MainStreet Bancshares, Inc. Reports Record Earnings

PR Newswire

FAIRFAX, Va., Jan. 21, 2021 /PRNewswire/ — MainStreet Bancshares, Inc. (Nasdaq: MNSB & MNSBP), the holding company for MainStreet Bank, reported record net income of $15.7 million for 2020, which represents a 10.54% Return on Average Equity (ROAE), a 1.05% Return on Average Assets (ROAA) and $1.85 per share of common stock (basic and diluted).

The strong year-end results can be attributed to the Bank’s breakneck performance in response to the pandemic

Net interest income and noninterest income for the year-ended December 31, 2020 increased to $45.9 million and $7.5 million, respectively. Net interest income and noninterest income for the year-ended December 31, 2020 increased 16.5% and 54%, respectively, over the same period in 2019. The Company realized $2.6 million of the $5.8 million recognized as fee income from the Paycheck Protection Program (PPP) during the year.

Total assets were $1.6 billion, an increase of 29% from the previous year-end. Net loans were $1.3 billion as of December 31, 2020, which included $135 million of the original $173 million in loans related to the PPP (22% were forgiven/repaid during 2020). Asset quality remains strong with non-performing assets and Other Real Estate Owned (OREO) representing only 0.08% of total assets as of December 31, 2020.

Non-interest-bearing deposits were $371 million, representing 26% of total deposits as of December 31, 2020. Total deposits as of December 31, 2020 were $1.4 billion, and core deposits represent a healthy 72% of total deposits.

“The strong year-end results can be attributed to the Bank’s breakneck performance in response to the pandemic, both at the start and throughout the entire year,” said Abdul Hersiburane, President of MainStreet Bank. “The Bank worked with all borrowers in order to assist, where prudent, with providing meaningful liquidity through the Paycheck Protection Plan, the Main Street Lending Program, payment deferrals and/or shifting to interest-only payments for a period.”

With the hospitality industry being most hard-hit, the team worked closely throughout the year with the 14 operating hotels in the Bank’s portfolio. Since April 2020, monthly Smith Travel Research (STR) reports for the portfolio of hotels showed favorable trends for occupancy. As of January 2021, all previously reported borrowers with payment deferrals are scheduled to be back to making monthly payments.

The Company analyzed the loan portfolio and made a special pandemic provision to the Allowance for Loan and Lease Losses (ALLL) on June 30, 2020 in the amount of $4.5 million. That special provision included a $1.76 million loan outstanding for one Commercial & Industrial (C&I) borrower that was immediately and fully impacted by the pandemic, $2.0 million for commercial borrowers with potential liquidity concerns and $760,000 for the indirect auto portfolio.

“At its outset, we didn’t have a good sense of the pandemic’s potential to affect the U.S. Economy or our market,” said Jeff W. Dick, Chairman & CEO of MainStreet Bancshares Inc. and MainStreet Bank. “As the year progressed, through a combination of federal programs and regulatory easing, our borrower’s collective confidence started to return. The vaccine approval announcements in December gave confirmation that the end was in sight. As a result of the significant changes in data and information available, we determined it would be prudent to update our special pandemic loan loss provision.”

The Company released $3.15 million from the Allowance for Loan and Lease Losses at year-end, as recapped in the table below.

Fourth Quarter Changes to the Allowance for Loan and Lease Losses
(000’s)
Beginning Balance September 30, 2020	$14,345
+ Current Year Recovery (1)	1,498
– Release of Specific Reserve for Repaid Loan	329
– Release of Pandemic Provision for indirect loans (2)	500
– Release of Provision for Loans reclassified as Held for Sale (3)	825
+ Provision for Quarter Growth	186
– Release of Loss Recovery	1,498
Ending Balance December 31, 2020	$12,877


(1)	The Bank recovered $1.498 million of a loan charged-off earlier in the year.
(2)	The indirect loan portfolio losses for the year were less than previous years, so $500,000 was released from the special pandemic provision for indirect loans.
(3)	The Company reclassified approximately $60 million in investor-owned commercial real estate loans as loans held for sale. The loan sale should take place in the first quarter of 2021 and the Company released the associated provision to the ALLL prior to year-end 2020.

The $2.0 million that was previously allocated to commercial borrowers remains intact for the pandemic provision to the ALLL as of December 31, 2020.

ABOUT MAINSTREET BANK: MainStreet operates seven branches in Herndon, Fairfax, Fairfax City, 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 full complement of payment solutions for financial technology companies and has a team ready to create a perfect solution for their needs.

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, DC 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 – a solution that provides multi-million-dollar FDIC insurance. Further information on the Bank can be obtained by visiting its website at mstreetbank.com.

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, future impacts of the novel coronavirus (COVID-19) outbreak, 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.

Contact: Jeff W. Dick, Chairman & CEO
(703) 481-4567


UNAUDITED CONSOLIDATED BALANCE SHEET INFORMATION
(In thousands, except share data)

	December 31, 2020		September 30, 2020		June 30, 2020		March 31, 2020		December 31, 2019
ASSETS
Cash and cash equivalents
Cash and due from banks	$	75,935	$	102,480	$	55,273	$	62,098	$	53,376
Federal funds sold		31,593		25,074		21,081		10,677		11,468
Total cash and cash equivalents		107,528		127,554		76,354		72,775		64,844
Investment securities available for sale, at fair value		147,414		118,844		91,823		102,191		92,791
Investment securities held to maturity, at carrying value		22,520		23,114		23,843		23,878		23,914
Restricted equity securities, at cost		4,616		4,616		5,041		5,041		6,157
Loans held for sale, at carrying value		57,006		—		—		—		—
Loans, net of allowance for loan losses of $12,877, $14,346, $13,731, $9,898, and $9,584, respectively		1,230,379		1,279,899		1,259,012		1,059,628		1,030,425
Premises and equipment, net		14,289		14,474		14,416		14,666		14,153
Other real estate owned, net		1,180		1,580		1,175		1,207		1,207
Accrued interest and other receivables		9,604		8,579		7,458		4,809		5,420
Bank owned life insurance		25,341		25,157		24,959		24,761		24,562
Other assets		23,288		26,371		24,786		20,786		13,885
Total Assets	$	1,643,165	$	1,630,188	$	1,528,867	$	1,329,742	$	1,277,358
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Non-interest bearing deposits	$	370,497	$	416,648	$	388,104	$	240,979	$	252,707
Interest bearing DDA deposits		70,307		72,807		18,266		16,846		53,707
Savings and NOW deposits		74,099		69,015		65,876		60,454		63,015
Money market deposits		426,600		348,146		332,246		265,443		141,337
Time deposits		496,743		510,429		537,840		559,489		560,857
Total deposits		1,438,246		1,417,045		1,342,332		1,143,211		1,071,623
Federal Home Loan Bank advances and other borrowings		—		—		10,000		10,000		40,000
Subordinated debt		14,834		14,827		14,819		14,812		14,805
Other liabilities		22,420		25,055		21,546		21,424		13,896
Total Liabilities		1,475,500		1,456,927		1,388,697		1,189,447		1,140,324
Stockholders’ Equity:
Preferred stock, $1 par value – 2,000,000 shares authorized
Non-cumulative perpetual, 28,750 shares issued and outstanding		27,263		27,527		—		—		—
Common stock, par value $4 per share, authorized 10,000,000 shares; issued and outstanding, 7,443,842 shares at December 31, 2020 including 161,435 unvested shares, 8,277,837 shares at September 30, 2020 including 162,917 unvested shares, 8,263,941 shares at June 30, 2020 including 155,742 unvested shares, 8,260,231 shares at March 31,2020 including 155,742 unvested shares, 8,260,259 shares at December 31, 2019 including 160,961 unvested shares.		29,130		32,460		32,433		32,418		32,397
Capital surplus		66,116		75,217		74,850		74,482		75,117
Retained earnings		44,179		37,105		31,933		32,567		29,097
Accumulated other comprehensive income		977		952		954		828		423
Total Stockholders’ Equity		167,665		173,261		140,170		140,295		137,034
Total Liabilities and Stockholders’ Equity	$	1,643,165	$	1,630,188	$	1,528,867	$	1,329,742	$	1,277,358




UNAUDITED CONSOLIDATED STATEMENTS OF INCOME INFORMATION
(In thousands, except share and per share data)

	Year-Ended				Three Months Ended
	December 31, 2020		December 31, 2019		December 31, 2020		September 30, 2020		June 30, 2020		March 31, 2020		December 31, 2019
INTEREST INCOME:
Interest and fees on loans	$	59,634	$	55,208	$	15,933	$	15,083	$	14,399	$	14,220	$	14,223
Interest on investment securities		2,007		2,202		519		491		496		501		534
Interest on federal funds sold		431		1,403		15		12		9		395		271
Total interest income		62,072		58,813		16,467		15,586		14,904		15,116		15,028
INTEREST EXPENSE:
Interest on interest bearing DDA deposits		317		998		108		56		36		117		195
Interest on savings and NOW deposits		221		289		52		55		50		64		71
Interest on money market deposits		2,162		2,379		418		490		474		778		489
Interest on time deposits		12,322		14,196		2,583		2,841		3,333		3,566		3,730
Interest on Federal Home Loan Bank advances and other borrowings		107		549		—		13		44		50		92
Interest on subordinated debt		966		966		240		245		241		241		244
Total interest expense		16,095		19,377		3,401		3,700		4,178		4,816		4,821
Net interest income		45,977		39,436		13,066		11,886		10,726		10,300		10,207
Provision for loan losses		3,610		1,618		(2,950)		635		5,575		350		358
Net interest income after provision for loan losses		42,367		37,818		16,016		11,251		5,151		9,950		9,849
NON-INTEREST INCOME:
Deposit account service charges		1,916		1,668		509		487		433		487		460
Bank owned life insurance income		779		498		183		199		198		199		181
Loan swap fee income		3,510		989		833		1,851		423		403		111
Net gain on available-for-sale securities		—		5		—		—		—		—		—
Net gain on sale of loans		33		566		—		33		—		—		—
Other fee income		1,255		1,136		378		288		264		325		407
Total other income		7,493		4,862		1,903		2,858		1,318		1,414		1,158
NON-INTEREST EXPENSES:
Salaries and employee benefits		17,937		15,776		4,746		4,495		4,263		4,433		4,179
Furniture and equipment expenses		2,128		1,728		601		574		500		454		457
Advertising and marketing		1,003		906		290		266		191		256		375
Occupancy expenses		1,270		864		360		332		311		267		221
Outside services		959		863		263		215		205		276		169
Administrative expenses		674		731		166		167		177		164		198
Other operating expenses		6,329		4,508		1,732		1,589		1,713		1,293		1,104
Total other expenses		30,300		25,376		8,158		7,638		7,360		7,143		6,703
Income before income tax (benefit)		19,560		17,304		9,761		6,471		(891)		4,221		4,304
Income tax expense (benefit)		3,843		3,354		2,051		1,299		(257)		751		742
Net Income (loss)		15,717		13,950		7,710		5,172		(634)		3,470		3,562
Preferred stock dividends		635		—		635		—		—		—		—
Net income (loss) available to common shareholders		15,082	$	13,950	$	7,075	$	5,172	$	(634)	$	3,470	$	3,562
Net income (loss) per common share, basic and diluted	$	1.85	$	1.69	$	0.92	$	0.63	$	(0.08)	$	0.42	$	0.43
Weighted average number of common shares, basic and diluted		8,131,334		8,251,302		7,700,470		8,272,570		8,263,370		8,287,317		8,260,259




UNAUDITED LOAN, DEPOSIT AND BORROWING DETAIL
*(In thousands)*

	December 31, 2020					September 30, 2020					December 31, 2019					Percentage Change
	$ Amount		% of Total			$ Amount		% of Total			$ Amount		% of Total			Last 3 Mos			Last 12 Mos
LOANS:
Construction and land development loans	$	324,906		26.0	%	$	325,516		25.0	%	$	272,620		26.2	%		-0.2	%		19.2	%
Residential real estate loans		183,531		14.7	%		157,518		12.1	%		150,848		14.5	%		16.5	%		21.7	%
Commercial real estate loans		466,898		37.4	%		505,201		38.8	%		421,870		40.5	%		-7.6	%		10.7	%
Commercial industrial loans – Other		94,847		7.6	%		88,884		6.8	%		121,225		11.6	%		6.7	%		-21.8	%
Commercial industrial loans – PPP Loans		135,180		10.8	%		173,075		13.3	%		—		0.0	%		-21.9	%		100.0	%
Consumer loans		44,073		3.5	%		51,505		4.0	%		75,583		7.2	%		-14.4	%		-41.7	%
Total Gross Loans	$	1,249,435		100.0	%	$	1,301,699		100.0	%	$	1,042,146		100.0	%		-4.0	%		19.9	%
Less: Allowance for loan losses		(12,877)					(14,346)					(9,584)
Net deferred loan fees		(6,179)					(7,454)					(2,137)
Net Loans	$	1,230,379				$	1,279,899				$	1,030,425
DEPOSITS:
Non-interest bearing demand deposits	$	370,497		25.8	%		416,648		29.4	%	$	252,707		23.6	%		-11.1	%		46.6	%
Interest-bearing demand deposits:
Demand deposits		70,307		4.9	%		72,807		5.1	%		53,707		5.0	%		-3.4	%		30.9	%
Savings and NOW deposits		74,099		5.2	%		69,015		4.9	%		63,015		5.9	%		7.4	%		17.6	%
Money market accounts		426,600		29.7	%		348,146		24.6	%		141,337		13.2	%		22.5	%		201.8	%
Certificates of deposit $250,000 or more		213,077		14.8	%		211,800		14.9	%		211,935		19.8	%		0.6	%		0.5	%
Certificates of deposit less than $250,000		283,666		19.6	%		298,629		21.1	%		348,922		32.5	%		-5.0	%		-18.7	%
Total Deposits	$	1,438,246		100.0	%	$	1,417,045		100.0	%	$	1,071,623		100.0	%		1.5	%		34.2	%
BORROWINGS:
Federal Home Loan Bank advances		—		0.0	%		—		0.0	%		40,000		73.0	%		0.0	%		-100.0	%
Subordinated debt		14,834		100.0	%		14,819		100.0	%		14,805		27.0	%		0.1	%		0.2	%
Total Borrowings	$	14,834		100.0	%	$	14,819		100.0	%	$	54,805		100.0	%		0.1	%		-72.9	%
Total Deposits and Borrowings	$	1,453,080				$	1,431,864				$	1,126,428					1.5	%		29.0	%

Core customer funding sources ⁽¹⁾	$	1,046,087		72.0	%	$	1,066,236		74.5	%	$	654,213		58.1	%		-1.9	%		59.9	%
Brokered and listing service sources ⁽²⁾		392,159		27.0	%		350,809		24.5	%		417,410		37.1	%		11.8	%		-6.0	%
Federal Home Loan Bank advances		—		0.0	%		—		0.0	%		40,000		3.5	%		0.0	%		-100.0	%
Subordinated debt ⁽³⁾		14,834		1.0	%		14,819		1.0	%		14,805		1.3	%		0.1	%		0.2	%
Total Funding Sources	$	1,453,080		100.0	%	$	1,431,864		100.0	%	$	1,126,428		100.0	%		1.5	%		29.0	%


(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
(3)	Subordinated debt obligation qualifies as Tier 2 capital at the holding company and Tier 1 capital at the Bank




UNAUDITED AVERAGE BALANCE SHEETS, INTEREST AND RATES
(In thousands)

	For the three months ended December 31, 2020							For the three months ended December 31, 2019
	Average Balance		Interest Income/ Expense		Average Yields/ Rate (annualized)			Average Balance		Interest Income/ Expense		Average Yields/ Rate (annualized)
ASSETS:
Interest earning assets:
Loans ^(1)(2)(3)	$	1,311,726	$	15,933		4.86	%	$	1,023,614	$	14,223		5.56	%
Investment securities		85,084		519		2.44	%		71,387		534		2.99	%
Federal funds and interest-bearing deposits		171,933		15		0.03	%		74,519		271		1.45	%
Total interest earning assets	$	1,568,743	$	16,467		4.20	%	$	1,169,520	$	15,028		5.14	%
Other assets		71,013							55,251
Total assets	$	1,639,756						$	1,224,771
Liabilities and Stockholders’ Equity:
Interest-bearing liabilities:
Interest-bearing demand deposits	$	71,906	$	108		0.60	%	$	54,176	$	195		1.44	%
Money market deposit accounts		390,645		418		0.43	%		134,011		489		1.46	%
Savings and NOW deposits		70,542		52		0.29	%		63,916		71		0.44	%
Time deposits		509,963		2,583		2.03	%		570,794		3,730		2.61	%
Total interest-bearing deposits	$	1,043,056	$	3,161		1.21	%	$	822,897	$	4,485		2.18	%
Federal funds and repos purchased		—		—		—			11		—		—
Subordinated debt		14,831		240		6.47	%		14,802		244		6.59	%
FHLB borrowings		—		—		—			15,370		92		2.39	%
Total interest-bearing liabilities	$	1,057,887	$	3,401		1.29	%	$	853,080	$	4,821		2.26	%
Demand deposits and other liabilities		414,581							236,396
Total liabilities	$	1,472,468						$	1,089,476
Stockholders’ Equity		167,288							135,295
Total Liabilities and Stockholders’ Equity	$	1,639,756						$	1,224,771
Interest Rate Spread						2.91	%						2.88	%
Net Interest Income			$	13,066						$	10,207
Net Interest Margin						3.33	%						3.49	%
Net Interest Margin, excluding PPP loans⁽⁴⁾						3.21	%						3.49	%


(1)	Includes loans classified as non-accrual
(2)	Includes average PPP balances of $157.8 million and related interest income of approximately $394,000 for the three months ended December 31, 2020
(3)	Total loan interest income includes amortization of deferred loan fees, net of deferred loan costs
(4)	Refer to Appendix for reconciliation of non-GAAP measures




UNAUDITED AVERAGE BALANCE SHEETS, INTEREST AND RATES
(In thousands)

	For the year ended December 31, 2020							For the year ended December 31, 2019
	Average Balance		Interest Income/ Expense		Average Yields/ Rate (annualized)			Average Balance		Interest Income/ Expense		Average Yields/ Rate (annualized)
ASSETS:
Interest earning assets:
Loans ^(1)(2)(3)	$	1,219,525	$	59,634		4.89	%	$	984,014	$	55,208		5.61	%
Investment securities		76,414		2,007		2.63	%		71,149		2,202		3.09	%
Federal funds and interest-bearing deposits		135,688		431		0.32	%		72,643		1,403		1.93	%
Total interest earning assets	$	1,431,627	$	62,072		4.34	%	$	1,127,806	$	58,813		5.21	%
Other assets		66,561							45,282
Total assets	$	1,498,188						$	1,173,088
Liabilities and Stockholders’ Equity:
Interest-bearing liabilities:
Interest-bearing demand deposits	$	37,431	$	317		0.85	%	$	56,675	$	998		1.76	%
Money market deposit accounts		314,398		2,162		0.69	%		129,606		2,379		1.84	%
Savings and NOW deposits		66,028		221		0.33	%		62,047		289		0.47	%
Time deposits		535,116		12,322		2.30	%		544,084		14,196		2.61	%
Total interest-bearing deposits	$	952,973	$	15,022		1.58	%	$	792,412	$	17,862		2.25	%
Federal funds and repos purchased		—		—		—			37		1		2.70	%
Subordinated debt		14,820		966		6.52	%		14,791		966		6.53	%
FHLB borrowings		6,189		107		1.73	%		21,162		548		2.59	%
Total interest-bearing liabilities	$	973,982	$	16,095		1.65	%	$	828,402	$	19,377		2.34	%
Demand deposits and other liabilities		375,046							215,405
Total liabilities	$	1,349,028						$	1,043,807
Stockholders’ Equity		149,160							129,281
Total Liabilities and Stockholders’ Equity	$	1,498,188						$	1,173,088
Interest Rate Spread						2.69	%						2.88	%
Net Interest Income			$	45,977						$	39,436
Net Interest Margin						3.21	%						3.50	%
Net Interest Margin, excluding PPP loans⁽⁴⁾						3.21	%						3.50	%


(1)	Includes loans classified as non-accrual
(2)	Includes average PPP balances of $116.7 million and related interest income of approximately $1.2 million for the year ended December 31, 2020
(3)	Total loan interest income includes amortization of deferred loan fees, net of deferred loan costs
(4)	Refer to Appendix for reconciliation of non-GAAP measures




UNAUDITED SUMMARY FINANCIAL DATA
(Dollars in thousands except per share data)

	At or For the Three Months Ended						At or For the Year Ended
	December 31,						December 31,
	2020			2019			2020			2019
*Per share Data and Shares Outstanding*
Earnings (losses) per common share (basic and diluted)	$	0.92		$	0.43		$	1.85		$	1.69
Book value per common share	$	18.86		$	16.59		$	18.86		$	16.59
Weighted average common shares (basic and diluted)		7,700,470			8,260,259			8,131,334			8,251,302
Common shares outstanding at end of period		7,443,842			8,260,259			7,443,842			8,260,259
*Performance Ratios*
Return on average assets (annualized)		1.88	%		1.16	%		1.05	%		1.19	%
Return on average assets, excluding impact of PPP loans (annualized)⁽²⁾		1.61	%		1.16	%		0.87	%		1.19	%
Return on average equity (annualized)		18.44	%		10.53	%		10.54	%		10.79	%
Yield on earning assets (annualized)		4.20	%		5.14	%		4.34	%		5.21	%
Cost of interest bearing liabilities (annualized)		1.29	%		2.26	%		1.65	%		2.34	%
Net interest spread		2.91	%		2.88	%		2.69	%		2.88	%
Net interest margin (annualized)		3.33	%		3.49	%		3.21	%		3.50	%
Net interest margin, excluding PPP loans (annualized)⁽²⁾		3.21	%		3.49	%		3.21	%		3.50	%
Noninterest income as a percentage of average assets (annualized)		0.46	%		0.38	%		0.50	%		0.41	%
Noninterest expense to average assets (annualized)		1.99	%		2.19	%		2.02	%		2.16	%
Efficiency ratio⁽³⁾		54.50	%		58.98	%		56.67	%		57.28	%
*Asset Quality*
Loans 30-89 days past due to total gross loans		0.01	%		0.03	%		0.01	%		0.03	%
Loans 90 days past due to total gross loans		0.00	%		0.00	%		0.00	%		0.00	%
Non-accrual loans to total gross loans		0.01	%		0.00	%		0.01	%		0.00	%
Other real estate owned	$	1,180		$	1,207		$	1,180		$	1,207
Non-performing assets	$	1,330		$	1,207		$	1,330		$	1,207
Non-performing assets to total assets		0.08	%		0.09	%		0.08	%		0.09	%
Non-performing assets to total assets, excluding PPP loans⁽²⁾		0.09	%		0.09	%		0.09	%		0.09	%
Allowance for loan losses to total gross loans		1.03	%		0.92	%		1.03	%		0.92	%
Allowance for loan losses to total loans, excluding PPP loans⁽²⁾		1.16	%		0.92	%		1.16	%		0.92	%
Allowance for loan losses to non-performing assets		9.68			7.94			9.68			7.94
Net loan charge-offs (recoveries)	$	(1,480)		$	144		$	317		$	865
Net charge-offs (recoveries) to average gross loans (annualized)		-0.45	%		0.06	%		0.03	%		0.09	%
Net charge-offs (recoveries) to average gross loans, excluding PPP loans (annualized)⁽²⁾		-0.52	%		0.06	%		0.03	%		0.09	%
Troubled debt restructurings (total)
Performing in accordance with modified terms	$	—		$	1,482		$	—		$	1,482
Not performing in accordance with modified terms	$	—		$	—		$	—		$	—
*Regulatory Capital Ratios (Bank only)⁽¹⁾*
Total risk-based capital ratio		12.13	%		13.74	%		12.13	%		13.74	%
Tier 1 risk-based capital ratio		11.00	%		12.91	%		11.00	%		12.91	%
Leverage ratio		10.78	%		12.65	%		10.78	%		12.65	%
Common equity tier 1 ratio		11.00	%		12.91	%		11.00	%		12.91	%
*Other information*
Closing stock price	$	16.91		$	23.00		$	16.91		$	23.00
Equity / assets		10.20	%		10.73	%		10.20	%		10.73	%
Equity / assets, excluding PPP loans⁽²⁾		11.12	%		10.73	%		11.12	%		10.73	%
Average equity / average assets		10.20	%		11.05	%		9.96	%		11.05	%
Average equity / average assets, less average PPP loans⁽²⁾		11.29	%		11.05	%		10.80	%		11.05	%
Number of full time equivalent employees		126			126			126			126
# Full service branch offices		7			6			7			6


(1)	Regulatory capital ratios as of December 31, 2020 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




Reconciliation of Certain Non-GAAP Financial Measures
(In thousands)

	For the three months ended December 31,						For the year ended December 31,
		2020			2019			2020			2019
Paycheck Protection Program adjustment impact
Loans held for investment (GAAP)	$	1,249,435		$	1,042,146		$	1,249,435		$	1,042,146
Less: PPP loans		135,180			—			135,180			—
Loans held for investment, excluding PPP (non-GAAP)	$	1,114,255		$	1,042,146		$	1,114,255		$	1,042,146

Average loans held for investment (GAAP)	$	1,311,726		$	1,023,614		$	1,219,525		$	984,014
Less: Average PPP loans		157,787			—			116,690			—
Average loans held for investment, excluding PPP (non-GAAP)	$	1,153,939		$	1,023,614		$	1,102,835			984,014

	For the three months ended December 31,						For the year ended December 31,
		2020			2019			2020			2019
Net interest margin adjustment
Net interest income (GAAP)	$	13,066		$	10,207		$	45,977		$	39,436
Less: PPP fees recognized		1,363			—			2,598			—
Less: PPP interest income earned		394			—			1,167			—
Net interest income, excluding PPP income (non-GAAP)		11,309			10,207			42,212			39,436

Average interest earning assets (GAAP)		1,568,743			1,169,520			1,431,627			1,127,806
Less: average PPP loans		157,787			—			116,690			—
Average interest earning assets, excluding PPP (non-GAAP)		1,410,956			1,169,520			1,314,937			1,127,806

Net interest margin (GAAP)		3.33	%		3.49	%		3.21	%		3.50	%
Net interest margin, excluding PPP (non-GAAP)		3.21	%		3.49	%		3.21	%		3.50	%

	For the three months ended December 31,						For the year ended December 31,
		2020			2019			2020			2019
Total asset adjustment
Total assets (GAAP)	$	1,643,165		$	1,277,358		$	1,643,165		$	1,277,358
Less: PPP loans		135,180			—			135,180			—
Total assets, excluding PPP loans (non-GAAP)		1,507,985			1,277,358			1,507,985			1,277,358
Total equity (GAAP)		167,665			137,034			167,665			137,034
Equity / assets, excluding PPP loans (non-GAAP)		11.12	%		10.73	%		11.12	%		10.73	%

Average asset adjustment
Average assets (GAAP)		1,639,756			1,224,771			1,498,188			1,173,088
Less: average PPP loans		157,787			—			116,690			—
Total average assets, excluding average PPP loans		1,481,969			1,224,771			1,381,498			1,173,088
Total average equity (GAAP)		167,288			135,295			149,160			129,281
Average equity / average assets, excluding average PPP loans (non-GAAP)		11.29	%		11.05	%		10.80	%		11.02	%

	For the three months ended December 31,						For the year ended December 31,
		2020			2019			2020			2019
Return on Average Assets, adjusted
Net income (GAAP)	$	7,710		$	3,562		$	15,717		$	13,950
Less: PPP fees recognized		1,363			—			2,598			—
Less: PPP interest income		394			—			1,167			—
Net income, excluding PPP income (non-GAAP)		5,953			3,562			11,952			13,950
Average total assets		1,639,756			1,224,771			1,498,188			1,173,088
Less: average PPP loans		157,787			—			116,690			—
Average total assets, excluding PPP (non-GAAP)		1,481,969			1,224,771			1,381,498			1,173,088
Return on average assets, excluding PPP (non-GAAP)		1.61	%		1.16	%		0.87	%		1.19	%

	For the three months ended December 31,						For the year ended December 31,
		2020			2019			2020			2019
Nonperforming Assets to total assets, adjusted
Total nonperforming assets (GAAP)	$	1,330		$	1,207		$	1,330		$	1,207
Total assets (GAAP)		1,643,165			1,277,989			1,643,165			1,277,989
Less: PPP loans		135,180			—			135,180			—
Total assets, excluding PPP loans (non-GAAP)		1,507,985			1,277,989			1,507,985			1,277,989
Nonperforming assets to total assets, excluding PPP loans (non-GAAP)		0.09	%		0.09	%		0.09	%		0.09	%

	For the three months ended December 31,						For the year ended December 31,
		2020			2019			2020			2019
Allowance for loan losses, adjusted
Allowance for loan losses (GAAP)	$	12,877		$	9,584		$	12,877		$	9,584
Total gross loans (GAAP)		1,306,441			1,042,146			1,306,441			1,042,146
Less: PPP loans		135,180			—			135,180			—
Total gross loans, excluding PPP loans (non-GAAP)		1,171,261			1,042,146			1,171,261			1,042,146
Allowance for loan losses to total loans, excluding PPP (non-GAAP)		1.10	%		0.92	%		1.10	%		0.92	%

	For the three months ended December 31,						For the year ended December 31,
		2020			2019			2020			2019
Net charge-offs to average loans, adjusted
Total net charge-offs (GAAP)	$	(1,480)			144		$	317		$	865
Total average gross loans (GAAP)		1,307,267			1,024,602			1,216,699			984,446
Less: average PPP loans		157,787			—			116,690			—
Total average gross loans, excluding PPP loans (non-GAAP)		1,149,480			1,024,602			1,100,009			984,446
Net charge-offs (recoveries) to average gross loans, excluding PPP (annualized) (non-GAAP)		-0.52	%		0.06	%		0.03	%		0.09

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SOURCE MainStreet Bancshares, Inc.