Company: BCTF
Filing Date: 2025-03-06
Form Type: 10-K
Source: 0001552781-25-000058
Chunk: 46

Company: Bancorp 34, Inc.
Filing Date: 2025-03-06
Form: 10-K
Item: Item 1
Chunk 46
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 rates that adversely affects the ability
of borrowers to pay the principal or interest on loans may lead to increases in nonperforming assets, charge-offs and delinquencies,
increases to the allowance for credit losses, and a reduction of income recognized, among others, which could have a material adverse
effect on our capital, results of operations and cash flows. Further, when we place a loan on non-accrual status, we reverse any accrued
but unpaid interest receivable, which decreases interest income. At the same time, we continue to have a cost to fund the loan, which
is reflected as interest expense, without any interest income to offset the associated funding expense. Thus, an increase in the amount
of nonperforming assets could have a material adverse impact on our net interest income.

Additionally, an increase
in interest rates may not increase our net interest income to the same extent we currently anticipate based on our modeling estimates
and the assumptions underlying such modeling. Our failure to benefit from an increased interest rate environment to the extent we currently
estimate, to the same extent as our competitors or at all could have a material adverse effect on our business, financial condition and
results of operations.

In response to the COVID-19
pandemic, the Federal Open Market Committee cut short-term interest rates to a record low range of 0% to 0.25%. Over
the course of 2022 and throughout 2023 these record low rates were reversed, with the Federal Reserve continuing to signal its concerns
with respect to inflation. The Federal Reserve began decreasing interest rates late in 2024.

35

Our
cost of funds may increase as a result of general economic conditions, interest rates and competitive pressures.

We have traditionally
obtained funds through local deposits and thus we have a base of lower cost transaction deposits. Generally, we believe local deposits
are less expensive and more stable source of funds than other borrowings because interest rates paid for local deposits are typically
lower than interest rates charged for borrowings from the Federal Reserve or from other institutional lenders and reflect a mix of transaction
and time deposits, whereas brokered deposits typically are higher cost time deposits. Further, economic conditions and rising interest
rates could result in a decrease in our transaction deposit account balances as customers seek to obtain maximum federal deposit insurance
coverage or to seek higher interest rates. Additionally, our costs of funds, operating results and liquidity are likely to be adversely
affected if, and to the extent, we have to rely upon