Bancorp 34 : Financial statements as restated

Bancorp 34, Inc.

Consolidated Financial Statements (As Restated)

For the Fiscal Years Ended December 31, 2022, and 2021

CONTENTS

	Page
Report of Independent Registered Public Accounting Firm	1
Consolidated Balance Sheets (As Restated)	3
Consolidated Statements of Comprehensive Income (As Restated)	4
Consolidated Statements of Changes in Stockholders' Equity (As Restated)	5
Consolidated Statements of Cash Flows (As Restated)	6
Notes to Consolidated Financial Statements (As Restated)	7

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, 2022 and 2021; the related consolidated statements of comprehensive income, changes in shareholders' equity, and cash flows for each of the years in the two-year period ended December 31, 2022; 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, 2022 and 2021 and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.

Correction of Errors

As discussed in Note 19 to the financial statements, the 2022 and 2021 financial statements have been restated to correct misstatements. The previously issued 2022 and 2021 financial statements, which have been restated, were audited by other auditors whose report dated April 7, 2023 on those financial statements was unqualified.

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.

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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 both the December 31, 2022 and 2021 audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate 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 matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

The critical audit matter communicated below is a matter arising from both the December 31, 2022 and 2021 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.

Allowance for Loan Losses - Significant Qualitative Adjustments in Collectively Evaluated Reserves - Refer to Notes 1 and 3 to the Financial Statements

Critical Audit Matter Description

As described in Notes 1 and 3 to the consolidated financial statements, the general component of the allowance covers nonimpaired loans and has a quantitative component (historical loss) and a qualitative component (current risk factors). The current qualitative risk factors include 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, nonaccrual 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.

We identified the Company's qualitative adjustments to historical loss experience within the collectively evaluated reserve of the allowance for loan losses as a critical audit matter. Given the significant estimates and assumptions management makes to estimate these adjustments for collectively evaluated reserves, performing audit procedures to evaluate the reasonableness of management's estimates and assumptions required a high degree of auditor judgment.

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To the Shareholders and Board of Directors

Bancorp 34, Inc.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the qualitative adjustments to historical loss experience within the collectively evaluated allowance included the following, among others:

• We obtained an understanding of management's process for determining the need for qualitative factor adjustments identifying appropriate factors and measuring the direction and magnitude of the adjustment.
• We evaluated the design of controls over the application of management's qualitative factor methodology in the estimate of collectively evaluated allowance.
• We evaluated management's rationale for determining qualitative adjustments were relevant and warranted for each loan segment and assessed the measurement of qualitative factor adjustments applied by management.
• Where applicable, we tested the accuracy and completeness of data used by management in the measurement of qualitative factor adjustments or vouched factors to relevant external data sources.
• We assessed changes in year-over-year qualitative factors against overall trends in credit quality within the Company and broader trends within the industry and local and national economies to evaluate reasonableness of management's qualitative factor adjustments.

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

Denver, Colorado

July 7, 2023

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