Executive Summary

Q4 2023 delivered a narrower net loss year over year ($1.68M; diluted EPS −$0.40), driven by merger-related expenses and a $3.4M loss on a single problem credit; NIM compressed to 2.63% vs 3.10% in Q4 2022 .
Operating headwinds included higher funding costs amid deposit competition; deposits fell $27.6M for 2023, partly offset by capital and borrowings; TBVPS ended at $12.94 .
Strategic catalysts: merger with CBOA targeted to close in March 2024 and rebrand to Southwest Heritage Bank; management highlighted preparations to scale toward $1B in assets .
The problematic credit moved to OREO at $3.0M; note sold in Feb 2024 for $2.5M with an additional $0.5M loss to be reflected in Q1 2024—an earnings overhang to monitor .
Street consensus (S&P Global) for Q4 2023 EPS and revenue was unavailable; comparisons to estimates cannot be provided at this time (S&P Global request limit) [GetEstimates error: IQ_EPS_EST_CIQ].

What Went Well and What Went Wrong

What Went Well

Year-over-year loss narrowed: Q4 net loss improved to $(1.68)M vs $(1.94)M in Q4 2022, with lower noninterest expense and provision for credit losses aiding the comparison .
Balance sheet resiliency: Total assets increased $6.9M in 2023; equity/assets rose to 10.45% from 8.57% in 2022, supporting capitalization ahead of the merger .
Management execution on merger and scaling: “Our team has started the preparations for life as a bank approaching and ultimately growing beyond $1 billion in assets… We are excited to showcase the merits of the combined bank as we rebrand as Southwest Heritage Bank.” — CEO Jim Crotty .

What Went Wrong

Elevated funding costs compressed net interest income (Q4 net interest income $3.58M vs $4.03M in Q4 2022) as deposit competition persisted .
Material credit cost: A single credit drove a $3.4M loss in Q4 and $3.0M transfer to OREO at year-end; an additional $0.5M loss will be recorded in Q1 2024 following the February 2024 note sale .
Deposit outflows: Deposits declined $27.6M in 2023, requiring higher borrowings (other borrowings up to $29.0M) and weighing on funding costs/NIM .

Financial Results

Metric	Q4 2022	Q3 2023 (Revised)	Q4 2023
Net (Loss) Income ($USD Millions)	$(1.942)	$(2.275)	$(1.676)
Diluted EPS ($USD)	$(0.81)	$(0.52)	$(0.40)
Total Interest Income ($USD Millions)	$6.326	$7.173	$7.404
Net Interest Income ($USD Millions)	$4.031	$3.705	$3.584
Provision for Credit Losses ($USD Millions)	$1.640	$3.147	$0.943
Total Noninterest Income ($USD Millions)	$0.159	$0.164	$0.201
Total Noninterest Expense ($USD Millions)	$5.486	$3.600	$4.545
Net Interest Margin (%)	3.10%	2.66%	2.63%
Return on Average Assets (%)	−1.35%	−1.55%	−1.15%
Return on Average Equity (%)	−21.03%	−14.08%	−11.12%

Notes:

Management cited merger-related expenses of $1.7M in Q4 and $3.0M for the year as a key drag on earnings .
Q3 2023 was revised from a small profit to a $(2.275)M net loss due to nonaccrual reclassification and additional provisioning on a single commercial real estate credit .
Street consensus for Q4 2023 was unavailable due to S&P Global API request limits; estimate comparisons cannot be provided at this time (values would be from S&P Global).

Balance Sheet and KPIs

KPI	Dec 31, 2022	Sep 30, 2023	Dec 31, 2023
Total Assets ($USD Millions)	$574.34	$580.87	$581.27
Total Deposits ($USD Millions)	$487.59	$468.39	$460.00
Other Borrowings ($USD Millions)	$5.00	$18.00	$29.00
Subordinated Debt ($USD Millions)	$24.53	$24.58	$24.60
Equity ($USD Millions)	$49.24	$60.40	$60.72
Equity/Assets (%)	8.57%	10.40%	10.45%
Non-Performing Assets / Assets (%)	0.73%	1.71%	0.90%
Tangible Book Value Per Share ($)	$13.85	$12.87	$12.94

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Merger closing timeline	Q1–Q2 2024	Seek shareholder approval in Q4 2023; merger effective in Q1 2024 [PR Nov 7, 2023: https://www.prnewswire.com/news-releases/bancorp-34-inc-reports-3rd-quarter-performance-301980599.html]	Anticipated closing in March 2024; rebrand to Southwest Heritage Bank	Updated timing (shift from “Q1 2024” to “March 2024”)
Problem credit resolution	Q1 2024	N/A	Note sold Feb 2024 for $2.5M; additional ~$0.5M loss to be reflected in Q1 2024	New disclosure (forward loss impact)
Numeric financial guidance (revenue/margins/OpEx/tax)	N/A	Not issued	Not issued	Maintained (no formal guidance)

Earnings Call Themes & Trends

No earnings call transcript was found for Q4 2023; the company appears to communicate quarterly results via press releases rather than public earnings calls [ListDocuments returned none for transcripts].

Topic	Previous Mentions (Q2 & Q3)	Current Period (Q4 2023)	Trend
Merger with CBOA	Regulatory approvals received (OCC/Fed) in Aug 2023; shareholders/closing targeted around Q4 2023/Q1 2024 [PR Nov 7, 2023: https://www.prnewswire.com/news-releases/bancorp-34-inc-reports-3rd-quarter-performance-301980599.html]	Closing anticipated March 2024; rebrand to Southwest Heritage Bank	Progressing; timing refined
Funding costs/deposit competition	Higher funding costs and deposit competition impacting profitability in 2023 [PR Nov 7, 2023: https://www.prnewswire.com/news-releases/bancorp-34-inc-reports-3rd-quarter-performance-301980599.html]	Continued pressure in Q4; deposits declined $27.6M in 2023	Persistent headwind
Asset quality (single CRE credit)	Q3 revised to reflect nonaccrual; higher provision; net loss $(2.275)M	$3.4M loss in Q4; moved to OREO at $3.0M; additional $0.5M loss in Q1 2024 post-sale	Resolution progressing; near-term earnings impact
Capital & TBVPS	TBVPS $12.87 (Q3); equity/assets improved	TBVPS $12.94; equity/assets 10.45%	Stabilizing/improving capitalization ahead of merger

Management Commentary

“While 2023 presented a challenging market, rate, and deposit environment… we saw our bank improve process, procedures, and efficiencies to prepare for the future… Our commitment to create shareholder value has never been stronger.” — Jim Crotty, President & CEO .
On merger execution: Both the Company and CBOA anticipated closing in March 2024, with the combined bank rebranding as Southwest Heritage Bank .
On Q4 drivers: Merger-related expenses totaled $1.7M in Q4 ($3.0M for the year); a single troubled credit resulted in a $3.4M loss and was transferred to OREO; subsequent sale in Feb 2024 implies an additional ~$0.5M loss to be recognized in Q1 2024 .

Q&A Highlights

No Q4 2023 earnings call transcript or Q&A was available; the company provided detailed press releases and an 8-K with exhibit financial schedules .

Estimates Context

S&P Global consensus estimates for Q4 2023 EPS and revenue were not retrievable at this time due to an API request limit; we cannot assess beats/misses versus Street numbers (values would be from S&P Global).
Micro-cap regional banks like BCTF often have limited sell-side coverage, which can reduce availability of consensus estimates in certain periods; in this case, estimate comparisons are unavailable [GetEstimates error: IQ_EPS_EST_CIQ].

Key Takeaways for Investors

Near-term earnings headwinds from merger costs and the single credit resolution will continue through Q1 2024 (additional ~$0.5M loss), but these are largely discrete and nonrecurring items; monitor for normalization from Q2 onward .
Funding cost pressure and deposit competition remain the primary structural headwinds; watch deposit mix, pricing actions, and borrowings to gauge NIM trajectory post-merger .
Capital position strengthened ahead of the merger (equity/assets 10.45%); TBVPS stabilized at $12.94—important for valuation support in a rising-rate environment .
The merger/rebrand to Southwest Heritage Bank is a key catalyst: management aims to scale toward ~$1B assets and drive operating efficiencies; execution and integration should influence the medium-term thesis .
Sequentially, Q4 improved vs revised Q3 (EPS −$0.40 vs −$0.52), with lower provision expense; continue to track credit metrics and OREO dispositions to confirm stabilization .
Absent Street estimates, focus on internal KPIs: NIM recovery, deposit trends, and expense discipline; these will likely drive near-term stock reaction around deal close and subsequent prints .
Leadership transition in April 2024 (new Chairman & CEO) underscores a pivot to post-merger execution—watch subsequent quarters for operating priorities and cost/mix actions .

Sources:

Q4 2023 8-K with press release and detailed financial schedules .
Q3 2023 revised performance press release and 8-K .
CEO transition press release (April 5, 2024) .
Q3 2023 performance press release (Nov 7, 2023) .
Merger completion announcement (Mar 19, 2024) .
Q4 consensus estimates (unavailable due to S&P Global API limit) [GetEstimates error: IQ_EPS_EST_CIQ].

Bancorp 34, Inc. (BCTF)·Q4 2023 Earnings Summary