10-K/A: MainStreet Bancshares Reports Q4 Loss Amid Software Impairment

Sentiment:

Annual Report Amendment 12 March 2026 3:33 PM

📋All filings for Mainstreet Bancshares, INC

MainStreet Bancshares, Inc. reported a significant net loss for fiscal year 2024, primarily driven by a $19.7 million impairment charge related to its Avenu financial technology software.

Capital raiseThe company issued $30.0 million in fixed-to-floating rate subordinated notes in April 2021, with a maturity date of April 15, 2031, to support growth and for other general business purposes.An additional $43.8 million in fixed-to-floating rate subordinated notes were issued in March 2022, with a maturity date of March 15, 2032, for growth and general business purposes.The Board of Directors authorized common stock repurchase programs in October 2020 ($17.0 million) and May 2022 ($7.5 million), with repurchases totaling $732,000 in 2024, $43,000 in 2023, and $6.9 million in 2022 under the latter program.Shareholders approved an increase in authorized common stock from 650,000 to 1,150,000 shares at the Annual Meeting on May 15, 2024, providing flexibility for future equity issuances.

Worse than expectedThe company reported a net loss of $(12.1) million for 2024, a significant deterioration from a net income of $24.4 million in 2023.Basic and diluted EPS dropped to $(1.60) from $3.25 in the prior year.Net interest income decreased by 18.5%, indicating pressure on core banking profitability.Provision for credit losses increased sharply, and nonaccrual loans surged over 2000%, signaling a significant decline in asset quality.A $19.7 million impairment charge on computer software contributed substantially to the net loss.

Summary

MainStreet Bancshares, Inc. filed an Amendment No. 3 to its Annual Report on Form 10-K for the fiscal year ended December 31, 2024, primarily to include the auditor's opinion on internal control over financial reporting.
The company reported a net loss available to common shareholders of $(12.1) million, or $(1.60) per basic and diluted share, for the year ended December 31, 2024, a significant decline from net income of $24.4 million in 2023.
This loss was largely due to a $19.7 million computer software intangible impairment charge recognized in the fourth quarter of 2024, related to its Avenu SaaS software program.
Net interest income decreased to $62.6 million in 2024 from $76.7 million in 2023, primarily due to higher interest expense on deposits.
Provision for credit losses on loans significantly increased to $7.5 million in 2024 from $1.9 million in 2023, driven by loan growth, charge-offs, and increasing qualitative factors.
Nonaccrual loans surged to $21.7 million as of December 31, 2024, compared to $1.0 million at December 31, 2023.
Total assets grew to $2.23 billion in 2024 from $2.04 billion in 2023, while total deposits increased to $1.91 billion from $1.69 billion.
The company's capital ratios remain strong and well above regulatory minimums for a well-capitalized institution.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing negatively due to the substantial net loss, significant software impairment, and notable deterioration in loan quality metrics, despite strong capital ratios and effective internal controls.

Positives

MainStreet Bancshares and its subsidiary maintained effective internal control over financial reporting as of December 31, 2024, as confirmed by an unqualified opinion from independent auditors.
The company's capital ratios (Total, Common Equity Tier 1, and Tier 1 capital) significantly exceed the minimum requirements for a well-capitalized institution as of December 31, 2024.
Total assets increased to $2.23 billion in 2024 from $2.04 billion in 2023, indicating balance sheet growth.
Total deposits grew to $1.91 billion in 2024 from $1.69 billion in 2023, demonstrating continued deposit gathering.
The Avenu SaaS software program was successfully deployed to customers in October 2024, indicating the completion of the development phase.

Negatives

The company reported a net loss available to common shareholders of $(12.1) million for the year ended December 31, 2024, a substantial decrease from a net income of $24.4 million in 2023.
Basic and diluted earnings per common share fell to $(1.60) in 2024 from $3.25 in 2023.
A significant computer software intangible impairment charge of $19.7 million was recognized in 2024, fully reducing the carrying value of the Avenu software asset.
Net interest income decreased by 18.5% to $62.6 million in 2024 from $76.7 million in 2023, primarily due to higher interest expense on deposits.
Provision for credit losses on loans increased sharply to $7.5 million in 2024 from $1.9 million in 2023, reflecting increased credit risk.
Nonaccrual loans dramatically increased to $21.7 million at December 31, 2024, from $1.0 million at December 31, 2023, indicating a deterioration in loan portfolio quality.
Collateral-dependent loans, where repayment is substantially through collateral sale due to borrower financial difficulty, rose significantly to $57.7 million in 2024 from $2.3 million in 2023.
The financial technology segment reported a substantial loss before income taxes of $23.4 million in 2024, compared to a loss of $71,000 in 2023, mainly due to the software impairment.

Risks

The estimation of the Allowance for Credit Losses (ACLL) on collectively evaluated loans involves complex and subjective management judgment, particularly in evaluating historical data, attrition rates, and forecasts of future conditions, which could lead to material misstatement if not accurately assessed.
The significant increase in nonaccrual loans ($21.7 million in 2024 vs. $1.0 million in 2023) and collateral-dependent loans ($57.7 million in 2024 vs. $2.3 million in 2023) indicates heightened credit risk and potential for future losses within the loan portfolio.
The $19.7 million impairment charge on the Avenu computer software intangible asset highlights the risk associated with technology investments and the potential for future write-downs if the asset does not generate expected value or if market conditions change.
Higher interest expense on deposits contributed to a decrease in net interest income, indicating sensitivity to interest rate fluctuations and potential pressure on profitability in a rising rate environment.
Substantially all loans, commitments, and standby letters of credit are granted to customers in the greater Washington, D.C. Metropolitan area, exposing the company to regional economic downturns and concentration of credit risk.
The substantial loss in the financial technology segment, even after software deployment, suggests ongoing challenges in achieving profitability and potential for further operational losses in its BaaS solution.
The company is a party to various litigation matters incidental to its ordinary course of business, which, while currently believed to be immaterial, always carry inherent uncertainty and potential for adverse outcomes.

Future Outlook

The filing primarily focuses on historical financial results and the amendment to include the auditor's opinion. It mentions the Avenu SaaS software program was deployed in October 2024 and that commitments to housing equity funds are expected to be fully funded by December 31, 2025, 2028, and 2029. There is no explicit forward-looking guidance on financial performance.

Management Comments

"Management believes that none of these legal proceedings, individually or in the aggregate, will have a material adverse impact on the results of operations or financial condition of the Company."
"Management believes, as of December 31, 2024, the Bank meets all capital adequacy requirements to which it is subject."
"Management, including the Company's principal executive and principal financial officer, assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2024... Based on our assessment, we believe that, as of December 31, 2024, the Company's internal control over financial reporting was effective based on those criteria."

Industry Context

StockSavvy.ai notes that the banking sector continues to navigate a challenging interest rate environment, which has impacted net interest margins for many institutions, as evidenced by MainStreet Bancshares' decreased net interest income. The significant increase in nonaccrual and collateral-dependent loans could signal broader credit quality concerns, particularly in regional real estate and commercial lending, which warrants close monitoring across the industry. The substantial impairment of the Avenu fintech software highlights the inherent risks and high capital requirements associated with developing and deploying new technology solutions in the competitive Banking-as-a-Service (BaaS) space, where many traditional banks are attempting to innovate.

Comparison to Industry Standards

MainStreet Bancshares' net interest income decline of 18.5% in 2024 is steeper than the average for U.S. regional banks, which generally saw more modest declines or even slight increases in net interest income in 2024, often due to better asset-liability management or more diversified revenue streams. For example, many larger regional banks like Truist Financial Corporation or PNC Financial Services Group, while facing margin compression, did not report such a sharp percentage drop in net interest income.
The surge in nonaccrual loans from $1.0 million to $21.7 million (a 2070% increase) and collateral-dependent loans from $2.3 million to $57.7 million (a 2400% increase) is significantly higher than typical industry trends for well-capitalized banks. While some banks have seen an uptick in problem loans, this magnitude of increase suggests specific portfolio weaknesses or regional economic pressures beyond the broader industry average.
The $19.7 million impairment charge on computer software for the Avenu fintech division is a substantial write-down relative to the company's equity and net income, indicating a significant challenge in its technology investment strategy. This contrasts with more successful fintech integrations or standalone ventures by larger financial institutions (e.g., JPMorgan Chase's investments in digital platforms or Goldman Sachs's Marcus) which, while costly, have generally avoided such large-scale impairments post-deployment.
Despite the financial losses, the bank's capital ratios (e.g., Total Capital Ratio of 15.69% and Tier 1 Capital Ratio of 14.64%) remain robust and well above the 'well-capitalized' thresholds (10.0% and 8.0% respectively), which is a positive compared to some smaller banks that have faced capital pressures.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Policy Adoption	Adopted a Policy Statement on Insider Trading and Confidentiality on July 17, 2024, outlining procedures for trading company securities and handling confidential information.	2024-07-17	Enhances compliance and ethical conduct standards for directors, officers, employees, and consultants regarding securities trading and information disclosure.
Policy Adoption	Implemented a policy against pledging company stock by Covered Persons as collateral for indebtedness, including holding securities in margin accounts.	2024-07-17	Reduces the risk of unplanned sales of company securities and aligns interests with shareholders by preventing speculative practices.
Shareholder Approval	Shareholders approved a proposal to increase the number of authorized common stock from 650,000 to 1,150,000 shares.	2024-05-15	Provides the company with greater flexibility for future equity issuances, potentially for capital raises, acquisitions, or employee incentive plans, but could lead to dilution.
Regulatory Status Change	The company is no longer considered an emerging growth company and will be an accelerated filer effective with this filing.	2024-12-31	Increases regulatory reporting requirements and compliance burdens, potentially impacting administrative costs and disclosure obligations.

Legal Proceedings

The company is a party to various litigation matters incidental to its ordinary conduct of business.
Management believes that none of these legal proceedings, individually or in the aggregate, will have a material adverse impact on the results of operations or financial condition of the Company.

Related Party Transactions

Loans and letters of credit are granted to executive officers, directors, and their affiliated entities in the ordinary course of business on substantially the same terms as with unrelated persons.
The ending balance of loans to related parties was $42,000 as of December 31, 2024, down from $281,000 in 2023.
Deposit accounts maintained by executive officers, directors, and their affiliated entities amounted to approximately $21.3 million at December 31, 2024, a significant increase from $2.2 million at December 31, 2023.

Stakeholder Impact

Shareholders: Negative impact due to the net loss, significant drop in EPS, and the software impairment charge. The increase in authorized common stock could lead to future dilution. Preferred shareholders continue to receive dividends.
Employees: The increase in salaries and employee benefits suggests continued investment in human capital, but the overall financial performance could impact future compensation or job security.
Customers (Core Banking): Continued loan growth and deposit services indicate ongoing customer relationships. However, increased provision for credit losses and nonaccrual loans might signal tighter lending standards or increased scrutiny for some borrowers.
Customers (Fintech/Avenu): The deployment of the Avenu SaaS software program is a positive for fintech partners, but the impairment charge raises questions about the long-term viability and value proposition of the platform.
Creditors: The strong capital ratios provide comfort regarding the bank's ability to meet its obligations, despite the net loss.

Next Steps

The Housing Equity Fund of Virginia XXIV, L.L.C. commitment is expected to be fully funded by December 31, 2025.
The VCDC Equity Fund 26, LLC commitment is expected to be fully funded by December 31, 2028.
The VCDC Equity Fund 27, LLC commitment is expected to be fully funded by December 31, 2029.
The company will continue to monitor and manage its loan portfolio, particularly nonaccrual and collateral-dependent loans.
The Avenu SaaS software program, deployed in October 2024, will continue its operations, with future performance to be assessed.

Key Dates

Date	Description
2003-03-28	MainStreet Bank incorporated.
2004-03-16	MainStreet Bank received its charter from the Bureau of Financial Institutions of the Commonwealth of Virginia.
2004-05-26	MainStreet Bank commenced regular operations.
2004-10-01	Bank adopted a 401(k) defined contribution plan.
2010-01-01	Bank began making matching contributions to the 401(k) plan.
2015-01-01	Basel III capital requirements became effective for the Bank.
2016-07-15	Reorganization into a holding company structure became effective, with MainStreet Bank becoming a wholly-owned subsidiary of MainStreet Bancshares, Inc.
2019-04-18	Company completed registration of common stock with the SEC through Form 10.
2019-04-22	Common stock approved for listing on Nasdaq Capital Market under symbol MNSB.
2019-07-17	Board of Directors adopted the MainStreet Bank 2019 Equity Incentive Plan.
2020-09-15	Company issued 1,000,000 depositary shares of Series A Fixed-Rate Non-Cumulative Perpetual Preferred Stock.
2020-09-16	Depositary shares of preferred stock approved for listing on Nasdaq Capital Market under symbol MNSBP.
2020-09-25	Company completed sale of an additional 150,000 depositary shares.
2020-10-22	Board of Directors authorized a common stock repurchase program of up to $17.0 million.
2020-12-31	Bank made a $5.0 million commitment to the Housing Equity Fund of Virginia XXIV, L.L.C. and a $2.0 million commitment to the Washington Housing Initiative Impact Pool, LLC.
2021-04-06	Company completed issuance of $30.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes due April 15, 2031.
2021-10-12	Company filed an election with the Federal Reserve Board to be a financial holding company.
2021-10-25	MainStreet Bancshares, Inc. formally introduced Avenu, a division of MainStreet Bank.
2022-01-01	Community Development Financial Institutions Fund (CDFI) certified MainStreet Community Capital, LLC as a registered CDE.
2022-03-01	Company completed issuance of $43.8 million in aggregate principal amount of fixed-to-floating rate subordinated notes due March 15, 2032.
2022-05-18	Board of Directors authorized a common stock repurchase program of up to $7.5 million.
2022-12-31	Bank made a $2.0 million commitment to the VCDC Equity Fund 26, LLC.
2023-01-01	Company adopted ASU 2016-13 (CECL methodology), resulting in a net decrease to retained earnings of $1.7 million.
2023-12-31	Bank made a $2.0 million commitment to the VCDC Equity Fund 27, LLC.
2024-01-01	Company adopted ASU 2023-02, transitioning to the proportional amortization method for New Market Tax Credit investments, with a cumulative change of $217,000.
2024-05-15	Common shareholders approved a proposal to increase the number of authorized common stock from 650,000 to 1,150,000 shares.
2024-07-17	Board of Directors adopted the Policy Statement on Insider Trading and Confidentiality.
2024-09-30	Company was no longer considered an emerging growth company.
2024-10-01	Avenu SaaS software program was deployed to customers.
2024-12-31	Fiscal year ended; company adopted ASU 2023-07 (Segment Reporting) and recognized a $19.7 million computer software intangible impairment.
2025-03-10	Number of shares of Common Stock outstanding was 7,728,106.
2025-03-14	Original Report (10-K) filed; Auditor's report date for financial statements and internal control over financial reporting.
2026-03-12	Date of filing of this Amendment No. 3 to Form 10-K/A.

Recommendation

sell

The significant net loss for 2024, primarily driven by a substantial $19.7 million software impairment, coupled with a sharp deterioration in asset quality evidenced by a dramatic increase in nonaccrual and collateral-dependent loans, indicates severe operational and credit challenges. While capital ratios remain strong, the negative trends in net interest income and the unproven profitability of the fintech segment suggest a difficult path forward. These factors outweigh the positive aspects of balance sheet growth and effective internal controls, warranting a sell recommendation for investors seeking better risk-adjusted returns.

Keywords

MainStreet Bancshares, MNSB, SEC Filing, Financial Results, Banking, Fintech, Avenu, Software Impairment, Net Loss, Credit Losses, Nonaccrual Loans, Capital Ratios, Deposits, Loans, Fairfax VA, Community Bank, Financial Holding Company

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