Company: BCTF
Filing Date: 2025-03-06
Form Type: 10-K
Source: 0001552781-25-000058
Chunk: 45

Company: Bancorp 34, Inc.
Filing Date: 2025-03-06
Form: 10-K
Item: Item 1
Chunk 45
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We
are subject to interest rate risk, which could adversely affect our financial condition and profitability.

The majority of our
banking assets are subject to changes in interest rates. For example, as of December 31, 2024, 42.3% of our loan portfolio, including
loan level derivative instruments, consisted of floating or adjustable interest rate loans. Like most financial institutions, our earnings
significantly depend on our net interest income, the principal component of our operating results, which is the difference between interest
earned by us from our interest-earning assets, such as loans and investment securities, and interest paid by us on our interest-bearing
liabilities, such as deposits and borrowings. We expect that we will periodically experience “gaps” in the interest rate
sensitivities of our assets and liabilities, meaning that either our interest-bearing liabilities will be more sensitive to changes in
market interest rates than our interest-earning assets, or vice versa. In either event, if market interest rates should move contrary
to our position, this “gap” will negatively impact our earnings. Many factors beyond our control impact interest rates, including
economic conditions, governmental monetary policies, inflation, recession, changes in unemployment, the money supply, and disorder and
instability in domestic and foreign financial markets. Changes in monetary policies of the various government agencies could influence
not only the interest we receive on loans and securities and the interest we pay on deposits and borrowings, but such changes could also
affect our ability to originate loans and obtain deposits, the fair value of our financial assets and liabilities, and the average duration
of our assets and liabilities.

In addition, changes
in monetary policy, including changes in interest rates, will influence the origination of loans, the prepayment 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