A challenging year, ending with strong and stable asset quality and strong capital
FAIRFAX, Va., Jan. 27, 2025 /PRNewswire/ — MainStreet Bancshares, Inc. (NASDAQ:MNSB, MNSBP)), the financial holding company for MainStreet Bank reported a loss of $9.98 million for 2024 resulting from the nonrecurring impairment of capitalized intangible software and the resolution of nonperforming assets. The Company remains strongly capitalized with good liquidity.
“At the end of 2024, the Company impaired the full value of its capitalized intangible software. Despite this impairment, the software remains a component of our Avenu Banking-as-a-Service solution and will continue to be used to drive fintech partnerships to grow low-cost deposits and fee income,” said Jeff W. Dick, Chairman & CEO of MainStreet Bancshares, Inc. and MainStreet Bank. “The end of 2024 was management’s first opportunity to review the Avenu platform’s performance, as it was only put into production during the fourth quarter. The delays in bringing Avenu to market and subsequent changes in the potential for revenue generation necessitated management’s review for impairment and resulting charge to earnings. Management conducted the impairment assessment in accordance with ASC 350-40-35, using the income approach. We remain committed to providing innovative embedded banking services that meet our customers where they do business and that allow developers to focus on providing leading-edge digital financial solutions.”
“During 2024, the Company ended the year with a healthy net interest margin of 3.13%,” said Alex Vari, Chief Accountant for MainStreet Bank. “Excess liquidity in the fourth quarter gave us the opportunity to exercise call options on higher-yielding term deposits and restructure our wholesale deposit position. This will further reduce our funding costs into 2025, and with expense management efforts will yield positive results for the Company and for our shareholders.”
Chief Lending Officer Tom Floyd said, “the lending team worked diligently to grow the loan portfolio by 6% while also resolving 62% of our nonperforming loans and making solid progress on resolving the final $21.7 million in a timely manner.”
Total deposits grew 13% from prior year-end to $1.9 billion, with core deposits growing $187 million year on year. Total core deposits at year-end were $1.4 billion, or 75% of total deposits.
“The DC Metropolitan area remains a vibrant market. The interest rate environment is normalizing, with the FOMC cutting rates three times thus far for a total of 1.0%,” said Abdul Hersiburane, President of MainStreet Bank. “Our borrowers are benefiting from the declining rate environment with strengthening liquidity.”
BACKGROUND: MainStreet Bancshares, Inc. (NASDAQ:MNSB, MNSBP)), is a small-cap financial holding company trading in the Nasdaq Capital Market index. The financial holding company owns 100% of MainStreet Bank, a business-focused community bank headquartered in Fairfax, Virginia. The Bank engages a branch-lite model with six full-service financial centers in Herndon, Fairfax, McLean, Leesburg, Clarendon, and Washington, D.C. MainStreet Bank has 55,000 free ATMs and a fully integrated online and mobile banking solution. The Bank is not restricted by a conventional branching system, as it can offer business customers the ability to Put Our Bank in Your Office®. With robust and easy-to-use online business banking technology, MainStreet has “put our bank” in well over 1,000 businesses in the metropolitan area.
MainStreet Bank has 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. MainStreet Bank is an SBA Preferred Lender, offering 7A and 504 lending solutions. From sophisticated cash management to enhanced mobile banking and instant-issue Debit cards, MainStreet Bank is always looking for ways to improve our customer’s experience.
MainStreet Bank was the first community bank in the Washington, D.C., metropolitan area to offer a full online business banking solution. MainStreet Bank was also the first bank headquartered in the Commonwealth of Virginia to offer CDARS – a solution that provides multi-million-dollar FDIC insurance. Further information on the Bank can be obtained by visiting its website at mstreetbank.com.
Banking-as-a-Service
In 2021, the Board and management decided to make an investment in technology that would best serve clients requiring Banking-as-a-Service (BaaS). The Avenu BaaS solution officially launched on October 1, 2024. The ability to digitally offer banking services in a safe and compliant manner allows the Company to reach new customer deposit segments, diversify revenue streams and generate additional income. The BaaS market is currently underserved, and the opportunities for a well-developed solution are robust. The Avenu business model is in-line with the Company’s physical branch-lite strategy.
Avenu provides a full-stack embedded banking solution that connects our partners and their apps directly and seamlessly to our purpose-built Avenu core. Avenu’s clients are fintechs, social media solutions, application developers, money movers, and entrepreneurs. They all have one thing in common: They are in search of a reliable partner to help innovate how money moves – solving real-world issues and helping communities thrive. MainStreet Bank is that reliable partner dedicated to providing a best-in-class solution to sustain long-term business relationships.
MainStreet Bancshares, Inc. has an investment grade rating of “A” from Egan-Jones Rating Company. This release contains forward-looking statements, including our expectations with respect to future events that are subject to various risks and uncertainties. The statements contained in this release that are not historical facts are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Words such as “may,” “will,” “could,” “should,” “expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “pursuant,” “target,” “continue,” and similar expressions are intended to identify such forward-looking statements. Factors that could cause actual results to differ materially from management’s projections, forecasts, estimates and expectations include: fluctuation in market rates of interest and loan and deposit pricing, adverse changes in the overall national economy as well as adverse economic conditions in our specific market areas, future impacts of pandemic outbreaks, maintenance and development of well-established and valued client relationships and referral source relationships, and acquisition or loss of key production personnel. We caution readers that the list of factors above is not exclusive. The forward-looking statements are made as of the date of this release, and we may not undertake steps to update the forward-looking statements to reflect the impact of any circumstances or events that arise after the date the forward-looking statements are made. In addition, our past results of operations are not necessarily indicative of future performance.
UNAUDITED CONSOLIDATED BALANCE SHEET INFORMATION
(In thousands)
December
31, 2024
September
30, 2024
June 30,
2024
March 31,
2024
December
31, 2023*
ASSETS
Cash and cash equivalents
Cash and due from banks
$
47,553
$
40,955
$
41,697
$
49,208
$
53,581
Federal funds sold
160,155
191,159
49,762
75,533
60,932
Total cash and cash equivalents
207,708
232,114
91,459
124,741
114,513
Investment securities available for sale, at fair value
55,747
58,489
57,605
58,699
59,928
Investment securities held to maturity, at amortized cost, net of allowance for credit losses of $0 for all periods
16,078
16,016
16,036
17,251
17,275
Restricted equity securities, at amortized cost
30,623
26,745
26,797
23,924
24,356
Loans, net of allowance for credit losses of $19,450, $18,327, $17,098, $16,531, and $16,506, respectively
1,810,556
1,775,558
1,778,840
1,727,110
1,705,137
Premises and equipment, net
13,287
13,571
13,787
14,081
13,944
Accrued interest and other receivables
11,311
11,077
11,916
10,727
12,390
Computer software, net of amortization
—
18,881
17,205
15,691
14,657
Bank owned life insurance
39,507
39,203
38,901
38,609
38,318
Other assets
43,281
32,945
41,200
39,182
34,914
Total Assets
$
2,228,098
$
2,224,599
$
2,093,746
$
2,070,015
$
2,035,432
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Non-interest bearing deposits
$
324,307
$
347,575
$
314,636
$
348,945
$
364,606
Interest bearing demand deposits
139,780
197,527
179,513
165,331
137,128
Savings and NOW deposits
64,337
61,893
60,867
46,036
45,878
Money market deposits
560,082
451,936
476,396
446,903
442,179
Time deposits
819,288
834,738
723,951
725,520
696,336
Total deposits
1,907,794
1,893,669
1,755,363
1,732,735
1,686,127
Federal funds purchased
—
—
—
—
15,000
Subordinated debt
73,039
72,940
72,841
72,741
72,642
Other liabilities
39,274
31,939
40,827
41,418
40,146
Total Liabilities
2,020,107
1,998,548
1,869,031
1,846,894
1,813,915
Stockholders’ Equity:
Preferred stock
27,263
27,263
27,263
27,263
27,263
Common stock
29,466
29,463
29,452
29,514
29,198
Capital surplus
67,823
67,083
66,392
65,940
65,985
Retained earnings
91,150
108,616
109,651
108,334
106,549
Accumulated other comprehensive loss
(7,711)
(6,374)
(8,043)
(7,930)
(7,478)
Total Stockholders’ Equity
207,991
226,051
224,715
223,121
221,517
Total Liabilities and Stockholders’ Equity
$
2,228,098
$
2,224,599
$
2,093,746
$
2,070,015
$
2,035,432
*Derived from audited financial statements
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME INFORMATION
(In thousands, except share and per share data)
Year-to-Date
Three Months Ended
December
31, 2024
December
31, 2023*
December
31, 2024
September
30, 2024
June 30,
2024
March 31,
2024
December
31, 2023
INTEREST INCOME:
Interest and fees on loans
$
125,177
$
116,482
$
31,323
$
31,615
$
31,655
$
30,582
$
30,951
Interest on investment securities
Taxable securities
1,693
1,836
431
397
430
435
451
Tax-exempt securities
1,093
1,065
262
294
268
270
268
Interest on federal funds sold
6,652
5,038
3,103
1,285
1,083
1,182
1,510
Total interest income
134,615
124,421
35,119
33,591
33,436
32,469
33,180
INTEREST EXPENSE:
Interest on interest bearing demand deposits
8,661
1,786
2,612
2,117
2,118
1,814
1,027
Interest on savings and NOW deposits
754
546
201
206
190
157
146
Interest on money market deposits
21,386
13,631
5,475
5,277
5,542
5,092
5,538
Interest on time deposits
37,364
26,905
10,003
9,543
9,010
8,808
8,187
Interest on federal funds purchased
575
299
—
277
191
107
25
Interest on Federal Home Loan Bank advances
46
1,224
—
—
—
46
118
Interest on subordinated debt
3,255
3,288
787
828
820
820
828
Total interest expense
72,041
47,679
19,078
18,248
17,871
16,844
15,869
Net interest income
62,574
76,742
16,041
15,343
15,565
15,625
17,311
Provision for (recovery of) credit losses
6,763
1,642
3,407
2,913
638
(195)
466
Net interest income after provision for (recovery of) credit losses
55,811
75,100
12,634
12,430
14,927
15,820
16,845
NON-INTEREST INCOME:
Deposit account service charges
1,996
2,149
481
557
490
469
510
Bank owned life insurance income
1,189
1,069
304
302
291
292
283
Net loss on securities called or matured
(48)
—
—
—
(48)
—
—
Other non-interest income (loss)
115
122
22
27
31
35
(34)
Total non-interest income
3,252
3,340
807
886
764
796
759
NON-INTEREST EXPENSES:
Salaries and employee benefits
30,475
28,267
8,253
7,250
7,484
7,488
7,129
Furniture and equipment expenses
3,636
2,787
830
931
940
935
804
Advertising and marketing
2,199
2,343
600
579
566
454
271
Occupancy expenses
1,614
1,684
358
407
415
435
397
Outside services
3,627
2,044
1,168
845
839
774
352
Administrative expenses
929
922
243
215
229
242
219
Computer software intangible impairment
19,721
—
19,721
—
—
—
—
Other operating expenses
10,766
7,569
3,258
2,992
2,362
2,153
2,166
Total non-interest expenses
72,967
45,616
34,431
13,219
12,835
12,481
11,338
Income (loss) before income tax expense (benefit)
(13,904)
32,824
(20,990)
97
2,856
4,135
6,266
Income tax expense (benefit)
(3,924)
6,239
(4,823)
(168)
238
830
1,120
Net income (loss)
(9,980)
26,585
(16,167)
265
2,618
3,305
5,146
Preferred stock dividends
2,156
2,156
539
539
539
539
539
Net income (loss) available to common shareholders
$
(12,136)
$
24,429
$
(16,706)
$
(274)
$
2,079
$
2,766
$
4,607
Earnings (loss) per common share, basic and diluted
$
(1.60)
$
3.25
$
(2.20)
$
(0.04)
$
0.27
$
0.36
$
0.61
Weighted average number of common shares, basic and diluted
7,606,391
7,522,913
7,603,318
7,601,925
7,608,389
7,611,990
7,527,327
*Derived from audited financial statements
UNAUDITED LOAN, DEPOSIT AND BORROWING DETAIL
(In thousands)
December 31, 2024
September 30, 2024
December 31, 2023
Percentage Change
$ Amount
% of
Total
$ Amount
% of
Total
$ Amount
% of
Total
Last 3
Mos
Last 12
Mos
LOANS:
Construction and land development loans
$
391,253
21.3
%
$
373,486
20.8
%
$