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 UNITED
STATES

 SECURITIES
AND EXCHANGE COMMISSION

 Washington,
D.C. 20549

 FORM

 ANNUAL REPORT
 PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For
the fiscal year ended December 31, 2023

 OR

 TRANSITION
 REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 Commission
File Number 333-273901

 BANCORP 34, INC.

 (Exact
name of registrant as specified in its charter)

 Maryland

 74-2819148

 (State
 or other jurisdiction of

 incorporation
 or organization)

 (I.R.S.
 Employer

 Identification
 Number)

 8777 E. Hartford Dive, Suite 100

 Scottsdale, Arizona 85255

 (623) 334-6064

 (Address,
including zip code, and telephone number, including area code, of registrant's principal executive offices)

registered pursuant to Section 12(b) of the Act: None

registered pursuant to Section 12(g) of the Act: None

by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No

by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
 No

by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes No

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 for such shorter period that the Registrant
was required to submit such files). Yes No

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

 Accelerated
 filer

 Non-accelerated Filer

 Smaller
 reporting company

 Emerging
 growth company

 If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.

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.

by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes
 No

 The
aggregate market value of the voting stock of the registrant held by non-affiliates of the registrant, on June 30, 2023, the last
business day of the registrant's most recently completed second fiscal quarter was approximately $ 28.2
 million.

 As
of March 7, 2024, there were approximately 3,873,895 shares of the registrant's common stock outstanding.

 Table
of Contents

 Page

 Cautionary Note Regarding Forward-Looking Statements

 Summary of Material Risks

 Item 1. Business

 Item 1A. Risk Factors

 Item 1B. Unresolved Staff Comments

 Item 1C. Cybersecurity

 Item 2. Properties

 Item 3. Legal Proceedings

 Item 4. Mine Safety Disclosures

 Item 5. Market for Registrant's Common Equity, Related Stockholder
 Matters and Issuer Purchases of Equity Securities

 Item 6. [Reserved]

 Item 7. Management's Discussion and Analysis of Financial Condition
 and Results of Operations

 Item 7A. Quantitative and Qualitative Disclosures About Market Risk

 Item 8. Financial Statements and Supplementary Data

 Item 9. Changes in and Disagreements with Accountants on Accounting
 and Financial Disclosures

 Item 9A. Controls and Procedures

 Item 9B. Other Information

 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

 Item 10. Directors, Executive Officers and Corporate Governance

 Item 11. Executive Compensation

 Item 12. Security Ownership of Certain Beneficial Owner and Management
 and Related Stockholder Matters

 Item 13. Certain Relationships and Related Transactions, and Director
 Independence

 Item 14. Principal Accounting Fees and Services

 Item 15. Exhibits, Financial Statement Schedules

 Item 16. Form 10-K Summary

 Signatures

 CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS

 This
Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of
1995, Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements are
not statements of historical or current fact nor are they assurances of future performance and generally can be identified by the use
of forward-looking terminology, such as "believe," "expect," "anticipate," "intend,"
"target," "estimate," "continue," "positions," "plan," "predict,"
"project," "forecast," "guidance," "goal," "objective," "prospects,"
"possible" or "potential," by future conditional verbs such as "assume," "will," "would,"
"should," "could" or "may," or by variations of such words or by similar expressions. These forward-looking
statements include, but are not limited to, statements related to our belief that sources of available liquidity are adequate to meet
our current and expected liquidity needs, our plans to meet future cash needs through the generation of deposits, and statements regarding
our business plan and strategies, including our proposed merger with CBOA Financial Inc. ("CBOA") and the expected timing
to close the merger and obtaining the necessary consents and approvals to close the merger. These forward-looking statements are
subject to numerous assumptions, risks and uncertainties, which change over time, are difficult to predict and are generally beyond our
control.

 There
are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking
statements, including, but not limited to, the following:

 the
 failure to close our previously announced merger with CBOA (the "merger") when expected or at all because required regulatory approvals
 and other closing conditions, including obtaining requisite shareholder approvals, are not received or satisfied on a timely basis
 or at all, and the risk that any regulatory approvals may result in the imposition of conditions that could adversely affect the
 combined company or the expected benefits of the proposed merger;

 the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the merger agreement;

 the possibility that the anticipated benefits of the merger, including anticipated cost savings and strategic gains, are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy, competitive factors in the areas where Bancorp 34 and CBOA do business or as a result of other unexpected factors or events;

 the impact of purchase accounting with respect to the merger, or any change in the assumptions used regarding the assets purchased and liabilities assumed to determine their fair value;

 diversion of management's attention from ongoing business operations and opportunities;

 potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the merger;

 the integration of the business and operations of CBOA, which may take longer than anticipated or be more costly than anticipated or have unanticipated adverse results relating to CBOA's existing business;

 challenges retaining or hiring key personnel;

 business disruptions resulting from or following the merger;

 the proposed merger with CBOA being more expensive
 or taking longer to complete than anticipated, including as a result of unexpected factors or events;

 the outcome of pending or threatened litigation or of matters before regulatory agencies, whether currently existing or commencing in the future, including litigation related to the merger;

 increased capital requirements, other regulatory requirements or enhanced regulatory supervision;

 the inability to grow revenue and earnings;

 the inability to efficiently manage operating expenses;

 changes in interest rates and capital markets;

 changes in asset quality and credit risk;

 changes in deposit costs and liquidity risk;

 adverse changes in economic conditions;

 capital management activities;

 customer borrowing, repayment, investment and deposit practices;

 the impact, extent and timing of technological changes;

 changes in legislation, regulation, policies or administrative practices, whether by judicial, governmental or legislative action, including, but not limited to, the Coronavirus Aid, Relief, and Economic Security Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, which we refer to as the Dodd-Frank Act, and other changes pertaining to banking, securities, taxation, rent regulation and housing, financial accounting and reporting, environmental protection and insurance, and the ability to comply with such changes in a timely manner;

 changes in the monetary and fiscal policies of the U.S. Government, including policies of the U.S. Department of the Treasury and the Federal Reserve;

 changes in interest rates,
 which may affect Bancorp 34's net income and other future cash flows, or the market value of Bancorp 34's assets,
 including its investment securities;

 changes in accounting principles, policies, practices or guidelines;

 failure to attract new customers and retain existing customers in the manner anticipated;

 any interruption or breach of security resulting in failures or disruptions in customer account management, general ledger, deposit, loan or other systems;

 the adverse effects of events beyond each party's control that may have a destabilizing effect on financial markets and the economy, such as epidemics and pandemics (including COVID-19), war or terrorist activities, essential utility outages, deterioration in the global economy, instability in the credit markets, disruptions in each party's customers' supply chains or disruption in transportation; and

 other actions of the Federal Reserve and legislative and regulatory actions and reforms.

 We
caution readers that the foregoing list of factors is not exclusive, is not necessarily in order of importance and readers should not
place undue reliance on any forward-looking statements. You should also consider the risks, assumptions and uncertainties set forth in
the "Risk Factors" section of this Form 10-K. Further, any forward-looking statement speaks only as of the date on
which it is made and we do not intend to and disclaim any obligation to update or revise any forward-looking statement to reflect events
or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, unless required
to do so under the federal securities laws.

 SUMMARY
OF MATERIAL RISKS

 An
investment in our securities involves risks, including those summarized below. For a more complete discussion of the material risks facing
our business, see " Item 1A. Risk Factors."

 Risks
Related to Bancorp 34 and its Business

 Economic
and Geographic-Related Risks

 Our
business may be adversely affected by economic and market conditions, including inflation.

 The
Federal Reserve's implementation of significant economic strategies that have affected interest rates, inflation, asset values
and the yield curve may have a significant negative effect on our business and clients.

 Lending
and Interest Rate Risk

 If
 we fail to effectively manage credit risk, our business and financial condition will suffer.

 Our
 estimated allowance for credit losses may be insufficient to absorb actual losses in our loan portfolio, which may adversely affect
 our business, financial condition and results of operations.

 We
 are exposed to higher credit risk by commercial real estate, commercial business, and construction lending.

 A
 significant portion of our loan portfolio is secured by real estate, and events that negatively impact the real estate market could
 hurt our business.

 Nonperforming
 assets take significant time and resources to resolve and adversely affect our results of operations and financial condition.

 We
 are subject to interest rate risk, which could adversely affect our financial condition and profitability.

 Rapidly
 rising interest rates may negatively affect our investments in securities and the cost of our funding sources, including deposits.

 A
 flat or inverted yield curve may reduce the net interest margin and adversely affect our loan and investment portfolios.

 We
 are subject to environmental liability risk associated with our lending activities.

 Operational
Risks

 We
 are subject to losses due to errors, omissions or fraudulent behavior by our employees, clients or others.

 We
 are exposed to the possibility of technology failure and a disruption in our operations may adversely affect us.

 Fraud
 is a major, and increasing, operational risk for us and all banks.

 A
 failure in, or breach of, our operational or security systems or infrastructure, or those of our third party vendors, including as
 a result of cyber-attacks, could disrupt our businesses, damage our reputation, and cause losses.

 Our
 risk management framework may not be effective in mitigating risks or losses.

 Our
 ability to maintain our reputation is critical to the success of our business.

 to complete our proposed merger with CBOA could negatively impact us.

 Regulatory
 approvals for our proposed merger with CBOA may not be maintained, may take longer than expected
 or may impose conditions that are not presently anticipated, cannot be met, or that could
 have an adverse effect on the combined company following the merger.

 Combining the Company and CBOA may be more difficult,
 costly or time consuming than expected and we may fail to realize the anticipated benefits and cost savings of the merger.

 Interest rate volatility may adversely impact the fair
 value adjustments of investments and loans acquired in our proposed merger with CBOA.

 Shareholder litigation could prevent or delay the completion
 of our proposed merger with CBOA or otherwise negatively impact our business, financial condition and results of operations.

 We
 depend on our executive officers and other key employees, and our ability to attract additional key personnel, and we could be harmed
 by the unexpected loss of their services.

 to keep pace with technological change could adversely affect our business.

 Industry-Related
Risks

 We
 are exposed to the possibility that more prepayments may be made by customers to pay down loan balances, which could reduce our interest
 income and negatively impact our operating results.

 We
 could experience a loss due to competition with other banks or because consumers decide not to use banks.

 to keep pace with technological change could result in losses.

 Our
 industry is subject to technology-driven disruption.

 We
 may be adversely affected by the lack of soundness of other financial institutions.

 The
 value of securities in our investment portfolio may decline in the future.

and Liquidity Risks

 We
 may need additional capital resources in the future, which may not be available when needed or at all.

 Liquidity,
 primarily through deposits, is essential to our business model, and a lack of liquidity or an increase in the cost of liquidity could
 materially impair our ability to fund our operations.

 We
 may not be able to maintain a strong core deposit base or access other low-cost funding sources.

 Deposit
 levels may be affected, fairly quickly, by changes in monetary policy.

 Risks
Related to Strategic Plans

 Future
 mergers and acquisitions may subject us to risks, which could disrupt our business and dilute stockholder value.

 We
 may be unable to grow our business organically, which could adversely affect our business.

 New
 lines of business or new products and services may subject us to additional risk.

 Legal,
Accounting, Regulatory and Compliance Risks

 The
 banking industry is heavily regulated and that regulation, together with any future legislation or regulatory changes, could limit
 or restrict our activities and adversely affect our operations or financial results.

 to maintain regulatory capital ratios could result in regulatory actions.

 We
 face risks related to compliance with the Bank Secrecy Act and other anti-money laundering statutes and regulations.

 lending laws restrict our ability to originate certain mortgage loans and increase our risk on such loans.

 We
 are subject to fair lending laws, and failure to comply with these laws could lead to material penalties.

 The
 Federal Reserve may require us to commit capital resources to support Bank 34.

 We
 are subject to claims and litigation, which could result in additional expenses and reputational damage.

 The
 expanding body of federal, state and local regulations may increase the cost of compliance and the risk of noncompliance regarding
 servicing and selling loans.

 We
 could be subject to changes in tax laws, regulations and interpretations or challenges to our income tax provision.

 Risks
Related to Bancorp 34 Common Stock

 Some
 provisions of our organizational documents may have anti-takeover effects that could discourage an acquisition.

 We
 are a "smaller reporting company," and the reduced reporting requirements applicable to Bancorp 34 may make our common
 stock less attractive to investors.

 Substantial
 future sales of our common stock could cause our stock price to decline.

 As
 a reporting issuer under Section 15(d) of the Exchange Act, we file more limited reports with the SEC than other companies registered
 under Section 12 of the Exchange Act.

 Our
 articles of incorporation include a forum selection clause.

 PART
I

 Item
1. Business

 As
used in this report, unless the context requires otherwise, the terms "Bancorp 34," "we," "us" and
"our" refer to Bancorp 34 and its consolidated subsidiaries before the pending merger with CBOA.

 History
and Growth

34, Inc. is a Maryland corporation that was organized in 2016 and originally headquartered in Alamogordo, New Mexico. Bancorp 34 was
formed to be the successor to Alamogordo Financial Corp. upon completion of the second step mutual-to-stock conversion (the "conversion")
of AF Mutual Holding Company (the "MHC"), the top tier mutual holding company of Alamogordo Financial Corp. Alamogordo Financial
Corp. was the former mid-tier holding company for Bank 34. Prior to completion of the conversion, approximately 54.7% of the shares of
common stock of Alamogordo Financial Corp. were owned by the MHC. In conjunction with the conversion, the MHC and Alamogordo Financial
Corp. merged into the Bancorp 34, Inc. The conversion was completed on October 11, 2016. We sold a total of 1,879,484 shares of common
stock at $10.00 per share in the second-step offering. Concurrent with the completion of the stock offering, each share of Alamogordo
Financial Corp. stock owned by public stockholders (stockholders other than the MHC) was exchanged for 2.0473 shares of our common stock.
The conversion was accounted for as a capital raising transaction by entities under common control.

34 common stock was previously traded on the NASDAQ Stock Market. On August 14, 2020, Bancorp 34 notified the NASDAQ Stock Market of
its intent to file a Notification of Removal from Listing and/or Registration Under Section 12(b) of the Securities Exchange Act of 1934,
as amended, with the Securities and Exchange Commission on or about August 25, 2020 to effect the voluntary delisting of its common stock
from NASDAQ. The delisting of Bancorp 34's common stock became effective on or about August 25, 2020. As of September 2020, Bancorp
34 also terminated the registration of its common stock under Section 12(b) of the Exchange Act and suspended its periodic reporting
obligations with the SEC. Bancorp 34's common stock is currently quoted on the OTC Markets Groups, Inc.'s OTCQB Venture Market
under the symbol "BCTF."

 On
December 30, 2022, and January 27, 2023, we entered into Securities Purchase Agreements, which we refer to collectively, as the "securities
purchase agreements," with Castle Creek Fund VIII, L.P. ("Castle Creek") and Brush Creek-B 34, LLC ("Brush
Creek") and other accredited investors, pursuant to which we sold: (i) 1,359,497 shares of our common stock, par value $0.01
per share, at a purchase price of $14.00 per share; (ii) 820,115 shares of a new series of preferred stock, Series A convertible perpetual
preferred stock, par value $0.01 per share, at a purchase price of $14.00 per share (the "Series A Preferred Stock"); and
(iii) warrants to purchase 211,667 shares of Non-Voting Common Stock at an exercise price equal to $14.00 per share,
in private placement transactions, which we collectively refer to as the "private placement", for net proceeds of approximately
$29.7 million after considering a portion of the placement fee was paid with 62,000 shares of common stock. The final net cash received
from the private placement, after issuance expenses, including placement fees and other issuance/due diligence costs of $880,660
and $193,302, respectively, was $28.6 million.

 In
connection with the private placement, effective July 19, 2023, we filed Articles Supplementary with the Maryland State Department of
Assessments and Taxation to convert the 1,100,000 shares of Series A Preferred Stock to Castle Creek and other accredited investors to
Non-Voting Common Stock. For more information regarding the securities purchase agreements, see Item 13. Certain Relationships and Related
Transactions, and Director Independence—Arrangements with Castle Creek and Brush Creek, on page 130.

 On
January 4, 2023, Bank 34 notified the OCC of its election to operate as a covered savings association, which election was confirmed by
the OCC, effective January 31, 2023. As a covered savings association, Bank 34 has the same rights and privileges as a national bank
that has its main office situated in Scottsdale, Arizona and is subject to the same duties, restrictions, penalties, liabilities, conditions,
and limitations that would apply to such a national bank. In addition Bank 34's activities became subject to the laws, regulations,
and safety and soundness expectations as a similarly located national bank, except for certain limited enumerated purposes.

 Recent
Developments

 On
April 27, 2023, Bancorp 34 and CBOA entered into a merger agreement, which was amended on December 21, 2023 (the "merger
agreement"). Under the merger agreement, CBOA will merge with and into Bancorp 34, with Bancorp 34 continuing as
the surviving entity. Immediately following the merger, Commerce Bank of Arizona will merge with and into our wholly-owned subsidiary
bank, Bank 34, with Bank 34 continuing as the surviving bank (the "bank merger"). Subject to the terms and conditions
of the merger agreement, at the effective time of the merger, each outstanding share of CBOA common stock will be converted into the
right to receive 0.2628 shares of Bancorp 34 common stock. The merger agreement was approved by the boards of directors of Bancorp
34 and CBOA, and is subject to customary closing conditions, including receipt of required regulatory approvals and the approvals
of the shareholders of CBOA and stockholders of Bancorp 34. A special shareholder meeting of CBOA to approve the merger agreement
is scheduled for March 18, 2024, and a special stockholder meeting of Bancorp 34 to approve the merger agreement is also scheduled for
March 18, 2024. The proposed merger is expected to close in the first quarter of 2024.

 Our
Competitive Strengths

 We
believe the following strengths differentiate us from our competitors and position us to execute our business strategy successfully:

 Specialized
commercial bank operating in key high growth Arizona and New Mexico markets. Following the completion of the merger with CBOA, we
will be the second largest commercial bank headquartered in Arizona and the largest commercial bank headquartered in Arizona with assets
under $10 billion. Our extensive suite of financial products and services combined with our growth goals and initiatives has made us
attractive to bankers and business development professionals who prefer to work with a specialized commercial bank. Over the past several
years our capital investments have focused around building talent and expertise in commercial lending. Combined with the fact that our
current footprint, inclusive of the potential merger with CBOA, positions us in growth areas in Arizona and New Mexico, we believe there
is a high degree of further organic growth opportunity. While we are confident in our ability to offer our customers specialized commercial
banking services and our future growth opportunities in our markets, there is no assurance that we will be able to achieve our strategic
initiatives. Risks associated with our strategic plans are discussed in the Risk Factors of this Annual Report on Form 10-K, see "Risk
Factors—Risks Related to Strategic Plans," beginning on page 42.

 Effective
talent and customer acquisition strategy in growth markets benefitting from recent consolidations. The markets we serve have experienced
significant bank consolidation, and we have a demonstrated track record in attracting both talent and customers created from this disruption.
Particularly in our Arizona and New Mexico markets, we have been able to recruit high quality teams and successfully grow organically.
We were able to make significant capital investments in people, technology, and infrastructure to create a top-tier commercial platform,
and we recruited seasoned bankers in our markets of operation. Although we have been successful in attracting talent and customers in
our market areas in the recent past due to market disruption, there is no assurance this trend will continue or that we will be able
to retain key personnel or our customers. For example, if new competitors enter our markets, they may seek to retain our key personnel
and compete with us for our current customers. Risks associated with our dependence on key personnel are discussed in the Risk Factors
of this Annual Report on Form 10-K, see "Risk Factors—Operational Risks," beginning on page 33.

 Attractive
core deposit franchise. Our deposit franchise is supported by substantial core deposits, which we define as total deposits less certificates
of deposit greater than $250,000, less repurchase obligations and brokered deposits. As of December 31, 2023, core deposits totaled $396.6
million or 86.2% of total deposits, CDs over $250,000 totaled $43.9 million, or 9.5% of total deposits, and brokered deposits totaled
$19.5 million, or 4.2% of total deposits. There were no repurchase obligations at December 31, 2023. Within our core deposit base, noninterest
bearing core deposits totaled $88.1 million, or 19.2% of total deposits. Additionally, within the core deposit base, $151.7 million,
or 38.3% of core deposits, have balances in excess of the FDIC's deposit insurance limit and are estimated to be uninsured.
In total, as of December 31, 2023, $195.6 million or 42.5% of the company's total deposit base was estimated to be
uninsured. Our core deposit base results from a focus on commercial and consumer banking opportunities in our markets and opportunistic
growth in commercial treasury management related accounts across our higher growth markets. We believe that our core deposit generation
is powered by our strong personal service, visibility in our markets, broad commercial banking, and convenient services such as remote
deposit capture and commercial internet banking. Although we have been successful in maintaining a high level of core deposits, there
is no assurance this success will continue and that our percentages of core deposits to total deposits will not decrease as customer
preferences for products and services change or, due to new technology or economic factors or due to customer preferences to limit uninsured
deposit exposure. Risks associated with our business are discussed in the Risk Factors of this Annual Report on Form 10-K, see "Risks
Factors—Risks Related to Our Business," beginning on page 26.

 Our
Market Areas

 At
December 31, 2023, Bank 34 operated three branches located in two states, Arizona and New Mexico, which we refer to as our "geographic
footprint."

 Bank 34

 State

 Total

($000) (1)

 # of
 Branches (1)

 Market Share (1)

in
 Market

($000) (1)

 Arizona

 208,902,217

 0.15
 %

 314,849

 New Mexico

 43,818,063

 0.40
 %

 176,527

 (1)

 Based
 solely on FDIC data, including total deposits, number of branches, market share and deposits in market as of June 30, 2023.

 Our
Business Strategy

 Our
goal is to build a premier regional bank serving the key markets of Phoenix and Tucson, Arizona as well as Southern New Mexico, primarily
by investing in people, technology and infrastructure to create a top-tier banking platform. Our business is focused on providing specialized
commercial and consumer banking services to our clients, with an emphasis on key growth markets. Our unwavering commitment to serving
local communities has led to a high-quality core deposit franchise focused in stable and growing markets that provides a low-cost funding
base for our lending opportunities.

 Leverage
our Relationships and Service Capabilities to Drive Organic Growth. Our core competencies include a relationship-centered and multi-line
sales approach, a focus on collaboration across a highly skilled and seasoned team of bankers and a dynamic ability to provide our clients
with the highest quality services and solutions. This strategy has enabled us to attract business customers across our traditional and
expanded geographic footprint. The objective is to be a trusted advisor to our clients as they build their businesses with our resources,
support and advice.

 Grow
 our core deposit franchise. The strength
of our deposit franchise is derived from strong, lasting relationships with our clients and a focus on being an integral part of the
communities where we do business. Our deposit footprint has provided, and we believe will continue to provide, principal support for
the growth of our loan portfolio. As of December 31, 2023, core deposits, which we define as total deposits less certificates of deposit
greater than $250,000 and brokered deposits comprised 86.2% of total deposits, driving a total average deposit cost of 2.93% for the
year ended December 31, 2023. A key element of our funding strategy is a focus on commercial and consumer banking relationships in our
markets, specifically growing traditional commercial and industrial relationships. Additionally, we believe our treasury management
business will continue to benefit our attractive funding base.

 Continue
our greater Southern Arizona and New Mexico market expansion. The greater Phoenix and Tucson markets has been a top strategic priority
for our organization from an organic and acquisition perspective. The Arizona market has been our fastest growing market and its robust
economy will allow for growth opportunity. In addition to our organic expansion, on a pro forma basis, if we close our proposed
merger with CBOA, the acquired CBOA business will represent 40% of our pro forma deposit base, as of December 31, 2023, and if the merger
closes, we anticipate growing our Southern Arizona deposit base in the years to come.

 Engage
in Opportunistic M&A. Our executive team will continue to evaluate acquisitions that we believe could produce attractive returns
for our stockholders. These could include fee-based businesses, whole bank or branch acquisitions that would improve or expand our market
position into geographies with attractive demographics and business trends, expand our existing branch network in existing markets, enhance
our earnings power or product and service offerings.

 Competition

 The
financial services industry is highly competitive and we compete for loans, deposits and customer relationships in our geographic footprint.
We compete with commercial banks, credit unions, savings institutions, mortgage banking firms, consumer finance companies, securities
brokerage firms, insurance companies, money market funds and other mutual funds, loan production offices and other providers of financial
services, including nontraditional financial technology companies or FinTech companies, as well as super-regional, national and international
financial institutions that operate offices in our market areas and elsewhere. Many of our nonbank competitors which are not subject
to the same extensive federal regulations that govern bank holding companies and banks, may have certain competitive advantages.

 We
compete for loans principally through the quality of our client service and our responsiveness to client needs in addition to competing
on interest rates and loan fees. Management believes that our long-standing presence in the community and personal one-on-one service
philosophy enhances our ability to compete favorably in attracting and retaining individual and business customers. We actively solicit
deposit-related clients and compete for deposits by offering personal attention, competitive interest rates, and professional services
made available through experienced bankers and multiple delivery channels that fit the needs of our markets.

 We
believe the financial services industry will likely continue to become more competitive as further technological advances enable more
financial institutions to provide expanded financial services without having a physical presence in our markets. We have focused on providing
value-added products and services to our clients, which we are able to do because of our close relationships with them. We believe our
ability to provide a flexible, sophisticated products and a customer-centric process to our customers and clients allows us to stay competitive
in the financial services environment.

 Our
Banking Services

 Our
banking services have been, and are, the cornerstone of our operations, through which we provide a full range of
deposit and lending products. We are dedicated to serving the banking needs of businesses, professionals and individuals in our markets
through our approach of personalized, relationship-based service. We strive to become trusted advisers to our clients and achieve long-term
relationships. We deliver a wide range of banking products and services tailored to meet the needs of our clients across our geographic
footprint.

 Lending
Activities

 We
offer a range of lending services, including commercial and industrial loans, commercial and residential real estate loans, real estate
construction loans, and consumer loans. Our customers are generally commercial businesses, professional services and retail consumers
within our market areas.

 Our
loan portfolio as of the date indicated was comprised as follows:

 ( In

 %
 of total

 loans

 1-4

 13.5
 %

 10.9
 %

 0.2
 %

 7.5
 %

 NOO
 CRE

 36.8
 %

 OO
 CRE

 17.9
 %

 13.2
 %

 Total gross loans

 $

 %

and Industrial Loans

 Our
commercial and industrial loans are typically made to small- and medium-sized manufacturing, service, wholesale and retail businesses
for working capital and operation needs and business expansions, including the purchase of capital equipment. Commercial and industrial
loans include our specialty lending verticals such as public finance offerings to our charter school and municipal based customers, asset
based lending and structured finance products. Commercial and industrial loans also includes our healthcare, SBA and other small
business lending products. Commercial and industrial loans generally include lines of credit and loans with maturities of five years
or less. Because we are a bank with long standing ties to the businesses and professionals operating in our geographic footprint, we
are able to tailor our commercial and industrial loan programs to meet the needs of our clients. Growing our commercial and industrial
loan portfolio is an important area of emphasis for us and we intend to continue to grow this portfolio.

and industrial loans are generally made with operating cash flows as the primary source of repayment, but may also include collateralization
by inventory, accounts receivable, equipment and personal guarantees. As a result, the repayment risk is subject to the ongoing business
operations of the borrower. Any interruption or discontinuance of operating cash flows from the borrower's business, which may
be influenced by events not under the control of the borrower such as economic events and changes in governmental regulations, could
materially affect the ability of the borrower to repay the loan. Further, commercial and industrial loans may be secured by the collateral
described above, which if the business is unsuccessful, typically have values insufficient to satisfy the loan without a loss.

 SBA
loans. We participate in the SBA 7(a) program in order to meet the needs of our small business. SBA guarantees are conditional and
cover a portion of the risk of payment default by the borrower, but not the risk of improper closing and servicing by the lender. As
such, prudent underwriting and closing processes are essential to effective utilization of the SBA 7(a) program.

and Residential Real Estate Loans

 Real
estate loans are subject to the same general risks as other loans and are particularly sensitive to fluctuations in the value of real
estate. Fluctuations in the value of real estate, as well as other factors arising after a loan has been made, could negatively affect
a borrower's cash flow, creditworthiness and ability to repay the loan. When we make new real estate loans, we obtain a security
interest in real estate whenever possible, in addition to any other available collateral, to increase the likelihood of the ultimate
repayment of the loan. To assess concentration risk, we monitor collateral type and industry concentrations within this portfolio.

Real Estate Loans. Our commercial real estate loans consist of both owner-occupied and non-owner occupied commercial real estate
loans. The real estate securing our existing commercial real estate loans includes a wide variety of property types, such as offices,
warehouses, production facilities, health care facilities, hotels, mixed-use residential/commercial, retail centers, assisted living
facilities and self-storage facilities. As of December 31, 2023, $82.2 million of our commercial real estate loan portfolio, or 17.9%
of our loan portfolio, was owner-occupied commercial real estate loans, and $168.4 million of our commercial real estate loan portfolio,
or 36.8% of our loan portfolio, was non-owner occupied commercial real estate loans. Commercial real estate loans are often larger and
involve greater risks than other types of lending. Adverse developments affecting commercial real estate values in our market areas could
increase the credit risk associated with these loans, impair the value of property pledged as collateral for these loans, and affect
our ability to sell the collateral upon foreclosure without a loss. Furthermore, adverse developments affecting the business operations
of the borrowers of our owner-occupied commercial real estate loans could significantly increase the credit risk associated with these
loans. Due to the larger average size of commercial real estate loans, we face the risk that losses incurred on a small number of commercial
real estate loans could have a material adverse impact on our financial condition and results of operations.

Loans. Multifamily loans are those properties that have five or more units with borrowers who are primarily commercial entities.
The bank finances loans in several different multifamily types but does not have a concentration in any one type and does not do any
specialty lending in this area. As with commercial real estate loans, adverse developments within that sector of the economy could increase
the credit risk associated with multifamily loans. These loans are made primarily in our marketplace.

 Residential
Real Estate Loans. Like our commercial real estate loans, our residential real estate loans are secured by real estate, the value
of which may fluctuate significantly over a short period of time as a result of market conditions in the area in which the real estate
is located. Adverse developments affecting real estate values in our market areas could therefore increase the credit risk associated
with these loans, impair the value of property pledged as collateral and affect our ability to sell the collateral upon foreclosure
without a loss or additional losses. We primarily make our residential real estate loans to qualified individuals and investors in accordance
with our real estate lending policies, which detail maximum loan to value ratios and maturities. The repayment of these loans are also
affected by a borrower's adverse personal circumstances.

Loans. Our construction real estate loans include commercial construction, land acquisition, and land development loans and single-family
interim construction loans to small- and medium-sized businesses and individuals. We target experienced local developers to lend to.
Construction loans carry a high risk because repayment of these loans is dependent, in part, on the success of the ultimate project or,
to a lesser extent, the ability of the borrower to refinance the loan or sell the property upon completion of the project, rather than
the ability of the borrower or guarantor to repay principal and interest.

 Deposit
Products

 We
obtain most of our deposits from small and medium-sized businesses and individuals in our markets. We solicit deposits through our relationship-driven
team of dedicated and accessible bankers and through community-focused marketing. We emphasize obtaining deposit relationships at loan
origination. We provide a high level of customer service to our depositors. We have invested in personnel, business and compliance processes
and technology that enable us to acquire, and efficiently and effectively serve, a wide array of business deposit accounts, while continuing
to provide the level of customer service for which we are known. We currently offer a comprehensive range of business deposit products
and services to assist with the banking needs of our business customers, including a variety of remote deposit and cash management products
along with commercial transaction accounts.

 Credit
Administration and Loan Review

 Certain
credit risks are inherent in making loans. These include repayment risks, risks resulting from uncertainties in the future value of collateral,
risks resulting from changes in economic and industry conditions and risks inherent in dealing with individual borrowers. We seek to
control credit risk both through disciplined underwriting of each transaction, as well as active credit management processes and procedures
to manage risk and minimize loss throughout the life of a loan. We seek to maintain a broadly diversified loan portfolio in terms of
type of customer, type of loan product, geographic area and industries in which our business customers are engaged. We have developed
tailored underwriting criteria and credit management processes for each of the various loan product types we offer our customers.

 Underwriting.
 In evaluating each potential loan relationship, we adhere to a disciplined underwriting evaluation process that includes the following:

 understanding
 the customer's financial condition and ability to repay the loan;

 verifying
 that the primary and secondary sources of repayment are adequate in relation to the amount and structure of the loan;

 observing
 appropriate loan-to-value guidelines for collateral secured loans; and

 maintaining
 loan, lien, and collateral documentation.

 Loan
Approval Authority. Our lending activities follow written, non-discriminatory, underwriting standards and loan origination procedures
established by our board of directors and management. We have established several levels of lending authority that have been delegated
by the board of directors to our Chief Executive Officer, Chief Credit Officer and other personnel in accordance with our loan policy.
Approval authority limits are based on the total exposure of the borrower and are conditioned on the loan conforming to the policies
contained in the loan policy. Any exceptions to the loan policy are disclosed in credit monitoring reports.

 Ongoing
Credit Risk Management. In addition to the tailored underwriting process described above, we perform ongoing risk monitoring and
review processes for credit exposures. Although we grade and classify our loans internally, we engage an independent third-party professional
firm to perform regular loan reviews and confirm loan classifications. We strive to identify potential problem loans early in an effort
to aggressively seek resolution of these situations before they create a loss. We record any necessary charge-offs promptly and maintain
appropriate allowances for credit losses to absorb expected charge-offs.

 In
general, whenever a particular loan or overall borrower relationship is downgraded from a pass grade to a watch or substandard grade
based on one or more standard loan grading factors, our relationship manager (who is typically the loan officer) and credit team members
engage in active evaluation of the asset to determine the appropriate resolution strategy. Management regularly reviews the status of
the watch list and classified assets portfolio as well as the larger credits in the portfolio.

 Concentrations
of Credit Risk. Diversification of risk is a key factor in prudent asset management. While the loan portfolio is concentrated in
real estate, management monitors the diversification within the commercial real estate portfolio closely and no segments exceed 15% of
the loan portfolio. Concentration risk is actively monitored by management and reviewed by our board of directors, and exposures relating
to borrower, industry and commercial real estate categories are tracked and measured against established policy limits and guidelines.

 Lending
Limits. Our lending activities are subject to a variety of lending limits imposed by federal law. In general, a bank is subject
to a legal lending limit on loans to a single borrower of 15% of the bank's capital and unimpaired surplus, or 25% if the loan
is fully secured. The dollar amounts of the Bank 34's lending limit increases or decreases as capital increases
or decreases. We are able to sell participations in its larger loans to other financial institutions, which allows us to better manage
the risk and exposure involved with larger loans and to meet the lending needs of our customers requiring extensions of credit in excess
of regulatory limits.

 Bank
34's legal lending limit as of December 31, 2023, on loans to a single borrower was $11.1 million (15%), and $18.5 million (25%),
for fully secured loans.

 Human
Capital Resources

 We
are committed to provide, develop and retain a high performing and diverse workforce that fosters a healthy, safe and productive work
environment for our employees to maximize individual and organizational potential and position us as an employer of choice.

 Employee
Profile. As of December 31, 2023, we had 50 full-time employees and 1 part-time employee. Our employees are not covered by a collective
bargaining agreement. We consider our relationship with our employees to be good and have not experienced interruptions of operations
due to labor disagreements.

and Benefits. We believe our competitive compensation and benefits package, along with our positive and inclusive work environment,
bring out the best in our employees. We have designed our compensation program around the philosophy of mutual respect and the continued
success of our organization. We know that our most valuable asset is our people. We offer competitive benefits to our employees and their
families. These programs include a 401(k) plan with an employer matching contribution, an Employee Stock Ownership Plan (ESOP), healthcare
and insurance benefits, flexible spending accounts, paid time off, tuition reimbursement, volunteer and parenting leave and an employee
assistance program.

 We
annually review benefit programs and compensation programs to seek to ensure that we remain competitive in our markets to meet the needs
of our employees and their families.

 Learning
and Development. Our goal is to better equip our managers and leaders with the most effective resources and tools to succeed in their
roles. We want to create strong leaders with a platform that allows open communication, provides consistency across regions as well as
fosters growth and development. Our goal is to establish strong leaders who will be able to effectively engage their employees to meet
and reinforce the mission and goals of Bank 34. We have internal programs for emerging managers and leaders that are designed to train
and enhance the skills of our employees to promote career advancement from within our company. In addition, we facilitate the educational
and professional development of our employees through financial support to attend conferences and obtain degrees, licenses and certifications
while employed by us.

 Available Information

 Since November 13, 2023, the date our joint
registration statement on Form S-4 was declared effective, Bancorp 43 became a reporting company pursuant to Section 15(d) of the Exchange
Act and accordingly will file annual, quarterly, and current reports on Forms 10-K, 10-Q, and 8-K with the SEC. These reports will be
available on the SEC's website at  We intend to furnish to our stockholders our annual reports containing our
audited consolidated financial statements certified by an independent registered public accounting firm.

 We also maintain a website at www.bank34.com.
The information on, or accessible through, our website or any other website cited in this Annual Report on Form 10-K is not part of,
or incorporated by reference into, this Annual Report on Form 10-K.

 SUPERVISION AND REGULATION

 General

 Bancorp 34 and Bank 34 are subject to extensive
banking regulations that impose restrictions on and provide for general regulatory oversight of their operations. These laws generally
are intended to protect consumers and depositors, rather than Bancorp 34 stockholders.

 The following discussion is not intended to be
a complete list of all the activities regulated by the banking laws or of the impact of such laws and regulations on our operations.
It is intended only to briefly summarize some material provisions. The following summary is qualified by reference to the statutory and
regulatory provisions discussed. These statutes and regulations are subject to change, and additional statutes, regulations, and corresponding
guidance may be adopted. We are unable to predict these future changes or the effects, if any, that these changes could have on our business,
revenues, and results of operations.

 Legislative and Regulatory Developments

 Although the 2008 financial crisis has now passed,
the legislative and regulatory response, including the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank
Act"), will continue to have an impact on our operations.

 The Dodd-Frank Wall Street Reform and Consumer Protection Act

 The Dodd-Frank Act was signed into law in July
2010 and impacts financial institutions in numerous ways, including:

 •
 The
 creation of a Financial Stability Oversight Council responsible for monitoring and managing
 systemic risk;

 •
 Granting
 additional authority to the Federal Reserve to regulate certain types of nonbank financial
 companies;

 •
 Granting
 new authority to the FDIC as liquidator and receiver;

 •
 Changing
 the manner in which deposit insurance assessments are made;

 •
 Requiring
 regulators to modify capital standards;

 •
 Establishing
 the Consumer Financial Protection Bureau (the "CFPB");

 •
 Capping
 interchange fees that certain banks charge merchants for debit card transactions;

 •
 Imposing
 more stringent requirements on mortgage lenders; and

 •
 Limiting
 banks' proprietary trading activities.

 There are many provisions in the Dodd-Frank Act
mandating regulators to adopt new regulations and conduct studies upon which future regulation may be based. While some have been issued,
many remain to be issued. Governmental intervention and new regulations could materially and adversely affect our business, financial
condition and results of operations.

 Bank Holding Company Regulation

 We own 100% of the outstanding capital stock of
Bank 34, a federal savings association which elected to be treated as a "covered savings association" in January 2023, and,
therefore, we are considered to be a bank holding company registered under the federal Bank Holding Company Act of 1956 (the "BHC
Act"). As a result, we are primarily subject to the supervision, examination and reporting requirements of the Federal Reserve
under the BHC Act and its regulations promulgated thereunder.

 Permitted Activities

 Under the BHC Act, a bank holding company is generally
permitted to engage in, or acquire direct or indirect control of more than 5% of the voting shares of any company engaged in, the following
activities:

 •
 banking
 or managing or controlling banks;

 •
 furnishing
 services to or performing services for our subsidiaries; and

 •
 any
 activity that the Federal Reserve determines to be so closely related to banking as to be
 a proper incident to the business of banking.

 Activities that the Federal Reserve has found to
be so closely related to banking as to be a proper incident to the business of banking include:

 •
 factoring
 accounts receivable;

 •
 making,
 acquiring, brokering or servicing loans and usual related activities;

 •
 leasing
 personal or real property;

 •
 operating
 a non-bank depository institution, such as a savings association;

 •
 trust
 company functions;

 •
 financial
 and investment advisory activities;

 •
 conducting
 discount securities brokerage activities;

 •
 underwriting
 and dealing in government obligations and money market instruments;

 •
 providing
 specified management consulting and counseling activities;

 •
 performing
 selected data processing services and support services;

 •
 acting
 as agent or broker in selling credit life insurance and other types of insurance in connection
 with credit transactions; and

 •
 performing
 selected insurance underwriting activities.

 The Federal Reserve has the authority to order
a bank holding company or its subsidiaries to terminate any of these activities or to terminate its ownership or control of any subsidiary
when it has reasonable cause to believe that the bank holding company's continued ownership, activity or control constitutes a
serious risk to the financial safety, soundness or stability of it or any of its bank subsidiaries.

 Financial Holding Company

 A bank holding company can elect to be treated
as a "financial holding company," which would allow it to engage in a broader array of activities. In summary, a financial
holding company can engage in activities that are financial in nature or incidental or complementary to financial activities, including
insurance underwriting, sales and brokerage activities, providing financial and investment advisory services, underwriting services and
limited merchant banking activities.

 Bancorp 34 has not elected to be treated as a financial
holding company.

 Expansion Activities

 The BHC Act requires a bank holding company to
obtain the prior approval of the Federal Reserve before merging with another bank holding company, acquiring substantially all the assets
of any bank or bank holding company, or acquiring directly or indirectly any ownership or control of more than 5% of the voting shares
of any bank. A bank holding company is also prohibited from acquiring direct or indirect ownership or control of more than 5% of the
voting shares of any company engaged in nonbanking activities, other than those determined by the Federal Reserve to be so closely related
to banking as to be a proper incident to the business of banking. In addition, the prior approval of the OCC is required for a federal
savings association to merge with another bank or purchase the assets or assume the deposits of another bank. In determining whether
to approve a proposed bank acquisition, federal bank regulators will consider, among other factors, the effect of the acquisition on
competition, the public benefits expected to be received from the acquisition, the projected capital ratios and levels on a post-acquisition
basis, and the acquiring institution's record of addressing the credit needs of the communities it serves, including the needs
of low and moderate income neighborhoods, consistent with the safe and sound operation of the bank, under the Community Reinvestment
Act (discussed below).

 On
July 9, 2021, President Biden issued an Executive Order on Promoting Competition in the American Economy. Among other initiatives, the
Executive Order encouraged the federal banking agencies to review their current merger oversight practices under the BHC Act and the
Bank Merger Act and adopt a plan for revitalization of such practices. There are many steps that must be taken by the agencies before
any formal changes to the framework for evaluating bank mergers can be finalized and the prospects for such action are uncertain at this
time however, the adoption of more expansive or prescriptive standards may have an impact on our acquisition activities. On December
18, 2023, the U.S. Department of Justice ("DOJ") released its updated merger guidelines, which modified certain criteria,
including a reduction of market concentration calculations by which the DOJ would presume a substantial lessening of competition or the
creation of a monopoly. Additionally, the updated merger guidelines focus on a number of other factors related to competitiveness and
the impact of the merger upon various constituencies, including customers and workers. While bank regulators, and not the DOJ, typically
have addressed anti-trust concerns in connection with bank mergers with a focus on market concentration, the DOJ guidelines and public
comments from DOJ officials suggest that the DOJ could weigh in on more bank mergers in the future. On January 29, 2024, the Office of
the Comptroller of the Currency proposed amendments to its business combination rules and added a proposed policy statement regarding
its evaluation of factors under the Bank Merger Act. While the amendments and policy statement are not final, it is expected that the
proposed policy statement would set forth standards by which certain mergers would raise regulatory concerns as well as procedures to
extend and augment public comments on proposed mergers. These amendments and the policy statement could delay merger and other business
combination approvals in the future.

 Change in Control

 Two statutes, the BHC Act and the Change in Bank
Control Act, together with regulations promulgated under them, require some form of regulatory review before any company may acquire
"control" of a bank or a bank holding company. Under the BHC Act, control is deemed to exist if a company acquires 25% or
more of any class of voting securities of a bank holding company; controls the election of a majority of the members of the board of
directors; or exercises a controlling influence over the management or policies of a bank or bank holding company. On January 30, 2020,
the Federal Reserve issued a final rule (which became effective September 30, 2020) that clarified and codified the Federal Reserve's
standards for determining whether one company has control over another. The final rule established four categories of tiered presumptions
of noncontrol that are based on the percentage of voting shares held by the investor (less than 5%, 5-9.9%, 10-14.9% and 15-24.9%) and
the presence of other indicia of control. As the percentage of ownership increases, fewer indicia of control are permitted without falling
outside of the presumption of noncontrol. These indicia of control include nonvoting equity ownership, director representation, management
interlocks, business relationship and restrictive contractual covenants. Under the final rule, investors can hold up to 24.9% of the
voting securities and up to 33% of the total equity of a company without necessarily having a controlling influence.

 Under the Change in Bank Control Act, a person
or company is generally required to file a notice with the Federal Reserve if it will, as a result of the transaction, own or control
10% or more of any class of voting securities or direct the management or policies of a bank or bank holding company and either if the
bank or bank holding

 company has registered securities or if the acquirer would be the largest
holder of that class of voting securities after the acquisition. Transactions subject to the BHC Act are exempt from Change in Bank Control
Act requirements.

 Source of Strength

 There are a number of obligations and restrictions
imposed by law and regulatory policy on bank holding companies with regard to their depository institution subsidiaries that are designed
to minimize potential loss to depositors and to the FDIC insurance funds in the event that the depository institution becomes in danger
of defaulting under its obligations to repay deposits. Under a policy of the Federal Reserve and the Dodd-Frank Act, a bank holding company
is required to serve as a source of financial strength to its subsidiary depository institutions and to commit resources to support such
institutions in circumstances where it might not do so absent such policy. Under the Federal Deposit Insurance Corporation Improvement
Act of 1991, to avoid receivership of its insured depository institution subsidiary, a bank holding company is required to guarantee
the compliance of any insured depository institution subsidiary that may become "undercapitalized" within the terms of any
capital restoration plan filed by such subsidiary with its appropriate federal banking agency up to the lesser of (a) an amount equal
to 5% of the institution's total assets at the time the institution became undercapitalized, or (b) the amount which is necessary
(or would have been necessary) to bring the institution into compliance with all applicable capital standards as of the time the institution
fails to comply with such capital restoration plan.

 The Federal Reserve also has the authority under
the BHC Act to require a bank holding company to terminate any activity or relinquish control of a nonbank subsidiary (other than a nonbank
subsidiary of a bank) upon the Federal Reserve's determination that such activity or control constitutes a serious risk to the
financial soundness or stability of any subsidiary depository institution of the bank holding company. Further, federal law grants federal
bank regulatory authorities' additional discretion to require a bank holding company to divest itself of any bank or nonbank subsidiary
if the agency determines that divestiture may aid the depository institution's financial condition.

 The Federal Deposit Insurance Act also provides
that amounts received from the liquidation or other resolution of any insured depository institution by any receiver must be distributed
(after payment of secured claims) to pay the deposit liabilities of the institution prior to payment of any other general or unsecured
senior liability, subordinated liability, general creditor or stockholder.

 Any capital loans by a bank holding company to
any of its subsidiary banks are subordinate in right of payment to deposits and to certain other indebtedness of such subsidiary bank.
In the event of a bank holding company's bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency
to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to a priority of payment.

 Capital Requirements

 The Federal Reserve imposes certain capital requirements
on bank holding companies under the BHC Act, including a minimum leverage ratio and a minimum ratio of "qualifying" capital
to risk-weighted assets. These requirements are essentially the same as those that apply to such holding company's bank subsidiary
and are described below under "Bank Regulation—Capital and Related Requirements."

 Dividend Payments

 Our ability to pay dividends to our stockholders
may be affected by both general corporate law considerations and policies of the Federal Reserve applicable to bank holding companies.
 Bancorp 34 is a Maryland corporation and subject to the limitations of the MGCL. The MGCL allows Bancorp 34 to pay dividends from
the net earnings of the corporation for the fiscal year in which the dividend is made, the net earnings of the corporation for the preceding
fiscal year, or the sum of net earnings of the corporation for the preceding eight fiscal quarters. The MGCL provides that no dividends
may be made by a corporation if, after giving effect to the dividend, the corporation would not be able to pay its indebtedness as it
becomes due in the usual course of business, or the corporation's total assets would be less than the sum of the corporation's
total liabilities plus, unless the charter permits otherwise, the amount that would be needed, if the corporation were to be dissolved
at the time of the distribution, to satisfy the preferential rights upon dissolution of stockholders whose preferential rights on dissolution
are superior to those receiving the distribution.

 In addition, as a general matter, the Federal Reserve
has indicated that the board of directors of a bank holding company should eliminate, defer or significantly reduce dividends to stockholders
if: (a) the company's net income available to stockholders for the past four quarters, net of dividends previously paid during
that period, is not sufficient to fully fund the dividends; (b) the prospective rate of earnings retention is inconsistent with
the company's capital needs and overall current and prospective financial condition; or (c) the company will not meet, or
is in danger of not meeting, its minimum regulatory capital adequacy ratios. Under Federal Reserve
policy, bank holding companies are expected to inform the Federal Reserve reasonably in advance of declaring or paying a dividend that
exceeds earnings for the period (e.g., quarter) for which the dividend is being paid or that could result in a material adverse change
to the organization's capital structure. The Federal Reserve also possesses enforcement powers over bank holding companies
and their non-bank subsidiaries to prevent or remedy actions that represent unsafe or unsound practices or violations of applicable statutes
and regulations. Among these powers is the ability to proscribe the payment of dividends by banks and bank holding companies. In addition,
under the Basel III rules, financial institutions that seek to pay dividends must maintain the 2.5% capital conservation buffer. See
"Bank Regulation—Capital and Related Requirements" below.

 Stock
Buybacks and Other Capital Redemptions

 Under
Federal Reserve policies and regulations, bank holding companies must seek regulatory approval prior to any redemption that would reduce
the bank holding company's consolidated net worth by 10% or more, prior to the redemption of most instruments included in Tier
1 or Tier 2 capital with features permitting redemption at the option of the issuing bank holding company, or prior to the redemption
of equity or other capital instruments included in Tier 1 or Tier 2 capital prior to stated maturity, if such redemption could have a
material effect on the level or composition of the organization's capital base. Bank holding companies are also expected to both
inform the Federal Reserve reasonably in advance of a redemption or repurchase of common stock if such buyback results in a net reduction
of the company's outstanding amount of common stock below the amount outstanding at the beginning of the fiscal quarter, and to
consult with the Federal Reserve generally prior to engaging in stock buybacks.

 Sarbanes-Oxley Act of 2002

 The Sarbanes-Oxley Act of 2002, which we refer
to as "Sarbanes-Oxley," implemented a broad range of corporate governance, accounting and reporting measures for companies,
that have securities registered under the Exchange Act. Bancorp 34 became subject to Sarbanes-Oxley on November 13, 2023. Sarbanes-Oxley
and the various regulations promulgated under Sarbanes-Oxley, established, among other things: (a) requirements for audit committees,
including independence, expertise, and responsibilities; (b) additional responsibilities relating to financial statements for the Chief
Executive Officer and Chief Financial Officer of reporting companies; (c) standards for auditors and regulation of audits, including
independence provisions that restrict non-audit services that accountants may provide to their audit clients; (d) increased disclosure
and reporting obligations for reporting companies and their directors and executive officers, including accelerated reporting of stock
transactions and a prohibition on trading during blackout periods; and (e) a range of civil and criminal penalties for fraud and other
violations of the securities laws.

 Bank Regulation

 Bank 34 is a federal savings association, which
elected and was approved to be treated as a "covered savings association" (CSA) in January of 2023. A CSA has the same rights
and privileges as a national bank that has its main office situated in the same location as the home office of the CSA and is subject
to the same duties, restrictions, penalties, liabilities, conditions, and limitations that would apply to such a national bank. As such,
Bank 34's activities are now subject to the same laws, regulations, and safety and soundness expectations as a national bank located
in the State of Arizona, including any appropriate enforcement action for failure to comply with applicable laws and regulations. As
a CSA, Bank 34 retained its federal savings association charter and must continue to comply with the provisions of law applicable to
federal savings associations for certain limited purposes enumerated in federal regulations, including governance (e.g., incorporation,
organization, charter, bylaws, board of directors, shareholders, mutual members, and dividends), consolidation, merger, dissolution,
conversion, conservatorship, receivership, and other purposes determined by OCC regulation.

 As a covered federal savings association, Bank
34 is subject to regulation and supervision primarily by the OCC and secondarily by the Federal Reserve, the FDIC, and the CFPB. We are
subject to requirements and restrictions under federal law, including requirements to maintain reserves against deposits, restrictions
on the types and amounts of loans that may be granted and the interest that may be charged thereon and limitations on the types of investments
that may be made and the types of services that may be offered. Various consumer laws and regulations also affect the operations of Bank
34. The OCC regularly examines Bank 34's operations and has the authority to approve or disapprove mergers, the establishment of
branches and similar corporate actions. The OCC also has the power to prevent the continuance or development of unsafe or unsound banking
practices or other violations of law. Bank 34 is also subject to numerous state and federal statutes and regulations that affect its
business, activities, and operations.

 Capital and Related Requirements

 We are subject to comprehensive capital adequacy
requirements intended to protect against losses that we may incur. Regulatory capital rules, which we refer to as Basel III, impose minimum
capital requirements for bank holding companies and banks. The Basel III rules apply to all state and national banks and savings and
loan associations regardless of size and bank holding companies and savings and loan holding companies other than "small bank holding
companies," generally holding companies with consolidated assets of less than $3 billion. More stringent requirements are
imposed on "advanced approaches" banking organizations—those organizations with $250 billion or more in total
consolidated assets, $10 billion or more in total foreign exposures, or that have opted into the Basel II capital regime.

 The rules include certain higher risk-based capital
and leverage requirements than those previously in place. Specifically, we are required to maintain the following minimum capital requirements:

 •
 a
 common equity Tier 1 ("CET1") risk-based capital ratio of 4.5%;

 •
 a
 Tier 1 risk-based capital ratio of 6%;

 •
 a
 total risk-based capital ratio of 8%; and

 •
 a
 leverage ratio of 4%.

 Under Basel III, Tier 1 capital includes two components:
CET1 capital and additional Tier 1 capital. The highest form of capital, CET1 capital, consists solely of common stock (plus related
surplus), retained earnings, accumulated other comprehensive income, otherwise referred to as AOCI, and limited amounts of minority interests
that are in the form of common stock. Additional Tier 1 capital is primarily comprised of noncumulative perpetual preferred stock, Tier
1 minority interests and grandfathered trust preferred securities. Tier 2 capital generally includes the allowance for credit losses
up to 1.25% of risk-weighted assets, qualifying preferred stock, subordinated debt and qualifying tier 2 minority interests, less any
deductions in Tier 2 instruments of an unconsolidated financial institution. AOCI is presumptively included in CET1 capital and often
would operate to reduce this category of capital. When implemented, Basel III provided a one-time opportunity for covered banking organizations
to opt out of much of this treatment of AOCI. We made this opt-out election.

 In addition, in order to avoid restrictions on
capital distributions or discretionary bonus payments to executives, under Basel III, a banking organization must maintain a "capital
conservation buffer" on top of its minimum risk-based capital requirements. This buffer must consist solely of Tier 1 Common Equity,
but the buffer applies to all three risk-based measurements (CET1, Tier 1 capital and total capital). The following effective minimum
capital plus capital conservation buffer ratios are applicable: (a) a CET1 capital ratio of 7.0%, (b) a Tier 1 risk-based capital ratio
of 8.5%, and (c) a total risk-based capital ratio of 10.5%.

 The capital rules require
that goodwill and other intangible assets (other than mortgage servicing assets), net of associated deferred tax liabilities ("DTLs"),
be deducted from CET1 capital. Additionally, deferred tax assets ("DTAs") that arise from net operating loss and tax credit
carryforwards, net of associated DTLs and valuation allowances, are fully deducted from CET1 capital. However, DTAs arising from temporary
differences that could not be realized through net operating loss carrybacks, along with mortgage servicing assets and "significant"
(defined as greater than 10% of the issued and outstanding common stock of the unconsolidated financial institution) investments in the
common stock of unconsolidated "financial institutions" are partially includible in CET1 capital, subject to deductions defined
in the rules.

 The OCC also considers
interest rate risk (arising when the interest rate sensitivity of Bank 34's assets does not match the sensitivity of its liabilities
or its off-balance sheet position) in the evaluation of the bank's capital adequacy. Banks with excessive interest rate risk exposure
are required to hold additional amounts of capital against their exposure to losses resulting from that risk. Through the risk-weighting
of assets, the regulators also require banks to incorporate market risk components into their risk-based capital. Under these market
risk requirements, capital is allocated to support the amount of market risk related to a bank's lending and trading activities.

 Bank 34's capital
categories are determined solely for the purpose of applying the "prompt corrective action" rules described below and they
are not necessarily an accurate representation of its overall financial condition or prospects for other purposes. Failure to meet capital
guidelines could subject a bank or bank holding company to a variety of enforcement remedies, including issuance of a capital directive,
the termination of deposit insurance by the FDIC, a prohibition on accepting brokered deposits, and certain other restrictions on its
business. See "Prompt Corrective Action" below.

 Banks and 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%, off-balance-sheet
exposures of 25% or less of total consolidated assets and trading assets plus trading liabilities of 5% or less of total consolidated
assets, are deemed "qualifying community banking organizations" are eligible to opt into the "community bank leverage
ratio framework." A qualifying community banking organization that elects to use the community bank leverage ratio framework and
that maintains a leverage ratio of greater than 9% is considered to have satisfied the generally applicable risk-based and leverage capital
requirements under the Basel III rules and, if applicable, is considered to have met the "well capitalized" ratio requirements
for purposes of its primary federal regulator's prompt corrective action rules, discussed below. We do not have any immediate plans
to use the community bank leverage ratio framework but may make such an election in the future.

 Prompt Corrective Action

 As an insured depository institution, we are required
to comply with the capital requirements promulgated under the Federal Deposit Insurance Corporation Improvement Act of 1991 (the "FDICIA").
The FDICIA requires each federal banking agency to take prompt corrective action ("PCA") to resolve the problems of insured
depository institutions, including those that fall below one or more prescribed minimum capital ratios. The law requires each federal
banking agency to promulgate regulations defining the following five categories in which an insured depository institution will be placed,
based on the level of capital ratios: "well capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized," or "critically undercapitalized." As
of December 31, 2023, we maintained capital ratios that exceeded the minimum ratios established for a "well capitalized"
institution.

 The following is a list of the criteria for each
PCA capital category:

 Well Capitalized —The institution exceeds
the required minimum level for each relevant capital measure. A well-capitalized institution:

 •
 has
 total risk-based capital ratio of 10% or greater; and

 •
 has
 a Tier 1 risk-based capital ratio of 8% or greater; and

 •
 has
 a common equity Tier 1 risk-based capital ratio of 6.5% or greater; and

 •
 has
 a leverage capital ratio of 5% or greater; and

 •
 is
 not subject to any order or written directive to meet and maintain a specific capital level
 for any capital measure.

 Adequately Capitalized —The institution
meets the required minimum level for each relevant capital measure. The institution may not make a capital distribution if it would result
in the institution becoming undercapitalized. An adequately capitalized institution:

 •
 has
 a total risk-based capital ratio of 8% or greater; and

 •
 has
 a Tier 1 risk-based capital ratio of 6% or greater; and

 •
 has
 a common equity Tier 1 risk-based capital ratio of 4.5% or greater; and

 •
 has
 a leverage capital ratio of 4% or greater.

 Undercapitalized —The institution fails
to meet the required minimum level for any relevant capital measure. An undercapitalized institution:

 •
 has
 a total risk-based capital ratio of less than 8%; or

 •
 has
 a Tier 1 risk-based capital ratio of less than 6%; or

 •
 has
 a common equity Tier 1 risk-based capital ratio of less than 4.5% or greater; or

 •
 has
 a leverage capital ratio of less than 4%.

 Significantly Undercapitalized —The
institution is significantly below the required minimum level for any relevant capital measure. A significantly undercapitalized institution:

 •
 has
 a total risk-based capital ratio of less than 6%; or

 •
 has
 a Tier 1 risk-based capital ratio of less than 4%; or

 •
 has
 a common equity Tier 1 risk-based capital ratio of less than 3% or greater; or

 •
 has
 a leverage capital ratio of less than 3%.

 Critically Undercapitalized —The institution
fails to meet a critical capital level set by the appropriate federal banking agency. A critically undercapitalized institution has a
ratio of tangible equity to total assets that is equal to or less than 2%.

 Depending upon the capital category to which an
institution is assigned, the primary federal regulators' corrective powers include: (a) requiring the institution to submit a capital
restoration plan; (b) limiting the institution's asset growth and restricting its activities; (c) requiring the institution
to issue additional capital stock (including additional voting stock) or to sell itself; (d) restricting transactions between the institution
and its affiliates; (e) restricting the interest rate that the institution may pay on deposits; (f) ordering a new election of directors
of the institution; (g) requiring that senior executive officers or directors be dismissed; (h) prohibiting the institution from accepting
deposits from correspondent banks; (i) requiring the institution to divest certain subsidiaries; (j) prohibiting the payment of principal
or interest on subordinated debt; and (k) ultimately, appointing a receiver for the institution.

 CECL

 On December 21, 2018,
the federal banking agencies issued a joint final rule to revise their regulatory capital rules to (a) address the implementation of
a new credit impairment model, the Current Expected Credit Loss, or CECL model, an accounting standard under United States generally
accepted accounting principles (U.S. GAAP) (b) provide an optional three-year phase-in period for the day-one adverse regulatory
capital effects that banking organizations are expected to experience upon adopting CECL and (c) require the use of CECL in stress
tests beginning with the 2020 capital planning and stress testing cycle for certain banking organizations that are subject to stress
testing. We implemented CECL effective January 1, 2023. Upon adoption, we recorded an increase to the ACL on the loans held-for-investment
of $604,000, established an ACL on unfunded commitments of $164,000 established an ACL on held-to-maturity investments of $38,000 recorded
an increase to deferred tax asset of $152,000 and a corresponding one-time cumulative reduction to retained earnings, net of tax, of
$654,000 in the consolidated balance sheet as of January 1, 2023.

 Dividend Payments

 The primary source of funds for Bancorp 34 is dividends
from Bank 34. Under the National Bank Act, a national bank may pay dividends out of its undivided profits in such amounts and at such
times as the bank's board of directors deems prudent. Without prior OCC approval, however, a national bank may not pay dividends
in any calendar year that, in the aggregate, exceed the bank's year-to-date net income plus the bank's retained net income
for the two preceding years. The payment of dividends by any FDIC-insured institution is affected by the requirement to maintain adequate
capital pursuant to applicable capital adequacy guidelines and regulations, and an FDIC-insured institution generally is prohibited from
paying any dividends if, following payment thereof, the institution would be undercapitalized. As described above, Bank 34 exceeded its
capital requirements under applicable guidelines as of December 31, 2023. Notwithstanding the availability of funds for dividends, the
OCC may prohibit the payment of dividends by Bank 34 if it determines such payment would constitute an unsafe or unsound practice. In
addition, under the Basel III Rule, institutions that seek the freedom to pay dividends will have to maintain the 2.5% capital conservation
buffer. See "Capital and Related Requirements" above.

 Community Reinvestment Act and Fair Lending Requirements

 Bank 34 is subject to certain fair lending requirements
and reporting obligations involving its home mortgage lending operations. Each bank is also subject to certain requirements and reporting
obligations under the Community Reinvestment Act ("CRA"). The CRA generally requires federal banking agencies to evaluate
the record of a financial institution in meeting the credit needs of its local communities, including low- and moderate-income neighborhoods.
The CRA further requires the agencies to take into account a bank's record of meeting community credit needs when evaluating applications
for, among other things, new branches or mergers. Bank 34 received a "satisfactory" CRA Assessment Rating from the OCC in
its most recent examination. In addition to substantive penalties and corrective measures that may be required for a violation of certain
fair lending laws, the federal banking agencies may take compliance with such laws and CRA into account when regulating and supervising
other activities of the bank, including in acting on expansionary proposals.

 On October 24, 2023, the federal banking agencies
issued a final rule to amend the regulations implementing the CRA. The rule significantly expands the number of areas in which a bank
is evaluated, materially changes the tests used to evaluate the bank in those areas and expands the data a bank must collect and report.
The final rule takes effect April 1, 2024, but the majority of its operative provisions are effective January 1, 2026, with the data
reporting requirements effective January 1, 2027. We expect the rule will increase Bank 34's obligations and compliance costs necessary
to achieve a "Satisfactory" or "Outstanding" rating under the CRA.

 Fair Lending Requirements

 We are subject to certain
fair lending requirements and reporting obligations involving lending operations. A number of laws and regulations provide these fair
lending requirements and reporting obligations, including, at the federal level, the Equal Credit Opportunity Act, or the "ECOA,"
as amended by the Dodd-Frank Act, and Regulation B, as well as the Fair Housing Act, or the "FHA," and regulations implementing
the FHA. ECOA and Regulation B prohibit discrimination in any aspect of a credit transaction based on a number of prohibited factors,
including race or color, religion, national origin, sex, marital status, age, the applicant's receipt of income derived from public
assistance programs, and the applicant's exercise, in good faith, of any right under the Consumer Credit Protection Act. ECOA and
Regulation B include lending acts and practices that are specifically prohibited, permitted, or required, and these laws and regulations
proscribe data collection requirements, legal action statute of limitations, and disclosure of the consumer's ability to receive
a copy of any appraisal(s) and valuation(s) prepared in connection with certain loans secured by dwellings. FHA prohibits discrimination
in all aspects of residential real-estate related transactions based on prohibited factors, including race or color, national origin,
religion, sex, familial status, and handicap.

 In addition to prohibiting
discrimination in credit transactions on the basis of prohibited factors, these laws and regulations can cause a lender to be liable
for policies that result in a disparate treatment of or have a disparate impact on a protected class of persons. If a pattern or practice
of lending discrimination is alleged by a regulator, then the matter may be referred by the agency to the DOJ, for investigation. In
December 2012, the DOJ and CFPB entered into a Memorandum of Understanding under which the agencies have agreed to share information,
coordinate investigations, and have generally committed to strengthen their coordination efforts. In addition to substantive penalties
and corrective measures that may be required for a violation of certain fair lending laws, the federal banking agencies may take compliance
with fair lending requirements into account when regulating and supervising other activities of the bank, including in acting on expansionary
proposals.

 Consumer Protection Regulations

 The activities of Bank 34 are subject to a variety
of statutes and regulations designed to protect consumers. Bank regulatory agencies have increasingly used a general consumer protection
statute to address "unethical" or otherwise "bad" business practices that may not necessarily fall directly under
the purview of a specific banking or consumer finance law. The law of choice for enforcement against such business practices has been
Section 5 of the Federal Trade Commission Act—the primary federal law that prohibits "unfair or deceptive acts or practices"
and unfair methods of competition in or affecting commerce ("UDAP" or "FTC Act"). "Unjustified consumer
injury" is the principal focus of the FTC Act. Prior to the Dodd-Frank Act, there was little formal guidance to provide insight
to the parameters for compliance with the UDAP law. However, the UDAP provisions have been expanded under the Dodd-Frank Act to apply
to "unfair, deceptive or abusive acts or practices" ("UDAAP"). The CFPB has brought a variety of enforcement
actions for violations of UDAAP provisions and CFPB guidance continues to evolve.

 Interest and other charges collected or contracted
for by us are subject to state usury laws and federal laws concerning interest rates. Our loan operations are also subject to federal
laws applicable to credit transactions, such as:

 •
 the
 Truth-In-Lending Act, or "TILA," and Regulation Z, governing disclosures of credit
 and servicing terms to consumer borrowers and including substantial requirements for mortgage
 lending and servicing, as mandated by the Dodd-Frank Act;

 •
 the
 Home Mortgage Disclosure Act and Regulation C, requiring financial institutions to provide
 information to enable the public and public officials to determine whether a financial institution
 is fulfilling its obligation to help meet the housing needs of the communities they serve;

 •
 ECOA
 and Regulation B, prohibiting discrimination on the basis of race, color, religion, or other
 prohibited factors in any aspect of a credit transaction;

 •
 the
 Fair Credit Reporting Act, as amended by the Fair and Accurate Credit Transactions Act and
 Regulation V, as well as the rules and regulations of the FDIC governing the use of consumer
 reports, provision of information to credit reporting agencies, certain identity theft protections
 and certain credit and other disclosures;

 •
 the
 Fair Debt Collection Practices Act and Regulation F, governing the manner in which consumer
 debts may be collected by collection agencies and intending to eliminate abusive, deceptive,
 and unfair debt collection practices;

 •
 the
 Real Estate Settlement Procedures Act, or "RESPA," and Regulation X, which governs
 various aspects of residential mortgage loans, including the settlement and servicing process,
 dictates certain disclosures to be provided to consumers, and imposes other requirements
 related to compensation of service providers, insurance escrow accounts, and loss mitigation
 procedures;

 •
 The
 Secure and Fair Enforcement for Mortgage Licensing Act, the "SAFE Act," which
 mandates a nationwide licensing and registration system for residential mortgage loan originators.
 The SAFE Act also prohibits individuals from engaging in the business of a residential mortgage
 loan originator without first obtaining and maintaining annually registration as either a
 federal or state licensed mortgage loan originator;

 •
 The
 Homeowners Protection Act, or the PMI Cancellation Act, provides requirements relating to
 private mortgage insurance on residential mortgages, including the cancellation and termination
 of PMI, disclosure and notification requirements, and the requirement to return unearned
 premiums;

 •
 The
 Fair Housing Act prohibits discrimination in all aspects of residential real-estate related
 transactions based on race or color, national origin, religion, sex, and other prohibited
 factors;

 •
 The
 Servicemembers Civil Relief Act and Military Lending Act, providing certain protections for
 servicemembers, members of the military, and their respective spouses, dependents and others;
 and

 •
 Section
 106(c)(5) of the Housing and Urban Development Act requires making home ownership available
 to eligible homeowners.

 The deposit operations of Bank 34 are also subject
to federal laws, such as:

 •
 the
 Federal Deposit Insurance Act which, among other things, limits the amount of deposit insurance
 available per insured depositor category to $250,000 and imposes other limits on deposit-taking;

 •
 the
 Right to Financial Privacy Act, which imposes a duty to maintain the confidentiality of consumer
 financial records and prescribes procedures for complying with administrative subpoenas of
 financial records;

 •
 the
 Electronic Funds Transfer Act and Regulation E, which governs the rights, liabilities, and
 responsibilities of consumers and financial institutions using electronic fund transfer services,
 and which generally mandates disclosure requirements, establishes limitations on liability
 applicable to consumers for unauthorized electronic fund transfers, dictates certain error
 resolution processes, and applies other requirements relating to automatic deposits to and
 withdrawals from deposit accounts;

 •
 The
 Expedited Funds Availability Act and Regulation CC, setting forth requirements to make funds
 deposited into transaction accounts available according to specified time schedules, disclose
 funds availability policies to customers, and relating to the collection and return of checks
 and electronic checks, including the rules regarding the creation or receipt of substitute
 checks; and

 •
 the
 Truth in Savings Act and Regulation DD, which requires depository institutions to provide
 disclosures so that consumers can make meaningful comparisons about depository institutions
 and accounts.

 The CFPB is an independent regulatory authority
housed within the Federal Reserve. The CFPB has broad authority to regulate the offering and provision of consumer financial products
and services. The CFPB has the authority to supervise and examine depository institutions with more than $10 billion in assets for
compliance with federal consumer laws. The authority to supervise and examine depository institutions with $10 billion or less in
assets such as us, for compliance with federal consumer laws remains largely with those institutions' primary regulators. However,
the CFPB may participate in examinations of smaller institutions on a "sampling basis" and may refer potential enforcement
actions against such institutions to their primary regulators. As such, the CFPB may participate in examinations of Bank 34. In addition,
states are permitted to adopt consumer protection laws and regulations that are stricter than the regulations promulgated by the CFPB,
and state attorneys general are permitted to enforce consumer protection rules adopted by the CFPB against certain institutions.

 The CFPB has issued a number of significant rules
that impact nearly every aspect of the lifecycle of consumer financial products and services, including rules regarding residential mortgage
loans. These rules implement Dodd-Frank Act amendments to ECOA, TILA and RESPA. Among other things, the rules adopted by the CFPB require
banks to: (i) develop and implement procedures to ensure compliance with a "reasonable ability-to-repay" test; (ii) implement
new or revised disclosures, policies and procedures for originating and servicing mortgages, including, but not limited to, pre-loan
counseling, early intervention with delinquent borrowers and specific loss mitigation procedures for loans secured by a borrower's
principal residence, and mortgage origination disclosures, which integrate existing requirements under TILA and RESPA; (iii) comply with
additional restrictions on mortgage loan originator hiring and compensation; and (iv) comply with new disclosure requirements and standards
for appraisals and certain financial products. The CFPB may issue regulations that impact products and services offered by Bank 34. The
CFPB has engaged in rulemakings that affect, among other things, credit card late fees, overdraft fees, data collection and reporting
requirements for small business lenders such as Bank 34, and personal financial data rights, including a proposed rule announced on January
17, 2024, that would, among other requirements, limit the overdraft fees that banks with greater than $10 billion in assets could charge.

 Bank regulators take into account compliance with
consumer protection laws when considering approval of any proposed expansionary proposal, including merger proposals.

 Anti-Money Laundering and the USA Patriot Act

 Financial institutions must maintain anti-money
laundering programs that include established internal policies, procedures, and controls; a designated compliance officer; an ongoing
employee training program; and testing of the program by an independent audit function. The program must comply with the anti-money laundering
provisions of the Bank Secrecy Act, or the "BSA." Bancorp 34 and the Bank are also prohibited from entering into specified
financial transactions and account relationships and must meet enhanced standards for due diligence and "knowing your customer"
in their dealings with foreign financial institutions, foreign customers, and other high risk customers. Financial institutions must
take reasonable steps to conduct enhanced scrutiny of account relationships to guard against money laundering and to report any suspicious
transactions, and certain laws provide law enforcement authorities with increased access to financial information maintained by banks.
Financial institutions must comply with requirements regarding risk-based procedures for conducing ongoing customer due diligence, which
requires the institutions to take appropriate steps to understand the nature and purpose of customer relationships and identify and verify
the identity of the beneficial owners of legal entity customers.

 Anti-money laundering obligations have been substantially
strengthened as a result of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism
Act, which we refer to as the "USA PATRIOT Act." Bank regulators routinely examine institutions for compliance with these
obligations and are required to consider compliance in connection with the regulatory review of applications. The regulatory authorities
have been active in imposing cease and desist orders and money penalty sanctions against institutions that have not complied with these
requirements.

 The USA PATRIOT Act amended the Bank Secrecy Act
and provides, in part, for the facilitation of information sharing among governmental entities and financial institutions for the purpose
of combating terrorism and money laundering by enhancing anti-money laundering and financial transparency laws, as well as enhanced information
collection tools and enforcement mechanics for the U.S. government, including: (a) requiring standards for verifying customer identification
at account opening; (b) rules to promote cooperation among financial institutions, regulators, and law enforcement entities in identifying
parties that may be involved in terrorism or money laundering; (c) reports by nonfinancial trades and businesses filed with the U.S.
Treasury Department's Financial Crimes Enforcement Network for transactions exceeding $10,000; (d) filing suspicious activities
reports if a bank believes a customer may be violating U.S. laws and regulations; and (e) requires enhanced due diligence requirements
for financial institutions that administer, maintain, or manage private bank accounts or correspondent accounts for non-U.S. persons.
Bank regulators routinely examine institutions for compliance with these obligations and are required to consider compliance in connection
with the regulatory review of applications.

 Under the USA PATRIOT Act, the regulators can provide
lists of the names of persons suspected of involvement in terrorist activities. The Bank can be requested, to search its records for
any relationships or transactions with persons on those lists. If the Bank finds any relationships or transactions, it must file a suspicious
activity report and contact the applicable governmental authorities.

 On January 1, 2021, Congress overrode former President
Trump's veto and thereby enacted the National Defense Authorization Act for Fiscal Year 2022, or "NDAA." The NDAA provides
for one of the most significant overhauls of the BSA and related anti-money laundering laws since the USA Patriot Act. Notably, changes
include:

 •
 expansion
 of coordination and information sharing efforts among the agencies tasked with administering
 anti-money laundering and countering the financing of terrorism requirements, including the
 Financial Crimes Enforcement Network, or "FinCEN," the primary federal banking
 regulators, federal law enforcement agencies, national security agencies, the intelligence
 community, and financial institutions;

 •
 providing
 additional penalties with respect to violations of BSA and enhancing the powers of FinCEN;

 •
 significant
 updates to the beneficial ownership collection rules and the creation of a registry of beneficial
 ownership which will track the beneficial owners of reporting companies which may be shared
 with law enforcement and financial institutions conducting due diligence under certain circumstances;

 •
 improvements
 to existing information sharing provisions that permit financial institutions to share information
 relating to SARs with foreign branches, subsidiaries, and affiliates (except those located
 in China, Russia, or certain other jurisdictions) for the purpose of combating illicit finance
 risks; and

 •
 enhanced
 whistleblower protection provisions, allowing whistleblower(s) who provide original information
 which leads to successful enforcement of anti-money laundering laws in certain judicial or
 administrative actions resulting in certain monetary sanctions to receive up to 30% of the
 amount that is collected in monetary sanctions as well as increased protections.

 Under the USA PATRIOT Act, FinCEN can send our
banking regulatory agencies lists of the names of persons suspected of involvement in terrorist activities. The Bank can be requested,
to search its records for any relationships or transactions with persons on those lists. If the Bank finds any relationships or transactions,
it must file a suspicious activity report and contact FinCEN.

 The Office of Foreign Assets Control

 The Office of Foreign Assets Control ("OFAC"),
which is an office in the U.S. Department of the Treasury, is responsible for helping to ensure that U.S. entities do not engage in transactions
with "enemies" of the United States, as defined by various Executive Orders and Acts of Congress. OFAC publishes lists of
names of persons and organizations suspected of aiding, harboring or engaging in terrorist acts; owned or controlled by, or acting on
behalf of target countries, and narcotics traffickers. If a bank finds a name on any transaction, account or wire transfer that is on
an OFAC list, it must freeze or block the transactions on the account.

 Financial Privacy and Cybersecurity

 Under privacy protection provisions of the Gramm-Leach-Bliley
Act of 1999, and related regulations, we are limited in our ability to disclose non-public information about consumers to nonaffiliated
third parties. These limitations require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent
disclosure of certain personal information to a nonaffiliated third-party. Federal banking agencies, including the OCC, have adopted
guidelines for establishing information security standards and cybersecurity programs for implementing safeguards under the supervision
of the board of directors. These guidelines, along with related regulatory materials, increasingly focus on risk management and processes
related to information technology and the use of third parties in the provision of financial services.

 Consumers must be notified in the event of a data
breach under applicable federal and state laws. Under federal regulations, banking organizations are required to notify their primary
federal regulator as soon as possible and no later than 36 hours after the discovery of a "computer-security incident" that
rises to the level of a "notification incident" within the meaning attributed to those terms by the federal regulation. Banks'
service providers are required under the federal regulation to notify any affected bank to or on behalf of which the service provider
provides services "as soon as possible" after determining that it has experienced an incident that materially disrupts or
degrades, or is reasonably likely to materially disrupt or degrade, covered services provided to such bank for as much as four hours.

 See Item 1A. Risk Factors for a further discussion
of risks related to cybersecurity and Item 1C. Cybersecurity for a further discussion of risk management strategies and governance processes
related to cybersecurity.

 Deposit Premiums and Assessments

 Bank 34's deposits are insured by the Deposit
Insurance Fund ("DIF") of the FDIC up to $250,000, the maximum amount permitted by law. The FDIC uses the DIF to protect
against the loss of insured deposits if an FDIC-insured bank or savings association fails. As an FDIC-insured bank, we must pay deposit
insurance assessments to the FDIC based on our average total assets minus our average tangible equity.

 As an institution with less than $10 billion in
assets, our assessment rates are based on the level of risk we pose to the FDIC's DIF. The initial base rate for deposit insurance
is between three and 30 basis points. Total base assessment after possible adjustments now ranges between 1.5 and 40 basis points. For
established smaller institutions, such as us, the total base assessment rate is calculated by using supervisory ratings as well as (a)
an initial base assessment rate, (b) an unsecured debt adjustment (which can be positive or negative), and (c) a brokered deposit adjustment.

 In addition to the ordinary assessments described
above, the FDIC has the ability to impose special assessments in certain instances. For example, under the Dodd-Frank Act, the minimum
designated reserve ratio for the DIF was increased to 1.35% of the estimated total amount of insured deposits. Extraordinary growth in
insured deposits during the first and second quarters of 2020 caused the DIF reserve ratio to decline below the statutory minimum of
1.35%. In November 2023, following the closures of Silicon Valley Bank and Signature Bank and in connection with its systemic risk determination
announced on March 12, 2023, the FDIC announced a special deposit insurance assessment rate of 13.4 basis points beginning in the first
quarterly assessment period of 2024, adjusted to exclude the first $5 billion in deposits for an anticipated total of eight quarterly
assessment periods.

 The FDIC may terminate the deposit insurance of
any insured depository institution if it determines after a notice and hearing 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
condition imposed by the FDIC.

 CRE Guidance

 In December 2015, the federal banking regulators
released a statement entitled "Interagency Statement on Prudent Risk Management for Commercial Real Estate Lending" (the
"CRE Guidance"). In the CRE Guidance, the federal banking regulators (a) expressed concerns with institutions that ease
CRE underwriting standards, (b) directed financial institutions to maintain underwriting discipline and exercise risk management
practices to identify, measure and monitor lending risks, and (c) indicated that they will continue to pay special attention to
CRE lending activities and concentrations. The federal banking regulators previously issued guidance in December 2006, entitled "Interagency
Guidance on Concentrations in CRE Lending, Sound Risk Management Practices," which stated that an institution that is potentially
exposed to significant CRE concentration risk should employ enhanced risk management practices. Specifically, the guidance states that
such institutions have (i) total CRE loans representing 300% or more of the institution's total capital and (ii) the
outstanding balance of such institution's CRE loan portfolio has increased by 50% or more during the prior 36 months.

 Effect of Governmental Monetary Policies

 Our earnings are affected by domestic economic
conditions and the monetary policies of the U.S. and its agencies. The Federal Open Market Committee's monetary policies have had,
and are likely to continue to have, an important effect on the operating results of banks through its power to implement national monetary
policy in order, among other things, to curb inflation or combat a recession. The monetary policies of the Federal Reserve have major
effects on the levels of bank loans, investments and deposits through its open market operations in U.S. government securities and through
its regulation of the discount rate on borrowings of member banks and the reserve requirements against member bank deposits. We cannot
predict the nature or effect of future changes in such monetary policies.

 Future Legislation and Regulation

 Congress may enact legislation from time to time
that affects the regulation of the financial services industry, and state legislatures may enact legislation from time to time affecting
the regulation of financial institutions chartered by or operating in those states. Federal and state regulatory agencies also periodically
propose and adopt changes to their regulations or change the manner in which existing regulations are applied or interpreted. The substance
or impact of pending or future legislation or regulation, or the application thereof, cannot be predicted, although enactment of the
proposed legislation has in the past and may in the future affect the regulatory structure under which we operate and may significantly
increase our costs, impede the efficiency of our internal business processes, require us to increase our regulatory capital or modify
our business strategy, or limit our ability to pursue business opportunities in an efficient manner. Our business, financial condition,
results of operations or prospects may be adversely affected, perhaps materially, as a result.

 Item
1A. Risk Factors

 An
investment in our securities involves risks and uncertainties. In addition to the other information set forth in this Form 10-K, including
the information addressed under "Forward-Looking Statements," investors in our securities should carefully consider the risk
factors discussed below. These factors could materially and adversely affect our business, financial condition, liquidity, results of
operations, and capital position and could cause our actual results to differ materially from our historical results or the results contemplated
by the forward-looking statements contained in this Form 10-K, in which case the trading price of our securities could decline. The risk
factors discussed below highlight the risks that we believe are material to us, but do not necessarily include all risks that we may
face, and an investor in our securities should not interpret the disclosure of a risk in the following risk factors to state or imply
that the risk has not already materialized.

 General
Risk Factors

 Our
historical operating results may not be indicative of our future operating results.

 We
may not be able to grow our banking businesses and our historical results of operations will not necessarily be indicative of
our future operations. Various factors, such as economic conditions, regulatory and legislative considerations, and competition, may
also impede our ability to expand our market presence. If we experience a significant decrease in our banking businesses, our
results of operations and financial condition may be adversely affected because a high percentage of our operating costs are fixed expenses.

 There
are risks, many beyond our control, which could cause our results to differ significantly from management's expectations. Some
of these risk factors are described below. Any factor described in this report could, by itself or together with one or more other factors,
adversely affect our business, results of operations and/or financial condition. Additional risks and uncertainties not currently known
to us or that we currently consider to not be material also may materially and adversely affect us. In assessing these risks, you should
also refer to other information disclosed in our SEC filings, including the financial statements and notes thereto.

 Risks
Related to Our Business

 Economic
and Geographic-Related Risks

 Our
business may be adversely affected by economic conditions. Generally, in periods of economic downturns, including periods of rising interest
rates and recessions, our realized credit losses increase, our deposit and funding costs increase, demand for our products and services
declines, and the credit quality of our loan portfolio declines.

 Our
financial performance generally, and in particular, the ability of borrowers to pay interest on and repay the principal of outstanding
loans and the value of collateral securing those loans, as well as demand for loans and other products and services we offer and whose
success we rely on is highly dependent upon the business environment in the primary markets where we operate and
in the United States as a whole. Unlike larger financial institutions that are more geographically diversified, we are a community bank
that provides banking and financial services to customers primarily in Arizona and New Mexico. The economic conditions in these markets
may be different from, and in some instances worse than, the economic conditions in the United States as a whole.

 Some
elements of the business environment that affect our financial performance include short-term and long-term interest rates, the prevailing
yield curve, inflation, monetary supply, fluctuations in the debt and equity capital markets, and the strength of the domestic economy
and the local economies in the markets in which we operate. Unfavorable market conditions can result in a deterioration of the credit
quality of borrowers, an increase in the number of loan delinquencies, defaults and charge-offs, foreclosures, additional provisions
for credit losses, adverse asset values, a reduction in assets under management or administration, and an increase in our deposit
and funding costs. A substantial component of our loan portfolio is secured by real estate. A decline in real estate values can negatively
impact our ability to recover our investment should the borrower become delinquent. Loans secured by stock or other collateral may be
adversely impacted by a downturn in the economy and other factors that could reduce the recoverability of our investment. Unsecured loans
are dependent on the solvency of the borrower, which can deteriorate, leaving us with a risk of loss. Unfavorable or uncertain economic
and market conditions can be caused by declines in economic growth, business activity or investor or business confidence, limitations
on the availability of or increases in the cost of credit and capital, increases in inflation or interest rates, high unemployment, natural
disasters, epidemics and pandemics (such as COVID-19), state or local government insolvency, or a combination of these or other factors.

 More
specifically, the market conditions in the markets in which we have a presence may be different from, and could be worse than, the economic
conditions in the United States as a whole. As of July 2023, the unemployment rates in Arizona and New Mexico were each 3.6% while the
United States unemployment rate was 3.8%. For the first quarter of 2023 as compared to the fourth quarter of 2022, Arizona and New Mexico
had gross domestic product (GDP) growth of 0.7% and 0.4%, respectively, as compared to 1.5% GDP growth for the United States over the
same time period. Additionally, for the first quarter of 2023 each of Arizona and New Mexico had deposit growth of $3.5 billion and $34
million, respectively. As discussed elsewhere in these Risk Factors, inflationary pressures have caused the Federal Reserve to recently
increase interest rates although the Federal Reserve has indicated that there could be interest rate decreases in 2024. Increases
in interest rates in the past have led to recessions of various lengths and intensities and might lead to such a recession in the near
future. Such a recession or any other adverse changes in business and economic conditions generally or specifically in the markets in
which we operate could affect our business, including causing one or more of the following negative developments:

 an
 increase in our deposit and funding costs;

 a
 decrease in the demand for loans and other products and services we offer;

 a
 decrease in our deposit account balances as customers move funds to seek to obtain maximum federal deposit insurance coverage or
 to seek higher interest rates;

 a
 decrease in the value of the collateral securing our residential or commercial real estate loans;

 a
 permanent impairment of our assets; or

 an
 increase in the number of customers or other counterparties who default on their loans or other obligations to us, which could result
 in a higher level of nonperforming assets, net charge-offs, and provision for credit losses.

 The
impact of the COVID-19 pandemic is fluid and there is pervasive uncertainty surrounding the future economic conditions that will emerge
in the years following the onset of the pandemic. Moreover, as economic conditions relating to the pandemic have improved over time,
the Federal Reserve has shifted its focus to limiting inflationary and other potentially adverse effects of the pandemic-related government
stimulus, which signals the potential for a continued period of economic uncertainty. In addition, there are continuing concerns related
to, among other things, the level of U.S. government debt and fiscal actions that may be taken to address that debt, the potential resurgence
of economic and political tensions with China, the Russian invasion of Ukraine, and conflict in the Middle East, each of which may have
a destabilizing effect on financial markets and economic activity. Economic pressure on consumers and overall economic uncertainty may
result in changes in consumer and business spending, borrowing and saving habits. These economic conditions and/or other negative developments
in the domestic or international credit markets may significantly affect the markets in which we do business, the value of our loans
and investments, and our ongoing operations, costs and profitability. Declines in real estate values and sales volumes and high unemployment
or underemployment may also result in higher than expected loan delinquencies, increases in our levels of nonperforming and classified
assets and a decline in demand for our products and services. These negative events may cause us to incur losses and may adversely affect
our capital, liquidity and financial condition.

 Inflationary
pressures present a potential threat to our results of operation and financial condition.

 The
United States generally and the regions in which we operate specifically have recently experienced, for the first time in decades, significant
inflationary pressures, evidenced by higher gas prices, higher food prices and higher prices for other consumer items. Accordingly, inflation can result in material adverse effects upon our customers, their
businesses and, as a result, our financial position and results of operation. Inflation also can and does generally lead to higher interest
rates, which have their own separate risks. Decreased deposit balances could result in our reliance upon higher cost funding sources.
See Lending and Interest Rate Risks included in these Risk Factors below.

 The
Federal Reserve has implemented significant economic strategies that have affected interest rates, inflation, asset values, and the shape
of the yield curve. These strategies have had, and will continue to have, a significant impact on our business and on many of our clients.

 To
illustrate: in response to the recession in 2008-09 and the following uneven recovery, the Federal Reserve implemented a series of domestic
monetary initiatives designed to lower rates and make credit easier to obtain. The Federal Reserve changed course in 2015, raising rates
several times through 2018. The last raise in 2018 was accompanied by a substantial and broad stock market decline. In 2019, the Federal
Reserve began to lower rates. In 2020, in response to economic disruption associated with the COVID-19 pandemic, the Federal Reserve
quickly reduced short-term rates to extremely low levels and acted to influence the markets to reduce long-term rates as well. During
2021, the Federal Reserve significantly reduced its "easing" actions that held down long-term rates. During 2022, the Federal
Reserve switched to a tightening policy. It raised short term rates significantly and rapidly over most of the year. Those actions triggered
a significant decline in the values of most categories of U.S. stocks and bonds; impacted bank asset values, funding costs, and liquidity
resources; significantly raised recessionary expectations for the U.S.; and inverted the yield curve through the second quarter of 2023.
The Federal Reserve has slowed the rate of increases in 2023 with 25 basis point increases occurring in February, March, May, and July.
The Federal Reserve has not increased interest rates since July and has indicated that interest rate decreases may occur in 2024.

 These
increases in interest rates may have significant and adverse effects upon our business as well as the business of many of our customers.
For example, the raising of short-term interest rates: (i) increases our cost of funds due largely to overall increases in the cost of
our deposits which may decrease our net interest margin; (ii) increases the cost of our other funding sources such as borrowings from
the Federal Home Loan Bank, which we utilize for liquidity, may further decrease our net interest margins; (iii) may cause
a further decline in the value of our investment portfolio which could result in unrealized or realized losses if the investments
are sold; (iv) may cause a decline in the demand for our products if borrowers are no longer able to afford our loans or if our competitors
offer more attractive rates for loans or deposits; and (v) may cause an increase in the number of customers who default on their loans
or obligations to us as they may not be able to fund higher loan payments on floating interest rate loans or have the ability to refinance
maturing loans at higher interest rates. Risks associated with interest rates and the yield curve and their potential effects on financial
institutions are further discussed in these Risk Factors under the Caption Lending and Interest Rate Risks.

Reserve strategies can, and often are intended to, affect the domestic money supply, inflation, interest rates, and the shape of the
yield curve.

 Effects
on the yield curve often are most pronounced at the short end of the curve, which is of particular importance to us and other banks.
Among other things, easing strategies are intended to lower interest rates, expand the money supply, and stimulate economic activity,
while tightening strategies are intended to increase interest rates, discourage borrowing, tighten the money supply, and restrain economic
activity. However, as noted above, in 2022 short term rates rose faster than long term rates to the point that the yield curve inverted
for much of the final two quarters of the year. This sort of phenomenon—where short term rates are raised more strongly and rapidly
than long-term rates—is relatively common. It is not clear when long term rates are likely to catch up, or when short
term rates will decrease, if at all.

 Many
external factors may interfere with the effects of Federal Reserve strategies or cause them to be changed, sometimes quickly.
Such factors include significant economic trends or events as well as significant international monetary policies and events. As exemplified
by the March 2023 bank failures in the U.S., such strategies also can affect the U.S. and world-wide financial systems in ways that may
be difficult to predict. Risks associated with interest rates and the yield curve and their potential effects on financial institutions
are discussed in these Risk Factors under the Caption Lending and Interest Rate Risks.

 Lending
and Interest Rate Risks

 If
we fail to effectively manage credit risk, our business and financial condition will suffer.

 We
must effectively manage credit risk. There are risks inherent in making any loan, including risks with respect to the period of time
over which the loan may be repaid, risks relating to proper loan underwriting and guidelines, risks resulting from changes in economic
and industry conditions, risks inherent in dealing with individual borrowers and risks resulting from uncertainties as to the future
value of collateral. There is no assurance that our credit risk monitoring and loan approval procedures are or will be adequate or will
reduce the inherent risks associated with lending.

 Our
risk management practices, such as monitoring the concentration of our loans within specific industries and our credit approval, review
and administrative practices, may not adequately reduce credit risk, and our credit administration personnel, policies and procedures
may not adequately adapt to changes in economic or any other conditions affecting customers and the quality of the loan portfolio. Many
of our loans are made to small and medium-sized businesses that are less able to withstand competitive, economic and financial pressures
than larger borrowers. Consequently, we may have significant exposure if any of these borrowers become unable to pay their loan obligations
as a result of economic or market conditions, or personal circumstances. A failure to effectively measure and limit the credit risk associated
with our loan portfolio may result in loan defaults, foreclosures and additional charge-offs, and may necessitate that we significantly
increase our allowance for credit losses, each of which could adversely affect our net income. As a result, our inability to successfully
manage credit risk could have a material adverse effect on our business, financial condition and results of operations.

 Our
estimated allowance for credit losses and fair value adjustments with respect to acquired loans may prove to be insufficient to absorb
actual losses in our loan portfolio, which may adversely affect our business, financial condition and results of operations.

 We
are exposed to the risk that our customers will be unable to repay their loans according to their terms and that any collateral securing
the payment of their loans will not be sufficient to ensure full repayment. Credit losses are inherent in the lending business and could
have a material adverse effect on our operating results and ability to meet our obligations. We evaluate the collectability of our loan
portfolio and we maintain an allowance for credit losses that represents management's judgment of expected credit losses
in our loan portfolio that we believe to be adequate based on a variety of factors including but not limited to: the risk characteristics
of various classifications of loans, previous loan loss experience, specific loans that have loss potential, delinquency trends, estimated
fair market value of the collateral, current economic conditions, the views of our regulators, and geographic and industry loan concentrations.
If our evaluation is incorrect and defaults by borrowers lead to credit losses that exceed our allowance for credit losses, our
operating results could be significantly and adversely affected. No assurance can be given that the allowance for credit losses
will be adequate to cover credit losses incurred in our portfolio. We may experience credit losses in our loan portfolio
or perceive adverse conditions and trends that may require us to significantly increase our allowance for credit losses in the future,
a decision that would unfavorably impact our operating results.

 The
application of the acquisition method of accounting in any future acquisitions, including the proposed merger with CBOA, will impact
our allowance for credit losses. Under the acquisition method of accounting, all acquired loans will be recorded in our consolidated
financial statements at their estimated fair value at the time of acquisition. To the extent that our estimates of fair value
are too high, we will incur losses associated with the acquired loans.

 In
addition, our regulators, as an integral part of their periodic examination, review our methodology for calculating, and the adequacy
of, our allowance and provision for credit losses. Although we believe that the methodology used by us to determine the amount of both
the allowance and provision for credit losses is effective, the regulators may conclude that changes
are necessary based on information available to them at the time of their review, which could impact our overall credit portfolio. Such
changes could result in, among other things, modifications to our methodology for determining our allowance or provision for credit losses
or models, reclassification or downgrades of our loans, increases in our allowance for credit losses or other credit costs, imposition
of new or more stringent concentration limits, restrictions in our lending activities and/or recognition of further losses. Further,
if actual charge-offs in future periods exceed the amounts allocated to the allowance for credit losses, we may need additional provisions
for credit losses to restore the adequacy of our allowance for credit losses.

 We
are exposed to higher credit risk by commercial real estate, commercial business, and construction lending.

real estate, commercial business and construction lending usually involves higher credit risks than that of single-family residential
lending. At December 31, 2023, the following loan types accounted for the stated percentages of our total loan portfolio: commercial
real estate (owner and non-owner occupied) 54.7%, commercial and industrial business 10.9%, and construction and land development lending
7.5%. These types of loans involve larger loan balances to a single borrower or groups of related borrowers.

real estate loans may be affected to a greater extent than residential loans by adverse conditions in real estate markets or the economy
because commercial real estate borrowers' ability to repay their loans depends in some cases on successful development of their
properties, as well as the factors affecting residential real estate borrowers. These loans may involve greater risk because they generally
are not fully amortizing over the loan period, but have a balloon payment due at maturity. A borrower's ability to make a balloon
payment typically will depend on being able to either refinance the loan or sell the underlying property in a timely manner. The increase
in market rates could increase the risk that a borrower is unable to meet the credit standards needed to refinance a loan.

and industrial business loans are typically based on the borrowers' ability to repay the loans from the cash flow of their businesses,
which may be unpredictable, and the collateral securing these loans may fluctuate in value. Although commercial and industrial business
loans are often collateralized by equipment, inventory, accounts receivable, or other business assets, the liquidation of collateral
in the event of default is often an insufficient source of repayment because, for instance, accounts receivable may be uncollectible
and inventories may be obsolete or of limited use. In addition, business assets may depreciate over time, may be difficult to appraise,
and may fluctuate in value based on the success of the business. Accordingly, the repayment of commercial business loans depends primarily
on the cash flow and credit worthiness of the borrower and secondarily on the underlying collateral value provided by the borrower and
liquidity of the guarantor.

 Risk
of loss on a construction and land development loan depends largely upon whether our initial estimate of the property's value at
completion of construction exceeds the cost of the property construction (including interest) and the availability of permanent take-out
financing. During the construction phase, a number of factors can result in delays and cost overruns. If estimates of value are inaccurate
or if actual construction costs exceed estimates, the value of the property securing the loan may be insufficient to ensure full repayment
when completed through a permanent loan or by seizure of collateral.

real estate, commercial business, and construction loans are more susceptible to a risk of loss during a downturn in the business cycle.
Our underwriting, review, and monitoring cannot eliminate all of the risks related to these loans.

 As
of December 31, 2023, our commercial real estate loans (owner and non-owner occupied) were equal to 338% of the bank's
total risk-based capital. The banking regulators give commercial real estate lending greater scrutiny, and may require banks with
higher levels of commercial real estate loans to implement enhanced underwriting, internal controls, risk management policies and portfolio
stress testing, as well as possibly higher levels of allowances for credit losses and capital levels as a result of commercial
real estate lending growth and exposures.

 A
significant portion of our loan portfolio is secured by real estate, and events that negatively impact the real estate market could hurt
our business.

 A
significant portion of our loans are secured by real estate. As of December 31, 2023, approximately 88.9% of such loans had real estate
as primary collateral. Additionally, certain loans may have real estate as a secondary component of collateral. The real estate collateral
in each case provides an alternate source of repayment in the event of default by the borrower and may deteriorate in value during the
time the credit is extended. Deterioration in the real estate market could cause us to adjust our opinion of the level of credit quality
in our loan portfolio. Such a determination may lead to an additional increase in our provisions for credit losses, which could
also adversely affect our business, financial condition, and results of operations.

 We
recently experienced the deterioration of a large out of market commercial real estate credit, and future deterioration in our commercial
real estate loan portfolio could adversely affect our results of operations and financial condition.

 To diversify the geographic scope of our commercial
real estate loan portfolio, a portion of our commercial real estate and construction loan portfolios is secured by real estate outside
of our market areas. At December 31, 2023, approximately 9.8% of our commercial real estate and construction loan portfolios were collateralized
with out of market real estate. As of September 30, 2023, we experienced a deterioration of a large out of market commercial real estate
loan which resulted in this loan becoming nonperforming as of September 30, 2023. As of December 31, 2023, a $3.3 million loss was recognized,
and the remaining $3 million balance was transferred to other real estate owned. Subsequent to the December 31, 2023, balance sheet date,
the note associated with the loan was sold for $2.5 million and an additional $0.5 million loss was taken in the first quarter of 2024.
The additional deterioration in the value occurred due to the decline in rent collections in January and February of 2024 compared to
December of 2023.

 Due to this event, management engaged an external
third-party to complete a loan review in the 4 th quarter of 2023. This loan review included a review of approximately 90%
of our out of market collateral loan portfolio. In addition, management conducted a review of the largest out of market credits, which
included a review of the real estate appraisals for the out of market collateral real estate securing these credits. While the external
third-party and management reviews did not indicate significant deterioration in our out of market collateral loan portfolio, we may
experience material deteriorations with other existing real estate loans, including real estate loans in our out of market commercial
real estate loan portfolio. In addition, management plans to limit out of market lending in the future.

 Future deterioration in our commercial real estate
loan portfolio could adversely affect our results of operations and financial condition. Other risks associated with our commercial real
estate loan portfolio and nonperforming assets are further discussed in these Risk Factors under the Caption, Lending and Interest
Rate Risk.

 Nonperforming
assets take significant time and resources to resolve and adversely affect our results of operations and financial condition.

 At
December 31, 2023, we had a total of approximately $5.2 million of nonperforming assets or approximately 0.90% of total assets. Our nonperforming
assets adversely affect our operating results in various ways. We do not record interest income on nonaccrual loans or other real
estate owned, thereby adversely affecting our operating results and returns on assets and equity, increasing our loan administration
costs and adversely affecting our efficiency ratio. When we take collateral in foreclosures and similar proceedings, we are required
to mark the related asset to the then fair market value of the collateral, which may ultimately result in a loss. An increase in the
level of nonperforming assets increases our risk profile and may impact the capital levels regulators believe are appropriate in light
of the ensuing risk profile. In addition, the resolution of nonperforming assets requires significant commitments of time from management,
which may materially and adversely impact their ability to perform their other responsibilities. If we experience increases in nonperforming
loans and nonperforming assets, our net interest income may be negatively impacted and our loan administration costs could increase,
each of which could have an adverse effect on our operating results and related ratios, such as return on assets and equity.

 New
accounting standards such as ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) (CECL) could require us to increase
our allowance for credit losses and may have a material adverse effect on our financial condition and results of operations.

 The
measure of our allowance for credit losses has been impacted by the adoption and interpretation of accounting standards. The Financial
Accounting Standards Board, or FASB, has issued a new credit impairment model, the Current Expected Credit Loss, or CECL model, which
became applicable to us in 2023. Under the CECL model, we are required to present certain financial assets carried at amortized cost,
such as loans held for investment, unused commitments, and held-to-maturity debt securities, at the net amount expected to be collected.
The measurement of expected credit losses is based on information about past events, including historical experience, current conditions,
and reasonable and supportable forecasts that affect the estimated collectability of loans held-for-investment, unfunded commitments,
and held-to-maturity debt securities. This measurement takes place at the time the financial asset is first added to the balance
sheet and periodically thereafter. This differs significantly from the "incurred loss" model previously required under GAAP,
which delayed recognition until it is probable a loss was incurred. Accordingly, the CECL model may create more volatility in the level
of our allowance for credit losses. If we are required to materially increase our level of allowance for credit losses for any reason,
such increase could adversely affect our business, financial condition and results of operations. Upon adoption, we recorded an increase
to the allowance for credit losses (ACL) on loans held-for-investment of $604,000, established an ACL on unfunded commitments of $165,000,
established an ACL on held-to-maturity investments of $38,000, recorded an increase to deferred tax assets of $153,000, and a corresponding
one-time cumulative reduction to retained earnings, net of tax, of $654,000 in the consolidated balance sheet as of January 1, 2023.

 We
are subject to interest rate risk, which could adversely affect our financial condition and profitability.

 The
majority of our banking assets are subject to changes in interest rates. For example, as of December 31, 2023, 34% of our loan portfolio,
including loan level derivative instruments, consisted of floating and adjustable interest rate loans. Like most financial institutions,
our earnings significantly depend on our net interest income, the principal component of our operating results, which is the difference
between interest earned by us from our interest-earning assets, such as loans and investment securities, and interest paid by us on our
interest-bearing liabilities, such as deposits and borrowings. We expect that we will periodically experience "gaps" in the
interest rate sensitivities of our assets and liabilities, meaning that either our interest-bearing liabilities will be more sensitive
to changes in market interest rates than our interest-earning assets, or vice versa. In either event, if market interest rates should
move contrary to our position, this "gap" will negatively impact our earnings. Many factors beyond our control impact interest
rates, including economic conditions, governmental monetary policies, inflation, recession, changes in unemployment, the money supply,
and disorder and instability in domestic and foreign financial markets. Changes in monetary policies of the various government agencies
could influence not only the interest we receive on loans and securities and the interest we pay on deposits and borrowings, but such
changes could also affect our ability to originate loans and obtain deposits, the fair value of our financial assets and liabilities,
and the average duration of our assets and liabilities.

 In
addition, changes in monetary policy, including changes in interest rates, will influence the origination of loans, the prepayment
of loans, and the rates received on loans.

 In
a declining interest rate environment, there may be an increase in prepayments on loans as borrowers refinance their loans at lower rates.
Interest rate increases often result in larger payment requirements for our floating interest rate borrowers, which increases the potential
for default. At the same time, the marketability of the property securing a loan may be adversely affected by any reduced demand resulting
from higher interest rates. An increase (or decrease) in interest rates may also require us to increase (or decrease) the interest rates
that we pay on our deposits.

in interest rates also can affect the value of loans, securities and other assets. An increase in interest rates that adversely affects
the ability of borrowers to pay the principal or interest on loans may lead to increases in nonperforming assets, charge-offs and delinquencies, increases to the allowance for credit losses, and a reduction of income recognized, among others, which could have a material
adverse effect on our capital, results of operations and cash flows. Further, when we place a loan on non-accrual status, we reverse
any accrued but unpaid interest receivable, which decreases interest income. At the same time, we continue to have a cost to fund the
loan, which is reflected as interest expense, without any interest income to offset the associated funding expense. Thus, an increase
in the amount of nonperforming assets could have a material adverse impact on our net interest income.

 Additionally,
an increase in interest rates may not increase our net interest income to the same extent we currently anticipate based on our modeling
estimates and the assumptions underlying such modeling. Our failure to benefit from an increased interest rate environment to the extent
we currently estimate, to the same extent as our competitors or at all could have a material adverse effect on our business, financial
condition and results of operations.

 In
response to the COVID-19 pandemic, the Federal Open Market Committee cut short-term interest rates to a record low range of 0% to 0.25%.
Ov er the course of 2022 and throughout 2023 these record low rates were reversed, with the Federal
Reserve continuing to signal its concerns with respect to inflation. Interest Rates have remained constant in the second half of 2023
with the Federal Reserve signaling that interest rate decreases could occur in 2024.

 Our
cost of funds may increase as a result of general economic conditions, interest rates and competitive pressures.

 We
have traditionally obtained funds through local deposits and thus we have a base of lower cost transaction deposits. Generally, we believe
local deposits are less expensive and more stable source of funds than other borrowings because interest rates paid for local
deposits are typically lower than interest rates charged for borrowings from the Federal Reserve or from other institutional lenders
and reflect a mix of transaction and time deposits, whereas brokered deposits typically are higher cost time deposits. Further, economic
conditions and rising interest rates could result in a decrease in our transaction deposit account balances as customers seek to obtain
maximum federal deposit insurance coverage or to seek higher interest rates. Our cost of funds has increased in the past 12 months due
largely to overall increases in the cost of our deposits. Additionally, our costs of funds, operating results and liquidity are
likely to be adversely affected if, and to the extent, we have to rely upon higher cost borrowings from the Federal Reserve or other
institutional lenders, such as the Federal Home Loan Bank ("FHLB"), or upon brokers to fund liquidity needs, and changes
in our deposit mix, pricing, and growth could adversely affect our profitability and the ability to expand our
loan portfolio.

 Rapidly
rising interest rates will impact the value of our investment securities and the cost of our funding sources, including deposits.

 Our
operating results are highly dependent on our net interest income, which is the difference between the interest income paid to
us on our loans and investments and the interest we pay to third parties such as our depositors, lenders and debt holders. Changes in
interest rates can impact our profits and the fair values of certain of our assets and liabilities. Higher market interest rates and
increased competition for deposits may result in higher interest expense, as we may offer higher rates to attract or retain customer
deposits. Increases in interest rates also may increase the amount of interest expense we pay to creditors on short and long-term debt.
Interest rate risk can also result from mismatches between the dollar amounts of re-pricing or maturing assets and liabilities and from
mismatches in the timing and rates at which our assets and liabilities re-price. Changes in market values of investment securities classified
as available for sale are impacted by higher rates and can negatively impact our other comprehensive income and equity levels through
accumulated other comprehensive income, which includes net unrealized gains and losses on those securities. Further, such losses could
be realized into earnings should liquidity and/or business strategy necessitate the sales of securities in a loss position. We actively
monitor and manage the balances of our maturing and re-pricing assets and liabilities to reduce the adverse impact of changes in interest
rates, but there can be no assurance that we will be able to avoid material adverse effects on our net interest margin in all market
conditions.

 A
flat or inverted yield curve may reduce our net interest margin and adversely affect our loan and investment portfolios.

 The
yield curve is a reflection of interest rates applicable to short and long-term debt. The yield curve is upward sloping when short-term
rates are lower than long-term rates; it is flat when short-term rates and long-term rates are nearly the same; and it is inverted when
short-term rates exceed long-term rates. Historically, the yield curve is usually upward sloping (higher rates for longer terms). However,
the yield curve can be relatively flat or inverted (downward sloping), which has happened several times in the past few years, and in
fact was common in the second half of 2022 and throughout 2023. A flat or inverted yield curve, which tends to decrease net interest
margin, would adversely impact our lending businesses and investment portfolio. The Federal Reserve, consistent with long-term goals,
has been raising rates in response to inflation. We cannot predict how long those conditions will exist. In 2024 there is significant
risk, especially if yield curve inversion remains common and a recession begins, that our net interest margin could compress.

 We
are subject to environmental liability and climate change risk associated with our business activities.

 We
own certain of our properties, and, in the course of our business, we may purchase real estate, or we may foreclose on and take title
to real estate. As a result, we could be subject to environmental liabilities with respect to these properties. We may be held liable
to a governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs required by
these parties in connection with environmental contamination or may be required to investigate or clean up hazardous or toxic substances
or chemical releases at a property. The costs associated with investigation or remediation activities could be substantial and could
exceed the value of the underlying properties. In addition, if we are the owner or former owner of a contaminated site, we may be subject
to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property.
Any significant environmental liabilities could have a material adverse effect on our business, financial condition and results of operations.

 In
addition, we are subject to the growing risk of climate change. Among the risks associated with climate change are more frequent severe
weather events. Severe weather events such as droughts, heat waves, hurricanes, tropical storms, tornados, winter storms, freezes, flooding
and other large-scale weather catastrophes in our markets subject us to significant risks and more frequent severe weather events magnify
those risks. Large-scale weather catastrophes or other significant climate change effects that either damage or destroy residential or
multifamily real estate underlying mortgage loans or real estate collateral, or negatively affects the value of real estate collateral
or the ability of borrowers to continue to make payments on loans, could decrease the value of our real estate collateral or increase
our delinquency rates in the affected areas and thus diminish the value of our loan portfolio. Such events could also cause downturns
in economic and market conditions generally, which could have an adverse effect on our business and results of operations. The
potential losses and costs associated with climate change related risks are difficult to predict and could have a material adverse effect
on our business, financial condition and results of operation.

 Operational
Risks

 We
are subject to losses due to errors, omissions or fraudulent behavior by our employees, clients, counterparties or other third parties.

 We
are exposed to many types of operational risk, including the risk of fraud by employees and third parties, clerical recordkeeping errors
and transactional errors. Our business is dependent on our employees as well as third-party service providers to process a large number
of increasingly complex transactions. We could be materially and adversely affected if employees, clients, counterparties or other third
parties caused an operational breakdown or failure, either as a result of human error, fraudulent manipulation or purposeful damage to
any of our operations or systems.

 In
deciding whether to extend credit or enter into other transactions with clients and counterparties, we may rely on information furnished
to us by or on behalf of clients and counterparties, including financial statements and other financial information. We also may rely
on representations of clients and counterparties as to the accuracy and completeness of that information and, with respect to financial
statements, on reports of independent auditors. For example, in deciding whether to extend credit to clients, we may assume that a customer's
audited financial statements conform to GAAP and present fairly, in all material respects, the financial condition, results of operations
and cash flows of the customer. Our operating results are significantly affected by our ability to properly originate, underwrite
and service loans. Our financial condition and results of operations could be negatively impacted to the extent we incorrectly assess
the creditworthiness of our borrowers, fail to detect or respond to deterioration in asset quality in a timely manner, or rely on financial
statements that do not comply with GAAP or are materially misleading.

 We
are exposed to the possibility of technology failure and a disruption in our operations may adversely affect our business.

 We
rely on our computer systems and the technology of outside service providers. Our daily operations depend on the operational effectiveness
of their technology. We rely on our systems to accurately track and record our assets and liabilities. If our computer systems or outside
technology sources become unreliable, fail, or experience a breach of security, our ability to maintain accurate financial records may
be impaired, which could materially affect our business operations and financial condition. In addition, a disruption in our operations
resulting from failure of transportation and telecommunication systems, loss of power, interruption of other utilities, natural disaster,
fire, global climate changes, computer hacking or viruses, failure of technology, terrorist activity or the domestic and foreign response
to such activity or other events outside of our control could have an adverse impact on the financial services industry as a whole and/or
on our business. Our business recovery plan may not be adequate and may not prevent significant interruptions of our operations or substantial
losses. The increased number of cyberattacks during the past few years has further heightened our attention to this risk.

 Fraud
is a major, and increasing operational risk for us and all banks.

 Two
traditional areas, deposit fraud (check kiting, wire fraud, etc.) and loan fraud, continue to be major sources of fraud attempts and
loss. The sophistication and methods used to perpetrate fraud continue to evolve as technology changes. In addition to cybersecurity
risk (discussed below), new technologies have made it easier for bad actors to obtain and use client personal information, mimic signatures
and otherwise create false documents that look genuine. The industry fraud threat continues to evolve, including but not limited to card
fraud, check fraud, social engineering and phishing attacks for identity theft and account takeover. Our anti-fraud measures are both
preventive and, when necessary, responsive; however, some level of fraud loss is unavoidable, and the risk of a major loss cannot be
eliminated.

 Our
ability to conduct and grow our businesses profitability is dependent in part upon our ability to create, maintain, expand, and
evolve an appropriate operational and organizational infrastructure, manage expenses, and recruit and retain personnel with the ability
to manage a complex business.

 Operational
risk can arise in many ways, including: errors related to failed or inadequate physical, operational, information technology, or other
processes; faulty or disabled computer or other technology systems; fraud, theft, physical security breaches, electronic data and related
security breaches, or other criminal conduct by associates or third parties; and exposure to other external events. Inadequacies may
present themselves in myriad ways. Actions taken to manage one risk may be ineffective against others. For example, information technology
systems may be sufficiently redundant to withstand a fire, incursion, malware, or other major casualty, but they may be insufficiently
adaptable to new business conditions or opportunities. Efforts to make systems more robust may make them less adaptable, and vice-versa.
Also, our efforts to control expenses, which is a significant priority for us, increases our operational challenges as we strive to maintain
client service and compliance at high quality and low cost.

 A
failure in or breach of our operational or security systems or infrastructure, or those of our third party vendors and other service
providers or other third parties, including as a result of cyber-attacks, could disrupt our businesses, result in the disclosure or misuse
of confidential or proprietary information, damage our reputation, increase our costs and cause losses.

 We
rely heavily on communications and information systems to conduct our business. Information security risks for financial institutions
such as ours have generally increased in recent years in part because of the proliferation of new technologies, the use of the internet
and telecommunications technologies to conduct financial transactions, and the increased sophistication and activities of organized crime,
hackers, terrorists, activists, and other external parties. As client, public, and regulatory expectations regarding operational and
information security have increased, our operational systems and infrastructure must continue to be safeguarded and monitored for potential
failures, disruptions, and breakdowns. Our business, financial, accounting and data processing systems, or other operating systems and
facilities may stop operating properly or become disabled or damaged as a result of a number of factors, including events that are wholly
or partially beyond our control. For example, there could be electrical or telecommunications outages; natural disasters such as earthquakes,
tornadoes, and hurricanes; disease pandemics (such as the COVID-19 pandemic); events arising from local or larger scale political or
social matters, including terrorist acts; and cyber-attacks.

 As
noted above, our business relies on our digital technologies, computer and email systems, software, and networks to conduct our operations.
Although we have information security procedures and controls in place, our technologies, systems, networks, and our clients' devices
may become the target of cyberattacks or information security breaches that could result in the unauthorized release, gathering, monitoring,
misuse, loss or destruction of our or our clients' confidential, proprietary and other information, or otherwise disrupt our or
our clients' or other third parties' business operations. Third parties with whom we do business or that facilitate our business
activities, including financial intermediaries, or vendors that provide services or security solutions for our operations, and other
third parties, could also be sources of operational and information security risk to us, including from breakdowns or failures of their
own systems or capacity constraints.

 To
date, we have experienced cybersecurity incidents. For example, we recently experienced cybersecurity incidents in June of 2023 in which
an unauthorized third party gained access to the email accounts of two of our employees. After investigation, we could not definitively
determine that sensitive customer information in these email accounts were not accessed by the unauthorized party. In response, we notified
the affected customers of the incident in early September 2023, and have taken steps to mitigate our and our customers' exposure
to unauthorized activity. To date, we have incurred expenses of approximately $25,000 related to the cybersecurity incidents.

 We
may experience additional cybersecurity incidents in the future that are or may be deemed to be material. While we have disaster recovery
and other policies and procedures designed to prevent or limit the effect of the failure, interruption or security breach of our information
systems, there can be no assurance that any such failures, interruptions or security breaches will not occur or, if they do occur, that
they will be adequately addressed. Our risk and exposure to these matters remains heightened because of the evolving nature of these
threats. As a result, cybersecurity and the continued development and enhancement of our controls, processes and practices designed to
protect our systems, computers, software, data and networks from attack, damage or unauthorized access, remain a focus for us. As threats
continue to evolve, we may be required to expend additional resources to continue to modify or enhance our protective measures or to
investigate and remediate information security vulnerabilities. Disruptions or failures in the physical infrastructure or operating systems
that support our businesses and clients, or cyber-attacks or security breaches of the networks, systems or devices that our clients use
to access our products and services could result in client attrition, 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.

 Our
board and its committees oversee our cybersecurity, disaster recovery and business continuity risk management framework. Our governance
oversight of cybersecurity, disaster recovery and business continuity risk management framework may not be effective in mitigating risks
and/or losses.

 Our
board of directors oversees our cybersecurity, disaster recovery and business continuity risk management framework. The board of directors
reviews and approves our cybersecurity, disaster recovery and business continuity risk management framework on an annual basis. The board
has delegated the primary review of our cybersecurity, disaster recovery and business continuity risk management framework and related
policies and procedures to the board-level Information Security Committee, which reports and makes recommendations to the board
of directors in these regards. Senior management is responsible for establishing, implementing, maintaining and testing our policies
and procedures related to cybersecurity, disaster recovery and business continuity and provides reports on these matters to the Information
Security Committee. The Information Security Committee reports its activities to the full board of directors.

 While
we have implemented a cybersecurity, disaster recovery and business continuity risk management framework to mitigate our loss and risk
exposure, there is no assurance that such framework will be effective under all circumstances. Failures in our governance oversight of
cybersecurity, disaster recovery and business continuity risk management framework could cause us to be more vulnerable to cyber attacks
and disruptions to our systems supporting customer activities, such as our online banking and mobile application which could result in
disruptions to our business, result in the disclosure or misuse of confidential proprietary information, damage our reputation, increase
our costs and cause losses. Risks associated with cybersecurity and disruptions to our operations are further addressed in these Risk
Factors under the Caption Operational Risks.

 Our
risk management framework may not be effective in mitigating risks and/or losses.

 We
have implemented a risk management framework to mitigate our risk and loss exposure. This framework is comprised of various processes,
systems and strategies, and is designed to identify, measure, monitor, report and manage the types of risk to which we are subject, including,
among others, credit risk, interest rate risk, liquidity risk, legal and regulatory risk, compliance risk, strategic risk, reputational
risk and operational risk related to our employees, systems and vendors, among others. Any system of control and any system to reduce
risk exposure, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute,
assurances that the objectives of the system are met and will be effective under all circumstances or that it will adequately identify,
manage or mitigate any risk or loss to us. Additionally, instruments, systems and strategies used to hedge or otherwise manage exposure
to various types of interest rate, price, legal and regulatory compliance, credit, liquidity, operational and business risks and enterprise-wide
risk could be less effective than anticipated. As a result, we may not be able to effectively mitigate our risk exposures in particular
market environments or against particular types of risk. If our risk management framework is not effective, we could suffer unexpected
losses and become subject to litigation, negative regulatory consequences, or reputational damage among other adverse consequences, any
of which could result in our business, financial condition, results of operations or prospects being materially adversely affected.

 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. 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:
being an integral part of the communities we serve; delivering superior service to our customers; and caring about our customers and
associates. Damage to our reputation could undermine the confidence of our current and potential clients in our ability to provide financial
services. Such damage could also impair the confidence of our counterparties and business partners, and ultimately affect our ability
to effect transactions. Maintenance of our reputation depends not only on our success in maintaining our core values and controlling
and mitigating the various risks described herein, but also on our success in identifying and appropriately addressing issues that may
arise in areas such as potential conflicts of interest, anti-money laundering, client personal information and privacy issues, record-keeping,
regulatory investigations and any litigation that may arise from the failure or perceived failure of us to comply with legal and regulatory
requirements. If our reputation is negatively affected, by the actions of our employees or otherwise, our business and, therefore, our
operating results may be materially adversely affected. Further, negative public opinion can expose us to litigation and regulatory action
as we seek to implement our growth strategy, which could adversely affect our business, financial condition and results of operations.

 Failure to complete our proposed merger
with CBOA could negatively impact us.

 Our merger
agreement with CBOA is subject to a number of conditions which must be fulfilled in order to complete the merger including the receipt
and maintenance of regulatory consents and approvals and shareholder approvals necessary to close the merger. If the proposed
merger is not completed for any reason, there may be various adverse consequences and we may experience negative reactions from the financial
markets and from our customers and employees. For example, our business may have been impacted adversely by the failure to pursue other
beneficial opportunities due to the focus of our management on the merger, without realizing any of the anticipated benefits of completing
the merger. Additionally, if the merger agreement is terminated, the market price of our common stock could decline to the extent that
current market prices reflect a market assumption that the merger will be beneficial and will be completed. We also could be subject
to litigation related to any failure to complete the merger or to proceedings commenced against us to perform our obligations under the
merger agreement.

 Additionally,
we have incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated
by the merger agreement. If the merger is not completed, we would have to recognize these expenses without realizing the expected benefits
of the merger.

 Regulatory approvals
for our proposed merger with CBOA may not be maintained, may take longer than expected or may impose conditions that are not presently
anticipated, cannot be met, or that could have an adverse effect on the combined company following the merger.

 Before
the merger with CBOA and the related bank merger may be completed, various approvals, consents and non-objections must be obtained from
bank regulatory authorities, including the Federal Reserve and the Office of the Comptroller of the Currency (the "OCC").
In determining whether to grant these approvals, the regulators consider a variety of factors, including the regulatory standing of each
party. Bancorp 34 received the OCC's approval of its application to merge Commerce Bank of Arizona with and into Bank 34 on August
4, 2023, and received the Federal Reserve's approval of its application to merge CBOA with and into Bancorp 34 on August 11, 2023,
which approvals are subject to certain conditions, including consummating the transaction within a stated timeframe and which would require
the parties to apply for an extension if they are unable to consummate the transaction within the stated timeframe. These approvals could
be delayed or not obtained at all, including due to an adverse development in either party's regulatory standing or in any other
factors considered by regulators in granting such approvals or an extension to such approvals governmental, political or community
group inquiries, investigations or opposition or changes in legislation or the political or regulatory environment generally.

 The
approvals or any extension to such approvals that are granted may impose terms and conditions, limitations, obligations or costs, or
place restrictions on the conduct of the combined company's business or require changes to the terms of the transactions contemplated
by the merger agreement. There can be no assurance that regulators will not impose any such conditions, limitations, obligations or restrictions
and that such conditions, limitations, obligations or restrictions will not have the effect of delaying the completion of any of the
transactions contemplated by the merger agreement, imposing additional material costs on or materially limiting the revenues of the combined
company following the merger or otherwise reduce the anticipated benefits of the merger if the merger were consummated successfully within
the expected timeframe. In addition, there can be no assurance that any such conditions, terms, obligations, or restrictions will not
result in the delay or abandonment of the merger. The completion of the proposed merger is conditioned on the receipt of the requisite
regulatory approvals without the imposition of any materially financially burdensome regulatory condition and the expiration of all statutory
waiting periods. Additionally, the completion of the proposed merger is conditioned on the absence of certain laws, orders, injunctions,
or decrees issued by any court or governmental entity of competent jurisdiction that would prevent, prohibit or make illegal the completion
of the merger, the bank merger or any of the other transactions contemplated by the merger agreement.

 If
the consummation of the proposed merger is delayed, including by a delay in receipt of necessary regulatory approvals or a failure to
maintain the current regulatory approvals, our business, financial condition, and results of operations may be adversely affected.

 Combining Bancorp
34 and CBOA may be more difficult, costly or time consuming than expected and we may fail to realize the anticipated benefits and
cost savings of the merger.

 The success
of our proposed merger with CBOA will depend, in part, on the ability to realize the anticipated cost savings from combining the businesses
of Bancorp 34 and CBOA. To realize the anticipated benefits and cost savings from the proposed merger, Bancorp 34 and CBOA
must successfully integrate and combine their businesses in a manner that permits those cost savings to be realized. If Bancorp 34
and CBOA are not able to successfully achieve these objectives, the anticipated benefits of the merger may not be realized fully
or at all or may take longer to realize than expected. In addition, the actual cost savings and anticipated benefits of the proposed
merger could be less than anticipated, and integration may result in additional unforeseen expenses.

 An
inability to realize the full extent of the anticipated benefits of the proposed merger and the other transactions contemplated by the
merger agreement, as well as any delays encountered in the integration process, could have an adverse effect on the revenues, levels
of expenses and operating results of the combined company following the completion of the merger, which may adversely affect the value
of the common stock of the combined company following the completion of the merger.

34 and CBOA have operated and, until the completion of the merger, must continue to operate, independently. It is possible that the
integration process could result in the loss of key employees, the disruption of our ongoing business or inconsistencies in standards,
controls, procedures and policies that adversely affect each company's ability to maintain relationships with clients, customers,
depositors and employees or to achieve the anticipated benefits and cost savings of the merger. Integration efforts may also divert management
attention during this transition period and for an undetermined period after completion of the merger, which may have an adverse effect
on the combined company.

 Interest rate volatility
may adversely impact the fair value adjustments of investments and loans acquired in our proposed merger with CBOA.

 Upon
the closing of our proposed merger with CBOA, the combined company will need to adjust the fair value of CBOA's investment and
loan portfolios. A continued rising interest rate environment could have the effect of increasing the magnitude of the purchase accounting
marks relating to such fair value adjustments, thereby increasing initial tangible book value dilution, extending the tangible book value
earn-back period, and negatively impacting the combined company's capital ratios, after consummation of the merger.

 Shareholder litigation
could prevent or delay the completion of our proposed merger with CBOA or otherwise negatively impact our business, financial condition,
and results of operations.

 Shareholders
of Bancorp 34 and/or CBOA may file lawsuits against Bancorp 34, CBOA and/or the directors and officers of either company
in connection with the proposed merger. One of the conditions to the closing is that no law order, injunction or decree issued by any
court or governmental entity of competent jurisdiction would prevent, prohibit or make illegal the completion of the merger, the bank
merger or any of the other transactions contemplated by the merger agreement be in effect. If any plaintiff were successful in obtaining
an injunction prohibiting Bancorp 34 or CBOA from completing the merger, the bank merger or any of the other transactions contemplated
by the merger agreement, then such injunction may delay or prevent the effectiveness of the merger and could result in significant costs
to Bancorp 34, including any cost associated with the indemnification of our directors and officers. We may incur costs in connection
with the defense or settlement of any shareholder lawsuits filed in connection with the merger. Shareholder lawsuits may divert management
attention from management of our business or operations. Such litigation could have an adverse effect on our business, financial condition
and results of operations and could prevent or delay the completion of the merger.

 We
depend on our executive officers and other key employees, and our ability to attract additional key personnel, to continue the implementation
of our long-term business strategy, and we could be harmed by the unexpected loss of their services.

 We
believe our future success will depend in large part on the skills of our executive officers and other key employees and our ability
to motivate and retain these individuals, as well as our ability to attract, motivate and retain highly qualified senior, middle
management and other skilled employees. Our business is primarily relationship-driven in that many of our key personnel have extensive
customer or asset management relationships. Loss of key personnel with such relationships may lead to the loss of business if the customers
were to follow that employee to a competitor or if asset management expertise was not replaced in a timely manner. Competition for employees
is intense, and the process of locating key personnel with the combination of skills and attributes required to execute our business
strategy may be lengthy. We may not be successful in retaining key personnel, and the unexpected loss of services of one or more of our
key personnel could have a material adverse effect on our business because of their skill, knowledge of our primary markets, years of
industry experience and the difficulty of promptly finding qualified replacement personnel. If the services of any of our key personnel
should become unavailable for any reason, we may not be able to identify and hire qualified persons on terms acceptable us, or at all,
which could have a material adverse effect on our business, financial condition, results of operation and future prospects.

to keep pace with technological change could adversely affect our business.

 The
financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven
products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers
and to reduce costs. Our future success will depend, in part, upon our ability to address the needs of our customers by using technology
to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in our operations.
Many of our competitors have substantially greater resources to invest in technological improvements. We may not be able to effectively
implement new technology-driven products and services or be successful in marketing these products and services to our customers. Failure
to successfully keep pace with technological change affecting the financial services industry could have a material adverse impact on
our business, financial condition and results of operations.

 Industry-Related
Risks

 We
are exposed to the possibility that more prepayments may be made by customers to pay down loan balances, which could reduce our interest
income and negatively impact our operating results.

 Prepayment
rates stem from consumer behavior, conditions in the housing and financial markets, general U.S. economic conditions, and the relative
interest rates on fixed-rate and adjustable-rate loans. Therefore, changes in prepayment rates are difficult to predict. Recognition
of deferred loan origination costs and premiums paid in originating these loans are normally recognized over the contractual life of
each loan. As prepayments occur, the rate at which net deferred loan origination costs and premiums are expensed will accelerate. The
effect of the acceleration of deferred costs and premium amortization may be mitigated by prepayment penalties paid by the borrower when
the loan is paid in full within a certain period of time, which varies between loans. If prepayment occurs after the period of time when
the loan is subject to a prepayment penalty, the effect of the acceleration of premium and deferred cost amortization is no longer mitigated.
We recognize premiums paid on mortgage-backed securities as an adjustment from interest income over the expected life of the security
based on the rate of repayment of the securities. Acceleration of prepayments on the loans underlying a mortgage-backed security shortens
the life of the investment security, increases the rate at which premiums are expensed and further reduces interest income. We may not
be able to reinvest loan and security prepayments at rates comparable to the prepaid instrument particularly in a period of declining
interest rates.

 We
could experience a decline in operating results due to competition with other financial institutions.

 We
face substantial competition in all areas of our operations from a variety of different competitors, both within and beyond our principal
markets, many of which are larger and may have more financial resources. Such competitors primarily include national, super-regional,
and internet banks within the various markets in which we operate. We also face competition from many other types of financial institutions,
including, without limitation, savings and loans, credit unions, finance companies, brokerage firms, insurance companies, and other financial
intermediaries. The financial services industry could become even more competitive as a result of legislative and regulatory changes
and continued consolidation. In addition, as customer preferences and expectations continue to evolve, technology has lowered barriers
to entry and made it possible for nonbanks to offer products and services traditionally provided by banks, such as automatic transfer
and automatic payment systems. Many of our competitors have fewer regulatory constraints and may have lower cost structures. Additionally,
due to their size, many competitors may be able to achieve economies of scale and, as a result, may offer a broader range of products
and services as well as better pricing for those products and services than we can.

 Our
ability to compete successfully depends on a number of factors, including, among other things:

 our
 ability to develop, maintain, and build upon long-term customer relationships based on top quality service, high ethical standards,
 and safe and sound assets;

 our
 ability to expand our market position;

 the
 scope, relevance, and pricing of the products and services we offer to meet our customers' needs and demands;

 the
 rate at which we introduce new products and services relative to our competitors;

 customer
 satisfaction with our level of service; and

 industry
 and general economic trends.

to perform in any of these areas could significantly weaken our competitive position, making it more difficult to attract new and retain
existing clients and our net interest margin and net interest income could decline, which would adversely affect our results of operations
and could cause us to incur losses in the future.

 Consumers
may decide not to use banks to complete their financial transactions.

 Technology
and other changes are allowing parties to complete financial transactions through alternative methods that historically have involved
banks. For example, consumers can now maintain funds that would have historically been held as bank deposits in brokerage accounts, mutual
fund, general-purpose reloadable prepaid cards, or cryptocurrencies. Consumers can also complete transactions such as paying
bills and/or transferring funds directly without the assistance of banks. The process of eliminating banks as intermediaries, known as
"disintermediation," could result in the loss of fee income, as well as the loss of customer deposits and the related income
generated from those deposits. The loss of these revenue streams and the lower cost of deposits as a source of funds could have a material
adverse effect on our financial condition and results of operations.

to keep pace with technological change could adversely affect our business.

 The
financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven
products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers
and to reduce costs. Our future success depends, in part, upon our ability to address the needs of our customers by using technology
to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in our operations.
Many of our competitors have substantially greater resources to invest in technological improvements. We may not be able to effectively
implement new technology-driven products and services or be successful in marketing these products and services to our customers. Failure
to successfully keep pace with technological change affecting the financial services industry could have a material adverse impact on
our business, financial condition and results of operations.

 Through
technological innovations and changes in client habits, the manner in which clients use financial services continues to change at a rapid
pace.

 We
provide a large number of services remotely (online and mobile), and physical branch utilization has been in long-term decline throughout
the industry for many years. Technology has helped us reduce costs and improve service, but also has weakened traditional geographic
and relationship ties, and has allowed disruptors to enter traditional banking areas. Through digital marketing and service platforms,
many banks are making client inroads unrelated to physical presence. This competitive risk is especially pronounced from the largest
U.S. banks, and from online-only banks, due in part to the investments they are able to sustain in their digital platforms. Companies
as disparate as PayPal, Coinbase and Starbucks provide payment and exchange services which compete directly with banks in ways
not possible traditionally.

 The
nature of technology-driven disruption to our industry is changing, in some cases seeking to displace traditional financial service providers
rather than merely enhance traditional services or their delivery.

 A
number of recent technologies have worked with the existing financial system and traditional banks, such as the evolution of ATM cards
into debit/credit cards and the evolution of debit/credit cards into smart phones. These sorts of technologies often have expanded the
market for banking services overall while siphoning a portion of the revenues from those services away from banks and disrupting prior
methods of delivering those services. Additionally, some recent innovations may tend to replace traditional banks as financial service
providers rather than merely augmenting those services.

 We
may be adversely affected by the lack of soundness of other financial institutions.

 Financial
services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships. We have exposure to many
different industries and counterparties, and routinely execute transactions with counterparties in the financial services industry, including
commercial banks, brokers and dealers, investment banks, and other institutional clients. Many of these transactions expose us to credit
risk in the event of a default by a counterparty or client. In addition, our credit risk may be exacerbated when the collateral held
by us cannot be realized or is liquidated at prices not sufficient to recover the full amount of the credit or derivative exposure due
to us. Any such losses could have a material adverse effect on our financial condition and results of operations.

 The
value of securities in our investment portfolio may decline in the future.

 As
of December 31, 2023, we had a carrying amount of $62.4 million of investment securities. The value of our investment securities may
be adversely affected by market conditions, including changes in interest rates, and the occurrence of any events adversely affecting
the issuer of particular securities in our investments portfolio. The Company evaluates all securities on a quarterly basis to determine
if a credit loss exists. The process for determining credit losses usually requires complex, subjective judgments about the future financial
performance of the issuer in order to assess the probability of receiving all contractual principal and interest payments on the security.
Because of changing economic and market conditions affecting issuers, we may be required to recognize credit losses in future periods,
which could have a material adverse effect on our business, financial condition, or results of operations.

 Our
deposit insurance premiums could be higher in the future, which could have an adverse effect on our future earnings.

 The
FDIC insures deposits at FDIC-insured depository institutions, such as Bank 34, up to $250,000 per depositor for each account ownership
category. Our regular assessments are based on average consolidated total assets minus average tangible equity as well as by risk
classification, which includes regulatory capital levels and the level of supervisory concern. In addition to ordinary assessments described
above, the FDIC has the ability to impose special assessments in certain instances.

 We
are generally unable to control the amount of premiums that we are required to pay for FDIC insurance. If there are additional bank or
financial institution failures, we may be required to pay higher FDIC premiums. For example, in response to March 2023 bank closures
and in an effort to strengthen public confidence in the banking system and protect depositors, regulators have announced that any losses
to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law,
which could increase the cost of our FDIC insurance assessments and affect our profitability. If our financial condition deteriorates
or if the bank regulators otherwise have supervisory concerns about us, then our assessments could rise. Any future additional assessments,
increases or required prepayments in FDIC insurance premiums could reduce our operating results, may limit our ability to pursue
certain business opportunities, or otherwise negatively impact our operations.

and Liquidity Risks

 We
may be exposed to a need for additional capital resources in the future and these capital resources may not be available when needed
or at all.

 We
may need to incur additional debt or equity financing in the future to make strategic acquisitions or investments or to strengthen our
capital and liquidity. Our ability to raise additional capital, if needed, will depend on, among other things, conditions in the
capital markets at that time, which are outside of our control and our financial performance. Accordingly, we cannot provide assurance
that such financing will be available to us on acceptable terms or at all. If we cannot raise additional capital when needed, our ability
to expand our operations through internal growth and acquisitions could be materially impaired. In addition, if we decide to
raise additional equity capital, our current stockholders' interests could be diluted.

 Liquidity,
primarily through deposits, is essential to our business model and a lack of liquidity, or an increase in the cost of liquidity could
materially impair our ability to fund our operations and jeopardize our results of operation, financial condition and cash flows.

 Liquidity
represents an institution's ability to provide funds to satisfy demands from depositors, borrowers and other creditors by either
converting assets into cash or accessing new or existing sources of incremental funds. Liquidity risk arises from the possibility that
we may be unable to satisfy current or future funding requirements and needs.

 Deposit
levels may be affected by several factors, including rates paid by competitors, general interest rate levels, returns available to customers
on alternative investments, customers seeking to maximize deposit insurance by limiting their deposits at a single financial institution
to the maximum federal deposit insurance level, general economic and market conditions and other factors. Loan repayments are a relatively
stable source of funds but are subject to the borrowers' ability to repay loans, which can be adversely affected by a number of
factors including changes in general economic conditions, adverse trends or events affecting business industry groups or specific businesses,
declines in real estate values or markets, business closings or lay-offs, inclement weather, natural disasters and other factors. Furthermore,
loans generally are not readily convertible to cash.

 From
time to time, if deposits and loan payments are not sufficient to meet our needs, we may be required to rely on secondary sources of
liquidity to meet growth in loans, deposit withdrawal demands or otherwise fund operations. Such secondary sources include FHLB advances,
brokered deposits, secured and unsecured federal funds lines of credit from correspondent banks, Federal Reserve borrowings and/or accessing
the equity or debt capital markets. The availability of these secondary funding sources is subject to broad economic conditions, to regulation
and to investor assessment of our financial strength and, as such, the cost of funds may fluctuate significantly and/or the availability
of such funds may be restricted, thus impacting our net interest income, our immediate liquidity and/or our access to additional liquidity.
Additionally, if we fail to remain "well-capitalized" our ability to utilize brokered deposits may be restricted. We have
somewhat similar risks to the extent high balance core deposits exceed the amount of deposit insurance coverage available.

 We
anticipate we will continue to rely primarily on deposits, loan repayments, and cash flows from our investment securities to provide
liquidity. Additionally, when necessary, the secondary sources of borrowed funds described above will be used to augment our primary
funding sources. An
inability to maintain or raise funds (including the inability to access secondary funding sources) in amounts necessary to meet our liquidity
needs would have a substantial negative effect, individually or collectively, on our liquidity. Our access to funding sources in amounts
adequate to finance our activities, or on terms attractive to us, could be impaired by factors that affect us specifically or the financial
services industry in general. For example, factors that could detrimentally impact our access to liquidity sources include our financial
results, a decrease in the level of our business activity due to a market downturn or adverse regulatory action against us, a reduction
in our credit rating, any damage to our reputation, counterparty availability, changes in the activities of our business partners, changes
affecting our loan portfolio or other assets, or any other event that could cause a decrease in depositor or investor confidence in our
creditworthiness and business. Those factors may lead to depositors withdrawing their deposits or creditors limiting our borrowings.
Our access to liquidity could also be impaired by factors that are not specific to us, such as general business conditions, interest
rate fluctuations, severe volatility or disruption of the financial markets, bank closures or negative views and expectations about the
prospects for the financial services industry as a whole, or legal, regulatory, accounting, and tax environments governing our funding
transactions. In addition, our ability to raise funds is strongly affected by the general state of the U.S. and world economies and financial
markets as well as the policies and capabilities of the U.S. government and its agencies, and may remain or become increasingly difficult
due to economic and other factors beyond our control. Any such event or failure to manage our liquidity effectively could affect our
competitive position, increase our borrowing costs and the interest rates we pay on deposits, limit our access to the capital markets
and have a material adverse effect on our results of operations or financial condition.

 We
may not be able to maintain a low cost deposit base or access other low-cost funding sources.

 We
rely on bank deposits to be a low cost and stable source of funding. In addition, our future growth will largely depend on our ability
to maintain and grow a strong core deposit base. If we are unable to continue to attract and retain core deposits, to obtain third party
financing on favorable terms, or to have access to interbank or other liquidity sources, we may not be able to grow our assets.
We compete with banks and other financial services companies for deposits. If our competitors raise the rates they pay on deposits in
response to interest rate changes initiated by the Federal Reserve or for other reasons of their choice, our funding costs may increase,
either because we raise our rates to retain deposits or because of deposit outflows that require us to rely on more expensive sources
of funding. In addition, we could experience deposit outflows as a result of depositors seeking to maximize deposit insurance by limiting
their deposits at a single financial institution to the maximum federal deposit insurance level. Inflation and higher interest rates,
along with monetary events, can cause some of our business customers who have greater operating cash needs to reduce their deposit balances
with us. Higher funding costs could reduce our net interest margin and net interest income. Any decline in available funding could adversely
affect our ability to continue to implement our business strategy which could have a material adverse effect on our liquidity, business,
financial condition and results of operations.

traditionally have provided our most affordable funds and by far the largest portion of funding. However, deposit trends can shift with
economic conditions.

 If
interest rates fall, deposit levels in our Bank might fall, perhaps fairly quickly if a tipping point is reached, as depositors become
more comfortable with risk and seek higher returns in other vehicles. Further, if interest rates remain high, our competitors, which
include other banks and non-banks, may raise interest rates for deposits materially and our depositors may move their funds to other
institutions, a process which has become easier with advances in technology and operations. These circumstances could result in material
changes in deposit levels over relatively short time periods, and they could pressure us to raise interest we pay on our deposits, which
could shrink our net interest margin if loan rates do not rise correspondingly.

 The
extremely low interest rate environment in recent years ended in 2022. Contrary to the expectations outlined in the paragraph above,
deposit levels prior to 2022 climbed, possibly buoyed by the severe volatility experienced by the stock markets in 2018-2020 coupled
with Federal pandemic assistance, particularly direct cash payments to most citizens, in 2020 and 2021. Significant market volatility
resumed in 2022, and we have generally raised deposit interest rates to attract and maintain clients. We are unsure whether or not deposit
levels will rise appreciably in 2024. In addition, recent economic events have highlighted the current market volatility
related to deposits, and regulators are taking action to strengthen public confidence in the banking system and protect depositors. We
are unable to predict how current economic conditions might affect our deposits and whether these regulatory actions will be successful.

 Deposit
levels may be affected, fairly quickly, by changes in monetary policy.

 The
Federal Reserve continues to signal its concerns with respect to inflation. Interest rates have remained constant in the second half
of 2023 with the Federal Reserve signaling that interest rate decreases could occur in 2024.
Additional information concerning monetary policy changes appears in these Risk Factors under the caption Economic and Geographic-Related
Risks.

 Risks
Related to Strategic Plans

 We
may be adversely affected by risks associated with future mergers and acquisitions, including execution risk, which could disrupt our
business and dilute stockholder value.

 In
accordance with our strategic plan, we evaluate opportunities to acquire other banks and branch locations, as well as other fee generating
lines of business. As a result, we may engage in mergers, acquisitions and other transactions that could have a material effect on our
operating results and financial condition, including short and long-term liquidity.

 Our
merger and acquisition activities, such as our proposed merger with CBOA, could be material and could require us to issue a significant
number of shares of our common stock or other securities and/or to use a substantial amount of cash, other liquid assets, and/or incur
debt.

 Our
merger and acquisition activities, including our proposed merger with CBOA, could involve a number of additional risks, including
the risks of:

 the
 incurrence and possible impairment of goodwill and other intangible assets associated with an acquisition or merger and possible
 adverse short-term effects on our results of operations;

 the
 possibility that the expected benefits of a transaction may not materialize in the timeframe expected or at all, or may be costlier
 than expected to achieve;

 incurring
 the time and expense associated with identifying and evaluating potential merger or acquisition targets;

 diversion
 of our management's attention to the negotiation of a transaction, and the integration of the operations and personnel of the
 combining businesses;

 our
 estimates and judgments used to evaluate credit, operations, management and market risks with respect to the acquired or merged company
 may not be accurate;

 potential
 exposure to unknown or contingent liabilities of the acquired or merged company;

 difficulty
 or unanticipated expense associated with converting the operating systems of the acquired or merged company into ours;

 the
 possibility that we will be unable to successfully implement integration strategies, due to challenges associated with integrating
 complex systems, technology, banking centers, and other assets of the acquired or merged company in a manner that minimizes any adverse
 effect on customers, suppliers, employees, and other constituencies;

 delay
 in completing a merger or acquisition due to litigation, closing conditions or the regulatory approval process;

 the
 possibility that a proposed acquisition or merger may not be timely completed, if at all;

 creating
 an adverse short-term effect on our results of operations; and

 the
 possible loss of our key employees and customers or of the acquired or merged company.

 There
is no assurance that, following any future mergers or acquisitions, including our proposed merger with CBOA, our integration efforts
will be successful or that we, after giving effect to the acquisition, will achieve the strategic objectives, operating efficiencies,
increased revenues comparable to or better than our expectations, or other benefits expected in the acquisition, and failure to realize
such strategic objectives, operating efficiencies, expected revenue increases, cost savings, increases in market presence or other benefits
could have a material adverse effect on our business, financial condition, and results of operations.

to achieve one or more key elements needed for successful organic growth could adversely affect our business and operating results.

 There
are a number of risks to the successful execution of our organic growth strategy that could result in a material and adverse effect upon
our results of operation and financial condition. These risks include, without limitation, the following:

 our
 inability to attract and retain clients in our banking market areas;

 our
 inability to achieve and maintain growth in our earnings while pursuing new business opportunities;

 our
 inability to maintain a high level of client service while optimizing our physical branch count due to changing client demand, all
 while expanding our remote banking services and expanding or enhancing our information processing, technology, compliance, and other
 operational infrastructures effectively and efficiently;

 our
 inability to maintain loan quality in the context of significant loan growth;

 our
 inability to attract or maintain sufficient deposits and capital to fund anticipated loan growth;

 our
 inability to maintain adequate common equity and regulatory capital while managing the liquidity and capital requirements associated
 with growth, especially organic growth and cash - funded acquisitions;

 our
 inability to hire or retain adequate management personnel and systems to oversee and support such growth;

 our
 inability to implement additional policies, procedures and operating systems required to support our growth; and

 our
 inability to manage effectively and efficiently the changes and adaptations necessitated by a complex, burdensome, and evolving regulatory
 environment.

 New
lines of business or new products and services may subject us to additional risk.

 From
time to time, we may implement new lines of business or offer new products and services within existing lines of business. There are
substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed.
In developing and marketing new lines of business and/or new products and services, we may invest significant time and resources. Initial
timetables for the introduction and development of new lines of business and/or new products or services may not be achieved and price
and profitability targets may not prove feasible. External factors, such as compliance with regulations, competitive alternatives, and
shifting market preferences, may also impact the successful implementation of a new line of business and/or a new product or service.
Furthermore, any new line of business and/or new product or service could have a significant impact on the effectiveness of our system
of internal controls. Failure to successfully manage these risks in the development and implementation of new lines of business and/or
new products or services could have a material adverse effect on our business, financial condition and results of operations.

 Legal,
Accounting, Regulatory and Compliance Risks

 The
banking industry is heavily regulated and that regulation, together with any future legislation or regulatory changes, could limit or
restrict our activities and adversely affect our operations or financial results.

 We
operate in an extensively regulated industry and we are subject to examination, supervision, and comprehensive regulation by various
federal and state agencies. Bancorp 34 is subject to Federal Reserve regulations, and Bank 34 is subject to regulation, supervision and
examination by the OCC. Our compliance with banking regulations is costly and restricts some of our activities, including payment of
dividends, mergers and acquisitions, investments, loans and interest rates and locations of offices. We are also subject to capitalization
guidelines established by our regulators, which require us to maintain adequate capital to support our business. If, as a result of an
examination, a banking agency were to determine that the financial condition, capital adequacy, asset quality, asset concentration, earnings
prospects, management, liquidity sensitivity to market risk or other aspects of any of our operations has become unsatisfactory, or that
we or our management are in violation of any law or regulation, the banking agency could take a number of different remedial actions
as it deems appropriate.

 Regulation
by these agencies is intended primarily for the protection of our depositors and the deposit insurance fund and not for the benefit of
our stockholders. Congress and federal regulatory agencies continually review banking laws, regulations and policies for possible changes.
The Dodd-Frank Act, enacted in July 2010, instituted major changes to the banking and financial institutions regulatory regimes. The
burden of regulatory compliance has increased under the Dodd-Frank Act and has increased our costs of doing business and, as a result,
may create an advantage for our competitors who may not be subject to similar legislative and regulatory requirements. Regulations and
laws may be modified at any time, and new legislation may be enacted that will affect us or our subsidiaries.

 Furthermore,
our regulators also have the ability to compel us to take certain actions, or restrict us from taking certain actions entirely, such
as actions that our regulators deem to constitute an unsafe or unsound banking practice. Our failure to comply with any applicable laws
or regulations, or regulatory policies and interpretations of such laws and regulations, could result in sanctions by regulatory agencies
(such as a memorandum of understanding, a written supervisory agreement or a cease and desist order), civil money penalties or damage
to our reputation, all of which could have a material adverse effect on our business, financial condition or results of operations.

to maintain certain regulatory capital levels and ratios could result in regulatory actions that would be materially adverse to our shareholders.

 U.S.
capital standards are discussed under the section titled "Capital Resources", as part of Item 7, Management's Discussion
and Analysis of Financial Condition and Results of Operations of Bancorp 34. Pressures to maintain appropriate capital levels and
address business needs in a changing economy could result in certain mandatory and possible additional discretionary actions by regulators
that, if undertaken, could be dilutive or otherwise have an adverse effect on our shareholders. Such actions could include: reduction
or elimination of dividends; the issuance of common or preferred stock, or securities convertible into stock; or the issuance of any
class of stock having rights that are adverse to those of the holders of our existing classes of common or preferred stock. In addition,
these requirements could have a negative impact on our ability to lend, grow deposit balances, make acquisitions or make share repurchases
or redemptions. Higher capital levels could also lower our return on equity.

 We
face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.

 The
federal Bank Secrecy Act, the USA Patriot Act and other laws and regulations require financial institutions, among other duties,
to institute and maintain effective anti-money laundering programs and file suspicious activity and currency transaction reports as appropriate.
The federal Financial Crimes Enforcement Network, established by the U.S. Treasury Department to administer the Bank Secrecy Act, is
authorized to impose significant civil money penalties for violations of those requirements and has recently engaged in coordinated enforcement
efforts with the individual federal banking regulators, as well as the U.S. Department of Justice, Drug Enforcement Administration and
Internal Revenue Service, or the "IRS." There is also increased scrutiny of compliance with the rules enforced by the Office
of Foreign Assets Control. Federal and state bank regulators also have begun to focus on compliance with Bank Secrecy Act and anti-money
laundering regulations. If our policies, procedures and systems are deemed deficient or the policies, procedures and systems of the financial
institutions that we have already acquired or may acquire in the future are deficient, we would be subject to liability, including fines
and regulatory actions such as restrictions on our ability to pay dividends and the necessity to obtain regulatory approvals to proceed
with certain aspects of our business plan, including our acquisition plans, which would negatively impact our business, financial condition
and results of operations. Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could
also have serious reputational consequences for us.

 Federal,
state and local consumer lending laws restrict our ability to originate certain mortgage loans and increase our risk of liability with
respect to such loans and increase our cost of doing business.

 Federal,
state and local laws have been adopted that are intended to eliminate certain lending practices considered "predatory." These
laws prohibit practices such as steering borrowers away from more affordable products, selling unnecessary insurance to borrowers, repeatedly
refinancing loans and making loans without a reasonable expectation that the borrowers will be able to repay the loans irrespective of
the value of the underlying property. Over the course of 2013, the CFPB issued several rules on mortgage lending, notably a rule requiring
all home mortgage lenders to determine a borrower's ability to repay the loan. Loans with certain terms and conditions and that
otherwise meet the definition of a "qualified mortgage" may be protected from liability to a borrower for failing to make
the necessary determinations. In response to these laws and related CFPB rules, we have tightened, and in the future may further tighten,
our mortgage loan underwriting standards to determine borrowers' ability to repay. Although it is our policy not to make predatory
loans and to determine borrowers' ability to repay, these laws and related rules create the potential for increased liability with
respect to our lending and loan investment activities. They increase our cost of doing business and, ultimately, may prevent us from
making certain loans and cause us to reduce the average percentage rate or the points and fees on loans that we do make.

 We
are subject to federal and state fair lending laws, and failure to comply with these laws could lead to material penalties.

and state fair lending laws and regulations, such as the Equal Credit Opportunity Act and the Fair Housing Act, impose nondiscriminatory
lending requirements on financial institutions. The U.S. Department of Justice, CFPB and other federal and state agencies are responsible
for enforcing these laws and regulations. Private parties may also have the ability to challenge an institution's performance under
fair lending laws in private class action litigation. A successful challenge to our performance under the fair lending laws and regulations
could adversely impact our rating under the Community Reinvestment Act and result in a wide variety of sanctions, including the required
payment of damages and civil money penalties, injunctive relief, imposition of restrictions on merger and acquisition activity and restrictions
on expansion activity, which could negatively impact our reputation, business, financial condition and results of operations.

 The
Federal Reserve may require us to commit capital resources to support Bank 34.

 The
Federal Reserve requires a bank holding company to act as a source of financial strength to a subsidiary bank and to commit
resources to support such subsidiary bank. Under the "source of strength" doctrine, the Federal Reserve may require a bank
holding company to make capital injections into a troubled subsidiary bank and may charge the bank holding company with engaging in unsafe
and unsound practices for failure to commit resources to such a subsidiary bank. In addition, the Dodd-Frank Act directs the federal
bank regulators to require that all companies that directly or indirectly control an insured depository institution serve as a source
of strength for the institution. Under these requirements, in the future, we could be required to provide financial assistance to Bank
34 if it experiences financial distress.

 A
capital injection may be required at times when we do not have the resources to provide it, and therefore we may be required to borrow
the funds. In the event of a bank holding company's bankruptcy, the bankruptcy trustee will assume any commitment by the holding
company to a federal bank regulatory agency to maintain the capital of a subsidiary bank. Moreover, bankruptcy law provides that claims
based on any such commitment will be entitled to a priority of payment over the claims of the holding company's general unsecured
creditors, including the holders of its note obligations. Thus, any borrowing that must be done by the holding company in order to make
the required capital injection becomes more difficult and expensive and will adversely impact the holding company's cash flows,
financial condition, and results of operations.

 We
are party to various claims and lawsuits incidental to our business. Litigation is subject to many uncertainties such that the expenses
and ultimate exposure with respect to many of these matters cannot be ascertained.

 From
time to time, we, our directors and our management are the subject of various claims and legal actions by customers, employees, stockholders
and others. Whether such claims and legal actions are legitimate or unfounded, if such claims and legal actions are not resolved in our
favor, they may result in significant financial liability and/or adversely affect our reputation and our products and services as well
as impact customer demand for those products and services. In light of the potential cost and uncertainty involved in litigation, we
have in the past and may in the future settle matters even when we believe we have a meritorious defense. Certain claims may seek injunctive
relief, which could disrupt the ordinary conduct of our business and operations or increase our cost of doing business. Our insurance
or indemnities may not cover all claims that may be asserted against us. Any judgments or settlements in any pending litigation or future
claims, litigation or investigation could have a material adverse effect on our business, reputation, financial condition and results
of operations.

 The
expanding body of federal, state and local regulations and/or the licensing of loan servicing, collections or other aspects of our business
and our sales of loans to third parties may increase the cost of compliance and the risks of noncompliance and subject us to litigation.

 We
service some of our own loans, and loan servicing is subject to extensive regulation by federal, state and local governmental authorities
as well as to various laws and judicial and administrative decisions imposing requirements and restrictions on those activities. The
volume of new or modified laws and regulations has increased in recent years and, in addition, some individual municipalities have begun
to enact laws that restrict loan servicing activities including delaying or temporarily preventing foreclosures or forcing the modification
of certain mortgages. If regulators impose new or more restrictive requirements, we may incur additional significant costs to comply
with such requirements which may adversely affect us. In addition, were we to be subject to regulatory investigation or regulatory
action regarding our loan modification and foreclosure practices, our financial condition and results of operation could be adversely
affected.

 We
could be subject to changes in tax laws, regulations and interpretations or challenges to our income tax provision.

 We
compute our income tax provision based on enacted tax rates in the jurisdictions in which we operate. Any change in enacted tax laws,
rules or regulatory or judicial interpretations, or any change in the pronouncements relating to accounting for income taxes could adversely
affect our effective tax rate, tax payments and results of operations. The taxing authorities in the jurisdictions in which we operate
may challenge our tax positions, which could increase our effective tax rate and harm our financial position and results of operations.
We are subject to audit and review by U.S. federal and state tax authorities. Any adverse outcome of such a review or audit could have
a negative effect on our financial position and results of operations. In addition, changes in enacted tax laws, such as adoption of
a lower income tax rate in any of the jurisdictions in which we operate, could impact our ability to obtain the future tax benefits represented
by our deferred tax assets. In addition, the determination of our provision for income taxes and other liabilities requires significant
judgment by management. Although we believe that our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded
in our financial statements and could have a material adverse effect on our financial results in the period or periods for which such
determination is made.

 Risks
Related to Bancorp 34 Common Stock

 Some
provisions of our organizational documents may have anti-takeover effects that could discourage an acquisition of us by others, even
if an acquisition would be beneficial to our stockholders.

 Provisions
in our certificate of incorporation and bylaws, federal banking laws, as well as provisions of the Maryland General Corporate Law ("MGCL"),
could make it more difficult for a third party to acquire us or increase the cost of acquiring us, even if doing so would benefit our
stockholders, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions include:

 establishing
 a classified board of directors such that not all members of the board are elected at one time; nominees for two of our eight director
 seats following the merger will continue to be designated by Castle Creek, and Brush Creek
 under the Securities Purchase Agreement, so long as certain stock ownership thresholds are maintained;

 prohibiting
 any persons from voting more than 10% of our outstanding shares of common stock;

 providing
 for a plurality voting standard in the election of directors without cumulative voting;

 providing
 that our stockholders may remove members of our board of directors only for cause;

 enabling
 our board of directors to issue additional shares of authorized, but unissued capital stock;

 enabling
 our board to issue "blank check" preferred stock without further stockholder approval; and

 enabling
 our board of directors to amend our bylaws without stockholder approval.

34 qualifies as a "smaller reporting company," and the reduced disclosure obligations applicable to smaller reporting companies
may make its common stock less attractive to investors.

34 is a "smaller reporting company," as defined in federal securities laws, and will remain a smaller reporting company until:
(i) the fiscal year following the determination that the market value of its voting and non-voting common shares held by non-affiliates
is more than $250 million measured on the last business day of its second fiscal quarter; or (ii) its annual revenues are
less than $100 million during the most recently completed fiscal year and the market value of its voting and non-voting common shares
held by non-affiliates is more than $700 million measured on the last business day of its second fiscal quarter. Smaller reporting companies
have reduced disclosure obligations, such as an exemption from providing selected financial data and an ability to provide simplified
executive compensation information and only two years of audited financial statements. If some investors find Bancorp 34's common
stock less attractive because Bancorp 34 may rely on these reduced disclosure obligations, there may be a less active trading market
for its common stock and its stock price may be more volatile.

 As
a reporting issuer under Section 15(d) of the Exchange Act, we file more limited reports with the SEC than other companies who are registered
under Section 12 of the Exchange Act. This lack of transparency may make it more difficult for investors in our securities to make informed
investment decisions, and there may be a less active trading market for our common stock.

 While
we are subject to Section 15(d) of the Exchange Act, and accordingly will file annual, quarterly, and current reports on Forms 10-K,
10-Q, and 8-K with the SEC on the SEC's website at  we do not have a class of securities registered under Section
12 of the Exchange Act. Consequently, we will file more limited reports with the SEC than other companies whose shares are registered
under Section 12. For example, as a filer subject to Section 15(d) of the Exchange Act, the company is not required to prepare proxy
or information statements; our common stock is not subject to the protection of the going private regulations; the company is subject
to only limited portions of the tender offer rules; our officers, directors, and more than ten (10%) percent stockholders are not required
to file beneficial ownership reports about their holdings in our company; such persons are not subject to the short-swing profit recovery
provisions of the Exchange Act; and stockholders of more than five percent (5%) are not required to report information about their ownership
positions in the securities. As a result, investors will have less visibility as to the company and its financial condition than they
would if the company had a class of securities registered under Section 12 of the Exchange Act.

 While
we believe that the disclosure requirements of SEC regulations applicable to us will collectively provide transparency to the investment
community and allow informed investment decisions to be made by investors in our securities, there is no assurance that the reduced transparency
afforded to registrations under Section 15(d) will not also reduce the information available to investors and make investment decisions
in our securities more difficult. If some investors find Bancorp 34's common stock less attractive because Bancorp 34 relies
on these reduced disclosure obligations, there may be a less active trading market for our common stock and our stock price may be
more volatile.

 Substantial
future sales of our common stock, or the perception that these sales may occur, could cause the price of our common stock to decline,
or could result in dilution.

 Sales
of substantial amounts of Bancorp 34 common stock, including following the proposed merger with CBOA, or in future offerings, or the
perception that these sales could occur, could cause the market price of Bancorp 34 common stock to decline. These sales could also make
it more difficult for us to sell equity or equity-related securities in the future, at a time and place that we deem appropriate. Castle
Creek and Brush Creek are party to a Registration Rights Agreement under which we may be required to register their approximately 1.5
million shares of Bancorp 34 common stock under the Securities Act of 1933, as amended (the "Securities Act"). See "Certain
Relationships and Related Transactions, and Director Independence—Registration Rights Agreement." Accordingly, the
market price of Bancorp 34 common stock could be adversely affected by actual or anticipated sales of a significant number of shares
of Bancorp 34 common stock in the future.

 We
are authorized to issue up to 100,000,000 shares of our common stock without further stockholder approval. We may issue additional shares
of our common stock in the future pursuant to current or future equity compensation plans or in connection with future acquisitions or
financings. If we choose to raise capital by selling shares of our common stock for any reason, the issuance would have a dilutive effect
on the holders of our common stock and could have a material negative effect on the value of our common stock.

 The
Bancorp 34 articles of incorporation designate the state and federal courts located within the state of Maryland as the sole and exclusive
forum for certain types of actions and proceedings that may be initiated by Bancorp 34's stockholders, which could limit Bancorp
34's stockholders' ability to obtain a favorable judicial forum for disputes with Bancorp 34 or its directors, officers or
employees.

 The
Bancorp 34 articles of incorporation, which will govern the combined company following completion of the merger, provide that, unless
Bancorp 34 consents in writing to the selection of an alternative forum, the sole and exclusive forum for (i) any derivative action or
proceeding brought on behalf of Bancorp 34, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer
or other employee of Bancorp 34 to Bancorp 34 or Bancorp 34's stockholders, (iii) any action asserting a claim pursuant to any
provision of the MGCL, or (iv) any action asserting a claim governed by the internal affairs doctrine shall be a state or federal court
located within the state of Maryland, in all cases subject to the court's having personal jurisdiction over the indispensable parties
named as defendants. To the extent permitted by law, the exclusive forum clause in Bancorp 34's articles of incorporation could
apply, respectively, to claims of the type described in the previous sentence that arise or purport to arise under U.S. federal securities
laws, including the Securities Act and the Exchange Act. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all
suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder, and Section 22 of
the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability
created by the Securities Act or the rules and regulations thereunder.

 Therefore, claims arising under the Exchange Act may not be brought
in state courts, while claims arising under the Securities Act may be brought in either federal or state courts. Bancorp 34's shareholders
will not be deemed, as a result of the existence or enforcement of these exclusive forum provisions, to have waived Bancorp 34's
compliance with the federal securities laws and the rules and regulations thereunder. Bancorp 34 believes that requiring these claims
to be filed in the state of Maryland is advisable because (i) doing so avoids unnecessarily redundant, inconvenient, costly, unnecessary,
time-consuming and sometimes lawyer-driven litigation in multiple forums and (ii) Maryland courts are authoritative on matters of Maryland
law and Maryland judges have more experience in dealing with issues of Maryland corporate law than judges in any other state.

 This exclusive
forum provision may limit a stockholder's ability to bring a claim in a judicial forum that the stockholder believes is favorable
for disputes with Bancorp 34 or its directors, officers or employees, which may discourage meritorious claims from being asserted against
Bancorp 34 and its directors, officers and employees or may cause a stockholder to incur additional expenses by having to bring a claim
in a judicial forum that is different from where the stockholder resides, or both. Alternatively, if a court were to find this provision
of the Bancorp 34 articles of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions
or proceedings, Bancorp 34 may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely
affect its business, financial condition, or results of operations.

 Item
1B. Unresolved Staff Comments

 None.

 Item
1C. Cybersecurity

 Overview

 The
cybersecurity threat environment is volatile and dynamic, requiring a robust and dynamic framework to reduce and mitigate cybersecurity
risk. Cybersecurity risk includes exposure to failures or interruptions of service or security breaches resulting from malicious technological
attacks that impact the confidentiality, integrity, or availability of our or third parties' operations, systems, or data. We seek
to mitigate cybersecurity risk and associated reputational and compliance risk by, among other
things:

 maintaining
 privacy policies, management oversight, accountability structures, and technology design
 processes to protect private and personal data;

 actively
 monitoring and mitigating cybersecurity threats and risks with a defense structure to provide
 oversight, governance, challenge, and testing;

 using
 a third-party cybersecurity oversight program to effectively discover, analyze and understand
 cyber threats;

 maintaining
 oversight of our information security program by senior management, our board-level Information
 Security Committee, and our Board of Directors;

 establishing
 and maintaining a comprehensive program to oversee and manager external connections and third-party
 relationships with access to the institution's technology assets and information; and

 maintaining
 an incident response program intended to enable us to mitigate the impact of, and recover
 from, any cyberattacks, and facilitate communication to internal and external stakeholders,
 as needed.

 We
experienced a single cybersecurity event in June of 2023 in which an unauthorized third party gained access to the email accounts of
two of our employees. We notified the affected customers of the incident in early September 2023, and have taken steps to mitigate our
and our customers' exposure to unauthorized activity. To date, we have incurred expenses of approximately $25,000 related to the
cybersecurity incident.

 Risk
Management and Strategy

 Our
cybersecurity risk management strategy uses a combination of management expertise and Board oversight, as discussed below, as well as
outside consultants to assist us in overseeing our cybersecurity risk management program. We deploy safeguards designed to protect customer
information and our own corporate information and technology. We have programs, technology and processes in place designed to mitigate
known attacks, and we use both internal and external resources to scan for vulnerabilities in our applications, systems, and platforms.
We implement backup and recovery systems and require the same of our critical third-party service providers.

 W e
use independent third-party service providers to perform penetration testing of our infrastructure
to help us better understand the effectiveness of our controls, improve our defenses, and conduct assessments of our program for compliance
with regulatory requirements and industry guidelines. We also engage with outside risk experts and industry groups, including other peer
institutions, as needed, to help us evaluate potential future threats and trends, particularly with respect to emerging information security
and fraud risks. In addition, we use a third-party to help mitigate risks with our third- and fourth-party providers; however, our ability
to monitor our service providers' cybersecurity practices is limited. We generally have agreements in place with our service providers
that include requirements related to cybersecurity and data privacy. We cannot guarantee, however, that such agreements will prevent
a cyber incident from impacting our systems or information. Additionally, we may not be able to obtain adequate or any reimbursement
from our service providers in the event we should suffer any such incidents. Due to applicable laws and regulations or contractual obligations,
we may be held responsible for cyber incidents attributed to our service providers in relation to any data that we share with them. To
offset non reimbursement of a cyberthreat or liability expense of an incident we maintain cyber insurance.

 Due
to the nature of our business, we are under constant threat of an attack and could experience a significant cybersecurity event in the
future. Potential risks we could face from a cybersecurity event are discussed in "Risk Factors" above.

 Governance

 Through established governance structures,
including our problem and incident management process and incident response plan, we have processes and procedures to help facilitate
appropriate and effective oversight of cybersecurity risk. These processes and procedures enable our lines of defense and management
to review and manage cybersecurity risks, monitor threats, and provide for further escalation to executive management, our board-level
Information Security Committee, or to the full Board, as appropriate.

 Role
of the Board of Directors

 Our
Board of Directors plays a critical role in the oversight of risk, including risks from cybersecurity threats, and has established a
risk oversight structure that seeks to ensure that cybersecurity risks are identified, monitored, assessed, and mitigated appropriately.
Our Board of Directors oversees our cybersecurity, risk assessment, vendor management and disaster recovery and business continuity risk
management framework. The Board of Directors reviews and approves our cybersecurity, disaster recovery and business continuity risk management
framework on an annual basis.

 Our
Board regularly receive reports on such matters from our Information Security committee. Our Board also meets with our internal and external
auditors, and federal and state regulators to review and discuss reports on risk, examination, and regulatory compliance matters.

 The
Board has delegated the primary review of our cybersecurity, disaster recovery, risk assessment, vendor management, and business continuity
risk management framework and related policies and procedures to the Information Security Committee, which consists of senior management
members and one Board member. The committee is responsible for assisting the Board in its oversight of risk, including cybersecurity
threats, and for overseeing our cybersecurity, disaster recovery, vendor management and business
continuity risk management framework. The committee actively discusses major risk exposures, establishes risk management principles,
and determines our risk appetite, and regularly reports on their activities, and makes recommendations to, the full Board. The Information
Security Committee receives regular summary analysis reports of cybersecurity risks, threats, and incidents at their meetings. In addition,
the committee is engaged, as needed, in accordance with our Incident Response Plan and Business Continuity Plan.

 Role of Management

management is responsible for establishing, implementing, maintaining, and testing our policies and procedures related to cybersecurity,
disaster recovery and business continuity. Reports on these matters are provided to the Information Security Committee. The committee
reports its activities to the full Board of Directors. Our cybersecurity risk management program is built on lines of defense
designed to assess, identify, assess, and manage our material risks from cybersecurity threats. Our VP of IT Operations is responsible
for coordinating the implementation of cybersecurity framework and reports directly to our Chief Financial Officer.

 Our
framework, implemented in conjunction with third party managed IT providers, manages preventative and detective controls to protect against
cybersecurity risks and responds to cyber incidents and data breaches. At least annually, training
on information security awareness is provided to employees. Training materials and topics include online training classes, mock phishing
attacks, and information security awareness emails from the VP of IT Operations. O ur cybersecurity risk management program is
designed to maintain and challenge our information security defense system, as well as monitor, respond, evaluate, escalate and recover
from cyber threats.

 Our
Information Security Committee governs our technology and operational risk tolerances, including cybersecurity and third- and fourth-party
provider risks. The management members who serve as part of the committee include the VP of IT Operations (chair), Chief Operations Officer,
Chief Financial Officer, and Chief Compliance Officer. The VP of IT Operations has relevant technical experience and certifications with
over 20 years of respective experience. The remaining committee members each have more than 15 years of relevant banking experience.
The Committee is responsible for escalating key risks members of Executive Management not serving on the committee as well the Board
of Directors.

 An annual
audit over cybersecurity related activities is completed by an independent third party.

 Item
2. Properties

 Our
principal executive offices and Bank 34's main office is located at 8777 East Hartford Drive, Suite 100, Scottsdale, Arizona 85255.
In addition, we currently operate two additional branches, one branch located in Las Cruces, New Mexico and one branch located in Alamogordo,
New Mexico.

 We
own both New Mexico banking branches and lease our Scottsdale banking branch. We believe that our facilities are in good condition and
are adequate to meet our operating needs for the foreseeable future.

 Item
3. Legal Proceedings

34 and its subsidiaries are from time to time subject to claims and litigation arising in the ordinary course of business. One or more
unfavorable outcomes in any claim or litigation against us could have a material adverse effect for the period in which they are resolved.
In addition, regardless of their merits or their ultimate outcomes, such matters are costly, divert management's attention and
may materially adversely affect our reputation, even if resolved in our favor.

 Item
4. Mine Safety Disclosures

 Not
Applicable

 Part
II

 Item
5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 Market
For Bancorp 34 Common Stock

 There
is no established public trading market for Bancorp 34 common stock. Bancorp 34 common stock is currently quoted under the symbol "BCTF"
on the OTC Markets Groups, Inc.'s OTCQB Venture Market. The following table sets forth the high and low bid information for
our common stock for the periods indicated, which reflect inter-dealer prices, without retail mark-up, mark-down or commissions and may
not represent actual transactions.

 High

 Low

 Fiscal Year Ended December

 Fourth Quarter

 $
 11.00

 $
 8.35

 Third Quarter

 $
 11.00

 $
 9.50

 Second Quarter

 $
 12.11

 $
 8.93

 First Quarter

 $
 13.65

 $
 11.50

 Fiscal Year Ended December 31, 2022

 Fourth Quarter

 $
 14.40

 $
 13.05

 Third Quarter

 $
 14.75

 $
 14.06

 Second Quarter

 $
 16.20

 $
 14.25

 First Quarter

 $
 17.00

 $
 13.78

 First Quarter

 $
 12.30

 $
 11.18

 Dividends
on Bancorp 34 Stock

 In
2018 Bancorp 34 paid a special dividend of $1.25 per share. In the second quarter of 2019 Bancorp 34 began paying regular quarterly dividends
of $0.05 per share. In the first quarter of 2022 the regular quarterly dividend was increased to $0.07 per share. Bancorp 34 suspended
dividend payments effective the third quarter of 2023.

 Recent
Sales of Unregistered Securities

 Bancorp 34 closed an unregistered sales
of securities during the year ended December 31, 2023, as further described herein. On January 27, 2023, we entered into securities purchase
agreements, with Castle Creek, Brush Creek and other accredited investors, pursuant to which we sold: (i) 815,283 shares of our common
stock, par value $0.01 per share, at a purchase price of $14.00 per share; (ii) 298,266 shares of the Series A Preferred Stock, par value
$0.01 per share, at a purchase price of $14.00 per share; and (iii) warrants to purchase 111,352 shares of common stock, or non-voting
common stock under certain circumstances, at an exercise price equal to $14.00 per share, as a part of the private placement. The total
consideration paid for the securities issued pursuant to the securities purchase agreements closed on January 27, 2023, was $15.6 million.
A portion of the placement fee was paid with 32,806 shares of common stock. The final net cash received from the private placement closed
in 2023, after all issuance expenses, including placement fees and all other issuance/due diligence costs of $0.5 million and $0.1 million,
respectively, was $15.0 million.

 The securities issued under
the securities purchase agreements were exempt from registration pursuant to Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D as promulgated by the Securities and Exchange Commission under
the Securities Act.

 In conjunction with the securities
purchase agreements, Bancorp 34 issued warrants to purchase up to 111,352 shares of Bancorp 34 common stock or non-voting
common stock under certain circumstances, at a price of $14.00. The warrants are exercisable at any time after their grant date, and
from time to time, in whole or in part, for 7 years from their grant dates, or January 27, 2030. The warrants may be exercised by "cashless
exercise" whereby shares are withheld to pay the exercise price of the warrants.

 The Series A Preferred Stock issued under
the securities purchase agreements was convertible into Non-Voting Common Stock. In connection with the private placement, effective
July 19, 2023, we filed Articles Supplementary with the Maryland State Department of Assessments and Taxation to convert all the shares
of Series A Preferred Stock issued to the accredited investors to Non-Voting Common Stock.

 For more information regarding
the securities purchase agreements, see Certain Relationships and Related Transactions, and Director Independence—Arrangements
with Castle Creek Fund VIII, L.P. and Brush Creek-B 34, LLC, beginning on page 130.

 Item
6. (Reserved)

 Item

 Management's
Discussion and Analysis of Financial Condition and Result of Operations of Bancorp 34

 In
this section, unless the context suggests otherwise, references to "we," "us," and "our" mean the
combined business of Bancorp 34 and its wholly-owned subsidiary, Bank 34.

 The
following discussion and analysis of Bancorp 34's consolidated financial condition and results of operations for the years ended
December 31, 2023, and 2022, should be read in conjunction with Bancorp 34's consolidated financial statements and related notes
thereto included elsewhere in this Annual Report on Form 10-K. Historical results of operations and the percentage relationships among
any amounts included, and any trends that may appear, may not indicate trends in operations or results of operations for any future periods.

 Comments
regarding Bancorp 34's business that are not historical facts are considered forward-looking statements that involve inherent risks
and uncertainties. Actual results may differ materially from those contained in these forward-looking statements. For additional information
regarding our cautionary disclosures, see the "Cautionary Statement Regarding Forward-Looking Statements" beginning
on page 1 of this Annual report on Form 10-K.

 Overview

34, headquartered in Scottsdale, Arizona, is the holding company for Bank 34. We conduct a full-service community banking business through
our wholly-owned subsidiary Bank 34.

 We
offer a full range of relationship-focused services to meet our client's business and personal financial objectives, with branches
in Arizona and New Mexico. Our product lines include commercial loans, commercial real estate loans, and a variety of commercial and
consumer deposit products, including noninterest bearing accounts, interest-bearing demand products, savings accounts, money market accounts
and certificates of deposit. We also offer online banking and bill payment services, online cash management, safe deposit box rentals,
debit card and ATM card services and the availability of a network of ATMs for our customers.

34 generates most of its income from interest income on loans, investment securities and deposits in other financial institutions, and
service charges on customer accounts. Bancorp 34 incurs interest expense on deposits and other borrowed funds and noninterest expenses
such as salaries and employee benefits, occupancy expenses, and technology expenses. Net interest income is the largest source of Bancorp
34's revenue. Net interest spread is the difference between rates earned on interest-earning assets and rates paid on interest-bearing
liabilities. Net interest margin is calculated as net interest income divided by average interest-earning assets. Because noninterest-bearing
sources of funds, such as noninterest-bearing deposits and shareholders' equity, also fund interest-earning assets, net interest
margin includes the benefit of these noninterest-bearing sources.

in the market interest rates and interest rates Bancorp 34 earns on interest-earning assets or pays on interest-bearing liabilities,
as well as the volume and types of interest-earning assets, interest-bearing and noninterest-bearing liabilities, and shareholders'
equity, are usually the largest drivers of periodic changes in net interest spread, net interest margin, and net interest income. Fluctuations
in market interest rates are driven by many factors, including governmental monetary policies, inflation, deflation, macroeconomic developments,
changes in unemployment, the money supply, political and international conditions, and conditions in domestic and foreign financial markets.
Periodic changes in the volume and types of loans in Bank 34's loan portfolio are affected by, among other factors, economic and
competitive conditions in Arizona and New Mexico, as well as developments affecting the real estate, technology, financial services,
insurance, transportation, manufacturing and homebuilding sectors within Bank 34's target market.

34 manages its operations as one unit, and thus does not have separate operating segments.

 Critical
Accounting Estimates

 Our
consolidated financial statements are prepared based on the application of accounting policies in accordance with generally accepted
accounting principles, or "GAAP," and follow general practices within the banking industry. These policies require the reliance
on estimates, assumptions and judgments, which may prove inaccurate and are subject to variations. Changes in underlying factors, estimates,
assumptions or judgements could have a material impact on our future financial condition and results of operations.

 Certain
policies inherently have a greater reliance on the use of estimates, assumptions and judgments and, as such, have a greater possibility
of producing results that could be materially different than originally reported. We have identified the determination of the allowance
for credit losses and fair value measurements to be the accounting areas that require the most subjective or complex judgments
and, as such, could be most subject to revision as new or additional information becomes available or circumstances change, including
overall changes in the economic climate and/or market interest rates. Therefore, we consider these policies, discussed below, to be critical
accounting estimates and discuss them directly with the Audit Committee of our board of directors.

 Our
significant accounting policies are presented in Note 1—Nature of Operations and Significant Accounting Policies of our audited
consolidated financial statements included in this Annual Report on Form 10-K. These policies, along with the disclosures presented in
the other financial statement notes and in this discussion, provide information on how significant assets and liabilities are valued
in the financial statements and how those values are determined. Recent accounting pronouncements and standards that have impacted or
could potentially affect us are also discussed in Note 1 of our audited consolidated financial statements.

for credit losses

 One
significant accounting policy is our accounting policy related to the allowance for credit losses (ACL). Effective January 1, 2023,
we adopted ASU 2016-13, Financial Instruments – Measurement of Current Expected Credit Losses on Financial Instruments ("CECL"), using
the modified retrospective method for our financial assets measured at amortized cost. CECL changed our method of accounting for credit
losses from an incurred loss model to an expected credit loss model. Under the prior incurred loss model, credit losses on financial
instruments were recognized when a probable loss was incurred, while CECL is an "expected credit loss" model. The expected
credit loss model represents management's estimate of expected credit losses to the full contractual maturity of the financial
asset and is based on historical experience, current conditions and reasonable and supportable forecasts. We believe the determination
of the ACL involves a greater amount of judgment and complexity when compared with our other significant accounting policies.

 Qualitative
factors are used in the CECL model to address various internal and external factors that may not be captured by the quantitative modeling
or historical data needed to assess the expected credit losses. Qualitative factors considered include, but may not be limited
to, the following: lending policies and procedures; changes in underwriting standards; nature and volume of financial assets; changes
in lending staff; volume and severity of past due or adversely classified assets; changes in collateral values; and the internal credit
review function.

 The
Company uses a 12-month forecast that is reasonable and supportable within the ACL calculation and then reverts to historical credit
loss experience on a straight-line basis over a one-year timeline. Historical credit loss experience is then used for the remaining life
of the assets. The Company uses several economic variables in the calculation of the ACL, the most significant of which is the economic
forecast for the national unemployment rate. In the December 31, 2023, estimate, the Company assumed a forecasted unemployment rate of
4.7%, which has improved from the January 1, 2023, forecasted rate of 5.7%. Changes in the economic forecast for unemployment rates could
significantly affect the estimated credit losses which could potentially lead to materially different ACL levels from one reporting period
to the next.

 For
our bank, CECL requires a separate ACL for each of: (i) loans held-for-investment; (ii) unfunded commitments; and (iii) held-to-maturity
debt securities.

 ACL
– Loans held-for-investment

 The
level of the ACL on loans held-for-investment is calculated to maintain a credit loss reserve level that management considers sufficient
to absorb estimated credit losses. Management's determination of the adequacy of the ACL is based on the periodic evaluation of
borrowers' abilities to make loan payments, local and national economic conditions, and other subjective factors. The evaluation
has subjective components requiring significant estimates that include default probabilities, expected loss given default, and estimated
credit losses based on historical credit loss experience and forecasted economic conditions. All these factors may be susceptible to
significant change and when actual results differ from the estimates, additional provisions for credit losses may be required, which
would adversely impact profitability.

 The
ACL for pooled loans is estimated using a non-discounted cash flow methodology. The bank then applies probability of default and loss
given default to the cashflow methodology to calculate expected losses within the model. This allows the bank to identify the timing
of default as compared to when the actual loss event may occur. The results are then aggregated to produce segment level results and
reserve requirements for each segment. The quantitative model also incorporates forward-looking macroeconomic information over a reasonable
and supportable period of twelve months with a reversion to historical losses occurring on straight line basis over the next 12 months.

 Loans
that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not included in the pooled
loan evaluation. When management determines that foreclosure is probable, expected credit losses are based on the fair value of the collateral
at the reporting date, adjusted for selling costs as appropriate.

 Qualitative
adjustments to historical loss data are made based on management's assessment of the risks that may lead to a future loan loss
or differences in current loan-specific risk characteristics such as differences. A ratings scale is used to tie risk metrics within
lending policies and procedures, economic factors note encompassed in the quantitative model, changes in nature of the volumes and terms
of loans, changes in the volume and severity of past due assets, concentrations within the loan portfolio. Additional factors such staffing,
loan review, collateral values, regulatory, legal, and technological risks are also reviewed on a more qualitative basis. The ratings
scale used in the qualitative modeling is derived from the bank's historical loss percentages in which the highest risk metrics
would align with the highest historical loss percentages adjusted for the expected life of the current portfolio.

 Management
has determined that calculating an ACL amount for accrued interest receivable on loans held-for-investment would not be significant,
and this is excluded from our estimate of credit losses for loans held-for-investment. Additionally, we write off applicable accrued
interest receivable balances in a timely manner when a loan is placed on non-accrual status, in which any accrued interest, not received
in cash, is reversed from interest income.

 The
ACL also excludes loans held-for-sale and loans accounted for under the fair value option.

 The
ACL is a contra-asset on our balance sheet that is deducted from the amortized cost of loans held-for-investment to present on our balance
the net amount expected to be collected. Loans are charged-off against the ACL when management believes the full or partial uncollectibility
is confirmed.

 ACL
– Unfunded commitments

 We
estimate expected credit losses on unfunded commitments over the contractual period in which we are exposed to credit risk via our contractual
obligations to extend credit, unless such obligations are unconditionally cancellable by us. The probability of funding such commitments
in the future is based on historical utilization statistics for unfunded commitments. The credit loss rates used are calculated using
the same assumptions as the associated funded balance.

 The
ACL on unfunded commitments is categorized in Other Liabilities on our balance sheet and, from time to time, is adjusted as a provision
for credit loss expense.

 ACL
– Held-to-maturity debt securities

 Management
measures expected credit losses on held-to-maturity debt securities on a collective basis by major security type. Our held-to-maturity
debt securities is largely comprised of bank subordinated debt. The ACL on held-to-maturity securities is adjusted through provision
for credit losses and is recorded as a contra asset to held-to-maturity securities. Management has determined that calculating an ACL
amount for accrued interest receivable on held-to-maturity debt securities would not be significant, and this is excluded from our estimate
of credit losses for held-to-maturity debt securities.

 Upon
CECL adoption, we recorded an increase to the ACL on loans held-for-investment of $604,000, established an ACL on unfunded commitments
of $165,000, established an ACL on held-to-maturity investments of $38,000, recorded an increase to deferred tax assets of $153,000,
and a corresponding one-time cumulative reduction to retained earnings, net of tax, of $654,000 in the consolidated balance sheet as
of January 1, 2023.

 For
further information regarding our Allowance for Credit Losses see Note 1 and Note 3—LOANS AND ALLOWANCE FOR CREDIT LOSSES in our
audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

 Fair
Value Measurements

 Fair
value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. Fair value is based on quoted market prices, or if market prices are not available, is estimated
using models employing various techniques.

 The
significant assumptions used in the models are independently verified against observable market data where possible. When observable
market data is not available, the estimate of fair value becomes more subjective and involves a high degree of judgment. In this circumstance,
fair value is estimated based on our judgment regarding the value that market participants would assign to the asset or liability. Therefore,
the results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or liability.
Additionally, there are inherent limitations to any valuation technique, and changes in the underlying assumptions used, including discount
rates and estimates of future cash flows, could significantly affect the results of current or future values.

 A
portion of our assets and liabilities are carried at fair value on our consolidated balance sheet. The majority of these assets and liabilities
are measured at fair value on a recurring basis, however, certain assets are measured at fair value on a nonrecurring basis based on
the fair value of the underlying collateral.

 For
further information regarding the valuation of our financial instruments, see Note 1 and Note 15 - Fair Value Information in our audited
consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

 Pending Merger with CBOA Financial, Inc.

 On April 27, 2023, Bancorp 34 and CBOA entered into the merger agreement,
which was amended on December 21, 2023. Under the merger agreement, CBOA will merge with and into Bancorp 34, with Bancorp 34 continuing
as the surviving entity. Immediately following the merger, Commerce Bank of Arizona will merge with and into our wholly-owned subsidiary
bank, Bank 34, with Bank 34 continuing as the surviving bank in the bank merger. Subject to the terms and conditions of the merger agreement,
at the effective time of the merger, each outstanding share of CBOA common stock will be converted into the right to receive 0.2628 shares
of Bancorp 34 common stock. The merger agreement was approved by the boards of directors of Bancorp 34 and CBOA, and is subject to customary
closing conditions, including receipt of required regulatory approvals and the approvals of the shareholders of CBOA and stockholders
of Bancorp 34. A special shareholder meeting of CBOA to approve the merger agreement is scheduled for March 18, 2024, and a special stockholder
meeting of Bancorp 34 to approve the merger agreement is also scheduled for March 18, 2024. The proposed merger is expected to close in
the first quarter of 2024.

 During 2023, we incurred pre-tax merger related costs of approximately
$3.0 million related to the proposed merger with CBOA.

 Results
of Operations

 General

 Our
results of operations depend substantially on net interest income, which is the difference between interest income on interest-earning
assets, consisting primarily of interest income on loans, investment securities and other short-term investments and interest expense
on interest-bearing liabilities, consisting primarily of deposits and borrowings. Our results of operations are also dependent on our
generation of non-interest income, consisting primarily of income from service charges on deposit accounts, interchange and ATM fees,
and gains on sales of SBA loans. Other factors contributing to our results of operations include our provisions for credit losses,
income taxes, and non-interest expenses, such as salaries and employee benefits, occupancy, amortization of intangible assets and other
operating costs.

 We
had a net loss of $3.4 million for the year ended December 31, 2023, compared to net income of $1.3 million for the year ended December
31, 2022. The $4.7 million decrease for the year ended December 31, 2023, compared to the year ended December 31, 2022, was primarily
due to a decrease of $3.3 million in net interest income and a $1.8 million increase in the provision for credit losses. Noninterest
expenses increased $353,000 due to merger costs of $3 million in the year ended December 31, 2023, and data processing fees increased
by $558,000 during the year ended December 31, 2023. The favorable impact from the decline in salaries and employee benefits expense
of $3.1 million in the year ended December 31, 2023, partially offset the aforementioned unfavorable variances.

 Net
Interest Income

 Net
interest income, representing interest income less interest expense, is a significant contributor to our revenues and earnings.
We generate interest income from interest and dividends on interest-earning assets, which are principally comprised of loans and
investment securities. We incur interest expense from interest owed or paid on interest-bearing liabilities, including interest-bearing
deposits, FHLB advances and other borrowings. Net interest income and margin are shaped by the characteristics of the underlying
products, including volume, term, and structure of each product. We measure and monitor yields on our loans and other interest-earning
assets, the costs of our deposits and other funding sources, our net interest spread and our net interest margin. Net interest
spread is the difference between rates earned on interest-earning assets and rates paid on interest-bearing liabilities. Net interest
margin is calculated as the annualized net interest income divided by average interest-earning assets.

earned on our loan portfolio is the largest component of our interest income. Our loan portfolio is presented at the principal
amount outstanding net of deferred origination fees and unamortized discounts and premiums. Interest income is recognized based
on the principal balance outstanding and the stated rate of the loan. Loan origination fees and certain direct origination costs
are capitalized and recognized as an adjustment of the yield on the related loan.

 Our
net interest income can be significantly influenced by a variety of factors, including overall loan demand, economic conditions,
credit risk, the amount of non-earning assets including nonperforming loans and OREO, the amounts of and rates at which assets
and liabilities reprice, variances in prepayment of loans and securities, exercise of call options on borrowings or securities,
a general rise or decline in interest rates, changes in the slope of the yield-curve, the relative mix of the various elements
of interest earning assets and interest bearing liabilities and balance sheet growth or contraction.

 Years
Ended December 31, 2023, and 2022

 Our
net interest income was $15.2 million for 2023, a decrease of $3.3 million, or 18%, from 2022. This decrease was primarily attributable
to the rapid increase in market interest rates causing the average rates paid on interest bearing liabilities to increase much
faster than the average rates paid on interest earning assets. We incurred a $7.6 million, or 144%, increase in interest expense,
partially offset by a $4.4 million, or 18%, increase in interest income for 2023, compared to 2022. These results were largely
driven by a 183 basis point increase in average rates paid on interest bearing liabilities to 3.08% in 2023 compared to 1.25%
in 2022. The average rate paid on interest earning assets increased 74 basis points from 2022 to 2023.

earning assets for 2023 were $550.7 million, an increase of $6.5 million, or 1%, compared to 2022. Total average loans in 2023
were $472.1 million, which was $15.8, or 3%, larger than 2022. Average loan yield in 2023 was 68 basis points higher than 2022.
Interest income from investment securities in 2023 was slightly lower than 2022 due to a $8.7 million, or 12%, decrease in average
balance, partially offset by a 27 basis point increase in yield.

interest-bearing liabilities decreased $4.5 million, or 4%, in 2023, compared to 2022. A $28.4 million, or 65%, decrease in average FHLB
and FRB borrowings was partially offset by a $23.8 million, or 7%, increase in average interest-bearing deposits. The FRB borrowings
consisted solely of term borrowings from the new Bank Term Funding Program implemented in March to minimize the need for banks to sell
securities at a loss in times of stress. The increase in average interest earning deposits was caused by a $57.6 million, or 92%,
increase in time deposits, partially offset by a $33.8 million, or 16%, decrease in average interest-bearing demand deposits over those
same time periods. Average brokered deposits, sometimes referred to as "brokered CDs", are included in average time deposits
and were $19.7 million in 2023, compared to $1.1 million during 2022.

noninterest bearing deposits decreased $12.6 million in 2023, compared to 2022. These trends reflect the broader market trends
in which customers have reduced non-interest- and interest-bearing demand deposits in favor of term CDs given the rising bank
deposit rate environment. Additionally, to assist with the management of overall interest rate risk and to save on funding costs,
fixed rate CDs were used to reduce exposure to higher-cost short-term FHLB borrowings. The average rate on the brokered CD deposits
during 2023 was 4.45%, which represented a 53-basis point, or 11%, reduction in interest expense when compared to the average
rate on FHLB and FRB borrowings during the year. Replacing the FHLB borrowings with CDs, including brokered CDs, did not increase
on-balance sheet liquidity but did increase our available borrowing capacity at the FHLB, due to the decline in FHLB borrowed
balances.

 Our
net interest margin was 2.76% for 2023, compared to 3.39% for 2022, a decrease of 63 basis points. While our total cost of funds
increased 194 basis points year over year, we also experienced a 74 basis point increase in yield on our earning assets over the
same period, due to the overall increase in market interest rates. The Federal Open Market Committee (FOMC) target Federal Funds
rates increased 525 basis points through 11 rate hikes between March 2022 and July 2023.

 The
average balance sheet amounts, the related interest income or expense, and average rates earned or paid are presented in the following
table.

 For
 the year ended December 31, 2023

 For
 the year ended December 31, 2022

 (dollars

 Yield/Rate

 Yield/Rate

 Earning Assets

 Loans (1)

 $
 472,113

 $
 25,779

 5.46
 %

 $
 456,297

 $
 21,818

 4.78
 %

 Investment
 securities

 61,694

 1,611

 2.61
 %

 70,389

 1,651

 2.35
 %

 Other
 interest earning assets

 16,888

 4.35
 %

 17,492

 4.67
 %

 Total
 earning assets

 550,695

 $
 28,124

 5.11
 %

 544,178

 $
 23,761

 4.37
 %

 Noninterest-earning
 assets

 29,101

 29,083

 Total
 assets

 $
 579,796

 $
 573,261

 Interest-bearing
 liabilities

 Checking,
 money market and savings deposits

 $
 260,238

 $
 6,878

 2.64
 %

 $
 294,000

 $
 2,920

 0.99
 %

 Time

 120,367

 4,261

 3.54
 %

 62,811

 1.22
 %

 Total
 interest-bearing deposits

 380,605

 11,139

 2.93
 %

 356,811

 3,684

 1.03
 %

 FRB
 and FHLB advances

 15,179

 4.98
 %

 43,533

 1.32
 %

 debt, net of issue costs

 24,568

 1,054

 4.29
 %

 24,489

 1,054

 4.30
 %

 Total
 interest-bearing liabilities

 420,352

 $
 12,949

 3.08
 %

 424,832

 $
 5,314

 1.25
 %

 Noninterest-bearing

 89,165

 101,790

 Other
 liabilities

 8,139

 7,932

 Shareholders'
 equity

 62,140

 38,706

 Total
 liabilities and stockholders' equity

 $
 579,796

 $
 573,261

 Net
 interest income

 $
 15,175

 $
 18,447

 Net
 interest spread

 2.03
 %

 3.12
 %

 Net
 interest margin

 2.76
 %

 3.39
 %

 (1)

 Includes nonaccrual
 loans.

 Rate-Volume
Analysis

 The
table below presents the effect of volume and rate changes on interest income and expense. Changes in volume are based on the
current period's average balance multiplied by the previous period's average rate. Changes in rate are based on the
current period's average rate multiplied by the average balance from the previous period. The net changes attributable to
the combined impact of both rate and volume have been allocated proportionately to the changes due to volume and the changes due
to rate.

 2023 vs 2022 Volume &
Rate Analysis

 Years
 Ended December 31,

 2023
 vs. 2022

 Increase
 (Decrease)

 Total

 Due
 to

 Increase

 Volume

 Rate

 (Decrease)

 Interest-earning
 assets:

 Loans

 $

 $
 3,184

 $
 3,961

 (483
)

 (40
)

 Other
 interest earning assets

 (9
)

 Total
 interest-earning assets

 4,078

 4,363

 Interest-bearing
 liabilities:

 Checking,
 money-market and savings accounts

 (294
)

 4,252

 3,958

 Certificates
 of deposit

 1,133

 2,364

 3,497

 Total

 6,616

 7,455

 Advances
 from FRB and FHLB

 (55
)

 debt, net of issuance costs

 (11
)

 (0
)

 Total
 interest-bearing liabilities

 6,840

 7,635

 Change
 in net interest income

 $
 (510
)

 $
 (2,762
)

 $
 (3,272
)

and Provision for Credit Losses – Loans held-for-investment

 At
December 31, 2023, the ACL was $5.9 million, or 1.28% of loans held-for-investment, an increase of $1.1 million, or 23% when compared
to the allowance for loan losses at December 31, 2022, which was based on an incurred loss model, not CECL. We maintain ACL
at a level that management believes is adequate to absorb expected credit losses over the lifetime of the bank's loans held-for-investment.
Specifically, identifiable and quantifiable losses are immediately charged off against the allowance; recoveries are generally
recorded only when sufficient cash payments are received subsequent to the charge-off.

 The
provision for credit losses is a charge to earnings to maintain the ACL at a level consistent with management's assessment
of the collectability of the loans held-for-investment in light of current economic conditions and market trends. Our provision
for credit losses was, $4.2 million for 2023 and $2.4 million for 2022. In the fourth quarter of 2023, we charged off $3.4 million
of an out of market commercial real estate loan which accounted for a large portion of the provision expense in 2023. The remaining
loan balance of $3 million is categorized as OREO in our December 31, 2023, balance sheet. In the fourth quarter of 2022, we charged
off $2.9 million of a commercial loan which led to higher provision expense in 2022.

 At
December 31, 2023, management believes the ACL is appropriate and has been derived from consistent application of our methodology.
Should any of the factors considered by management in evaluating the appropriateness of the allowance for credit losses change,
management's estimate of inherent losses in the portfolio could also change, which would affect the level of future provisions
for credit losses.

for Credit Losses – Off Balance Sheet Credit Exposures

 We
estimate expected credit losses over the contractual period in which we are exposed to credit risk via a contractual obligation to extend
credit, unless that obligation is unconditionally cancellable by us. The ACL on off-balance sheet credit exposures is adjusted as a provision
for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit
losses on commitments expected to be funded over its estimated life.
Upon adoption of CECL, we recorded an ACL on unfunded commitments of $165,000.

 Noninterest

 The
following table presents our noninterest income for the years ended December 31, 2023, and 2022.

 Year
 Ended December 31,

 ( In

 2023

 2022

 Service
 charges and fees

 $

 $

 Gain
 on sale of loans

 —

 Bank
 owned life insurance

 Gain
 (loss) on disposal/impairment of fixed assets

 (25
)

 Other

 (87
)

 (59
)

 Total
 noninterest income

 $

 $

 Our
noninterest income increased $185,000 to $730,000 in 2023, from $545,000 in the prior year. The increase in noninterest income
for 2023, compared to 2022, was primarily due to a $99,000 increase in gains on sales of fixed assets, a $41,000 increase in service
charges and fees and a $32,000 gain on sale of loans in 2023.

 Noninterest
Expense

 The
following table presents noninterest expense for the years ended December 31, 2023, and 2022.

 Year
 Ended December 31,

 ( In

 2023

 2022

 Salary
 and employee benefits

 $
 6,124

 $
 9,092

 Occupancy

 1,148

 1,292

 Data
 processing

 2,665

 2,107

 insurance premiums and other insurance

 Professional
 fees

 Merger
 costs

 3,010

 —

 Advertising

 Other

 1,454

 1,652

 Total
 noninterest expense

 $
 15,537

 $
 15,184

 Our
noninterest expense increased $353,000 to $15.5 million for year ended December 31, 2023, from $15.3 million for 2022. The increase
in noninterest expense in 2023, compared to 2022, was primarily due to merger-related expense of $3 million in 2023, and a $558,000 increase
in data processing fees. Those increases were partially offset by decreases of $3.1 million in salaries and employee benefits, $198,000
in other expense, and $144,000 in occupancy expense.

 Salary
and employee benefits expense is the largest component of our noninterest expense and includes employee payroll expense, incentive
compensation, health benefits and payroll taxes. Salary and employee benefits decreased $3.1 million for 2023, compared to the
prior year, due primarily to a $1.6 million decrease in pension expense due to costs related to a defined benefit pension plan
terminated in 2022, lower incentives resulting from a decline in loan demand, the reduction in force in April 2023, and no employee
recruiting expense in 2023. These reductions were partially offset by the benefit of the $547,000 Employee Retention Credit (ERC)
booked in the first quarter of 2022 under the 2021 Consolidated Appropriations (CARES) Act.

 Merger
costs of $3 million was incurred in 2023 compared to none in 2022. Merger costs included systems termination and conversion costs
of $983,000, external audit expenses of $560,000, and legal fees of $526,000.

 Data
processing fees in 2023 were $558,000 larger than 2022 due to system upgrades and product expansion.

 Efficiency
ratio

 The
efficiency ratio is one measure of profitability in the banking industry. This ratio measures the cost of generating one dollar
of revenue. That is, the ratio is designed to reflect the percentage of one dollar which must be expended to generate that dollar
of revenue. We calculate this ratio by dividing non-interest expense by the sum of net interest income and non-interest income.

 Our
efficiency ratio was 97.69% and 80.07% for the years ended December 31, 2023, and 2022, respectively. The efficiency ratio for
the year ended December 31, 2023, reflects $3 million of non-interest expense related to merger costs. Excluding these 2023 merger
costs, our efficiency ratio was 78.77% for the year ended December 21, 2023.

 Return
on equity and assets

 The
following table sets forth our ROAA, ROAE, dividend payout and average stockholders' equity to average assets ratio for
the periods ended:

 2023

 2022

 Return on average total assets (ROAA)

 (0.59
)%

 0.23
 %

 Return on average stockholders' equity (ROAE)

 (5.48
)%

 3.44
 %

 Dividend payout ratio

 (15.91
)%

 50.08
 %

 Average stockholders' equity to average assets

 10.72
 %

 6.75
 %

Taxes

 We
had an income tax benefit for the year ended 2023 of $453,000 compared to income tax expense of $58,000 for the year ended 2022. The
2023 income tax benefit was due to our pre-tax loss in 2023. Our effective tax rate was 11.75% for the year ended 2023,
compared to 4.18% for the year ended 2022. The effective tax rate for the year ended 2023 includes an unfavorable impact of $2.2 million
of non-deductible merger costs. This unfavorable impact was partially offset by favorable state tax credits which were proportionally
greater to our 2023 pre-tax loss as compared to our 2022 pre-tax income.

 Further
information on our annual income taxes is presented in Note 11 – Income Taxes in our audited consolidated financial statements
included elsewhere in this Annual Report on Form 10-K.

 FINANCIAL
CONDITION

Sheet

 Our
total assets were $581.3 million at December 31, 2023, compared to $574.3 million at December 31, 2022. Our total loans held for
investment were $457.0 million at December 31, 2023, a decrease of $6.3 million, compared to $463.4 million at December 31, 2022.

 Investment

 Our
securities portfolio is used to make various term investments, maintain a source of liquidity and serve as collateral for certain
types of borrowings. We manage our investment portfolio according to written investment policies approved by our board of directors.
Investment in our securities portfolio may change over time based on our funding needs and interest rate risk management objectives.
Our liquidity levels take into account anticipated future cash flows funds and available sources of funds and are maintained at
levels that we believe are appropriate to provide the necessary flexibility to meet our anticipated funding requirements.

 Our
investment securities portfolio consists of securities classified as available-for-sale and held-to-maturity. There were no trading
securities in our investment portfolio as of December 31, 2023, and December 31, 2022. All available-for-sale securities are carried
at fair value and may be used for liquidity purposes should management consider it to be in our best interest.

 Our
securities available-for-sale decreased by $1.9 million to $56.7 million at December 31, 2023, compared to December 31, 2022.
The decrease was primarily due to maturities and regular monthly payments on mortgage-backed securities being offset by purchases
of $2 million. Securities held-to-maturity were $5.7 million at December 31, 2023, and $5.8 million at December 31, 2022.

for Credit Losses – Held-to-Maturity Debt Securities

 The
following table presents the activity in the allowance for credit losses on held-to-maturity debt securities, for the year ended
December 31, 2023:

 December 31, 2023 (in 000s)

 Corporate Bonds

 Allowance for credit losses:

 $
 —

 Impact of adopting ASU 2016-13

 Provision for credit losses

 Securities charged-off (recoveries)

 —

 Ending balance

 $

 Loans

 Our
loan portfolio represents a broad range of borrowers primarily in our markets in Arizona and New Mexico, comprised of construction,
commercial, commercial real estate, residential real estate and consumer financing loans.

 Gross
loans as of December 31, 2023, were $458.2 million, compared to $464.7 million as of December 31, 2022.

 The
following tables set forth the composition of our loan portfolio, as of the periods presented:

 31, 2022

 (In

 %
 of total

 loans

 %
 of total

 loans

 1-4

 13.5
 %

 13.6
 %

 10.9
 %

 10.5
 %

 0.2
 %

 1,048

 0.2
 %

 7.5
 %

 9.4
 %

 NOO
 CRE

 36.8
 %

 40.0
 %

 OO
 CRE

 17.9
 %

 13.2
 %

 13.2
 %

 13.1
 %

 Total gross loans

 $

 %

 $

 %

 Family
residential real estate loans represent loans to consumers collateralized by a mortgage on a residence and include purchase money,
refinancing, secondary mortgages, and home equity loans and lines of credit.

loans include commercial and industrial loans to commercial customers for use in normal business operations to finance working
capital needs, equipment and inventory purchases, and other expansion projects. SBA, USDA and other small business lending products
are also included. These loans are made primarily in our market areas are underwritten on the basis of the borrower's ability
to service the debt from revenue, and are generally extended under our normal credit standards, controls and monitoring systems.

and other include direct consumer installment loans, overdrafts and other revolving loans.

loans include both residential and commercial projects. Construction loan terms are dependent upon the project, but in some cases
the loan will be longer term and include both the construction phase as well as longer term financing.

real estate loans include owner occupied and non-owner occupied commercial real estate mortgage loans to operating commercial
businesses and include loans for long-term financing of land and buildings. No significant concentrations are present within the
CRE portfolio as the bank has made an effort to diversify across various industries and geographic locations. While the majority
of these loans are made primarily in our marketplace, some of the loans have out of market properties. In response to the deterioration
of the large out of market commercial real estate loan during 2023, management engaged an external party to complete a loan review
that included approximately 90% of the out of market collateral portfolio. Additionally, management reviewed the property appraisals
associated with the out of market loans and plans to limit out of market lending moving forward.

loans are those properties that have five or more units with borrowers who are primarily commercial entities. The bank finances loans
in several different multifamily types but does not have a concentration in any one type and does not do any specialty lending in this
area. These loans are made primarily in our marketplace.

 Maturities
and Sensitivity of Loans to Changes in Interest Rates

 The
information in the following table is based on the contractual maturities of individual loans, including loans that may be subject
to renewal at their contractual maturity. Renewal of these loans is subject to review and credit approval, as well as modification
of terms upon maturity. Actual repayments of loans may differ from the maturities reflected below because borrowers have the right
to prepay obligations with or without prepayment penalties. The following table summarizes the loan maturity distribution by type
and related interest rate characteristics as of the periods presented:

 ( In

 As
 of December 31, 2023

 One
 year

or less

 After
 one through five years

 After
 five through 15 years

 After
 15 years

 Total

 Fixed

 Fixed

 Fixed

 1-4

 $
 2,750

 $
 36,192

 $
 1,601

 $
 9,010

 $
 1,823

 $
 4,668

 $
 5,600

 $

 16,340

 15,241

 1,458

 8,857

 8,274

 8,933

 8,767

 3,591

 10,355

 1,922

 NOO
 CRE

 17,651

 70,156

 15,034

 7,319

 42,033

 16,212

 OO
 CRE

 5,639

 28,413

 1,160

 13,176

 33,196

 2,445

 33,251

 2,458

 19,712

 2,681

 Total
 gross loans

 $
 54,347

 $
 192,129

 $
 25,301

 $
 59,043

 $
 98,362

 $
 6,589

 $
 22,456

 $

 Allocation
of Allowance for Credit Losses

 The
following tables present the allocation of the ACL on loans held-for-investment and the percentage of the total amount
of loans held-for-investment in each category listed and as of the dates indicated:

 31, 2022

 ( Dollars

 %
 of

 Portfolio

 %
 of

 Portfolio

 1-4

 $

 1.19
 %

 $

 0.72
 %

 1.84
 %

 1,382

 2.85
 %

 1.15
 %

 5.34
 %

 1.48
 %

 0.51
 %

 NOO
 CRE

 1,859

 1.10
 %

 1,680

 0.90
 %

 OO
 CRE

 1,201

 1.46
 %

 0.90
 %

 1.02
 %

 0.70
 %

 Total

 $
 5,860

 1.28
 %

 $
 4,778

 1.03
 %

 The
ACL increased by $1.1 million during the year ended December 31, 2023, including $604,000 from the adoption of CECL. The change in methodologies
from an incurred loss model to an expected loss model resulted in allowance allocations increasing across the construction, non-owner
occupied commercial real estate, owner occupied commercial real estate, 1-4 Family residential real estate, and multifamily portfolios.
The CECL adoption also resulted in lower allowance allocations in the commercial and consumer and other portfolios.

 Nonperforming

 We
have established policies and procedures to guide us in originating, monitoring and maintaining the credit quality of our loan
portfolio. These policies and procedures are required to be followed by our bankers and underwriters and exceptions to these policies
require elevated levels of approval and are reported to our board of directors.

 Nonperforming
assets include all loans categorized as nonaccrual, other real estate owned and other repossessed assets. The accrual of interest
on loans is discontinued, or the loan is placed on nonaccrual, when the full collection of principal and interest is in doubt.
We do not generally accrue interest on loans that are 90 days or more past due. When a loan is placed on nonaccrual, previously
accrued but unpaid interest is reversed and charged against interest income and future accruals of interest are discontinued.
Payments by borrowers for loans on nonaccrual are applied to loan principal. Loans are returned to accrual status when, in our
judgment, the borrower's ability to satisfy principal and interest obligations under the loan agreement has improved sufficiently
to reasonably assure recovery of principal and the borrower has demonstrated a sustained period of repayment performance. In general,
we require a minimum of six consecutive months of timely payments in accordance with the contractual terms before returning a
loan to accrual status.

 Historically
Other Real Estate Owned (OREO) represents assets acquired through, or in lieu of, foreclosure. The amounts reported as OREO generally
are supported by recent appraisals, with the appraised values adjusted, where applicable, for expected transaction fees likely
to be incurred upon sale of the property. We typically have incurred recurring expenses relating to OREO in the form of maintenance,
taxes, insurance, and legal fees, among others, until the OREO parcel is disposed. While disposition efforts with respect to our
OREO are generally ongoing, if these properties are appraised at lower-than-expected values or if we are unable to sell the properties
at the prices for which we expect to be able to sell them, we may incur additional losses. Bank 34 held $3 million of OREO, represented
by one out of market commercial real estate property, at December 31, 2023, and no OREO at December 31, 2022.

 The
following tables set forth our non-performing assets, non-performing asset ratios, and net losses as a percentage of average loans
for each period presented:

 ( Dollars

2023

2022

 Nonaccrual
 loans:

 1-4

 $

 $

 1,208

 1,641

 —

 —

 —

 1,591

 NOO
 CRE

 —

 —

 OO
 CRE

 —

 —

 —

 Total
 nonaccrual loans

 2,244

 3,891

 Accrual
 loans greater than 90 days past due

 —

 Total
 nonperforming loans (NPLs)

 2,244

 4,183

 Other
 real estate owned and foreclosed assets, net

 3,000

 —

 Total
 nonperforming assets (NPAs)

 $
 5,244

 $
 4,183

 ACL

 5,860

 4,778

 NPLs

 2,244

 4,183

 ACL
 to NPLs

 261.14
 %

 114.22
 %

 NPA's

 5,244

 4,183

 Total

 581,265

 574,340

 NPAs
 to total assets

 0.90
 %

 0.73
 %

 NPLs

 2,244

 4,183

 Total
 Gross Loans

 NPLs
 to total loans

 0.49
 %

 0.90
 %

 (Dollars in thousands)

 Net Loss /(recovery)

 Average Balance

 Loss %

 Net Loss /(recovery)

 Average Balance

 Loss %

 $
 (6
)

 $
 61,019

 -0.01
 %

 $
 6 5

 $
 59,025

 0.11
 %

 $
 51,111

 0.63
 %

 2,905

 44,007

 6.60
 %

 —

 $

 0.00
 %

 —

 0.00
 %

 —

 $
 43,838

 0.00
 %

 —

 44,175

 0.00
 %

 3,382

 $
 185,860

 1.82
 %

 —

 185,892

 0.00
 %

 —

 $
 69,461

 0.00
 %

 —

 62,988

 0.00
 %

 —

 $
 59,885

 0.00
 %

 —

 59,751

 0.00
 %

 Total

 $
 3,697

 $
 472,113

 0.78
 %

 $
 2,970

 $
 456,297

 0.65
 %

 Total
nonperforming assets were $5.2 million as of December 31, 2023, compared to $4.2 million at December 31, 2022. The increase was
due to the increase in OREO, with paydowns of existing nonaccrual loans.

 Potential
problem loans are impaired loans which management has serious doubts as to the ability of the borrowers to comply with the present
loan repayment terms. Management has not identified any potential problem loans not included in the nonperforming assets table
above.

for Credit Losses – Unfunded loan commitments

 The
following table presents the changes in the ACL on unfunded loan commitments for the year ended December 31, 2023:

 December 31, 2023 (in 000s)

 Unfunded

Loan

 Allowance for credit losses:

 $
 —

 Impact of adopting ASU 2016-13

 Recovery of credit losses

 (30
)

 Ending balance

 $

represent our primary source of funds. We are focused on growing our core deposits through relationship-based banking with our
business and consumer clients. Total deposits decreased $27.6 million as of December 31, 2023, compared to $487.6 million at December
31, 2022. Consistent with industry trends, we experienced an outflow of deposits as large deposit customers diversified their
deposit holdings and sought out other forms of investment. Deposit outflows in 2023 were partially offset by growth in brokered
CDs, which increased $14.6 million from $5 million at December 31, 2022, to $19.5 million on December 31, 2023, and a new high
yield savings account offered through an online banking platform which grew by $9.1 million during the same period. The high-yield
savings account offering is through a platform administered by a third-party which we believed would offer better reach in terms
of potential depositors, and we do not classify them as brokered deposits. The savings accounts provided additional diversity
to our funding sources and represented modest savings over non-core funding alternatives. Our total time deposits, or CDs, increased
$54.9 million from December 31, 2022, to December 31, 2023, primarily due to customers wishing to lock in higher interest rates
for longer periods, CD promotions to attract new customers, and the $14.6 million growth in brokered CDs.

 The
following table sets forth the average balance amounts and the average rates paid on deposits held by us for the periods presented:

 For the years ended

 ( Dollars in thousands)

 Rate Paid

 Rate Paid

 Noninterest-bearing demand deposits

 $
 89,165

 —
 %

 $
 101,790

 —
 %

 Interest-bearing demand and NOW deposits

 260,238

 2.64

 294,000

 0.99

 Certificates of deposit

 120,367

 3.54

 62,811

 1.22

 Total deposits

 $
 469,770

 2.37
 %

 $
 458,601

 0.80
 %

 For
the years ended December 31, 2023, and December 31, 2022, average certificates of deposit includes average brokered CD balances
of $19.7 million and $1.1 million, respectively. This growth in our brokered CD deposits in 2023 has been used to supplement
deposit growth, assist in the management of interest rate risk through less volatile funding costs, and to reduce the reliance
on short-term FHLB borrowings.

 The
following table sets forth the portion of the Bank's time deposits, by account, that are in excess of the FDIC insurance
limit, by remaining time until maturity, as of December 31, 2023:

 ( In thousands)

 2023

 Three months or less

 $
 10,739

 Over three months through six months

 4,355

 Over six months through twelve months

 12,441

 Over twelve months

 16,354

 Total

 $
 43,889

 As
of December 31, 2023, and December 31, 2022, approximately $195.6 million and $283.5 million, of our total deposit portfolio
was uninsured. The estimates are based on the methodologies and assumptions used for the Bank's regulatory reporting requirements.

Reserve Bank and Federal Home Loan Bank Advances

 Other
than deposits, we also utilize Federal Home Loan Bank (FHLB) advances and Federal Reserve Bank (FRB) advances as supplementary
funding sources to finance our operations. At December 31, 2023, we had $29 million of borrowings through the FRB's Bank
Term Funding Program (BTFP) established in March 2023. At December 31, 2022, we had $5 million in term FHLB borrowings. Our advances
from the FRB are collateralized by pledged securities. Collateral for FHLB borrowings is provided by a blanket lien on our loan
portfolio. At December 31, 2023, we had $1.3 million in availability through the FRB's BTFP and $15.4 million in availability
through the FRB's Discount Window. As of December 31, 2023, we had $145.6 million in borrowing capacity at the FHLB of San
Francisco.

 The
following table presents certain attributes of our FRB and FHLB Advances. The maximum month-end balance represents the high indebtedness
at any month end during 2023.

 Maximum

 Ending

 Period End

 Month End

 Period Average

 ( Dollars

 Rate

 Rate

 As of and for the year ended December 31, 2023

 FRB and FHLB Advances

 $

 4.83
 %

 $

 $
 15,179

 4.98
 %

 Subordinated debt

 4.00
 %

 4.00
 %

 Total

 $

 4.45
 %

 $

 $
 40,179

 4.50
 %

Debt

 In
addition to our FHLB advances, we also have subordinated debt amounting to $24.6 million at December 31, 2023, and $24.5 million
at December 31, 2022, net of remaining origination fees. For more information about these borrowings, see Note 6—Borrowings
in our audited consolidated financial statements included elsewhere in Annual Report on Form 10-K.

Raises

 During
December 2022 and January 2023, Bancorp 34 completed
two private placements of common and preferred stock. Bancorp 34 issued a total of 1,359,497 shares of common stock and 820,115 shares
of convertible, non-voting Series A perpetual preferred Stock at $14.00 per share each, generating net cash proceeds of approximately
$28.6 million. Bancorp 34 will use the net proceeds from these private placements to fund organic growth, transact on potential acquisition
opportunities, enter complementary new business lines, and to enhance capital ratios.

 In
conjunction with the private placements, Bancorp 34 issued warrants to purchase up to 211,667 shares of Common Stock at a price
of $14.00. The approximate fair value of the warrants at the date of grant was not considered significant. The warrants are exercisable
at any time after their grant date, and from time to time, in whole or in part, for 7 years from their grant dates, between December
2029 and January 2030. The exercise of such warrants remains subject to certain contractual provisions and a "cashless exercise"
may be executed.

 For
more information about these private placements, see Note 17--Private Placements of Common and Preferred Stock, in our audited
consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

 Liquidity

 Liquidity
refers to our ability to maintain cash flow that is adequate to fund operations, support asset funding, meet present and future
obligations of deposit withdrawals, lending obligations, and other contractual obligations.

34 (Parent Company)

34 has routine cash needs consisting primarily of operating expenses, debt service, and funds used for acquisitions. Bancorp 34 can obtain
funding to meet its obligations from dividends collected from its subsidiary, Bank 34, and through the issuance of varying forms of debt
and equity. At December 31, 2023, Bancorp 34 has cash and cash equivalents of $19.2 million, a $1.5 million note receivable from
the Bank 34 ESOP, and debt outstanding, net of issuance costs, of $24.6 million. Management believes Bancorp 34 has the ability to generate
and obtain adequate amounts of liquidity to meet its requirements in the short-term and the long-term.

banking laws regulate the amount of dividends that may be paid by banking subsidiaries without prior approval. Bank 34 may declare
dividends without prior regulatory approval that do not exceed the total of retained net income for the current year combined
with its retained net income for the preceding two years, subject to maintenance of minimum capital requirements. Prior regulatory
approval to pay dividends was not required in 2022 or 2023 and is not currently required. At December 31, 2023, Bank 34 could
pay dividends to Bancorp 34 of approximately $5.5 million without prior regulatory approval. During the year ended December 31,
2023, Bank 34 did not pay a dividend to Bancorp 34.

 Bank

 Bank
34's liquidity management policy and our asset and liability management policy, or ALM policy, provides the framework that
we use to seek to maintain adequate liquidity and sources of available liquidity at levels that will enable us to meet all reasonably
foreseeable short-term, long-term and strategic liquidity demands. Our Asset and Liability Management Committee, or ALCO, is responsible
for oversight of our liquidity risk management activities in accordance with the provisions of our ALM Policy and applicable bank
regulatory capital and liquidity laws and regulations. Our liquidity risk management process includes (i) ongoing analysis and
monitoring of our funding requirements under various economic and interest rate scenarios, (ii) review and monitoring of lenders,
depositors, brokers and other liability holders to ensure appropriate diversification of funding sources and (iii) liquidity contingency
planning to address liquidity needs in the event of unforeseen market disruption, including appropriate allocation of funds to
a liquid portfolio of marketable securities and investments. We continuously monitor our liquidity position in order for our assets
and liabilities to be managed in a manner that we believe will meet our immediate and long-term funding requirements. We seek
to manage our liquidity position to meet the daily cash flow needs of customers, while maintaining an appropriate balance between
assets and liabilities to meet the return on investment objectives of our stockholders. We also monitor our liquidity requirements
in light of interest rate trends, changes in the economy, and the scheduled maturity and interest rate sensitivity of our securities
and loan portfolios and deposits. Liquidity management is made more complicated because different balance sheet components are
subject to varying degrees of management control. For example, the timing of maturities of our investment portfolio is fairly
predictable and subject to a high degree of control when we make investment decisions.

 Our
liquidity position is supported by management of our liquid assets and liabilities and access to alternative sources of funds.
Our short-term and long-term liquidity requirements are primarily to fund on-going operations, including payment of interest on
deposits and debt, extensions of credit to borrowers and capital expenditures. These liquidity requirements are met primarily
through our deposits, FHLB advances, subordinated debt and the principal and interest payments we receive on loans and investment
securities. Cash, interest-bearing deposits in third party banks, securities available for sale and maturing or prepaying balances
in our investment and loan portfolios are our most liquid assets. Other sources of liquidity that are available to us include
the sale of loans we hold for investment, the ability to acquire additional national market non-core deposits, borrowings through
the Federal Reserve's discount window and the issuance of additional debt or equity securities.

 At
December 31, 2023, our liquid assets, which consist of cash and amounts due from banks and interest-bearing deposits in other
financial institutions, amounted to $28.9 million, or 5% of total assets, compared to $16.9 million, or 3% of total assets, at
December 31, 2022. The increase in our liquid assets was primarily due to an increase in cash held at the Federal Reserve.
Our available-for-sale securities at December 31, 2023, were $56.7 million, or 10% of total assets, compared to $58.6 million,
or 10% of total assets, at December 31, 2022. Investment securities with an aggregate carrying value of $43.1 million and
$8.2 million at December 31, 2023, and December 31, 2022, respectively, were pledged to secure various liquidity sources.

 The
liability portion of our balance sheet serves as a primary source of liquidity. We plan to meet our future cash needs primarily
through the generation of deposits. Customer deposits have historically provided a sizeable source of relatively stable and low-cost
funds. At December 31, 2023, net loans as a percentage of deposits were 98%, compared with 94% at December 31, 2022. For
additional information related to our deposits, see the Deposits section above.

 We
are also borrowing capacity at the FRB of San Francisco and the FHLB of San Francisco, from which we can borrow for leverage or
liquidity purposes. Both the FRB and FHLB require that securities and qualifying loans be pledged to secure any advances. At December
31, 2023, we had $29.0 million in advances from the FRB's BTFP. At December 31, 2023, we had $1.3 million in availability
through the FRB's BTFP and $15.4 million in availability through the FRB's Discount Window. As of December 31, 2023,
we had $145.6 million in borrowing capacity at the FHLB of San Francisco.

 In
addition, we have unused Federal funds lines-of-credit with certain other financial institutions totaling $39.8 million as of
December 30, 2023.

 Management
believes the Bank has the ability to generate and obtain adequate amounts of liquidity to meet its requirements in the short-term
and the long-term.

Resources

 Stockholders'
equity at December 31, 2023, was $60.7 million, compared to $49.2 million at December 31, 2022, an increase of $11.5 million,
or 23%. The increase was primarily driven by the private placement of common and preferred shares generating $15.0 million in
new equity, partially offset by the net loss and dividends paid in 2023. The private placement of equity was completed on January
27, 2023, representing the second round of the capital raise begun on December 30, 2022.

 We
are subject to various regulatory capital requirements administered by federal banking regulators. Failure to meet minimum capital
requirements can initiate certain mandatory and possibly additional discretionary actions by federal banking regulators that,
if undertaken, could have a direct material effect on our financial statements.

 Regulatory
capital rules adopted in July 2013 and fully-phased in as of January 1, 2019, which we refer to as the Basel III rules, impose minimum
capital requirements for bank holding companies and banks. The Basel III rules apply to all national and state banks and savings associations
regardless of size and bank holding companies and savings and loan holding companies with consolidated assets of more than $3 billion.
In order to avoid restrictions on capital distributions or discretionary bonus payments to executives, a covered banking organization
must maintain the fully-phased in "capital conservation buffer" of 2.5% on top of its minimum risk-based capital requirements.
This buffer must consist solely of common equity Tier 1 risk-based capital, but the buffer applies to all three measurements (common
equity Tier 1 risk-based capital, Tier 1 capital and total capital). At December 31, 2023, Bancorp
34 and Bank 34 exceeded the regulatory minimums and met the regulatory definition of well-capitalized.

 The
following table shows the regulatory capital ratios for Bancorp 34 at the dates indicated:

 Minimum
 Required

 To be
 Well-

 Minimum
 Required

 Capitalized
 under

 For Capital

 Prompt
 Corrective

 Actual

 Adequacy
 Purposes (1)

 Action
 Provisions

 (Dollars

 Ratio

 Ratio

 Ratio

 As
 of December 31, 2023

 Total
 risk-based capital to risk-weighted assets

 $
 96,761

 19.20
 %

 $
 40,311

 8.00
 %

 $N/A

 N/A
 %

 Tier
 1 risk-based capital to risk-weighted assets

 65,651

 13.03

 30,234

 6.00

 N/A

 N/A

 Equity Tier 1 (CET 1) to risk-weighted assets

 N/A

 N/A

 N/A

 N/A

 N/A

 N/A

 Tier
 1 leverage capital to average assets

 65,651

 11.20

 23,446

 4.00

 N/A

 N/A

 As
 of December 31, 2022

 Total
 risk-based capital to risk-weighted assets

 $
 85,108

 17.72
 %

 $
 38,422

 8.00
 %

 $N/A

 N/A
 %

 Tier
 1 risk-based capital to risk-weighted assets

 53,329

 11.52

 28,816

 6.00

 N/A

 N/A

 Equity Tier 1 (CET 1) to risk-weighted assets

 N/A

 N/A

 N/A

 N/A

 N/A

 N/A

 Tier
 1 leverage capital to average assets

 53,329

 9.48

 23,335

 4.00

 N/A

 N/A

 The
following table shows the regulatory capital ratios for Bank 34 at the dates indicated:

 To be Well-

 Capitalized under

 For Capital

 Prompt Corrective

 Actual

 Adequacy
Purposes (1)

 Action Provisions

 (Dollars in thousands)

 Ratio

 Ratio

 Ratio

 As of December 31, 2023

 Total risk-based capital to risk-weighted assets

 $
 74,142

 14.79
 %

 $
 40,114

 8.00
 %

 $
 50,143

 10.00
 %

 Tier 1 risk-based capital to risk-weighted assets

 13.57

 30,086

 6.00

 40,114

 8.00

 Common Equity Tier 1 (CET 1) to risk-weighted assets

 13.57

 22,564

 4.50

 32,593

 6.50

 Tier 1 leverage capital to average assets

 11.66

 23,347

 4.00

 29,184

 5.00

 As of December 31, 2022

 Total risk-based capital to risk-weighted assets

 $
 64,492

 13.57
 %

 $
 38,286

 8.00
 %

 $
 47,857

 10.00
 %

 Tier 1 risk-based capital to risk-weighted assets

 12.57

 28,717

 6.00

 38,290

 8.00

 Common Equity Tier 1 (CET 1) to risk-weighted assets

 12.57

 21,538

 4.50

 31,111

 6.50

 Tier 1 leverage capital to average assets

 10.34

 23,274

 4.00

 29,092

 5.00

 Off-Balance
Sheet items

 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. These financial instruments include commitments to extend credit and unused lines of credit. Those 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 or notional amounts of those instruments reflect the extent of involvement
we have in particular classes of financial instruments.

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 many of
the commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future
cash requirements. We evaluate each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained,
if deemed necessary by us upon extension of credit, is based on management's credit evaluation of the counterparty. Collateral
is primarily obtained in the form of commercial and residential real estate, including income producing commercial properties.

to make loans are generally made for periods of 90 days or less.

 Our
exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend
credit and standby letters of credit is represented by the contractual or notional amount of those instruments. We use the same
credit policies in making commitments and conditional obligations as for funded instruments. We do not anticipate any material
losses as a result of the commitments and standby letters of credit.

 The
following table summarizes commitments as of the dates presented (dollars in thousands):

 Fixed

 Fixed

 to extend credit

 $
 5,327

 $
 6,966

 $
 7,112

 $
 16,090

 Unused
 lines of credit

 3,962

 18,859

 4,544

 14,162

 $
 9,289

 $
 25,825

 $
 11,656

 $
 30,252

 Contractual
Obligations

 We
have entered into contractual obligations in the normal course of business that involve elements of credit risk, interest rate
risk and liquidity risk.

 The
following table summarizes our contractual obligations as of December 31, 2023, and December 31, 2022:

 ( In

 Less than

 1-3

 3-5

 More than

 Total

 Year

 Years

 Years

 Years

 Long-term
 debt:

 FRB
 term advances

 $

 $

 $
 —

 $
 —

 $
 —

 debt

 —

 —

 —

 Total
 long-term debt

 —

 —

 Operating
 leases

 2,344

 Certificates
 of deposit

 128,403

 93,675

 30,390

 4,338

 Total

 $
 184,747

 $
 123,000

 $
 31,116

 $
 5,087

 $
 25,544

 31, 2022

 Long-term
 debt:

 FHLB
 term advances

 5,000

 5,000

 —

 —

 —

 debt

 —

 —

 —

 Total
 long-term debt

 30,000

 5,000

 —

 —

 Operating
 leases

 2,578

 Certificates
 of deposit

 73,493

 50,025

 21,627

 1,841

 —

 Total

 $
 106,071

 $
 55,230

 $
 22,341

 $
 2,579

 $
 25,921

 Item
7-A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 Market
risk is the risk of reduced earnings and/or declines in the net market value of the balance sheet due to changes in market rates.
Our primary market risk is interest rate risk which impacts our net interest income, fee income related to interest sensitive
activities such as mortgage origination and servicing income and loan and deposit demand.

 We
are subject to interest rate risk due to:

 the maturity
 or repricing of assets and liabilities at different times or for different amounts;

 differences
 in short-term and long-term market interest rate changes; and

 the remaining
 maturity of various assets or liabilities may shorten or lengthen as interest rates change.

 Our
Asset Liability Committee, or ALCO, which is composed of our executive officers, certain board members and other members of management,
monitors interest rate risk on an ongoing basis in accordance with policies approved by our board of directors. The ALCO reviews
interest rate positions and considers the impact projected interest rate scenarios have on earnings, liquidity, business strategies
and other factors.

 The
ALCO's objective is to operate in compliance with the board of directors' approved policies and procedures. Limits
are established by policy around point in time liquidity metrics which include, but are not limited to, on-hand liquidity, non-core
funding dependency, and loan-to-deposit ratios. Limits are also established around various funding sources which include, but
are not limited to, brokered deposits, deposits gathered through on-line resources, and borrowings. Regarding interest rate risk,
limits have been instituted around 12- and 24-month earnings simulation modeling as well as economic value of equity modeling.
No material changes to policy limits have been made in response to current market conditions or developments.

 Due
to the possibility of rapid changes within the credit and interest rate markets, the ALCO must have the flexibility to make prudent
decisions which may temporarily deviate from the approved policy and risk limits to enhance profitability or minimize risk. Our
policy thus permits ALCO management to implement exceptions to policy; however, any exception to policy must have the prior approval
of the Chief Executive Officer and one other ALCO member. All exceptions must be documented in the ALCO minutes and reported to
the board of directors at the next scheduled meeting. In 2023, no policy exception strategies have been implemented that deviate
from the risk limits outlined in the ALCO related policies and procedures.

 To
assess and manage interest rate risk, sensitivity analysis is used to determine the impact on earnings and the net market value
of the balance sheet across various interest rate scenarios, balance sheet trends, and strategies.

 Management
uses a simulation model to analyze the sensitivity of net interest income to changes in interest rates across various interest
rate scenarios, which seeks to demonstrate the level of interest rate risk inherent in the balance sheet. The analysis holds the
current balance sheet values constant and does not take into account management intervention. In addition, we assume certain correlation
rates, often referred to as a "deposit beta," for interest-bearing deposits, wherein the rates paid to customers change
relative to changes in benchmark interest rates. The effect on the bank's net interest income over a 12-month time horizon
and economic value of equity due to hypothetical changes in market interest rates is presented in the table below. In this interest
rate shock simulation, as of the periods presented, interest rates have been adjusted by instantaneous parallel changes rather
than in a ramp simulation, which applies interest rate changes over time. All rates, short-term and long-term, are changed by
the same amount (e.g. plus or minus 100 basis points) resulting in the shape of the yield curve remaining unchanged.

 %
 Change in Net Interest Income

 %
 Change in Economic Value of Equity

 in Interest Rates (Basis Points)

 As
 of December 31, 2023

 As
 of December 31, 2022

 As
 of December 31, 2023

 As
 of December 31, 2022

 -13.90
 %

 -18.02
 %

 -9.67
 %

 -10.04
 %

 -8.20
 %

 -10.77
 %

 -5.36
 %

 -5.36
 %

 -3.70
 %

 -5.44
 %

 -1.06
 %

 -0.66
 %

 0.61
 %

 0.57
 %

 1.25
 %

 1.96
 %

 Base

 -100

 -0.59
 %

 -0.59
 %

 -2.78
 %

 -4.07
 %

 -200

 2.52
 %

 4.71
 %

 -6.54
 %

 -7.69
 %

 -300

 5.77
 %

 8.77
 %

 -10.50
 %

 -11.86
 %

 -400

 8.92
 %

 14.53
 %

 -15.26
 %

 -17.88
 %

 Item
8. Financial Statements and Supplementary Data

 BANCORP
34, INC.

TO FINANCIAL STATEMENTS

 Contents

 Page

 Report of Independent Registered Public Accounting Firm (PCAOB ID # 166)

 Financial Statements

 Consolidated Balance Sheets

 Consolidated Statements of Comprehensive (Loss) Income

 Consolidated Statements of Changes in Stockholders' Equity

 Consolidated Statements of Cash Flows

 Notes to the Consolidated Financial Statements

 Report
of Independent Registered Public Accounting Firm

 To the Shareholders and Board
of Directors

 Bancorp 34, Inc.

 Opinion on the Consolidated
Financial Statements

 We
have audited the accompanying consolidated balance sheets of Bancorp 34, Inc. (the "Company") as of December 31, 2023,
and 2022; the related consolidated statements of comprehensive (loss) income, changes in shareholders' equity, and cash
flows for each of the years in the two-year period ended December 31, 2023; and the related notes (collectively referred to as
the "financial statements"). In our opinion, the financial statements referred to above present fairly, in all material
respects, the financial position of the Company as of December 31, 2023, and 2022 and the results of its operations and its cash
flows for each of the years in the two-year period ended December 31, 2023, in conformity with accounting principles generally
accepted in the United States of America.

 Change in Accounting
Principle

 As
described in Notes 1 and 3 to the financial statement, the Company adopted the provisions of Accounting Standards Updated (ASU)
No. 2016-13, Financial Instruments – Credit Losses (Topic 326), as of January 1, 2023. Our opinion is not modified
with respect to this matter.

 Basis for Opinion

 The
Company's management is responsible for these financial statements. 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 the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits
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 audits, 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.

 To the Shareholders and Board
of Directors

 Bancorp 34, Inc.

 Our
audits 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 audits 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 audits provide a reasonable basis for our opinion.

 Critical
Audit Matter

 The
critical audit matter communicated below is a matter arising from the December 31, 2023, audit of the financial statements that was communicated
or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial
statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters
does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit
matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

for Credit Losses – Qualitative Adjustments - Refer to Notes 1 and 3 to the financial statements

 Critical
Audit Matter Description

 The allowance
for credit losses for loans consists of a collectively evaluated and an individually evaluated reserve as described in Notes 1
and 3 to the financial statements. The collectively evaluated reserve has both quantitative and qualitative components. The Company
estimates the quantitative allowance for credit losses using relevant available information, from internal and external sources,
related to past events, current conditions, and reasonable and supportable forecasts. This quantitative component is then adjusted
for qualitative risk factors that involve significant assumptions and a high degree of management's judgment. The qualitative
risk factors included consideration of the following: changes in lending policies and underwriting standards; changes in economic
conditions; changes in nature and volume of loans; changes in the depth of lending staff; changes in the volume and severity of
past due, non-accrual and adversely classified loans; changes in the levels and trends of charge offs and recoveries; changes
in the quality of the loan review system; changes in concentrations of credit; and, the effects of other external factors such
as competition and legal and regulatory requirements. Given the significant estimates and assumptions management makes to estimate
qualitative adjustments within the allowance for credit losses, performing audit procedures to evaluate the reasonableness of
management's estimates and assumptions required a high degree of auditor judgment.

 How
the Critical Audit Matter Was Addressed in the Audit

 Our
primary audit procedures related to the qualitative adjustments to the collectively evaluated allowance for credit losses of loans
included the following, among others:

 -
 We
 obtained an understanding of management's process for development of the qualitative
 factors and evaluated the design of controls over the application of management's
 qualitative factor methodology.

 -
 We
 evaluated the methodology and the relevance and reliability of information utilized in
 the development of the estimate.

 -
 Where
 applicable, we evaluated the accuracy and completeness of data used by management in
 the measurement of qualitative factor adjustments or compared to relevant external data
 sources.

 -
 We
 developed an independent estimate to assess the modelling assumptions and significant
 inputs used to estimate the allowance for credit losses for collectively evaluated loans,
 which involved independently obtaining significant inputs from external sources.

 -
 We
 assessed the adequacy of the disclosures related to the allowance for credit losses.

 /s/ Plante &
Moran, PLLC

 We
have served as the Company's auditors since 2023.

 Denver, Colorado

 March 7, 2024

 Consolidated
Balance Sheets

 (Dollars
in Thousands, except share data)

31, 2023, and December 31, 2022

 31,

 2023

 2022

 ASSETS

 Cash
 and due from banks

 $
 27,182

 $
 16,112

 Fed
 funds sold

 1,715

 Total
 cash and cash equivalents

 28,897

 16,947

 Available-for-sale
 securities, at fair value

 Held-to-maturity
 securities, at amortized cost, net of allowance for credit losses

 5,684

 5,832

 Loans
 held for investment

 457,027

 463,360

 for credit losses

 ( 5,860
)

 ( 4,778
)

 Loans
 held for investment, net

 451,167

 458,582

 Other
 real estate owned

 3,000

 —

 Premises
 and equipment, net

 7,350

 8,077

 Operating
 lease right-of-use assets

 1,819

 2,067

 Other
 investments

 4,063

 1,277

 Accrued
 interest receivable

 1,597

 1,505

 income tax asset, net

 4,884

 4,924

 Bank
 owned life insurance

 11,847

 11,598

 Prepaid
 and other assets

 4,267

 4,949

 Total
 assets

 $
 581,265

 $
 574,340

 The
accompanying notes are an integral part of the consolidated financial statements.

 Consolidated
Balance Sheets (Continued)

 (Dollars
in Thousands, except Share data)

31, 2023, and December 31, 2022

 LIABILITIES AND
 STOCKHOLDERS' EQUITY

 LIABILITIES

 2023

 2022

 Demand

 $
 88,091

 $
 102,699

 Savings
 and NOW deposits

 243,505

 311,395

 Time

 128,403

 73,493

 Total

 459,999

 487,587

 Reserve Bank BTFP Advances

 —

 Home Loan Bank advances

 —

 5,000

 Subordinate
 debt, net of issuance costs

 24,595

 24,531

 Escrows

 Operating
 lease liabilities

 2,011

 2,153

 Accrued
 interest and other liabilities

 4,771

 5,652

 Total
 liabilities

 520,544

 525,102

 STOCKHOLDERS'
 EQUITY

 Preferred stock, $ 0.01 par value Authorized: 50,000,000 shares Issued and outstanding: 0 and 521,849 on December 31, 2023, and December 31, 2022, respectively

 —

 Common stock, $ 0.01 par value Authorized: 100,000,000 shares, including 1,100,000 shares of non-voting common stock

 Voting common stock, $ 0.01 par value Issued and outstanding: 3,873,895 and 3,032,606 on December 31, 2023, and December 31, 2022, respectively

 Non-voting common stock, $ 0.01 par value Issued and outstanding: 820,115 and 0 on December 31, 2023, and December 31, 2022, respectively

 —

 Additional
 paid-in capital

 43,279

 28,369

 Retained
 earnings

 24,301

 29,013

 Accumulated
 other comprehensive loss

 ( 5,560
)

 ( 6,773
)

 Unearned
 Employee Stock Ownership Plan (ESOP) share

 ( 1,346
)

 ( 1,406
)

 Total
 stockholders' equity

 60,721

 49,238

 Total
 liabilities and stockholders' equity

 $
 581,265

 $
 574,340

 The
accompanying notes are an integral part of the consolidated financial statements.

 Consolidated
Statements of Comprehensive (Loss) Income

 (Dollars
in Thousands, Except Per Share Data)

 For
years ended December 31, 2023, and 2022

 Year Ended December
 31,

 2023

 2022

 INTEREST
 INCOME

 and fees on loans

 $
 25,779

 $
 21,818

 on securities

 1,611

 1,650

 on other interest-earning assets

 Total
 interest income

 28,124

 23,761

 expense

 on deposits

 11,139

 3,684

 on borrowings

 1,810

 1,630

 Total
 interest expense

 12,949

 5,314

 Net
 interest income

 15,175

 18,447

 Provision
 for credit losses

 4,223

 2,420

 Net
 interest income after provision for credit losses

 10,952

 16,027

 NON-INTEREST
 INCOME

 Service
 charges and fees

 Gain
 on sale of loans, net

 —

 Bank
 owned life insurance

 Gain
 (Loss) on disposal or impairment of fixed assets

 ( 25
)

 Other

 ( 87
)

 ( 59
)

 Total
 non-interest income

 NON-INTEREST
 EXPENSE

 Salaries
 and employee benefits

 6,124

 9,092

 Occupancy

 1,148

 1,292

 Data
 processing fees

 2,665

 2,107

 FDIC
 and other insurance expense

 Professional
 fees

 Merger
 Costs

 3,010

 —

 Advertising

 Other

 1,454

 1,652

 Total
 non-interest expense

 15,537

 15,184

 (Loss)
 income before provision for income taxes

 ( 3,855
)

 1,388

 (Benefit
 from) provision for income taxes

 ( 453
)

 Net
 (loss) income

)

 1,330

 Other
 comprehensive income (loss)

 1,684

 ( 7,868
)

 Tax
 effect of other comprehensive income or loss

 ( 471
)

 2,015

 Other
 comprehensive income (loss), net of tax

 1,213

 ( 5,853
)

 Comprehensive
 (loss)

 $
 ( 2,189
)

 $
 ( 4,523
)

 (Loss)
 Earnings per common share Basic

 $
 ( 0.88
)

 $
 0.56

 (Loss)
 Earnings per common share Diluted

 $
 ( 0.88
)

 $
 0.56

 The
accompanying notes are an integral part of the consolidated financial statements.

 Consolidated
Statements of Changes in Stockholders' Equity

(Dollars in Thousands, Except Number of Shares)

Years Ended December 31, 2023, and 2022

 Balances

 Other

 Non-voting

 Series A

 Non-voting

 Series A

 Additional

 Comprehensive

 Unearned

 Paid-In

 Retained

 ESOP

 Stock

 Stock

 Stock

 Earnings

 (Loss),
 Net

 Total

 BALANCE, January
 1, 2023

 3,032,606

 —

 521,849

 $

 $
 —

 $

 $
 28,369

 29,013

 $
 ( 6,773
)

 $
 ( 1,406
)

 $
 49,238

 Cumulative
 adjustment for day one adoption of ASU 2016-13, net of tax (Reference Notes 1 and 3)

 —

 —

 —

 —

 —

 —

 —

 ( 654
)

 —

 —

 ( 654
)

 —

 —

 —

 —

 BALANCE,
 January 1, 2023 (as adjusted for the adoption of ASU 2016-13)

 3,032,606

 —

 521,849

 $

 $
 —

 $

 $
 28,369

 28,359

 $
 ( 6,773
)

 $
 ( 1,406
)

 $
 48,584

 —

 —

 —

 —

 Net
 loss for 2023

 —

 —

 —

 —

 —

 —

 —

)

 —

 —

)

 Other
 comprehensive income on AFS securities

 —

 —

 —

 —

 —

 —

 —

 —

 1,213

 —

 1,213

 stock award

 10,250

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 stock forfeiture

 ( 2,050
)

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Amortization
 of equity awards

 —

 —

 —

 —

 —

 —

 —

 —

 Repurchase
 of common stock

 ( 15,000
)

 —

 —

 —

 —

 —

 ( 210
)

 —

 —

 —

 ( 210
)

 Issuance
 of common stock, net of issuance costs

 848,089

 —

 —

 —

 —

 10,858

 —

 —

 —

 10,867

 Issuance
 of Series A preferred stock, net of issuance costs

 —

 —

 298,266

 —

 —

 4,172

 —

 —

 —

 4,175

 Conversion
 of Series A preferred stock to non voting common stock

 —

 820,115

 ( 820,115
)

 —

 ( 8
)

 —

 —

 —

 —

 —

 Dividends
 paid - $ 0.14 per share

 —

 —

 —

 —

 —

 —

 —

 ( 656
)

 —

 —

 ( 656
)

 BALANCE,
 DECEMBER 31, 2023

 3,873,895

 820,115

 —

 $

 $

 $
 —

 $
 43,279

 24,301

 $
 ( 5,560
)

 $
 ( 1,346
)

 $
 60,721

 Balances

 Other

 Non-voting

 Series A

 Non-voting

 Series A

 Additional

 Comprehensive

 Unearned

 Paid-In

 Retained

 ESOP

 Stock

 Stock

 Stock

 Earnings

 (Loss),
 Net

 Total

 Balance on January 1, 2022

 2,523,398

 —

 —

 $

 $
 —

 $
 —

 $
 14,647

 $
 28,383

 $
 ( 920
)

 $
 ( 1,465
)

 $
 40,670

 Net income for 2022

 —

 —

 —

 —

 —

 —

 —

 1,330

 —

 —

 1,330

 Other comprehensive loss on AFS securities

 —

 —

 —

 —

 —

 —

 —

 —

 ( 7,161
)

 —

 ( 7,161
)

 Defined benefit plan

 —

 —

 —

 —

 —

 —

 —

 —

 1,308

 —

 1,308

 Restricted stock awards

 9,500

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Restricted stock forfeiture

 ( 7,439
)

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Amortization of equity awards

 —

 —

 —

 —

 —

 —

 —

 —

 Repurchase of common stock

 ( 5,297
)

 —

 —

 —

 —

 —

 ( 78
)

 —

 —

 —

 ( 78
)

 Stock option exercise

 1,036

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Issuance of common stock, net of issuance costs

 511,408

 —

 —

 —

 —

 6,207

 —

 —

 —

 6,212

 Issuance of Series A preferred stock, net of issuance costs

 —

 —

 521,849

 —

 —

 7,301

 —

 —

 —

 7,306

 Dividends paid - $ 0.28 per share

 —

 —

 —

 —

 —

 —

 —

 ( 700
)

 —

 —

 ( 700
)

 Balance on December 31, 2022

 3,032,606

 —

 521,849

 $

 $

 $

 $
 28,369

 $
 29,013

 $
 ( 6,773
)

 $
 ( 1,406
)

 $
 49,238

 The
accompanying notes are an integral part of the consolidated financial statements.

 Consolidated Statements
of Cash Flows

 (Dollars in Thousands)

 For
years ended December 31, 2023, and 2022

 Year
 Ended December 31,

 2023

 2022

 CASH
 FLOWS FROM OPERATING ACTIVITIES

 Net
 (loss) income

 $

)

 $

 1,330

 Adjustments
 to reconcile net (loss) income to net cash used in operating activities

 Depreciation
 and amortization

 Stock
 dividends on other investments

 ( 71

)

 ( 47

)

 Amortization
 of premiums and discounts on securities, net

 Amortization
 of equity awards

 Gain
 on sale of loans, net

 ( 32

)

 —

 Loans
 originated with the intent to sell

 ( 1,316

)

 —

 from sale of loans

 1,367

 5,002

 Provision
 for credit losses

 4,223

 2,420

 Gain
 on the sale of fixed assets

 ( 74

)

 Net
 appreciation on bank-owned life insurance

 ( 248

)

 ( 238

)

 income tax (benefit) expense

 ( 278

)

 in operating assets and liabilities

 Accrued
 interest receivable

 ( 92

)

 ( 151

)

 Prepaid
 and other assets

 ( 123

)

 Accrued
 interest and other liabilities

 ( 1,016

)

 Net
 cash provided by operating activities

 9,761

 CASH
 FLOWS FROM INVESTING ACTIVITIES

 from calls, sales, maturities, or principal payments on available-for-sale securities

 5,348

 7,475

 Purchases
 of available-for-sale securities

 ( 2,005

)

 ( 8,060

)

 Purchases
 of held-to-maturity securities

 —

 ( 500

)

 Net
 (purchase) redemptions of other investments

 ( 2,715

)

 Net
 change in loans held for investment

 ( 382

)

 ( 55,709

)

 from disposals of premises and equipment

 Purchases
 of premises and equipment

 ( 226

)

 ( 684

)

 Net
 cash provided by (used in) investing activities

 ( 56,838

)

 CASH
 FLOWS FROM FINANCING ACTIVITIES

 Net
 change in deposits

 ( 27,599

)

 49,783

 from Federal Home Loan Bank advances

 320,398

 712,500

 Repayments
 of Federal Home Loan Bank advances

 ( 325,398

)

 ( 726,500

)

 from Federal Reserve advances

 122,000

 —

 Repayments
 of Federal Reserve advances

 ( 93,000

)

 —

 stock repurchases

 ( 210

)

 ( 78

)

 stock issuance, net

 10,867

 6,212

 stock issuance, net

 4,175

 7,306

 Payment
 of dividends

 ( 656

)

 ( 700

)

 Net
 cash provided by financing activities

 10,577

 48,523

 NET
 CHANGE IN CASH AND CASH EQUIVALENTS

 11,950

 1,446

 CASH
 AND CASH EQUIVALENTS, beginning of period

 16,947

 15,501

 CASH
 AND CASH EQUIVALENTS, end of period

 $

 28,897

 $

 16,947

 SUPPLEMENTAL
 DISCLOSURES

 on deposits and borrowings paid

 $

 12,536

 $

 5,181

 tax (refunds received) paid

 $

 ( 1

)

 $

 Loans
 transferred to other real estate owned

 $

 3,000

 $

 —

 The accompanying notes are an integral
part of the consolidated financial statements.

 Notes
to Consolidated Financial Statements

 Note
1 – Nature of Operations and Significant Accounting Policies

34, Inc. ("Bancorp 34" or the "Company") is a Maryland corporation organized in 2016 to be the successor to Alamogordo
Financial Corp ("AFC"), a savings and loan holding company, upon completion of the October 2016 second-step conversion of
Bank 34 (the "Bank") from the two-tier mutual holding company structure to the stock holding company structure. Bancorp 34
owns 100% of the Bank. The Bank provides a variety of banking services to individuals and businesses through its full-service branch
in Scottsdale, Arizona as well as branches in Alamogordo and Las Cruces, New Mexico.

 Basis
of presentation – The accompanying consolidated financial statements have been prepared on the accrual basis of accounting
in accordance with accounting principles generally accepted in the United States of America (GAAP). In management's opinion, all
accounting adjustments necessary to accurately reflect the financial position and results of operations on the accompanying financial
statements have been made. These adjustments are normal and recurring accruals considered necessary for a fair and accurate presentation.

 Basis
of consolidation – The consolidated financial statements include the accounts of Bancorp 34 and the Bank. All significant intercompany
accounts and transactions have been eliminated.

 Reclassifications
 – Certain reclassifications have been made to prior period's financial information to conform to the current period presentation.
Reclassifications had no effect on Equity or Net Income.

 Use
of estimates – The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
Estimates associated with the allowance for credit losses are particularly susceptible to material change in the near term.

 Adoption
of ASU 2016-13 "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments."
– On January 1, 2023, we adopted ASC 326. The FASB issued ASC 326 (also known as CECL, for Current Expected Credit Losses)
to replace the incurred loss model for loans and other financial assets with an expected loss model that requires consideration of a
wider range of reasonable and supportable information to determine credit losses. In accordance with ASC 326, we have developed an Allowance
for Credit Loss (ACL) methodology effective January 1, 2023, which replaces its previous allowance for loan losses methodology. The ACL
is a valuation account that is deducted from loans' amortized cost basis to present the net amount expected to be collected on
the loans. Loans are charged-off against the allowance when management believes the uncollectibility of a loan balance is confirmed.
Upon adoption, we recorded an increase to the ACL on loans held-for-investment of $604,000, established an ACL on unfunded commitments
of $165,000, established an ACL on held-to-maturity investments of $38,000, recorded an increase to deferred tax assets of $153,000,
and a corresponding one-time cumulative reduction to retained earnings, net of tax, of $654,000 in the consolidated balance sheet as
of January 1, 2023.

 Subsequent
events – Subsequent events have been evaluated through the date the consolidated financial statements were issued.

 Cash
and cash equivalents – Cash and cash equivalents include cash, due from banks, and federal funds sold. Generally, the Company
considers all highly liquid instruments with original maturities of three months or less to be cash equivalents. In monitoring credit
risk associated with deposits in other banks, the Bank periodically evaluates the stability of the correspondent financial institutions.
Banks may be required to maintain reserve funds in cash or on deposit with the Federal Reserve Bank. No reserves were required at December
31, 2023 and December 31, 2022.

 – If management has the intent and the Company has the ability at the time of purchase to hold securities until maturity, they
are classified as held-to-maturity and carried at amortized historical cost less the allowance for credit losses. Securities to be held
for an undeterminable period of time and not intended to be held until maturity are classified as available-for-sale and carried at fair
value, with unrealized gains and losses reported in other comprehensive income or loss, net of tax. Securities classified as available-for-sale
include securities that management intends to use as part of its asset/liability management strategy and that may be sold in response
to changes in interest rates, prepayment risk, and other factors. Management determines the appropriate classification of securities
at the time of purchase but may reassess the classification.

 Net
purchase premiums and discounts on securities are recognized in interest income using the level yield method over the estimated life
of the security. Premiums are amortized to the earliest call date. Gains and losses on the sale of available-for-sale securities are
determined using the specific identification method.

 For
Available-for-sale (AFS) securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more
likely than not that the Company will be required to sell, the security before recovery of its amortized cost basis. If either of the
criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value through net
income. For AFS securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has
resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less
than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the
security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be
collected from the security is compared to the amortized cost basis of the security. If the present value of cash flows expected to be
collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss,
limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an
allowance for credit losses is recognized in other comprehensive income (loss), net of applicable taxes.

for credit losses - held-to-maturit y securities: Held-to maturity securities are carried at amortized cost net of ACL when
management has the positive intent and ability to hold them to maturity. The Company's held-to maturity portfolio consists solely
of bank subordinated debt. Management measures expected credit losses on held-to-maturity debt securities on an individual basis. When
accrued interest is reversed or charged-off in a timely manner, the CECL standard provides a practical expedient to exclude accrued interest
from ACL measurement. The Company considers it's nonaccrual and charge-off policies to be timely for all investments securities,
as such, accrued interest receivable on held-to-maturity debt securities is excluded from the estimate of credit losses. The estimate
of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable
forecasts.

 Loans
held for investment, net – Loans that management has the intent and ability to hold for the foreseeable future or until
maturity or payoff are reported at their outstanding unpaid principal balances reduced by any charge-offs and net of any deferred
fees or costs. Loans are considered past due, or delinquent based on the contractual terms in the loan agreement and how recently
repayments have been received. Interest income is recognized based upon principal amounts outstanding. The accrual of interest is
discontinued at the time the loan is 90 days past due or when, in the opinion of management, there is doubt about the ability of the
borrower to pay interest or principal, unless the credit is well secured and in process of collection. Interest previously accrued
but uncollected on such loans is reversed and charged against current income. Loans are charged-off as uncollectible when, in the
opinion of management, collectability of principal is improbable. If payment is received on a nonaccrual loan, generally the payment
is first applied to the remaining principal balance. Payments are then applied to recover any charged-off amounts related to the
loan. Finally, if both the principal balance and any charge-offs have been recovered, then the payment will be recorded as fee and
interest income. Personal loans are typically charged off when no later than 180 days past due.

 Loan
origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using
the interest method.

for credit losses - loans: The ACL is a valuation account that is deducted from the loans' amortized cost basis to present
the net amount expected to be collected on the loans. The ACL excludes loans held-for-sale and loans accounted for under the fair value
option. The Company elected to not measure an ACL for accrued interest receivables, as we write off applicable accrued interest receivable
balances in a timely manner when a loan is placed on non-accrual status, in which any accrued but uncollected interest is reversed from
current income. Loans are charged off against the allowance when management believes the uncollectibility of a loan balance is confirmed.
Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. Management estimates
the allowance balance using relevant available information, from internal and external sources, related to past events, current conditions,
and reasonable and supportable forecasts. An industry index is used in the model to provide historical credit loss experience and provides
the basis for the estimation of expected credit losses. The Company identified and grouped portfolio segments based on risk characteristics
and underlying collateral.

 The principal segments of our loan portfolio are discussed below:

 Commercial loans. We provide a mix of variable and fixed
rate commercial loans. The loans are typically made to small- and medium-sized manufacturing, wholesale, retail and service businesses
for working capital needs and business expansion. Commercial loans generally include lines of credit and loans with maturities of five
years or less. The loans are generally made with business operations as the primary source of repayment, but may also include collateralization
by inventory, accounts receivable, and equipment. Personal guarantees are typically obtained on commercial loans as well.

 Commercial real estate loans. Our commercial real estate
loans consist of both real estate occupied by the borrower for ongoing operations and non-owner occupied real estate properties. The
real estate securing our existing commercial real estate loans includes a wide variety of property types, such as owner and non-owner-occupied
offices, warehouses and production facilities, office buildings, hotels, mobile home parks, retail centers, and assisted living facilities.

 Multifamily. Our multifamily portfolio includes properties with
5 or more dwellings where the use is primarily residential.

 Construction and land development loans. Our construction
and land development loans are comprised of residential construction, commercial construction, and land acquisition and development loans.

 Residential real estate loans. Our residential real estate
loans consist of residential properties that generally do not qualify for secondary market sale.

 Consumer loans. Our consumer loans include direct personal
loans and automobile loans. Personal loans are generally unsecured or secured by cash held at the bank.

 The ACL
for pooled loans is estimated using a non-discounted cash flow methodology. The bank then applies probability of default and loss given
default to the cash flow methodology to calculate expected losses within the model. This allows the bank to identify the timing of default
as compared to when the actual loss event may occur. The results are then aggregated to produce segment level results and reserve requirements
for each segment. The Company uses a 12-month forecast that is reasonable and supportable within the ACL calculation and then reverts
to historical credit loss experience on a straight-line basis over a one-year timeline. Historical loss experience is then used for the
remaining life of the assets. The Company uses several economic variables in the calculation of the ACL, the most significant of which
is the economic forecast for the national unemployment rate. Changes in the economic forecast for unemployment rates could significantly
affect the estimated credit losses which could potentially lead to materially different allowance levels from one reporting period to
the next.

 Loans
that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not included in the pooled
loan evaluation. When management determines that foreclosure is probable, expected credit losses are based on the fair value of the collateral
at the reporting date, adjusted for selling costs as appropriate.

 Qualitative
adjustments to historical loss data are made based on management's assessment of the risks that may lead to a future loan loss
or differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, changes in
environmental and economic conditions, or other relevant factors.

 In March
2022, the FASB issued ASU 2022-02, Financial Instruments – Credit Losses (Topic 326); Troubled Debt Restructurings ("TDR")
and Vintage Disclosures. This ASU was effective for the Company on January 1, 2023. The amendments eliminate the TDR recognition and
measurement guidance and instead require an entity to evaluate whether the modification represents a new loan or a continuation of an
existing loan (consistent with accounting for other modifications). The amendments also enhance existing disclosure requirements related
to certain modifications of receivables made to borrowers experiencing financial difficulty. The Company adopted ASU 2022-02 on January
1, 2023. Refer to Note 3 - Loans and Allowance for Credit Losses for additional information on the required disclosures.

 Prior
to the adoption of ASC 326 methodology, the allowance consisted of probable credit losses inherent in the loan portfolio. Allowances
for impaired loans were generally determined based on collateral values or the present value of estimated cash flows and made up the
specific reserve component of the reserve. The general component of the allowance covered non-impaired loans and had a quantitative component
(historical loss) and a qualitative component (current risk factors). The qualitative risk factors included consideration of the following:
changes in lending policies and underwriting standards; changes in economic conditions; changes in nature and volume of loans; changes
in the depth of lending staff; changes in the volume and severity of past due, non-accrual and adversely classified loans; changes in
the levels and trends of charge offs and recoveries; changes in the quality of the loan review system; changes in concentrations of credit;
and, the effects of other external factors such as competition and legal and regulatory requirements.

 The
allowance is increased by a provision for credit losses, which is charged to expense and reduced by charge-offs, net of recoveries.

 Premises and equipment
 – Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation
and amortization are computed using the straight-line method in amounts sufficient to relate the cost of depreciable assets to operations
over the estimated useful lives of the assets which range from three to seven years for equipment and fifteen to forty years for leasehold
improvements and buildings. Maintenance and repairs that do not extend the useful lives of premises and equipment are charged to expense
as incurred.

 Leases –
Leases are classified as operating or finance leases at the lease commencement date. Lease expense for operating leases and short-term
leases is recognized on a straight-line basis over the lease term. Right-of-use assets represent the Company's right to use an
underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Right-of-use
assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over
the lease term.

 Other investments
 – The Bank has investments in The Independent Bankers Bank (TIB), Pacific Coast Bankers' Bancshares (PCBB) and the Federal
Home Loan Bank (FHLB) of San Francisco. The Bank is a member of FHLB system. The Bank is required to maintain minimum levels of FHLB
stock-based on various factors, including the amount of borrowings outstanding, mortgage assets, and the Bank's total assets. These
equity securities, included within "Other investments" on the Consolidated Balance Sheets, are carried at fair value, with
changes in fair value reported in net income. Equity securities without readily determinable fair values are carried at cost, minus impairment,
if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment.
The carrying value of financial institution stocks at December 31, 2023, and December 31, 2022, was $ 3,254,000 and $ 963,000, respectively.
Cash and stock dividends are recorded in the Interest on other interest-earning assets section of the Consolidated Statement of Comprehensive
Income.

 The
Company invested in the Castle Creek Launchpad Fund I, LP in April 2022. The Company has committed to fund up to $2 million over a 4-year
funding period. As of December 31, 2023, the investment has a carrying value of $809,000 compared to $315,000 as of December 31, 2022.
As of December 31, 2023, the investment was valued using the net asset value practical expedient. The scope of the NAV practical expedient
is limited to investments without readily determinable fair values in entities that calculate NAV per share consistently with the measurement
principles of ASC 946, Financial Services — Investment Companies. Both criteria were present at year-end. The investment was carried
at cost as of December 31, 2022.

 Transfers
of financial assets – Transfers of financial assets are accounted for as sales when control over the assets has been relinquished.
Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains
the right, free of conditions that constrain it from taking advantage of that right, to pledge or exchange the transferred assets, and
the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

 Bank
Owned Life Insurance (BOLI) – The Bank holds BOLI representing life insurance on the lives of certain executives of the Bank
purchased in order to help offset the costs of the Bank's benefit expenses. BOLI is carried on our consolidated balance sheets
at the net cash surrender value of the policies and increases in the net cash surrender value are recorded in noninterest income in the
consolidated statements of comprehensive income (loss) as bank owned life insurance income.

 Other
real estate owned – Other real estate owned is comprised of properties acquired through a foreclosure proceeding or acceptance
of a deed in lieu of foreclosure. Generally, these properties are initially recorded at fair value, less estimated cost to sell at the
date of foreclosure, establishing a new cost basis. After foreclosure, valuations are periodically performed by management; other real
estate owned is carried at the lower of the carrying amount or fair value, less the estimated cost to sell. Expenses, gains and losses
on disposition, and reductions in carrying value are reported as a non-interest expense. There was $ 3,000,000 in other real estate owned
as of December 31, 2023, and none at December 31, 2022.

 Fair
value measurements – Fair value is defined as the exchange price that would be received for an asset or paid to transfer a
liability (an 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. Valuation techniques used to measure fair value must maximize the use of observable inputs and
minimize the use of unobservable inputs. A three-level fair value hierarchy prioritizes the inputs used to measure fair value:

 Level
1 – Quoted prices in active markets for identical assets or liabilities; includes certain U.S. Treasury and other U.S. Government
agency debt that is highly liquid and is actively traded in over-the-counter markets.

 Level
2 – Inputs that are observable, either directly or indirectly, 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 for substantially
the full term of the assets or liabilities.

 Level
3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the
assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted
cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant
management judgment or estimation.

 The
asset or liability's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that
is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the
use of unobservable inputs.

 Escrow
accounts – Funds collected from loan customers for insurance, real estate taxes and other purposes are maintained in escrow
accounts and carried as a liability in the Consolidated Balance Sheets. These funds are periodically remitted to the appropriate entities
to satisfy those claims.

 Financial
Instruments with off-balance-sheet risk – In the ordinary course of business, the Bank enters into off-balance-sheet financial
instruments consisting of commitments to extend credit and letters of credit. Such financial instruments are recorded in The Consolidated
Financial Statements when they are funded or related fees are incurred or received. The credit risk associated with these instruments
is generally evaluated using the same methodology as for loans held for investment.

for credit losses - off-balance sheet credit ex p osures: The Company estimates expected credit losses over the contractual
period in which the Company is exposed to credit risk via a contractual obligation to extend credit unless that obligation is unconditionally
cancellable by the Company. The allowance for credit losses on off-balance sheet credit exposures is adjusted through the Provision for
credit losses and is recorded in Other liabilities. The estimate includes consideration of the likelihood that funding will occur and
an estimate of expected credit losses on commitments expected to be funded over its estimated life. The probability of funding is based
on historical utilization statistics for unfunded loan commitments that are not unconditionally cancelable by the Company. The loss rates
used are calculated using the same assumptions as the associated funded balance.

 Advertising
cost – The Bank conducts direct and non-direct response advertising and purchases prospective customer lists from various sources.
These costs are expensed as incurred. Advertising costs from continuing operations are not material.

 Employee
Stock Ownership Plan (ESOP) – The Bank sponsors an internally leveraged ESOP. The cost of shares issued to the ESOP but not
yet released is shown as unearned employee stock ownership plan (ESOP) shares, an element of stockholders' equity in our consolidated
balance sheets. As shares are committed to be released, compensation expense is recorded equal to the market price of the shares, and
the shares become outstanding for purposes of earnings per share calculations. To the extent that the fair value of ESOP shares committed
differs from the cost of such shares, the difference is charged or credited to additional paid-in capital in stockholders' equity.

 Cash
dividends on unallocated ESOP shares may be used to make payments on the ESOP loan and may be allocated to participant accounts in proportion
to their account balances. Cash dividends paid on allocated shares are recorded as a reduction of retained earnings and, at the direction
of the employer may be: a) credited directly to participant accounts in proportion to their account balances, or b) distributed directly
to participants (outside the plan) in proportion to their account balances, or c) used to make payments on the ESOP loan requiring the
release of shares with at least a similar fair market value be allocated to participant accounts. In addition, participants have the
right to receive an immediate distribution of their vested cash dividends paid on shares of common stock credited to their accounts.

 Other
stock-based compensation – The Company has stock-based compensation plans which provide for the award of various benefits to
Directors and employees, including restricted stock and options to purchase stock. Each restricted stock award is separated into vesting
tranches and compensation expense is recognized based on the fair value at the date of grant for each tranche on a straight-line basis
over the vesting period reduced for estimated forfeitures. Cash dividends on unvested restricted shares are charged to compensation expense.
The fair value of stock option awards granted is estimated using the Black-Scholes-Merton option pricing model using inputs including
the option exercise price and risk-free rate of return, and assumptions for expected dividend yield, expected stock price volatility
and the expected life of the awards. The closing market price of the Company's stock on the date of grant is the exercise price
for the stock options and the estimated fair value of the restricted stock awards. Expense is recognized over the required service period,
defined as the vesting period. For awards with graded vesting, expense is recognized on a straight-line basis over the requisite service
period for the entire award. The Company's accounting policy is to recognize expense net of actual forfeitures.

 Employee
retention credit – The Company qualified for identified refunds based upon federal laws that allow an eligible employer to
obtain a refundable employment tax credit under Section 2301 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), as
amended by Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Relief Act), enacted December 27, 2020, the American Rescue Plan Act
of 2021 (ARP Act), enacted March 11, 2021, and the Infrastructure Investment and Jobs Act (Infrastructure Act), enacted November 15,
2021, if they experienced a significant decline in gross receipts or more than a nominal portion of its business operations are impacted
by a governmental order. The Company recorded a net benefit of $ 547,000 which offset salary and benefit expenses in 2022.

 Additionally,
the Company received $ 254,000 of credits that it determined met the substantial authority to file a claim with the IRS. However, based
on uncertainty associated with the IRS's regulation and notices associated with qualifying under the governmental order eligibility criteria,
the Company has concluded the claim meets the probable threshold required to recognize the benefits of the credit. As such, the Company
will not recognize the income until the statute of limitations has elapsed.

taxes – Income tax (benefit) 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 basis 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. Accrued interest and penalties associated with uncertain tax positions are
recognized as part of the income tax provision. The Company has no uncertain tax provisions.

 Comprehensive
income (loss) – Comprehensive income (loss) consists solely of unrealized gains and losses on securities available-for-sale
(net of taxes) as of December 31, 2023, and December 31, 2022.

 Earnings
per common share – Basic earnings per common share is net income divided by the weighted-average number of common shares outstanding
during the period. ESOP shares are considered outstanding for this calculation unless unearned. Maryland corporate law does not provide
for treasury shares; therefore, shares repurchased are removed from issued and outstanding immediately and would not be considered outstanding.
All outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends are considered participating securities
for this calculation. Diluted earnings per common share include the dilutive effect of additional potential common shares issuable under
stock options. Earnings per share are restated for all stock splits and stock dividends through the date of issuance of the consolidated
financial statements. The two-class method is an earnings allocation method under which earnings per share is calculated for each class
of common stock and participating security considering both dividends declared (or accumulated) and participation rights in undistributed
earnings as if all such earnings had been distributed during the period.

 Business
Combination – On April 26, 2023, the Company and CBOA Financial, Inc. ("CBOA") entered into an Agreement and Plan
of Merger that provides for the merger of CBOA with and into the Company, with the Company as the surviving entity (the "merger").
The parties amended the merger agreement on December 21, 2023. If the merger is completed, each share of CBOA common stock will be converted
into the right to receive 0.2628 shares of Company common stock plus cash in lieu of any fractional shares. Completion of the merger,
among other things, is subject to the requisite approval of the appropriate regulatory bodies and the Company's stockholders and
CBOA's shareholders, and if approved is expected to close in the first quarter of 2024. At December 31, 2023, CBOA had total assets
of $434.7 million, total liabilities of $402.1 million, and total stockholders' equity of $32.6 million.

 Recent Accounting Guidance That
Has Not Yet Been Adopted – The following new accounting standards have yet to be adopted by the Company but may have
an impact on financial statements and/or related disclosures once implemented.

 In December 2023, the Financial Accounting
Standards Board issued a final standard on improvements to income tax disclosures. The standard requires, among other things,
disaggregated information as regards effective tax rate reconciliation components, as well as information on income taxes paid.
This standard, Accounting Standards Update No. 2023-9, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures",
applies to all entities subject to income taxes. For public business entities, the new requirements will be effective for annual
periods beginning after December 15, 2024. The guidance will be applied on a prospective basis with the option to apply the standard
retrospectively. Early adoption is permitted.

 Note
2 – Securities

 Available-for-sale and held-to-maturity
securities have been classified in the consolidated balance sheets according to management's intent on December 31, 2023,
and 2022. The amortized cost of such securities and their approximate fair values were as follows (dollars in thousands):

 Schedule of Available-for-sale and held-to-maturity securities

 Cost

 Gross
 Gains

 Gross

 Fair
 Value

 Available-for-sale, December 31, 2023

 $
 36,829

 $
 —

 $
 ( 4,362
)

 $
 32,467

 3,069

 —

 ( 277
)

 2,792

 U.S. government agencies

 —

 ( 17
)

 22,921

 —

 ( 2,593
)

 1,000

 —

 ( 167
)

 Total

 $
 64,106

 $
 —

 $
 ( 7,416
)

 $

 Cost

 Gross
 Gains

 Gross

 Fair
 Value

 Held-to-maturity, December 31, 2023

 $
 5,799

 $
 —

 $
 ( 692
)

 $
 5,107

 Total

 $
 5,799

 $
 —

 $
 ( 692
)

 $
 5,107

 Allowance for Credit Losses

 $
 ( 115
)

 Net carrying value of HTM securities

 $
 5,684

 Cost

 Gross
 Gains

 Gross

 Fair
 Value

 Available-for-sale, December 31, 2022

 $
 39,709

 $
 —

 $
 ( 5,177
)

 $
 34,532

 3,083

 —

 ( 366
)

 2,717

 U.S. government agencies

 —

 ( 26
)

 23,500

 —

 ( 3,349
)

 20,151

 1,000

 —

 ( 188
)

 Total

 $
 67,688

 $
 —

 $
 ( 9,106
)

 $

 Cost

 Gross
 Gains

 Gross

 Fair
 Value

 Held-to-maturity, December 31, 2022

 $
 5,832

 $

 $
 ( 409
)

 $
 5,432

 Total

 $
 5,832

 $

 $
 ( 409
)

 $
 5,432

 There was no allowance for credit
losses related to available for sale securities as of December 31, 2023.

 Securities with
unrealized losses on December 31, 2023, and 2022, that have not been recognized in income are as follows (dollars in thousands):

 Schedule of Securities with unrealized losses

 Continued Unrealized
 Loss for
 Less than 12 Months

 Continued Unrealized
 Loss for
 12 Months or More

 Total

 Description of securities

 Fair
 Value

 Loss

 Fair
 Value

 Loss

 Fair
 Value

 Loss

 Available-for-sale, December 31, 2023

 $
 —

 $
 —

 $
 30,462

 $
 ( 4,362
)

 $
 30,462

 $
 ( 4,362
)

 —

 —

 2,792

 ( 277
)

 2,792

 ( 277
)

 U.S. government agencies

 —

 —

 ( 17
)

 ( 17
)

 —

 —

 ( 2,593
)

 ( 2,593
)

 —

 —

 ( 167
)

 ( 167
)

 Total temporarily impaired

 $
 —

 $
 —

 $
 54,685

 $
 ( 7,416
)

 $
 54,685

 $
 ( 7,416
)

 Held to Maturity December 31, 2023

 $

 $
 ( 96
)

 $
 4,203

 $
 ( 596
)

 5,107

 ( 692
)

 Total temporarily impaired

 $

 $
 ( 96
)

 $
 4,203

 $
 ( 596
)

 5,107

 ( 692
)

 Continued Unrealized
 Loss for
 Less than 12 Months

 Continued Unrealized
 Loss for
 12 Months or More

 Total

 Description of securities

 Fair
 Value

 Loss

 Fair
 Value

 Loss

 Fair
 Value

 Loss

 Available-for-sale, December 31, 2022

 $
 21,377

 $
 ( 2,080
)

 $
 13,155

 $
 ( 3,097
)

 $
 34,532

 $
 ( 5,177
)

 —

 —

 2,717

 ( 366
)

 2,717

 ( 366
)

 U.S. government agencies

 ( 10
)

 ( 16
)

 ( 26
)

 12,547

 ( 1,698
)

 7,104

 ( 1,651
)

 19,651

 ( 3,349
)

 —

 —

 ( 188
)

 ( 188
)

 Total temporarily impaired

 $
 34,095

 $
 ( 3,788
)

 $
 23,987

 $
 ( 5,318
)

 $
 58,082

 $
 ( 9,106
)

 Held to Maturity December 31, 2022

 $
 2,615

 $
 ( 202
)

 $
 1,793

 $
 ( 207
)

 4,408

 ( 409
)

 Total temporarily impaired

 $
 2,615

 $
 ( 202
)

 $
 1,793

 $
 ( 207
)

 4,408

 ( 409
)

 Unrealized losses
on U.S. Treasury bonds and U.S. Agency bonds have not been recognized through the income statement due to the bonds being backed
in full by the United States government. Management has no intent to sell the securities, the Company can hold the securities
to maturity, and the decline in fair value is largely due to changes in market interest rates. The fair value is expected to recover
as the securities approach their maturity date.

 Unrealized losses
on mortgage-backed securities have not been recognized into income. At December 31, 2023, 82% of the mortgage-backed securities
portfolio were issued by U.S. government sponsored entities or agencies. Because the decline in fair value is attributable to
changes in interest rates, and not credit quality, and because the Company does not intend to sell the mortgage-backed securities,
it is likely that management will not be required to sell the securities prior to their anticipated recovery, the Company does
not consider these securities to be other-than-temporarily impaired at December 31, 2023.

 The remainder
of the mortgage-backed securities portfolio includes non-agency structured commercial mortgage-backed securities (CMBS) with a
fair value of $5,726,000 which had unrealized losses of $642,000 at December 31, 2023. Each CMBS was rated AAA at December 31,
2023. These bonds have significant credit enhancement and have performed as agreed. Management does not intend to sell the CMBSs
and it is likely that management will not be required to sell the securities prior to their anticipated recovery.

 Unrealized losses
on available-for-sale municipal obligation securities have not been recognized through the income statement. As of December 31,
2023, the credit rating for these securities ranges from A+ to AAA. General Obligation bonds represent 30% of the municipal bond
portfolio. The remaining 70% of the portfolio consists of revenue bonds, the majority of which are essential purpose or have an
insurance wrapper. Management has no intent to sell these securities and can hold the securities to maturity. The decline in fair
value is largely due to changes in market interest rates and management expects the fair value to recover as the securities approach
their maturity date.

 Management evaluated the foregoing available-for-sale
securities for potential impairment as of December 31, 2023. Based on this evaluation, including the preceding analysis summary, management
has determined that the unrealized losses on available-for-sale securities are primarily attributable to increases in market interest
rates and do not reflect credit losses. Accordingly, as of December 31, 2023, management concluded that an allowance for credit losses
on available-for-sale securities is not necessary, as the decline in fair value is not indicative of credit losses. Management
will continue to monitor the fair value of these available-for-sale securities and reassess the need for an allowance for credit losses
if circumstances change substantially.

 The were no
sales of securities for the years ended December 31, 2023, or 2022.

 Expected maturities
will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties. Securities not due at a single maturity date are shown separately.

 As of December
31, 2023, the amortized cost and estimated fair value of the debt securities portfolio are shown by contractual maturity dates
(dollars in thousands).

 Schedule of Amortized
Cost and Fair Value of Investment Securities

 Cost

 Fair
 Value

 Yield

 Available-for-sale

 Due in one year or less

 $

 $

 2.11
 %

 Due from one to five years

 9,654

 8,706

 1.76
 %

 Due from five to ten years

 16,818

 14,723

 2.32
 %

 Due after ten years

 —

 —

 —

 36,829

 32,467

 2.21
 %

 Total

 $
 64,106

 $

 2.17
 %

 Cost

 Fair
 Value

 Yield

 Held-to-maturity

 Due in one year or less

 $
 —

 $
 —

 —

 Due from one to five years

 —

 —

 —

 Due from five to ten years

 5,799

 5,107

 4.28
 %

 Due after ten years

 —

 —

 —

 Total

 $
 5,799

 $
 5,107

 4.28
 %

 Securities pledged
at December 31, 2023, and December 31, 2022, had a carrying amount of $ 43,070,000 and $ 8,193,000, respectively.

 The Company
had no investment in securities of issuers outside of the United States as of December 31, 2023, or 2022.

 Allowance for Credit Losses
for HTM Securities

 Management measures expected
credit losses on held-to-maturity debt securities on a collective basis by major security type. The held-to-maturity investment
portfolio consists solely of bank subordinated debt. Accrued interest receivable on held-to-maturity debt securities totaled $ 56,000
at December 31, 2023, and is excluded from the estimate of credit losses. Refer to Note 1 – Nature of Operations and Significant
Accounting Policies for additional information on the Company's methodology on estimating credit losses. The following table
presents the activity in the allowance for credit losses for debt securities held-to-maturity by major security type for the year
ended December 31, 2023 (dollars in thousands):

of Allowance for Credit Losses for Securities Held-To-Maturity

 For year ended December 31, 2023

 Corporate Bonds

 Allowance for credit losses:

 $
 —

 Impact of ASU 2016-13 adoption

 Provision for credit losses

 Securities charged -off (recoveries)

 —

 Total ending allowance balance

 The Company monitors the credit
quality of held-to-maturity securities on a quarterly basis. As of December 31, 2023, there were no held-to-maturity securities
past due or on non-accrual.

 Note
3 – Loans And Allowance For Credit Losses

 On January 1, 2023, the Company
adopted the new CECL standard, ASU 2016-13, using the modified retrospective method for all financial assets measured at amortized
cost. For comparability, the Company has adjusted certain prior period loan amounts to conform to the current presentation of
segmentation under CECL. Refer to Note 1 - Nature of Operations and Significant Accounting Policies for additional information
related to the Company's methodology for estimating the allowance for credit losses.

 The following presents a summary
of the Company's loans at amortized cost as of the dates noted (dollars in thousands):

 Schedule of Company's Loan

 2023

 2022

 $

 $

 1,048

 Non-Owner Occupied (NOO) CRE

 Owner Occupied (OO) CRE

 Gross loans

 Deferred loan fees

 ( 1,201
)

 ( 1,370
)

 Loans held for investment

 457,027

 463,360

 Less: allowance for credit losses

 ( 5,860
)

 ( 4,778
)

 Loans, net

 $
 451,167

 $
 458,582

 Allowance for Credit Losses
on Loans

 Beginning January 1, 2023, the allowance
for credit losses for loans is measured on the loan's amortized cost basis, excluding interest receivable. Interest receivable
excluded at December 31, 2023, and December 31, 2022, was $ 1.3
million and $ 1.2
million, respectively, presented in Accrued interest receivable on the Condensed Consolidated
Balance Sheets. Refer to Note 1 - Nature of Operations and Significant Accounting Policies for additional information related to the
Company's methodology for estimating the allowance for credit losses.

 Allocation of a portion of
the allowance for credit losses to one category of loans does not preclude its availability to absorb losses in other categories.
The following table presents the activity in the allowance for credit losses by portfolio segment for the years ended December
31, 2023, and December 31, 2022 (dollars in thousands):

 Schedule of Allowance for Credit Losses

 1–4 Family
 Residential

 and Other

 NOO

 OO

 Total

 Changes in allowance for credit losses for the year ended December 31, 2023

 $

 $
 1,382

 $

 $

 $
 1,680

 $

 $

 $
 4,778

 Impact of adopting of ASU 2016-13

 ( 33
)

 ( 307
)

 ( 50
)

 Provision (credit) for loan losses

 ( 151
)

 3,290

 4,175

 Loans charged off

 —

 ( 321
)

 —

 —

 ( 3,382
)

 —

 —

 ( 3,703
)

 Recoveries

 —

 —

 —

 —

 —

 Balance on December 31, 2023

 $

 $

 $

 $

 $
 1,859

 $
 1,201

 $

 $
 5,860

 1–4 Family
 Residential

 and Other

 NOO

 OO

 Total

 Changes in allowance for loan losses for the year ended December 31, 2022

 $

 $

 $

 $

 $
 2,565

 $

 $

 $
 5,328

 Provision (credit) for loan losses

 3,640

 ( 45
)

 ( 60
)

 ( 885
)

 ( 176
)

 ( 103
)

 2,420

 Loans charged off

 ( 72
)

 ( 2,905
)

 —

 —

 —

 —

 —

 ( 2,977
)

 Recoveries

 —

 —

 —

 —

 —

 —

 Balance on December 31, 2022

 $

 $
 1,382

 $

 $

 $
 1,680

 $

 $

 $
 4,778

 Allowance for loan losses - December 31, 2022

 Ending balance individually evaluated for impairment

 $
 —

 $

 $
 —

 $
 —

 $
 —

 $
 —

 $
 —

 $

 Ending balance collectively evaluated for impairment

 1,283

 1,680

 4,679

 Total

 $

 $
 1,382

 $

 $

 $
 1,680

 $

 $

 $
 4,778

 Gross loans - December 31, 2022

 Ending balance individually evaluated for impairment

 $

 $
 1,641

 $
 —

 $
 1,591

 $
 —

 $
 —

 $
 —

 $
 3,951

 Ending balance collectively evaluated for impairment

 62,457

 46,926

 1,048

 42,073

 460,779

 Total

 $

 $

 $
 1,048

 $

 $

 $

 $

 $

table presents the aging of the recorded investment in contractually past due loans, as of December 31, 2023, and 2022. It
is shown by class of loans (dollars in thousands):

of Loan Category and Aging Analysis of Loans

 Loans Contractually Past Due

 30–59
 Days

 60–89
 Days

 Over 90
 Days

 Total

 Loans Not
 Past Due

 Total

 $

 $
 —

 $
 —

 $

 $
 61,236

 $

 —

 —

 49,580

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Total

 $

 $
 —

 $

 $

 $
 457,230

 $

 Loans Contractually Past Due

 30–59
 Days

 60–89
 Days

 Over 90
 Days

 Total

 Loans Not
 Past Due

 Total

 $

 $

 $
 —

 $

 $
 62,199

 $

 1,032

 47,535

 —

 —

 —

 —

 1,048

 1,048

 —

 —

 —

 —

 —

 —

 185,187

 —

 —

 —

 —

 —

 —

 60,682

 Total

 $
 1,361

 $
 1,387

 $

 $
 3,040

 $
 461,690

 $

 Non-accrual
loan balances guaranteed by the SBA are $589,000, or 26.3%, and $99,000, or 1.5%, of the nonaccrual loan balances at December
31, 2023, and December 31, 2022, respectively.

 Impaired
Loans: The following tables include the recorded investment and unpaid principal balances, net of charge-offs for impaired
loans with the associated allowance amount, if applicable. Management determined the allocated allowance based on the present
value of expected future cash flows, discounted at the loan's effective interest rate, except when the remaining source
of repayment for the loan is the operation or liquidation of the collateral. In those cases, the current fair value of the collateral,
less selling costs was used to determine the allocated allowance recorded.

 Schedule of Average Recorded Investment and Interest Income Recognized

 December 31, 2022 (dollars in thousands)

 Unpaid

 Principal

 Recorded

 Investment

 for Loan

 Allocated

 Recorded

 Investment

 With no related allowance recorded:

 $
 1,591

 $
 1,591

 $
 —

 $
 1,464

 1-4 Family Residential RE

 —

 Commercial and Industrial

 —

 —

 —

 —

 —

 —

 —

 —

 With an allowance recorded:

 Commercial Real Estate

 —

 —

 —

 —

 1-4 Family Residential RE

 —

 —

 —

 —

 Commercial and Industrial

 4,546

 1,641

 4,333

 —

 —

 —

 —

 Total

 $
 6,856

 $
 3,951

 $

 $
 6,536

 Credit quality indicators
 – The following table represents the credit exposure by internally assigned grades at December 31, 2023, and December
31, 2022. This grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements
in accordance with the loan terms. The Bank's internal credit risk grading system is based on management's experiences
with similarly graded loans. Credit risk grades are reassessed each quarter based on any recent developments potentially impacting
the creditworthiness of the borrower, as well as other external statistics and factors, which may affect the risk characteristics
of the respective loan. The Company uses the following definitions for risk ratings:

 Pass: Strong
credit with no existing or known potential weaknesses deserving of management's close attention.

 Special Mention:
Potential weaknesses that deserve management's close attention. Borrower and guarantor's capacity to meet all financial
obligations is marginally adequate or deteriorating.

 Substandard:
Inadequately protected by the paying capacity of the Borrower and/or collateral pledged. The borrower or guarantor is unwilling
or unable to meet loan terms or loan covenants for the foreseeable future.

 Doubtful: All
the weakness inherent in one classified as substandard with the added characteristic that those weaknesses in place make the collection
or liquidation in full, on the basis of current conditions, highly questionable and improbable.

 Loss –
Considered uncollectible or no longer a bankable asset. This classification does not mean that the asset has no recoverable value.
In fact, a certain salvage value is inherent in these loans. Nevertheless, it is not practical or desirable to defer writing off
a portion or whole of a perceived asset even though partial recovery may be collected in the future.

 The following table presents
the amortized cost basis of loans by credit quality indicator, by class of financing receivable, and year of origination for term
loans as of December 31, 2023. For revolving lines of credit that are converted to term loans, if the conversion involved a credit
decision, such loans are included in the origination year in which the credit decision was made. If revolving lines of credit
converted to term loans without a credit decision, such lines of credit are included in the "Revolving lines of credit converted
to term" column in the following table (dollars in thousands).

 Schedule of loan category and loan by risk categories

 Term Loans Amortized Cost by Origination

 2023

 2022

 2021

 2020

 2019

 Prior

 Revolving
 Loans
 Cost Basis

 Revolving
 Loans
 Converted
 to Term

 Total

 1-4 Family

 Pass

 $
 4,244

 $
 24,009

 $
 12,236

 $
 7,928

 $
 1,466

 $
 9,622

 $
 1,717

 $
 —

 $
 61,222

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Total 1-4 Family

 4,244

 24,009

 12,236

 7,928

 1,466

 10,045

 1,717

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Pass

 13,150

 15,405

 3,234

 3,176

 1,546

 10,139

 —

 46,737

 —

 —

 2,018

 —

 —

 —

 —

 2,181

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Total Commercial

 13,150

 15,568

 3,234

 6,097

 1,546

 10,139

 —

 —

 —

 —

 —

 —

 —

 —

 Pass

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Total Consumer and Other

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Pass

 7,788

 21,551

 3,938

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Total Construction

 7,788

 21,551

 3,938

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Pass

 7,187

 35,899

 53,442

 21,091

 13,491

 30,911

 6,140

 —

 168,161

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Total NOO CRE

 7,187

 35,899

 53,442

 21,334

 13,491

 30,911

 6,140

 —

 3,382

 —

 —

 —

 —

 —

 —

 —

 3,382

 Pass

 20,726

 12,365

 20,807

 7,966

 5,806

 4,214

 —

 —

 71,884

 —

 7,196

 —

 —

 1,690

 —

 —

 9,114

 —

 —

 —

 1,193

 —

 —

 —

 1,230

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Total OO CRE

 20,954

 12,365

 28,003

 8,003

 6,999

 5,904

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Multi Family

 Pass

 15,652

 22,007

 7,572

 6,369

 7,105

 —

 59,575

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Total Multi Family

 15,652

 22,977

 7,572

 6,369

 7,105

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Total

 $
 53,866

 $
 125,182

 $
 123,830

 $
 50,977

 $
 29,080

 $
 56,106

 $
 19,187

 $
 —

 $

 Total year-to-date gross write-offs

 $
 3,382

 $
 —

 $
 —

 $
 —

 $

 $
 —

 $
 —

 $
 —

 $
 3,703

 As of December 31, 2022, the
risk category of loans by class of loans was as follows (dollars in thousands):

 Pass

 Special
 Mention

 Not Risk
 Rated

 Total

 1-4 Family

 $
 62,517

 $
 —

 $

 $
 —

 $
 —

 $

 46,474

 1,716

 —

 —

 —

 —

 —

 1,048

 42,073

 —

 1,591

 —

 —

 —

 —

 —

 —

 57,407

 3,685

 —

 —

 Multi Family

 —

 —

 —

 —

 Total

 $
 456,364

 $
 4,062

 $
 4,249

 $
 —

 $

 $

 Non-accrual loans –
The accrual of interest on loans is discontinued at the time the loan becomes 90 or more days delinquent unless the loan is well
secured and in the process of collection or renewal due to maturity. Past due status is based on the contractual terms of the
loan. In all cases, loans are placed on non-accrual status or charged off if collection of interest or principal is considered
doubtful. There was no interest income recognized from non-accrual loans in the income statement for the years ending December
31, 2023, and December 31, 2022. The following presents the amortized cost basis of loans on non-accrual status and loans past
due over 89 days still accruing by class as of the date noted (dollars in thousands).

 Schedule of Nonaccrual
Loans

 As of December 31, 2023

 Non-accrual loans
 with
 no ACL

 Total non-accrual
 loans

 Loans past due
over 89 days and
still accruing

 $

 $

 $
 —

 1,208

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Total

 $
 1,883

 $
 2,244

 $
 —

 As of December 31, 2022

 Non-accrual loans
 with
 no ACL

 Total non-accrual
 loans

 Loans past due
 over 89 days and
 still accruing

 $

 $

 $
 —

 —

 1,641

 —

 —

 —

 1,591

 1,591

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Total

 $
 2,310

 $
 3,951

 $

 Collateral dependent loans
– Non-accrual loans, excluding loans held for investment measured at fair value, are classified as collateral dependent
loans and are individually evaluated. The following presents the amortized cost basis of collateral-dependent loans, which are
individually evaluated to determine expected credit losses by class of loans as of the date noted (dollars in thousands):

of Collateral Dependent Loans

 As of December 31, 2023
 Collateral Dependent Loans

 Secured by

 Secured by
 Other

 Total

 $

 $
 —

 $

 —

 1,208

 1,208

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Total

 $
 1,036

 $
 1,208

 $
 2,244

 Loan Modifications
Made to Borrowers Experiencing Financial Difficulty – The ACL incorporates an estimate of lifetime expected credit losses and
is recorded on each asset upon origination. The analysis includes losses from modifications of receivables to borrowers experiencing
financial difficulty. Because the effect of most modifications made to borrowers experiencing financial difficulty is already included
in the ACL allowance for credit losses, a change to the ACL is generally not recorded when a loan is modified. Currently, the bank
does not hold any loans having modified terms related to economic distress and none were modified during the years ended December 31,
2023, or 2022.

 Note
4 – Premises and Equipment, Net

 Components of
premises and equipment, net included in the consolidated balance sheets at December 31, were as follows (dollars in thousands):

 Schedule of Premises and equipment

 2023

 2022

 Land and improvements

 $
 1,806

 $
 2,170

 Buildings and improvements

 12,482

 12,439

 Furniture and equipment

 1,953

 1,776

 Total cost

 16,241

 16,385

 Accumulated depreciation and amortization

 ( 8,891
)

 ( 8,308
)

 Net book value

 $
 7,350

 $
 8,077

 Depreciation
and amortization expenses were $ 583,000 and $ 489,000 for the years ended December 31, 2023, and 2022, respectively.

 Note
5 – Time Deposits

 Following
are maturities of time deposits at December 31, 2023, and 2022 (dollars in thousands):

 Schedule of Maturities of
Time Deposits

 Maturity

 2023

 2022

 One year or less

 $
 93,675

 $
 50,025

 Over one through three years

 30,390

 21,627

 Over three through five years

 4,338

 1,841

 $
 128,403

 $
 73,493

 On December
31, 2023, and 2022, the Bank had $ 43.9 million and $ 23.4 million, respectively, in time deposits of $250,000 or more. On December
31, 2023, and 2022, $ 27.5 million and $ 19.8 million, respectively, of such time deposits mature within one year.

 As of December
31, 2023, and December 31, 2022, certificate of deposits includes brokered CD balances of $ 19,531,000 and $ 5,000,000, respectively.
This growth in our brokered CD deposits in 2023 has been used to supplement deposit growth, assist in the management of interest
rate risk through the fixing of funding costs, and to reduce the reliance on short-term borrowings.

 Note
6 – Borrowings

 The bank converted
from the FHLB Dallas to the FHLB of San Francisco effective October 2, 2023, and established a borrowing line on the same date with the
FHLB San Francisco. As of December 31, 2023, the Bank had no outstanding FHLB advances. As of December 31, 2023, borrowing capacity totaled
$ 146.0 million and
collateral consists of a banket lien on the loan portfolio. As of December 31, 2022, the Bank had one outstanding advance at the FHLB
of Dallas totaling $ 5.0 million carrying an interest rate of 1.40% with a maturity date in 2023. As of December 31, 2022, loans and securities
with a carrying value of $ 264.1 million were pledged to secure advances at the FHLB of Dallas, with remaining availability of $ 198.1
million at year end.

 On March 12, 2023, the
Federal Reserve Board announced it would make additional funding available to eligible depository institutions to help ensure banks could
meet the needs of depositors made available through the creation of a new Bank Term Funding Program ("BTFP"). The BTFP is
a liquidity resource with capacity based on the pledging of high-quality securities. The intention of the program was to eliminate an
institution's need to quickly sell those securities in times of stress. As of December 31, 2023, the Company pledged investments
of $ 30.3 million in securities under the BTFP and has one borrowing of $29.0 million at a rate of 4.83%
with a maturity date of December 27, 2024. Additionally, the bank has $ 15.4 million in availability at the Federal Reserve Bank of San Francisco's
Discount Window.

 As of December 31,
2023, and 2022, the bank had unsecured Federal Funds lines of credit at correspondent banks totaling $ 39.8 million, respectively. The
terms of the borrowings are overnight at the applicable fed funds borrowing rate.

 On June 29,
2021, the Company completed a private placement of $ 25.0 million of 10 year, fixed-to-floating rate subordinated notes. The subordinated
notes will initially bear interest at 4.00% per annum for five years, floating at Three-Month SOFR plus 328 basis points quarterly
thereafter. The ten-year notes mature on July 15, 2031, and are callable at the Company's option after five years. The subordinated
notes have unamortized origination fees of $ 405,000 at December 31, 2023.

are maturities of outstanding borrowings as of December 31, 2023 (dollars in thousands):

 Schedule of maturities
of outstanding borrowings

 Maturity

 One year or less

 $

 Over one through three years

 Over three through five years

 Over five through ten years

 $

 Note
7 – Financial instruments with off-balance-sheet risk

 In the normal
course of business, and from time to time, the Bank has had outstanding commitments to extend credit and standby letters of credit
which, consistent with U.S. GAAP, are not reflected in the accompanying consolidated financial statements. 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
and standby letters of credit is represented by the contractual or notional amounts of those instruments. The Bank uses the same
credit policies in making commitments as it does for instruments that are included in the consolidated balance sheets.

 Contractual
or notional amounts of financial instruments representing off-balance-sheet credit risk are as follows as of December 31 (dollars
in thousands):

 Schedule of Financial Instruments with Off-Balance-Sheet Risk

 2023

 2022

 Fixed

 Fixed

 Commitments to extend credit

 $
 5,327

 $
 6,966

 $
 7,112

 $
 16,090

 Unused lines of credit

 3,962

 18,859

 4,544

 14,162

 $
 9,289

 $
 25,825

 $
 11,656

 $
 30,252

 Allowance for Credit Losses on Off-Balance Sheet Credit Exposures

 Schedule of Credit Losses on Off-Balance Sheet Credit

 For the

year ended

 Beginning Balance

 $
 —

 Impact of Adopting ASU 2016-13

 165,000

 (Release) provision for credit losses

 ( 30,000
)

 Ending Balance

 $
 135,000

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 many 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 Collateral
held varies by and may include accounts receivable, inventory, property and equipment, and income-producing commercial properties.

 Standby letters
of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third-party. Standby
letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee. The credit
risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.
The Bank's policy for obtaining collateral, and the nature of such collateral, is essentially the same as that involved
in making commitments to extend credit. There are no standby letters of credit at December 31, 2023, or December 31, 2022.

 Note
8 – Leases

 The Bank has
noncancelable operating leases for office space that expire over the next seven years that require the payment of base lease amounts
and executory costs such as taxes, maintenance, and insurance. At September 30, 2023, the bank had one active operating lease.
Rental expenses for leases was $ 365,000 and $ 516,000 for the years ended December 31, 2023, and 2022 respectively.

presents the classification of the right-of-use assets and corresponding liabilities as of the December 31 (dollars

 in thousands):

 Schedule of Lease Information

 2023

 2022

 Lease right-of-use assets

 Operating lease right-of-use assets

 $
 1,819

 $
 2,067

 Lease Liabilities

 Operating lease liabilities

 $
 2,011

 $
 2,153

 Approximate
future minimum rental commitments under noncancelable leases as of December 31, 2023, are (dollars in thousands):

 Schedule of Future Undiscounted Operating Lease Payments

 2024

 $

 2025

 2026

 2027

 2028

 2029

 2030

 Total minimum lease payments

 2,344

 Amounts representing interest (present value discount)

 ( 333
)

 Operating lease liabilities (present value of minimum lease payments)

 $
 2,011

 Weighted-average remaining term (in years)

 6.4

 Weighted-average discount rate

 4.70
 %

 Note
9 – Employee Retirement Benefit Plans

 Profit Sharing
Plan: The Company has established a profit-sharing 401(k) type salary reduction plan (Plan) for all employees that meet the
necessary eligibility requirements and participants are fully vested after six years of service. For Company matching contributions
made for plan years prior to 2014, annual Company contributions were at the discretion of the Board of Directors. From 2014 through
2019, the Company adopted a Safe Harbor matching contribution provision, whereby it agreed to match 100% of participant's
contributions up to the first 3% of salary and 50% of the next 2%, for a total maximum Company matching contribution of 4% of
participant salary, as defined by the Plan. The Safe Harbor matching contribution was guaranteed. The Company elected not to adopt
a safe harbor matching contribution for 2023 or 2022.

 Employee
Stock Ownership Plan: The ESOP covers substantially all employees that meet certain age and service requirements. Under the
plan, annual retirement expense is generally defined as a percentage of employee compensation, net of forfeitures from employees
who have terminated employment.

 In October 2016,
the ESOP borrowed $1.5 million from the Company to purchase 150,358 shares of common stock from the Company at $10 per share.
Bancorp 34 accepted a $1.8 million note from the ESOP secured by all unallocated shares in the plan with a 30-year repayment term.
The principal balance includes $1.5 million used to purchase stock in 2016 and $266,000 used to pay off already outstanding ESOP
loans used to purchase shares in 2012 and 2014. Principal and interest payments on the note are made every December 31 and the
interest rate on the loan adjusts annually on January 1st to the prime rate of interest as published in the Wall Street Journal.
The Bank makes at least annual discretionary contributions to the ESOP and the ESOP uses all funds it receives to repay the loan.
When loan payments are made, ESOP shares are allocated to participants based on relative compensation for that plan year. At the
discretion of the employer, participants may receive the shares, cash, or a combination of stock and cash at the end of employment.

 Since the Bank
is the primary source of repayment on ESOP loans, the Bank records the note payable and an equal contra-equity account on its
balance sheet and interest expense and ESOP benefit plan expense on its statement of comprehensive income equal to the annual
loan payments. As inter-company borrowings, all bank-recorded balance sheet items, Bancorp 34 interest income and Bank 34 interest
expense on the ESOP loan are eliminated in consolidation. Bancorp 34 consolidated financial statements include a contra-equity
account with a balance equal to the purchase price of all unallocated shares in the ESOP.

 Shares held
by the ESOP on December 31, 2023, and 2022, were as follows:

 Schedule of Shares held by ESOP

 2023

 2022

 Allocated shares

 50,717

 44,476

 Unallocated shares

 139,334

 145,597

 Total ESOP shares

 190,051

 190,073

 The fair value
of unallocated shares held by the ESOP is $ 1,379,000 and $ 1,966,000 at December 31, 2023, and 2022, respectively. ESOP expense
was $ 67,000 and $ 338,000 for the years ended December 31, 2023, and 2022, respectively.

 Bank 34 Employees
DB Retirement Plan: Effective April 1, 2020, the Company withdrew from the Pentegra DB Plan and established the Bank 34 Employee
Defined Benefit Retirement Plan ("Bank DB Plan"). On June 2, 2020, all assets and liabilities were transferred from
the Pentegra DB Plan to the newly established Bank DB Plan. The Bank DB Plan was a funded noncontributory defined benefit pension
plan covering 49 current and former employees. Similar to its predecessor plan, benefits available under the Bank DB Plan are
frozen. The plan provides defined benefits based on years of service and final average salary. The fair value of plan assets and
accumulated benefit obligation on the April 1, 2020, Bank DB Plan adoption date were $2,392,000 and $3,951,000, respectively.

 During the year
ended December 31, 2022, the Company extinguished the Bank DB Plan and recorded expense of $1,750,000. At December 31, 2023 and
2022, there were no plan assets or liabilities included in the Consolidated Balance Sheet, respectively. Contributions to the
plan totaled $-0- and $30,000 in 2023 and 2022, respectively.

Compensation and Director's Fee Plans: A deferred compensation plan covers all senior officers and a deferred director's
fee plan covers all directors. Under these plans, the company pays each participant that elects to defer, or their beneficiary,
the amount deferred plus interest over a pre-selected period up to 10 years, beginning with the participant's termination
of service. A liability is accrued monthly for the deferred amount plus interest earned. The interest rate on deferred balances
is determined annually on January 1st at the greater of Wall Street Journal Prime or 5%; and was 7.5% and 5.0% for the years ended
December 31, 2023, and 2022, respectively. Interest expense for the deferred plans was $ 147,000 and $ 97,000, for the years ended
December 31, 2023, and 2022, respectively. Deferred plan liabilities, included in accrued interest and other liabilities on the
consolidated balance sheet, were $ 2,012,000 and $ 1,949,000, as of December 31, 2023, and 2022, respectively.

 Note
10 – Board of Directors' Retirement Policy

 The Board
previously had a deferred compensation policy (Policy) to compensate Board members for their service to the Company. The retirement
date for directors was the later of the last month in which they reached age 70 or completion of their term if they were elected
to the Board during the annual meeting resulting in service beyond age 70. Upon retirement, Board members receive deferred compensation
for the remainder of their life up to a maximum of $2,000 per month. Board members vested in the Policy based on service as follows:
zero to four years of service (20%), five years of service (40%), six years of service (60%), seven years of service (80%) and
eight years of service (100%). On September 21, 2011, the Board rescinded this retirement policy for current directors.

 The total
liability for the combined policies and agreements was $ 229,000 and $ 256,000 at December 31, 2023, and 2022, respectively.

 Note
11 – Income Taxes

tax provision consists of the following (dollars in thousands):

of Income Tax Provision

 2023

 2022

 Current

 $
 —

 $

 State

 ( 175
)

 ( 227
)

 Deferred benefit

 ( 278
)

 Total income tax provision

 $
 ( 453
)

 $

 Income tax expense
from continuing operations differs from the amounts computed by applying the federal income tax rate of 21 % in 2023 and 2022,
to earnings before federal income tax expense. These differences are primarily caused by state income taxes, net of federal tax
benefit, income that is not taxable for federal and state income tax purposes, expenses that are not deductible for tax purposes
and tax adjustments related to prior federal income tax returns.

 Income tax provision
calculated at the statutory federal income tax rate of 21% for 2023 and 2022, differs from actual income tax provision as follows
(dollars in thousands):

of Income Tax Rate Reconciliation

 2023

 2022

 Income tax at statutory rate

 $
 ( 810
)

 $

 Non-deductible merger costs

 —

 Benefit from other permanent differences:

 Earnings on life insurance assets

 ( 52
)

 ( 50
)

 State income taxes, net of Federal tax benefit

 ( 165
)

 ( 116
)

 Other items, net

 ( 68
)

 $
 ( 453
)

 $

 Deferred tax assets and liabilities
consist of the following at December 31 (dollars in thousands):

 Schedule of Deferred Tax
Assets and Liabilities

 2023

 2022

 Deferred tax assets:

 Allowance for credit losses

 $
 1,458

 $
 1,191

 Net operating loss carryforwards and certain state tax credits

 1,042

 Deferred compensation

 Accrued bonus

 Lease liability

 Unrealized losses on AFS securities

 1,840

 2,317

 Other, net

 Total deferred tax assets

 5,689

 5,785

 Deferred tax liabilities:

 Loan origination costs

 ( 165
)

 ( 196
)

 Depreciation

 ( 152
)

 ( 515
)

 Right-of-use asset

 ( 453
)

 ( 139
)

 FHLB stock dividends

 ( 35
)

 ( 11
)

 Total deferred tax liabilities

 ( 805
)

 ( 861
)

 Net deferred tax assets included in other assets

 $
 4,884

 $
 4,924

 A valuation
allowance for deferred tax assets is recorded when it is more likely than not that some portion or all of the deferred tax assets
will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income
and tax planning strategies which will create taxable income during the periods in which those temporary differences become deductible.
Management considered the scheduled reversal of deferred tax liabilities, projected future taxable income, net operating loss
carry-back potential, and tax planning strategies in making this assessment. Based upon the Company's assessment of all
available evidence, management determined it was more likely than not that the net deferred tax asset would be realized at December
31, 2023.

 At December
31, 2023, the Company had federal operating loss carry-forwards of approximately $ 3.7 million, $2.8 million of which are subject
to Internal Revenue Code ("IRC") Section 382 limitations, which limit the annual use of acquired losses to $250,000
per year, and begin to expire in 2028. At December 31, 2023, the Company has recorded deferred tax assets of $778 thousand related
to the Federal net operating loss carry-forwards.

 It is the Company's
policy to provide for uncertain tax positions and the related interest and penalties based upon management's assessment
of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. As of December 31, 2023,
and 2022, there were no material uncertain tax positions related to federal and state income tax matters. The Company does not
expect the amounts of unrecognized tax benefits to significantly increase or decrease within the next 12 months.

 The Company
files consolidated U.S. federal and various state income/franchise tax returns. The Company is no longer subject to examination
by U.S. federal taxing authorities for years before 2020 and is no longer subject to examination by state taxing authorities for
years before 2019. Our federal and state tax returns have not been audited for the past seven years.

 Note
12 – Regulatory Matters

 Bank 34 is subject
to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory and discretionary actions by regulators that if undertaken, could have a direct material effect
on the Bank's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective
action, the Bank must meet specific capital guidelines involving quantitative measures of the Bank's assets, liabilities,
and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank's capital amounts, and
classification are also subject to qualitative judgments by the regulators about components, risk-weightings, and other factors.

 Quantitative
measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of total
risk-based capital and Tier 1 capital to risk-weighted assets, and Tier 1 capital to adjusted total assets. Management believes,
as of December 31, 2023, and 2022, the Bank meets all capital adequacy requirements to which it is subject.

 Banks are also
subject to certain restrictions on the dollar amount of dividends that they may declare without prior regulatory approval.

 As of December
31, 2023, the Bank was categorized as well capitalized under the regulatory framework for prompt corrective action. To be categorized
as well capitalized, the Bank has to maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as disclosed
in the table below. There are no conditions or events that management believes have changed the Bank's prompt corrective
action category. The Bank has not opted into the Community Bank Leverage Ratio ("CBLR") and therefore is required
to continue calculating and reporting risk-based capital ratios.

 The Bank's
actual and required capital amounts and ratios are as follows (dollars in thousands):

 Schedule of actual capital amounts and ratios as well as minimum amounts for each regulatory defined category for the bank and the company

 Actual

 For Capital
 Adequacy Purposes

 To Be
 Well Capitalized
 Under Prompt Corrective
 Action Regulations

 Ratio

 Ratio

 Ratio

 2023

 Total Capital to risk-weighted assets:

 $
 74,142

 14.79
 %

 $
 40,114

 %

 $
 50,143

 %

 Tier 1 (Core) Capital to risk weighted assets:

 $

 13.57
 %

 $
 30,086

 %

 $
 40,114

 %

 Common Tier 1 Capital to risk
weighted assets (CET1):

 $

 13.57
 %

 $
 22,564

 4.50
 %

 $
 32,593

 6.50
 %

 Tier 1 (Core) Capital to average assets:

 $

 11.66
 %

 $
 23,347

 %

 $
 29,184

 %

 Actual

 For Capital
 Adequacy Purposes

 To Be
 Well Capitalized
 Under Prompt Corrective
 Action Regulations

 Ratio

 Ratio

 Ratio

 2022

 Total Capital to risk-weighted assets:

 $
 64,942

 13.57
 %

 $
 38,286

 %

 $
 47,857

 %

 Tier 1 (Core) Capital to risk weighted assets:

 $

 12.57
 %

 $
 28,717

 %

 $
 38,290

 %

 Common Tier 1 Capital to risk
weighted assets (CET1):

 $

 12.57
 %

 $
 21,538

 4.50
 %

 $
 31,111

 6.50
 %

 Tier 1 (Core) Capital to average assets:

 $

 10.34
 %

 $
 23,274

 %

 $
 29,092

 %

 Note
13 – Related-Party Transactions

 The Bank periodically
enters into transactions with its executive officers, directors, significant stockholders, and their affiliates (related parties).
Transactions with such related parties included (dollars in thousands):

 Schedule of Related Party Transactions

 2023

 2022

 Fees and bonuses paid to directors during the period

 $

 $

 Deposits from related parties held by the bank at the end of period

 2,607

 4,568

 There were no
loans to related parties in 2023 or 2022.

 Note
14 – Stock-Based Compensation

 Stock-based
compensation expense, reflected in earnings, for the years ended December 31, 2023, and 2022, was $ 90,000 and $ 292,000, respectively.

 The Company
accounts for forfeitures when they occur by reversing any previously accrued compensation expense on forfeited options in accordance
with ASC 718, Compensation – Stock Compensation.

 On November
17, 2017, the stockholders approved the adoption of the 2017 Equity Incentive Plan ("2017 Plan"). The 2017 Plan provides
for the grant of a maximum of 263,127 shares of the Company's common stock of which up to 187,948 shares of common stock
may be granted for stock options and 75,179 shares of common stock may be issued as restricted stock to Directors and employees
of the Company. Stock options and restricted stock awards currently issued under the 2017 Plan vest at 20% per year beginning
on the first anniversary of date of grant and the options expire seven years after the grant date.

 On May 25, 2022,
the stockholders approved the adoption of the 2022 Equity Incentive Plan ("2022 Plan"). The 2022 Plan provides for
the grant of a maximum of 252,340 shares of the Company's common stock of which up to 168,227 shares of common stock may
be issued as restricted stock and 84,113 shares of common stock may be granted for stock options to Directors and employees of
the Company. The Board of Director's compensation committee specifies the vesting schedules for the restricted stock and
options. Option expiration dates are flexible as well but cannot exceed ten years from the grant date.

 The stock option
plans allow for net settlement of vested options. In a net settlement, the Company, at the direction of the optionee, net settles
the options by issuing new shares to the optionee with a value, at the current per share trading price, equal to the total in-the-money
or intrinsic value of the options less any necessary tax withholdings on the disqualifying disposition of Incentive Stock Options.
The optionee is granted newly issued shares and a small amount of cash in lieu of partial shares. There were no net settlements
in 2023 and one net settlement in 2022.

 In 2023, 10,250
stock options were granted and 8,739 shares of restricted stock were issued under the 2017 plan and 1,511 shares of restricted
stock were issued under the 2022 plan. In 2022, 15,000 stock options were granted and 9,500 shares of restricted stock were issued
under the 2017 plan. Stock option grant-date fair values for 2023 and 2022 were computed using the Black Scholes Merton options
pricing model with the following weighted-average inputs and assumptions:

of Weighted Average Inputs and Assumptions

 2023

 2022

 Grant date stock price and exercise price

 $
 12.03

 $
 15.80

 Dividend yield

 2.89
 %

 2.48
 %

 Expected stock price volatility

 23.37
 %

 23.59
 %

 Risk-free interest rate

 3.50
 %

 2.17
 %

 Expected option life in years

 Total weighted-average fair value of options granted

 $
 2.42

 $
 3.00

 Historical data
is used to estimate expected volatility and the term of options expected to be outstanding and takes into account that options
are not transferable. The risk-free interest rate is based on the U.S. Treasury yield curve for the expected term in effect at
the date of grant.

 A summary of stock option
activity in 2023 is presented below (Aggregate Intrinsic Value in thousands):

 Schedule of Stock Options Activity

 Subject
 to
 Options

 Weighted-
 Exercise
 Price

 Weighted-
 Remaining
 Contractual
 Term

 Aggregate
 Intrinsic
 Value

 Outstanding at beginning of year

 144,020

 $
 14.07

 2.8 years

 Granted

 10,250

 12.03

 6.3 years

 —

 Exercised

 —

 —

 —

 —

 Forfeited or expired

 ( 16,770
)

 14.53

 2.1 years

 —

 Outstanding at end of year

 137,500

 $
 13.86

 2.1 years

 $
 —

 Exercisable at year-end

 109,700

 $
 14.23

 1.4 years

 $
 —

 Information related to stock option
exercises during each year is as follows (dollars in thousands):

 Schedule of Information
related to Stock Option Exercise

 2023

 2022

 Intrinsic value of options exercised

 $
 —

 $

 Cash received from options exercised

 $
 —

 $
 —

 Tax benefit realized from options exercised

 $
 —

 $

 A summary of
restricted stock activity for the year ended December 31, 2023, is presented below:

 Schedule of Non-Vested Restricted Stock Activity

 Weighted-
 Grant
 Date Fair
 Value

 Remaining

Contractual

 Term

 Non-vested on January 1, 2023

 6,500

 $
 14.89

 4.1 years

 Granted

 10,250

 12.03

 4.3 years

 Vested

 ( 1,300
)

 14.89

 3.2 years

 Forfeited

 ( 2,050
)

 13.18

 3.8 years

 Non-vested on December 31, 2023

 13,400

 $
 12.97

 3.9 years

 As of December
31, 2023, there was $ 67,000 and $ 143,000 of total unrecognized equity-based expense related to unvested stock options and restricted
stock awards, respectively, granted under the equity plans that is expected to be recognized over the next 5 years as follows
(dollars in thousands):

of Unrecognized Equity-Based Expense under 2017 Equity Incentive Plan

 Year

 2024

 $

 2025

 2026

 2027

 2028

 $

 Note
15 – Fair Value Information

table presents information about assets and liabilities measured at fair value on a recurring and non-recurring basis and indicates
the fair value hierarchy of the valuation techniques utilized to determine such fair values (dollars in thousands):

 Schedule of Assets and Liabilities measured at Fair Value

 Quoted Prices

 in Active

 Markets for

 Identical

 Significant

 Other

 Observable

 Inputs

 Significant

 Unobservable

 Inputs

 Fair Value

 Recurring:

 Assets:

 Securities available-for-sale:

 $
 —

 $
 32,467

 $
 —

 $
 32,467

 —

 2,792

 —

 2,792

 U.S. Government Agencies

 —

 —

 —

 —

 —

 —

 Total available-for-sale:

 $
 —

 $

 $
 —

 $

 Nonrecurring basis:

 Collateral dependent loans

 $
 —

 $
 —

 $
 1,071

 $
 1,071

 Other Real Estate Owned

 $
 —

 $
 —

 $
 3,000

 $
 3,000

 Quoted Prices

 in Active

 Markets for

 Identical

 Significant

 Other

 Observable

 Inputs

 Significant

 Unobservable

 Inputs

 Fair Value

 Recurring:

 Assets:

 Securities available-for-sale:

 $
 —

 $
 34,532

 $
 —

 $
 34,532

 —

 2,717

 —

 2,717

 U.S. Government Agencies

 —

 —

 —

 20,151

 —

 20,151

 —

 —

 Total available-for-sale:

 $
 —

 $

 $
 —

 $

 Nonrecurring basis:

 Impaired loans

 $
 —

 $
 —

 $
 3,951

 $
 3,951

 The fair values
of certain of these instruments were calculated by discounting expected cash flows, which involves significant judgments by management
and uncertainties. Fair value is the estimated amount at which financial assets or liabilities could be exchanged in a current
transaction between willing parties, other than in a forced or liquidation sale. Because no market exists for certain of these
financial instruments and because management does not intend to sell these
financial instruments, the Bank does not know whether the fair values shown represent values at which the respective financial
instruments could be sold individually or in the aggregate.

 There were no
transfers between levels of the fair value hierarchy during the years ended December 31, 2023, or 2022.

table presents the significant unobservable inputs used in the fair value measurements for Level 3 financial assets measured on
a non-recurring basis (dollars in thousands):

 Fair Value Measurement Inputs and
Valuation Techniques

 Collateral Dependent Loans

 Fair Value

 Methodologies

 Valuation Model

 Unobservable
 Input

 1,071

 Receivables Discount/Liquidation Discount

 0 – 50 %

 Total collateral dependent loans

 $
 1,071

 Other Assets

 Other Real Estate Owned

 $
 3,000

 Appraisal Discount/Estimated Selling Costs

 %

 Collateral Dependent
 Loans

 Fair
 Value

 Methodologies

 Model

 Unobservable
 Input

 1,641

 Receivables
 Discount/Liquidation Discount

 0 – 18 %

 1,591

 Discount/Estimated Selling Costs

 18 – 50 %

 1–4 family residential
 RE

 Discount/Estimated Selling Costs

 0 – 18 %

 Total collateral dependent
 loans

 $
 3,951

 The estimated
fair values of the Company's consolidated financial instruments at year-end are as follows (dollars in thousands):

of Fair Value of Financial Instruments

 2023

 2022

 Financial assets

 Fair Value
 Hierarchy

 Carrying

 Fair
 Value

 Carrying

 Fair
 Value

 Cash and due from banks

 $
 27,182

 $
 27,182

 $
 16,112

 $
 16,112

 Federal funds sold

 1,715

 1,715

 Securities available-for-sale

 Securities held-to-maturity

 5,684

 5,107

 5,832

 5,432

 Loans held for investment

 457,027

 437,878

 463,360

 419,251

 Other Real Estate Owned

 3,000

 3,000

 Other investments

 4,063

 4,063

 1,277

 1,277

 Accrued interest receivable

 1,597

 1,597

 1,505

 1,505

 Financial liabilities

 Nonmaturity Deposits

 $
 ( 331,596
)

 $
 ( 331,596
)

 $
 ( 414,094
)

 $
 ( 414,094
)

 Time deposits

 ( 128,403
)

 ( 128,108
)

 ( 73,493
)

 ( 71,932
)

 FRB and FHLB advances

 ( 29,000
)

 ( 29,000
)

 ( 5,000
)

 ( 5,292
)

 Subordinated debentures

 ( 24,595
)

 ( 20,421
)

 ( 24,531
)

 ( 21,728
)

 Accrued interest payable

 ( 521
)

 ( 521
)

 ( 562
)

 ( 562
)

 Note
16 – Earnings per Share

 Following shareholder
approval received on June 29, 2023, the Company converted 820,115 shares of its Series A Preferred Stock to an equal number of
shares of its newly created Non-Voting Common Stock, which was effective on July 19, 2023.

 The Company
has voting common stock, restricted stock awards, and non-voting common stock that are all eligible to participate in dividends
equal to the voting common stock dividends on a per share basis. Securities that participate in dividends, such as the Company's
restricted stock awards and non-voting common stock, are considered "participating securities." The Company calculates
net income available to voting common shareholders using the two-class method required for capital structures that include participating
securities.

 In applying
the two-class method, basic net income per share was calculated by dividing net income (less any dividends on participating securities)
by the weighted average number of shares of common stock and participating securities outstanding for the period. Diluted earnings
per share may include the additional effect of other securities, if dilutive. Potentially dilutive common stock equivalents consist
of employee stock options and warrants. Unallocated common shares held by the ESOP are not included in the weighted average number
of common shares outstanding for purposes of calculating earnings per common share until they are committed to be released to
plan participants. The factors are used in the earnings per share computation follow:

of Earning Per Share

 Year Ended December 31,

 (dollars in thousands, except for earnings per common share amounts)

 2023

 2022

 Net (loss) income

 $
)

 $
 1,330

 Less: convertible preferred stock dividends

 —

 Less: earnings allocated to participating securities

 ( 11
)

 ( 11
)

 Net income allocated to common shareholders

 $
 ( 3,506
)

 $
 1,319

 Basic weighted average common shares outstanding - Voting

 3,654

 2,359

 Basic weighted average common shares outstanding - Non-Voting

 —

 Diluted weighted average common shares outstanding - Voting

 3,656

 2,371

 Diluted weighted average common shares outstanding - Non-Voting

 —

 Basic earnings per common share - Voting

 ($
 0.88
)

 $
 0.56

 Basic earnings per common share - Non-Voting

 ($
 0.88
)

 —

 Diluted earnings per common share - Voting

 ($
 0.88
)

 $
 0.56

 Diluted earnings per common share - Non-Voting

 ($
 0.88
)

 —

 Participating securities are
restricted stock awards and preferred stock since they participate in common stock dividends. Stock options for 112,500 and 118,000
shares of common stock and warrants totaling 211,667 and 100,315 were not considered in computing diluted earnings per common
share for 2023 and 2022, because they were antidilutive.

 Note
17 – Private Placement of Common and Preferred Stock

 In December 2022 and January
2023, the Company completed one private placement of common stock and one private placement of preferred stock, respectively.
The Company issued 1,359,497 shares of common stock and 820,115 shares of convertible, non-voting Series A perpetual preferred
stock at $14.00 per share each, generating net cash proceeds of approximately $ 28.6 million. The Company will use the net proceeds
from these private placements to fund organic growth, transact on potential acquisition opportunities, enter complementary new
business lines, and/or to enhance capital ratios.

 In conjunction with the private
placements, the Company issued warrants to purchase up to 211,667 shares of Common Stock at a price of $14.00. The approximate
fair value of the warrants was deemed immaterial by management. The Warrants are exercisable at any time after their grant date,
and from time to time, in whole or in part, for 7 years from their grant dates, on December 30, 2029, and January 27, 2030. The
exercise of such Warrants remains subject to certain contractual provisions and a "cashless exercise" may be executed.

 Non-voting common stock
– In accordance with the capital raise, and in conjunction with shareholder approval at the Annual Meeting that occurred
on June 29, 2023, a class of non-voting common stock was created on July 19, 2023. On said date, the State of Maryland approved
the Articles Supplementary to the Articles of Incorporation for Bancorp 34, Inc. in which a class of authorized stock containing
 1,100,000 shares of non-voting common stock was established. In accordance with the stipulations established during the capital
raise, the preferred stock issued during the raise was converted to the newly established class of non-voting common stock as
of the date the class was created. Except for voting privileges, the new class of non-voting common stock is treated pari passu
with common stock.

 Note
18 – Bancorp 34, Inc. (Parent Company Only) Financial Information

 Condensed
financial statements of Bancorp 34, Inc. follow (dollars in thousands):

 Balance Sheet

 2023

 2022

 Cash and cash equivalents

 $
 19,184

 $
 17,835

 Investment in subsidiary bank

 63,102

 54,073

 ESOP note receivable

 1,531

 1,558

 Other Investments

 Prepaid and other assets

 1,248

 Total assets

 $
 85,874

 $
 74,675

 Liabilities and stockholders' equity

 Subordinated debt, net of issuance costs

 $
 24,595

 $
 24,531

 Accounts payable and other liabilities

 Stockholders' equity

 60,721

 49,238

 Total liabilities and stockholders' equity

 $
 85,874

 $
 74,675

 Condensed
Statements of Operations

 Year Ended December 31,

 Statement of (Loss) Income

 2023

 2022

 Interest income

 $

 $

 Interest expense

 ( 1,054
)

 ( 1,054
)

 Equity in (loss) income of subsidiary bank

 ( 1,680
)

 2,162

 Merger expense

 ( 814
)

 —

 Net asset value adjustment, other investments

 ( 100
)

 —

 Other expenses

 ( 211
)

 ( 103
)

 Benefit for income taxes

 Net (loss) income

 $
)

 $
 1,330

 Condensed
Statements of Cash Flows

 Year Ended December 31,

 Statement of Cash Flows

 2023

 2022

 Operating activities

 Net (loss) income

 $
)

 $
 1,330

 Adjustments to reconcile net (loss) income to net cash used in operating activities

 Amortization of subordinated debt issuance costs

 Equity in loss (income) of subsidiary bank

 1,680

 ( 2,162
)

 Changes in prepaid and other assets

 ( 354
)

 ( 297
)

 Changes in accrued interest and other liabilities

 ( 348
)

 Net cash used in operating activities

 ( 2,360
)

 ( 596
)

 Investing activities

 Principal collections on ESOP note receivable

 Other investment contributions

 ( 494
)

 ( 315
)

 Capital contribution to bank subsidiary

 ( 10,000
)

 —

 Net cash used in investing activities

 ( 10,467
)

 ( 273
)

 Financing activities

 Repurchase of common stock

 ( 210
)

 ( 78
)

 Issuance of common stock, net

 10,866

 6,212

 Issuance of preferred stock, net

 4,176

 7,306

 Cash dividends paid

 ( 656
)

 ( 700
)

 Net cash from financing activities

 14,176

 12,740

 Net change in cash and cash equivalents

 1,349

 11,871

 Beginning cash and cash equivalents

 17,835

 5,964

 Ending cash and cash equivalents

 $
 19,184

 $
 17,835

 Note
19 – Real Estate Owned

 Real estate owned activity was as
follows (dollars in thousands):

 Schedule of Other Real Estate Owned

 Year Ended
 2023

 Year Ended
 2022

 $
 —

 $
 —

 Foreclosures and additions

 3,000

 Impairments

 —

 —

 Sales

 —

 Ending balance

 $
 3,000

 $
 —

 At both December 31, 2023, and 2022,
the balance of real estate owned includes no foreclosed residential real estate properties recorded as a result of obtaining physical
possession of the property. At December 31, 2023, and 2022, the recorded investment of consumer mortgage loans secured by residential
real estate properties for which formal foreclosure proceedings are in process is $0 and $17,000, respectively.

 Note
20 – Subsequent Events

 On February 22, 2024, the bank consummated a note sale relating
to the real estate owned in Note 19 – Real Estate Owned through a third-party broker. Net cash proceeds totaled $ 2.5 million after
the broker's fee. The additional loss in value of $0.5 million was attributed to the decline in tenant cash rents collected during
January and February of 2024 compared to the tenant cash rents collected in December 2023 when $3.0 million value was established. The
$0.5 million loss will be reflected in the Company's 2024 first quarter financial statements.

 Effective January 1, 2024, the deferred compensation plan that covered
all senior officers and the deferred director's fee plan that covered all directors was frozen. The terms of each plan remain in
place as described in Note 9 – Employee Retirement Benefit Plans, but contributions can no longer be made by participants.

 Item 9. Changes in and
Disagreements with Accountants on Accounting and Financial Disclosures

 Not applicable.

 Item 9A. Controls and Procedures

 Evaluation of Disclosure
Controls and Procedures

 Based on
our management's evaluation (with the participation of our principal executive officer and principal financial officer),
as of the end of the period covered by this annual report, our principal executive officer and principal financial officer have
concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) are effective to ensure that information required to be disclosed by
us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods
specified in Securities and Exchange Commission rules and forms and is accumulated and communicated to our management, including
our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

in Internal Control over Financial Reporting

 There has
been no change in our internal control over financial reporting during the year ended December 31, 2023, that has materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 Internal
Control Over Financial Reporting

 This Annual
Report on Form 10-K does not include a report of management's assessment regarding internal control over financial reporting or
an attestation report of the company's registered public accounting firm due to a transition period established by rules of the
Securities and Exchange Commission for newly public companies.

 Item
9B. Other Information

 Not
Applicable

 Item
9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

 Not
applicable

 Item 10. Directors, Executive
Officers and Corporate Governance

 Directors

 The Bancorp
34 board of directors is divided into three classes approximately equal in number, serving staggered three-year terms. As a result,
the terms of only approximately one-third of Bancorp 34's board members expire at each annual meeting. The term of Bancorp
34's Class I directors will expire at the 2024 annual meeting, the term of its Class II directors will expire
at the 2025 annual meeting and the term of its Class III directors will expire at the 2026 annual meeting.

 Two of our directors
currently serve on the board of directors pursuant to the securities purchase agreements entered into with Castle Creek and Brush Creek.
This agreement will not terminate upon the completion of the merger. See the section entitled "Certain Relationships and Related
Transactions, and Director Independence—Arrangements with Castle Creek Fund VIII, L.P. and Brush Creek-B 34, LLC"
for a description of the terms of the securities purchase agreements.

 Name

 Age

 Served
 as Director Since

 Class I
 (term expires 2024)

 Randal
 L. Rabon

 2007

 Wortham
 A. (Pete) Cook

 2015

 Class II
 (term expires 2025)

 William
 F. Burt

 2007

 Don
 P. Van Winkle

 2013

 Spencer
 T. Cohn

 2023

 Class III
 (term expires 2026)

 Elaine
 E. Ralls

 2014

 James

 2020

 Kevin
 Ahern

 2023

 Biographical Information for Directors

 Elaine
E. Ralls, Ph. D has served as a director since 2014 following the acquisition of Bank 1440, where she was an organizer
and served as a Vice Chair of the Board. She serves as Chair of the Audit Committee for Bank 34. Ms. Ralls is on the Board of
Directors of the Pacific Southwest Better Business Bureau, is a founding partner of Commit Agency, an active member of Women Presidents
Organization, Central Christian Church and the Sun Lakes Rotary Club. Previously she has served in leadership with Women on Boards
2020, as a director for the Arizona Foundation for Women, on the Steering Committee for Women in Leadership for the Chandler Chamber,
as an active member of Vistage International, and as an adjunct professor in the Colangelo College of Business at Grand Canyon
University. Ms. Ralls' OneBigLife personal brand has been featured in "Think and Grow Rich for Women", by Sharon
Lechter, as well as "Discover Your Inner Strength" which she co-authored with Ken Blanchard, Stephen Covey, and Brian
Tracy. Ms. Ralls has earned an MBA from Arizona State University as well as a Ph. D. from Nova Southeastern University's
Wayne Huizenga's College of Business and Entrepreneurship. She has built and transitioned multiple businesses in Arizona,
spanning many industries including healthcare, education, and banking, and has been dubbed a serial entrepreneur by Biz AZ magazine.
Her experience with numerous company mergers and associated integration of companies and cultures provides us with a strong resource
for guidance pertaining to our business expansion via strategic alliances and acquisitions.

 James
T. ("Jim") Crotty is the current Chief Executive Officer and President of Bancorp 34 and Bank 34. Mr. Cotty
was appointed Co-President and Co-Chief Executive Officer of Bancorp 34 and Bank 34 in July 2020, and was named President and
Chief Executive Officer of each entity in September 2020. Before joining Bank 34, Mr. Crotty spent 16 years of his career at Keefe,
Bruyette & Woods as an investment banker advising and working with community banks on a variety of strategic initiatives.
Mr. Crotty's primary focus was on mergers and acquisitions, debt and equity capital raising (including mutual to stock conversions
and initial public offerings), branch and asset purchases and divestitures as well as overall strategic planning initiatives.
Prior to his time at KBW, Mr. Crotty served as a software engineer and consultant for a software development firm. Mr. Crotty
is a graduate of Miami University.

 Kevin Ahern
 is currently a co-founder and Managing Partner of Brush Creek Partners (formed in 2020), a private opportunistic investment
vehicle focused on making investments in operating companies in the specialty finance, banking and financial services, manufacturing,
distribution, media, and business and consumer services sectors. Mr. Ahern has 35 years of experience as an executive, entrepreneur,
and operator in the financial services industry including commercial banking, private equity, institutional investment management,
alternative investments, insurance, investment banking, and mergers and acquisitions. He also actively provides consulting and
advisory services to several banking and wealth management organizations via Colorow Capital Partners, a strategic advisory and
consulting company that was formed in 2017.

 Mr. Ahern currently
serves on the board of directors of InBank Corp and InBank, ERI Group, Inc., a Colorado-based medical device contract design and
manufacturing firm, GXIII, a New York-based digital audio company, and is an active board observer with the Bank of Idaho Holding
Company. He is also Chairman of Investment Trust Company, a Colorado-based independent trust company. Mr. Ahern is the former
Founder, Chairman, and CEO of CIC Bancshares, a bank holding company that was formed in 2009. Following CIC's sale to Heartland
Financial USA in 2016, Mr. Ahern remained as Executive Chairman of Centennial Bank and as Chairman of the Board of Citywide Banks,
a Colorado-chartered community bank and Heartland Financial member bank. From 2005 to 2008, Mr. Ahern served as President and
COO of Braddock Financial Corporation, a Colorado-based alternative asset management and private equity firm, and previously held
executive positions with CoBiz Financial and CoBiz Bank, NA, Aetna Investment Management, ING Investment Management, and Sterling
Partners.

 Mr. Ahern was
appointed by the Governor of Colorado and served two terms on the Board of Trustees for the University of Northern Colorado. He
formerly served on the board of the UNC Foundation, Inc. and chaired the investment committee. He is currently a member of the
Dean's Leadership Council of the Monfort College of Business and is a frequent adjunct faculty member teaching an undergraduate
senior level investments course. Mr. Ahern serves on the ACE Scholarships Board of Trustees. He is also an active member and former
board member of YPO-Gold Rocky Mountain and is a Chartered Financial Analyst (CFA).

 Randal L.
Rabon has served as a director of Bancorp 34 since 2007 and is currently Chairman of Bancorp 34. He is a lifelong resident of
Alamogordo where he co-owns and operates several businesses. His primary interests include C&R Ventures; Mesa Verde Enterprises (which
is Otero County's largest civil contractor); Aggregate Technologies; The Heritage Group (developer of Mesa Village and Cielo Vista
Ranch subdivisions); and the Mesa Verde Ranch. Mr. Rabon's deep economic roots in the community and experience dealing with regulatory
matters associated with banking and government contracts is highly beneficial in bringing perspective to corporate governance matters.

 Wortham
A. (Pete) Cook has served as a director of Bancorp 34 since 2015. Prior to his appointment to the Board of Directors,
Mr. Cook served as a financial consultant to Bank 34 from January 2014 to March 2015. From 1989 until his retirement in 2013 he
served as President, Chief Executive Officer and Director at First National Bank in Alamogordo, New Mexico. Mr. Cook also served
as Executive Vice President and Vice President at First National Bank from 1987 to 1989. He held the position of Executive Vice
President and managed commercial lending, corporate strategy and administration at United Bank of Lea County, Hobbs, New Mexico,
from 1982 through 1987. He served as an executive branch manager overseeing consumer finance and administration from 1971 through
1982 in Hobbs, New Mexico and Farmington, New Mexico. Mr. Cook is past chairman of the Economic Development Council of Otero County
and a former member of the Committee of 50 (military support committee). His director experience spanned other organizations including:
Federal Reserve Bank, El Paso, Texas; Federal Reserve Bank, Dallas, Texas; and the New Mexico Bankers Association. Mr. Cook's
banking background and leadership experience brings valuable insight in the areas of leadership, bank operations, credit evaluation
and corporate governance.

 William
F. Burt has served as director of Bancorp 34 since 2007 and is currently Vice Chairman of Bancorp 34. Mr. Burt has served
in several different capacities in the broadcast industry since receiving his degree in Mass Communications from New Mexico State
University in 1974. He has been the owner and general manager of Burt Broadcasting, Inc. since 1988. Mr. Burt is a current State
Senator representing District #33. He has spent many years actively supporting the U.S. Air Force and Army. Mr. Burt was a charter
member of the Governor Appointed New Mexico Military Base Planning Commission and is a member of the Military and Veterans Affairs
Committee. He also serves as a Holloman Wingman and a former member of the Air Force Air Combat Command Commanders Group. In the
New Mexico State Senate, Mr. Burt serves on the Senate Finance Committee, as well as the Revenue Stabilization and Tax Committee
and Science and Technology Committee. Mr. Burt has been awarded the New Mexico Broadcaster of the Year Award, Owner of the Radio
Station of the Year Award and was named Alamogordo Citizen of the Year. He has also served as Chairman of the Alamogordo Chamber
of Commerce, the Committee of 50 (military support committee), Flickinger Center for Performing Arts Board and the New Mexico
Broadcasters Association. Mr. Burt's media background, senatorial experience and experience in our local markets provides
the franchise with substantial insights and discipline for enhancing our public perception and corporate citizenship initiatives.

 Don P.
Van Winkle has served as a director of Bancorp 34 since 2013. He works with mid-market companies in an out-sourced corporate
development and Board role to include managing acquisitions and divestitures, bank-relations and other capital access options.
Previous experience includes: Vistage Chair for Vistage International from 2011 through 2014 (a CEO peer advisory organization);
Managing Director for SDR Ventures, a Denver-based investment banking firm and mezzanine debt fund; Three years as both President
and Corporate Banking Manager for two Denver-based middle-market banking groups; Seven years as Chairman & Chief Executive
Officer of Van Winkle's Farmers Market, Inc. (a 500 employee IGA retail grocery store group based in New Mexico), which
he successfully sold in 2002; Chief Financial Officer and Chief Operating Officer of Fresh Produce Sportswear, Inc., a sportswear
design and distribution firm based in Boulder, Colorado where he additionally served on the Board of Directors for 10 years. Mr.
Van Winkle began his career as a corporate banker in Denver (1980 to 1991) after spending two years as a bank examiner with the
Comptroller of the Currency. Mr. Van Winkle's experience is instrumental in high level evaluation of our credit management
processes and practices and his experience as a chief financial officer and chief executive officer qualify him to serve as our
audit committee financial expert.

 Spencer
T. Cohn currently works and has worked for a private equity fund, Castle Creek, since 2014. He sits on the board of directors
at several bank portfolio companies. Prior to joining the firm, Mr. Cohn worked at Keefe, Bruyette & Woods, Inc. as an Investment
Banking Associate in the Financial Institutions Group. At KBW, he concentrated on mergers and acquisitions including bankruptcy
structures, recapitalizations and restructurings, and capital markets transactions. Mr. Cohn is a Director of the Cystic Fibrosis
Foundation and serves as Co-Chair of the Cystic Fibrosis Foundation's Tomorrow's Leaders program (San Diego Chapter).
In addition to his charitable involvement, Mr. Cohn is a Senior Mentor and Resume Reviewer for Wall Street Oasis.

 Biographical Information for Executive
Officers

 Our executive
officers are:

 Name

 Age

 Position

 James

 President
 and Chief Executive Officer of Bancorp 34 and Bank 34

 Kim
 Yacuel

 Vice President and Chief Operating Officer of Bancorp 34 and Bank 34

 Kevin

 Vice President and Chief Financial Officer of Bancorp 34 and Bank 34

 Because Mr. Crotty
also serves on our board of directors, we have provided biographical information for him above. Biographical information for each
of Ms. Yacuel and Mr. Vaughn is provided below:

 Kim Yacuel
 currently serves as Senior Vice President and Chief Operations Officer of Bancorp 34 and Bank 34, a position she has held
since 2014. Prior to joining Bank 34, Ms. Yacuel held the position of Executive Vice President at First Scottsdale Bank in Scottsdale,
Arizona. During her 33 years of banking, Ms. Yacuel has gained experience in areas such as BSA, strategic project management,
compliance and risk management, core conversion process integration, systems conversion and managing teams with best practice
operational support, products, ongoing employee development program, and customer servicing processes.

 Kevin Vaughn
 currently serves as the Senior Vice President and Chief Financial Officer of Bancorp 34 and Bank 34, a position he has
held since March of 2022. Mr. Vaughn has 20 years of banking industry experience. Prior to joining Bancorp 34, he spent seven
years with a $1+ billion institution in the Midwest in a senior finance role with responsibility for investments, financial reporting,
and other related functions. Prior to his senior finance role, Mr. Vaughn served for twelve years as a bank examiner with the
Indiana Department of Financial Institutions.

 Code of Ethics

34's Board of Directors approved and adopted a Code of Ethics applicable to all of our directors, executive officers and employees.
The full text of the Code of Ethics is attached hereto as Exhibit 14.1 and is incorporated herein by reference. We intend to disclose
any amendments to or waivers of certain provisions of our Code of Ethics in a Current Report on Form 8-K.

 Item 11. Executive Compensation

 Compensation of Executive Officers

 In this Annual
Report on Form 10-K, we refer to the individuals who served as our principal executive officer and our two other most highly compensated
executive officers, as the "named executive officers." Our named executive officers as of December 31, 2023, were:

 James
 T. Crotty, President and Chief Executive Officer of Bancorp 34 and Bank 34;

 Kim
 Yacuel, Senior Vice President and Chief Operations Officer of Bancorp 34 and Bank 34; and

 Kevin
 Vaughn, Senior Vice President and Chief Financial Officer of Bancorp 34 and Bank 34.

 Summary Compensation Table

table sets forth information concerning all compensation awarded to, earned by or paid to our named executive officers for all
services rendered in all capacities to us and our subsidiaries for the fiscal year ended December 31, 2023.

 Name and Principal Position

 Year

 Salary
 ($)

 Bonus
 ($) (1)

 Stock
 Awards
 ($) (2)

 Option
 Awards
 ($) (3)

 Non-

 Equity
 Incentive
 Plan
 ($) (4)

 Nonqualified
 Earnings
 ($) (5)

 All Other
 ($) (6)

 Total
 ($)

 James

 2023

 318,750

 242,000

 60,150

 12,100

 —

 —

 52,770

 685,770

 Chief
 Executive Officer and President

 Kim
 Yacuel

 2023

 185,000

 103,500

 30,075

 6,050

 16,680

 —

 41,946

 383,251

 Vice President and Chief Operations Officer

 Kevin

 2023

 171,416

 18,045

 3,630

 —

 —

 21,350

 268,441

 Vice President and Chief Financial Officer

 (1)

 See
 discussion under "Annual Bonus Payment" below.

 (2)

 The
 amounts shown in this column reflect the aggregate grant date fair value of the restricted stock awards computed in accordance
 with FASB ASC Topic 718. For the year ended December 31, 2023, the amounts shown are not an indication of actual
 compensation received but rather the maximum potential compensation (based on the grant date fair value of the restricted
 stock awards) if all performance and service requirements are met over the entire five-year vesting period. For further information
 regarding the aggregate grant date fair value of the restricted stock awards, see Note 14 our audited consolidated financial
 statements included elsewhere in this Annual Report on Form 10-K.

 (3)

 The
 amounts shown in this column reflect the aggregate grant date fair value of the option awards computed in accordance with
 FASB ASC Topic 718. For the year ended December 31, 2023, the amounts shown are not an indication of actual compensation
 received but rather the maximum potential compensation (based on the grant date fair value of the option awards) if all performance
 and service requirements are met over the entire five-year vesting period. The per share exercise price of each option award
 was equal to the market value of Bancorp 34's common stock on the date each option was granted. For further
 information regarding the aggregate grant date fair value of the option awards, see Note 14 our audited consolidated financial
 statements included elsewhere in this Annual Report on Form 10-K.

 (4)

 See
 discussion under "Jet Fuel Cash Incentive Plan" below.

 (5)

 There
 were no above-market or preferential earnings on our nonqualified deferred compensation plan.

 (6)

 The
 amounts set forth in this column include the following:

 Mr. Crotty
 ($)

 Ms. Yacuel
 ($)

 Mr. Vaughn
 ($)

 Paid Time off Payout

 20,295

 12,019

 9,856

 401(k) match

 15,292

 11,992

 9,894

 ESOP Stock Allocation

 8,783

 9,082

 —

 Split Dollar Death Benefit BOLI

 —

 —

 Christmas Gift

 —

 Car Allowance

 7,200

 7,200

 —

 Cell phone

 1,200

 1,200

 1,200

 Total

 52,770

 41,946

 21,350

 Narrative to Summary Compensation
Table

 Employment Agreements with
Named Executive Officers

 We currently
have employment agreements with each of our named executive officers. We have included below descriptions of the current employment
agreements for each of these officers.

 Current Employment Agreement with

 Bancorp 34 entered
into an employment agreement (the "current employment agreement") with Mr. Crotty, effective July 20, 2020, pursuant
to which he serves as President and Chief Executive Officer of Bancorp 34. The initial term of the current employment agreement
was two years. Mr. Crotty's current employment agreement was amended on April 1, 2022 to amend the term of the agreement
until May 1, 2024, to renew each year on May 1 for a successive two year period, subject to the disinterested members of the board
of directors conducting a comprehensive performance evaluation and review of Mr. Crotty at least 60 days prior to renewal of the
agreement and affirmative approval the renewal of the agreement. In addition, in the event of a change in control, the agreement
is automatically extended for an additional 24 months.

 Under the current
employment agreement, Mr. Crotty is entitled to an annual base salary of $260,000. His base salary will be reviewed during the
term of the agreement and may be increased, but not decreased, at the discretion of the board. Mr. Crotty's current base
salary is $320,000. The current employment agreement also entitles Mr. Crotty to a $200,000 retention bonus, payable ratably over
5 years on each anniversary of Mr. Crotty's employment date. The retention bonus is expected to be used for the purchase
of Bancorp 34 common stock, unless the value of Mr. Crotty's investment in Bancorp 34, excluding equity benefits provided
by Bancorp 34, exceeds the cumulative retention bonus paid. Upon 90 days of employment the agreement also provides that Mr. Crotty
receive a grant of 25,000 Bancorp 34 stock options, which vest in equal installments over a five-year period, provided Mr. Crotty
remains employed.

 Mr. Crotty is
entitled to receive performance or other bonuses based upon the achievement of the goals and objectives agreed upon with the board
of directors, and Mr. Crotty is also eligible to participate in all employee benefit plans, arrangements and perquisites offered
to other employees and officers of the company. In addition, Mr. Crotty is entitled to participate in a non-qualified deferred
compensation plan which will allow Mr. Crotty to defer up to 100% of his base salary per year. Bancorp 34 also provides Mr. Crotty
a $600 per month automobile allowance and a $100 per month cell phone allowance. Mr. Crotty is also entitled to 25 days per year
in paid time off and reimbursement for reasonable travel, entertainment and other reasonable business expenses incurred.

 We may terminate
Mr. Crotty's employment with or without cause, and Mr. Crotty may terminate his employment with or without good reason.
Mr. Crotty is eligible for certain severance benefits upon termination, as described below under "Potential Payments Upon
Termination or Change in Control." If Mr. Crotty is terminated without cause, he is entitled to a cash lump sum payment
equal to his base salary at the time of termination through the last day of the remaining term of his employment agreement, subject
to Mr. Crotty executing a customary release.

 Ms. Crotty's
current employment agreement requires that he keep information about Bancorp 34 confidential. He is also subject to provisions
related to non-competition and non-solicitation that generally preclude him, for a period of 1 year following termination (other
than a termination following a change in control), from, among other things, (a) competing with Bancorp 34 or Bank 34 or otherwise
being employed directly or indirectly in any capacity, including as a consultant, for any entity that competes with Bancorp 34
or Bank 34 and has an office within 25 miles of any location in which Bancorp 34 has business operations or has filed an application
with regulatory authorities to establish an office; (b) soliciting any business relation to terminate its an existing business
relationship with Bancorp 34; (c) soliciting for employment any person employed by Bancorp 34 or Bank 34 to work for any business
that competes with Bancorp 34 or Bank 34 within the restricted territory.

 New Employment Agreement with

 In connection with the
proposed merger with CBOA, and contingent upon the consummation of the merger, Bank 34 has entered into a new employment
agreement (the "new employment agreement") with Mr. Crotty. Mr. Crotty has agreed to serve as the Chief Executive Officer
of Bank 34 and Bancorp 34 for a two-year term ending April 30, 2025, that may be extended for additional one-year periods upon each anniversary
of the agreement. Mr. Crotty's initial base salary will be $320,000. In addition to his base salary, Mr. Crotty, will be entitled
to receive cash bonuses equaling up to 40% of his annual base salary if Mr. Crotty achieves certain performance levels established from
time to time by the board of directors or its authorized designee.

 The new employment
agreement provides that Mr. Crotty will be reimbursed for reasonable and necessary travel, mobile cellular and data plans, and
other business expenses. Mr. Crotty will participate in Bank 34's retirement, welfare, health, and other benefit programs.
Mr. Crotty will be prohibited from disclosing our trade secrets or confidential information.

 The new employment
agreement provides that, if Bank 34 terminates the executive's employment without cause prior to a change in control or
more than 12 months following a change in control, Bank 34 will pay the executive on the first day of the month following the
date of termination, and thereafter on the first day of the month for the next 11 months, compensation in an amount equal to 100%
of his then current monthly base salary, plus any bonus earned or accrued through the date of termination.

 We may terminate
Mr. Crotty's employment with or without cause, and Mr. Crotty may terminate his employment with or without good reason.
Mr. Crotty is eligible for certain severance benefits upon termination, as described below under "Potential Payments Upon
Termination or Change in Control." If Mr. Crotty is terminated without cause, he is entitled to a cash lump sum payment
equal to his base salary at the time of termination through the last day of the remaining term of his employment agreement, subject
to Mr. Crotty executing a customary release.

 Finally, during
their employment and for a period of 12 months thereafter (other than a termination within one year following a change in control),
Mr. Crotty may not, subject to limited exceptions, (i) compete with us by forming, serving as an organizer, director, or officer
of, or consultant to, or acquiring or maintaining more than a 1% passive investment in, a depository financial institution or
holding company of a depository financial institution, if the depository institution or holding company has one or more offices
or branches within our territory, (ii) solicit our customers for a competing business, or (iii) solicit our employees for a competing
business.

 Current Change in Control Agreement
with Kim Yacuel

 Bancorp 34 entered
into a change in control agreement with Ms. Yacuel, effective January 1, 2017 (the "current change in control agreement").
The initial term of the current change in control agreement was two years. Ms. Yacuel's current change in control agreement
was amended on April 1, 2022 to amend the term of the agreement until May 1, 2024, to renew each year on May 1 for a successive
two year period, subject to the disinterested members of the board of directors conducting a comprehensive performance evaluation
and review of Mr. Crotty at least 60 days prior to renewal of the agreement and affirmative approval of the renewal of the agreement.

 We may terminate
Ms. Yacuel's employment with or without cause, and Ms. Yacuel may terminate her employment with or without good reason.
Under the change in control agreement Ms. Yacuel is eligible for certain severance benefits upon termination, as described below
under "Potential Payments Upon Termination or Change in Control."

 New Change in Control Agreement
with Kim Yacuel

 In connection with the
proposed merger with CBOA, and contingent upon the consummation of the merger, Bank 34 has entered into a new change in
control agreement with Ms. Yacuel (the "new change in control agreement"). The new change in control agreement is for a two-year
term ending April 30, 2025, that may be extended for additional one-year periods upon each anniversary of the agreement. Under the new
change in control agreement Ms. Yacuel is eligible for certain severance benefits upon termination, as described below under "Potential
Payments Upon Termination or Change in Control."

 Change in Control Agreement with
Kevin Vaughn

 In connection with the
proposed merger with CBOA, and contingent upon the consummation of the merger, Bank 34 has entered into a new change in
control agreement with Mr. Vaughn. The change in control agreement is for a two-year term ending April 30, 2025, that may be extended
for additional one-year periods upon each anniversary of the agreement. Under the change in control agreement Mr. Vaughn is eligible
for certain severance benefits upon termination, as described below under "Potential Payments Upon Termination or Change in Control."

 Annual Bonus Payments

 Annual bonus
compensation is an integral component of our total compensation program that links executive decision-making and performance with
our annual strategic objectives. Our named executive officers were eligible for bonus payments in 2023.

 In 2023, the
board of directors did not establish any specific set of corporate metrics or measures to determine annual bonuses for our named
executive officers. However, in consultation with our Chief Executive Officer, the board of directors took into consideration,
among other things, the following achievements of management:

 Strong
 core earnings for Bancorp 34 in 2022;

 Healthy
 deposit growth;

 Completion
 of a successful capital raise;

 Solid
 core credit metrics;

 Successful
 execution on internal strategic initiatives;

 Favorable
 results from outside and 3 rd party reviews and audits; and

 Continued
 growth of the balance sheet.

 In
2023, based on their individual performance, Mr. Crotty received an annual bonus equal to 76% of his base salary, Ms. Yacuel received
an annual bonus equal to 56% of her base salary, and Mr. Vaughn received an annual bonus equal to 32% of his base salary.

 Jet Fuel Cash Incentive Plan

 The Bank 34 Jet
Fuel Incentive Plan is a plan under which Bank 34 officers can earn cash incentives based upon the solicitation and opening of
new deposit accounts at Bank 34. Under the plan, for an opened demand deposit account, an officer receives 30 basis points of
the total amount deposited by the customer at the 90 day anniversary of the account opening date, and an additional 60 basis points
of the amount deposited by the customer at the one year anniversary of the account opening date. For interest bearing deposit
accounts, an officer receives 25 basis points of the total amount deposited by the customer at the 90 day anniversary of the account
opening date, with a maximum payout of $1,000.

 2017 Equity Incentive Plan

 The Bancorp 34,
Inc. 2017 Equity Incentive Plan, which we refer to as the "2017 Equity Plan," was adopted by the Bancorp 34 board
of directors and approved by our stockholders on November 17, 2017. The 2017 Equity Plan remains effective as long as any awards
are existing under the plan, provided that no awards may be granted under the plan after the ten-year anniversary date of the
of plan. The Equity Plan was designed to enable us to attract, retain and reward individuals who contribute to the further success
and to further align the participant's interest with those of the company's stockholders.

Subject to the Equity Plan. The shares issuable under the 2017 Equity Plan are 263,127 shares of Bancorp 34 common stock that
are authorized but unissued or reacquired common stock. The maximum number of stock options that may be issuable under the plan
is 187,948, and the maximum number of restricted stock or restricted stock unit awards that may be issuable under the plan is
75,179. Generally, shares that have not been delivered because they were forfeited or cancelled or the award was settled in cash,
and that have not been applied to pay the exercise price or taxes, may again be issued pursuant to new awards. The compensation
committee of the board of directors of Bancorp 34 (the "committee") must equitably adjust awards and the shares available
under the 2017 Equity Plan in the event of certain corporate restructurings and corporate events, such as recapitalization, reorganization,
stock split, or stock dividend.

 Types
of Awards and Eligibility. There are four types of awards that may be made under the 2017 Equity Plan including options (both
incentive stock options ("ISOs") and nonqualified stock options ("NQSOs")), restricted stock awards and
restricted stock units. Awards are memorialized in an award agreement and are subject to the conditions, restrictions and contingencies
specified by the committee in such agreement (and the 2017 Equity Plan). Employees and directors of Bancorp 34 or any of its subsidiaries
are eligible to receive awards.

 Stock Options.
Options can be issued as ISOs or NQSOs. ISOs are options to purchase our common stock that receive tax benefits under Section
422 of the Code. NQSOs are options to purchase our common stock that do not meet those requirements. Unless otherwise specified
by the award agreement, any stock option granted to an employee under the plan will be an ISO to the maximum extent permitted,
and ISO's may not be granted to a non-employee. As a general rule, the exercise price of each option must be at least 100%
(or, in the case of an ISO granted to a 10% or more stockholder, 110%) of the fair market value of a share on the date of grant.
A higher or lower exercise price may be permissible in connection with a merger or other corporate transaction if it would not
violate Section 409A of the Code. The maximum term of any option is ten years from the date of grant (or five years, for ISOs
granted to an employee who is a 10% or more stockholder). The maximum shares covered by stock options granted in any calendar
year to an employee is 46,987 and to any non-employee director is 9,397 (or to all non-employee directors in the aggregate, 56,384).

Stock. A restricted stock award can be issued as a restricted stock award or restricted stock unit. A restricted stock award
and a restricted stock unit is a grant of shares subject to restrictions specified by the committee that generally lapse upon
vesting. The maximum shares covered by restricted stock or restricted stock unit awards granted in any calendar year to an employee
is 18,794 and to any non-employee director is 3,759 (or to all non-employee directors in the aggregate, 22,553).

Stock Awards. Except to the extent that dividend equivalent rights are provided in the award agreement, a participant of a
restricted stock award has stockholder rights, such as voting and cash dividend rights, provided that dividends for restricted
stock awards that are performance awards will not be paid until the vesting of the performance based restricted stock award.

Stock Units. Unless otherwise provided in the award agreement, a participant of a restricted stock unit has no stockholder
rights, such as voting or cash dividend rights, until vesting of the restricted stock.

 Performance
Awards. A performance award means the grant of a right to receive shares or share units based on our performance, or the performance
of any one or more of our subsidiaries, or business units of either, during a performance period set forth in the award agreement.
The number of performance shares earned by the participant depends on the extent to which the performance goals are attained.
While the 2017 Equity Plan was drafted to allow the grant of "performance-based compensation" awards that would be
exempt from the $1 million deduction limit that applies to publicly-held corporations under Section 162(m) of the Code, this special
exclusion was repealed December 31, 2017 and is not available for awards granted after that date.

 Other Stock-Based
Awards. Other stock-based incentives valued in whole or in part by reference to, or otherwise based on, shares (such as restricted
stock units) may be granted under the 2017 Equity Plan, with such restrictions and other conditions as the board determines.

 Administration.
The 2017 Equity Plan is administered by the members of the committee who are disinterested board members (as defined in the plan).
The board of directors may, in their discretion, take any action or exercise any power, privilege or discretion conferred on the
committee under the plan with the same force and effect as if done or exercised by the committee. Among other powers, the committee
has the authority to grant awards, choose participants to receive awards, determine the number of shares of Bancorp 34 common
stock that will be subject to the awards, interpret the 2017 Equity Plan, and establish, amend or rescind any rules and regulations
relating to the 2017 Equity Plan. Except with respect to certain capitalization adjustments, the committee, however, does not
have the power to make any adjustment or amendment to an award that reduces or would have the effect of reducing the exercise
price of a stock option previously granted under the plan, whether through amendment, cancellation (including cancellation in
exchange for a cash payment in excess of the stock option's in-the-money value or in exchange for options or other awards),
replacement grants, or other means.

 Vesting; Forfeiture
& Transferability. The committee determines the time and conditions under which an option holder may exercise an award
or when the period of restriction that applies to an award will lapse ("vesting") and specifies these terms in the
award agreement. Unless the committee specifies a different vesting schedule at the time of grant, awards other than performance
awards are granted with a vesting rate not to exceed 20% per year, with the first installment vesting no earlier than the one
year anniversary of the date of grant. All awards granted under the 2017 Equity Plan are subject to a vesting requirement of at
least one year of employment or service as a director following the grant of the award (subject to acceleration upon death, disability
or certain involuntary terminations following a change in control). Vesting may be based upon employment or service, or achievement
of performance goals, or both. Unless provided otherwise in the award agreement or an employment or severance agreement, all unexercised
or unvested awards are forfeited upon termination of employment or service and vested options continue to be exercisable for three
months (or, in the case of disability or death, 12 months), or their earlier expiration. Awards may be subject to certain clawback
rights to the extent required by the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act
of 2010, or a policy adopted by the board for Bancorp 34. The committee may at any time accelerate vesting of an award or extend
the exercise period of an option in a manner in compliance with section 409A of the Code, except for any award within the first
year after the grant of the award. Awards are generally only exercisable by the participant, and are transferable only by will
or by the laws of descent and distribution, except in certain limited cases of divorce or where otherwise provided by the committee.

 Change in
Control. In the event of any merger, consolidation or other business reorganization of Bancorp 34 (including, but not limited
to a change in control, as defined in the 2017 Equity Plan) in which Bancorp 34 is not the surviving entity, unless otherwise
determined by the committee prior to such event, outstanding stock options will automatically convert to stock options to purchase
voting securities of the surviving entity with substantially the same terms as in effect prior to the event and reflecting the
same economic benefit; provided, however, that the committee may direct that outstanding stock options are canceled as of the
merger for a cash payment equal to the spread (or, in the case of underwater stock options, for no consideration). Otherwise in
the event of a change in control, if the acquiring corporation fails to assume any awards or to convert the awards to awards for
the acquiror's stock options, restricted stock or restricted stock units, such awards will vest immediately upon the effective
time of the change in control. If, at or following a change in control, the participant is involuntarily terminated (including
a constructive termination for "good reason"), all stock options will fully vest and remain exercisable until one
year following the involuntary termination, and all awards of restricted stock subject to time-based vesting will fully vest immediately;
and any restricted stock or restricted stock unit awards subject to performance-based vesting conditions will be vested at the
"target" level of performance unless data supports and the committee certifies the performance measures have been
achieved at a higher level than "target" in which case the award will vest at such higher level. To the extent not
specified in the award agreement or the plan, the committee shall have the discretion to determine the treatment of outstanding
unvested awards, provided that such awards shall be deemed earned and shall vest if not assumed by the successor entity.

 Amendment
& Termination. The 2017 Equity Plan became effective immediately upon our stockholder approval, and terminates on the
tenth anniversary of its effective date. The board may, as permitted by law, at any time amend or terminate the 2017 Equity Plan
or any award agreement, without consent of stockholders or participants, provided, however, that no amendment may cause
the repricing of a stock option or without the consent of such participants impair the rights of participants with outstanding
awards; and provided further that no amendment may (i) materially increase the benefits accruing to participants under
the plan, (ii) materially increase the aggregate number of securities which may be issued under the plan, other than pursuant
to a corporate transaction, or (iii) materially modify the requirements for participation in the plan, unless the amendment under
(i), (ii) or (iii) above is approved by Bancorp 34's stockholders. Notwithstanding the foregoing, the committee may amend
the 2017 Equity Plan or any award to conform to law or avoid certain negative accounting treatments.

 2022 Equity Incentive Plan

 The Bancorp 34,
Inc. 2022 Equity Incentive Plan, which we refer to as the "2022 Equity Plan," was adopted by the Bancorp 34 board
of directors and approved by our stockholders on May 25, 2022. The 2022 Equity Plan remains effective as long as any awards are
existing under the plan, provided that no awards may be granted under the plan after the ten-year anniversary date of the of plan.
The Equity Plan was designed to enable us to attract, retain and reward individuals who contribute to the further success and
to further align the participant's interest with those of the company's stockholders.

Subject to the Equity Plan. The shares issuable under the 2022 Equity Plan are 252,340 shares of Bancorp 34 common stock that
are authorized but unissued or reacquired common stock. The maximum number of stock options that may be issuable under the plan
is 84,113, and the maximum number of restricted stock or restricted stock unit awards that may be issuable under the plan is 168,227.
Generally, shares that have not been delivered because they were forfeited or cancelled or the award was settled in cash, and
that have not been applied to pay the exercise price or taxes, may again be issued pursuant to new awards. The compensation committee
of the board of directors of Bancorp 34 (the "committee") must equitably adjust awards and the shares available under
the 2022 Equity Plan in the event of certain corporate restructurings and corporate events, such as recapitalization, reorganization,
stock split, or stock dividend.

 Types
of Awards and Eligibility. There are four types of awards that may be made under the 2017 Equity Plan including options (both
incentive stock options ("ISOs") and nonqualified stock options ("NQSOs")), restricted stock awards and
restricted stock units. Awards are memorialized in an award agreement and are subject to the conditions, restrictions and contingencies
specified by the committee in such agreement (and the 2022 Equity Plan). Employees, directors and certain consultants and advisors
of Bancorp 34 or any of its subsidiaries are eligible to receive awards.

 Stock Options.
Options can be issued as ISOs or NQSOs. ISOs are options to purchase our common stock that receive tax benefits under Section
422 of the Code. NQSOs are options to purchase our common stock that do not meet those requirements. Unless otherwise specified
by the award agreement, any stock option granted to an employee under the plan will be an ISO to the maximum extent permitted,
and ISO's may not be granted to a non-employee. As a general rule, the exercise price of each option must be at least 100%
(or, in the case of an ISO granted to a 10% or more stockholder, 110%) of the fair market value of a share on the date of grant.
A higher or lower exercise price may be permissible in connection with a merger or other corporate transaction if it would not
violate Section 409A of the Code. The maximum term of any option is ten years from the date of grant (or five years, for ISOs
granted to a 10% or more stockholder).

Stock. A restricted stock award can be issued as a restricted stock award or restricted stock unit. A restricted stock award
and a restricted stock unit is a grant of shares subject to restrictions specified by the committee that generally lapse upon
vesting.

Stock Awards. Unless otherwise provided in the award agreement, a participant of a restricted stock award has stockholder
rights, such as voting and dividend rights, provided that dividends payable with respect to restricted stock awards will be subject
to the same vesting conditions appliable to the restricted stock award and will be paid when any vesting conditions lapse.

Stock Units. Unless otherwise provided in the award agreement, a participant of a restricted stock unit has no stockholder
rights, such as voting or dividend rights, until vesting of the restricted stock.

 Performance
Awards. A performance award means an award that vests in whole or in part upon the achievement of one or more specified
performance measures as determined by the committee. Performance measures may be based on our performance as a whole or on
any one or more of our subsidiaries, or our or our subsidiary's business units, may provide that partial achievement of
performance measures may result in the partial payment or vesting of the award or that the achievement of a performance
measure may be measured over more than one period in a fiscal year. The number of performance shares earned by the
participant depends on the extent to which the performance goals are attained as determined by the committee.

 Other Stock-Based
Awards. Other stock-based incentives valued in whole or in part by reference to, or otherwise based on, shares (such as restricted
stock units) may be granted under the Equity Plan, with such restrictions and other conditions as the board determines.

 Administration.
The 2022 Equity Plan is administered by the members of the committee who are disinterested board members (as defined in the plan).
The board of directors may, in their discretion, take any action or exercise any power, privilege or discretion conferred on the
committee under the plan with the same force and effect as if done or exercised by the committee. Among other powers, the committee
has the authority to grant awards, chose participants to receive awards, and to determine the number of shares of Bancorp 34 common
stock that will be subject to the awards, interpret the 2022 Equity Plan, and establish, amend or rescind any rules and regulations
relating to the 2022 Equity Plan. Except with respect to certain capitalization adjustments, the committee, however, does not
have the power to make any adjustment or amendment to an award that reduces or would have the effect of reducing the exercise
price of a stock option previously granted under the plan, whether through amendment or cancellation (including cancellation in
exchange for a cash payment in excess of the stock option's in-the-money value or in exchange for options or other awards)
or replacement grants, or other means.

 Vesting; Forfeiture
& Transferability. The committee determines the time and conditions under which an option or restricted stock holder may
exercise an award or when the period of restriction that applies to the award will lapse ("vesting") and specifies
these terms in the award agreement, provided that at least 95% of the awards available under the plan will vest no earlier than
one year after the date of grant. Vesting may be based upon employment or service, or achievement of performance goals, or both.
Unless provided otherwise in the award agreement or an employment or severance agreement, all unexercised or unvested awards are
forfeited upon termination of employment or service and vested options continue to be exercisable for three months (or, in the
case of disability or death, 12 months), or their earlier expiration. Awards may be subject to certain clawback rights to the
extent required by the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or a
policy adopted by the board for Bancorp 34. The committee may at any time accelerate vesting of an award or extend the exercise
period of an option in a manner in compliance with section 409A of the Code, except that the committee may not accelerate the
vesting period of any award within the first year following the date of the grant if the exercise of such discretion would result
in more than 5% of the aggregate awards under the plan vesting in less than one year from the date of grant. Awards are generally
only exercisable by the participant, and are transferable only by will or by the laws of descent and distribution, except in certain
limited cases of divorce or where otherwise provided by the committee. The award agreement may require the participant to agree
to hold a vested award or shares of stock received upon exercise of a stock option for a specified holding period, subject to
certain exceptions.

 Merger; Change
in Control. If the event of a merger, consolidation or other business reorganization (including a change in control) in which
the company is not the surviving entity, outstanding stock options will automatically convert to stock options to purchase voting
securities of the surviving entity with substantially the same terms as in effect prior to the event and reflecting the same economic
benefit. Similar, any outstanding restricted stock or restricted stock unit award will be assumed by and become restricted stock
or restricted stock unit award of the surviving entity. If the surviving entity fails to assume the outstanding awards, any service-based
awards will vest immediately at or immediately before the effective time of the merger, and performance-based awards will vest
at the greater of the "target" level of performance or actual annualized performance measured as of the most recent
completed fiscal quarter. Unless otherwise provided in the 2022 Equity Plan, any holder of vested restricted stock or restricted
stock unit award will receive the same value as received by other stockholders in the event and any holder of vested stock options
will receive the spread based on the value as received by other stockholders in the event. If, at or following a change in control,
the participant is involuntarily terminated (including a constructive termination for "good reason"), then, except
as otherwise provided in the plan or otherwise specified in the award agreement, all service-based stock options will fully vest
and remain exercisable until one year following the termination, all service-based restricted stock or restricted stock unit awards
will fully vest immediately, and any restricted stock or restricted stock unit awards subject to performance-based vesting conditions
will vest at the greater of the "target" level of performance or actual annualized performance measured as of the
most recent completed fiscal quarter.

 Amendment
& Termination. The 2022 Equity Plan became effective immediately upon our stockholder approval, and terminates on the
tenth anniversary of its effective date. The board may, as permitted by law, at any time amend or terminate the 2022 Equity Plan
or any award agreement, without consent of stockholders or participants, provided, however, that no amendment may cause
the repricing of a stock option or without the consent of such participants impair the rights of participants with outstanding
awards; and provided further that no amendment may (i) materially increase the benefits accruing to participants under
the plan, (ii) materially increase the aggregate number of securities which may be issued under the plan, other than pursuant
to a corporate transaction, or (iii) materially modify the requirements for participation in the plan, unless the amendment under
(i), (ii) or (iii) above is approved by Bancorp 34's stockholders. Notwithstanding the foregoing, the committee may amend
the 2022 Equity Plan or any award to conform to law or avoid certain negative accounting treatments.

 Outstanding Equity Awards at 2023
Fiscal Year-End

table provides a summary of equity awards outstanding as of December 31, 2023, for the named executive officers.

 Option
 Awards

 Stock
 Awards

 Name

 Grant

 Date

 Number
 of

 Underlying
 Unexercised
 Options
 (#)
 Exercisable

 Number
 of

 Underlying
 Unexercised
 Options (#)
 Unexercisable (1)

 Option

 Exercise
 Price ($)

 Option

 Expiration
 Date

 Number

 of shares
 or units
 of stock
 that have
 not
 vested (2) (#)

 Market

 value of
 shares of
 units of
 stock that
 have not
 vested ($)

 James

 10/19/2020

 15,000

 10,000

 9.85

 10/19/2027

 —

 —

 02/15/2022

 1,200

 4,800

 16.00

 02/15/2029

 2,400

 14.97

 04/03/2023

 —

 5,000

 12.03

 04/03/2030

 5,000

 12.03

 Kim
 Yacuel

 12/6/2017

 6,000

 —

 14.90

 12/6/2024

 —

 —

 2/15/2022

 2,400

 16.00

 02/15/2029

 1,200

 14.97

 04/03/2023

 —

 2,500

 12.03

 04/03/2030

 2,500

 12.03

 Kevin

 6/19/2022

 1,600

 14.52

 6/19/2029

 14.48

 04/03/2023

 —

 1,500

 12.03

 04/03/2030

 1,500

 12.03

 (1)

 stock options that vest ratably over a five year period on each anniversary date of the grant date.

 (2)

 restricted stock grants that vest ratably over a five year period on each anniversary date of the grant date.

 Potential Payments Upon Termination
or Change in Control

 Employment Agreements

 Current Employment Agreement with

 Mr. Crotty's
current employment agreement was amended on December 16, 2020 to provide for an amended change in control benefit to Mr. Crotty.
Under the amendment to the employment agreement, upon the termination of Mr. Crotty without cause or with good reason (as those
terms are defined in the current employment agreement) after the time of a change in control (as defined in the current employment
agreement), Bancorp 34 will pay Mr. Crotty an amount equal to three times the sum of (i) his highest rate of base salary, and
(ii) the highest annual bonus paid to, or earned by, Mr. Crotty during the current calendar year of the date of termination or
either of the two prior years. The amendment also requires Bancorp 34 to pay Mr. Crotty any unpaid portion of the retention bonus
in a single lump sum within ten days following the date of termination.

 If Mr. Crotty's employment is
terminated within six months of a change in control, Mr. Crotty is entitled to the difference of any amounts otherwise received upon
termination and the amount Mr. Crotty would have received based upon termination due to a change in control.

 New Employment Agreement with

 Mr. Crotty's
new employment agreement provides for certain change in control benefits to Mr. Crotty. If, within 12 months following a change
in control Bank 34 terminates Mr. Crotty without cause or Mr. Crotty terminates his employment for good reason, Mr. Crotty will
be entitled to severance equal to the sum of Mr. Crotty's then current base salary plus the average of his last two years'
bonuses multiplied by three, plus any bonuses awarded for previous years but which have not been paid. While we believe the amounts
to be paid to Mr. Crotty upon termination are reasonable compensation for services under the applicable provisions of the Internal
Revenue Code, if Bank 34's independent accounting firm or independent tax counsel determine that payments to the executive
would constitute "excess parachute payments," the payments to the executive will be either delivered in full or reduced
such that no portion would be subject to any additional tax liability applicable to the executive as a result of such payments,
whichever results in the greatest amount of benefits to the executive, as determined by the Bank 34's independent accounting
firm or independent tax counsel.

 Current Change in Control Agreement
with Kim Yacuel

 Under the current
change in control agreement with Ms. Yacuel, upon the termination of Ms. Yacuel without cause or with good reason (as those terms
are defined in the change in control agreement) within six months of a change in control or after a change in control (as defined
in the change in control agreement), Bancorp 34 will pay Ms. Yacuel an amount equal to one times the executive's highest
rate of base salary, and the average bonus paid to Ms. Yacuel during the current calendar year of the date of termination and
the two prior years. If this payment constitutes an "excess parachute payments" the payment will be reduced by the
minimum amount necessary to such that the payments due to the executive are not subject to penalties under IRS code sections 280G
and 4999.

 New Change in Control Agreement
with Kim Yacuel

 Under the new
change in control agreement with Ms. Yacuel, if simultaneous with or with one year following a change in control Bank 34 terminates
Ms. Yacuel without cause or Ms. Yacuel terminates her employment for good reason, Ms. Yacuel will be entitled to severance equal
to the sum of Ms. Yacuel's then current base salary plus the average of her last two years' bonuses, plus any bonuses
awarded for previous years but which have not been paid. While we believe the amounts to be paid to Ms. Yacuel upon termination
are reasonable compensation for services under the applicable provisions of the Internal Revenue Code, if Bank 34's independent
accounting firm or independent tax counsel determine that payments to the executive would constitute "excess parachute payments,"
the payments to the executive will be either delivered in full or reduced such that no portion would be subject to any additional
tax liability applicable to the executive as a result of such payments, whichever results in the greatest amount of benefits to
the executive, as determined by the Bank 34's independent accounting firm or independent tax counsel.

 Change in Control Agreement with
Kevin Vaughn

 Under the change
in control agreement with Mr. Vaughn, if simultaneous with or with one year following a change in control Bank 34 terminates Mr.
Vaughn without cause or Mr. Vaughn terminates his employment for good reason, Mr. Vaughn will be entitled to severance equal to
the sum of Mr. Vaughn's then current base salary plus the average of his last two years' bonuses multiplied by 0.5,
plus any bonuses awarded for previous years but which have not been paid. While we believe the amounts to be paid to Mr. Vaughn
upon termination are reasonable compensation for services under the applicable provisions of the Internal Revenue Code, if Bank
34's independent accounting firm or independent tax counsel determine that payments to the executive would constitute "excess
parachute payments," the payments to the executive will be either delivered in full or reduced such that no portion would
be subject to any additional tax liability applicable to the executive as a result of such payments, whichever results in the
greatest amount of benefits to the executive, as determined by the Bank 34's independent accounting firm or independent
tax counsel.

 Equity Incentive Plan

 Stock Options

 Each option award
granted to our named executive officers was granted under the 2017 Equity Plan. Under our option award agreements with our named
executive officers, outstanding stock options vest ratably over a five year period on each anniversary of the grant date.

 If the executive
is terminated for any reason other than due to death, disability, retirement, involuntary termination (including for good reason)
following a change in control or for cause (as those terms are defined in the 2017 Equity Plan), any options that were exercisable
at the time of termination, may be exercised for a period of three months following the time of such termination, subject to termination
on the option's expiration date, if earlier. If the executive is terminated for death or disability, all options become
vested and exercisable for a period of one year from the date of termination, subject to termination on the option's expiration
date, if earlier. If the executive is terminated for retirement, vested options may be exercised for a period of one year from
the date of termination, subject to termination on the option's expiration date, if earlier. If the executive is terminated
for cause, all options that have not been exercised expire and are forfeited.

 In addition,
in the event of the executive's involuntary termination (including for good reason) following a change in control (as those
terms are defined in the 2017 Equity Plan) all options held by the executive, whether or not exercisable, will become fully exercisable,
subject to the expiration provisions otherwise applicable to the option. In addition, the committee can determine, prior to the
effective date of the change in control, to require options to be cancelled for a cash payment in accordance with the 2017 Equity
Plan.

 Restricted Stock

 Each restricted
stock award granted to our named executive officers was granted under the 2017 Equity Plan. Under our restricted stock award agreements
with our named executive officers, outstanding restricted stock vests ratably over a five year period on each anniversary of the
grant date.

 If the executive
is terminated for any reason other than due to death, disability, retirement, involuntary termination (including for good reason)
following a change in control or for cause (as those terms are defined in the 2017 Equity Plan), any restricted stock awards that
were not vested at the time of termination expire and are forfeited. If the executive is terminated for death or disability, all
restricted stock awards become vested upon the date of termination of service. If the executive is terminated for retirement,
any restricted stock awards that were not vested at the time of termination expire and are forfeited.

 In addition,
in the event of the executive's involuntary termination (including for good reason) following a change in control (as those
terms are defined in the 2017 Equity Plan) all restricted stock awards held by the executive become fully vested. In addition,
the committee can determine, prior to the effective date of the change in control, to require options to be cancelled for a cash
payment in accordance with the 2017 Equity Plan.

 Compensation of Directors
for Fiscal Year 2023

 We
do not pay our "inside" employee-directors any additional compensation for their service as directors. For 2023, we provided
the following annual compensation to our non-employee directors for their service as directors, which consists of a monthly cash retainer
of $3,000.

 The
following table sets forth, for the fiscal year ended December 31, 2023, certain information regarding the compensation of
each non-employee director of Bancorp 34.

 Name

 Fees
 Earned or

 Paid in Cash ($)

 All
 Other

 ($) (1)

 Nonqualified

 Earnings ($)

 Total
 ($)

 Kevin
 W. Ahern (2)

 33,000

 —

 —

 33,000

 William
 P. Burt

 1,637

 —

 37,637

 Spencer
 T. Cohn

 —

 —

 Wortham
 A. (Pete) Cook

 —

 (3)

 Jill
 Gutierrez (4)

 6,000

 —

 6,960

 Randal
 L. Rabon

 (5)

 36,751

 Elaine
 E. Ralls

 —

 —

 (6)

 Don
 P. Van Winkle

 —

 (1)

 The
 amounts included in "All Other Compensation" include reportable amounts of Split Dollar Bank Owned Life Insurance
 policies owned by the bank.

 (2)

 Mr.
 Ahern joined the board of directors in 2023 and his compensation is based on a partial year of service.

 (3)

 The
 director compensation for Mr. Cook is contributed to a vested deferred compensation account for Mr. Cook.

 (4)

 Ms.
 Gutierrez resigned from the board of directors in February of 2023.

 (5)

 The
 director compensation for Mr. Rabon is contributed to a vested deferred compensation account for Mr. Rabon.

 (6)

 The
 director compensation for Ms. Ralls is contributed to a vested deferred compensation account for Ms. Ralls.

 Compensation Committee Interlocks
and Insider Participation

 None of the members
of our Compensation Committee is or has been an officer or employee of Bancorp 34 or any of our subsidiaries. In addition, none
of our executive officers serves or has served as a member of the board of directors, compensation committee or other board committee
performing equivalent functions of any entity that has one or more executive officers serving as one of our directors or on our
Compensation Committee.

 Item 12. Security Ownership
of Certain Beneficial Owner and Management and Related Stockholder Matters

 The following table
sets forth information about the beneficial ownership of Bancorp 34 common stock as of March 7, 2024:

 each
 person known to Bancorp 34 to be the beneficial owner of more than 5% of its common stock;

 each
 named executive officer of Bancorp 34;

 each
 director of Bancorp 34; and,

 all
 of Bancorp 34's executive officers and directors as a group.

 Unless otherwise
noted in the footnotes below, the address of each beneficial owner listed in the table is c/o Bancorp 34, Inc., 8777 E. Hartford
Drive, Suite 100, Scottsdale, Arizona 85255. Except as indicated by the footnotes below, Bancorp 34 believes, based on the information
furnished to it, that the persons and entities named in the table below have sole voting and investment power with respect to
all shares of our common stock that they beneficially own, subject to applicable community property laws.

 In computing the
number of shares of Bancorp 34 common stock beneficially owned by a person and the percentage ownership of that person, it deemed
outstanding shares of its common stock subject to options held by that person that are currently exercisable or exercisable within
60 days of March 7, 2024. Bancorp 34, however, did not deem these shares outstanding for the purpose of computing the percentage
ownership of any other person.

 of

 Owned

 Right
 to

 Acquire (1)

 Total
 Non-

 Held

 Total

 (Voting) (2)

 Percent
 of

 Class
 (Voting)

 Percent
 of

 Class (Voting
 and Non-
 Voting) (3)

 Directors
 and Named Executive Officers

 Kevin
 W. Ahern (4)

 321,428

 32,143

 —

 353,571

 8.42

 %

 7.05

 %

 William
 F. Burt

 21,563

 9,600

 —

 31,163

 (5)

 *

 *

 Spencer
 T. Cohn (6)

 380,580

 108,242

 701,849

 383,595

 9.90

 %

 23.73

 %

 Wortham
 A. (Pete) Cook

 16,903

 9,400

 —

 26,303

 (7)

 *

 *

 James

 30,089

 17,400

 —

 47,489

 (8)

 1.13

 %

 *

 Randall
 L. Rabon

 51,445

 10,114

 —

 61,559

 (9)

 1.47

 %

 1.23

 %

 Elaine
 E. Ralls

 27,555

 9,700

 —

 37,255

 (10)

 *

 *

 Kevin

 2,500

 —

 2,900

 (11)

 *

 *

 Don
 P. Van Winkle

 8,986

 9,471

 —

 18,457

 (12)

 *

 *

 Kim
 Yacuel

 7,100

 7,200

 —

 14,300

 (13)

 *

 *

 All
 directors and executive officers as a group (10 persons)

 868,149

 213,670

 701,849

 976,592

 23.27

 %

 35.55

 %

 5%
 Stockholders

 Brush
 Creek-B34, LLC (14)

 321,428

 32,143

 —

 353,571

 8.42

 %

 7.05

 %

 Castle
 Creek Capital Partners VIII, L.P. (15)

 380,580

 108,242

 701,849

 383,595

 9.90

 %

 23.73

 %

 AB
 Financial Services Opportunities (16)

 260,546

 29,999

 118,266

 383,595

 6.92

 %

 8.15

 %

 *

 Indicates
 ownership which does not exceed 1.0%.

 (1)

 The
 shares in this column represents (i) restricted stock of Bancorp 34 held by the person or entity and (ii) stock options and warrants
 of Bancorp 34 that are currently exercisable or exercisable within 60 days of March 7, 2024.

 (2)

 34 has based its calculation of the percentage of beneficial ownership on 3,873,895 shares which represent all of Bancorp 34 voting
 common stock outstanding as of March 7, 2024, plus those shares of non-voting common stock and warrants held by the person
 or entity which are immediately convertible to voting common stock.

 (3)

 34 has based its calculation of the percentage of beneficial ownership on 5,017,177 share of its voting common stock, non-voting
 common stock and warrants.

 (4)

 Mr.
 Ahern serves as the director designee for Brush Creek-B34, LLC. Mr. Ahern is a Managing Partner at BCP Manager, LLC, which
 is the general partner of Brush Creek Partners, LP, the sole owner of Brush Creek-34, LLC, which entity owns 321,428 shares
 of Bancorp 34 voting common stock and 32,143 warrants to purchase Bancorp 34 common stock. Mr. Ahern disclaims beneficial
 ownership of such shares held by Brush Creek-B34, LLC except to the extent of his pecuniary interest therein.

 (5)

 21,563 shares and 9,600 options held by Mr. Burt.

 (6)

 Mr.
 Cohn serves as the director designee for Castle Creek Partners VIII, L.P. Mr. Cohn is a director at Castle Creek Capital LLC
 which is the sole general partner of Castle Creek Partners VIII, L.P., which entity owns 380,580 shares of Bancorp 34 voting
 common stock, 701,849 shares of non-voting stock and 108,242 warrants to purchase Bancorp 34 common stock. Mr. Cohn disclaims
 beneficial ownership of such shares held by Castle Creek Partners VIII, L.P., except to the extent of his pecuniary interest
 therein.

 (7)

 16,903 shares and 9,400 options held by Mr. Cook.

 (8)

 21,949 shares held by Mr. Crotty, individually, 740 shares held by Mr. Crotty's spouse in an IRA, 17,400 options, and
 7,400 shares of unvested restricted stock.

 (9)

 19,835 shares held by Mr. Rabon individually, 28,439 held jointly with his spouse, 3,171 shares held jointly with his spouse
 and grandchildren, 9,400 options, and 714 warrants to purchase common stock.

 (10)

 27,555 shares held in Ms. Ralls living trust, 9,400 options, and 300 vested warrants to purchase common stock.

 (11)

 200 shares held by Mr. Vaughn individually, 400 options, and 2,300 shares of unvested restricted stock.

 (12)

 8,986 shares held by Mr. Van Winkle and 9,471 options to purchase common stock.

 (13)

 3,400 shares held by Ms. Yacuel individually, 7,200 options, and 3,700 shares of unvested restricted stock.

 (14)

 The
 address of Brush Creek-B34, LLC ("Brush Creek-B34") is 2549 V. Main Street, Suite 201, Littletown, co 80120. BCP
 Manager, LLC is the general partner of Brush Creek Partners, LP, the sole owner of Brush Creek-B34. Kevin Ahern and Scott
 Majerhofer are managing partners of Brush Creek Partners, LP. The effect of this ownership structure is that Mr. Ahern holds
 voting and investment control of Brush Creek-B34's shares of Bancorp 34, and in Mr. Ahern's absence Mr. Maierhofer
 holds voting and investment control of Brush Creek-B34's shares of Bancorp 34.

 (15)

 The
 address of Castle Creek Capital Partners VIII, L.P. is 11682 EI Camino Real, ste 320, San Diego, CA 92130. Castle Creek Capital
 LLC is the sole general partner of Castle Creek Partners VIII, L.P. Spencer Cohn is the director of Castle Creek Partners
 VIII, L.P., and David Volk is the managing principal of Castle Creek Partners VIII, L.P. The effect of this ownership structure
 is that Mr. Cohn holds voting and investment control of Castle Creek Capital Partners VIII, L.P.'s shares of Bancorp
 34, and in Mr. Cohn's absence Mr. Volk holds voting and investment control of Castle Creek Capital Partners VIII, L.P.'s
 shares of Bancorp 34.

 (16)

 The
 address of AllianceBernstein Financial Services Opportunities Fund ("ABSOF") is c/o AllianceBernstein L.P., 1345
 Avenue of the Americas, New York, NY 10105. Mike Howard, the Chief Investment Officer of ABSOF holds voting and investment
 control of ABSOF's shares of Bancorp 34.

 Equity Compensation Plan Information

 The following table provides certain information
with respect to all our equity compensation plans in effect as of December 31, 2023.

 Plan Category

 Number of Shares to be issued upon Exercise of Outstanding Options (a)

 Weighted Average Exercise Price of Outstanding Options (b)

 Number of Shares Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Shares Reflected in Column (a)

 Equity compensation plans approved by security holders (1)

 109,700

 $14.23

 272,817

 Equity compensation plans not approved by security holders

 N/A

 N/A

 N/A

 Total

 109,700

 $14.23

 272,817

 (1) Column (a) consists of shares of our common stock issuable upon the exercise of 109,700 stock options issued under our 2017 Equity Incentive Plan and 0 shares under the 2022 Equity Incentive Plan. Column (c) consists of an aggregate of 21,988 shares reserved for future issuance under our 2017 Equity Incentive Plan, which was approved by our stockholders on November 17, 2017, and 250,829 shares reserved for future issuance under our 2022 Equity Incentive Plan, which was approved by our stockholders on May 25, 2022.

 Item 13. Certain Relationships
and Related Transactions, and Director Independence

 The following section summarizes the
material provisions of certain agreements entered into by Bancorp 34 with its related parties. The summaries of agreements in this section
are qualified in their entirety by reference to the forms of such agreements, which have been filed as exhibits to this Annual Report
on Form 10-K.

 Arrangements with Castle Creek
Fund VIII, L.P. and Brush Creek-B 34, LLC

 Under
a Securities Purchase Agreement entered into between Bancorp 34 and Castle Creek Capital Fund VIII, L.P. ("Castle
Creek") and a Securities Purchase Agreement entered into between Bancorp 34 and Brush Creek-B 34, LLC ("Brush
Creek," and collectively with Castle Creek, the "Funds"), which each beneficially own more than 5% of Bancorp 34
common stock, the Funds purchased for aggregate cash consideration of $15.4 million from Castle Creek and $4.5 million from
Brush Creek, in our private placements an aggregate of 702,008 shares of our voting common stock, 701,849 shares of non-voting
common stock (in the case of Castle Creek only) and warrants to purchase 140,385 shares of our common stock. As a result, as of
December 31, 2023 the Funds currently beneficially own 18.3% of our voting common stock
(assuming the exercise of all immediately exercisable warrants to voting common stock and immediately convertible non-voting common
stock to voting common stock), and 30.8% of our outstanding common stock (including both voting and non-voting common stock and
assuming the exercise of all immediately exercisable warrants held by them). Pursuant to the Securities Purchase Agreements with
Castle Creek and Brush Creek, unless appropriate regulatory approvals are obtained, the Funds were each limited to purchasing no
more than 24.9% of our total equity, and no more than 9.9% of any class of our voting securities. Pursuant to the Articles
Supplementary to our Articles of Incorporation for Non-Voting Common Stock, each of the Funds is permitted to convert, or upon the
written request of Bancorp 34 will convert, its shares of non-voting common stock to voting common stock at any time, provided that
the Fund, together with its affiliates, own no more than 9.9% of our voting common stock.

 Additionally,
under the Securities Purchase Agreements with Brush Creek and Castle Creek, as long as each of Brush Creek or Castle Creek (together
with their affiliates) owns at least 4.9% of our common stock then outstanding (the "minimum ownership interest"),
each of Brush Creek and Castle Creek has the right to designate a representative reasonably acceptable to Bancorp 34 to the Bancorp
34 and Bank 34 Boards of Directors. To the extent that Brush Creek or Castle Creek maintain the minimum ownership and does not
have a representative appointed to the board of directors of Bancorp 34 or Bank 34, or the board representative is unable to attend
a board meeting, Brush Creek and Castle Creek have the right to appoint a representative to attend meetings of the boards of directors
in a non-voting observer capacity. Bancorp 34 has agreed to use its reasonable efforts to have the board representative elected
as a director of the company by the shareholders of the company, and will solicit proxies for the board representative to the
same extent as it does for any of its other nominees to the board. Each board member appointed is entitled to compensation and
indemnification and insurance coverage in connection with his or her role as a board member to the same extent as other members
of our boards of directors.

 Each
of Brush Creek's and Castle Creek's nominating right will terminate at such time as the applicable Fund owns less
than 4.9% of our common stock. Mr. Ahern currently serves as the Brush Creek representative on Bancorp 34's and Bank
34's Boards of Directors. See " Management—Board of Directors—Kevin Ahern " for Mr. Ahern's
biography. Mr. Cohn currently serves as the Castle Creek representative on Bancorp 34's and Bank 34's Boards
of Directors. See " Management—Board of Directors—Spencer Cohn " for Mr. Cohn's biography.

 In
consideration of a portion of the purchase price in our 2022 and 2023 private placement, we issued warrants to purchase an aggregate
of 140,385 shares of our common stock to the Funds. The aggregate proceeds from the Funds of $19.9 million in our 2022 and 2023
private placement were allocated between the 702,008 voting common shares purchased, 701,849 common nonvoting shares purchased
and the 140,385 warrants purchased based on the relative fair value of the warrants, resulting in a purchase price allocation
of $19.9 million for the shares of common stock and non-voting common stock and $0.0 million for the warrants. The warrants are
exercisable until December 30, 2029, or January 27, 2030, and have an exercise price of $14.00 per share. In addition, we paid
approximately $104,000 to the Funds, as reimbursement for due diligence and related expenses in connection with its investment
in our private placement. The Securities Purchase Agreement for the 2022 and 2023 private placement included representations,
warranties and covenants customary for a transaction of this type and was materially similar to the stock subscription agreements
entered into between Bancorp 34 and the other investors in the offering, except that the other investors (i) except for Brush
Creek and Castle Creek, were not entitled to designate a board representative and board observer, (ii) purchased common stock
in the private placement at $14.00 per share (the same price as the Funds), and (iii) were not reimbursed for due diligence and
related expenses in connection with the private placement, each as described above. In addition, the Funds were granted "venture
capital operating company" rights that were not provided to the other investors, including consultation rights, inspection
and access rights, and rights to receive materials for all meetings of our Board of Directors, and the right to audited and unaudited
financial statements, annual budget and other financial and operations information, including consultation with officers and directors
of the company no more than once per calendar quarter, for so long as the Funds maintain an investment in our common stock, subject
to their agreement to maintain the confidentiality of any non-public information provided to them and to comply with applicable
securities laws.

 Registration Rights Agreement

 Registration
Rights Agreement with the Funds. In connection with our 2022 and 2023 private placement, we entered into a registration rights
agreement for the benefit of the Funds with respect to our common stock sold to the Funds in the private placements. Under the
terms of the registration rights agreement, we agreed to file a registration statement under the Securities Act as would
allow the Funds to resell shares of common stock acquired in the private placements (including those received upon exercise of
the Funds' warrants) (the "registrable securities") no later than December 30, 2027 (with respect to Castle
Creek) and January 27, 2028 (with respect to Brush Creek) for an offering to be made on a continuous basis pursuant to Rule 415
(or if a registration under Rule 415 is not available for offers and sales of the registrable securities, by such other means
as Bancorp 34 may reasonably determine). We agreed to use commercially reasonable efforts to cause the registration statement
to be declared effective by the SEC as soon practicable, but in no event later than the tenth trading day after the date Bancorp
34 is notified by the Securities and Exchange Commission that the registration statement will not be reviewed or will not be subject
to further review, and then to maintain the effectiveness of the registration statement. As described in our registration rights
agreement, if we do not comply with our obligations to file the registration statement and ensure that it is declared and remains
effective, we could be obligated to contractual penalties, including liquidated damages.

 Under
the registration rights agreement, we are required to provide written notice to the Funds of our intent to file a registration
statement covering a primary or secondary public offering of our common stock, non-voting common stock, warrants or other securities
(a "Primary or Secondary Registration Statement") other than in connection with registration statement to implement
an employee benefit plan pursuant to a registration statement on Form S-8 (or successor form) or a registration statement on Form
S-4 (or successor form) or a transaction to which Rule 145 or any other similar rule of the Securities and Exchange Commission
is applicable. The Funds have "piggy-back" registration rights that permit them to have shares of common stock owned
by them included in the Primary or Secondary Registration Statement upon written notice to us within the prescribed time limit.
The ability of the Funds to register shares under the Primary or Secondary Registration Statement is subject to the terms of the
registration rights agreement. The managing underwriter may under certain circumstances limit, or cut back the number of shares
owned by such holders that are included in the offering.

 We
will pay all expenses incident to our performance under the registration rights agreement with the Funds, including, without limitation,
all SEC and Financial Industry Regulatory Authority, Inc. ("FINRA") registration, filing and review fees, all fees
and expenses of complying with securities or state "blue sky" laws, all fees of counsel and independent public accountants
retained by us and those expenses of each Fund actually and reasonably incurred, including reasonable attorneys' fees, not
to exceed $50,000 in the aggregate per Fund. We are not required, however, to pay any underwriting discounts and selling commissions,
stock transfer taxes and fees of counsel (except as provided in the prior sentence) for the holders of registrable securities.
We have also agreed to indemnify the Funds and their affiliates who have securities included in a registration statement against
specified liabilities, including certain potential liabilities arising under the Securities Act, and the Funds have similarly
agreed to indemnify us against specific liabilities.

 Related Party Transaction Policy

 Transactions
by us with related parties are subject to regulatory requirements and restrictions. These requirements and restrictions include
Sections 23A and 23B of the Federal Reserve Act (which govern certain transactions by us with our affiliates) and the Federal
Reserve's Regulation O (which governs certain loans by us to our executive officers, directors and principal stockholders).
We have also adopted policies to comply with these regulatory requirements and restrictions, including policies governing the
approval of related party transactions. Under our policies, all transactions between us and our directors, officers and 5% stockholders
are subject to the approval of a majority of the independent and disinterested outside directors and are conducted on terms no
less favorable than could be obtained from unaffiliated third parties on an arm's-length basis. In addition, we conduct
an appropriate review of all related person transactions for potential conflicts of interest on an ongoing basis, and all such
transactions must be approved by the Audit Committee (or another independent body of the board).

 Director Independence

 Our securities are
not listed on a national securities exchange or any inter-dealer quotation system which has a requirement that a majority of directors
be independent. Our board has undertaken a review of the independence of each director on the Bancorp 34 board of directors under the
standards for director independence set forth in the NASDAQ Marketplace Rules. Under these rules, our board has affirmatively determined
that Ms. Ralls, Mr. Ahern, Mr. Cohn, Mr. Van Winkle, Mr. Burt, Mr. Cook and Mr. Rabon are "independent directors." We have
determined that Mr. Crotty does not qualify as independent director because he is an executive officer of both Bancorp 34 and Bank 34.

 Item 14. Principal Accounting
Fees and Services

 We have paid or expect to pay
the following fees to Plante & Moran, PLLC for work performed in 2022 and 2023 or attributable to the audit
of our 2022 and 2023 consolidated financial statements:

 Type
 of Fees

 Fiscal
 Year

 Ended
 2023

 Fiscal
 Year

 Ended
 2022

 Audit
 Fees paid to Plante & Moran, PLLC

 $

 383,954

 215,407

 Audit-Related
 Fees paid to Plante & Moran, PLLC

 [-]

 [-]

 Tax
 Fees paid to Plante & Moran, PLLC

 [-]

 [-]

 All
 Other Fees paid to Plante & Moran, PLLC

 [-]

 [-]

 TOTAL
 FEES PAID TO Plante & Moran, PLLC

 $

 383,954

 215,407

 Audit Fees. Audit
fees for 2023 include actual fees for the 2023 audit of the financial statements and review of the 10K as well as additional services
associated with our S-4 registration statement, including the performance of all comparable period interim reviews during the year and
issuance of consents. Audit fees for 2022 include approximate fees for the re-audit of the 2022 financial statements and performance
of all comparable period interim reviews during the year.

 Audit-Related Fees.
There were no audit related fees for 2023 or 2022.

 Tax Fees. There
were no tax fees for 2023 or 2022.

 All Other Fees. There
were no other fees for 2023 or 2022.

 Pre-Approval Policy. The Audit Committee pre-approves all audit and non-audit and tax services performed by our independent registered public accounting firm.
All services provided by the independent registered public accounting firm are either within general pre-approved limits or specifically
approved by the Audit Committee. The Audit Committee is informed of the prospective services that would be provided at the next regularly
scheduled Audit Committee meeting. All services provided by Plante & Moran, PLLC, and all fees related thereto, were approved accordingly.

 Item 15. Exhibits, Financial
Statement Schedules

 Exhibit

 No.

 Description

 2.1

 Agreement and Plan of Merger by and between Bancorp 34, Inc. and CBOA Financial, Inc. dated as of April 27, 2023 (incorporated by reference to Annex A of the Company's Registration Statement on Form S-4 (File No. 333-273901) filed with the SEC on August 11, 2023).**

 2.2

 Amendment No. 1 to Agreement and Plan of Merger, dated December 21, 2023, by and between Bancorp 34, Inc. and CBOA Financial, Inc. to Agreement and Plan of Merger dated April 27, 2023 (incorporated by reference to Exhibit 2.1 to the Company's Form 8-K (File no. 333-273901) filed with the SEC on December 22, 2023).**

 3.1

 Articles of Incorporation of Bancorp 34, Inc. (incorporated by reference to Exhibit 3.1 to the Company's Registration Statement on Form S-4 (File No. 333-273901) filed with the SEC on August 11, 2023).

 3.2

 Articles of Revival of Bancorp 34, Inc. (incorporated by reference to Exhibit 3.2 to the Company's Registration Statement on Form S-4 (File No. 333-273901) filed with the SEC on August 11, 2023).

 3.3

 Articles Supplementary of Bancorp 34, Inc. for Series A Convertible Perpetual Preferred Stock (incorporated by reference to Exhibit 3.3 to the Company's Registration Statement on Form S-4 (File No. 333-273901) filed with the SEC on August 11, 2023).

 3.4

 Articles Supplementary of Bancorp 34, Inc. for Non-Voting Common Stock (incorporated by reference to Exhibit 3.4 to the Company's Registration Statement on Form S-4 (File No. 333-273901) filed with the SEC on August 11, 2023).

 3.5

 Bylaws of Bancorp 34, Inc. (incorporated by reference to Exhibit 3.5 to the Company's Registration Statement on Form S-4 (File No. 333-273901) filed with the SEC on August 11, 2023).

 4.1

 Form of common stock certificate of Bancorp 34, Inc. (incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-4 (File No. 333-273901) filed with the SEC on August 11, 2023).

 4.2

 34, Inc. will furnish, upon request, copies of all instruments defining the rights of holders
 of long-term debt instruments of the registrant.

 4.3

 Form of Registration Rights Agreement by and among Bancorp 34 and the parties signatories thereto (incorporated by reference to Exhibit 4.3 to the Company's Registration Statement on Form S-4 (File No. 333-273901) filed with the SEC on August 11, 2023).

 10.1

 Employment Agreement dated as of June 20, 2020 by and among James T. Crotty and Bank 34 (incorporated by reference to Exhibit 10.1 to the Company's Registration Statement on Form S-4 (File No. 333-273901) filed with the SEC on August 11, 2023).+

 10.2

 Amendment Number One to the Employment Agreement dated as of December 16, 2020 by and among James T. Crotty and Bancorp 34, Inc. (incorporated by reference to Exhibit 10.2 to the Company's Registration Statement on Form S-4 (File No. 333-273901) filed with the SEC on August 11, 2023).+

 10.3

 Bancorp 34, Inc. and Bank 34 Amendment to Employment Agreement dated as of April 1, 2022 by and amount James T. Crotty, Bank 34 and Bancorp 34, Inc (incorporated by reference to Exhibit 10.3 to the Company's Registration Statement on Form S-4 (File No. 333-273901) filed with the SEC on August 11, 2023).+

 10.4

 Employment Agreement dated as of April 27, 2023 by and between Bank 34 and James Crotty (incorporated by reference to Exhibit 10.4 to the Company's Registration Statement on Form S-4 (File No. 333-273901) filed with the SEC on August 11, 2023).+

 10.5

 Change in Control Agreement dated as of January 9, 2017 by and between Bancorp 34, Inc. and Kimberly Yacuel (incorporated by reference to Exhibit 10.5 to the Company's Registration Statement on Form S-4 (File No. 333-273901) filed with the SEC on August 11, 2023).+

 10.6

 Bancorp 34, Inc. & Bank 34 Amendment to Change in Control Agreement dated as of April 1, 2022 by and between Bancorp 34, Inc., Bank 34 and Kimberly Yacuel (incorporated by reference to Exhibit 10.6 to the Company's Registration Statement on Form S-4 (File No. 333-273901) filed with the SEC on August 11, 2023).+

 Exhibit

 No.

 Description

 10.7

 Change in Control Agreement dated as of April 27, 2023 by and between Bank 34 and Kim Yacuel (incorporated by reference to Exhibit 10.7 to the Company's Registration Statement on Form S-4 (File No. 333-273901) filed with the SEC on August 11, 2023).+

 10.8

 Change in Control Agreement dated as of April 27, 2023 by and between Bank 34 and Kevin Vaughn (incorporated by reference to Exhibit 10.8 to the Company's Registration Statement on Form S-4 (File No. 333-273901) filed with the SEC on August 11, 2023).+

 10.9

 Bancorp 34, Inc. 2017 Equity Incentive Plan (incorporated by reference to Exhibit 10.9 to the Company's Registration Statement on Form S-4 (File No. 333-273901) filed with the SEC on August 11, 2023).+

 10.10

 Bancorp 34, Inc. 2022 Equity Incentive Plan (incorporated by reference to Exhibit 10.10 to the Company's Registration Statement on Form S-4 (File No. 333-273901) filed with the SEC on August 11, 2023).+

 10.11

 Form of Bancorp 34, Inc. Incentive Stock Option Award Agreement (incorporated by reference to Exhibit 10.11 to the Company's Registration Statement on Form S-4 (File No. 333-273901) filed with the SEC on August 11, 2023).+

 10.12

 Form of Bancorp 34, Inc. Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.12 to the Company's Registration Statement on Form S-4 (File No. 333-273901) filed with the SEC on August 11, 2023).+

 10.13

 Form of Securities Purchase Agreement by and among Bancorp 34 and the parties signatories thereto (incorporated by reference to Exhibit 10.13 to the Company's Registration Statement on Form S-4 (File No. 333-273901) filed with the SEC on August 11, 2023).**

 14.1*

 Code of Ethics.

 21.1

 Subsidiaries of Bancorp 43, Inc (incorporated by reference to Exhibit 21.1 to the Company's Registration Statement on Form S-4 (File No. 333-273901) filed with the SEC on August 11, 2023).

 24.1

 Power
 of Attorney (included on Signature Page).

 31.1*

 Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a).

 31.2*

 Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a).

 32.1*

 Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 101.INS*

 101.CAL*

 101.SCH*

 101.DEF*

 101.LAB*

 101.PRE*

 line

 104*

 Cover

 *
 Filed herewith.

 **
 Annexes,
 schedules, and exhibits have been omitted pursuant to item 601(b)(2) of Regulation S-K. Bancorp
 24 agrees to furnish supplementally a copy of any omitted attachment to the Securities and
 Exchange Commission on a confidential basis upon request.

 +
 Indicates a management contract
or compensatory plan.

 Item
16. Form 10-K Summary

 Not
Applicable.

 SIGNATURES

 Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report
to be signed on its behalf by the undersigned, thereunto duly authorized, in Scottsdale, Arizona, on March 8, 2024.

 BANCORP 34, INC.

 (Registrant)

 By:

 /s/

 James

 President
 and Chief Executive Officer

 KNOW ALL MEN
BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints James T. Crotty and Kevin Vaughn, his or her
true and lawful attorney in fact and agent, with full power of substitution and resubstitution, for him or her and in his
or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10 K, and
to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission,
granting unto attorney in fact and agent full power and authority to do and perform each and every act and thing requisite
or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that attorney in fact and agent, or his substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.

 Pursuant
to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated:

 Signature

 Title

 Date

 By:

 /s/

 Director,
 President and Chief Executive Officer

 March

 (Principal
 Executive Officer)

 By:

 /s/ Kevin

 Vice President and Chief Financial

 March

 Kevin Vaughn

 Officer
 (Principal Financial and Accounting Officer)

 By:

 /s/
 Kevin W. Ahern

 March

 Kevin W. Ahern

 By:

 /s/
 William F. Burt

 March

 William F. Burt

 By:

 /s/
 Spencer T. Cohn

 March

 Spencer T. Cohn

 By:

 /s/
 Wortham A. Cook

 March

 Wortham A. Cook

 By:

 /s/
 Randal L. Rabon

 March

 Randal L. Rabun

 By:

 /s/
 Elaine E. Ralls

 March

 Elaine E. Ralls

 By:

 /s/
 Don P. Van Winkle

 March

 Don P. Van Winkle