Company: BCTF
Filing Date: 2025-03-06
Form Type: 10-K
Source: 0001552781-25-000058
Chunk: 619

Company: Bancorp 34, Inc.
Filing Date: 2025-03-06
Form: 10-K
Item: Item 1C
Chunk 619
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 regarding the CBOA Merger, also see Note 2 in our consolidated financial statements included
in this Annual Report on Form 10-K.

69

Nonperforming
Assets

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. Southwest Heritage Bank held $3 million of OREO, represented by one out
of market commercial real estate property, at December 31, 2023, and no OREO at