Company: BCTF
Filing Date: 2025-03-06
Form Type: 10-K
Source: 0001552781-25-000058
Chunk: 43

Company: Bancorp 34, Inc.
Filing Date: 2025-03-06
Form: 10-K
Item: Item 1
Chunk 43
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 adversely affect our results of operations and financial condition.

To diversify the geographic
scope of our commercial real estate loan portfolio, a portion of our commercial real estate and construction loan portfolios is secured
by real estate outside of our market areas. At December 31, 2024, approximately 83.7% of our commercial real estate and construction
loan portfolios were collateralized with out of market real estate. As of September 30, 2023, we experienced a deterioration of a large
out of market commercial real estate loan which resulted in this loan becoming nonperforming as of September 30, 2023. As of December
31, 2023, a $3.3 million loss was recognized, and the remaining $3 million balance was transferred to other real estate owned. The note
associated with the loan was sold for $2.6 million and an additional $0.4 million loss was taken in the first quarter of 2024.

33

Due to this event, management
engaged an external third-party to complete a loan review in the fourth quarter of 2023. This loan review included a review of approximately
90% of our out of market collateral loan portfolio. In addition, management conducted a review of the largest out of market credits,
which included a review of the real estate appraisals for the out of market collateral real estate securing these credits. While the
external third-party and management reviews did not indicate significant deterioration in our out of market collateral loan portfolio,
we may experience material deteriorations with other existing real estate loans, including real estate loans in our out of market commercial
real estate loan portfolio. In addition, management plans to limit out of market lending in the future.

Future deterioration
in our commercial real estate loan portfolio could adversely affect our 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