Financial Data and Key Metrics Changes - The net interest margin increased by 34 basis points from the previous quarter to 3.3% [7] - Earnings per common share were reported at $0.25, with a return on average assets of 0.46% and a return on average equity of 4.78% [8] - Non-performing loans remained steady at $21.7 million, expected to reduce to $10.5 million with a court-approved payoff in June [7][32] Business Line Data and Key Metrics Changes - The loan portfolio experienced nominal net growth of $1 million quarter on quarter [20] - Non-owner occupied commercial real estate loans grew by $25 million, accounting for 31% of the portfolio [21] - Construction loans decreased by $47 million, while multi-family loans increased by $12 million [22][23] Market Data and Key Metrics Changes - The D.C. Metropolitan area is characterized by low unemployment and good median household incomes, with a vibrant housing market [4] - The market remains a seller's market, particularly in residential real estate, while the condo market is expected to recover as interest rates approach 5% [4] Company Strategy and Development Direction - The company has discontinued the Avenue banking-as-a-service initiative to focus on core banking operations [6][38] - There is a strategic emphasis on reducing funding costs and expanding the net interest margin through balance sheet management [12][16] - The company aims to capitalize on pricing opportunities in a stable or decreasing rate environment [14][16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing strong loan demand and positive resolutions on non-performing loans [9][36] - The company is closely monitoring political and economic conditions that may impact business strategy [5][140] - Management believes the current environment is positive for the bank, focusing on core banking to enhance shareholder value [99][102] Other Important Information - The company anticipates a 12.5% decrease in operating expenses during the second quarter [16] - The company has credit facilities for over 35% of its deposit portfolio [11] - The company is exploring opportunities for stock buybacks in line with its strategy [17] Q&A Session Summary Question: What is the background on the share count increase? - The increase is due to employee compensation plans where restricted shares vest in January each year [41] Question: How much of the margin improvement is due to lower cost of funds? - The improvement is attributed to both lower cost deposits and strong loan demand [49] Question: Are there risks from other properties affecting asset quality? - Management is continuously evaluating market data and does not have direct exposure to federal agency leases [51][119] Question: What are the plans for capital redeployment after Avenue's discontinuation? - Currently, there are no new technological initiatives planned; the focus remains on core banking [145] Question: What is the expected annual cost savings from the Avenue shutdown? - Detailed annualized cost savings will be provided in future reports, with some savings already recognized [114][112] Question: Will there be further cost cuts in 2026? - The company will continue to focus on efficiency and make decisions as necessary [116] Question: What is the strategy for growing deposits? - The strategy involves leveraging business bankers and maintaining strong relationships to attract low-cost deposits [132][134]

Financial Performance - The company's Earnings Per Share (EPS) for 1Q25 was $0.25[24] - The Return on Average Assets (ROAA) for 1Q25 was 0.46%[24] compared to (2.80%) in 4Q24[24] - The Net Interest Margin for 1Q25 was 3.30%[24] compared to 2.96% in 4Q24[24] - Net Income to Common Shareholders (Loss) was $1.914 million in Q1'25[63] compared to -$16.706 million in Q4'24[63] Balance Sheet and Liquidity - Total assets were $2.223 billion as of 1Q25[24] - Total deposits were $1.908 billion as of 1Q25[24] - The Liquidity Coverage Ratio (LCR) for 1Q25 was 225%[25] - High quality liquid assets totaled $274 million in 1Q25[25] Loan Portfolio - Net loans totaled $1.812 billion as of 1Q25[24] - Residential Real Estate loans accounted for 11% of the loan portfolio[36], Construction loans accounted for 19%[36], C&I loans accounted for 6%[36], Multi-Family loans accounted for 13%[36], Owner-Occupied CRE loans accounted for 20%[36], and Non-Owner Occupied CRE loans accounted for 31%[36]

Core Viewpoint - MainStreet Bank reported quarterly earnings of $0.25 per share, exceeding the Zacks Consensus Estimate of $0.21 per share, but down from $0.36 per share a year ago, indicating a 19.05% earnings surprise [1] Financial Performance - The company posted revenues of $17.45 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 1.39%, compared to $16.26 million in the same quarter last year [2] - Over the last four quarters, MainStreet Bank has surpassed consensus EPS estimates just once and topped consensus revenue estimates two times [2] Stock Performance - MainStreet Bank shares have declined approximately 9.1% since the beginning of the year, while the S&P 500 has decreased by 10.2% [3] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $0.26 on revenues of $17.89 million, and for the current fiscal year, it is $1.10 on revenues of $72.37 million [7] - The estimate revisions trend for MainStreet Bank is favorable, leading to a Zacks Rank 2 (Buy) for the stock, indicating expected outperformance in the near future [6] Industry Context - The Banks - Northeast industry, to which MainStreet Bank belongs, is currently in the top 23% of over 250 Zacks industries, suggesting a positive outlook for stocks within this sector [8]

Expanding Net Interest Margin, Resilient Loan Portfolio and Well Capitalized FAIRFAX, Va., April 21, 2025 /PRNewswire/ -- MainStreet Bancshares, Inc. (Nasdaq: MNSB & MNSBP), the financial holding company for MainStreet Bank, reported first quarter net income of $2.5 million with a net interest margin of 3.30%, up 34 basis points from the previous quarter. Net interest income after provision for credit losses was $16.5 million, up $3.9 million from the previous quarter and earnings per common share were $0.2 ...

Financial Performance - MainStreet Bancshares reported a net income of $2.5 million for Q1 2025, with earnings per share at $0.25[1] - Net income available to common shareholders was $1,914 million, a recovery from a loss of $16,706 million in the previous quarter[12] - Earnings per common share for the quarter was $0.25, compared to a loss of $2.20 in the previous quarter[12] - Earnings per common share (basic and diluted) decreased to $0.25 in Q1 2025 from $0.36 in Q1 2024, a decline of approximately 30.6%[20] - The return on average assets (annualized) was 0.46% for Q1 2025, down from 0.65% in Q1 2024[20] Interest Income and Margin - Total interest income for the three months ended March 31, 2025, was $32,963 million, a decrease from $35,119 million in the previous quarter[12] - Net interest income after provision for credit losses was $16,510 million, compared to $12,634 million in the previous quarter, reflecting a significant recovery[12] - For the three months ended March 31, 2025, net interest income was $16,580,000, compared to $15,697,000 for the same period in 2024, reflecting an increase in net interest margin to 3.30% from 3.29%[18] - Net interest income (GAAP) for Q1 2025 was $16,510 million, an increase from $15,625 million in Q1 2024, representing a growth of 5.67%[23] - Total interest income (GAAP) for Q1 2025 reached $32,963 million, compared to $32,469 million in Q1 2024, reflecting an increase of 1.52%[23] - Net interest margin (GAAP) improved to 3.28% in Q1 2025 from 3.27% in Q1 2024[23] - The net interest margin increased to 3.30%, up 34 basis points from the previous quarter, driven by the replacement of higher-cost deposits[2] Loans and Deposits - Total deposits remained stable at $1.9 billion, with funding costs improving by 24 basis points to 3.49%[2] - The loan-to-deposit ratio was 96%, indicating efficient utilization of deposit funds for lending[2] - Total gross loans increased slightly to $1,835,928 million, with commercial real estate loans growing by 4.3% quarter-over-quarter[14] - Total deposits remained stable at $1,908,325 million, with a notable increase in savings and NOW deposits by 92.8% compared to the previous quarter[14] - Nonperforming loans held steady at $21.7 million, with an additional $11.2 million expected to pay off in Q2 2025[3] - Non-performing loans rose to $21,665,000 in Q1 2025, compared to $9,263,000 in Q1 2024, marking an increase of 134.5%[20] Assets and Capital - Total assets were reported at $2.2 billion, with gross loans stable at $1.8 billion[3] - The total assets as of March 31, 2025, were $2,155,461,000, up from $2,037,469,000 in 2024, indicating a growth of approximately 5.8%[18] - Total assets (GAAP) grew to $2,222,845 million as of March 31, 2025, compared to $2,070,015 million in 2024, indicating an increase of 7.37%[23] - The total risk-based capital ratio decreased to 15.83% as of March 31, 2025, from 17.05% in the previous year[20] Expenses and Efficiency - Total non-interest expenses decreased significantly to $14,314 million from $34,431 million in the previous quarter, indicating improved cost management[12] - The efficiency ratio increased to 82.03% in Q1 2025 from 76.01% in Q1 2024, indicating a decline in operational efficiency[20] Strategic Initiatives - The Avenu technology initiative was discontinued due to an extended timeline for expected returns on invested capital[4] - MainStreet Bank operates six branches and offers a fully integrated online and mobile banking solution[4] - The bank continues to focus on enhancing customer experience through various lending products and services[5] - MainStreet Bank was the first community bank in the D.C. area to provide a full online business banking solution[6]

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Financial Position and Capital Management - As of December 31, 2024, the legal lending limit for loans to one borrower was approximately $46.8 million[48]. - The held-to-maturity portfolio totaled $16.1 million, primarily composed of municipal securities and subordinated debt[55]. - The available-for-sale portfolio totaled $55.7 million, including collateralized mortgage-backed securities and U.S. Government agency securities[55]. - The Company issued $30 million in fixed-to-floating subordinated notes in April 2021, with a fixed interest rate of 3.75% until April 2026[56]. - The Company completed the issuance of $43.8 million in fixed-to-floating rate subordinated notes in March 2022, with a fixed interest rate of 4.00% until March 2027[57]. - The Company is classified as a "small bank holding company" with total consolidated assets of less than $3 billion, allowing for capital adequacy evaluation at the bank level[110]. - The capital restoration plan for undercapitalized banks requires guarantees from the bank holding company, with liability limited to the lesser of 5% of the bank's assets or the amount needed for adequate capitalization[112]. - Under Basel III, the Bank must maintain a common equity Tier 1 capital ratio of at least 4.5%, a Tier 1 capital ratio of at least 6%, and a total capital ratio of at least 8%[125]. - As of December 31, 2024, the Bank was classified as "well-capitalized," meeting all regulatory capital standards[130]. - The Company has opted not to utilize the Community Bank Leverage Ratio (CBLR) framework, despite qualifying for it as of December 31, 2024[128]. Regulatory Compliance and Oversight - The company is subject to extensive regulation under the Bank Holding Company Act and other federal laws, impacting its operations and financial condition[99][101]. - The Economic Growth Act increased the asset threshold for certain regulatory benefits from $1 billion to $3 billion, affecting the company's examination cycle[105]. - The Federal Reserve must approve any acquisition of more than 5% of voting stock in other banks or bank holding companies, considering factors such as competition and financial condition[113]. - The Company is subject to restrictions on dividends, requiring net income to cover dividends and maintaining minimum regulatory capital adequacy ratios[115]. - The Volcker Rule generally prohibits bank holding companies from engaging in proprietary trading and certain investment fund activities, but the Company is exempt due to its asset size[119]. - The Federal Reserve has broad authority to restrict activities of bank holding companies that are deemed unsafe or unsound, including dividend payments[120]. - The Bank is subject to certain restrictions on dividends under federal and state laws, requiring regulatory approval for dividends exceeding net undivided profits[137]. - The Bank may not pay any dividend if it is undercapitalized or if the payment would cause it to become undercapitalized[138]. - The Bank's ability to engage in transactions with affiliates is limited to 10% of its capital stock and surplus for any one affiliate[134]. Interest Rate Risk Management - The company's net interest income for a 12-month period is projected to be $69,874,000 at current interest rates, with potential increases of 7.57% to $75,167,000 if rates rise by 400 basis points[446]. - A 100 basis point increase in interest rates would result in a net interest income of $71,964,000, reflecting a 2.99% increase from the current level[446]. - The economic value of equity (EVE) is estimated at $315,663,000 at current interest rates, with a potential decrease of 18.00% to $258,851,000 if rates increase by 400 basis points[447]. - The company is asset sensitive as of December 31, 2024, indicating a potential impact from interest rate fluctuations on net interest income[451]. - The company utilizes interest rate swaps to manage interest rate risk, allowing customers to pay a fixed rate while the company receives a floating rate[452]. - The company has established policies to manage market risk, focusing on minimizing adverse effects from changes in interest rates on net interest income[442]. - The company’s interest rate risk management is overseen by its Asset/Liability Committee, which meets regularly to formulate strategies[443]. - The company’s financial instruments are influenced by changes in interest rates, with various assumptions made regarding loan prepayment speeds and deposit maturity[444]. Employee Diversity and Community Engagement - As of December 31, 2024, the company employed 204 full-time employees, with 73% self-identifying as either female or ethnically diverse[82][84]. - Approximately 12% of employees work remotely full-time, contributing to a broader recruitment pool and reduced carbon footprint[79]. - The company established MainStreet Community Capital in 2022 to support ESG initiatives, focusing on distressed, low-income communities in the Washington, D.C. area[81]. - The company had 25 promotions in 2024, with 5 promotions for ethnically diverse females and 6 for white females[95]. - The age distribution of employees shows 29% are aged 50-59, while 10% are aged 20-29[91]. - The board consists of 9 directors, with 7 being independent, including one female and one African-American male[87][89]. - The company is focused on equal pay for equal work and developing all employees to reach their full potential[90]. - The company has applied for New Markets Tax Credits through the CDFI Fund to support its community development initiatives[81]. Sustainability and ESG Initiatives - The Company aims to support the FinTech industry by providing Banking-as-a-Service (BaaS) solutions to access untapped markets[62]. - The Company has a goal of reducing carbon emissions each year as part of its Environmental, Social, and Governance (ESG) initiatives[75]. - The Company has converted all lighting to LED and added charging stations for electric vehicles to enhance sustainability efforts[77]. Compliance and Legal Risks - The company must comply with federal laws and regulations regarding privacy and information security, impacting how consumer information is handled[155][156]. - The company is subject to regulatory scrutiny regarding compliance with anti-money laundering programs and OFAC sanctions, which could have legal and financial consequences[154]. CRA Performance - The Bank received an "Outstanding" rating in its most recent CRA examination in 2022[145]. FDIC and CFPB Regulations - The FDIC issued a final rule in October 2022 increasing deposit insurance assessments on all financial institutions beginning in the first quarterly assessment period of 2023[141]. - The CFPB finalized a rule in December 2024 requiring financial institutions with over $10 billion in assets to cap overdraft fees at $5.00 or follow TILA requirements[148]. - The Dodd-Frank Act requires incentive compensation rules to be issued jointly by six federal agencies, with the original proposal still pending[140]. - The Federal Reserve must appoint a receiver or conservator for an institution that is critically undercapitalized[131].

Core Viewpoint - MainStreet Bank (MNSB) has been upgraded to a Zacks Rank 2 (Buy), indicating a positive trend in earnings estimates which is a significant factor influencing stock prices [1][3]. Earnings Estimates and Stock Performance - The Zacks rating system is based on changes in earnings estimates, which are closely correlated with stock price movements, making it a valuable tool for investors [2][4]. - The recent upgrade reflects an optimistic earnings outlook for MainStreet Bank, likely leading to increased buying pressure and a rise in stock price [3][5]. Earnings Estimate Revisions - MainStreet Bank is projected to earn $1.10 per share for the fiscal year ending December 2025, representing a year-over-year increase of 103.7% [8]. - Over the past three months, the Zacks Consensus Estimate for MainStreet Bank has risen by 25%, indicating a positive trend in earnings estimates [8]. Zacks Rank System - The Zacks Rank system categorizes stocks into five groups based on earnings estimates, with a strong historical performance, particularly for Zacks Rank 1 stocks which have averaged a +25% annual return since 1988 [7]. - MainStreet Bank's upgrade to Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, suggesting potential for market-beating returns in the near term [10].

Group 1 - MainStreet Bank reported a quarterly loss of $0.12 per share, missing the Zacks Consensus Estimate of $0.23, and down from earnings of $0.61 per share a year ago, representing an earnings surprise of -152.17% [1] - The company posted revenues of $16.85 million for the quarter ended December 2024, missing the Zacks Consensus Estimate by 0.84%, and down from $17.87 million year-over-year [2] - MainStreet Bank shares have declined approximately 3.3% since the beginning of the year, while the S&P 500 has gained 3.7% [3] Group 2 - The earnings outlook for MainStreet Bank is mixed, with the current consensus EPS estimate for the coming quarter at $0.20 on revenues of $17.03 million, and $1.02 on revenues of $71.35 million for the current fiscal year [7] - The Zacks Industry Rank for Banks - Northeast is currently in the top 11% of over 250 Zacks industries, indicating a favorable outlook for the industry [8] - The estimate revisions trend for MainStreet Bank is currently a Zacks Rank 3 (Hold), suggesting the stock is expected to perform in line with the market in the near future [6]

Core Insights - MainStreet Bancshares, Inc. reported a loss of $9.98 million for 2024 due to nonrecurring impairment of capitalized intangible software and resolution of nonperforming assets, but remains strongly capitalized with good liquidity [1][2][3] - The company ended 2024 with a net interest margin of 3.13% and total deposits grew by 13% year-over-year to $1.9 billion, with core deposits making up 75% of total deposits [2][3][4] Financial Performance - The total interest income for the year was $134.615 million, an increase from $124.421 million in 2023, while total interest expense rose to $72.041 million from $47.679 million, resulting in a net interest income of $62.574 million [11][12] - The company resolved 62% of its nonperforming loans and grew its loan portfolio by 6%, with total gross loans reaching $1.835 billion [2][13] Business Strategy - The Avenu Banking-as-a-Service (BaaS) solution launched in October 2024 aims to diversify revenue streams and reach new customer segments, aligning with the company's branch-lite strategy [6][7] - MainStreet Bank focuses on providing innovative embedded banking services and has established fintech partnerships to enhance low-cost deposits and fee income [2][6] Market Position - MainStreet Bank operates in the DC Metropolitan area, which is described as a vibrant market, benefiting from a normalizing interest rate environment with the FOMC cutting rates by a total of 1.0% [3][4] - The bank has a robust line of business and professional lending products, including government contracting lines of credit and commercial real estate loans, and is an SBA Preferred Lender [4][5]