Company: BCTF
Filing Date: 2025-03-06
Form Type: 10-K
Source: 0001552781-25-000058
Chunk: 960

Company: Bancorp 34, Inc.
Filing Date: 2025-03-06
Form: 10-K
Item: Item 3
Chunk 960
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 The
Company uses a 12-month forecast that is reasonable and supportable within the ACL calculation and then reverts to historical credit
loss experience on a straight-line basis over a one-year timeline. Historical loss experience is then used for the remaining life of
the assets. The Company uses several economic variables in the calculation of the ACL, the most significant of which is the economic
forecast for the national unemployment rate. Changes in the economic forecast for unemployment rates could significantly affect the estimated
credit losses which could potentially lead to materially different allowance levels from one reporting period to the next.

Loans that do not share risk
characteristics are evaluated on an individual basis. Loans evaluated individually are not included in the pooled loan evaluation. When
management determines that foreclosure is probable, expected credit losses are based on the fair value of the collateral at the reporting
date, adjusted for selling costs as appropriate.

Qualitative adjustments to
historical loss data are made based on management’s assessment of the risks that may lead to a future loan loss or differences
in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, changes in environmental
and economic conditions, or other relevant factors.

The allowance is increased
by a provision for credit losses, which is charged to expense and reduced by charge-offs, net of recoveries.

Acquired
Loans – At
the purchase or acquisition date, loans are recorded at their fair value. The fair value of acquired loans was based on a discounted
cash flow methodology that involves assumptions about credit risk, repayments, and discount rates. Further, loans are evaluated to
determine whether there has been more than insignificant credit deterioration since origination. Loans that have experienced more than
insignificant credit deterioration since origination are referred to as purchase credit deteriorated (PCD) loans. In its evaluation of
whether a loan has experienced more than insignificant deterioration in credit quality since origination, the Company takes into consideration
loan grades, payment performance, past due status, and nonaccrual status. The Company also considered the results of an independent external
credit review completed during the due diligence phase to identify other loans that have experienced deterioration. At the purchase or
acquisition date, the amortized cost basis of PCD loans is equal to the purchase price and an initial estimate of credit losses. The
initial recognition of expected credit losses on PCD loans is reflected as a “Day 2” on-balance sheet gross-up to the allowance
for credit losses and as an increase