Company: BCTF
Filing Date: 2025-03-06
Form Type: 10-K
Source: 0001552781-25-000058
Chunk: 9

Company: Bancorp 34, Inc.
Filing Date: 2025-03-06
Form: 10-K
Item: Item 1
Chunk 9
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 contained in the loan policy. Any exceptions to the loan policy are disclosed in credit monitoring
reports.

Ongoing
Credit Risk Management. In addition to the tailored underwriting process described above, we
perform ongoing risk monitoring and review processes for credit exposures. Although we grade and classify our loans internally, we engage
an independent third-party professional firm to perform regular loan reviews and confirm loan classifications. We strive to identify
potential problem loans early in an effort to aggressively seek resolution of these situations before they create a loss. We record any
necessary charge-offs promptly and maintain appropriate allowances for credit losses to absorb expected charge-offs.

In general, whenever
a particular loan or overall borrower relationship is downgraded from a pass grade to a watch or substandard grade based on one or more
standard loan grading factors, our relationship manager (who is typically the loan officer) and credit team members engage in active
evaluation of the asset to determine the appropriate resolution strategy. Management regularly reviews the status of the watch list and
classified assets portfolio as well as the larger credits in the portfolio.

Concentrations
of Credit Risk. Diversification of risk is a key factor in prudent asset management. While the
loan portfolio is concentrated in real estate, management monitors the diversification within the commercial real estate portfolio closely
and no segments exceed 12.3% of the loan portfolio. Concentration risk is actively monitored by management and reviewed by our board
of directors, and exposures relating to borrower, industry and commercial real estate categories are tracked and measured against established
policy limits and guidelines.

Lending
Limits. Our lending activities are subject to a variety of lending limits imposed by federal
law. In general, a bank is subject to a legal lending limit on loans to a single borrower of 15% of the bank’s capital and unimpaired
surplus, or 25% if the loan is fully secured. The dollar amounts of the Bank’s lending limit increases or decreases as capital
increases or decreases. We are able to sell participations in its larger loans to other financial institutions, which allows us to better
manage the risk and exposure involved with larger loans and to meet the lending needs of our customers requiring extensions of credit
in excess of regulatory limits.

The Bank’s legal
lending limit as of December 31, 2024, on loans to a single borrower was $17.0 million (15%), and $28.3 million (25%), for fully secured
loans.

11

Human
Capital Resources