Company: BCTF
Filing Date: 2025-03-06
Form Type: 10-K
Source: 0001552781-25-000058
Chunk: 63

Company: Bancorp 34, Inc.
Filing Date: 2025-03-06
Form: 10-K
Item: Item 1
Chunk 63
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 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 to attract and maintain clients. We are unsure whether or not deposit levels will rise appreciably
in 2025. In addition, recent economic events have highlighted the current market volatility related to deposits, and regulators are taking
action to strengthen public confidence in the banking system and protect depositors. We are unable to predict how current economic conditions
might affect our deposits and whether these regulatory actions will be successful.

45

Deposit
levels may be affected, fairly quickly, by changes in monetary policy.

The Federal Reserve
continues to signal its concerns with respect to inflation. Interest rates remained constant in the second half of 2023 with interest
rate decreases occurring in late 2024. Additional information concerning monetary policy changes appears