Company: BCTF
Filing Date: 2025-03-06
Form Type: 10-K
Source: 0001552781-25-000058
Chunk: 456

Company: Bancorp 34, Inc.
Filing Date: 2025-03-06
Form: 10-K
Item: Item 1B
Chunk 456
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 the derivative contract. The amount of cash delivered
from one party to the other is determined based on the interaction of the notional amount of the contract with the underlying term. Derivatives
may also be implicit in certain contracts and commitments.

We recognize derivative
financial instruments in the consolidated financial statements at fair value regardless of the purpose or intent for holding the instrument.
We record derivative assets and derivative liabilities on the balance sheet within other assets and other liabilities, respectively.
Changes in fair values of derivative financial instruments are either recognized in income or shareholders’ equity as a component
of accumulated other comprehensive income or loss depending on whether the derivative financial instrument qualifies for hedge accounting
and, if so, whether it qualifies as a fair value hedge or cash flow hedge.

As part of our interest
rate risk management strategy to manage the Bank’s exposure to interest rate movements as a result of the Bank’s available-for-sale
fixed rate bond portfolio and in the third quarter of 2024, we entered into two pay-fixed/receive-floating interest rate swaps (the “Pay
Fixed Swap Agreements”) for a total notional amount of $30 million, both of which were designated as fair value hedges. The Pay
Fixed Swap Agreements involve the Bank’s receipt of variable-rate amounts from a counterparty in exchange for the Bank making fixed-rate
payments over the life of the derivative contracts without the exchange of the underlying notional amount. For all period presented,
there were no other derivatives.

67

The following items
are included on the December 31, 2024, consolidated balance sheet in connection with the Pay Fixed Swap Agreements: (i) $300,000 related
to a cash margin account included in cash and cash equivalents and (ii) mark-to-market values of $356,000 as an increase to prepaid
and other assets. During the year ended December 31, 2024, the interest rate swap contract provided $127,000 of income that was included
in interest income on the consolidated income statement. As of December 31, 2024, the amortized cost of the underlying available-for-sale
investments being hedged by the Pay Fixed Swap Agreements was $51.2 million.

Allowance
for Credit Losses – Held-to-Maturity Debt Securities 

 The
following table presents the activity in the allowance for credit losses on held-to-maturity debt securities, for the year ended December
31, 2024:

    December 31, 2024 (in 000s