Company: MGNO
Filing Date: 2025-03-28
Form Type: 10-K
Source: 0000927089-25-000061
Chunk: 5

Company: Magnolia Bancorp, Inc.
Filing Date: 2025-03-28
Form: 10-K
Item: Item 1A
Chunk 5
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 stock ownership plan and for our new stock-based benefit plans, assuming such plans had been implemented at the beginning of the year, is estimated to be approximately $133,000 ($105,000 after-tax based on an effective tax rate of 21% and assuming that 20% of stock options are non-qualified stock options which are tax deductible), assuming the $10.00 per share purchase price as fair market value. Actual expenses, however, may be higher or lower, depending on the price of our common stock.

Risks Related to Our Lending  Activities

Our concentration of residential mortgage loans exposes us to increased lending risks.

As of December 31, 2024, one- to four-family residential mortgage loans totaled $28.3 million or 92.3% of our total loan portfolio. We intend to continue to make one- to four-family residential mortgage loans. One- to four-family residential mortgage lending is generally sensitive to regional and local economic conditions that significantly impact the ability of borrowers to meet their loan payment obligations, making loss levels difficult to predict. Declines in real estate values could cause some of our residential mortgages to be inadequately collateralized, which would expose us to a greater risk of loss if we seek to recover on defaulted loans by selling the real estate collateral.

Our residential construction loans involve credit risks that could adversely affect our financial condition and results of operations.

We originate residential construction loans, which accounted for 24.7% of total loan originations in 2024 compared to 62.2% of total loan originations in 2023 and 38.9% of total loan originations in 2022. When we originate residential construction loans, we typically provide scheduled disbursements as different construction phases are completed, with the construction loan to convert to a single-family residential loan upon completion of the construction. At December 31, 2024, no residential construction loans were outstanding, as construction was completed and the loans had converted to a single-family residential loan. We expect the origination of residential construction loans will continue to account for a significant portion of our total loan originations.

Construction lending involves additional risks when compared with permanent finance lending because funds are advanced upon the security of the project, which is of uncertain value before its completion. Because of the uncertainties inherent in estimating construction costs, as well as the market value of the completed project, it is relatively difficult to accurately evaluate the total funds required to complete a project and the related loan-to-value ratio. Residential construction loans can experience