Company: BCTF
Filing Date: 2025-03-06
Form Type: 10-K
Source: 0001552781-25-000058
Chunk: 245

Company: Bancorp 34, Inc.
Filing Date: 2025-03-06
Form: 10-K
Item: Item 1A
Chunk 245
---
 of loans, and the rates
received on loans.

In a declining interest
rate environment, there may be an increase in prepayments on loans as borrowers refinance their loans at lower rates. Interest rate increases
often result in larger payment requirements for our floating interest rate borrowers, which increases the potential for default. At the
same time, the marketability of the property securing a loan may be adversely affected by any reduced demand resulting from higher interest
rates. An increase (or decrease) in interest rates may also require us to increase (or decrease) the interest rates that we pay on our
deposits.

Changes in interest
rates also can affect the value of loans, securities and other assets. An increase in interest 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