Company: BCTF
Filing Date: 2025-03-06
Form Type: 10-K
Source: 0001552781-25-000058
Chunk: 534

Company: Bancorp 34, Inc.
Filing Date: 2025-03-06
Form: 10-K
Item: Item 1B
Chunk 534
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12 – DERIVATIVES AND HEDGING ACTIVITIES

The Company is exposed to certain risks
relating to its ongoing business operations. As such, from time to time, the Company will enter into interest rate derivatives as part
of its asset liability management strategy to help manage interest rate risk. Derivative instruments represent contracts between parties
that result in one party delivering cash to the other party based on a notional amount and an underlying term (such as a rate, security
price or price index) as specified in 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.

Derivative financial instruments in the
consolidated financial statements are recognized at fair value regardless of the purpose or intent for holding the instrument. Derivative
assets and derivative liabilities on the balance sheet are recorded within other assets and other liabilities, respectively. Changes
in the fair value of derivative financial instruments are either recognized in income or in 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 the Company’s interest
rate risk management strategy, two pay-fixed/receive-floating interest rate swaps (the “Pay Fixed Swap Agreements”) were
entered into on August 30, 2024, for a total notional amount of $30 million, both of which were designated as fair value hedges. The
Pay Fixed Swaps involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments
over the life of the derivative contracts without the exchange of the underlying notional amount. Each swap agreement was effective immediately
and each expire August 30, 2027.

The table below presents fair values of
derivative instruments as well as the classification within the consolidated balance sheets:

Schedule of Fair Value
of Derivative Instruments

    December 31, 2024 
    December 31, 2023
  
    (in thousands) 
    Balance Sheet 
Location 
    Fair Value  
    Balance Sheet 
Location 
    Fair Value 
  
    Derivatives designated as hedging instruments 

    Interest rate swap contracts 
    Prepaid and Other Assets 
    $356  
    Prepaid and Other Assets 
    $