MainStreet Bancshares (MNSB) risk factors, FY2024 10-K

Risks Related to Our Business

1. 01Our business, like that of most banking organizations, is highly susceptible to credit risk
2. 02We have exposure to risks associated with commercial and residential real estate
3. 03loan concentrations and the associated risks related to commercial and residential real estate may pose additional regulatory credit risk concerns, including interest rate risk due to maturity considerations, liquidity risk due to funding considerations and risks to earnings and capital
4. 04Certain expenditures associated with the ownership of real estate, principally real estate taxes and maintenance costs, may also adversely affect our operating expenses
5. 05Commercial and industrial loans may expose us to greater financial and credit risk than other loans
6. 06The small-to-midsized businesses that we lend to may have fewer resources to weather adverse business developments, which may impair a borrower’s ability to repay a loan, and such impairment could have a material adverse effect on our business, financial condition and results of operations
7. 07The borrowing needs of our customers may increase, especially during a challenging economic environment, which could result in increased borrowing against our contractual obligations to extend credit
8. 08Our allowance for credit losses may not be adequate to cover actual future losses
9. 09We may be required to increase our provisions for credit losses and to charge off loans in the future, which increases in provision and charges could materially adversely affect us
10. 10Our credit standards and judgments and our ongoing process of credit assessment might not protect us from significant credit losses
11. 11We are subject to environmental liability risk associated with our lending activities
12. 12Climate change could have a material negative impact on us
13. 13Changes in interest rates may negatively affect our earnings, income and financial condition as well as the value of our assets
14. 14Liquidity risk could impair our ability to fund operations, meet our obligations as they become due, and jeopardize our financial condition

Operational Risks

1. 15New lines of business, products, product enhancements, or services may subject us to additional risks
2. 16BAAS Software Solutions. Developing and deploying a software program has added, and may contain to add, additional risk, including financial, cybersecurity, compliance and reputational concerns
3. 17We face risks related to our operational, technological, and organizational infrastructure
4. 18A failure or a breach of our operational systems or infrastructure, or those of third party service providers, could disrupt our business, result in the unauthorized disclosure of confidential or proprietary information, damage our reputation, and cause financial losses
5. 19Potential costs of a cyber incident may include, but would not be limited to, remediation costs, increased protection costs, lost revenue from the unauthorized use of proprietary information or the loss of current and/or future customers, and litigation
6. 20Legal liability - deep fakes could expose companies to legal liability for defamation, copyright infringement, or other claims
7. 21We rely on third party service providers to provide key components of our business infrastructure, and a failure of these parties to perform for any reason could disrupt our operations
8. 22Reputational risk and social factors may impact our results
9. 23We could be subject to losses, regulatory action, or reputational harm due to fraudulent and negligent acts on the part of loan applicants, our employees, and vendors
10. 24We are subject to claims and litigation pertaining to intellectual property
11. 25The decreased soundness of other financial institutions could adversely affect us
12. 26COVID-19 and its variants have not been completely eliminated

Strategic Risks

1. 27Strong competition within our market area could reduce our profits and slow growth
2. 28Our financial performance will be negatively affected if we are unable to execute our growth strategy
3. 29We may face increasing deposit-pricing pressures, which may, among other things, reduce our profitability
4. 30Changes in general business, economic and political conditions, especially in our market area, could adversely affect our growth and earnings
5. 31Inflationary pressures and rising prices may affect our results of operations and financial condition
6. 32If we do not adjust to rapid changes in the financial services industry, our financial performance may suffer
7. 33The results of poorly executed decisions in a financial institution of significant size can negatively impact other financial institutions, despite the quality of leadership and decision making of the other financial institutions or their ability to effectively identify, measure, manage and control risk
8. 34Our stock price and our required liquidity may be negatively impacted by unrelated bank failures and negative customer confidence in financial institutions
9. 35Additional required capital may not be available
10. 36We operate in a highly regulated environment, and we may be adversely affected by changes in laws and regulations
11. 37We may be affected by possible regulatory reform and legislation
12. 38We may be adversely affected by changes in federal and state tax laws and regulations
13. 39Our participation in the New Markets Tax Credit (“NMTC”) Program entails certain risks
14. 40The market price for the Company’s common stock price may be volatile
15. 41The Company depends on the Bank for dividends, distributions and other payments
16. 42Although we have paid cash dividends on shares of our common stock in the past, we may not pay cash dividends on shares of our common stock in the future
17. 43Our common stock is subordinate to our existing and future preferred stock and to our subordinated notes
18. 44We will depend on our management team to implement our business strategy and execute successful operations, and we could be harmed by the loss of their services
19. 45We may not be able to attract and retain skilled people
20. 46We may be subject to increased litigation which could result in legal liability and damage to our reputation
21. 47Our reported financial results depend on management’s selection of accounting methods and certain assumptions and estimates
22. 48The obligations associated with being a public company require significant resources and management attention
23. 49comply with applicable requirements of the Sarbanes-Oxley Act