Item 2.05.
Costs Associated with Exit or Disposal Activities
On May 1, 2019, Bank 34, the wholly-owned subsidiary of Bancorp 34, Inc. (the "Company"), took steps to exit Bank 34's operations with respect to originating residential mortgage loans for sale into the secondary market ("Mortgage Banking"). Bank 34 believes that this transaction aligns with its strategic goal of reducing its reliance on an earnings stream that can be more cyclical and volatile, while increasing its reliance on the more stable earnings from its core commercial banking business. Bank 34 conducts Mortgage Banking operations through nine loan production offices and its four full-service banking centers. The Company has determined that these actions constitute a commitment to a plan of exit or disposal of certain long-lived assets (through sale or abandonment) and termination of employees in connection with exiting Mortgage Banking operations. Bank 34 will continue its traditional banking operations through its four full-service banking centers.
Another financial institution has offered employment to a majority of Bank 34's employees who are involved in Bank 34's Mortgage Banking operations. Bank 34 expects its exit from its Mortgage Banking operations to be substantially completed during the second quarter of 2019.
In connection with these actions, the Company expects to incur pre-tax charges between $100,000 to $150,000 for severance and related benefit costs, $400,000 to $550,000 for asset and technology-related charges, $50,000 to $500,000 for termination of real property leases and $50,000 for other charges. The amount of the charges for real property leases will depend on Bank 34's ability to sublease its Mortgage Banking offices. The total charges resulting from this plan are expected to be between $600,000 and $1.2 million, which will be recognized during the second quarter of 2019. The Company expects the plan will result in total cash payments in the range of $600,000 to $1.2 million, which are expected to be made during 2019. The Company expects that Bank 34 will remain "well capitalized" for regulatory capital purposes following completion of the exit activities.
Forward-Looking Statements
Certain statements in this Current Report on Form 8-K may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to a variety of matters, including, without limitation, statements regarding the anticipated timing and costs of Bank 34's
exiting Mortgage Banking operations
. These forward-looking statements are made on the basis of the current beliefs, expectations and assumptions of the management of the Company and are subject to significant risks and uncertainty. Investors are cautioned not to place undue reliance on any such forward-looking statements. All such forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update or revise these statements, whether as a result of new information, future events or otherwise, except as may be required by law. These forward-looking statements involve many risks and uncertainties that may cause actual results to differ materially from what may be expressed or implied in these forward-looking statements. For example, risks and uncertainties that could affect the forward-looking statements set forth in this Current Report on Form 8-K include: risks relating to the completion of the proposed transactions, including the risk that conditions to the completion of the employee transfer not being satisfied; any difficulties associated with requests or directions from governmental
authorities; unexpected costs, delays, charges or expenses; and factors generally affecting the business, operations, and financial condition of the Company and Bank 34.