Company: BCTF
Filing Date: 2025-03-06
Form Type: 10-K
Source: 0001552781-25-000058
Chunk: 243

Company: Bancorp 34, Inc.
Filing Date: 2025-03-06
Form: 10-K
Item: Item 1A
Chunk 243
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 results of operations and financial condition. Other risks associated
with our commercial real estate loan portfolio and nonperforming assets are further discussed in these Risk Factors under the Caption, Lending
and Interest Rate Risk.

Nonperforming
assets take significant time and resources to resolve and adversely affect our results of operations and financial condition.

At December 31, 2024,
we had a total of approximately $4.7 million of nonperforming assets or approximately 0.51% of total assets. Our nonperforming assets
adversely affect our operating results in various ways. We do not record interest income on nonaccrual loans or other real estate owned,
thereby adversely affecting our operating results and returns on assets and equity, increasing our loan administration costs and adversely
affecting our efficiency ratio. When we take collateral in foreclosures and similar proceedings, we are required to mark the related
asset to the then fair market value of the collateral, which may ultimately result in a loss. An increase in the level of nonperforming
assets increases our risk profile and may impact the capital levels regulators believe are appropriate in light of the ensuing risk profile.
In addition, the resolution of nonperforming assets requires significant commitments of time from management, which may materially and
adversely impact their ability to perform their other responsibilities. If we experience increases in nonperforming loans and nonperforming
assets, our net interest income may be negatively impacted and our loan administration costs could increase, each of which could have
an adverse effect on our operating results and related ratios, such as return on assets and equity.

New
accounting standards such as ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) (CECL) could require us to increase
our allowance for credit losses and may have a material adverse effect on our financial condition and results of operations.

The measure of our allowance
for credit losses has been impacted by the adoption and interpretation of accounting standards. The Financial Accounting Standards Board,
or FASB, has issued a new credit impairment model, the Current Expected Credit Loss, or CECL model, which became applicable to us in
2023. Under the CECL model, we are required to present certain financial assets carried at amortized cost, such as loans held for investment,
unused commitments, and held-to-maturity debt securities, at the net amount expected to be collected. The measurement of expected credit
losses is based on information about past events, including