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MainStreet Bancshares, Inc. (MNSB)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered a clean rebound: EPS of $0.25 versus a Q4 impairment-driven loss, with net interest margin (NIM) expanding 34 bps sequentially to 3.30% on lower funding costs and deposit mix optimization .
  • EPS beat Wall Street consensus by roughly 3–4 cents (S&P Global consensus EPS 0.21*), driven primarily by faster-than-expected funding cost relief; revenue “net interest income + non-interest income” was ~$17.45M .
  • Management shut down the Avenu BaaS initiative to focus on the core bank, a strategic pivot that removes execution risk and cost drag; operating commentary emphasized sustained NIM tailwinds as callable/wholesale CDs and noncore deposits are refinanced down .
  • Credit remained manageable: nonperforming loans were $21.7M with additional $11.2M expected to pay off at par in Q2 on a court-approved resolution; loan-to-deposit ratio ~96%, deposits steady at $1.91B, capital remains strong (Bank CET1 14.78%) .

What Went Well and What Went Wrong

  • What Went Well

    • NIM inflected higher: 3.30% (+34 bps QoQ) as total funding costs fell 24 bps to 3.49% and the bank replaced higher-cost deposits; “Our net interest margin expansion was fueled primarily by an opportunity to replace higher cost deposits” — Alex Vari, Chief Accountant .
    • Mix and funding actions working: non-interest-bearing deposits improved to $345.3M (+6.5% QoQ), with structured noncore deposits ($211M of $578M) positioned to reprice quickly as rates fall .
    • Asset quality catalysts: NPLs stable at $21.7M with $11.2M expected to pay off at par in Q2 on a court-approved resolution, highlighting execution on problem credits .

  • What Went Wrong

    • Efficiency still elevated: efficiency ratio 82.0% (vs. 76.0% YoY) despite NIM improvement, reflecting persistent expense intensity after a difficult 2024; ROAA 0.46% remains below potential .
    • Nonaccruals higher YoY: non-accrual loans to total loans 1.18% vs. 0.53% YoY; nonperforming assets to total assets 0.97% vs. 0.45% YoY, though management expects resolution progress in Q2 .
    • Strategic reset: Avenu BaaS discontinued; while de-risking, it signals loss of a previously promoted non-core growth vector and may require investor model resets — “Avenu … will not be moving forward,” CEO Jeff Dick .

Financial Results

Quarterly trend (oldest → newest)

MetricQ3 2024Q4 2024Q1 2025
EPS ($)(0.04) (2.20) 0.25
Net Revenues ($M) (NII + Non-interest income)16.23 (15.343 + 0.886) 16.85 (16.041 + 0.807) 17.45 (16.510 + 0.939)
NIM (FTE, %)3.05% 2.96% 3.30%

Year-over-year (Q1)

MetricQ1 2024Q1 2025
EPS ($)0.36 0.25
Net Revenues ($M) (NII + Non-interest income)16.42 (15.625 + 0.796) 17.45 (16.510 + 0.939)
NIM (FTE, %)3.29% 3.30%
Cost of interest-bearing liabilities (annualized, %)4.77% 4.19%

Loan portfolio composition (as of March 31, 2025)

CategoryAmount ($000s)% of TotalQoQ %YoY %
Construction & Land Dev.344,742 18.8% -12.4% -15.7%
Residential Real Estate450,728 24.6% 2.6% -0.3%
Commercial Real Estate933,947 50.9% 4.3% 14.8%
Commercial & Industrial105,180 5.6% 0.3% 46.4%
Consumer1,331 0.1% -15.4% -54.1%
Total Gross Loans1,835,928 100.0% 0.1% 5.0%

Key KPIs

KPIQ4 2024Q1 2025
Total Deposits ($000s)1,907,794 1,908,325
Loan-to-Deposit Ratio (%)—96%
NPLs ($000s)21,650 21,665
NPA / Assets (%)0.97% 0.97%
Cost of Interest-bearing Liabilities (annualized, %)4.47% 4.19%
CET1 (Bank) (%)14.64% 14.78%
Total Assets ($000s)2,228,098 2,222,845

Estimates vs Actuals (S&P Global unless noted)

MetricPeriodConsensusActual
EPS ($)Q1 20250.21*0.25
Revenue ($M)Q1 2025N/A*17.45 (calc)

Values with asterisks retrieved from S&P Global.

Supplementary third-party reference: Some trackers showed revenue miss vs ~$18.0M consensus and EPS beat (actual $0.25 vs $0.21) .

Guidance Changes

MetricPeriodPrevious Guidance/CommentaryCurrent Guidance/CommentaryChange
Net Interest Margin (direction)Near-term 2025Q4: NIM to improve as callable CDs are exercised; deposit costs trending down (called $60M in Q4; additional ~$120M in Q1 pipeline) Q1: NIM 3.30% (+34 bps QoQ); funding costs -24 bps QoQ; continuing to replace higher-cost deposits Raised qualitatively (trajectory improved)
Loan Growth2025Low single-digit growth targeted Reiterated cautious stance; loans stable at $1.836B Maintained
Expense Run-rateQ1 2025Target run-rate reduction vs 2024; 83 bps/month projection (company-wide) Q1 efficiency 82.0% (still elevated), but mix actions underway Maintained qualitative focus
Avenu BaaSOngoingQ4: Version 1 in service; breakeven path discussed (longer-dated) Q1: “Avenu … will not be moving forward” to focus on core bank Ceased/Withdrawn
Capital & Credit2025Expect normalization in credit metrics through 2025 $11.2M NPL payoff expected at par in Q2 per court resolution Improved visibility

Earnings Call Themes & Trends

TopicQ-2 (Q3 2024)Q-1 (Q4 2024)Current (Q1 2025)Trend
Deposit costs & NIMNIM depressed by nonaccrual interest reversal; strategy to reprice deposits, callable CDs; 55% noncore deposits adjustable immediately Called $60M of high-rate CDs; more callable CDs planned; targeting NIM stabilization/expansion NIM +34 bps QoQ to 3.30%; funding costs -24 bps; continued deposit stack optimization Improving
Avenu/Tech strategyLaunch of Version 1; consultant validation; breakeven path discussed Expense paring; focus on deposits/fees (Avenu, Venu) through 2025 Discontinued Avenu; pivot to core bank focus Strategic exit
Credit normalizationNonperforming loans actively resolved; YTD losses ~0.1% of loans; note sales at par; strong collateral stories Classified loans down to 2.94% of loans; NPAs reduced 62% in 2024 NPLs $21.7M with $11.2M payoff expected at par in Q2 De-risking
Capital & liquidityStrong capitalization; stress test shows resilience Capital strong; callable CDs to lift NIM; liquidity management intact CET1 14.78%; deposits stable at $1.91B Stable/Strong
Macro/MarketDC market resilient; deposit competition; regulatory posture for BaaS Competitive funding; efficiency push; SBA/owner-occupied opportunities Cautious optimism on DC market early in new administration Stable

Note: Q1 2025 earnings call transcript (highlights: deposit repricing and margin drivers) referenced externally .

Management Commentary

  • “Our net interest margin expansion was fueled primarily by an opportunity to replace higher cost deposits. 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.” — Alex Vari, Chief Accountant .
  • “This quarter saw a change in direction for the Avenu technology initiative, which will not be moving forward.” — Jeff W. Dick, Chairman & CEO .
  • “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.” — Chris Johnston, Chief Credit Officer .
  • “We remain cautiously optimistic about the DC Metropolitan market…serving our customers but taking conservative steps as we monitor the early days that come with a new administration.” — Abdul Hersiburane, President .

Q&A Highlights

  • Margin path: Management emphasized NIM improvement is driven by both lower funding costs and stable asset yields, with deposit repricing/wholesale CDs replacement the primary contributor (Tom Chmelik) .
  • Deposit actions detail: Company repriced significant tranches of CDs and replaced/called wholesale deposits, added non-interest-bearing/low-cost transaction deposits — reinforcing forward NIM tailwinds .
  • Strategic focus: Discussion acknowledged Avenu discontinuation with continued emphasis on balance sheet optimization and core franchise execution .

Estimates Context

  • EPS: Q1 2025 EPS of $0.25 beat S&P Global consensus of $0.21 by ~$0.04, reflecting faster funding cost relief and deposit mix improvements (EPS consensus shown with S&P Global asterisk in the table above) .
  • Revenue: S&P Global revenue consensus for Q1 2025 was not available for display; actual revenue proxy (NII + non-interest income) was ~$17.45M from company-reported financials . Third-party trackers indicated a revenue miss vs ~$18.0M expectation .
    Values with asterisks retrieved from S&P Global.

Key Takeaways for Investors

  • The core earnings engine has turned the corner: a +34 bps QoQ NIM jump to 3.30% alongside funding cost compression suggests further upside as more CDs reprice/callable balances roll and noncore deposits reprice down .
  • Strategic simplification: Exiting Avenu removes execution risk and cost overhang, sharpening focus on balance sheet optimization and community banking core, a positive for multiple expansion if NIM momentum sustains .
  • Credit risk appears contained with tangible resolution catalysts (court-approved par payoff of $11.2M in Q2); watch nonaccrual and classified loan trends for confirmation of normalization into mid-2025 .
  • Deposit base is stable at $1.91B with better mix; the bank retains levers via structured noncore deposits designed to reprice quickly in a lower-rate cycle .
  • Near-term model updates: Raise NIM assumptions and EPS for 2025 modestly on deposit cost relief; remove Avenu contribution/costs from outer-year assumptions and focus on core margin/volume .
  • Capital remains a backstop (CET1 14.78%) enabling prudent growth and balance sheet maneuvers without equity dilution pressure .
  • Trading lens: The narrative shift from BaaS to core bank profitability plus visible NIM tailwinds is a constructive catalyst; deliverability of credit resolutions and sustained funding cost declines are the critical watch items over the next 1–2 quarters .