An investment in our securities involves risks, including those summarized below. For a more complete discussion of the material risks facing our business, see “Item 1A. Risk Factors.”
Risks Related to Bancorp 34 and its Business
Economic and Geographic-Related Risks
| · | Our business may be adversely affected by economic and market conditions, including inflation. |
| · | The Federal Reserve’s implementation of significant economic strategies that have affected interest rates, inflation, asset values and the yield curve may have a significant negative effect on our business and clients. |
Lending and Interest Rate Risk
| · | If we fail to effectively manage credit risk, our business and financial condition will suffer. |
| · | Our estimated allowance for credit losses may be insufficient to absorb actual losses in our loan portfolio, which may adversely affect our business, financial condition and results of operations. |
| · | We are exposed to higher credit risk by commercial real estate, commercial business, and construction lending. |
| · | A significant portion of our loan portfolio is secured by real estate, and events that negatively impact the real estate market could hurt our business. |
| · | Nonperforming assets take significant time and resources to resolve and adversely affect our results of operations and financial condition. |
| · | We are subject to interest rate risk, which could adversely affect our financial condition and profitability. |
| · | Rapidly rising interest rates may negatively affect our investments in securities and the cost of our funding sources, including deposits. |
| · | A flat or inverted yield curve may reduce the net interest margin and adversely affect our loan and investment portfolios. |
| · | We are subject to environmental liability risk associated with our lending activities. |
Operational Risks
| · | We are subject to losses due to errors, omissions or fraudulent behavior by our employees, clients or others. |
| · | We are exposed to the possibility of technology failure and a disruption in our operations may adversely affect us. |
| · | Fraud is a major, and increasing, operational risk for us and all banks. |
| · | A failure in, or breach of, our operational or security systems or infrastructure, or those of our third party vendors, including as a result of cyber-attacks, could disrupt our businesses, damage our reputation, and cause losses. |
| · | Our risk management framework may not be effective in mitigating risks or losses. |
| · | Our ability to maintain our reputation is critical to the success of our business. |
| · | Failure to complete our proposed merger with CBOA could negatively impact us. |
| · | Regulatory approvals for our proposed merger with CBOA may not be maintained, may take longer than expected or may impose conditions that are not presently anticipated, cannot be met, or that could have an adverse effect on the combined company following the merger. |
| · | Combining the Company and CBOA may be more difficult, costly or time consuming than expected and we may fail to realize the anticipated benefits and cost savings of the merger. |
| · | Interest rate volatility may adversely impact the fair value adjustments of investments and loans acquired in our proposed merger with CBOA. |
| · | Shareholder litigation could prevent or delay the completion of our proposed merger with CBOA or otherwise negatively impact our business, financial condition and results of operations. |
| · | We depend on our executive officers and other key employees, and our ability to attract additional key personnel, and we could be harmed by the unexpected loss of their services. |
| · | Failure to keep pace with technological change could adversely affect our business. |
Industry-Related Risks
| · | We are exposed to the possibility that more prepayments may be made by customers to pay down loan balances, which could reduce our interest income and negatively impact our operating results. |
| · | We could experience a loss due to competition with other banks or because consumers decide not to use banks. |
| · | Failure to keep pace with technological change could result in losses. |
| · | Our industry is subject to technology-driven disruption. |
| · | We may be adversely affected by the lack of soundness of other financial institutions. |
| · | The value of securities in our investment portfolio may decline in the future. |
Capital and Liquidity Risks
| · | We may need additional capital resources in the future, which may not be available when needed or at all. |
| · | Liquidity, primarily through deposits, is essential to our business model, and a lack of liquidity or an increase in the cost of liquidity could materially impair our ability to fund our operations. |
| · | We may not be able to maintain a strong core deposit base or access other low-cost funding sources. |
| · | Deposit levels may be affected, fairly quickly, by changes in monetary policy. |
Risks Related to Strategic Plans
| · | Future mergers and acquisitions may subject us to risks, which could disrupt our business and dilute stockholder value. |
| · | We may be unable to grow our business organically, which could adversely affect our business. |
| · | New lines of business or new products and services may subject us to additional risk. |
Legal, Accounting, Regulatory and Compliance Risks
| · | The banking industry is heavily regulated and that regulation, together with any future legislation or regulatory changes, could limit or restrict our activities and adversely affect our operations or financial results. |
| · | Failure to maintain regulatory capital ratios could result in regulatory actions. |
| · | We face risks related to compliance with the Bank Secrecy Act and other anti-money laundering statutes and regulations. |
| · | Consumer lending laws restrict our ability to originate certain mortgage loans and increase our risk on such loans. |
| · | We are subject to fair lending laws, and failure to comply with these laws could lead to material penalties. |
| · | The Federal Reserve may require us to commit capital resources to support Bank 34. |
| · | We are subject to claims and litigation, which could result in additional expenses and reputational damage. |
| · | The expanding body of federal, state and local regulations may increase the cost of compliance and the risk of noncompliance regarding servicing and selling loans. |
| · | We could be subject to changes in tax laws, regulations and interpretations or challenges to our income tax provision. |
Risks Related to Bancorp 34 Common Stock
| · | Some provisions of our organizational documents may have anti-takeover effects that could discourage an acquisition. |
| · | We are a “smaller reporting company,” and the reduced reporting requirements applicable to Bancorp 34 may make our common stock less attractive to investors. |
| · | Substantial future sales of our common stock could cause our stock price to decline. |
| · | As a reporting issuer under Section 15(d) of the Exchange Act, we file more limited reports with the SEC than other companies registered under Section 12 of the Exchange Act. |
| · | Our articles of incorporation include a forum selection clause. |
PART I
