MainStreet Bancshares(MNSB) - 2025 Q2 - Quarterly Results

Executive Summary & Company Overview This section provides an overview of MainStreet Bancshares Inc.'s strong Q2 2025 financial performance, management insights, company profile, and forward-looking statement disclaimers Second Quarter 2025 Highlights MainStreet Bancshares Inc. reported strong second-quarter earnings for Q2 2025, driven by significant increases in net income and net interest margin, outperforming market expectations. The company also highlighted strong asset quality and capital | Metric | Q2 2025 | Change from Previous Quarter | | :----------------------- | :---------- | :--------------------------- | | Net Income | $4.6 million | +$2.1 million | | Net Interest Margin (NIM) | 3.75% | +45 basis points | | Net Interest Income | $19.3 million | +$2.8 million | | Earnings Per Common Share | $0.53 | - | Management Commentary Management attributed the strong performance to team dedication, credit discipline, and strategic deposit management. They emphasized building the core banking franchise and maintaining a well-utilized loan-to-deposit ratio, which contributed to NIM growth. The company also continues to evaluate share repurchases - CEO Jeff W. Dick highlighted the team's hard work and focus on financial performance, affirming the commitment to building the core banking franchise[2] - Chief Lending Officer Tom Floyd noted the loan portfolio's excellent condition due to credit discipline and community knowledge[2] - CFO Alex Vari stated that the loan to deposit ratio remained well utilized at 99%, with strategic deposit management directly contributing to net interest margin growth[2] - The Company maintains an active share repurchase plan with approximately $3.1 million in available capacity[2] About MainStreet Bank MainStreet Bank operates six branches in the Washington, D.C. metropolitan area, offering extensive online and mobile banking solutions. It provides a robust line of business and professional lending products, including government contracting, commercial real estate, and SBA loans, and was a pioneer in online business banking and multi-million-dollar FDIC insurance solutions - MainStreet Bank operates six branches in Herndon, Fairfax, McLean, Leesburg, Clarendon, and Washington, D.C., complemented by 55,000 free ATMs and integrated online/mobile banking[3] - The bank offers a robust line of business and professional lending products, including government contracting lines of credit, commercial lines and term loans, residential and commercial construction, and commercial real estate, as well as SBA 7A and 504 lending solutions[4] - MainStreet Bank was the first community bank in the Washington, D.C. metropolitan area to offer a full online business banking solution and the first in Virginia to offer CDARS for multi-million-dollar FDIC insurance[5] Forward-Looking Statements The release contains forward-looking statements subject to various risks and uncertainties, including fluctuations in interest rates, adverse economic conditions, client relationships, and key personnel changes. Readers are cautioned that actual results may differ materially from projections, and the company does not undertake to update these statements - The release includes forward-looking statements, as defined by the Private Securities Litigation Reform Act of 1995, which are subject to various risks and uncertainties[6] - Factors that could cause actual results to differ materially include fluctuations in market interest rates, adverse economic conditions, maintenance of client relationships, and acquisition or loss of key personnel[6] - The company cautions readers that the list of factors is not exclusive and does not undertake to update forward-looking statements to reflect future events[6] Financial Statements This section presents the unaudited consolidated balance sheets and statements of income, detailing asset, liability, equity, revenue, and expense trends for MainStreet Bancshares Inc Unaudited Consolidated Balance Sheet Information MainStreet Bancshares' balance sheet shows a decrease in total assets and liabilities from March 31, 2025, to June 30, 2025, primarily driven by a reduction in total deposits. Stockholders' equity saw a slight increase over the quarter | Metric (in thousands) | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :-------------------- | :------------ | :------------- | :------------ | | Total Assets | $2,114,781 | $2,222,845 | $2,093,746 | | Total Liabilities | $1,901,311 | $2,013,227 | $1,869,031 | | Total Deposits | $1,798,547 | $1,908,325 | $1,755,363 | | Total Stockholders' Equity | $213,470 | $209,618 | $224,715 | - Total assets decreased by $108.064 million (4.86%) from March 31, 2025, to June 30, 2025[8] - Total deposits decreased by $109.778 million (5.75%) from March 31, 2025, to June 30, 2025[8] Unaudited Consolidated Statements of Income (Loss) Information The company reported a significant increase in net income for Q2 2025 compared to the previous quarter and the prior year, driven by higher net interest income and a recovery in credit losses. Total interest income increased, while total interest expense decreased quarter-over-quarter, contributing to a stronger net interest income | Metric (in thousands) | Q2 2025 (3 Months) | Q1 2025 (3 Months) | Q2 2024 (3 Months) | YTD 2025 (6 Months) | YTD 2024 (6 Months) | | :-------------------- | :----------------- | :----------------- | :----------------- | :------------------ | :------------------ | | Total Interest Income | $34,286 | $32,963 | $33,436 | $67,249 | $65,905 | | Total Interest Expense | $15,496 | $16,453 | $17,871 | $31,949 | $34,715 | | Net Interest Income | $18,790 | $16,510 | $15,565 | $35,300 | $31,190 | | Provision for (recovery of) credit losses | ($543) | $0 | $638 | ($543) | $443 | | Net Income | $4,590 | $2,453 | $2,618 | $7,043 | $5,923 | | Net Income Available to Common Shareholders | $4,051 | $1,914 | $2,079 | $5,965 | $4,845 | | EPS (Basic & Diluted) | $0.53 | $0.25 | $0.27 | $0.78 | $0.64 | - Net interest income increased by $2.28 million (13.81%) QoQ and $3.225 million (20.72%) YoY for the three months ended June 30, 2025[10] - The company recorded a recovery of credit losses of $543 thousand in Q2 2025, compared to a provision of $638 thousand in Q2 2024[10] Detailed Financial Metrics This section provides detailed insights into MainStreet Bancshares Inc.'s loan, deposit, and borrowing structures, alongside average balance sheets, interest rates, and net interest margin trends Unaudited Loan, Deposit and Borrowing Detail Total gross loans and total deposits experienced a quarter-over-quarter decrease, while year-over-year changes were mixed. Commercial real estate loans remain the largest segment, showing growth YoY despite a slight QoQ decline. Deposit composition shifted, with non-interest bearing deposits increasing YoY but decreasing QoQ | Category (in thousands) | June 30, 2025 | March 31, 2025 | June 30, 2024 | Last 3 Mos Change | Last 12 Mos Change | | :---------------------- | :------------ | :------------- | :------------ | :---------------- | :----------------- | | LOANS: | | | | | | | Total Gross Loans | $1,790,973 | $1,835,928 | $1,801,219 | -2.4% | -0.6% | | Construction and land development loans | $328,351 | $344,742 | $410,698 | -4.8% | -20.1% | | Commercial real estate loans | $911,390 | $933,947 | $845,030 | -2.4% | 7.9% | | DEPOSITS: | | | | | | | Total Deposits | $1,798,547 | $1,908,325 | $1,755,363 | -5.8% | 2.5% | | Non-interest bearing deposits | $330,045 | $345,319 | $314,636 | -4.4% | 4.9% | | Interest-bearing demand deposits | $124,090 | $106,033 | $179,513 | 17.0% | -30.9% | | BORROWINGS: | | | | | | | Subordinated debt, net | $71,238 | $72,138 | $72,841 | -1.2% | -2.2% | - Core customer funding sources remained stable QoQ (0.0% change) but decreased by 3.4% YoY[12] - Brokered and listing service sources decreased by 18.9% QoQ but increased by 23.9% YoY[12] Unaudited Average Balance Sheets, Interest and Rates (Three Months Ended) For the three months ended June 30, 2025, MainStreet Bank significantly expanded its net interest margin and interest rate spread compared to the prior year, primarily due to a decrease in the cost of interest-bearing liabilities, despite a slight dip in the yield on interest-earning assets | Metric (annualized) | Q2 2025 | Q2 2024 | | :------------------ | :------ | :------ | | Yield on earning assets | 6.84% | 6.86% | | Cost of interest-bearing liabilities | 3.97% | 4.83% | | Interest Rate Spread | 2.87% | 2.03% | | Net Interest Margin | 3.75% | 3.20% | - Net Interest Margin increased by 55 basis points from 3.20% in Q2 2024 to 3.75% in Q2 2025[16] - Interest Rate Spread increased by 84 basis points from 2.03% in Q2 2024 to 2.87% in Q2 2025[16] Unaudited Average Balance Sheets, Interest and Rates (Six Months Ended) For the six months ended June 30, 2025, the company also demonstrated an improved net interest margin and interest rate spread compared to the same period in the prior year, reflecting effective management of interest-earning assets and interest-bearing liabilities over the longer term | Metric (annualized) | YTD 2025 | YTD 2024 | | :------------------ | :------- | :------- | | Yield on earning assets | 6.69% | 6.84% | | Cost of interest-bearing liabilities | 4.08% | 4.80% | | Interest Rate Spread | 2.61% | 2.04% | | Net Interest Margin | 3.52% | 3.24% | - Net Interest Margin increased by 28 basis points from 3.24% in YTD 2024 to 3.52% in YTD 2025[18] - Interest Rate Spread increased by 57 basis points from 2.04% in YTD 2024 to 2.61% in YTD 2025[18] Summary Financial Data & Ratios This section provides a comprehensive overview of MainStreet Bancshares Inc.'s per share data, key performance ratios, asset quality, concentration ratios, non-performing assets, regulatory capital, and other operational metrics Per Share Data and Shares Outstanding Earnings per common share significantly increased for both the quarter and year-to-date periods compared to the prior year. Book value and tangible book value per common share also showed positive trends | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------------------- | :------ | :------ | :------- | :------- | | Earnings per common share (basic and diluted) | $0.53 | $0.27 | $0.78 | $0.64 | | Book value per common share | $24.17 | $25.99 | $24.17 | $25.99 | | Tangible book value per common share | $24.17 | $23.72 | $24.17 | $23.72 | | Weighted average common shares (basic and diluted) | 7,704,677 | 7,608,389 | 7,670,623 | 7,610,188 | | Common shares outstanding at end of period | 7,704,037 | 7,598,529 | 7,704,037 | 7,598,529 | - Earnings per common share for Q2 2025 increased by 96.3% YoY[20] - Tangible book value per common share increased by 1.9% YoY to $24.17[20] Performance Ratios Key performance ratios improved significantly, with Return on Average Assets and Return on Average Equity showing substantial increases. The Net Interest Margin expanded, and the Efficiency Ratio improved, indicating better operational effectiveness | Metric (annualized) | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :------------------ | :------ | :------ | :------- | :------- | | Return on average assets | 0.86% | 0.50% | 0.66% | 0.58% | | Return on average equity | 8.72% | 4.70% | 6.78% | 5.34% | | Net interest margin (FTE) | 3.75% | 3.20% | 3.52% | 3.24% | | Efficiency ratio | 74.26% | 78.60% | 77.90% | 77.30% | - Return on average assets increased by 36 basis points YoY for Q2 2025[20] - Efficiency ratio improved by 4.34 percentage points YoY for Q2 2025, indicating lower non-interest expense relative to income[20] Asset Quality Asset quality improved significantly, with a decrease in the Allowance for Credit Losses (ACL) and a substantial reduction in non-performing loans. The coverage ratio of ACL to non-performing loans increased, reflecting a stronger position | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------------------- | :------ | :------ | :------- | :------- | | Ending balance, ACL - loans | $19,057 | $17,098 | $19,057 | $17,098 | | Total allowance for credit losses | $19,329 | $17,455 | $19,329 | $17,455 | | Allowance for credit losses on loans to total gross loans | 1.07% | 0.95% | 1.07% | 0.95% | | Allowance for credit losses on loans to non-performing loans | 2.01X | 1.78X | 2.01X | 1.78X | | Net charge-offs (recoveries) to average gross loans (annualized) | (0.03)% | 0.08% | (0.01)% | 0.06% | - Allowance for credit losses on loans to non-performing loans increased from 1.78X in Q2 2024 to 2.01X in Q2 2025[20] - Net charge-offs to average gross loans shifted from 0.08% (charge-offs) in Q2 2024 to (0.03)% (recoveries) in Q2 2025[20] Concentration Ratios Concentration ratios for commercial real estate and construction loans relative to total capital showed slight changes, with construction loans decreasing significantly year-over-year | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------------------- | :------ | :------ | :------- | :------- | | Commercial real estate loans to total capital | 365.89% | 367.24% | 365.89% | 367.24% | | Construction loans to total capital | 108.84% | 130.19% | 108.84% | 130.19% | - Construction loans to total capital decreased by 21.35 percentage points YoY for Q2 2025[20] Past Due and Non-Performing Assets Non-performing assets saw a substantial reduction, with non-accrual loans and total non-performing loans decreasing significantly year-over-year, indicating improved asset quality | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------------------- | :------ | :------ | :------- | :------- | | Loans 30-89 days past due and accruing to total gross loans | 2.12% | 0.81% | 2.12% | 0.81% | | Non-accrual loans to total gross loans | 0.40% | 1.15% | 0.40% | 1.15% | | Non-performing loans | $7,169 | $20,691 | $7,169 | $20,691 | | Non-performing assets to total assets | 0.34% | 0.99% | 0.34% | 0.99% | - Non-performing loans decreased by $13.522 million (65.35%) YoY for Q2 2025[20] - Non-performing assets to total assets decreased by 0.65 percentage points YoY for Q2 2025[20] Regulatory Capital Ratios (Bank only) The bank's regulatory capital ratios remained strong and well above minimum requirements, although showing a slight decrease across all categories year-over-year | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------------- | :------ | :------ | :------- | :------- | | Total risk-based capital ratio | 16.44% | 16.78% | 16.44% | 16.78% | | Tier 1 risk-based capital ratio | 15.39% | 15.85% | 15.39% | 15.85% | | Leverage ratio | 13.21% | 14.22% | 13.21% | 14.22% | | Common equity tier 1 ratio | 15.39% | 15.85% | 15.39% | 15.85% | - All regulatory capital ratios decreased slightly YoY, but remain robust[20] Other Information The common shares closing stock price increased year-over-year, and the tangible equity to tangible assets ratio also improved. The number of full-time equivalent employees decreased | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------------------- | :------ | :------ | :------- | :------- | | Common shares closing stock price | $18.90 | $17.73 | $18.90 | $17.73 | | Tangible equity / tangible assets | 10.09% | 9.99% | 10.09% | 9.99% | | Number of full time equivalent employees | 174 | 195 | 174 | 195 | - Common shares closing stock price increased by 6.6% YoY[20] - Number of full-time equivalent employees decreased by 21 YoY[20] Non-GAAP Reconciliation This section provides a reconciliation of MainStreet Bancshares Inc.'s GAAP financial measures to non-GAAP measures, including adjustments for tax-equivalent effects and intangible assets Unaudited Reconciliation of Certain Non-GAAP Financial Measures This section provides a reconciliation of GAAP to non-GAAP financial measures, specifically for Net Interest Margin (FTE), Yield on Earning Assets (FTE), Net Interest Spread (FTE), Tangible Common Stockholders' Equity, and Tangible Assets. These adjustments primarily involve tax-equivalent adjustments for tax-exempt securities and the exclusion of intangible assets to provide a clearer view of core financial performance - Net interest income (GAAP) is adjusted for the tax-equivalent effect of tax-exempt securities to arrive at Net interest income (FTE) (non-GAAP)[23] - Total interest income (GAAP) is adjusted for the tax-equivalent effect of tax-exempt securities to derive Total interest income (FTE) (non-GAAP)[23] - Tangible common stockholders' equity (non-GAAP) is calculated by subtracting intangible assets and preferred stock from total stockholders' equity (GAAP)[23] - Total tangible assets (non-GAAP) are derived by subtracting intangible assets from total assets (GAAP)[23]