Company: BCTF
Filing Date: 2025-03-06
Form Type: 10-K
Source: 0001552781-25-000058
Chunk: 241

Company: Bancorp 34, Inc.
Filing Date: 2025-03-06
Form: 10-K
Item: Item 1A
Chunk 241
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 the borrowers’ ability to repay the loans from the cash flow of their businesses, which may
be unpredictable, and the collateral securing these loans may fluctuate in value. Although commercial and industrial business loans are
often collateralized by equipment, inventory, accounts receivable, or other business assets, the liquidation of collateral in the event
of default is often an insufficient source of repayment because, for instance, accounts receivable may be uncollectible and inventories
may be obsolete or of limited use. In addition, business assets may depreciate over time, may be difficult to appraise, and may fluctuate
in value based on the success of the business. Accordingly, the repayment of commercial business loans depends primarily on the cash
flow and credit worthiness of the borrower and secondarily on the underlying collateral value provided by the borrower and liquidity
of the guarantor.

Risk of loss on a construction
and land development loan depends largely upon whether our initial estimate of the property’s value at completion of construction
exceeds the cost of the property construction (including interest) and the availability of permanent take-out financing. During the construction
phase, a number of factors can result in delays and cost overruns. If estimates of value are inaccurate or if actual construction costs
exceed estimates, the value of the property securing the loan may be insufficient to ensure full repayment when completed through a permanent
loan or by seizure of collateral.

Commercial real estate,
commercial business, and construction loans are more susceptible to a risk of loss during a downturn in the business cycle. Our underwriting,
review, and monitoring cannot eliminate all of the risks related to these loans.

As of December 31, 2024,
our commercial real estate loans (owner and non-owner occupied) were equal to 367.2% of the bank’s total risk-based capital. The
banking regulators give commercial real estate lending greater scrutiny, and may require banks with higher levels of commercial real
estate loans to implement enhanced underwriting, internal controls, risk management policies and portfolio stress testing, as well as
possibly higher levels of allowances for credit losses and capital levels as a result of commercial real estate lending growth and exposures.

A
significant portion of our loan portfolio is secured by real estate, and events that negatively impact the real estate market could hurt
our business.

A significant portion
of our loans are secured by real estate. As of December 31, 2024, approximately 83.7% of such loans had real estate as primary
coll