Company: MGNO
Filing Date: 2025-03-28
Form Type: 10-K
Source: 0000927089-25-000061
Chunk: 12

Company: Magnolia Bancorp, Inc.
Filing Date: 2025-03-28
Form: 10-K
Item: Item 1A
Chunk 12
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 will be worth less in the future as inflation decreases the value of money. Inflation rose sharply at the end of 2021 and remained at an elevated level throughout 2022 and 2023 and was still above the Federal Reserve Board’s target rate of 2% throughout 2024. During 2022 and 2023, the Federal Reserve Board raised certain benchmark interest rates to combat inflation. As interest rates increase, the value of our fixed-rate mortgage loans, particularly those with longer maturities, decreases, as does the demand for new fixed-rate mortgage loans. Inflation also increases the cost of goods and services we use in our business operations, such as electricity and other utilities, which increases our noninterest expenses. In addition, our loan customers are affected by inflation through the rising costs of goods and services used in their households and businesses, which could have an adverse effect on their ability to make timely payments on their loans.

Furthermore, inflation and higher interest rates have had a negative effect on the demand for mortgage loans, including construction loans, in our market area. Inflation has led to a rising market interest rate environment and higher loan interest rates, making mortgage loan debt more expensive and thereby depressing loan demand. The current market interest rate environment has also depressed the market for existing home sales because homeowners are reluctant to forego their lower interest rate mortgage loans upon a sale and having to obtain a higher rate mortgage loan to finance a new home purchase. Inflation has also increased building construction costs, which has had a negative effect on demand for construction loans.

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We have a high concentration of loans secured by real estate in our market area. Adverse economic conditions, both generally and in our market area, could adversely affect our financial condition and results of operations.

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 have relatively few one- to four-family residential mortgage loans secured by real estate outside of our market area.

Consequently, we have a greater risk of loan defaults and losses in the event of a further economic downturn in our market area, as adverse economic conditions may have an adverse effect on the ability of our borrowers to make timely payments of their loans. A return of recessionary conditions and/or negative developments in the economy may significantly affect the markets in which we do business, the value of our loans, the collateral securing our loans, and our ongoing operations, costs and profitability.