Company: MGNO
Filing Date: 2025-03-28
Form Type: 10-K
Source: 0000927089-25-000061
Chunk: 8

Company: Magnolia Bancorp, Inc.
Filing Date: 2025-03-28
Form: 10-K
Item: Item 1A
Chunk 8
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 allowance for credit losses, we review our loans and estimate lifetime credit losses in loans as of the balance sheet date using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. If our assumptions or the results of our analyses are incorrect, our allowance for credit losses may not be sufficient to cover losses inherent in our loan portfolio, resulting in additions to our allowance. In addition, our emphasis on loan growth and on modestly increasing our portfolio of commercial real estate and multi-family residential loans, as well as any future credit deterioration, could require us to increase our allowance for credit losses in the future. Material additions to our allowance for credit losses would materially decrease our net income.

Effective January 1, 2023, the Current Expected Credit Loss, referred to as “CECL” throughout this prospectus, accounting standard became effective for Mutual Savings and other financial institutions. CECL requires financial institutions to determine periodic estimates of lifetime expected credit losses on loans and recognize the expected credit losses as allowances for credit losses. CECL required us to change the prior method of providing allowances for credit losses that are incurred or probable, which required us to increase the types of data we need to collect and review to determine the appropriate level of the allowance for credit losses. Using loan data as of December 31, 2022, no transition adjustment was recorded related to loans or unfunded commitments upon adoption due to immateriality.

In addition, bank regulators periodically review our allowance for credit losses and, as a result of such reviews, we may decide to increase our provision for credit losses or recognize additional loan charge-offs. Any increase in our allowance for credit losses or loan charge-offs as a result of such review or otherwise may have a material adverse effect on our financial condition and results of operations.

The high cost of property and flood insurance in our market area has had an adverse effect on mortgage loan demand in our market area.

A monthly mortgage loan payment typically includes principal repayment, interest payment, insurance payments and tax payments. In addition to general inflationary pressure on insurance premiums, recent hurricanes and other adverse weather conditions have significantly increased premiums on property and flood insurance and have also caused some insurers to exit the market and cease insuring properties in our market area. In addition, some insurers now require higher deductibles for damage caused by wind, hurricanes or floods, including deductibles of 5% of the value of the property. Some insurers have also perceived our market area to be a highly litigious environment between insurers