Bancorp 34 Reports $1.7 Million Net Income for 2024 After CBOA Merger

Bancorp 34, Inc. reported net income of $1.7 million for the year ended December 31, 2024, a significant improvement compared to a net loss of $3.4 million in 2023. This turnaround is largely attributed to a $5 million bargain purchase gain from the March 19, 2024 merger with CBOA Financial, Inc. Net interest income increased by $14.1 million (93%) to $29.3 million in 2024, driven by the merger and higher average earning asset yields (6.33% vs. 5.11% in 2023). However, the net interest margin also increased to 3.65% from 2.76% in 2023, reflecting the impact of the merger.

The merger with CBOA resulted in a substantial increase in assets, with total assets reaching $918.1 million at the end of 2024, compared to $581.3 million at the end of 2023. This increase primarily reflects the acquisition of CBOA's assets, valued at approximately $419.3 million at fair value. The merger also significantly boosted the loan portfolio, which grew to $676.1 million from $457.0 million. Post-merger, the combined entity operates seven branches across Arizona and New Mexico, holding a 60.29% market share in Arizona and 20.35% in New Mexico based on June 30, 2024 FDIC data.

Significant operational changes included the rebranding of Bank 34 to Southwest Heritage Bank and the integration of Commerce Bank of Arizona following the merger. As of December 31, 2024, the bank employed 103 full-time and one part-time employee. The company's core deposit base totaled $701.3 million, representing 88.5% of total deposits. Noninterest-bearing core deposits comprised 27.6% of total deposits, while approximately 24.5% of deposits exceeded the FDIC insurance limit. The company also noted that it experienced a check kiting incident in the fourth quarter of 2024, resulting in a $0.7 million expense.

The company highlighted several competitive strengths, including its specialized commercial banking services in high-growth markets, an effective talent and customer acquisition strategy, and a strong core deposit franchise. The company's business strategy focuses on organic growth, core deposit franchise growth, market expansion in Southern Arizona and New Mexico, and opportunistic mergers and acquisitions. The company acknowledged numerous risks, including economic downturns, interest rate fluctuations, credit risk, operational risks, and regulatory changes, all detailed in the filing's "Risk Factors" section.

Bancorp 34's outlook is tied to its ability to successfully integrate CBOA, realize anticipated cost savings and strategic gains from the merger, and execute its organic growth strategy. The company also noted that it suspended dividend payments effective the third quarter of 2023 and that it filed a Form 15 with the SEC, suspending its reporting obligations under Section 15(d) of the Exchange Act. The company's future performance will depend on its ability to navigate the various risks and uncertainties outlined in the 10-K filing.