Company: BCTF
Filing Date: 2025-03-06
Form Type: 10-K
Source: 0001552781-25-000058
Chunk: 262

Company: Bancorp 34, Inc.
Filing Date: 2025-03-06
Form: 10-K
Item: Item 1A
Chunk 262
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, to obtain third party financing on favorable
terms, or to have access to interbank or other liquidity sources, we may not be able to grow our assets. We compete with banks and other
financial services companies for deposits. If our competitors raise the rates they pay on deposits in response to interest rate changes
initiated by the Federal Reserve or for other reasons of their choice, our funding costs may increase, either because we raise our rates
to retain deposits or because of deposit outflows that require us to rely on more expensive sources of funding. In addition, we could
experience deposit outflows as a result of depositors seeking to maximize deposit insurance by limiting their deposits at a single financial
institution to the maximum federal deposit insurance level. Inflation and higher interest rates, along with monetary events, can cause
some of our business customers who have greater operating cash needs to reduce their deposit balances with us. Higher funding costs could
reduce our net interest margin and net interest income. Any decline in available funding could adversely affect our ability to continue
to implement our business strategy which could have a material adverse effect on our liquidity, business, financial condition and results
of operations.

Deposits
traditionally have provided our most affordable funds and by far the largest portion of funding. However, deposit trends can shift with
economic conditions.

If interest rates fall,
deposit levels in our Bank might fall, perhaps fairly quickly if a tipping point is reached, as depositors become more comfortable with
risk and seek higher returns in other vehicles. Further, if interest rates remain high, our competitors, which include other banks and
non-banks, may raise interest rates for deposits materially and our depositors may move their funds to other institutions, a process
which has become easier with advances in technology and operations. These circumstances could result in material changes in deposit levels
over relatively short time periods, and they could pressure us to raise interest we pay on our deposits, which could shrink our net interest
margin if loan rates do not rise correspondingly.

The extremely low interest
rate environment in recent years ended in 2022. Contrary to the expectations outlined in the paragraph above, deposit levels prior to
2022 climbed, possibly buoyed by the severe volatility experienced by the stock markets in 2018-2020 coupled with Federal pandemic assistance,
particularly direct cash payments to most citizens, in 2020 and 2021. Significant market volatility resumed in 2022 and 2023, and we
have generally raised deposit interest rates