest Margin (%)	3.31%	2.66%

Year-to-Date (9M) Income Statement

Metric	9M 2022	9M 2023
Total interest income ($000)	$17,435	$20,720
Total interest expense ($000)	$3,019	$9,129
Net interest income ($000)	$14,416	$11,591
Provision for credit losses ($000)	$780	$3,280
Total noninterest income ($000)	$386	$529
Total noninterest expense ($000)	$9,698	$10,992
Pre-tax income ($000)	$4,324	$(2,152)
Provision for income taxes ($000)	$1,052	$(426)
Net income ($000)	$3,272	$(1,726)
Diluted EPS ($)	$1.37	$(0.48)
Net Interest Margin (%)	3.55%	2.82%

Balance Sheet Snapshot

Metric	Dec 31, 2022	Sep 30, 2023
Total assets ($000)	$574,340	$580,868
Loans HFI, net ($000)	$458,582	$471,825
Total deposits ($000)	$487,587	$468,391
Other borrowings ($000)	$5,000	$18,000
Subordinated debt ($000)	$24,531	$24,581
Stockholders’ equity ($000)	$49,238	$60,402
Tangible book value/share ($)	$13.85	$12.87
Nonperforming assets/total assets (%)	0.73%	1.71%
Shares outstanding	3,554,455	4,694,810

KPIs

KPI	Q3 2022	Q3 2023
ROAA (%)	0.70%	-1.55%
ROAE (%)	10.64%	-14.08%
Net Interest Margin (%)	3.31%	2.66%
Efficiency ratio (%)	—	93.09%

Note: Bancorp 34 manages operations as one unit; no segment reporting .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
CBOA Merger Exchange Ratio (shares of BCTF per CBOA share)	At closing	0.2400	0.2628	Raised
Merger Outside Date	Closing deadline	April 27, 2024	June 28, 2024	Extended

No explicit revenue, margin, OpEx, OI&E, or tax rate guidance disclosed for Q3 2023.

Earnings Call Themes & Trends

No Q3 2023 earnings call transcript was found; themes derived from 10-Q MD&A and press releases.

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q3 2023)	Trend
Interest rate cycle and liability sensitivity	Not available	NIM down 65 bps YoY; total cost of funds up 192 bps YoY in Q3; asset yields up 75 bps YoY	Negative margin pressure
Deposit mix shift	Not available	Customers shifted from demand to CDs; brokered CDs and high-yield savings used to diversify funding	Ongoing shift to higher-cost deposits
Credit quality	Not available	One large NOO CRE credit drove ~$3.0M provision; NPAs/Assets rose to 1.71%	Deterioration due to isolated credit
Liquidity and FHLB usage	Not available	FHLB advances $18.0M; availability $127.3M post conversion to SF; unused federal funds lines $39.8M	Liquidity access maintained
Capital and M&A	Not available	Well-capitalized; exchange ratio increased; outside date extended; targeted Q1 2024 closing	Constructive corporate action

Management Commentary

“While we had to address a single isolated credit with a specific reserve in the third quarter, significant progress has been made towards completing the merger with CBOA Financial, Inc.… The excitement is high amongst our team members as we prepare for this next chapter as a combined best in class bank.” — CEO Jim Crotty .
MD&A emphasizes margin compression from liability sensitivity as rate hikes increased funding costs faster than earning asset yields .
Strategy continues to focus on core deposit growth, Arizona and New Mexico expansion, and opportunistic M&A to enhance earnings power and funding base .

Q&A Highlights

No Q3 2023 earnings call transcript available; therefore, Q&A highlights and clarifications are not available from primary sources.

Estimates Context

Wall Street consensus estimates via S&P Global were unavailable due to data access limits at request time; as a result, comparisons to consensus for Q3 2023 EPS and revenue are not provided. Values would normally be retrieved from S&P Global; consensus data was unavailable.

Key Takeaways for Investors

The quarter’s headline loss was driven by a single CRE nonaccrual and associated reserve; monitor resolution and recoveries from that collateral-dependent exposure .
Margin compression is likely to persist near term given deposit repricing; funding mix actions (CDs, high-yield savings) helped reduce reliance on short-term FHLB but raise funding costs—watch NIM trajectory and deposit betas .
Asset quality metrics worsened but are concentrated; ACL coverage of nonaccruals at ~85% offers protection against further losses tied to identified problem credits .
Capital position is robust and well above “well-capitalized” thresholds, supporting balance sheet resilience and M&A execution bandwidth .
Merger with CBOA appears on track with improved shareholder terms and extended timeline; closing in Q1 2024 could catalyze rerating on scale, funding, and earnings power .
Near-term trading: sentiment hinges on clarity around the single CRE credit workout and any sequential NIM stabilization; medium-term thesis: operating leverage post-merger and core deposit franchise growth in AZ/NM .
Absence of consensus estimates limits beat/miss framing; focus on internal KPIs (NIM, efficiency ratio, NPAs, loan growth) and merger milestones until external estimate visibility improves.

Sources: 10-Q for the quarter ended September 30, 2023 and the revised Q3 2023 earnings press release filed via 8-K. Citations provided inline.

Bancorp 34, Inc. (BCTF)·Q3 2023 Earnings Summary