MainStreet Bancshares Inc. Reports Third Quarter Results
Increase in Core Deposits, a High-Quality Loan Portfolio and Strong Capital
FAIRFAX, Va., Oct. 28, 2024 /PRNewswire/ -- MainStreet Bancshares, Inc. (NASDAQ:MNSB, MNSBP)), the financial holding company for MainStreet Bank, reported a loss of -$0.04 per common share for the third quarter of 2024 as it dealt decisively with a small number of nonperforming real estate loans. Year-to-date 2024 earnings per common share are $0.60. The Company remains strongly capitalized.
"Our third quarter annualized net interest margin was impacted by $984,000 in accrued interest income that was reversed in relation to loans placed on nonaccrual status," said Alex Vari, Chief Accountant for MainStreet Bank. "This resulted in a quarterly net interest margin of 3.05% and a year-to-date net interest margin of 3.19%."
The Company charged off $1.9 million of nonperforming loans during the quarter and allocated $1 million to provision expense to augment loan growth and ensure the Allowance for Credit Losses remains directionally consistent for the purposes of growth and quality.
In response to the bank's credit quality, Chris Johnston, Chief Credit Officer for MainStreet Bank, expanded, "this quarter showed the underlying strength of a portfolio shaped by a rigorous credit culture. The total principal losses incurred year-to-date 2024 approximates just 0.1% of total loans. Our lending team has demonstrated great resolve in addressing troubled loans, both by working with borrowers and by finding acceptable solutions minimizing the impact on shareholder value. With that, we expect the level of problem loans to improve from this point."
Total deposits expanded to $1.9 billion. The Bank continues to attract healthy amounts of core deposits, reaching $1.47 billion, or 78% of total deposits.
"The DC Metropolitan area is a vibrant market. Our Business Bankers continue to perform, growing noninterest bearing core deposits by $33 million during the quarter," noted Abdul Hersiburane, President of MainStreet Bank. "In an exercise of foresight, we structured noncore deposits with immediate rate repricing or callable options. We have now $233 million of our $423 million noncore deposits available to reprice as rates fall."
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 just prior to the end of the third quarter of 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," said Jeff W. Dick, Chairman & CEO of MainStreet Bancshares, Inc. and MainStreet Bank. "With Version 1 of Avenu placed in-service, the team is focused on getting the first fintech to general release in early November, and another four fintechs to follow soon thereafter. Just as with any business expansion opportunity, the expenses associated with launching Avenu will impact profitability until we reach break-even. However, after that point Avenu's ability to digitally scale can far surpass bricks and mortar growth and profitability."
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.
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)
September 30, 2024
June 30, 2024
March 31, 2024
December 31, 2023*
September 30, 2023
ASSETS
Cash and cash equivalents
Cash and due from banks
$
40,955
$
41,697
$
49,208
$
53,581
$
44,912
Federal funds sold
191,159
49,762
75,533
60,932
76,271
Total cash and cash equivalents
232,114
91,459
124,741
114,513
121,183
Investment securities available for sale, at fair value
58,489
57,605
58,699
59,928
56,726
Investment securities held to maturity, at amortized cost, net of allowance for credit losses of $0 for all periods
16,016
16,036
17,251
17,275
17,565
Restricted equity securities, at amortized cost
26,745
26,797
23,924
24,356
20,619
Loans, net of allowance for credit losses of $18,327, $17,098, $16,531, $16,506, and $15,626, respectively
1,775,558
1,778,840
1,727,110
1,705,137
1,681,444
Premises and equipment, net
13,571
13,787
14,081
13,944
14,275
Accrued interest and other receivables
11,077
11,916
10,727
12,390
11,184
Computer software, net of amortization
18,881
17,205
15,691
14,657
13,373
Bank owned life insurance
39,203
38,901
38,609
38,318
38,035
Other assets
32,945
41,200
39,182
34,914
47,087
Total Assets
$
2,224,599
$
2,093,746
$
2,070,015
$
2,035,432
$
2,021,491
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Non-interest bearing deposits
$
347,575
$
314,636
$
348,945
$
364,606
$
394,859
Interest bearing demand deposits
197,527
179,513
165,331
137,128
76,423
Savings and NOW deposits
61,893
60,867
46,036
45,878
46,550
Money market deposits
451,936
476,396
446,903
442,179
461,398
Time deposits
834,738
723,951
725,520
696,336
703,960
Total deposits
1,893,669
1,755,363
1,732,735
1,686,127
1,683,190
Federal funds purchased
—
—
—
15,000
—
Subordinated debt
72,940
72,841
72,741
72,642
72,543
Other liabilities
31,939
40,827
41,418
40,146
52,015
Total Liabilities
1,998,548
1,869,031
1,846,894
1,813,915
1,807,748
Stockholders' Equity:
Preferred stock
27,263
27,263
27,263
27,263
27,263
Common stock
29,463
29,452
29,514
29,198
29,188
Capital surplus
67,083
66,392
65,940
65,985
65,407
Retained earnings
108,616
109,651
108,334
106,549
102,694
Accumulated other comprehensive loss
(6,374)
(8,043)
(7,930)
(7,478)
(10,809)
Total Stockholders' Equity
226,051
224,715
223,121
221,517
213,743
Total Liabilities and Stockholders' Equity
$
2,224,599
$
2,093,746
$
2,070,015
$
2,035,432
$
2,021,491
*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
September 30, 2024
September 30, 2023
September 30, 2024
June 30, 2024
March 31, 2024
December 31, 2023
September 30, 2023
INTEREST INCOME:
Interest and fees on loans
$
93,852
$
85,530
$
31,615
$
31,655
$
30,582
$
30,951
$
29,822
Interest on investment securities
Taxable securities
1,262
1,384
397
430
435
451
459
Tax-exempt securities
832
797
294
268
270
268
268
Interest on federal funds sold
3,550
3,528
1,285
1,083
1,182
1,510
1,217
Total interest income
99,496
91,239
33,591
33,436
32,469
33,180
31,766
INTEREST EXPENSE:
Interest on interest bearing demand deposits
6,049
761
2,117
2,118
1,814
1,027
216
Interest on savings and NOW deposits
553
400
206
190
157
146
145
Interest on money market deposits
15,911
8,091
5,277
5,542
5,092
5,538
4,068
Interest on time deposits
27,361
18,719
9,543
9,010
8,808
8,187
7,516
Interest on federal funds purchased
575
274
277
191
107
25
35
Interest on Federal Home Loan Bank advances
46
1,105
—
—
46
118
186
Interest on subordinated debt
2,468
2,460
828
820
820
828
828
Total interest expense
52,963
31,810
18,248
17,871
16,844
15,869
12,994
Net interest income
46,533
59,429
15,343
15,565
15,625
17,311
18,772
Provision for (recovery of) credit losses
3,356
1,176
2,913
638
(195)
466
255
Net interest income after provision for (recovery of) credit losses
43,177
58,253
12,430
14,927
15,820
16,845
18,517
NON-INTEREST INCOME:
Deposit account service charges
1,516
1,639
557
490
469
510
514
Bank owned life insurance income
885
786
302
291
292
283
272
Net loss on securities called or matured
(48)
—
—
(48)
—
—
—
Other non-interest income (loss)
93
158
27
31
35
(34)
105
Total non-interest income
2,446
2,583
886
764
796
759
891
NON-INTEREST EXPENSES:
Salaries and employee benefits
22,222
21,139
7,250
7,484
7,488
7,129
6,924
Furniture and equipment expenses
2,806
1,983
931
940
935
804
713
Advertising and marketing
1,599
2,072
579
566
454
271
577
Occupancy expenses
1,257
1,287
407
415
435
397
375
Outside services
2,458
1,691
845
839
774
352
697
Administrative expenses
686
703
215
229
242
219
277
Other operating expenses
7,508
5,404
2,992
2,362
2,153
2,166
1,988
Total non-interest expenses
38,536
34,279
13,219
12,835
12,481
11,338
11,551
Income before income tax expense (benefit)
7,087
26,557
97
2,856
4,135
6,266
7,857
Income tax expense (benefit)
900
5,119
(168)
238
830
1,120
1,516
Net income
6,187
21,438
265
2,618
3,305
5,146
