MAINSTREET BAN(US:MNSBP)2026-03-13 14:11Financial Position and Capital - As of December 31, 2025, the legal lending limit for loans to one borrower was approximately $46.3 million[51]. - The held-to-maturity portfolio totaled $13.8 million, primarily composed of municipal securities, as of December 31, 2025[57]. - The available-for-sale portfolio, carried at fair value, totaled $58.0 million as of December 31, 2025[57]. - The allowance for credit losses on loans (ACLL) totaled $19.3 million as of December 31, 2025, representing the company's best estimate of expected credit losses[473]. - The collectively evaluated ACLL consists of both quantitative and qualitative components, with the quantitative component derived from a weighted average remaining maturity (WARM) model[474]. - The bank's capital levels are monitored using risk-based guidelines and leverage ratios[124]. - The bank must maintain a common equity Tier 1 capital ratio of at least 4.5% and a Tier 1 capital ratio of at least 6%[129]. - As of December 31, 2025, the bank was classified as "well-capitalized" under regulatory standards[133]. - The capital conservation buffer requires banks to hold an additional 2.5% of common equity Tier 1 capital to avoid limits on capital distributions[127]. - The bank is subject to restrictions on dividends if it does not meet minimum capital adequacy ratios[116]. Debt Issuance - In April 2021, the company issued $30 million in fixed-to-floating subordinated notes with a fixed interest rate of 3.75% until April 15, 2026[58]. - The company completed the issuance of $43.8 million in subordinated notes in March 2022, with a fixed interest rate of 4.00% until March 15, 2027[59]. Employment and Diversity - As of December 31, 2025, the company employed 171 full-time employees, with no employees represented by a collective bargaining agreement[80]. - Seventy-three percent of the Company's employees self-identify as either female or ethnically diverse[82]. - The Board consists of ten directors, with eight being independent; two independent directors self-identify as female, one as African-American, and one as Hispanic[85]. - The Company had forty-two promotions in 2025, with 16 being ethnically diverse females and 4 being ethnically diverse males[95]. - The employee age distribution shows 30% are aged 50-59, and 27% are aged 40-49, indicating a balanced age diversity[91]. - The Company is focused on equal pay for equal work and developing all employees to reach their full potential[90]. - The Company celebrates diversity and fosters opportunities to learn about different cultures, which contributes to exceeding customer expectations[96]. Regulatory Environment - The Company is subject to extensive regulation under the Bank Holding Company Act and various federal and state laws[99]. - The Economic Growth Act increased the asset threshold for small bank holding companies from $1 billion to $3 billion, benefiting the Company[105]. - The Company is eligible to be treated as a "small bank holding company" under the Federal Reserve's policy, affecting its capital adequacy evaluation[111]. - The bank holding company must maintain a common equity Tier 1 capital ratio of at least 4.5% and a Tier 1 capital ratio of at least 6%[129]. - The bank holding company is limited to a liability of 5% of the bank's assets when it becomes undercapitalized[113]. - The Federal Reserve requires prior approval for acquisitions exceeding 5% of voting stock or substantial assets of any bank[114]. - Control is presumed if a person or entity acquires 25% or more of voting securities of the bank holding company[115]. - The bank must obtain written approval from its primary federal regulator before any merger or acquisition[135]. - Federal law limits transactions with affiliates to 10% of the bank's capital stock and surplus for any one affiliate, and 20% for all affiliates combined[137]. - The Dodd-Frank Act expanded the scope of limitations on affiliate transactions, including credit exposures related to derivatives and securities lending arrangements[139]. Risk Management - The company is primarily exposed to interest rate risk, with net interest income and the fair value of financial instruments influenced by changes in interest rates[455]. - A 400 basis point increase in interest rates could lead to a decrease in economic value of equity (EVE) by $62,659 thousand, or 18.46%[459]. - The company is liability sensitive as of December 31, 2025, indicating a potential vulnerability to interest rate fluctuations[464]. - The bank utilizes derivative financial instruments, such as interest rate swaps, to manage interest rate risk and assist customers[465]. - The effective management of market risk is essential for achieving the company's strategic financial objectives, with interest rate risk being the most significant exposure[454]. - The company cannot predict the future impact of fiscal and monetary policies on its operations and financial condition[460]. Audit and Internal Controls - The company’s financial statements have been audited and present fairly its financial position as of December 31, 2025, in accordance with generally accepted accounting principles[468]. - MainStreet Bancshares, Inc. maintained effective internal control over financial reporting as of December 31, 2025, based on established criteria[479]. - The audit included consolidated financial statements for the years ended December 31, 2025, 2024, and 2023, with an unqualified opinion expressed[480]. - The audit procedures involved testing the design and operating effectiveness of internal controls related to the allowance for credit losses (ACLL)[478]. - The company evaluated the completeness and accuracy of internal data used for ACLL calculations, including a comparison to relevant peer groups[478]. - Significant judgments and assumptions used in the ACLL calculation were assessed for reasonableness[478]. - Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting[483]. - Limitations of internal control may prevent or detect misstatements, and effectiveness may vary over time due to changing conditions[484]. - The audit was conducted in accordance with PCAOB standards, ensuring a thorough evaluation of internal controls[482]. - The company has been audited by Yount, Hyde & Barbour, P.C. since 2008, indicating a long-standing relationship with the auditing firm[478]. - The audit report was dated March 13, 2026, reflecting the most recent assessment of the company's financial controls[485]. Community Engagement and ESG Initiatives - MainStreet Community Capital was established to support ESG initiatives in low-income communities, focusing on job creation and financial services[79]. - The company has converted all lighting to LED and implemented energy-efficient HVAC systems to reduce carbon emissions[75]. - The Bank received a "Satisfactory" rating in its most recent Community Reinvestment Act examination in 2025[148]. Compliance and Legal Obligations - Financial institutions must maintain anti-money laundering programs and comply with OFAC regulations to avoid serious legal and financial consequences[155]. - Federal laws limit the disclosure of non-public consumer information, requiring banks to provide privacy policies and allowing consumers to prevent certain disclosures[156]. - The FDIC issued a final rule in October 2022 increasing deposit insurance assessments for all financial institutions starting in the first quarterly assessment period of 2023[144]. - The Dodd-Frank Act requires financial institutions to make a reasonable determination of a borrower's ability to repay before issuing residential mortgage loans[152].