MainStreet Bank (MNSB) came out with quarterly earnings of $0.25 per share, beating the Zacks Consensus Estimate of $0.21 per share. This compares to earnings of $0.36 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 19.05%. A quarter ago, it was expected that this company would post earnings of $0.23 per share when it actually produced a loss of $0.12, delivering a surprise of -152.17%.Over the last four quarters, the company ...

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]

Financial Performance - MainStreet Bancshares reported a loss of $9.98 million for 2024 due to nonrecurring impairment of capitalized intangible software and resolution of nonperforming assets[1]. - The company reported a net loss of $9,980 thousand, contrasting with a net income of $26,585 thousand in the previous year[17]. - Earnings per common share were reported at $(1.60), down from $3.25, indicating a substantial decline[17]. - The company's return on average assets (annualized) for the three months ended December 31, 2024, was (2.80)%, compared to 1.02% for the same period in 2023[27]. - Net income (loss), as reported, for Q4 2024 was $(16,167) million, compared to a profit of $5,146 million in Q4 2023[30]. - Adjusted net income (loss) for Q4 2024 was $(353) million, while adjusted net income for Q4 2023 was $5,146 million[30]. - The annualized return on average assets (ROAA), as reported, for 2024 was (0.47)%, compared to 1.38% in 2023[30]. Revenue and Income - Total interest income for the year-to-date increased to $134,615 thousand, up from $124,421 thousand in the previous year, representing an increase of 0.96%[17]. - Total non-interest income totaled $3,252 thousand, slightly down from $3,340 thousand, reflecting a decrease of 2.63%[17]. - Net interest income after provision for credit losses decreased to $55,811 thousand from $75,100 thousand, a decline of 25.7%[17]. - Net interest income for the year ended December 31, 2024, was $62,865 thousand, a decrease from $77,025 thousand in 2023, reflecting a decline of 18.4%[25]. - Net interest income (GAAP) for Q4 2024 was $16,041 million, down from $17,311 million in Q4 2023, representing a decrease of 7.3%[30]. - Total interest income (GAAP) for the year 2024 was $134,615 million, an increase of 8.5% compared to $124,421 million in 2023[30]. Assets and Liabilities - Total assets as of December 31, 2024, were $2.23 billion, reflecting a stable financial position[15]. - The allowance for credit losses on loans increased to $19,450 thousand as of December 31, 2024, up from $16,506 thousand in 2023, indicating a rise of 11.7%[27]. - Total gross loans increased to $1,834,988 million, reflecting a 2.0% increase from the previous quarter and a 6.2% increase year-over-year[19]. - Net loans amounted to $1,810,556 million, showing a quarter-over-quarter increase of 2.0%[19]. - The total funding sources increased to $1,980,833 million, reflecting a 0.7% increase from the previous quarter and an 11.7% increase year-over-year[19]. Deposits and Funding - Total deposits grew by 13% year-over-year to $1.9 billion, with core deposits increasing by $187 million[2]. - Total deposits reached $1,907,794 million, a slight increase of 0.7% from the previous quarter and a significant 13.1% increase year-over-year[19]. - Non-interest bearing deposits decreased by 6.7% quarter-over-quarter and 11.1% year-over-year, totaling $324,307 million[19]. - Interest-bearing deposits saw a notable increase in money market deposits, which rose by 23.9% quarter-over-quarter and 26.7% year-over-year, reaching $560,082 million[19]. Operational Efficiency - The efficiency ratio for the year ended December 31, 2024, was 110.85%, significantly higher than 56.96% in 2023, indicating increased operational costs relative to income[27]. - The efficiency ratio, as reported, for Q4 2024 was 204.36%, significantly higher than 61.29% in Q4 2023[31]. Capital and Equity - Total stockholders' equity decreased to $207.99 million by year-end 2024, down from $226.05 million in the previous quarter[15]. - The total risk-based capital ratio as of December 31, 2024, was 15.69%, down from 17.18% in 2023, reflecting a decrease in capital adequacy[27]. - Tangible common stockholders' equity as of December 31, 2024, was $180,728 million, slightly up from $179,597 million in 2023[31]. - The tangible equity to tangible assets ratio decreased to 9.33% in 2024 from 10.24% in 2023, indicating a decline in financial stability[28]. Market and Stock Performance - The closing stock price on December 31, 2024, was $18.10, a decline from $24.81 at the end of 2023, representing a drop of 27.1%[27]. Employee Metrics - The number of full-time equivalent employees increased to 204 in 2024, up from 186 in 2023, indicating a growth in workforce[28]. Interest Rates and Economic Environment - The interest rate environment has normalized with the FOMC cutting rates by a total of 1.0% in 2024, benefiting borrowers[3]. - The interest rate spread decreased to 1.99%, down from 2.39% year-over-year[23]. - The yield on earning assets (GAAP) for Q4 2024 was 6.45%, down from 6.83% in Q4 2023[31].

Financial Performance - Net income for the three months ended September 30, 2024, was $265 thousand, a significant decrease of 95.8% from $6,341 thousand in the same period of 2023[9]. - Net income for the nine months ended September 30, 2024, was $6,187,000, a decrease of 71% compared to $21,438,000 in 2023[20]. - Comprehensive income for the three months ended September 30, 2024, was $1,934 thousand, compared to $3,878 thousand for the same period in 2023[11]. - The company reported a basic loss per common share of $0.04 for the three months ended September 30, 2024, compared to earnings of $0.77 per share in the same period of 2023[9]. - Net income available to common shareholders for the three months ended September 30, 2024, was a loss of $274,000 compared to a profit of $5,802,000 for the same period in 2023[112]. Asset and Deposit Growth - Total assets increased to $2,224,599 thousand as of September 30, 2024, up from $2,035,432 thousand at December 31, 2023, representing a growth of approximately 9.3%[6]. - Total deposits increased to $1,893,669 thousand as of September 30, 2024, up from $1,686,127 thousand at December 31, 2023, reflecting a growth of approximately 12.3%[6]. - As of September 30, 2024, total stockholders' equity increased to $226,051 thousand, up from $224,715 thousand as of June 30, 2024, reflecting a growth of approximately 0.6%[15]. - Cash and cash equivalents at the end of the period reached $232,114,000, up from $121,183,000, marking an increase of 92%[20]. Interest Income and Expense - Net interest income for the three months ended September 30, 2024, was $15,343 thousand, a decrease of 18.3% compared to $18,772 thousand for the same period in 2023[9]. - The total interest income for the three months ended September 30, 2024, was $33,591 thousand, an increase of 5.8% from $31,766 thousand in the same period of 2023[9]. - Total interest expense increased by $5.3 million to $18.2 million for the three months ended September 30, 2024, from $13.0 million for the same period in 2023[150]. - The average yield on interest-earning assets decreased by 14 basis points to 6.67% for the three months ended September 30, 2024, compared to 6.81% for the same period in 2023[145]. Credit Losses and Provisions - Provision for credit losses on loans was $3,125 thousand for the three months ended September 30, 2024, compared to a recovery of $98 thousand in the same period of 2023[9]. - The allowance for credit losses on loans was $18.3 million as of September 30, 2024, compared to $16.5 million at the end of 2023, indicating an increase of approximately 10.9%[55]. - The total allowance for credit losses was $18,327,000, an increase from $17,098,000 at the end of the previous quarter[59]. - The company reported charge-offs of $1,907,000 for the three months ended September 30, 2024, compared to $324,000 in the same period last year[59]. Non-Interest Income and Expense - Non-interest income for the Core Banking segment was $667 million, while total non-interest expense was $12,153 million for the same period[120]. - Non-interest income decreased by $5,000, or 0.6%, to $886,000 for Q3 2024, primarily due to non-recurring prepayment penalties recognized in 2023[165]. - Non-interest expense increased by $1.7 million, or 14.4%, to $13.2 million for Q3 2024, driven by increases in salaries and employee benefits as the company added fifteen employees[166]. Loan Performance - Loan originations decreased from approximately $92.0 million in the three months ended September 30, 2023, to $60.0 million in the same period of 2024, a decline of $32.0 million[160]. - Non-performing loans increased to a balance of $28.3 million as of September 30, 2024, with 42% attributable to one relationship[160]. - Special mention loans increased by $29.9 million and substandard loans increased by $44.2 million, totaling $45.8 million and $77.6 million respectively as of September 30, 2024[162]. Strategic Initiatives and Future Outlook - The company is focusing on market expansion and new product development to enhance revenue streams in the upcoming quarters[81]. - Future guidance indicates a positive outlook for revenue growth driven by strategic initiatives and market demand[81]. - The company is actively exploring acquisition opportunities to strengthen its market position and diversify its offerings[81]. Regulatory and Accounting Changes - The company adopted ASU 2023-02, which allows for a new method of accounting for tax equity investments, effective January 1, 2024, with a cumulative change of approximately $217,000[33]. - The Company expects the adoption of ASU 2023-07 to have no material impact on its consolidated financial statements, effective for fiscal years beginning after December 15, 2023[36].

Financial Data and Key Metrics Changes - The company reported an earnings per common share loss of $0.04 in Q3 2024, primarily due to actions taken on problem loans, impacting several financial ratios including net interest margin and efficiency ratio [11][12] - The annualized net interest margin for Q3 was 3.05%, with a year-to-date margin of 3.19%. Without interest reversals, the margins would have been 3.25% for the quarter and 3.32% year-to-date, indicating stability and improvement in the core earning engine [13] - Noninterest expenses decreased slightly quarter-over-quarter, with a projected run rate of 50 basis points per month for Q4 [17] Business Line Data and Key Metrics Changes - Core deposits constituted 78% of total deposits, with $95 million in new core deposits during the quarter, 35% of which were noninterest-bearing [14] - Gross loans remained flat at $1.8 billion, with new loan fundings of $82 million, indicating continued interest income growth [16][38] - The concentration in construction loans decreased from 130% of capital to 118%, attributed to lower origination volumes and project completions [27] Market Data and Key Metrics Changes - The company operates in a strong market characterized by low unemployment and high median household incomes, benefiting from its location in the Washington D.C. Metropolitan area [5] - Traditional deposit growth remains a challenge across many markets, prompting the company to pursue a banking-as-a-service solution to acquire low-cost deposits [8] Company Strategy and Development Direction - The company is focused on expanding its net interest margin by lowering deposit costs and enhancing its digital strategy through the Avenu banking-as-a-service solution [6][46] - Avenu version 1 is now in service, aimed at reaching new customer deposit segments and diversifying revenue streams [9][46] - The company engaged an independent consulting group, FS Vector, to assess the Avenu solution and its fit within the current regulatory environment [51][53] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future performance, expecting improved metrics in loan classifications and a reduction in problem loans [12][43] - The company is well-capitalized and committed to serving its community, with a focus on healthy growth despite challenges in the market [44] Other Important Information - The company has a robust liquidity management plan and is actively monitoring the stickiness of deposits from fintech partners [87] - The projected breakeven point for the Avenu solution has been pushed to 2026, reflecting a more conservative outlook based on the delayed launch and market conditions [76][79] Q&A Session Summary Question: What industries were involved in the loans sold at par? - The loans sold at par were primarily in investor commercial real estate, including a for-sale condo project and a multifamily project [65] Question: Can you provide an update on the cost of funds? - The cost of funds has declined slightly from June to September, and the beta on funding as Fed funds declines is expected to be higher than during the increase [66][68] Question: What are the expectations for Avenu's growth? - The current deposits stand at $30 million, with a breakeven point projected for 2026, reflecting a conservative estimate based on the delayed launch [76][79] Question: Are FDIC costs changing? - FDIC costs are expected to remain consistent, with slight increases due to higher deposits [72] Question: What is the estimated loss from nonperforming loans? - The estimated loss from current nonperforming loans is around 1.25%, equating to approximately $250,000 to $300,000 [89]