MainStreet Bancshares, Inc. Q3 FY2024 earnings call

• Financial Performance: Q3 earnings per share loss of $0.04 due to problem loans. Net interest margin impacted by interest reversals but expected to expand with lower deposit costs and new loans. Core deposits at 78% of total deposits.
• Expenses: Non-interest expenses decreased excluding non-recurring items. Avenue launch led to amortization of intangible software and additional expenses, but temporary.
• Loan Portfolio: Strong loan portfolio with disciplined lending, problem loans being addressed, new loans originated, and construction loans performing well.
• Avenu BaaS: In-service, Board received independent validation, fintech partners in various stages, aiming for general release of fintechs.

Lending: Gross loans were relatively flat in Q3 with new loan fundings of $82 million. Weighted average rate for new loans was 7.8% with a weighted average maturity of 44 months. Loan portfolio had problem loans but expected improvements. Classified loans were 4.3% of total loans, non-performing loans had positive outlooks with potential for full repayment. Avenu BaaS: Version 1 in service, aiming to get first fintech to general release in early November, with other fintechs to follow. Involved expenses but expected to be profitable in 2026.

• Net Interest Margin: Expect net interest margin expansion due to lower deposit costs, callable CDs, and new quality loans.
• Loan Growth: Expect low single-digit loan growth in Q4.
• Avenu: Expected to be profitable in 2026, with fintechs moving to general release, and deposits accumulating.

• Regulatory Risks: Previously had 12 consent orders from regulators, though addressed, ongoing regulatory compliance is a risk.
• Avenu Launch Risks: Initial expenses from Avenu launch may impact profitability until breakeven.
• Loan Portfolio Risks: Some problem loans and non-performing loans, though expected to be resolved with positive outcomes.

Q: About loans sold at par, what industries were they in?

A: Investor commercial real estate, including for-sale condo and multifamily projects.

Q: Cost of funds decline?

A: Cost of funds is coming down, with non-core deposits adjustable and Fed funds rate impact considered.

Q: Avenue expenses?

A: Expenses for Avenue are consistent, with amortization of intangible software and projected expenses.

Q: FDIC costs?

A: FDIC costs staying consistent, with slight increase with deposit growth.

Q: Expectations for problem loans?

A: Most problem loans expected to have positive resolution with minimal losses.

Q: FS Vector projections?

A: FS Vector's projections are a reasonable start, providing a perspective on Fintech potential.