Company: BCTF
Filing Date: 2025-03-06
Form Type: 10-K
Source: 0001552781-25-000058
Chunk: 284

Company: Bancorp 34, Inc.
Filing Date: 2025-03-06
Form: 10-K
Item: Item 1A
Chunk 284
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in a timely manner when a loan is placed on non-accrual status, in which any accrued interest, not received in cash, is reversed from
interest income.

The ACL also excludes
loans held-for-sale and loans accounted for under the fair value option. Assets purchased with credit deterioration (“PCD”)
represent assets that are acquired with evidence of more than insignificant credit quality deterioration since origination at the acquisition
date. At acquisition, the allowance for credit losses on PCD assets is recorded directly to the ACL. Any subsequent changes in the ACL
on PCD assets are recorded through the provision for credit losses.

The ACL is a contra-asset
on our balance sheet that is deducted from the amortized cost of loans held-for-investment to present on our balance sheet the net amount
expected to be collected. Loans are charged off against the ACL when management believes the full or partial non-collectability is confirmed.

ACL
– Unfunded commitments

We estimate expected
credit losses on unfunded commitments over the contractual period in which we are exposed to credit risk via our contractual obligations
to extend credit unless such obligations are unconditionally cancellable by us. The probability of funding such commitments in the future
is based on historical utilization statistics for unfunded commitments. The credit loss rates used are calculated using the same assumptions
as the associated funded balance.

The ACL on unfunded
commitments is categorized in other liabilities on our balance sheet and, from time to time, is adjusted as a provision for credit loss
expense.

59

ACL
– Held-to-maturity debt securities

Management measures
expected credit losses on held-to-maturity debt securities on a collective basis by major security type. Our held-to-maturity debt securities
is comprised of bank subordinated debt. The ACL on held-to-maturity debt securities is adjusted through provision for credit losses and
is recorded as a contra asset to held-to-maturity debt securities. Management has determined that calculating an ACL amount for accrued
interest receivable on held-to-maturity debt securities would not be significant, and this is excluded from our estimate of credit losses
for held-to-maturity debt securities.

Upon our January
1, 2023, CECL adoption, we recorded an increase to the ACL on loans held-for-investment of $604,000, established an ACL on unfunded commitments
of $165,000, established an ACL on held-to-maturity investments of $38,000, recorded an increase to deferred tax assets of $153,