MainStreet Bancshares, Inc. Q4 FY2024 earnings call

Bullet points:

• Intangible assets were written down to zero due to implementation delays in the Venue software-as-a-service solution.
• The bank ended 2024 with a net interest margin of 3.13% and continued to build new deposit relationships, using excess liquidity to exercise call options on $60 million in high CDs.
• Loan portfolio showed positive trends in non-performing assets and past-due loans, with a goal to reduce CRE concentration within policy limits.
• Significant progress made in working through non-performing loans, reducing them by 62% over 2024.
• Focus on expense reduction and efficiency, with a projected 83 basis points per month reduction in run rates starting from 2024 normalized net interest expenses.

The core banking segment had a net interest margin of 3.13% for the year. Loan portfolio saw growth, with net new loan funding of $108 million over the fiscal year. Non-interest bearing deposits represented 23% of the core deposit base and 17% of all deposits. The Avenue segment had Version 1 in production with a small team continuing to optimize it. The Venue segment, a cannabis payments solution, had an estimated average outstanding deposits of $135 million for 2025 and potential for significant transaction fees if successful.

Bullet points:

• Expect low-single-digit loan growth in 2025.
• Projected run rate of 83 basis points per month reduction in expenses starting from 2024 normalized net interest expenses.
• Venue is expected to reach profitability in 2025 with proper execution of strategy, including converting cannabis store sales to digital payments and adding new stores to the network.

Bullet points:

• Deposit costs are a significant challenge, with 54% of community bank CEOs citing this as their number one challenge in 2025.
• Competition from super regional and multinational banks in the deposit market requires deep relationship building.
• Potential risks with certain loan types, such as those in the government contracting space with payments on billed receivables and acquisition financing.

Q: Will the other measures put in place be meaningful as taking Avenue forward?

A: Yes, actions like reducing expenses, renegotiating contracts, and focusing on revenue are meaningful.

Q: Does the Avenue solution fully support the cannabis opportunity?

A: Version 1 of Avenue has everything needed, with a small team continuing to optimize it and working on ISO reseller relationships.

Q: Is pre-ROA of 53 basis points achievable in 2025?

A: Yes, with improvements in credit metrics, net interest income growth, and continued deposit opportunities.

Q: Do loan growth opportunities exist in the market?

A: Absolutely, with less than 1% market share in the market, there are abundant opportunities for owner-occupied, owner-operated end-user businesses.

Q: What are the expected expenses for 2025?

A: Expenses have been pared down, with a focus on keeping operating expenses lean and revisiting contracts to lower costs.