Company: BCTF
Filing Date: 2025-03-06
Form Type: 10-K
Source: 0001552781-25-000058
Chunk: 945

Company: Bancorp 34, Inc.
Filing Date: 2025-03-06
Form: 10-K
Item: Item 3
Chunk 945
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 examining, on a test basis, evidence regarding the amounts
and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a
reasonable basis for our opinion.

Critical
Audit Matters 

The
critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated
or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial
statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters
does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit
matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate. 

78

To
the Shareholders and Board of Directors

Bancorp
34, Inc.

Allowance
for Credit Losses -  Qualitative Adjustments - Refer to Notes 1 and 4 to the Financial Statements

Critical
Audit Matter Description

The
allowance for credit losses for loans consists of a collectively evaluated and an individually evaluated reserve, as described in Notes
1 and 4 to the consolidated financial statements. The collectively evaluated reserve has both quantitative and qualitative components.
The Company estimates the quantitative allowance for credit losses using relevant available information, from internal and external sources,
related to past events, current conditions, and reasonable and supportable forecasts. This quantitative component is then adjusted for
qualitative risk factors that involve significant assumptions and a high degree of management’s judgment. The qualitative risk
factors included consideration of the following: Qualitative adjustments to historical loss data are made based on management’s
assessment of the risks that may lead to a future loan loss or differences in current loan-specific risk characteristics, such as differences
in underwriting standards, portfolio mix, changes in environmental and economic conditions, or other relevant factors. Given the significant
estimates and assumptions management makes to estimate qualitative adjustments within the allowance for credit losses for collectively
evaluated loans, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions required
a high degree of auditor judgment.

How
the Critical Audit Matter Was Addressed in the Audit

Our
primary audit procedures related to the qualitative adjustments to the collectively evaluated allowance for credit losses of loans included
the following