MainStreet Bancshares(US:MNSB)2025-03-14 13:38Financial 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].