Company: BCTF
Filing Date: 2025-03-06
Form Type: 10-K
Source: 0001552781-25-000058
Chunk: 806

Company: Bancorp 34, Inc.
Filing Date: 2025-03-06
Form: 10-K
Item: Item 2
Chunk 806
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 residential properties
that generally do not qualify for secondary market sale.

Consumer
loans. Our consumer loans include direct personal loans and automobile loans. Personal
loans are generally unsecured or secured by cash held at the bank.

The ACL for pooled loans is estimated
using a non-discounted cash flow methodology. The bank then applies probability of default and loss given default to the cash flow methodology
to calculate expected losses within the model. This allows the bank to identify the timing of default as compared to when the actual
loss event may occur. The results are then aggregated to produce segment level results and reserve requirements for each segment. 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