Company: BCTF
Filing Date: 2025-03-06
Form Type: 10-K
Source: 0001552781-25-000058
Chunk: 38

Company: Bancorp 34, Inc.
Filing Date: 2025-03-06
Form: 10-K
Item: Item 1
Chunk 38
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 bank asset values, funding costs, and liquidity resources;
significantly raised recessionary expectations for the U.S.; and inverted the yield curve through the second quarter of 2023. The Federal
Reserve slowed the rate of increases in 2023 and began lower rates in late 2024.

30

Despite the recent cuts
in interest rates, rates remain higher than they have been in the recent past and these increases in interest rates accordingly may have
significant and adverse effects upon our business as well as the business of many of our customers. For example, the raising of short-term
interest rates: (i) increases our cost of funds due largely to overall increases in the cost of our deposits which may decrease our net
interest margin; (ii) increases the cost of our other funding sources such as borrowings from the Federal Home Loan Bank, which we utilize
for liquidity, may further decrease our net interest margins; (iii) may cause a further decline in the value of our investment portfolio
which could result in unrealized or realized losses if the investments are sold; (iv) may cause a decline in the demand for our products
if borrowers are no longer able to afford our loans or if our competitors offer more attractive rates for loans or deposits; and (v)
may cause an increase in the number of customers who default on their loans or obligations to us as they may not be able to fund higher
loan payments on floating interest rate loans or have the ability to refinance maturing loans at higher interest rates. Risks associated
with interest rates and the yield curve and their potential effects on financial institutions are further discussed in these Risk Factors
under the Caption Lending and Interest Rate Risks.

Federal
Reserve strategies can, and often are intended to, affect the domestic money supply, inflation, interest rates, and the shape of the
yield curve.

Effects on the yield
curve often are most pronounced at the short end of the curve, which is of particular importance to us and other banks. Among other things,
easing strategies are intended to lower interest rates, expand the money supply, and stimulate economic activity, while tightening strategies
are intended to increase interest rates, discourage borrowing, tighten the money supply, and restrain economic activity. However, as
noted above, in 2022 short term rates rose faster than long term rates to the point that the yield curve inverted for much of the final
two quarters of the year. This sort of phenomenon—where short term rates are raised more strongly and rapidly