MainStreet Bancshares(US:MNSB)2025-05-09 14:52PART I – FINANCIAL INFORMATION Consolidated Financial Statements For the first quarter ended March 31, 2025, MainStreet Bancshares, Inc. reported total assets of $2.22 billion, a slight decrease from $2.23 billion at year-end 2024. Net income was $2.45 million, a decrease from $3.31 million in the same period of 2024, resulting in diluted earnings per share of $0.25, down from $0.36 year-over-year. The financial statements reflect stable loan and deposit balances, with a strategic pivot away from its Banking-as-a-Service (BaaS) initiative to refocus on core community banking Consolidated Statements of Financial Condition (Unaudited) | (Dollars in thousands) | At March 31, 2025 | At December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $2,222,845 | $2,228,098 | | Loans, net | $1,811,789 | $1,810,556 | | Total deposits | $1,908,325 | $1,907,794 | | Total Liabilities | $2,013,227 | $2,020,107 | | Total Stockholders' Equity | $209,618 | $207,991 | Consolidated Statements of Income (Unaudited) | (Dollars in thousands, except per share data) | For the Three Months Ended March 31, 2025 | For the Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net Interest Income | $16,510 | $15,625 | | Provision For Credit Losses - Loans | $0 | $164 | | Net Income | $2,453 | $3,305 | | Net Income Available to Common Shareholders | $1,914 | $2,766 | | Diluted Earnings Per Common Share | $0.25 | $0.36 | - In the first quarter of 2025, the Company made a strategic decision to pivot away from its Banking-as-a-Service (BaaS) initiative and its fintech core platform, Avenu, to concentrate on its core community banking activities20 Notes to Consolidated Financial Statements The notes detail the company's accounting policies, including the recent adoption of ASU 2023-07 for segment reporting. They provide breakdowns of the investment securities portfolio, which is primarily composed of collateralized mortgage-backed securities and municipal bonds, and the loan portfolio, dominated by commercial and residential real estate. The notes also cover derivatives used for customer accommodation, fair value measurements, lease obligations, and segment performance, which shows the Core Banking segment as profitable and the Financial Technology segment incurring a loss Investment Securities Composition (March 31, 2025) | (Dollars in thousands) | Amortized Cost | Fair Value | | :--- | :--- | :--- | | Available-for-Sale | $65,509 | $55,935 | | Collateralized Mortgage Backed | $21,134 | $17,488 | | Municipal Securities | $32,605 | $27,621 | | Held-to-Maturity | $15,657 | $15,354 | | Municipal Securities | $13,157 | $12,867 | Loan Portfolio Composition (March 31, 2025) | (Dollars in thousands) | Gross Loans | | :--- | :--- | | Residential Real Estate | $451,324 | | Commercial Real Estate | $933,349 | | Construction and Land Development | $344,816 | | Commercial – Non Real Estate | $105,180 | | Total Gross Loans | $1,836,001 | Segment Performance (Q1 2025) | (Dollars in thousands) | Core Banking | Financial Technology | Consolidated | | :--- | :--- | :--- | :--- | | Segment profit (loss) | $5,361 | ($2,226) | $3,135 | | Segment assets | $2,222,779 | $66 | $2,222,845 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management reported a decrease in net income to $2.5 million for Q1 2025, down from $3.3 million in Q1 2024, primarily due to a $1.8 million increase in non-interest expense, driven by higher salaries, severance costs, and outside services. Net interest income grew by 5.6% to $16.6 million, benefiting from a 33 basis point increase in the interest rate spread. The loan portfolio remained stable at $1.81 billion, with a notable concentration in Commercial Real Estate (CRE) loans, which management addresses through robust underwriting and stress testing. The allowance for credit losses was stable at 1.06% of gross loans, and non-performing assets remained at 0.97% of total assets. The company maintains a strong liquidity position and capital ratios well above regulatory requirements Comparison of Results of Operations For Q1 2025 compared to Q1 2024, net income decreased by $0.9 million. This was driven by a $1.8 million rise in non-interest expenses, mainly from salaries, severance, and outside services. Despite this, net interest income increased by $0.9 million due to loan growth and a wider interest rate spread. The provision for credit losses was zero, compared to a $164,000 provision in the prior year. Non-interest income saw a modest increase of $143,000 - Net income decreased by $0.9 million to $2.5 million for Q1 2025, primarily impacted by a $1.8 million increase in non-interest expense124 - Net interest income increased by approximately $0.9 million (5.6%) to $16.6 million, with the net interest margin remaining stable at 3.30%131132 - Non-interest expense increased by $1.8 million (15%), primarily due to an $897,000 increase in salaries and employee benefits (including severance), a $434,000 increase in other operating expenses, and a $399,000 increase in outside services147 Comparison of Financial Condition As of March 31, 2025, total assets slightly decreased by $5.3 million to $2.22 billion from year-end 2024. Net loans grew marginally by $1.2 million to $1.81 billion, with increases in commercial and residential real estate loans offset by a decrease in construction loans. The company holds a significant concentration in Commercial Real Estate (CRE) loans, representing 388.2% of risk-based capital, which is actively managed. Deposits remained stable at $1.91 billion, with a shift in composition including an increase in non-interest-bearing demand deposits and a decrease in money market accounts. Wholesale deposits increased to $577.9 million, serving as a key funding source - The company holds a significant concentration in commercial real estate (CRE) loans. As of March 31, 2025, total CRE loans represented 388.2% of consolidated risk-based capital. Management maintains heightened risk management procedures and strong underwriting criteria for this portfolio156157 Allowance for Credit Losses Ratios | Ratio | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Allowance to non-performing loans | 89.83% | 89.84% | | Allowance to gross loans | 1.06% | 1.06% | Nonperforming Assets | (Dollars in thousands) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total non-performing loans | $21,664 | $21,650 | | Total non-performing assets | $21,664 | $21,650 | | Non-performing assets to total assets | 0.97% | 0.97% | - Wholesale deposits increased by $109.8 million to $577.9 million as of March 31, 2025, providing a diversified and stable source of funding180 Liquidity and Capital Resources The company maintains a strong liquidity position, with primary funding from deposits and supplemental sources from FHLB advances and other borrowings. As of March 31, 2025, cash and cash equivalents totaled $202.6 million. The company had an additional secured borrowing capacity of $554.8 million from the FHLB and $144.0 million from other institutions. All capital ratios remained well above the regulatory requirements for being well-capitalized - As of March 31, 2025, the company had access to significant supplemental liquidity, including $554.8 million in secured borrowing capacity from the FHLB and $144.0 million from other financial institutions185 Bank Capital Ratios (March 31, 2025) | Ratio | Actual | Well Capitalized Requirement | | :--- | :--- | :--- | | Total capital (to risk-weighted assets) | 15.83% | ≥ 10.0% | | Common equity tier 1 capital | 14.78% | ≥ 6.5% | | Tier 1 capital (to risk-weighted assets) | 14.78% | ≥ 8.0% | | Tier 1 capital (to average assets) | 12.90% | ≥ 5.0% | Quantitative and Qualitative Disclosures about Market Risk The company's most significant market risk is interest rate risk, which is managed by the Asset/Liability Committee. The company uses simulation models to estimate the impact of interest rate changes on net interest income over a 12-month period. As of March 31, 2025, the model shows that a 100 basis point increase in rates would increase net interest income by 2.36%, while a 100 basis point decrease would reduce it by 1.91% Net Interest Income Sensitivity Analysis (March 31, 2025) | Basis Point Change in Interest Rates | Year 1 Change From Level | | :--- | :--- | | +400 | 5.70% | | +200 | 3.90% | | +100 | 2.36% | | Level | — | | -100 | (1.91)% | | -200 | (2.15)% | Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures as of March 31, 2025, and concluded they were effective. There were no changes in internal control over financial reporting during the first quarter that materially affected, or are reasonably likely to materially affect, these controls - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were designed and operating in an effective manner as of March 31, 2025205 - No material changes to the company's internal control over financial reporting occurred during the first fiscal quarter of 2025206 PART II – OTHER INFORMATION Legal Proceedings As of March 31, 2025, the Company was not involved in any pending legal proceedings other than routine matters occurring in the ordinary course of business, which are not expected to be material to its financial condition or operating results - The Company is not involved in any material pending legal proceedings outside the ordinary course of business207 Risk Factors As a smaller reporting company, MainStreet Bancshares, Inc. is not required to provide a risk factor update in its Form 10-Q. The company refers to the Risk Factors section in its Annual Report on Form 10-K for the year ended December 31, 2024 - This section is not required for smaller reporting companies. Reference is made to the company's Annual Report on Form 10-K for risk factors208 Unregistered Sales of Equity Securities and Use of Proceeds During the first quarter of 2025, the Company repurchased 24,909 shares of its common stock under a publicly announced plan. All repurchases occurred in January 2025 at an average price of $17.88 per share Common Stock Repurchases (Q1 2025) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | January 2025 | 24,909 | $17.88 | | February 2025 | — | $— | | March 2025 | — | $— | | Total | 24,909 | — | Other Information During the quarter ended March 31, 2025, no directors or executive officers adopted, modified, or terminated any Rule 10b5-1 trading plans or other non-Rule 10b5-1 trading arrangements for the purchase or sale of company securities - No directors or executive officers adopted, modified, or terminated any Rule 10b5-1 trading plans during the fiscal quarter211 Exhibits This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including the CEO and CFO certifications required under Rule 13a-14(a) and Section 1350, as well as the Inline XBRL financial data files - Exhibits filed include: * 31.1: CEO Certification * 31.2: CFO Certification * 32.0: Section 1350 Certification * 101 & 104: Inline XBRL documents213214 Signatures