Company: BCTF
Filing Date: 2025-03-06
Form Type: 10-K
Source: 0001552781-25-000058
Chunk: 942

Company: Bancorp 34, Inc.
Filing Date: 2025-03-06
Form: 10-K
Item: Item 3
Chunk 942
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 strategies and other factors.

The ALCO’s objective
is to operate in compliance with the board of directors’ approved policies and procedures. Limits are established by policy around
point in time liquidity metrics which include, but are not limited to, on-hand liquidity, non-core funding dependency, and loan-to-deposit
ratios. Limits are also established around various funding sources which include, but are not limited to, brokered deposits, deposits
gathered through on-line resources, and borrowings. Regarding interest rate risk, limits have been instituted around 12- and 24-month
earnings simulation modeling as well as economic value of equity modeling. No material changes to policy limits have been made in response
to current market conditions or developments.

Due to the possibility
of rapid changes within the credit and interest rate markets, the ALCO must have the flexibility to make prudent decisions which may
temporarily deviate from the approved policy and risk limits to enhance profitability or minimize risk. Our policy thus permits ALCO
management to implement exceptions to policy; however, any exception to policy must have the prior approval of the Chief Executive Officer
and one other ALCO member. All exceptions must be documented in the ALCO minutes and reported to the board of directors at the next scheduled
meeting. In 2024, no policy exception strategies have been implemented that deviate from the risk limits outlined in the ALCO related
policies and procedures.

To assess and manage
interest rate risk, sensitivity analysis is used to determine the impact on earnings and the net market value of the balance sheet across
various interest rate scenarios, balance sheet trends, and strategies.

Management uses a simulation
model to analyze the sensitivity of net interest income to changes in interest rates across various interest rate scenarios, which seeks
to demonstrate the level of interest rate risk inherent in the balance sheet. The analysis holds the current balance sheet values constant
and does not take into account management intervention. In addition, we assume certain correlation rates, often referred to as a “deposit
beta,” for interest-bearing deposits, wherein the rates paid to customers change relative to changes in benchmark interest rates.
The effect on the bank’s net interest income over a 12-month time horizon and economic value of equity due to hypothetical changes
in market interest rates is presented in the table below. In this interest rate shock simulation, as of the periods presented, interest
rates have been adjusted by instantaneous parallel changes rather than in a ramp simulation, which applies interest rate changes over
time. All rates