MainStreet Bancshares, Inc.: MainStreet Bancshares Inc. Reports a Profitable First Quarter

Strong credit quality and no adverse loan portfolio trends

FAIRFAX, Va., April 22, 2024 /PRNewswire/ -- MainStreet Bancshares, Inc. (Nasdaq: MNSB & MNSBP), the holding company for MainStreet Bank, reported net income of $2.77 million for the first quarter of 2024.

"Our loan portfolio was well-positioned for the current interest rate cycle and continues to generate strong and sustainable interest income. During the first quarter of 2024, we experienced an uptick in deposit costs, compressing the net interest margin to 3.24%," said Jeff W. Dick, Chairman & CEO of MainStreet Bancshares, Inc. and MainStreet Bank. "We are focused on improving our funding costs for the remainder of 2024 and anticipate that our cumulative performance ratios will reflect our ability to do so, as we build for the future and deliver positive returns to our shareholders."

The Company continues to experience strong asset quality with relatively low levels of past due and non-performing loans. It should be noted that multifamily housing in the Washington, D.C. metropolitan area is devoid of the type of rent controls experienced in New York City. Demand for housing in our market far outstrips supply and the rental markets are strong.

"Our lending team is very focused on their borrowers and relationships at this time," said Tom Floyd, Chief Lending Officer at MainStreet Bank. "We want to make sure that if any issues or concerns do arise, we recognize them early in order to properly manage risk and work together toward positive outcomes."

"We are laser-focused on growing good business relationships throughout the metropolitan area," said Abdul Hersiburane, President of MainStreet Bank. "Our best source is our existing client base, as the quality of our service and attention to detail is second to none."

Banking-as-a-Service
The headlines were bleak in 2023 for several of the banks providing banking-as-a-service to fintechs. In one instance, consultant Kate Drew wrote, "The truth is many of the most jarring headlines have involved sponsor banks and fintech partners that had little to no relationship at all, and instead operated through a banking-as-a-service provider. That model is all but dead. In its place will likely emerge a more resilient proposition that puts the bank in the driver's seat when it comes to compliance and focuses on fintechs with sustainable businesses and realistic objectives in financial services." Drew, Kate (December 12, 2023), Where is Banking-as-a Service Headed in 2024? Forbes Media L.L.C.

"Our one miss was underestimating the amount of time it would take to build and launch the technology that we designed," said Dick. "With hindsight, the timing is perfect as we launch a solution that is purpose-built to meet the compliance and safety and soundness needs required not only by us but also by the industry. We are the resilient solution fintechs have been waiting for."

Avenu
Avenu is the only embedded banking solution that connects our partners and their apps directly and seamlessly to our purpose-built Avenu core solution. We are not a sponsor bank without our own technology, and we are not a middleware software company without our own bank. We are Avenu, a leading financial technology company owned by an established community bank in the heart of Washington, D.C.

Avenu's clients are fintechs, application developers, money movers, and entrepreneurs. They all have one thing in common: They are innovating how money moves to solve real-world issues and help communities thrive. We are focused on servicing our community and creating long-term business relationships.

About MainStreet Bank:
MainStreet operates six branches in Herndon, Fairfax, McLean, Leesburg, Clarendon, and Washington, D.C. MainStreet Bank has 55,000 free ATMs and a fully integrated online and mobile banking solution. The Bank is not restricted by a conventional branching system, as it can offer business customers the ability to Put Our Bank in Your Office^®. With robust and easy-to-use online business banking technology, MainStreet has "put our bank" in thousands of businesses in the metropolitan area.

MainStreet Bank has a robust line of business and professional lending products, including government contracting lines of credit, commercial lines and term loans, residential and commercial construction, and commercial real estate. MainStreet also works with the SBA to offer 7A and 504 lending solutions. From sophisticated cash management to enhanced mobile banking and instant-issue debit cards, MainStreet Bank is always looking for ways to improve our customer's experience.

MainStreet Bank was the first community bank in the Washington, D.C., metropolitan area to offer a full online business banking solution. MainStreet Bank was also the first bank headquartered in the Commonwealth of Virginia to offer CDARS and ICS - solutions that provides multi-million-dollar FDIC insurance. Further information can be obtained by visiting mstreetbank.com/ics-cdars.

This release contains forward-looking statements, including our expectations with respect to future events that are subject to various risks and uncertainties. The statements contained in this release that are not historical facts are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Words such as "may," "will," "could," "should," "expect," "plan," "project," "intend," "anticipate," "believe," "estimate," "predict," "potential," "pursuant," "target," "continue," and similar expressions are intended to identify such forward-looking statements. Factors that could cause actual results to differ materially from management's projections, forecasts, estimates and expectations include: fluctuation in market rates of interest and loan and deposit pricing, adverse changes in the overall national economy as well as adverse economic conditions in our specific market areas, adverse changes caused by geopolitical risks at the national and global level, adverse impact of a local, national or global health crisis, maintenance and development of well-established and valued client relationships and referral source relationships, and acquisition or loss of key production personnel. We caution readers that the list of factors above is not exclusive. The forward-looking statements are made as of the date of this release, and we may not undertake steps to update the forward-looking statements to reflect the impact of any circumstances or events that arise after the date the forward-looking statements are made. In addition, our past results of operations are not necessarily indicative of future performance.

MainStreet Bancshares, Inc UNAUDITED CONSOLIDATED BALANCE SHEET INFORMATION (In thousands)
		March 31, 2024				December 31, 2023*				September 30, 2023				June 30, 2023				March 31, 2023
ASSETS
Cash and cash equivalents
Cash and due from banks		$	49,208			$	53,581			$	44,912			$	67,700			$	225,334
Federal funds sold			75,533				60,932				76,271				30,341				-
Total cash and cash equivalents			124,741				114,513				121,183				98,041				225,334
Investment securities available for sale, at fair value			58,699				59,928				56,726				60,579				63,209
Investment securities held to maturity, at amortized cost, net of allowance for credit losses of $0 for all periods			17,251				17,275				17,565				17,590				17,616
Restricted equity securities, at amortized cost			23,924				24,356				20,619				20,304				22,436
Loans, net of allowance for credit losses of $16,531, $16,506, $15,626, $16,047, and $15,435, respectively			1,727,110				1,705,137				1,681,444				1,637,484				1,617,275
Premises and equipment, net			14,081				13,944				14,275				14,427				14,521
Accrued interest and other receivables			10,727				12,390				11,184				10,256				9,744
Computer software, net of amortization			15,691				14,657				13,373				12,266				10,559
Bank owned life insurance			38,609				38,318				38,035				37,763				37,503
Other assets			39,182				34,914				47,087				40,641				36,811
Total Assets		$	2,070,015			$	2,035,432			$	2,021,491			$	1,949,351			$	2,055,008
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Non-interest bearing deposits		$	348,945			$	364,606			$	394,859			$	388,992			$	487,875
Interest bearing demand deposits			165,331				137,128				76,423				71,308				100,522
Savings and NOW deposits			46,036				45,878				46,550				51,294				53,499
Money market deposits			446,903				442,179				461,398				380,500				260,316
Time deposits			725,520				696,336				703,960				701,289				730,076
Total deposits			1,732,735				1,686,127				1,683,190				1,593,383				1,632,288
Federal funds purchased			-				15,000				-				30,000				60,696
Federal Home Loan Bank advances			-				-				-				-				45,000
Subordinated debt			72,741				72,642				72,543				72,444				72,344
Other liabilities			41,418				40,146				52,015				43,016				39,692
Total Liabilities			1,846,894				1,813,915				1,807,748				1,738,843				1,850,020
Stockholders' Equity:
Preferred stock			27,263				27,263				27,263				27,263				27,263
Common stock			29,514				29,198				29,188				29,177				29,185
Capital surplus			65,940				65,985				65,407				64,768				64,213
Retained earnings			108,334				106,549				102,694				97,646				91,991
Accumulated other comprehensive loss			(7,930)				(7,478)				(10,809)				(8,346)				(7,664)
Total Stockholders' Equity			223,121				221,517				213,743				210,508				204,988
Total Liabilities and Stockholders' Equity		$	2,070,015			$	2,035,432			$	2,021,491			$	1,949,351			$	2,055,008
*Derived from audited financial statements

MainStreet Bancshares, Inc UNAUDITED CONSOLIDATED STATEMENTS OF INCOME INFORMATION (In thousands, except share and per share data)
		Three Months Ended
		March 31, 2024				December 31, 2023				September 30, 2023				June 30, 2023				March 31, 2023
INTEREST INCOME:
Interest and fees on loans		$	30,487			$	30,849			$	29,750			$	28,855			$	26,731
Interest on investment securities
Taxable securities			435				451				459				407				518
Tax-exempt securities			270				268				268				265				264
Interest on federal funds sold			1,182				1,510				1,217				1,179				1,132
Total interest income			32,374				33,078				31,694				30,706				28,645
INTEREST EXPENSE:
Interest on interest bearing demand deposits			1,860				1,058				240				251				343
Interest on savings and NOW deposits			157				146				145				147				108
Interest on money market deposits			5,178				5,639				4,156				2,926				1,203
Interest on time deposits			8,833				8,257				7,526				7,077				4,144
Interest on federal funds purchased			107				25				35				201				38
Interest on Federal Home Loan Bank advances			46				118				186				13				906
Interest on subordinated debt			820				828				828				820				812
Total interest expense			17,001				16,071				13,116				11,435				7,554
Net interest income			15,373				17,007				18,578				19,271				21,091
(Recovery of) provision for credit losses			(195)				466				255				638				283
Net interest income after (recovery of) provision for credit losses			15,568				16,541				18,323				18,633				20,808
NON-INTEREST INCOME:
Deposit account service charges			469				510				514				535				590
Bank owned life insurance income			292				283				272				259				255
Other non-interest income			130				68				177				16				158
Total other income			891				861				963				810				1,003
NON-INTEREST EXPENSES:
Salaries and employee benefits			7,488				7,129				6,924				6,595				7,621
Furniture and equipment expenses			935				804				713				772				498
Advertising and marketing			454				271				577				698				797
Occupancy expenses			435				397				375				426				486
Outside services			774				352				697				504				490
Administrative expenses			242				219				277				211				215
Other operating expenses			1,996				1,964				1,866				1,646				1,596
Total non-interest expenses			12,324				11,136				11,429				10,852				11,703
Income before income tax expense			4,135				6,266				7,857				8,591				10,108
Income tax expense			830				1,120				1,516				1,645				1,957
Net income			3,305				5,146				6,341				6,946				8,151
Preferred stock dividends			539				539				539				539				539
Net income available to common shareholders		$	2,766			$	4,607			$	5,802			$	6,407			$	7,612
Net income per common share, basic and diluted		$	0.36			$	0.61			$	0.77			$	0.85			$	1.01
Weighted average number of common shares, basic and diluted			7,611,990				7,527,327				7,524,332				7,522,764				7,517,213

MainStreet Bancshares, Inc UNAUDITED LOAN, DEPOSIT AND BORROWING DETAIL (In thousands)
		March 31, 2024								December 31, 2023								March 31, 2023								Percentage Change
		$ Amount				% of Total				$ Amount				% of Total				$ Amount				% of Total				Last 3 Mos				Last 12 Mos
LOANS:
Construction and land development loans		$	408,903				23.4	%		$	429,637				24.9	%		$	415,078				25.3	%			-4.8	%			-1.5	%
Residential real estate loans			451,991				25.8	%			474,602				27.5	%			391,648				23.9	%			-4.8	%			15.4	%
Commercial real estate loans			813,387				46.5	%			743,827				43.1	%			737,019				45.0	%			9.4	%			10.4	%
Commercial and industrial loans			71,822				4.1	%			75,415				4.4	%			86,937				5.3	%			-4.8	%			-17.4	%
Consumer loans			2,902				0.2	%			3,610				0.1	%			7,534				0.5	%			-19.6	%			-61.5	%
Total Gross Loans		$	1,749,005				100.0	%		$	1,727,091				100.0	%		$	1,638,216				100.0	%			1.3	%			6.8	%
Less: Allowance for credit losses			(16,531)								(16,506)								(15,435)
Net deferred loan fees			(5,364)								(5,448)								(5,506)
Net Loans		$	1,727,110							$	1,705,137							$	1,617,275
DEPOSITS:
Non-interest bearing deposits		$	348,945				20.1	%		$	364,606				21.6	%		$	487,875				29.9	%			-4.3	%			-28.5	%
Interest-bearing deposits:
Demand deposits			165,331				9.5	%			137,128				8.1	%			100,522				6.2	%			20.6	%			64.5	%
Savings and NOW deposits			46,036				2.7	%			45,878				2.7	%			53,499				3.3	%			0.3	%			-13.9	%
Money market accounts			446,903				25.8	%			442,179				26.2	%			260,316				15.9	%			1.1	%			71.7	%
Certificates of deposit $250,000 or more			467,892				27.0	%			442,662				26.3	%			458,683				28.1	%			5.7	%			2.0	%
Certificates of deposit less than $250,000			257,628				14.9	%			253,674				15.1	%			271,393				16.6	%			1.6	%			-5.1	%
Total Deposits		$	1,732,735				100.0	%		$	1,686,127				100.0	%		$	1,632,288				100.0	%			2.8	%			6.2	%
BORROWINGS:
Federal funds purchased			-				0.0	%			15,000				17.1	%			60,696				34.1	%			-100.0	%			-100.0	%
Federal Home Loan Bank advances			-				0.0	%			-				0.0	%			45,000				25.3	%			0.0	%			-100.0	%
Subordinated debt			72,741				100.0	%			72,642				82.9	%			72,344				40.6	%			0.1	%			0.5	%
Total Borrowings		$	72,741				100.0	%		$	87,642				100.0	%		$	178,040				100.0	%			-17.0	%			-59.1	%
Total Deposits and Borrowings		$	1,805,476							$	1,773,769							$	1,810,328								1.8	%			-0.3	%
Core customer funding sources(1)		$	1,312,746				72.7	%		$	1,252,534				70.7	%		$	1,156,279				63.9	%			4.8	%			13.5	%
Brokered and listing service sources(2)			419,989				23.3	%			433,593				24.4	%			476,009				26.3	%			-3.1	%			-11.8	%
Federal funds borrowed			-				0.0	%			15,000				0.8	%			60,696				3.3	%			-100.0	%			-100.0	%
Federal Home Loan Bank advances			-				0.0	%			-				0.0	%			45,000				2.5	%			0.0	%			-100.0	%
Subordinated debt(3)			72,741				4.0	%			72,642				4.1	%			72,344				4.0	%			0.1	%			0.5	%
Total Funding Sources		$	1,805,476				100.0	%		$	1,773,769				100.0	%		$	1,810,328				100.0	%			1.8	%			-0.3	%

(1)	Includes ICS, CDARS, and reciprocal deposits maintained by customers, which represent sweep accounts tied to customer operating accounts
(2)	Consists of certificates of deposit (CD) through multiple listing services and multiple brokered deposit services, as well as ICS and CDARS one-way certificates of deposit and regional money market accounts.
	Excludes $210.9 million in core deposits placed in reciprocal networks for FDIC insurance coverage that will be classified as brokered deposits on the call report in pursuant to rule 12 CFR 337.6(e) as of March 31, 2024.
(3)	Subordinated debt obligation qualifies as Tier 2 capital at the holding company and Tier 1 capital at the Bank

MainStreet Bancshares, Inc U NAUDITED AVERAGE BALANCE SHEETS, INTEREST AND RATES (In thousands)
		For the three months ended March 31, 2024												For the three months ended March 31, 2023
		Average Balance				Interest Income/ Expense (3)(4)				Average Yields/ Rate (annualized) (3)(4)				Average Balance				Interest Income/ Expense (3)(4)				Average Yields/ Rate (annualized) (3)(4)
ASSETS:
Interest-earning assets:
Loans (1)(2)		$	1,728,761			$	30,487				7.07	%		$	1,599,756			$	26,731				6.78	%
Securities:
Taxable			56,001				435				3.12	%			57,600				518				3.65	%
Tax-exempt			37,420				342				3.66	%			37,941				334				3.57	%
Federal funds and interest bearing deposits			91,993				1,182				5.15	%			118,670				1,132				3.87	%
Total interest-earning assets		$	1,914,175			$	32,446				6.80	%		$	1,813,967			$	28,715				6.42	%
Other assets			123,294												71,704
Total assets		$	2,037,469											$	1,885,671
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Interest-bearing demand deposits		$	146,248			$	1,860				5.10	%		$	83,388			$	343				1.67	%
Savings and NOW deposits			44,219				157				1.42	%			51,943				108				0.84	%
Money market deposit accounts			433,654				5,178				4.79	%			225,037				1,203				2.17	%
Time deposits			710,019				8,833				4.99	%			673,441				4,144				2.50	%
Total interest-bearing deposits		$	1,334,140			$	16,028				4.82	%		$	1,033,809			$	5,798				2.27	%
Federal funds borrowed			7,476				107				5.74	%			2,965				38				5.20	%
FHLB advances			3,297				46				5.60	%			77,833				906				4.72	%
Subordinated debt			72,703				820				4.52	%			72,306				812				4.55	%
Total interest-bearing liabilities		$	1,417,616			$	17,001				4.81	%		$	1,186,913			$	7,554				2.58	%
Demand deposits and other liabilities			397,753												497,155
Total liabilities		$	1,815,369											$	1,684,068
Stockholders' Equity			222,100												201,603
Total Liabilities and Stockholders' Equity		$	2,037,469											$	1,885,671
Interest Rate Spread											1.99	%											3.84	%
Net Interest Income						$	15,445											$	21,161
Net Interest Margin											3.24	%											4.73	%

(1)	Includes loans classified as non-accrual
(2)	Total loan interest income includes amortization of deferred loan fees, net of deferred loan costs
(3)	Income and yields for all periods presented are reported on a tax-equivalent basis using the federal statutory rate of 21%
(4)	Refer to Appendix for reconciliation of non-GAAP measures

MainStreet Bancshares, Inc UNAUDITED SUMMARY FINANCIAL DATA (Dollars in thousands except per share data)
		At or For the Three Months Ended
		March 31,
		2024				2023
Per share Data and Shares Outstanding
Earnings per common share (basic and diluted)		$	0.36			$	1.01
Book value per common share		$	25.72			$	23.62
Tangible book value per common share(2)		$	23.66			$	22.22
Weighted average common shares (basic and diluted)			7,611,990				7,517,213
Common shares outstanding at end of period			7,614,090				7,524,277
Performance Ratios
Return on average assets (annualized)			0.65	%			1.75	%
Return on average equity (annualized)			5.97	%			16.40	%
Return on average common equity (annualized)			5.69	%			17.71	%
Yield on earning assets (FTE)(2) (annualized)			6.80	%			6.42	%
Cost of interest bearing liabilities (annualized)			4.81	%			2.58	%
Net interest spread (FTE)(2)			1.99	%			3.84	%
Net interest margin (FTE)(2) (annualized)			3.24	%			4.73	%
Noninterest income as a percentage of average assets (annualized)			0.18	%			0.22	%
Noninterest expense to average assets (annualized)			2.43	%			2.52	%
Efficiency ratio(3)			75.77	%			52.97	%
Asset Quality
Allowance for credit losses (ACL)
Beginning balance, ACL - loans		$	16,506			$	14,114
Add: current expected credit losses, nonrecurring adoption			-				895
Add: recoveries			2				11
Less: charge-offs			(141)				-
Add: provision for (recovery of) credit losses - loans			164				415
Ending balance, ACL - loans		$	16,531			$	15,435
Beginning balance, reserve for unfunded commitment (RUC)		$	1,009			$	-
Add: current expected credit losses, nonrecurring adoption			-				1,310
Add: provision for (recovery of) unfunded commitments, net			(359)				(132)
Ending balance, RUC		$	650			$	1,178
Total allowance for credit losses		$	17,181			$	16,613
Allowance for credit losses on loans to total gross loans			0.95	%			0.94	%
Allowance for credit losses to total gross loans			0.98	%			1.01	%
Allowance for credit losses on loans to non-performing loans			1.78X				N/A
Net charge-offs (recoveries) to average gross loans (annualized)			0.03	%			0.00	%
Concentration Ratios
Commercial real estate loans to total capital(4)			364.65	%			372.12	%
Construction loans to total capital (5)			130.06	%			140.78	%
Non-performing Assets
Loans 30-89 days past due to total gross loans			0.22	%			0.00	%
Loans 90 days past due to total gross loans			0.51	%			0.00	%
Non-accrual loans to total gross loans			0.53	%			0.00	%
Other real estate owned		$	-			$	-
Non-performing loans		$	9,263			$	-
Non-performing assets to total assets			0.45	%			0.00	%
Regulatory Capital Ratios (Bank only) (1)
Total risk-based capital ratio			17.05	%			16.35	%
Tier 1 risk-based capital ratio			16.12	%			15.49	%
Leverage ratio			14.54	%			14.69	%
Common equity tier 1 ratio			16.12	%			15.49	%
Other information
Closing stock price		$	18.16			$	23.49
Tangible equity / tangible assets(2)			10.10	%			9.51	%
Average tangible equity / average tangible assets(2)			10.24	%			10.22	%
Number of full time equivalent employees			191				170
Number of full service branch offices			6				6

(1)	Regulatory capital ratios as of March 31, 2024 are preliminary
(2)	Refer to Appendix for reconciliation of non-GAAP measures
(3)	Efficiency ratio is calculated as non-interest expense as a percentage of net interest income and non-interest income
(4)	Commercial real estate includes only non-owner occupied and construction loans as a percentage of Bank capital
(5)	Construction loans as a percentage of Bank capital

MainStreet Bancshares, Inc Unaudited Reconciliation of Certain Non-GAAP Financial Measures (Dollars In thousands)
		For the three months ended March 31,
		2024				2023
Net interest margin (FTE)
Net interest income (GAAP)		$	15,373			$	21,091
FTE adjustment on tax-exempt securities			72				70
Net interest income (FTE) (non-GAAP)			15,445				21,161
Average interest earning assets			1,914,175				1,813,967
Net interest margin (GAAP)			3.22	%			4.72	%
Net interest margin (FTE) (non-GAAP)			3.24	%			4.73	%
		For the three months ended March 31,
		2024				2023
Yield on earning assets (FTE)
Total interest income		$	32,374			$	28,645
FTE adjustment on tax-exempt securities			72				70
Total interest income (FTE) (non-GAAP)			32,446				28,715
Average interest earning assets			1,914,175				1,813,967
Yield on earning assets (GAAP)			6.78	%			6.40	%
Yield on earning assets (FTE) (non-GAAP)			6.80	%			6.42	%
		For the three months ended March 31,
		2024				2023
Net interest spread (FTE)
Yield on earning assets (GAAP)			6.78	%			6.40	%
Yield on earning assets (FTE) (non-GAAP)			6.80	%			6.42	%
Yield on interest-bearing liabilities			4.81	%			2.58	%
Net interest spread (GAAP)			1.97	%			3.82	%
Net interest spread (FTE) (non-GAAP)			1.99	%			3.84	%
		As of March 31,
		2024				2023
Tangible common stockholders' equity
Total stockholders' equity (GAAP)		$	223,121			$	204,988
Less: intangible assets			(15,691)				(10,559)
Tangible stockholders' equity (non-GAAP)			207,430				194,429
Less: preferred stock			(27,263)				(27,263)
Tangible common stockholders' equity (non-GAAP)			180,167				167,166
Common shares outstanding			7,614,090				7,524,277
Tangible book value per common share (non-GAAP)		$	23.66			$	22.22
		As of March 31,
		2024				2023
Total tangible assets
Total assets (GAAP)		$	2,070,015			$	2,055,008
Less: intangible assets			(15,691)				(10,559)
Total tangible assets (non-GAAP)			2,054,324				2,044,449
		For the three months ended March 31,
		2024				2023
Average tangible stockholders' equity
Total average stockholders' equity (GAAP)		$	222,100			$	201,603
Less: average intangible assets			(15,078)				(9,879)
Total average tangible stockholders' equity (non-GAAP)			207,022				191,724
		For the three months ended March 31,
		2024				2023
Average tangible assets
Total average assets (GAAP)		$	2,037,469			$	1,885,671
Less: average intangible assets			(15,078)				(9,879)
Total average tangible assets (non-GAAP)			2,022,391				1,875,792

Contact:
Debra Cope
Director of Corporate Communications
Desk [phone]
Mobile [phone]

SOURCE MainStreet Bancshares, Inc.