UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
or
For the transition period from to
Commission File Number:
| Magnolia Bancorp, Inc. |
| (Exact name of registrant as specified in its charter) |
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
(Zip Code) |
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(Registrant’s telephone number, including area code) |
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N/A |
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(Former name, former address and former fiscal year, if changed since last report) Securities registered pursuant to Section 12(b) of the Act: |
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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Large accelerated filer ☐ |
Accelerated filer ☐ |
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Smaller reporting company
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Emerging growth company
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Number of shares of common stock outstanding as of August 12, 2025:
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Index |
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Part I. - Financial Information |
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Item 1. |
Financial Statements (Unaudited) |
Page # |
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Consolidated Statements of Financial Condition |
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Consolidated Statements of Operations |
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Consolidated Statements of Changes in Stockholders' Equity |
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Consolidated Statements of Cash Flows |
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Notes to Consolidated Financial Statements |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
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Item 4. |
Controls and Procedures |
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Part II. - Other Information |
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Item 1. |
Legal Proceedings |
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Item 1A. |
Risk Factors |
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Item 2. |
Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities |
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Item 3. |
Defaults Upon Senior Securities |
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Item 4. |
Mine Safety Disclosures |
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Item 5. |
Other Information |
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Item 6. |
Exhibits |
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Signature Page |
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Item 1. Financial Statements
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MAGNOLIA BANCORP, INC. |
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(dollars in thousands) |
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June 30, |
December 31, |
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2025 |
2024 |
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(Unaudited) |
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| ASSETS | ||||||||
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Cash and due from banks |
$ |
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$ |
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Loans receivable |
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Allowance for credit losses |
(
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Loans receivable, net |
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Accrued interest receivable |
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Property and equipment, net |
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Federal Home Loan Bank stock, at cost |
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Other assets |
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TOTAL ASSETS |
$ |
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$ |
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LIABILITIES |
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Deposits: |
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Interest-bearing deposits |
$ |
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$ |
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Non-interest-bearing deposits |
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Advance payments by borrowers for insurance and taxes |
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Accrued expense and other liabilities |
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Total Liabilities |
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STOCKHOLDERS' EQUITY |
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Preferred stock, $ par value - shares authorized, issued |
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Common Stock, $ par value - shares authorized; issued and outstanding at June 30, 2025 |
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Additional paid-in capital |
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Unearned ESOP compensation- shares |
(
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Retained earnings |
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Total Stockholders' Equity |
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements. |
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MAGNOLIA BANCORP, INC. |
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(dollars in thousands) |
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Three Months Ended |
Six Months Ended |
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June 30, |
June 30, |
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2025 |
2024 |
2025 |
2024 |
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Interest Income |
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Interest and fees on loans |
$ |
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$ |
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$ |
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$ |
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Other |
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Total interest income |
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Interest Expense |
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Deposits |
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Advances |
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Total interest expense |
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Net interest income |
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Provision for credit losses |
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Net interest income after provision for credit losses |
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Noninterest Income |
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Service charges on deposit accounts |
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Other income |
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Total noninterest income |
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Noninterest Expense |
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Salaries and employee benefits |
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Occupancy and equipment |
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Data processing |
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Audit and regulatory examination fees |
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General insurance |
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Legal fees |
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Advertising |
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Automobile depreciation and expense |
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Correspondent charges |
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Other expenses |
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Total noninterest expense |
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Loss before income taxes |
(
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(
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Income tax benefit |
(
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(
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(
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(
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Net Loss |
$ |
(
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) | $ |
(
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(
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(
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Earnings (loss) per share - basic and diluted |
$ |
(.
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$ |
(.
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Weighted average shares outstanding |
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The accompanying notes are an integral part of these consolidated financial statements. |
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MAGNOLIA BANCORP, INC. |
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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited) |
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(dollars in thousands) |
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Common Shares Issued |
Common Stock |
Additional paid-in capital |
ESOP Unearned Compensation |
Retained Earnings |
Total Stockholders' Equity |
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Balance, March 31, 2024 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Net loss |
- |
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(
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(
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Balance, June 30, 2024 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Balance, March 31, 2025 |
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$ |
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$ |
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$ |
(
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$ |
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Issuance cost of common stock |
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(
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ESOP shares committed to be released |
- |
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Net loss |
- |
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(
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(
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Balance, June 30, 2025 |
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$ |
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$ |
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$ |
(
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) | $ |
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$ |
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Balance, December 31, 2023 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Net loss |
- |
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(
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(
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Balance, June 30, 2024 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Balance, December 31, 2024 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Issuance of common stock (net of issuance costs of $ million) |
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Purchase of common shares for
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- |
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(
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ESOP shares committed to be released |
- |
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Net loss |
- |
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(
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(
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Balance, June 30, 2025 |
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$ |
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$ |
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$ |
(
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) | $ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements. |
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MAGNOLIA BANCORP, INC. |
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(dollars in thousands) |
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Six Months Ended June 30, |
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2025 |
2024 |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net loss |
$ |
(
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(
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Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
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Depreciation |
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FHLB stock dividends |
(
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Net change in: |
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Accrued interest receivable and other assets |
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(
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Accrued expenses and other liabilities |
(
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Net cash used in operating activities |
(
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(
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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(Increase) decrease in loans receivable, net |
(
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Net cash provided by (used in) investing activities |
(
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Decrease in deposits, net |
(
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(
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Refund of stock subscriptions |
(
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Proceeds from stock conversion deposited |
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Increase in advances by borrowers for insurance and taxes |
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Proceeds on FHLB advances, net |
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Stock issuance costs paid |
(
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Net cash used in financing activities |
(
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(
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Net change in cash and cash equivalents |
(
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(
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Cash and cash equivalents, beginning of period |
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Cash and cash equivalents, end of period |
$ |
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$ |
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SUPPLEMENTAL DISCLOSURES FOR CASH FLOW INFORMATION: |
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Cash paid during the period for interest |
$ |
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$ |
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Proceeds from stock issuance, net of offering costs |
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The accompanying notes are an integral part of these consolidated financial statements. |
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MAGNOLIA BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated financial statements of Magnolia Bancorp, Inc. (the “Company”) were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information, general practices within the financial services industry, and instructions for Regulation S- X. Accordingly, these interim financial statements do not include all of the information or footnotes required by GAAP for annual financial statements. However, in the opinion of management, all adjustments necessary for a fair presentation of the financial statements have been included. The results of operations for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for the entire fiscal year. These statements should be read in conjunction with the audited financial statements of Mutual Savings and Loan Association (the “Association”) and notes thereto, included in the Company’s Form 10 -K for the year ended December 31, 2024.
Certain amounts classified within noninterest expense categories in prior periods have been reclassified to conform to the current period presentation. Such reclassifications within noninterest expense categories had no effect on previously reported equity or net income.
Description of Business
The Company is a holding company for Mutual Savings and Loan Association. Mutual Savings and Loan Association was formed in 1885. The Association provides financial services primarily to individuals, mainly through the origination of loans for one - to four -family residences through its two branches located in the metropolitan New Orleans area. During 2007, the Association became a federally chartered savings and loan association. The Association also accepts deposits in the form of passbook savings, certificates of deposit and NOW accounts.
The Company was incorporated as a Louisiana corporation in
May 2024
in connection with the Association’s conversion from mutual to stock form. On
January 14, 2025,
the Association completed its conversion from a mutual savings and loan association to a stock savings and loan association and became a wholly owned subsidiary of Magnolia Bancorp. Prior to completion of the conversion, Magnolia Bancorp did
not
engage in any active business. Magnolia Bancorp issued
Upon completion of the conversion, Magnolia Bancorp made a loan to the ESOP in the amount of $
Critical Accounting Policies and Estimates
In preparing the consolidated financial statements, the Company is required to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the Company’s consolidated financial condition, results of operations, changes in equity, and cash flows for the interim periods presented. These adjustments are of a normal recurring nature and include appropriate estimated provisions.
There were no material changes or developments during the reporting period with respect to methodologies that the Company uses when applying what management believes are critical accounting policies and developing critical accounting estimates as previously disclosed in its Annual Report for the year ended December 31, 2024.
Cash and Cash Equivalents
For the purpose of reporting cash flows, cash and cash equivalents include cash and interest-bearing deposits with in other institutions and highly liquid debt instruments with original maturities of three months or less.
Recent Accounting Pronouncements
Accounting Standards Issued But Not Yet Adopted
In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023 - 09, “Income Taxes (Topic 740 ): Improvements to Income Tax Disclosures”. The amendments in this ASU add specific requirements for income tax disclosures to improve transparency and decision usefulness by requiring additional categories of information about federal, state, and foreign income taxes to be included in the rate reconciliation and by requiring more detail to be disclosed on certain reconciling item categories that meet a quantitative threshold. Additionally, the amendment requires all entities to annually disclose disaggregated information about income taxes paid using specific quantitative thresholds and income tax expense (or benefit) from continuing operations. The amendments in this update are effective for annual periods beginning after December 15, 2024. Entities should apply the amendments on a prospective basis and retrospective application is permitted. As the update contains only amendments to disclosure requirements, adoption will have no impact to the Company’s consolidated results of operations or financial condition.
In November 2024, the FASB issued ASU 2024 - 03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220 - 40 ),” to improve the disclosures about a public business entity’s expenses in commonly presented expense captions. The amendments in this update require disclosure of specified information about certain costs and expenses in the notes to consolidated financial statements. Disclosure requirements also include a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively, among other items. An entity is not precluded from providing additional voluntary disclosures that may provide investors with additional decision-useful information. This update, as amended, is effective for annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The amendments in this update should be applied either prospectively to financial statements issued for reporting periods after the effective date of this update, or retrospectively to any or all prior periods presented in the consolidated financial statements. The Company is currently assessing the provisions of this guidance. As the update contains only amendments to disclosure requirements, adoption will have no impact to the Company’s consolidated results of operations or financial condition.
Note 2. Loans Receivable
A summary of the balances of loans as of June 30, 2025 and December 31, 2024 is as follows:
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June 30, |
December 31, |
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2025 |
2024 |
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(dollars in thousands) |
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Residential real estate |
$ |
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$ |
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Construction |
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Commercial real estate |
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Total real estate loans |
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Share Loans |
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Total loans |
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Unamortized, net deferred loan costs |
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Less allowance for credit losses |
(
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(
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Loans receivable, net |
$ |
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$ |
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Loans are stated at the amount of unpaid principal net of unamortized loan costs and exclude accrued interest. Accrued interest is reflected in the accrued interest line item on the consolidated statements of financial condition.
The following tables present an analysis of past due loans as of as of June 30, 2025 and December 31, 2024:
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As of June 30, 2025 |
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30 to 89 days past due |
90 days and over past due |
Current Loans |
Total |
Past due greater than 90 days accruing |
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(dollars in thousands) |
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Residential real estate |
$ |
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$ |
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$ |
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$ |
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$ |
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Construction |
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Commercial real estate |
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Share Loans |
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Loans receivable, total |
$ |
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$ |
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$ |
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$ |
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$ |
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As of December 31, 2024 |
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30 to 89 days past due |
90 days and over past due |
Current Loans |
Total |
Past due greater than 90 days accruing |
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(dollars in thousands) |
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Residential real estate |
$ |
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$ |
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$ |
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$ |
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$ |
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Construction |
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Commercial real estate |
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Share Loans |
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Loans receivable, total |
$ |
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$ |
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$ |
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$ |
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$ |
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Nonaccrual loans for which
no
related allowance for loan losses was recorded totaled $
Credit Quality Indicators
The Company uses several credit quality indicators to manage credit risk in an ongoing manner. The Company's primary credit quality indicators are to use an internal credit risk rating system that categorizes loans into pass, special mention, substandard or doubtful categories. Credit risk ratings are applied individually to those classes of loans that have significant or unique credit characteristics that benefit from a case-by-case evaluation.
The following are the definitions of the Company's credit quality indicators:
Pass: Loans that comply in all material respects with the Company's loan policies, which are adequately secured with conforming collateral, and are extended to borrowers with documented cash flow and/or liquidity to safely cover their total debt service requirements.
Watch: Loans that are above the FNMA limits are monitored on a routine basis. In addition, loans that become delinquent are initially identified as watch list loans for further monitoring: these loans do not currently expose the institution to sufficient risk to warrant adverse classification.
Special Mention: Loans that have potential weaknesses that, if left uncorrected, may result in deterioration of repayment prospects for the asset or in the Company's credit position at some future date.
Classified Loans Credit Quality Indicators
Substandard: Loans that are inadequately protected by the current net worth and paying capacity of the obligor or the collateral pledged. These assets have a well-defined weakness or weaknesses. The Company has a distinct possibility to sustain some loss if the deficiencies are not corrected.
Doubtful: Loans that have the weaknesses of those classified Substandard, with the added characteristic that the weaknesses make the collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
The Company’s credit quality indicators are periodically updated on a case-by-case basis.
The following table reflects loans by credit quality indicator and origination year at June 30, 2025:
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June 30, 2025 (dollars in thousands) |
2025 |
2024 |
2023 |
2022 |
2021 |
Prior |
Total |
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Residential Real Estate: |
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Pass/Watch |
$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Special Mention |
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Classified |
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Total |
$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Current period gross charge-offs |
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Construction: |
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Pass/Watch |
$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Special Mention |
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Classified |
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Total |
$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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||||||||||||||
|
Current period gross charge-offs |
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Commercial Real Estate: |
||||||||||||||||||||||||||||
|
Pass/Watch |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||
|
Special Mention |
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Classified |
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Total |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||
|
Current period gross charge-offs |
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Share Loans: |
||||||||||||||||||||||||||||
|
Pass/Watch |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||
|
Special Mention |
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Classified |
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Total |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||
|
Current period gross charge-offs |
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Total Loans: |
||||||||||||||||||||||||||||
|
Pass/Watch |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||
|
Special Mention |
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Classified |
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Total |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||
|
Current period gross charge-offs |
|
|
|
|
|
|
|
|||||||||||||||||||||
The following table reflects loans by credit quality indicator and origination year at December 31, 2024:
|
December 31, 2024 (dollars in thousands) |
2024 |
2023 |
2022 |
2021 |
2020 |
Prior |
Total |
|||||||||||||||||||||
|
Residential Real Estate: |
||||||||||||||||||||||||||||
|
Pass/Watch |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||
|
Special Mention |
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Classified |
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Total |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||
|
Current period gross charge-offs |
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Construction: |
||||||||||||||||||||||||||||
|
Pass/Watch |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||
|
Special Mention |
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Classified |
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Total |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||
|
Current period gross charge-offs |
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Commercial Real Estate: |
||||||||||||||||||||||||||||
|
Pass/Watch |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||
|
Special Mention |
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Classified |
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Total |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||
|
Current period gross charge-offs |
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Share Loans: |
||||||||||||||||||||||||||||
|
Pass/Watch |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||
|
Special Mention |
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Classified |
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Total |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||
|
Current period gross charge-offs |
|
|
|
|
|
|
|
|||||||||||||||||||||
|
All Loans: |
||||||||||||||||||||||||||||
|
Pass/Watch |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||
|
Special Mention |
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Classified |
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Total |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||
|
Current period gross charge-offs |
|
|
|
|
|
|
|
|||||||||||||||||||||
The allowance for credit loss represents the estimated amount considered necessary to cover lifetime expected credit losses inherent in financial assets at the statement of financial condition date. The following tables summarize the activity in the allowance for credit losses for the three and six months ended June 30, 2025 and 2024:
|
Residential Real Estate Loans |
||||||||||||||||||||
|
Three Months Ended June 30, 2025 (dollars in thousands) |
Mortgage |
Construction |
Commercial Real Estate |
Share Loans |
Total |
|||||||||||||||
|
Allowance for Credit Losses |
||||||||||||||||||||
|
Beginning Balance |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||
|
Charge-offs |
|
|
|
|
|
|||||||||||||||
|
Recoveries |
|
|
|
|
|
|||||||||||||||
|
Provision for credit losses |
(
|
) |
|
|
|
|
||||||||||||||
|
Ending Balances |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||
|
Ending Balances Allocated to: |
||||||||||||||||||||
|
Individually Evaluated for Impairment |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||
|
Collectively Evaluated for Impairment |
|
|
|
|
|
|||||||||||||||
|
Total |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||
|
Residential Real Estate Loans |
||||||||||||||||||||
|
Three Months Ended June 30, 2024 (dollars in thousands) |
Mortgage |
Construction |
Commercial Real Estate |
Share Loans |
Total |
|||||||||||||||
|
Allowance for Credit Losses |
||||||||||||||||||||
|
Beginning Balance |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||
|
Charge-offs |
|
|
|
|
|
|||||||||||||||
|
Recoveries |
|
|
|
|
|
|||||||||||||||
|
Provision for credit losses |
|
(
|
) |
|
|
|
||||||||||||||
|
Ending Balances |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||
|
Ending Balances Allocated to: |
||||||||||||||||||||
|
Individually Evaluated for Impairment |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||
|
Collectively Evaluated for Impairment |
|
|
|
|
|
|||||||||||||||
|
Total |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||
|
Residential Real Estate Loans |
||||||||||||||||||||
|
Six Months Ended June 30, 2025 (dollars in thousands) |
Mortgage |
Construction |
Commercial Real Estate |
Share Loans |
Total |
|||||||||||||||
|
Allowance for Credit Losses |
||||||||||||||||||||
|
Beginning Balance |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||
|
Charge-offs |
|
|
|
|
|
|||||||||||||||
|
Recoveries |
|
|
|
|
|
|||||||||||||||
|
Provision for credit losses |
(
|
) |
|
|
|
|
||||||||||||||
|
Ending Balances |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||
|
Ending Balances Allocated to: |
||||||||||||||||||||
|
Individually Evaluated for Impairment |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||
|
Collectively Evaluated for Impairment |
|
|
|
|
|
|||||||||||||||
|
Total |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||
|
Residential Real Estate Loans |
||||||||||||||||||||
|
Six Months Ended June 30, 2024 (dollars in thousands) |
Mortgage |
Construction |
Commercial Real Estate |
Share Loans |
Total |
|||||||||||||||
|
Allowance for Credit Losses |
||||||||||||||||||||
|
Beginning Balance |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||
|
Charge-offs |
|
|
|
|
|
|||||||||||||||
|
Recoveries |
|
|
|
|
|
|||||||||||||||
|
Provision for credit losses |
|
(
|
) |
|
|
|
||||||||||||||
|
Ending Balances |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||
|
Ending Balances Allocated to: |
||||||||||||||||||||
|
Individually Evaluated for Impairment |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||
|
Collectively Evaluated for Impairment |
|
|
|
|
|
|||||||||||||||
|
Total |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||
The Company considered an adjustment for credit losses on unfunded loan commitments for the periods ended June 30, 2025 and December 31, 2024 to be insignificant.
In the ordinary course of business, the Company has granted loans to principal officers and directors, and entities in which they have significant ownership or management positions. An analysis of the changes in loans to such borrowers for the six months ended June 30, 2025 and 2024 follows:
|
2025 |
2024 |
|||||||
|
(dollars in thousands) |
||||||||
|
Balance, Beginning |
$ |
|
$ |
|
||||
|
Additions |
|
|
||||||
|
Payments |
(
|
) |
(
|
) | ||||
|
Balance, Ending |
$ |
|
$ |
|
||||
Note 3. Deposits
A summary of deposit balances by type as of June 30, 2025 and December 31, 2024 is as follows:
|
June 30, 2025 |
December 31, 2024 |
|||||||
|
(dollars in thousands) |
||||||||
|
Noninterest-bearing deposits |
$ |
|
$ |
|
||||
|
Interest-bearing demand deposits |
|
|
||||||
|
Savings deposits |
|
|
||||||
|
Time deposits |
|
|
||||||
| $ |
|
$ |
|
|||||
Time deposits that exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limit of
$250,000
at
June 30, 2025
and
December 31, 2024,
were $
At June 30, 2025, the scheduled maturities of time deposits were as follows :
|
Year Ending |
Amount |
|||
|
(dollars in thousands) |
||||
|
2025 |
$ |
|
||
|
2026 |
|
|||
|
2027 |
|
|||
|
2028 |
|
|||
|
2029 |
|
|||
|
2030 and thereafter |
|
|||
|
Total time deposits |
$ |
|
||
During the normal course of business, the Company accepts deposits from members of the Board of Directors and officers. As of
June 30, 2025
and
December
31,2024,
these deposits totaled $
Note 4. Earnings (Loss) Per Share
Earnings (loss) per share (“EPS”) represents income available or loss attributable to common shareholders divided by the weighted average number of common shares outstanding during the period. Unallocated common shares held by the ESOP are shown as a reduction in stockholders’ equity and are excluded from the weighted-average common shares outstanding for both basic and diluted earnings per share calculations until they are committed to be released.
|
Three Months Ended June 30, 2025 |
Six Months Ended June 30, 2025 |
|||||||
|
Denominator |
||||||||
|
Weighted average common shares outstanding |
|
|
||||||
|
Less average unearned ESOP shares |
(
|
) |
(
|
) | ||||
|
Weighted average shares |
|
|
||||||
The Company had
Note 5. Commitments and Contingencies
In the normal course of business, the Company has outstanding commitments and contingent liabilities, such as commitments to extend credit, which are not included in the accompanying financial statements. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the Company's consolidated statements of financial condition. The Company's exposure to credit loss is represented by the contractual amount of those commitments. The Company uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated statements of financial condition.
As of
June 30, 2025
and
December 31, 2024,
the Company had commitments to extend credit of $
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer's credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management's credit evaluation.
Note 6. Segment Reporting
The Company determined that all of its banking operations serve a similar customer base, offer similar products and services, and are managed through similar processes. Therefore, the Company’s banking operations are aggregated into reported operating segment, which generates income principally from interest on loans as well as from fees charged in connection with various loan and deposit services. The chief operating decision maker (“CODM”) is the Chief Executive Officer, who for the purposes of assessing performance, making operating decisions, and allocating Company resources, regularly reviews net income as reported in the accompanying consolidated statements of operations. The level of disaggregation and amounts of significant segment income and expenses that are regularly provided to the CODM are the same as those presented in the accompanying consolidated statements of operations. Likewise, the measure of segment assets is reported on the accompanying consolidated statements of financial condition as total assets.
Note 7. Regulatory Matters
The Association is subject to various regulatory capital requirements administered by its primary federal regulator, the Office of the Comptroller of Currency (“OCC”). Failure to meet the minimum regulatory capital requirements can initiate certain mandatory, and possible additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Association’s financial statements. Under the regulatory capital adequacy guidelines and the regulatory framework for prompt corrective action, the Association must meet specific capital guidelines involving quantitative measures of the Association's assets, liabilities, and certain off-financial condition items, as calculated under regulatory accounting practices. The Association's capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
Management believes, as of June 30, 2025, that the Association meets all capital adequacy requirements to which it is subject.
As of June, 30, 2025 the most recent notification from the OCC categorized the Association as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Association must maintain minimum total risk based, Tier I risk-based, and Tier I leverage ratios as disclosed in the table below. There are no conditions or events since the notification that management believes have changed the Association’s prompt corrective action category.
The Association's actual capital amounts and ratios as of June 30, 2025 and December 31, 2024 are presented in the table:
|
June 30, 2025 (dollars in thousands) |
Actual |
Required for Capital Adequacy Purposes |
Required to be Well-Capitalized Under Prompt Corrective Action Provisions |
|||||||
|
Amount |
Ratio |
Amount |
Ratio |
Amount |
Ratio |
|||||
|
Tier 1 Leverage Ratio |
$ |
|
|
$ |
|
|
$ |
|
|
|
|
Common Equity Tier 1 |
|
|
|
|
|
|
||||
|
Tier 1 Risk-Based Capital |
|
|
|
|
|
|
||||
|
Total Risk-Based Capital |
$ |
|
|
$ |
|
|
$ |
|
|
|
|
December 31, 2024 (dollars in thousands) |
Amount |
Ratio |
Amount |
Ratio |
Amount |
Ratio |
||||
|
Tier 1 Leverage Ratio |
$ |
|
|
$ |
|
|
$ |
|
|
|
|
Common Equity Tier 1 |
|
|
|
|
|
|
||||
|
Tier 1 Risk-Based Capital |
|
|
|
|
|
|
||||
|
Total Risk-Based Capital |
$ |
|
|
$ |
|
|
$ |
|
|
Note 8. Fair Value Measures
Accounting guidance establishes a fair value hierarchy to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value.
| Level |
1 - Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. |
| Level |
2 - Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. |
| Level |
3 - Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. |
Fair Value of Assets and Liabilities Measured on a Nonrecurring Basis
Loans individually evaluated for credit loss are level 2 assets measured at the fair value of the underlying collateral based on independent third -party appraisals on a nonrecurring basis.
The following presents the financial assets that are measured at fair value on a non-recurring basis for each of the fair value hierarchy levels:
|
June 30, 2025 |
||||||||||||
|
Level 1 |
Level 2 |
Level 3 |
||||||||||
|
(dollars in thousands) |
||||||||||||
|
Loans individually evaluated, net of reserve |
$ |
|
$ |
|
$ |
|
||||||
|
December 31, 2024 |
||||||||||||
|
Level 1 |
Level 2 |
Level 3 |
||||||||||
|
(dollars in thousands) |
||||||||||||
|
Loans individually evaluated, net of reserve |
$ |
|
$ |
|
$ |
|
||||||
Accounting guidance from the FASB requires the disclosure of estimated fair value information about certain on- and off-balance sheet financial instruments, including those financial instruments that are not measured and reported at fair value on a recurring basis. The significant methods and assumptions used by the Company to estimate the fair value of financial instruments are discussed below.
Cash and cash equivalents – The carrying value approximates fair value.
FHLB stock – The carrying value approximates fair value based on the redemption provisions of the Federal Home Loan Bank.
Loans receivable, net – Fair value is estimated by discounting the future cash flows using the current rate at which similar loans would be made to borrowers with similar credit rating and for the same remaining maturity.
Deposits - For NOW, passbook and certificates of deposit accounts, fair value is equal to the amount payable on demand or carrying value. For time deposits, fair value is estimated using a discounted cash flow method.
The carrying value and estimated fair value of financial instruments not measured and reported at fair value on a recurring or nonrecurring basis are as follows:
|
June 30, 2025 |
Fair Value Measures |
|||||||||||||||
|
(dollars in thousands) |
Carrying Value |
Level 1 |
Level 2 |
Level 3 |
||||||||||||
|
Financial assets: |
||||||||||||||||
|
Cash and cash equivalents |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Loans receivable, net |
|
|
|
|
||||||||||||
|
FHLB stock |
|
|
|
|
||||||||||||
|
Financial liabilities: |
||||||||||||||||
|
Deposits |
$ |
|
|
$ |
|
$ |
|
|||||||||
|
December 31, 2024 |
Carrying Value |
Fair Value Measures |
||||||||||||||
|
(dollars in thousands) |
Level 1 |
Level 2 |
Level 3 |
|||||||||||||
|
Cash and cash equivalents |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Loans receivable, net |
|
|
|
|
||||||||||||
|
FHLB stock |
|
|
|
|
||||||||||||
|
Financial liabilities: |
||||||||||||||||
|
Deposits |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
Item 2. Management ’ s Discussion and Analysis of Financial Condition and Results of Operations
Management’s discussion and analysis is intended to assist in understanding our financial condition and results of operations. The information in this section should be read in conjunction with the unaudited consolidated financial statements of Magnolia Bancorp, Inc. (“Magnolia Bancorp” or the “Company”) and the notes thereto appearing in Part I, Item 1 of this Quarterly report on Form 10-Q as well as the business and financial information included in the Company’s Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2024.
Forward-Looking Statements
Certain statements contained in this Quarterly Report on Form 10-Q that are not historical facts may be considered within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect” and words of similar meaning, but are not limited to:
|
● |
statements of our goals, intentions and expectations; |
|
● |
statements regarding our business plans, prospects, growth and operating strategies; |
|
● |
statements regarding the quality of our loans and other assets; and |
|
● |
estimates of our risks and future costs and benefits. |
These forward-looking statements are based on the current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. We are under no duty to and do not take any obligation to update any forward-looking statements after the date of this report.
Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. Except as required by applicable law or regulation, we do not undertake, and we specifically disclaim, any obligation to release publicly the results of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of this statement or to reflect the occurrence of anticipated or unanticipated events.
Overview
Magnolia Bancorp, Inc. completed its common stock offering and the conversion of Mutual Savings and Loan Association in January 2025. Magnolia conducts its operations primarily through its wholly owned subsidiary, Mutual Savings and Loan Association. The Company’s loan portfolio consists primarily of fixed-rate one- to four-family residential mortgage loans that we have originated. The Company intends to continue our focus on originating primarily fixed-rate one- to four-family residential mortgage loans, and to a lesser extent residential construction loans and home equity lines of credit. In prior years, the Company has also originated commercial real estate loans and multi-family residential loans which represent approximately 3.9% of our loan portfolio at June 30, 2025. We also originate share loans, which are loans secured by deposit accounts at the Company. We generally do not purchase or sell loans. We offer a variety of deposit accounts including checking accounts, NOW accounts and certificates of deposit. The Company is subject to comprehensive regulation and examination by the Office of the Comptroller of the Currency (“OCC”).
Our results of operations depend primarily on our net interest income. Net interest income is the difference between the interest income we earn on our interest-earning assets and the interest we pay on our interest-bearing liabilities. Our results of operations are also affected by our provisions for credit losses, non-interest income and non-interest expense. Non-interest income currently consists primarily of service charges on deposit accounts and other fees. Non-interest expense currently consists primarily of expenses related to salaries and employee benefits, occupancy and equipment, data processing, audit and regulatory examination fees, FDIC deposit insurance premiums, and other expenses.
Our results of operations also may be affected significantly by general and local economic and competitive conditions, changes in market interest rates, governmental policies and actions of regulatory authorities.
The Federal Reserve Board began increasing its federal funds rate in March 2022 to combat inflation, with 11 increases aggregating 5.25% occurring between March 2022 and July 2023. These increases resulted in substantial increases in market interest rates, including the rates we pay on our certificates of deposit. As interest rates rose during this period, our cost of funds increased and the demand for our fixed-rate loans decreased, resulting in declines in our net interest income. We elected not to match the highest market rates being paid on longer term certificates of deposit in light of the substantial increases in market interest rates, and we shortened the average maturity of our certificates of deposit. In an effort to offset the declines in net interest income during this period, we took steps to control our total non-interest expenses, which decreased in 2023 from 2022 and further decreased in 2024. Our non-interest expenses increased in 2025 as a result of our conversion to a public reporting entity. We incurred a net loss in the first six months of 2025, as non-interest expense increased more than net interest income increased.
In September 2024, the Federal Reserve Board decreased its federal funds rate by 0.50%, which was the first decrease in four years. The federal funds rate decreased by 0.25% in both November and December 2024 to 4.25%. Additional rate reductions in the coming months by the Federal Reserve Board are generally expected by the market. We expect these rate reductions will eventually result in declines in our cost of funds. At June 30, 2025, we had $4.5 million of certificates of deposit scheduled to mature within six months, with $1.2 million of such short-term certificates of deposit bearing an interest rate of 5.00% or more and with $2.4 million of such short-term certificates having an interest rate between 3.00% and 4.99%. We also expect the demand for our fixed-rate loans will begin to increase as market interest rates decline. However, we expect our total non-interest expenses to increase due to our need to hire additional lending and accounting personnel, and the increased expenses associated with being a public company.
Business Strategy
Our principal objective is to build long-term value for our shareholders by operating a profitable community-oriented financial institution dedicated to meeting the banking needs of our customers by emphasizing personalized and efficient customer service.
Highlights of our current business strategy include:
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● |
Continue to focus on originating fixed-rate one- to four-family residential mortgage loans and residential construction loans for retention in our portfolio. We are primarily a fixed-rate one- to four-family residential mortgage loan lender for borrowers in our primary market area. Our residential construction loans typically convert to a permanent residential mortgage loan upon completion of the construction. We do not offer adjustable-rate residential mortgage loans, other than home equity loans. At June 30, 2025, $28.7 million or 92.3% of our total loan portfolio consisted of fixed- rate one- to four-family residential mortgage loans. In addition, at June 30, 2025, $404,000 or 1.3% of our total loan portfolio consisted of adjustable-rate home equity loans. We expect residential mortgage lending to remain our primary lending activity. |
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Modestly increase our commercial real estate loan portfolio. To a limited extent, we have originated commercial real estate loans. At June 30, 2025, $.5 million or 1.7% of our total loan portfolio consisted of commercial real estate loans. Commercial real estate loans are higher-yielding and have shorter terms, which helps to mitigate interest rate risk, than one- to four-family residential mortgage loans. |
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Modestly increase our multi-family residential loan portfolio. To a limited extent, we have originated multi-family residential loans. At June 30, 2025, $282,000 or 0.9% of our total loan portfolio consisted of multi-family residential loans. Multi-family residential loans are higher-yielding and have shorter terms, which helps to mitigate interest rate risk, than one- to four-family residential mortgage loans. |
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Maintain our strong asset quality through conservative loan underwriting. We intend to maintain strong asset quality through what we believe are our conservative underwriting standards and credit monitoring processes. At June 30, 2025, we had only four loans aggregating $.3 million that were 30 days or more delinquent. |
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Continue efforts to grow low-cost “ core ” deposits. We consider our core deposits to include all deposits other than certificates of deposit. We will continue our efforts to increase our core deposits to provide a stable source of funds to support loan growth at costs consistent with improving our interest rate spread and net interest margin. Core deposits totaled $9.3 million or 56.8% of total deposits at June 30, 2025. Of this amount, $.9 million or 5.3% of total deposits consisted of non-interest-bearing accounts. |
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Remain a community-oriented institution and rely on high quality service to maintain and build a loyal local customer base . We were established in 1885. By servicing all loans we originate, our loan customers are able to deal directly with us when questions may arise about their loans. Through the goodwill we have developed over years of providing timely, efficient banking services, we believe that we have been able to attract a loyal base of local retail customers on which we expect to continue to build our banking business. |
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Grow organically and through opportunistic branching opportunities. We intend to grow our balance sheet organically on a managed basis, and with the capital we raised in the stock offering which we expect will enable us to increase our lending capacity. In addition to organic growth, we may also consider expansion opportunities in our market area or in contiguous markets that we believe would enhance both our franchise value and shareholder returns. These opportunities may include establishing loan production offices, establishing new branch offices, and/or acquiring branch offices. The capital we raised in the stock offering is expected to help us fund any such opportunities that may arise. We have no current plans or intentions regarding any such expansion activities. |
We expect these strategies to guide our investment of the net proceeds of the stock offering. We intend to continue to pursue these business strategies subject to changes necessitated by future market conditions, regulatory restrictions and other factors.
There are risks associated with our plans to increase our commercial real estate loans and multi-family residential loans. While we intend to mitigate these risks by updating our loan underwriting policies with respect to such loans and by hiring additional loan officers who are experienced in this area, there can be no assurance that we can hire additional loan officers with such experience or that such loan officers will be able to generate a sufficient volume of new loans to cover their compensation. In addition, we expect our commercial real estate loan portfolio and our multi-family residential loan portfolio to each account for less than 5% of our total loan portfolio for the foreseeable future.
Anticipated Increase in Noninterest Expense
Following the completion of the conversion, our noninterest expense has increased because of the increased costs associated with operating as a public company and the increased compensation expenses associated with the purchase of shares of common stock by our employee stock ownership plan. In addition, our noninterest expense is expected to continue to increase due to our need to hire additional personnel and the expected implementation of stock-based benefit plans, if approved by our shareholders at the upcoming annual meeting of shareholders.
Critical Accounting Policies and Use of Critical Accounting Estimates
The discussion and analysis of the financial condition and results of operations are based on our consolidated financial statements, which are prepared in conformity with Generally Accepted Accounting Principles (“GAAP”). The preparation of these consolidated financial statements requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of income and expenses. We consider the accounting policy discussed below to be our critical accounting policy. The estimates and assumptions that we use are based on historical experience and various other factors and are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions, resulting in a change that could have a material impact on the carrying value of our assets and liabilities and our results of operations.
The Jumpstart Our Business Startups (“JOBS”) Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company,” we may delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We intend to take advantage of the benefits of this extended transition period. Accordingly, our consolidated financial statements may not be comparable to companies that comply with such new or revised accounting standards.
We consider the accounting policy for the allowance for credit losses to be our critical accounting policy. Under the current expected credit loss model (“CECL”), the allowance for credit losses represents management’s estimate of lifetime credit losses on 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.
Internal Control Over Financial Reporting
We identified material weaknesses in our internal control over financial reporting with respect to our allowance for credit losses that existed as of December 31, 2024. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements may not be prevented or detected on a timely basis. We concluded that our procedures were not effective as of December 31, 2024, and we identified the following material weaknesses in our internal control over financial reporting:
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We did not maintain an effective control environment as there was an insufficient complement of personnel to provide for adequate segregation of duties within the finance and accounting function to maintain effective controls over the financial close and reporting process. |
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The insufficient complement of personnel adversely impacted our ability to design and maintain policies, procedures and controls that operate at a sufficient level of precision over our significant accounts, classes of transactions and disclosures, including the allowance for credit losses on loans held for investment, to ensure that policies and procedures designed to mitigate the risks to the achievement of our financial reporting objectives are carried out. |
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We did not have an effective and formally documented risk assessment process that defined clear financial reporting objectives and elevated risks, including fraud risks, and risks resulting from changes in the external environment and business operations at a sufficient level of detail to identify all relevant risks of material misstatement. |
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We did not design and maintain an effective monitoring program for evaluating and monitoring compliance with established accounting policies, procedures and controls. This weakness included the failure to design and operate effective procedures and controls whose purpose is to evaluate and monitor the effectiveness of individual control activities including the loan review function. |
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We did not have an effective information and communication process to ensure that the processes and controls were effectively documented and disseminated to enable financial personnel to effectively carry out their roles and responsibilities. |
The above material weaknesses in our control environment, risk assessment, information and communication, and monitoring controls contributed to the following additional material weaknesses.
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We did not design and maintain effective controls regarding significant accounts, transaction cycles and disclosures to ensure policies and procedures designed to mitigate the risks to the achievement of objectives are carried out; and |
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We did not design and maintain effective information technology general controls which could result in misstatements potentially impacting all financial statement accounts and disclosures. Specifically, user access controls were not appropriately designed and maintained to adequately restrict user and privileged access to financial applications and data to the appropriate personnel, segregation of duties over preparation and review of journal entries, and access to critical spreadsheets and similar end-user data files is not restricted and is accessible by all personnel of Mutual Savings and Loan Association. |
These material weaknesses could result in a misstatement in our financial statements that may result in a material misstatement in the annual or interim financial statements that would not be prevented or detected.
We have taken steps to remediate these material weaknesses, including hiring a Director of Compliance and Internal Audit in May 2023 with over 25 years of experience as a compliance director and internal auditor in several financial institutions and with a bank consulting practice. The Compliance Director is responsible for evaluating policies and procedures, has direct access to the board of directors and does not have direct duties relating to financial accounting and reporting. We currently are assessing and improving our processes and control procedures to ensure they will operate at an acceptable level of assurance, including implementing a more formal risk assessment process and revising our monitoring programs relating to financial accounting and reporting, providing for additional documentation of internal controls, formalizing documentation of certain review and approval processes, and providing for additional written documentation. As part of our remedial measures to address these material weaknesses, we have (a) implemented an internal control environment that is appropriate for the size and operational complexity of the Company, (b) updated a significant number of our policies, (c) performed a financial statement risk assessment and (d) revised our monitoring programs to focus on areas of higher risk, with an increased emphasis in the areas relating to financial accounting and reporting.
We believe there were no adverse changes in our internal controls during the quarter ended June 30, 2025 and we did not identify any additional material weaknesses in our internal controls as of June 30, 2025.
Comparison of Financial Condition at June 30, 2025 and December 31, 2024
Total Assets. Total assets were $37.1 million at June 30, 2025, a decrease of $6.9 million, or 15.7%, from $44.0 million at December 31, 2024. This decrease is primarily due to a decrease of $5.8 million or 58.1% in cash and cash equivalents and a decrease of $1.4 million or 93.5% in other assets. The decrease was partially offset by an increase of $0.3 million or 1.0% in net loans receivable.
Cash and Cash Equivalents. Cash and cash equivalents decreased by $5.8 million, or 58.1%, to $4.2 million at June 30, 2025 from $9.9 million at December 31, 2024. As market interest rates continued to remain at relatively high rates and in light of the reduced demand for our fixed-rate mortgage loans, we elected not to match the highest market rates being paid on longer term deposits, and did not renew higher rate certificates of deposits. We used our excess liquidity to fund the decrease in deposits. Our cash and cash equivalents were 11.2% of total assets at June 30, 2025 compared to 22.6% of total assets at December 31, 2024.
Loans Receivable, Net. Loans receivable, net, increased by $.3 million, or 1.1%, to $30.9 million at June 30, 2025 from $30.6 million at December 31, 2024. During the first six months of 2025, our total loan originations increased by $1.6 million, or 365%, from $.4 million during the first six months of 2024. Originations of one- to-four family residential loans representing most of the loan portfolio increased by $1.1 million in the first six months of 2025 compared to the first six months of 2024, as the demand for our fixed-rate loans increased compared to the first six months of 2024.
Deposits. Total interest-bearing deposits decreased by $12.4 million, or 44.4%, to $15.5 million at June 30, 2025 from $27.9 million at December 31, 2024. Core deposits (defined as deposits other than certificates of deposit) decreased by $10.7 million, or 53.4%, to $9.3 million at June 30, 2025 from $20.0 million at December 31, 2024. The decline in core deposits was primarily due to the completion of the conversion, which resulted in $7.7 million on deposit at the Association being used to purchase shares of common stock of Magnolia Bancorp (with the remaining shares purchased with a loan to the ESOP), and an additional $1.4 million of deposits being refunded to purchasers in the over-subscribed community offering. To a lesser extent, the decrease was also partially due to our certificates of deposit decreasing by $2.5 million, or 26.3%, to $7.1 million at June 30, 2025 from $9.6 million at December 31, 2024. Certificates of deposit decreased primarily due to payoffs of higher rate maturing term deposits.
Management continued its strategy of pursuing growth in demand accounts and lower cost core deposits, but market conditions affected this strategy during the first six months of 2025. Non-interest-bearing deposits, which are part of our total core deposits, decreased by $.8 million, or 48.4%, to $.9 million at June 30, 2025 from $1.7 million at December 31, 2024. Management intends to continue its efforts to increase core deposits, with an emphasis on growth in consumer deposits.
Borrowings . We had no FHLB advances at June 30, 2025 or December 31, 2024. We have a line of credit totaling $13.3 million with the FHLB for advances which are secured by a blanket collateral agreement covering substantially all of our loans receivable.
Total Equity. Total equity increased by $6.2 million, or 44.3%, to $20.1 million at June 30, 2025 from $13.9 million at December 31, 2024. The increase resulted from the proceeds of the conversion in January 2025 of $8.3 million less the $1.4 million in stock offering costs and $656,000 in unearned ESOP compensation, which was partially offset by our net loss of $66,000.
Average Balances, Net Interest Income, and Yields Earned and Rates Paid
The following tables show for the periods indicated the total dollar amount of interest from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and the net interest margin. As we did not own any tax-exempt securities during the periods presented, no yield adjustments were made. All average balances are based on daily balances.
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Three Months Ended June 30, |
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2025 |
2024 |
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Average Balance |
Interest |
Average Yield/ Rate |
Average Balance |
Interest |
Average Yield/ Rate |
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(dollars in thousands) |
(dollars in thousands) |
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Interest-earning assets: |
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Loans receivable (1) |
$ | 30,784 | $ | 334 | 4.34 | % | $ | 31,644 | $ | 338 | 4.27 | % | ||||||||||||
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FHLB stock |
357 | 4 | 4.48 | 339 | 5 | 5.90 | ||||||||||||||||||
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Other interest-earning assets |
4,809 | 58 | 4.82 | 1,738 | 24 | 5.52 | ||||||||||||||||||
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Total interest-earning assets |
35,950 | 396 | 4.41 | 33,721 | 367 | 4.35 | ||||||||||||||||||
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Non-interest-earning assets |
1,569 | 2,232 | ||||||||||||||||||||||
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Total assets |
$ | 37,519 | $ | 35,953 | ||||||||||||||||||||
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Interest-bearing liabilities: |
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Savings and NOW accounts (2) |
$ | 8,625 | 2 | 0.09 | $ | 8,995 | 2 | 0.09 | ||||||||||||||||
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Certificates of deposit |
7,045 | 60 | 3.41 | 9,962 | 87 | 3.49 | ||||||||||||||||||
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Total deposits |
15,670 | 62 | 1.58 | 18,957 | 89 | 1.88 | ||||||||||||||||||
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FHLB advances |
- | - | - | 523 | 7 | 5.35 | ||||||||||||||||||
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Total interest-bearing liabilities |
15,670 | 62 | 1.58 | 19,480 | 96 | 1.97 | ||||||||||||||||||
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Non-interest-bearing liabilities |
1,765 | 2,477 | ||||||||||||||||||||||
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Total liabilities |
17,435 | 21,957 | ||||||||||||||||||||||
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Total equity |
20,084 | 13,996 | ||||||||||||||||||||||
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Total liabilities and equity |
$ | 37,519 | $ | 35,953 | ||||||||||||||||||||
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Net interest-earning assets |
$ | 20,280 | $ | 14,241 | ||||||||||||||||||||
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Net interest income; average interest spread |
$ | 334 | 2.82 | % | $ | 271 | 2.38 | % | ||||||||||||||||
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Net interest margin (3) |
3.72 | % | 3.21 | % | ||||||||||||||||||||
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Average interest-earning assets to average interest-bearing liabilities |
229.42 | % | 173.11 | % | ||||||||||||||||||||
__________________________
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(1) |
Includes nonaccrual loans during the respective periods. Calculated net of deferred fees and discounts, loans in process and allowance for credit losses. |
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(2) |
Includes interest-bearing demand accounts. |
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(3) |
Equals net interest income divided by average interest-earning assets. |
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Six Months Ended June 30, |
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2025 |
2024 |
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Average Balance |
Interest |
Average Yield/ Rate |
Average Balance |
Interest |
Average Yield/ Rate |
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(dollars in thousands) |
(dollars in thousands) |
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Interest-earning assets: |
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Loans receivable (4) |
$ | 30,830 | $ | 665 | 4.31 | % | $ | 32,065 | $ | 673 | 4.19 | % | ||||||||||||
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FHLB stock |
355 | 8 | 4.51 | 339 | 9 | 5.31 | ||||||||||||||||||
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Other interest-earning assets |
5,872 | 133 | 4.53 | 1,695 | 43 | 5.19 | ||||||||||||||||||
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Total interest-earning assets |
37,057 | 806 | 4.35 | 34,099 | 725 | 4.25 | ||||||||||||||||||
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Non-interest-earning assets |
2,069 | 1,771 | ||||||||||||||||||||||
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Total assets |
$ | 39,126 | $ | 35,870 | ||||||||||||||||||||
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Interest-bearing liabilities: |
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Savings and NOW accounts (5) |
$ | 8,851 | 4 | 0.09 | $ | 10,851 | 5 | 0.09 | ||||||||||||||||
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Certificates of deposit |
7,824 | 139 | 3.55 | 9,579 | 160 | 3.34 | ||||||||||||||||||
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Total deposits |
16,675 | 143 | 1.72 | 20,430 | 165 | 1.62 | ||||||||||||||||||
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FHLB advances |
- | - | - | 675 | 19 | 5.63 | ||||||||||||||||||
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Total interest-bearing liabilities |
16,675 | 143 | 1.72 | 21,105 | 184 | 1.75 | ||||||||||||||||||
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Non-interest-bearing liabilities |
1,969 | 776 | ||||||||||||||||||||||
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Total liabilities |
18,644 | 21,881 | ||||||||||||||||||||||
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Total equity |
20,482 | 13,990 | ||||||||||||||||||||||
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Total liabilities and equity |
$ | 39,126 | $ | 35,871 | ||||||||||||||||||||
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Net interest-earning assets |
$ | 20,382 | $ | 12,994 | ||||||||||||||||||||
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Net interest income; average interest spread |
$ | 663 | 2.63 | % | $ | 541 | 2.50 | % | ||||||||||||||||
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Net interest margin (6) |
3.58 | % | 3.17 | % | ||||||||||||||||||||
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Average interest-earning assets to average interest-bearing liabilities |
222.23 | % | 161.6 | % | ||||||||||||||||||||
__________________________
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(4) |
Includes nonaccrual loans during the respective periods. Calculated net of deferred fees and discounts, loans in process and allowance for credit losses. |
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(5) |
Includes interest-bearing demand accounts. |
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(6) |
Equals net interest income divided by average interest-earning assets. |
Rate/Volume Analysis. The following table shows the extent to which changes in interest rates and changes in volume of interest-earning assets and interest-bearing liabilities affected our interest income and expense during the periods indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (1) changes in rate, which is the change in rate multiplied by prior year volume, and (2) changes in volume, which is the change in volume multiplied by prior year rate. The combined effect of changes in both rate and volume has been allocated proportionately to the change due to rate and the change due to volume.
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Three Months Ended
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Six Months Ended June 30, 2025 vs 2024 |
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Increase (Decrease) Due to |
Total Increase |
Increase (Decrease) Due to |
Total Increase |
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Rate |
Volume |
(Decrease) |
Rate |
Volume |
(Decrease) |
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( dollars in thousands ) |
( dollars in thousands ) |
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Interest income: |
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Loans receivable |
$ | 5 | $ | (9 | ) | $ | (4 | ) | $ | 19 | $ | (27 | ) | $ | (8 | ) | ||||||||
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FHLB stock |
(1 | ) | - | (1 | ) | (1 | ) | - | (1 | ) | ||||||||||||||
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Other interest-earning assets |
(3 | ) | 37 | 34 | (5 | ) | 95 | 90 | ||||||||||||||||
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Total interest income |
1 | 28 | 29 | 13 | 68 | 81 | ||||||||||||||||||
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Interest expense: |
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Savings and NOW accounts |
- | - | - | - | (1 | ) | (1 | ) | ||||||||||||||||
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Certificates of deposit |
(2 | ) | (25 | ) | (27 | ) | 10 | (31 | ) | (21 | ) | |||||||||||||
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Total deposits |
(2 | ) | (25 | ) | (27 | ) | 10 | (32 | ) | (22 | ) | |||||||||||||
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FHLB advances |
(7 | ) | - | (7 | ) | (19 | ) | - | (19 | ) | ||||||||||||||
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Total interest expense |
(9 | ) | (25 | ) | (34 | ) | (9 | ) | (32 | ) | (41 | ) | ||||||||||||
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Increase (decrease) in net interest income |
$ | 10 | $ | 53 | $ | 63 | $ | 22 | $ | 100 | $ | 122 | ||||||||||||
Comparison of Operating Results for the Three Months Ended June 30, 2025 and 2024
General . We had a net loss of $36,000 for the three months ended June 30, 2025 compared to a net loss of $6,000 for the comparable period of 2024. This $30,000 increase in the net loss was due to an increase of $99,000 in total non-interest expense, which was partially offset by an increase of $63,000 in net interest income and an increase of $6,000 in the income tax benefit. On September 18, 2024, the Federal Reserve Board decreased its federal funds rate by 0.5%, which was the first decrease in four years, and which was followed by two additional decreases in the fourth quarter of 2024. One or more rate reductions in the last several months of 2025 by the Federal Reserve Board are expected by the market. We expect these rate reductions will continue to result in declines in our cost of funds and improvement in our net interest income. We also expect the demand for our fixed-rate loans will begin to increase as market interest rates decline. However, we expect our total non-interest expenses to remain high following the conversion due to our need to hire additional lending and accounting personnel and the increased expenses associated with being a public company.
Interest Income. Interest income increased by $29,000 or 7.9% to $396,000 in the three months ended June 30, 2025 from $367,000 in the comparable period of 2024. The increase in interest income was due to an increase of $33,000 or 113.8% in other interest on deposits with other banks and cash equivalents, as the average balance increased by $3.1 million or 176.7% due to the conversion proceeds. Our cash and cash equivalents were $4.2 million at June 30, 2025 as we used a portion of our excess liquidity to fund deposit outflows. This increase was partially offset by decreases of $4,000 or 1.2% in interest on loans and $1,000 or 20.0% in dividends on FHLB stock.
The decreased interest on loans was due to a $.9 million or 2.7% decrease in the average loan balance, as demand for our fixed-rate loans remained weak throughout 2024 and into 2025. The decrease in the average balance was partially offset by an increase in the average yield to 4.34% in 2025 compared to 4.27% in 2024, as the average yield on new loan originations exceeded the average yield on repayments of older loans. Our total loan originations increased in the three months ended June 30, 2025 by $171,000, or 38.5%, from $444,000 for the three months ended June 30, 2024, as the demand for our fixed-rate loans began to increase. Market interest rates for fixed-rate loans currently exceed the average yield on our loan portfolio.
The decreased dividends on our FHLB stock were primarily due to a decrease in the average yield on this stock to 4.48% in 2025 compared to 5.90% in 2024. The lower yield was partially offset by an increase in the average outstanding balance of $18,000 or 5.3% in 2025 compared to 2024, as we were required to purchase additional FHLB stock in connection with our dividends in FHLB stock.
Interest Expense . Total interest expense decreased by $34,000 or 35.4% to $62,000 for the three months ended June 30, 2025 from $96,000 for the three months ended June 30, 2024. The decrease was primarily due to the decrease of $27,000 in interest expense on certificates of deposit, and a decrease of $7,000 in FHLB advances in the three months ended June 30, 2025 compared to June 30, 2024. Interest expense on interest-bearing demand deposits was flat between the periods as we incurred $2,000 in both periods. The average rate paid remained at .09%; however, the average account balance decreased by $.4 million from $9.0 million for the three month period June 30, 2024 for a 4.1% decrease.
At June 30, 2025, $6.8 million or 96.3% of our total certificates of deposit were scheduled to mature within the following 18 months. We shortened the average maturity of our certificates of deposit in anticipation of market interest rates beginning to decline. If the Federal Reserve Board reduces its federal funds rate and market interest rates on new certificates of deposit decrease from current levels, we expect these rate reductions will eventually result in declines in our cost of funds.
The interest expense on our certificates of deposit decreased to $60,000 in the three months ended June 30, 2025 from $87,000 in the comparable three months of 2024. This decrease in interest expense of $27,000 was due to the average rate paid on certificates of deposit decreasing to 3.41% in 2025 from 3.49% in 2024, reflecting the roll-off of higher rate certificates of deposits. The average balance of certificates of deposit declined in 2025 by $2.9 million or 29.3% from the three months ended June 30, 2024, as we elected not to renew higher average rate term deposits that matured during the period.
There was no interest expense on FHLB advances during the three months ended June 30, 2025 compared to $7,000 in the three months ended June 30, 2024, as there were no outstanding FHLB advances in the three months ended June 30, 2025 compared to $523,000 in the three months ended June 30, 2024. All of our outstanding FHLB advances were repaid upon maturity prior to December 31, 2024.
Net Interest Income. Net interest income increased by $63,000, or 23.2%, to $334,000 for the three months ended June 30, 2025 compared to $271,000 for the three months ended June 30, 2024. The increase was primarily due to a $6 million or 42.4% increase in the average balance of our net interest-earning assets. The average interest rate spread increased to 2.82% for three months ended June 30, 2025 from 2.38% for the three months ended June 30, 2024, as the cost of funds decreased as higher paying certificate of deposits that matured were not renewed. The ability to shift our funding mix and rates was due to the completion of our stock offering and conversion in January of 2025.
Provision for Credit Losses. We made no provision for credit losses in either the three months ended June 30, 2025 or 2024. We had no loan charge-offs in either the three months ended June 30, 2025 or 2024. Our total non-performing assets as of June 30, 2025 and 2024 were $73,000 and $34,000, respectively. The allowance for credit losses was $185,000 at June 30, 2025 and 253% of non-performing asset at June 30, 2025. As of June 30, 2025, we had four loans totaling $266,000 that were 30 days or more delinquent, compared to one loan for $354,000 that was 30 days or more delinquent at December 31, 2024. One past due loan with an outstanding balance of $73,000 was 90 days past due and on nonaccrual at June 30, 2025. No additional provision for credit losses was deemed necessary in the loan portfolio.
Non-interest Income . Non-interest income totaled $8,000 for both the three months ended June 30, 2025 and the comparable three months of 2024. Non-interest income is comprised of customer service charges and rental income.
Non-interest Expense . Non-interest expense increased by $99,000, or 34.5%, to $386,000 for the three months ended June 30, 2025 compared to $287,000 for the three months ended June 30, 2024. The increase in non-interest expense in the three months of 2025 was primarily due to increases of:
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$74,000 or 274.1% in audit and regulatory examination fees, legal and insurance |
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$17,000 or 100% in advertising |
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$8,000 or 4.5% in salaries and employee benefits |
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$3,000 or 11.5% in data processing |
The above increases were partially offset by decreases of:
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$1,000 or 2.9% in occupancy and equipment expense |
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$1,000 or 20.0% in correspondent charges |
The increase in audit and regulatory examination expense, legal and insurance resulted primarily from additional professional fees related to preparation and filing of public company filings. The increase in salaries and employee benefits in the three months of 2025 was primarily due to additional costs related to the hiring of an additional accounting employee and contract resources, which was partially offset by the reduction in salary expense of our chief financial officer. Advertising expense increased in the three months of 2025 as we implemented a social media campaign in select markets.
Income Tax Provision (Benefit) . We had an income tax benefit of $8,000 for the three months ended June 30, 2025 compared to an income tax benefit of $2,000 for the comparable three months of 2024. The tax benefit in the three months of 2025 represented an effective tax rate of 18.2% on our pre-tax loss of $44,000 for such period, and our tax benefit for the three months of 2024 represented an effective tax rate of 22.2% on our pre-tax loss of $9,000 for such period. The change in the effective rate between the periods was due to the amount of certain nondeductible expenses.
Comparison of Operating Results for the Six Months Ended June 30, 2025 and 2024
General . We had a net loss of $66,000 for the six-month period ended June 30, 2025 compared to a net loss of $24,000 for the comparable period of 2024. This $42,000 increase in the net loss was due to an increase of $174,000 in total non-interest expense, which was partially offset by an increase of $122,000 in net interest income and an increase of $9,000 in the income tax benefit. On September 18, 2024, the Federal Reserve Board decreased its federal funds rate by 0.5%, which was the first decrease in four years, and which was followed by two additional decreases in the fourth quarter of 2024. One or more rate reductions in the last several months of 2025 by the Federal Reserve Board are expected by the market. We expect these rate reductions will continue to result in declines in our cost of funds and improvement in our net interest income. We also expect the demand for our fixed-rate loans will begin to increase as market interest rates decline. However, we expect our total non-interest expenses to remain high following the conversion due to our need to hire additional lending and accounting personnel and the increased expenses associated with being a public company.
Interest Income. Interest income increased by $81,000 or 11.2% to $806,000 in the six months ended June 30, 2025 from $725,000 in the comparable period of 2024. The increase in interest income was due to an increase of $90,000 or 173.1% in other interest on deposits with other banks and cash equivalents, as the average balance increased by $4.2 million or 246.6% due to the conversion proceeds. This increase was partially offset by decreases of $8,000 or 1.2% in interest on loans and $1,000 or 11.0% in dividends on FHLB stock.
The decreased interest on loans was due to a $1.2 million or 3.9% decrease in the average loan balance, as demand for our fixed-rate loans remained weak throughout 2024 and into 2025. The decrease in the average balance was partially offset by an increase in the average yield to 4.31% in 2025 compared to 4.19% in 2024, as the average yield on new loan originations exceeded the average yield on repayments of older loans. Our total loan originations increased in the six months ended June 30, 2025 by $1.5 million, or 300.6%, from $499,000 for the six months ended June 30, 2024, as the demand for our fixed-rate loans began to increase. Market interest rates for fixed-rate loans currently exceed the average yield on our loan portfolio.
The decreased dividends on our FHLB stock were primarily due to a decrease in the average yield on this stock to 4.51% for the first half of 2025 compared to 5.31% in the first half of 2024. The lower yield was partially offset by an increase in the average outstanding balance of $16,000 or 4.72% in 2025 compared to 2024, as we were required to purchase additional FHLB stock in connection with our dividends in FHLB stock.
Interest Expense . Total interest expense decreased by $41,000 or 22.2% to $143,000 for the six months ended June 30, 2025 from $184,000 for the six months ended June 30, 2024. The decrease was primarily due to the decrease of $19,000 in interest expense on FHLB advances in the six months ended June 30, 2025 compared to June 30, 2024 and a decrease of $21,000 in interest expense on certificates of deposit between the periods. The average balance of certificates of deposit declined in 2025 by $1.8 million from the six months ended June 30, 2024, as we did not renew $2 million of term deposits that matured with an average rate of 4.1%.
At June 30, 2025, $6.8 million or 96.3% of our total certificates of deposit were scheduled to mature within the following 18 months. We shortened the average maturity of our certificates of deposit in anticipation of market interest rates beginning to decline. If the Federal Reserve Board reduces its federal funds rate and market interest rates on new certificates of deposit decrease from current levels, we expect these rate reductions will eventually result in declines in our cost of funds.
There was no interest expense on FHLB advances during the six months ended June 30, 2025 compared to $19,000 in the six months ended June 30, 2024, as there were no outstanding FHLB advances in the six months ended June 30, 2025 compared to $500,000 in the six months ended June 30, 2024. All of our outstanding FHLB advances were repaid upon maturity prior to December 31, 2024.
Net Interest Income. Net interest income increased by $122,000, or 22.5%, to $663,000 for the six months ended June 30, 2025 compared to $541,000 for the six months ended June 30, 2024. The increase was primarily due to an increase in the average balance of other interest-earning assets as a result of the stock transaction in January and a decrease in average interest-bearing liabilities as high rate time deposits were not renewed.
Provision for Credit Losses. We made no provision for credit losses in either the six months ended June 30, 2025 or 2024. We had no loan charge-offs in either the six months ended June 30, 2025 or 2024. Our total non-performing asset as of June 30, 2025 and 2024 were $73,000 and $34,000, respectively. The allowance for credit losses was $185,000 at June 30, 2025 and 253.4% of non-performing asset at June 30, 2025. As of June 30, 2025, we had four loans totaling $266,000 that were 30 days or more delinquent, compared to one loan for $354,000 that was 30 days or more delinquent at December 31, 2024. One past due loan with an outstanding balance of $73,000 was 90 days past due and on nonaccrual at June 30, 2025. No additional provision for credit losses was deemed necessary in the loan portfolio.
Non-interest Income . Non-interest income increased $1,000 for the six months ended June 30, 2025 to $17,000 compared to the six months of 2024. The increase is due primarily to an increase in customer service charges and fees. Rental income totaled $13,000 and $11,000 for the six months ended June 30, 2025 and 2024, respectively.
Non-interest Expense . Non-interest expense increased by $174,000, or 29.6%, to $762,000 for the six months ended June 30, 2025 compared to $588,000 for the six months ended June 30, 2024. The increase in non-interest expense in the six months of 2025 was primarily due to increases of:
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$147,000 or 262.5% in audit and regulatory examination fees, insurance and legal expenses |
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$17,000 in advertising expenses |
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$6,000 or 11.8% in data processing |
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$3,000 or .8% in salaries and employee benefits |
The above increases were partially offset by decreases of:
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$5,000 or 7.2% in occupancy and equipment expense |
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$1,000 or 10% in correspondent fees |
The increase in audit and regulatory examination fees and legal expense resulted primarily from additional professional fees related to preparation and filing of public company filings. Advertising expense increased in the six months of 2025 as we implemented a social media campaign in certain markets. The increase in data processing is due primarily to rising costs of processing transactions. The increase in salaries and employee benefits in the three months of 2025 was primarily due to incurring compensation expense for the Company’s new ESOP and additional costs related to the hiring of an additional accounting employee and contract resources, partially offset by the reduction in salary expense of our chief financial officer.
Income Tax Provision (Benefit) . We had an income tax benefit of $16,000 for the six months ended June 30, 2025 compared to an income tax benefit of $7,000 for the comparable six months of 2024. The tax benefit in the six months of 2025 represented an effective tax rate of 19.5% on our pre-tax loss of $82,000 for such period, and our tax benefit for the six months of 2024 represented an effective tax rate of 22.6% on our pre-tax loss of $31,000 for such period. The amount of non-deductible expenses resulted in the change in the effective rate between the periods.
Liquidity and Capital Resources
Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans, and to a lesser extent borrowings. We have the ability to borrow from the Federal Home Loan Bank of Dallas. All advances outstanding during 2024 matured and were paid prior to December 31, 2024, and we have not utilized any FHLB advances in 2025.
While maturities and scheduled amortization of loans are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions and competition. Our most liquid assets are cash and cash equivalents. The levels of these assets depend on our operating, financing and lending activities during any given period.
Our cash flows are comprised of three primary classifications: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities. For the six months ended June 30, 2025, cash flows from operating, investing and financing activities resulted in a net decrease in cash and cash equivalents of $5.8 million compared to a net decrease of $115,000 for the six months ended June 30, 2024. The decrease in cash and cash equivalents was due primarily from a use of cash in financing activities of $5.4 million and a use of cash from investing activities of $326,000 for the six months ended June 30, 2025 compared to a use of cash in both financing activities and operating activities of $334,000 and $236,000 for the six months ended June 30, 2024. Operating activities decreased primarily due to fluctuations in operating assets and liabilities and non-cash operating changes in account balances. Financing activities used $4.3 million of cash to fund deposit outflows, $1.4 million in refunds of stock subscriptions and $145,000 in stock issuances costs paid, which amounts were partially offset by $187,000 of proceeds from stock subscription conversion deposits and a $241,000 increase in advances from borrowers for insurance and taxes. The $5.8 million reduction in cash and cash equivalents during the six months ended June 30, 2025 to $4.2 million contributed to the reduction in total assets to $37.1 million from $44.0 million at December 31, 2024.
We are committed to maintaining a strong liquidity position. We monitor our liquidity on a daily basis and anticipate that we will have sufficient funds to meet our current funding commitments. Based on our deposit retention experience and current pricing strategy, we anticipate that a significant portion of maturing time deposits can be retained. At June 30, 2025, certificates of deposit that are scheduled to mature within the next 18 months totaled $6.7 million with $4.5 million in the remainder of 2025. Management expects that a substantial portion of the maturing certificates of deposit will be renewed. However, if a substantial portion of these deposits is not retained, we may raise interest rates on deposits to attract new accounts or utilize Federal Home Loan Bank of Dallas advances, which may result in higher levels of interest expense.
At June 30, 2025, the Association was categorized as well-capitalized under regulatory capital guidelines. Management is not aware of any conditions or events since the most recent notification that would change our category. For further information, see Note 7 of the notes to the unaudited consolidated financial statements as of and for the six months ended June 30, 2025.
The following table summarizes our outstanding commitments to originate loans and to advance additional amounts pursuant to outstanding letters of credit, lines of credit and undisbursed construction loans at June 30, 2025. When we disburse funds pursuant to outstanding commitments, those disbursements increase our outstanding loans and are treated as loan originations in the period in which the funds are disbursed.
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Total Amounts Committed at June 30, 2025 |
Amount of Commitment Expiration - Per Period |
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| To | 1-3 |
Over 3 to 5 |
After 5 |
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1 Year |
Years |
Years |
Years |
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(dollars in thousands) |
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Unused lines of credit |
$ | 980 | $ | - | $ | - | $ | - | 980 | |||||||||||
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Undisbursed portion of loans in process |
918 | 918 | - | - | - | |||||||||||||||
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Commitments to originate loans |
- | - | - | - | - | |||||||||||||||
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Total commitments |
$ | 1,898 | $ | 918 | $ | - | $ | - | $ | 980 | ||||||||||
The following table summarizes our contractual cash obligations at June 30, 2025.
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As of June 30, 2025 |
Payments Due by Period |
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| To | 1-3 |
Over 3 to 5 |
After 5 |
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1 Year |
Years |
Years |
Years |
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(dollars in thousands) |
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Certificates of deposit |
$ | 7,065 | $ | 6,665 | $ | 370 | $ | 30 | $ | - | ||||||||||
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FHLB advances |
- | - | - | - | - | |||||||||||||||
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Total long-term debt |
$ | 7,065 | $ | 6,665 | $ | 370 | $ | 30 | $ | - | ||||||||||
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required.
Item 4. Controls and Procedures
An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of June 30, 2025. Based on that evaluation, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company’s controls and procedures were not effective due to the material weaknesses disclosed above in Item 2 under “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Internal Control Over Financial Reporting.”
During the quarter ended June 30, 2025, there have been no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting, except as follows to address the material weaknesses disclosed above in Item 2 under “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Internal Control Over Financial Reporting.” We are currently assessing and improving our processes and control procedures to ensure they operate at an acceptable level of assurance. Re-assessment of segregation of duties has been performed including formalizing controls and procedures. Technology controls continue to be reviewed, however technology access controls have been updated.
Part II – Other Information
The Company is not subject to any pending legal proceedings. From time to time, the Association is subject to various legal actions arising in the normal course of business. In the opinion of management, the resolution of these legal actions is not expected to have a material adverse effect on the Association’s or the Company’s financial condition or results of operations.
Not applicable, as the Company is a smaller reporting company.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
During the three months ended June 30, 2025, of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of the Company’s securities that was intended to satisfy the affirmative defense conditions of SEC Rule 10b5 - 1 (c) or any “non-Rule 10b5 - 1 trading arrangement” (as such term is defined in Item 408 of SEC Regulation S-K).
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Articles of Incorporation of Magnolia Bancorp, Inc. (1) |
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Bylaws of Magnolia Bancorp, Inc. (1) |
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Amendment No. 1 to Bylaws of Magnolia Bancorp, Inc. (2) |
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Form of Stock Certificate of Magnolia Bancorp, Inc. (1) |
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Description of Securities Registered under Section 12 of the Securities Exchange Act of 1934 (3) |
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Employment Agreement by and between Magnolia Bancorp, Inc. and Mutual Savings and Loan Association and Michael L. Hurley* (1) |
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Employment Agreement by and between Magnolia Bancorp, Inc. and Mutual Savings and Loan Association and Anita C. Cambre* (1) |
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Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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| 32.2 | Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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101.INS |
Inline XBRL Instance Document. |
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101.SCH |
Inline XBRL Taxonomy Extension Schema Document. |
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101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
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101.DEF |
Inline XBRL Taxonomy Extension Definitions Linkbase Document. |
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101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document. |
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101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
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104 |
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
__________________________
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* |
Denotes management compensation plan or arrangement. |
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(1) |
Incorporated by reference from the Company’s Registration Statement on Form S-1, filed on August 27, 2024, as amended, and declared effective on November 8, 2024 (Commission File No. 333-281796). |
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(2) |
Incorporated by reference from the Company’s Current Report on Form 8-K, filed on July 29, 2025 (Commission File No. 333-281796). |
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(3) |
Incorporated by reference from the Company’s Registration Statement on Form 8-A, filed on January 14, 2025 (File (Commission File No. 333-281796). |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Magnolia Bancorp, Inc. | ||
| (Registrant) |
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Date: August 12, 2025 |
/s/ Michael L Hurley | |
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Michael L Hurley |
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President and Chief Executive Officer |
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Date: August 12, 2025 |
/s/ Anita C Cambre | |
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Anita C Cambre |
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Vice President and Chief Financial Officer |