MainStreet Bank outlines 2026 growth and capital plans

Management resets after technology transition and refocuses on core banking

MainStreet Bank executives used their prerecorded 2025 earnings webcast to describe the past year as a reset period and to outline plans for 2026. Chairman and CEO Jeff Dick said the company had shifted back to ‘core banking’ priorities following a disruptive technology transition in 2024. He characterized 2025 as positioning the bank for a ‘springboard’ in performance this year, emphasizing a strategy of maximizing core profitability rather than pursuing ‘growth for growth’s sake.’ The bank operates a ‘branch‑light’ model supported by technology‑based service delivery and will add its seventh branch, in downtown Middleburg, Virginia, in February.

Dick highlighted the Washington, D.C., metropolitan area as a key market, citing economic diversity across universities, tourism, technology, data centers, healthcare and large corporations. He pointed to market statistics such as a $125,000 median household income, an $810,000 average home listing price and an average 38 days on market for homes as indicators of local strength. Devon Porter, who is leading the new Middleburg branch effort, has already accumulated more than $100 million in low‑cost deposits ahead of its formal opening, according to management.

Management said it intends to remain accessible to investors, noting plans to attend the Janney conference in Scottsdale, Arizona, on February 4–5 and inviting follow‑up questions by phone. Dick closed the webcast reiterating that, with 2024’s technology transition now behind the bank, the leadership team is focused on translating late‑2025 loan and deposit momentum into improved returns in 2026.

Margin resilience, funding costs, and liquidity strategy

Chief Financial Officer Alex Vari reported that net interest income rose 11% year‑over‑year in 2025 and that core net interest margin had remained steady over the last nine months. He noted that fourth‑quarter results included $600,000 of non‑recurring interest reversals tied to two relationships moved to non‑accrual status. Excluding those items, Vari said the underlying portfolio was strong and that management expected continued net interest margin resilience with potential for improvement as balance‑sheet trends carry into 2026.

Vari emphasized the bank’s effort to ‘recalibrate’ deposit composition rather than chase raw balance growth. Over the past five quarters, MainStreet reduced its cost of deposits by 71 basis points year‑over‑year, which Vari said generally tracked the Federal Reserve’s rate‑reduction cycle. The bank has also expanded its liquidity facilities so they now cover ‘over 30%’ of the deposit portfolio, with particular strength in secured credit availability. Vari said management expects ‘even more funding cost relief throughout 2026’ and will continue optimizing deposit mix to favor ‘profitable, low cost, and scalable funding,’ including non‑interest‑bearing deposits sourced from targeted niche industries.

Looking ahead, Vari projected that expenses in the first two quarters of 2026 would be consistent with the normalized level seen in the fourth quarter of 2025. He guided to loan growth of 3% to 4% over the first six months of 2026, describing the outlook as balanced between growth and disciplined risk management. Vari also underscored that liquidity remained ample, supported by diversified funding sources and the enlarged secured borrowing capacity.

Capital deployment and share repurchase activity

MainStreet has been active in returning capital to shareholders via repurchases. Dick noted that in October the company filed a Form 8‑K refreshing its share repurchase authorization and increasing capacity to $10 million. He said the company intends to adopt a Rule 10b5‑1 trading plan once it exits its blackout period. As of year‑end, Dick said the bank’s stock was trading at roughly 80% of tangible book value, a level he suggested provided room for accretive buybacks.

Vari reported that the bank repurchased 209,000 shares in the fourth quarter at a price he described as ‘28% accretive to book value.’ He added that management would continue to look for repurchase opportunities as long as they remained attractive relative to intrinsic value and capital needs. Despite this activity, Vari said regulatory capital remained solid and that the bank’s capital position was further validated by internal stress‑testing results.

In parallel with buybacks, Dick said the bank plans to keep investing selectively in physical distribution. The expansion of the branch footprint, including the new Middleburg location, is being paired with outreach to niche sectors such as government contracting and specialty commercial segments, with a goal of attracting additional low‑cost operating deposits that support both growth and capital efficiency.

Loan growth, portfolio mix, and credit quality

Chief Lending Officer Tom Floyd said fourth‑quarter loan growth was concentrated in ‘desirable categories’ and accompanied by continued credit discipline. He characterized annual net charge‑offs as ‘virtually zero’ and said the bank achieved net portfolio growth while intentionally reducing its exposure to non‑owner‑occupied commercial real estate (CRE). Floyd explained that MainStreet has been selectively pulling back from higher‑risk CRE and reallocating toward owner‑occupied properties associated with broader customer relationships.

As of the end of 2025, the loan portfolio was composed of 30% non‑owner‑occupied CRE, 24% owner‑occupied CRE, 16% construction, 12% multifamily, 12% residential real estate, and 6% commercial and industrial credits. Floyd noted that nearly all construction loans carry an interest reserve held at the bank. He said the average new loan size had trended lower over several years, reflecting a deliberate focus on smaller, more granular exposures in the current environment.

Floyd also discussed the government contracting portfolio, which includes 27 asset‑based lines of credit and a total of 29 lines with $12.3 million outstanding against $67.3 million of commitments, implying 18% utilization. Term debt outstanding in that segment totaled $1.4 million, with an average remaining term of 24 months and rapid amortization. He highlighted that deposits related to this portfolio averaged $93.6 million in the quarter, nearly seven times the outstanding credit, underscoring its value as a funding source.

Interest‑rate positioning and stress testing results

On interest‑rate sensitivity, Floyd said 67% of MainStreet’s loan portfolio has rate resets beyond six months, while 33% resets within six months. Within the faster‑resetting portion, he said about 60% carries a weighted average floor rate of 5.84%. Floyd indicated that, if market rates remain stable or decline, these loan floors could help support the bank’s net interest margin by preventing yields from falling as quickly as benchmark rates.

Floyd provided an overview of the bank’s stress‑testing process, which estimated a worst‑case stress loss of $62.9 million for the quarter. Even under that scenario, he said MainStreet’s post‑stress Common Equity Tier 1 ratio would be 11.8%, comfortably above the 7% ‘well‑capitalized’ threshold. Actual credit performance has been far stronger than modeled stress outcomes, with net charge‑offs near zero. As of year‑end, classified assets stood at 2.69% of total assets, non‑accrual loans at 1.69%, and other real estate owned at 0.09%.

While acknowledging that these indicators are monitored closely, Floyd said the bank’s historical record of protecting principal and resolving problem loans reinforced management’s confidence in asset quality. Combined with stable funding and expanding secured credit facilities, the bank views its interest‑rate and credit positioning as key supports for earnings stability as it enters 2026.