Company: BCTF
Filing Date: 2025-03-06
Form Type: 10-K
Source: 0001552781-25-000058
Chunk: 443

Company: Bancorp 34, Inc.
Filing Date: 2025-03-06
Form: 10-K
Item: Item 1B
Chunk 443
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 from our estimate of credit losses
for held-to-maturity debt securities.

Upon our January
1, 2023, 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.

Business
Combinations

Assets acquired, including
identified intangible assets such as core deposit intangibles, and liabilities assumed as a result of a merger or acquisition transaction
are recorded at their estimated fair values. The difference between the net fair value of assets acquired and liabilities assumed, and
the consideration paid is recorded as a bargain purchase gain or goodwill. Management engages third-party specialists to assist in the
development of fair value estimates. Significant estimates and assumptions used to value acquired assets and liabilities assumed include,
but are not limited to, projected cash flows, future growth rates, repayment rates, default rates and losses assuming default, discount
rates, and realizable collateral values. The ACL for PCD loans is recognized as part of the acquisition accounting. The ACL for non-PCD
loans is recognized as provision for credit losses in the same reporting period as the merger or acquisition. Fair value adjustments
are amortized or accreted into the income statement over the estimated lives of the acquired assets and assumed liabilities. The purchase
date valuations and any subsequent adjustments determine the amount of bargain purchase gain or goodwill recognized in connection with
the merger or acquisition.

Preliminary estimates
of fair values may be adjusted for a period of no greater than one year subsequent to the merger or acquisition date if new information
is obtained about facts and circumstances that existed as of the merger or acquisition date that, if known, would have affected the measurement
of the amounts recognized as of that date. Adjustments recorded during this measurement period are recognized in the current reporting
period. For further information regarding the CBOA Merger, see Note 2 in our consolidated financial statements included 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