Company: BCTF
Filing Date: 2025-03-06
Form Type: 10-K
Source: 0001552781-25-000058
Chunk: 240

Company: Bancorp 34, Inc.
Filing Date: 2025-03-06
Form: 10-K
Item: Item 1A
Chunk 240
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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.

Commercial real estate,
commercial business and construction lending usually involves higher credit risks than that of single-family residential lending. At
December 31, 2024, the following loan types accounted for the stated percentages of our total loan portfolio: commercial real estate
(owner and non-owner occupied) 60.7%, commercial and industrial business 16.3%, and construction and land development lending 3.9%. These
types of loans involve larger loan balances to a single borrower or groups of related borrowers.

Commercial 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.

32

Commercial and industrial
business loans are typically based on