MainStreet Bancshares Inc.

04/21/2025 | Press release | Distributed by Public on 04/21/2025 06:00

MainStreet Bancshares Inc. Reports First Quarter Results (Form 8-K)

MainStreet Bancshares Inc. Reports First Quarter Results

Expanding Net Interest Margin, Resilient Loan Portfolio and Well Capitalized

Fairfax, VA., April 21, 2025 - MainStreet Bancshares, Inc. (Nasdaq: MNSB & MNSBP), the financial holding company for MainStreet Bank, reported first quarter net income of $2.5 million with a net interest margin of 3.30%, up 34 basis points from the previous quarter. Net interest income after provision for credit losses was $16.5 million, up $3.9 million from the previous quarter and earnings per common share were $0.25 for the first quarter. The Company continues to report strong asset quality and strong capital.

Total deposits maintained their level at $1.9 billion, with total funding costs improving by 24 basis points from the previous quarter to 3.49%. "Our net interest margin expansion was fueled primarily by an opportunity to replace higher cost deposits," said Alex Vari, Chief Accountant for MainStreet Bank. "We worked diligently to optimize pricing on our deposit stack, while also structuring $211 million of our $578 million in noncore deposits to reprice quickly should rates adjust down." The loan-to-deposit ratio of 96% indicates efficient utilization of deposit funds for lending.

Nonperforming loans held steady at a low level of $21.7 million during the quarter, with another $11.2 million expected to pay off at par in the second quarter based upon a successful court-approved resolution. Chief Credit Officer Chris Johnston said, "The resolution of nonperforming loans is a testament to the team's diligent and creative efforts to work together with borrowers to find positive outcomes in a timely manner."

Total assets were $2.2 billion with gross loans demonstrating stability at $1.8 billion. "We remain cautiously optimistic about the DC Metropolitan market," said Abdul Hersiburane, President of MainStreet Bank. "Our team is steadfast on serving our customers but taking conservative steps as we monitor the early days that come with a new administration."

Banking-as-a-Service

"This quarter saw a change in direction for the Avenu technology initiative, which will not be moving forward," according to Chairman and CEO Jeff W. Dick. "The timeline for the expected return on invested capital extended beyond the Company's plan, and we decided to devote our energy on the core bank."

About MainStreet Bank: MainStreet operates six branches 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 thousands of 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 also works with the SBA to offer 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.

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)

March 31, 2025

December 31, 2024*

September 30, 2024

June 30, 2024

March 31, 2024

ASSETS

Cash and cash equivalents

Cash and due from banks

$ 18,385 $ 21,351 $ 15,319 $ 17,112 $ 17,270

Interest-bearing deposits at other financial institutions

159,582 161,866 191,637 50,495 76,178

Federal funds sold

24,673 24,491 25,158 23,852 31,293

Total cash and cash equivalents

202,640 207,708 232,114 91,459 124,741

Investment securities available for sale, at fair value

55,935 55,747 58,489 57,605 58,699

Investment securities held to maturity, at amortized cost, net of allowance for credit losses of $0 for all periods

15,657 16,078 16,016 16,036 17,251

Restricted equity securities, at amortized cost

33,611 30,623 26,745 26,797 23,924

Loans, net of allowance for credit losses of $19,460, $19,450, $18,327, $17,098, and $16,531, respectively

1,811,789 1,810,556 1,775,558 1,778,840 1,727,110

Premises and equipment, net

13,020 13,287 13,571 13,787 14,081

Accrued interest and other receivables

9,607 11,311 11,077 11,916 10,727

Computer software, net of amortization

- - 18,881 17,205 15,691

Bank owned life insurance

39,809 39,507 39,203 38,901 38,609

Other assets

40,777 43,281 32,945 41,200 39,182

Total Assets

$ 2,222,845 $ 2,228,098 $ 2,224,599 $ 2,093,746 $ 2,070,015

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:

Non-interest bearing deposits

$ 345,319 $ 324,307 $ 347,575 $ 314,636 $ 348,945

Interest-bearing demand deposits

106,033 139,780 197,527 179,513 165,331

Savings and NOW deposits

124,049 64,337 61,893 60,867 46,036

Money market deposits

511,925 560,082 451,936 476,396 446,903

Time deposits

820,999 819,288 834,738 723,951 725,520

Total deposits

1,908,325 1,907,794 1,893,669 1,755,363 1,732,735

Subordinated debt, net

72,138 73,039 72,940 72,841 72,741

Other liabilities

32,764 39,274 31,939 40,827 41,418

Total Liabilities

2,013,227 2,020,107 1,998,548 1,869,031 1,846,894

Stockholders' Equity:

Preferred stock

27,263 27,263 27,263 27,263 27,263

Common stock

29,810 29,466 29,463 29,452 29,514

Capital surplus

67,612 67,823 67,083 66,392 65,940

Retained earnings

92,305 91,150 108,616 109,651 108,334

Accumulated other comprehensive loss

(7,372 ) (7,711 ) (6,374 ) (8,043 ) (7,930 )

Total Stockholders' Equity

209,618 207,991 226,051 224,715 223,121

Total Liabilities and Stockholders' Equity

$ 2,222,845 $ 2,228,098 $ 2,224,599 $ 2,093,746 $ 2,070,015

*Derived from audited financial statements

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME (LOSS) INFORMATION

(In thousands, except share and per share data)

Three Months Ended

March 31, 2025

December 31, 2024

September 30, 2024

June 30, 2024

March 31, 2024

INTEREST INCOME:

Interest and fees on loans

$ 31,111 $ 31,323 $ 31,615 $ 31,655 $ 30,582

Interest on investment securities

Taxable securities

420 431 397 430 435

Tax-exempt securities

263 262 294 268 270

Interest on interest-bearing deposits at other financial institutions

946 2,826 1,041 806 889

Interest on federal funds sold

223 277 244 277 293

Total interest income

32,963 35,119 33,591 33,436 32,469

INTEREST EXPENSE:

Interest on interest-bearing demand deposits

1,048 2,612 2,117 2,118 1,814

Interest on savings and NOW deposits

221 201 206 190 157

Interest on money market deposits

5,276 5,475 5,277 5,542 5,092

Interest on time deposits

9,031 10,003 9,543 9,010 8,808

Interest on federal funds purchased

65 - 277 191 107

Interest on Federal Home Loan Bank advances

- - - - 46

Interest on subordinated debt

812 787 828 820 820

Total interest expense

16,453 19,078 18,248 17,871 16,844

Net interest income

16,510 16,041 15,343 15,565 15,625

Provision for (recovery of) credit losses

- 3,407 2,913 638 (195 )

Net interest income after provision for (recovery of) credit losses

16,510 12,634 12,430 14,927 15,820

NON-INTEREST INCOME:

Deposit account service charges

530 481 557 490 469

Bank owned life insurance income

302 304 302 291 292

Gain on retirement of subordinated debt

60 - - - -

Net loss on securities called or matured

- - - (48 ) -

Other non-interest income

47 22 27 31 35

Total non-interest income

939 807 886 764 796

NON-INTEREST EXPENSES:

Salaries and employee benefits

8,385 8,253 7,250 7,484 7,488

Furniture and equipment expenses

1,016 830 931 940 935

Advertising and marketing

481 600 579 566 454

Occupancy expenses

396 358 407 415 435

Outside services

1,173 1,168 845 839 774

Administrative expenses

229 243 215 229 242

Computer software intangible impairment

- 19,721 - - -

Other operating expenses

2,634 3,258 2,992 2,362 2,153

Total non-interest expenses

14,314 34,431 13,219 12,835 12,481

Income (loss) before income tax expense (benefit)

3,135 (20,990 ) 97 2,856 4,135

Income tax expense (benefit)

682 (4,823 ) (168 ) 238 830

Net income (loss)

2,453 (16,167 ) 265 2,618 3,305

Preferred stock dividends

539 539 539 539 539

Net income (loss) available to common shareholders

$ 1,914 $ (16,706 ) $ (274 ) $ 2,079 $ 2,766

Earnings (loss) per common share, basic and diluted

$ 0.25 $ (2.20 ) $ (0.04 ) $ 0.27 $ 0.36

Weighted average number of common shares, basic and diluted

7,636,191 7,603,318 7,601,925 7,608,389 7,611,990

UNAUDITED LOAN, DEPOSIT AND BORROWING DETAIL

(In thousands)

March 31, 2025

December 31, 2024

March 31, 2024

Percentage Change

$ Amount

% of Total

$ Amount

% of Total

$ Amount

% of Total

Last 3 Mos

Last 12 Mos

LOANS:

Construction and land development loans

$ 344,742 18.8 % $ 393,385 21.4 % $ 408,903 23.4 % -12.4 % -15.7 %

Residential real estate loans

450,728 24.6 % 439,481 23.9 % 451,991 25.8 % 2.6 % -0.3 %

Commercial real estate loans

933,947 50.9 % 895,743 48.8 % 813,387 46.5 % 4.3 % 14.8 %

Commercial and industrial loans

105,180 5.6 % 104,815 5.7 % 71,822 4.1 % 0.3 % 46.4 %

Consumer loans

1,331 0.1 % 1,574 0.2 % 2,902 0.2 % -15.4 % -54.1 %

Total Gross Loans

$ 1,835,928 100.0 % $ 1,834,998 100.0 % $ 1,749,005 100.0 % 0.1 % 5.0 %

Less: Allowance for credit losses

(19,460 ) (19,450 ) (16,531 )

Net deferred loan fees

(4,679 ) (4,992 ) (5,364 )

Net Loans

$ 1,811,789 $ 1,810,556 $ 1,727,110

DEPOSITS:

Non-interest bearing deposits

$ 345,319 18.1 % $ 324,307 17.0 % $ 348,945 20.1 % 6.5 % -1.0 %

Interest-bearing deposits:

Demand deposits

106,033 5.6 % 139,780 7.3 % 165,331 9.5 % -24.1 % -35.9 %

Savings and NOW deposits

124,049 6.5 % 64,337 3.4 % 46,036 2.7 % 92.8 % 169.5 %

Money market deposits

511,925 26.8 % 560,082 29.4 % 446,903 25.8 % -8.6 % 14.5 %

Certificates of deposit $250,000 or more

541,772 28.4 % 535,676 28.1 % 467,892 27.0 % 1.1 % 15.8 %

Certificates of deposit less than $250,000

279,227 14.6 % 283,612 14.8 % 257,628 14.9 % -1.5 % 8.4 %

Total Deposits

$ 1,908,325 100.0 % $ 1,907,794 100.0 % $ 1,732,735 100.0 % 0.0 % 10.1 %

BORROWINGS:

Subordinated debt, net

72,138 100.0 % 73,039 100.0 % 72,741 100.0 % -1.2 % -0.8 %

Total Borrowings

$ 72,138 100.0 % $ 73,039 100.0 % $ 72,741 -1.2 % -0.8 %

Total Deposits and Borrowings

$ 1,980,463 $ 1,980,833 $ 1,805,476 0.0 % 9.7 %

Core customer funding sources (1)

$ 1,330,390 67.2 % $ 1,439,657 72.7 % $ 1,312,746 72.7 % -7.6 % 1.3 %

Brokered and listing service sources (2)

577,935 29.2 % 468,137 23.6 % 419,989 23.3 % 23.5 % 37.6 %

Subordinated debt, net (3)

72,138 3.6 % 73,039 3.7 % 72,741 4.0 % -1.2 % -0.8 %

Total Funding Sources

$ 1,980,463 100.0 % $ 1,980,833 100.0 % $ 1,805,476 100.0 % 0.0 % 9.7 %

(1)

Includes ICS, CDARS, and reciprocal deposits maintained by customers, which represent sweep accounts tied to customer operating accounts.

(2)

Consists of certificates of deposit (CD) through multiple listing services and multiple brokered deposit services, as well as ICS and CDARS one-way certificates of deposit and regional money market accounts.

Excludes $87.8 million in core deposits placed in reciprocal networks for FDIC insurance coverage that will be classified as brokered deposits on the call report in pursuant to rule 12 CFR 337.6(e) as of March 31, 2025.

(3)

Subordinated debt obligation qualifies as Tier 2 capital at the holding company and Tier 1 capital at the Bank.

UNAUDITED AVERAGE BALANCE SHEETS, INTEREST AND RATES

(In thousands)

For the three months ended March 31, 2025

For the three months ended March 31, 2024

Average Balance

Interest Income/ Expense (3)(4)

Average Yields/ Rate (annualized) (3)(4)

Average Balance

Interest Income/ Expense (3)(4)

Average Yields/ Rate (annualized) (3)(4)

ASSETS:

Interest-earning assets:

Loans (1)(2)

$ 1,838,358 $ 31,111 6.86 % $ 1,728,761 $ 30,582 7.10 %

Securities:

Taxable

53,143 420 3.21 % 56,001 435 3.12 %

Tax-exempt

35,200 333 3.84 % 37,420 342 3.66 %

Interest-bearing deposits at other financial institutions

86,715 946 4.42 % 66,253 889 5.38 %

Federal funds sold

24,975 223 3.62 % 25,740 293 4.57 %

Total interest-earning assets

$ 2,038,391 $ 33,033 6.57 % $ 1,914,175 $ 32,541 6.82 %

Other assets

117,070 123,294

Total assets

$ 2,155,461 $ 2,037,469

Liabilities and Stockholders' Equity:

Interest-bearing liabilities:

Interest-bearing demand deposits

$ 111,413 $ 1,048 3.81 % $ 146,248 $ 1,814 4.98 %

Savings and NOW deposits

67,851 221 1.32 % 44,219 157 1.42 %

Money market deposits

537,733 5,276 3.98 % 433,654 5,092 4.71 %

Time deposits

798,007 9,031 4.59 % 710,019 8,808 4.98 %

Total interest-bearing deposits

$ 1,515,004 $ 15,576 4.17 % $ 1,334,140 $ 15,871 4.77 %

Federal funds purchased

5,610 65 4.70 % 7,476 107 5.74 %

FHLB advances

- - - 3,297 46 5.60 %

Subordinated debt, net

73,043 812 4.51 % 72,703 820 4.52 %

Total interest-bearing liabilities

$ 1,593,657 $ 16,453 4.19 % $ 1,417,616 $ 16,844 4.77 %

Demand deposits and other liabilities

353,711 397,753

Total liabilities

$ 1,947,368 $ 1,815,369

Stockholders' Equity

208,093 222,100

Total Liabilities and Stockholders' Equity

$ 2,155,461 $ 2,037,469

Interest Rate Spread

2.38 % 2.05 %

Net Interest Income

$ 16,580 $ 15,697

Net Interest Margin

3.30 % 3.29 %

(1)

Includes loans classified as non-accrual

(2)

Total loan interest income includes amortization of deferred loan fees, net of deferred loan costs

(3) Income and yields for all periods presented are reported on a tax-equivalent basis using the federal statutory rate of 21%

(4)

Refer to "Unaudited Reconciliation of Certain Non-GAAP Financial Measures" for reconciliation of non-GAAP measures

UNAUDITED SUMMARY FINANCIAL DATA

(Dollars in thousands except share and per share data)

At or For the Three Months Ended

March 31,

2025

2024

Per share Data and Shares Outstanding

Earnings per common share (basic and diluted)

$ 0.25 $ 0.36

Book value per common share

$ 23.67 $ 25.72

Tangible book value per common share(2)

$ 23.67 $ 23.66

Weighted average common shares (basic and diluted)

7,636,191 7,611,990

Common shares outstanding at end of period

7,703,197 7,614,090

Performance Ratios

Return on average assets (annualized)

0.46 % 0.65 %

Return on average equity (annualized)

4.78 % 5.97 %

Return on average common equity (annualized)

5.50 % 6.80 %

Yield on earning assets (FTE) (2) (annualized)

6.57 % 6.82 %

Cost of interest bearing liabilities (annualized)

4.19 % 4.77 %

Net interest spread (FTE)(2) (annualized)

2.38 % 2.05 %

Net interest margin (FTE)(2) (annualized)

3.30 % 3.29 %

Non-interest income as a percentage of average assets (annualized)

0.18 % 0.16 %

Non-interest expense to average assets (annualized)

2.69 % 2.46 %

Efficiency ratio(3)

82.03 % 76.01 %

Asset Quality

Allowance for credit losses (ACL)

Beginning balance, ACL - loans

$ 19,450 $ 16,506

Add: recoveries

10 2

Less: charge-offs

- (141 )

Add: provision for credit losses - loans

- 164

Ending balance, ACL - loans

$ 19,460 $ 16,531

Beginning balance, reserve for unfunded commitment (RUC)

$ 287 $ 1,009

Add: recovery of unfunded commitments, net

- (359 )

Ending balance, RUC

$ 287 $ 650

Total allowance for credit losses

$ 19,747 $ 17,181

Allowance for credit losses on loans to total gross loans

1.06 % 0.95 %

Allowance for credit losses on loans to non-performing loans

89.82 %

1.78X

Net charge-offs to average gross loans (annualized)

0.00 % 0.03 %

Concentration Ratios

Commercial real estate loans to total capital (4)

388.24 % 364.65 %

Construction loans to total capital (5)

115.56 % 130.06 %

Past due and Non-performing Assets

Loans 30-89 days past due and accruing to total gross loans

2.19 % 0.22 %

Loans 90 days past due and accruing to total gross loans

0.00 % 0.51 %

Non-accrual loans to total gross loans

1.18 % 0.53 %

Other real estate owned

$ - $ -

Non-performing loans

$ 21,665 $ 9,263

Non-performing assets to total assets

0.97 % 0.45 %

Regulatory Capital Ratios (Bank only) (1)

Total risk-based capital ratio

15.83 % 17.05 %

Tier 1 risk-based capital ratio

14.78 % 16.12 %

Leverage ratio

12.90 % 14.54 %

Common equity tier 1 ratio

14.78 % 16.12 %

Other information

Common shares closing stock price

$ 16.72 $ 18.16

Tangible equity / tangible assets (2)

9.43 % 10.10 %

Average tangible equity / average tangible assets (2)

9.65 % 10.24 %

Number of full time equivalent employees

182 191

Number of full service branch offices

6 6

(1)

Regulatory capital ratios as of March 31, 2025 are preliminary

(2)

Refer to "Unaudited Reconciliation of Certain Non-GAAP Financial Measures" for reconciliation of non-GAAP measures

(3)

Efficiency ratio is calculated as non-interest expense as a percentage of net interest income and non-interest income

(4)

Commercial real estate includes only non-owner occupied, multifamily, and construction loans as a percentage of Bank capital

(5)

Construction loans as a percentage of Bank capital

Unaudited Reconciliation of Certain Non-GAAP Financial Measures

(Dollars In thousands)

For the three months ended March 31,

2025

2024

Net interest margin (FTE)

Net interest income (GAAP)

$ 16,510 $ 15,625

FTE adjustment on tax-exempt securities

70 72

Net interest income (FTE) (non-GAAP)

16,580 15,697

Average interest earning assets

2,038,391 1,914,175

Net interest margin (GAAP)

3.28 % 3.27 %

Net interest margin (FTE) (non-GAAP)

3.30 % 3.29 %

For the three months ended March 31,

2025

2024

Yield on earning assets (FTE)

Total interest income (GAAP)

$ 32,963 $ 32,469

FTE adjustment on tax-exempt securities

70 72

Total interest income (FTE) (non-GAAP)

33,033 32,541

Average interest earning assets

2,038,391 1,914,175

Yield on earning assets (GAAP)

6.56 % 6.80 %

Yield on earning assets (FTE) (non-GAAP)

6.57 % 6.82 %

For the three months ended March 31,

2025

2024

Net interest spread (FTE)

Yield on earning assets (GAAP)

6.56 % 6.80 %

Yield on earning assets (FTE) (non-GAAP)

6.57 % 6.82 %

Yield on interest-bearing liabilities (GAAP)

4.19 % 4.77 %

Net interest spread (GAAP)

2.37 %

2.03

%

Net interest spread (FTE) (non-GAAP)

2.38 % 2.05 %

As of March 31,

2025

2024

Tangible common stockholders' equity

Total stockholders equity (GAAP)

$ 209,618 $ 223,121

Less: intangible assets

- (15,691 )

Tangible stockholders' equity (non-GAAP)

209,618 207,430

Less: preferred stock

(27,263 ) (27,263 )

Tangible common stockholders' equity (non-GAAP)

182,355 180,167

Common shares outstanding

7,703,197 7,614,090

Tangible book value per common share (non-GAAP)

$ 23.67 $ 23.66

As of March 31,

2025

2024

Stockholders equity, adjusted

Total stockholders equity (GAAP)

$ 209,618 $ 223,121

Less: intangible assets

- (15,691 )

Total tangible stockholders equity (non-GAAP)

209,618 207,430

As of March 31,

2025

2024

Total tangible assets

Total assets (GAAP)

$ 2,222,845 $ 2,070,015

Less: intangible assets

- (15,691 )

Total tangible assets (non-GAAP)

2,222,845 2,054,324

For the three months ended March 31,

2025

2024

Average tangible stockholders' equity

Total average stockholders' equity (GAAP)

$ 208,093 $ 222,100

Less: average intangible assets

- (15,078 )

Total average tangible stockholders' equity (non-GAAP)

208,093 207,022

For the three months ended March 31,

2025

2024

Average tangible assets

Total average assets (GAAP)

$ 2,155,461 $ 2,037,469

Less: average intangible assets

- (15,078 )

Total average tangible assets (non-GAAP)

2,155,461 2,022,391