MainStreet Bancshares (MNSB) risk factors, FY2025 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 estate42% rewritten
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 expenses41% rewritten
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; increases in provision and charge offs 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. 11Our stress tests may not accurately predict our financial conditionNew
12. 12We are subject to environmental liability risk associated with our lending activities
13. 13Climate change could have a material negative impact on us
14. 14Changes in interest rates may negatively affect our earnings, income and financial condition as well as the value of our assets
15. 15Liquidity risk could impair our ability to fund operations, meet our obligations as they become due, and jeopardize our financial condition

Operational Risks

1. 16New lines of business, products, product enhancements, or services may subject us to additional risks43% rewritten
2. 17We face risks related to our operational, technological, and organizational infrastructure
3. 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
4. 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
5. 20Legal liability - deep fakes could expose companies to legal liability for defamation, copyright infringement, or other claims
6. 21The adoption and use of artificial intelligence tools by us and our third-party vendors and service providers may increase the risk of errors, omissions, unfair treatment or fraudulent behavior by our employees, clients, or counterparties, or other third partiesNew
7. 22We 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. 23Reputational risk and social factors may impact our results
9. 24We 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. 25We are subject to claims and litigation pertaining to intellectual property
11. 26The decreased soundness of other financial institutions could adversely affect us
12. 27Health emergencies or pandemics may re-emergeNew

Strategic Risks

1. 28Strong competition within our market area could reduce our profits and slow growth
2. 29Our financial performance will be negatively affected if we are unable to execute our growth strategy
3. 30We may face increasing deposit-pricing pressures, which may, among other things, reduce our profitability33% rewritten
4. 31Changes in general business, economic and political conditions, especially in our market area, could adversely affect our growth and earnings
5. 32Inflationary pressures and rising prices may affect our results of operations and financial condition
6. 33If we do not adjust to rapid changes in the financial services industry, our financial performance may suffer
7. 34The 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. 35Our stock price and our required liquidity may be negatively impacted by unrelated bank failures and negative customer confidence in financial institutions
9. 36Additional required capital may not be available
10. 37We operate in a highly regulated environment, and we may be adversely affected by changes in laws and regulations
11. 38We may be affected by possible regulatory reform and legislation
12. 39We may be adversely affected by changes in federal and state tax laws and regulations
13. 40Our participation in the New Markets Tax Credit ( “ NMTC ” ) Program entails certain risks
14. 41The market price for the Company ’ s common stock price may be volatile
15. 42The Company depends on the Bank for dividends, distributions and other payments
16. 43Although 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. 44Our common stock is subordinate to our existing and future preferred stock and to our subordinated notes
18. 45We 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. 46We may not be able to attract and retain skilled people
20. 47We may be subject to increased litigation which could result in legal liability and damage to our reputation
21. 48Our reported financial results depend on management ’ s selection of accounting methods and certain assumptions and estimates
22. 49The obligations associated with being a public company require significant resources and management attention
23. 50comply with applicable requirements of the Sarbanes-Oxley Act