Company: MGNO
Filing Date: 2025-03-28
Form Type: 10-K
Source: 0000927089-25-000061
Chunk: 9

Company: Magnolia Bancorp, Inc.
Filing Date: 2025-03-28
Form: 10-K
Item: Item 1A
Chunk 9
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 and policyholders, which has also contributed to higher insurance premiums or exit from the market. The increased insurance premiums add to the debt burden of mortgage loan borrowers which has had an adverse effect on mortgage loan demand.

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We are subject to environmental liability risk associated with lending activities or properties we own.

A significant portion of our loan portfolio is secured by real estate, and we could become subject to environmental liabilities with respect to one or more of these properties, or with respect to properties that we own in operating our business. During the ordinary course of business, we may foreclose on and take title to properties securing defaulted loans and, in doing so, there is a risk that hazardous or toxic substances could be found on these properties. If hazardous conditions or toxic substances are found on these properties, we may be liable for remediation costs, as well as for personal injury and property damage, civil fines and criminal penalties regardless of when the hazardous conditions or toxic substances first affected any particular property. Environmental laws may require us to incur substantial expenses to address unknown liabilities and may materially reduce the affected property’s value or limit our ability to use or sell the affected property. In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental liability. Our policies, which require us to perform an environmental review before initiating any foreclosure action on non-residential real property, may not be sufficient to detect all potential environmental hazards. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on us.

Risks Related to Market Interest Rates

Prevailing high market interest rates have reduced our profits and asset values.

Net income is the amount by which net interest income and non-interest income exceed the sum of non-interest expense, income tax expense and the provision for credit losses. Net interest income makes up a substantial majority of our income and is based on the difference between:

      ● 
      the interest income we earn on interest-earning assets, such as loans, cash equivalents and interest-bearing deposits in other banks; and 

      ● 
      the interest expense we pay on interest-bearing liabilities, such as deposits and borrowings. 

Like many savings institutions, our interest-bearing liabilities generally have shorter contractual maturities than our interest-earning assets, a substantial portion of which are fixed-rate loans. In addition, the rates we pay on our certificates of deposit and FHLB advances are generally fixed for only a relatively short contractual period of time. This imbalance can create significant earnings volatility because