MainStreet Bancshares, Inc. Q1 FY2024 earnings call

• Banking-as-a-Service (Avenue): Developed a robust system with modern API connectivity, integrated compliance, and working with multiple Fintech clients. Capitalized $15.3 million on the Avenue solution. Goal to reach $225 million in deposits for Avenue by 2024.
• Bank Operations: Virginia community bank in its 20th year, using a branch-light strategy. Strong market with federal government, universities, etc. Asset quality strong, risk management robust. Disciplined underwriting and loan pricing, loan portfolio with 64% fixed rate and 56% floating rate loans with floors. Office exposure reduced, construction portfolio diversified.

For Avenue, legacy Avenue deposits produced $619,000 in interest and fees over the first quarter, covering almost two-thirds of Avenue's expenses. For the bank, key financial ratios include EPS of $0.36, efficiency ratio 76%, annualized return on average assets 0.65%, return on average equity 5.97%, and net interest margin 3.24%. Net loans increased $22 million for the quarter, total deposits increased $47 million. Core deposits make up 76% of total deposits with a weighted average cost of 3.32%, while non-core deposits are 24% with a weighted average rate of 4.89%.

• Expense run rate to average 1.2% per month in 2024.
• Avenue goal: Reach $225 million in deposits and $2 million in fees.
• Project low-single-digit loan growth for remainder of 2024.
• Expect improved net interest margin in the back half of 2024 due to non-interest bearing deposits from Avenue.

• Regulatory scrutiny on banking-as-a-service partners, requiring heightened oversight of Fintech partners.
• Persistent deposit cost challenges despite Avenue efforts.
• Potential impact of interest rate changes on net interest margin and deposit costs.

Q: Chris Marinac on net interest margin and loan growth A: Jeff Dick thinks progress will be made, Tom Chmelik mentions low to mid-single-digit loan growth Q: Avenue deposit progress A: Jeff Dick says second quarter may see small growth, but depends on Fintech integration Q: Credit front with non-performing loans A: Tom Chmelik and Jeff Dick discuss a construction project expected to be resolved by year-end Q: Tangible book value decrease A: Alex Vari explains it's a one-time event from equity incentive plan Q: Buyback program and insider buying A: Jeff Dick talks about remaining shares in buyback and blackout periods for insiders