Mainstreet Bancshares, Inc. · NASDAQ:MNSB
Mainstreet Bancshares — Q2 2024 Earnings Presentation
42 slides from Mainstreet Bancshares's earnings presentation, Jul 29, 2024
Slide 1: 2nd Quarter 2024 Earnings Presentation
1130 Connecticut Ave NW, Washington, DC (Across from the Mayflower Hotel) 2nd Quarter 2024 ETS JS MainStreetBancshares, Inc.
Slide 2: Forward-looking statements and additional information
Forward-looking statements and additional information Statements in this presentation which are not over time, including those detailed in Form 10-K historical are “forward-looking statements” within under the section, “Risk Factors”. the meaning of Section 27A of the Securities Act of 1933, as amen
Slide 3: Branch lite business model
Branch lite business model ~ ~ MainStreet excellent for controlling overhead expenses ~Bank Bank established: May 26, 2004 Headquarters: Fairfax, VA Leesburg D.C. Metro Area Branches: 6 Loudoun Full time employees: 195 Assets per employee: $10.7 million County - Dulles ~ Herndon McLean ~ ~ Fairfax ~
Slide 4: Diverse primary market
Diverse primary market Strong employment Unemployment rate Diverse opportunities 16.0% 14.8% ~ 14.0% 12.0% 1111 Federal Defense 16 Iii Tourism, 10.0% Contracting Fortune 500 10.0% government hospitality, 9.4% CACI Companies conventions 8.0% 7.2% Lockheed Amazon NBA, NFL, 6.0% Martin Boeing MLS, NHL
Slide 5: Share performance during current rate cycle
Share performance during current rate cycle As of June 30, 2024 Nasdaq Capital Markets: MNSB Market capitalization: $135 million Close common stock price: $17.73 Preferred stock Nasdaq symbol: MNSBP Price / Tangible Book Value: 75% Close preferred stock price: $22.25 Common shares outstanding: 7,598
Slide 6: Summary of financial performance
Summary of financial performance 2Q24 1Q24 4Q23 3Q23 Profitability EPS $0.27 $0.36 $0.61 $0.77 Efficiency ratio 78.38% 75.77% 62.33% 58.49% ROAA2 0.50% 0.65% 1.02% 1.30% ROAE2 4.70% 5.97% 9.42% 11.80% ROATCE2 5.85% 7.37% 11.63% 14.53% Net interest margin1,2,3 3.15% 3.24% 3.49% 3.97% Net loans ($000)
Slide 7: Well-managed liquidity
Well-managed liquidity Quarterly liquidity monitoring results Metric 2Q24 1Q24 4Q23 3Q23 Liquidity coverage ratio (LCR)1 122% 125% 133% 164% Core deposit ratio 2 78% 76% 74% 68% FDIC insured / total deposits 3 78% 78% 77% 76% (millions) High quality liquid assets4 $167 $189 $180 $180 Secured line av
Slide 8: Loan beta steadfast through rate cycle, deposit beta cresting
Loan beta steadfast through rate cycle deposit beta cresting Pe r fo r m a n c e a g a i n s t e f fe c t i ve Fe d F u n d s rat e Cost of Funds 54% Collapse of SVB, First Republic, Silvergate, Heartland 8.00% Effective Fed Funds Rate 7.00% Yield on Assets Cumulative 6.00% cycle loan 5.00% beta 1 4
Slide 9: Net interest margin levels off
Net interest margin levels off Monthly net interest margin1 5.00% 4.88% Customers held 4.50% 4.35% higher levels of 4.06% low-cost deposits 4.00% 3.82% during April 3.50% 3.37% 3.23% 3.13% 3.00% 2.50% Jan 23 Feb 23 Mar 23 Apr 23 May 23 Jun 23 Jul 23 Aug 23 Sep 23 Oct 23 Nov 23 Dec 23 Jan 24 Feb 24 M
Slide 10: Core deposits reflect community engagement
Core deposits reflect community engagement Deposit type / total deposits Deposits 2Q24 ($MM) Core 1 $1,376 78% 35% 33% 40% 42% 41% 42% 41% Non-core $379 22% 50% 52% Total $1,755 100% 26% 18% 38% 23% 21% 20% 36% 23% 24% 39% 38% 38% 41% 35% 27% 29% 24% 24% 2018 2019 2020 2021 2022 3Q23 4Q23 1Q24 2Q24
Slide 11: Core deposits are efficiently structured
Core deposits are efficiently structured June 30, 2024 Balance Percent Weighted Weighted Type (millions) of total avg rate maturity Non-interest-bearing DDA $315 23% Low-cost transactional 1 $52 4% 0.20% Interest bearing $601 43% 4.75% Term $408 30% 4.90% 7 mos Total core deposits $1,376 100% 3.48%
Slide 12: Non-core deposits are well structured
Non-core deposits are well structured flexibility and diversity for anticipated interest rate environment June 30, 2024 Balance Percent Weighted Weighted Type (millions) of total avg. rate maturity Money market deposits $63 17% 5.55% Term with call option1 $173 45% 5.17% 39 mos Term $143 38% 4.66% 1
Slide 13: Loan portfolio dynamics are stable
Loan portfolio dynamics are stable Average new loan size1 and legal lending limit by year 2Q24 composition - (000’s) $46,810 $47,320 Average New Loan Size $42,986 Res. Real • Legal Lending Limit $34,104 Estate C&I 12% Construction $28,430 5% 23% $23,684 $21,354 Multi-Family 13% $1.8 / $12,519 $1,403
Slide 14: Loan rate structure is well suited
Loan rate structure is well suited for anticipated interest rate environment June 30, 2024 – Total Loans of $1.8B 63% 37% 57% with a weighted average floor rate resets rate of 6.48% beyond 6 rate resets up 19bp from months 1 within previous quarter 6 months 2 1 Loans include all fixed-rate and float
Slide 15: CRE concentration is well managed
CRE concentration is well managed Investor CRE as a % of total capital 372% 364% 373% 373% 365% 367% 141% 140% 139% 138% 130% 130% 231% 224% 234% 235% 235% 237% 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 ■ Investor CRE ■ Construction 15
Slide 16: Loan portfolio is proactively managed
Loan portfolio is proactively managed Criticized & classified loans over five quarters 6/30/2023 9/30/2023 12/31/2023 3/31/2024 6/30/2024 Relationships Relationships Relationships Relationships Relationships Number of Number of Number of Number of Number of Current balance balance balance balance ba
Slide 17: New Q2 loans are in diverse sectors
1 New Q2 loans are in diverse sectors new loans are in good sectors with strong credit metrics New loan originations 2Q2024 Other Construction C&I 2% 15% Commercial Use Weighted average LTV 2 is 30% 62% $73M Multi-Family 4% Weighted average rate is 8.29% Residential Residential 8% Construction 41% 1
Slide 18: CRE office exposure is low
CRE “office” exposure is low Current Balance of O ffice Por tfolio 1 (millions) Location Category DC MD VA Other Total Medical $22 $15 <$1 $38 Mixed use <$1 $3 $3 $6 $13 million Office building $1 $2 $4 $7 Exposure to Office conversion 2 $12 $32 $44 mixed-use buildings and Total $14 $27 $54 <$1 $95
Slide 19: Construction loans performing with good metrics
Construction loans performing with good metrics portfolio is well diversified with good interest rates, loan-to-values and payment reserves Location & Balance (millions) Risk Metrics1 Weighted Weighted Construction DC VA MD Other Total Interest Rate LTV Hospitality $12 $12 9.50% 63% Industrial $35 $
Slide 20: Non-owner occupied commercial real estate metrics
Non-owner occupied commercial real estate metrics portfolio is well diversified by type and location with good interest rates, loan-to- values, and occupancy Location & balance (millions) Risk metrics1 Weighted interest Weighted Weighted Type DC VA MD Other Total rate LTV occupancy Hospitality $29 $
Slide 21: Owner-Occupied loans have good metrics
Owner-Occupied loans have good metrics portfolio is well diversified with good interest rates and loan-to-values Location & balance (millions) Risk metrics1 Weighted interest Weighted Owner industry DC VA MD Other Total rate LTV Accommodation and food services $19 $11 $3 $11 $44 5.88% 69% Waste mana
Slide 22: Earning asset stress-test results in continued strong capital ratios
Earning asset stress-test results in continued strong capital ratios after stress loss estimates P r e - s t r e s s a n d p o s t - s t r e s s c a p i t a l ra t i o s 15.8% 15.8% 16.1% 15.9% 15.5% 15.4% CET1 risk-based capital ratio 14.6% 14.9% 14.0% 14.0% 13.4% 13.6% 7.0% Stress loss Estimates (
Slide 23: Share buyback program accretive to book
Share buyback program accretive to book • Repurchased 41,858 shares between February and June 14, 2024 • Average repurchase price $17.50 23
Slide 24: Capital stack is well structured
Capital stack is well structured Return on capital components Outstanding Rate of Percent of Component (million) Return Capital Stack Common Stock $223 1 5.3% 2 71% Subordinated debt $73 3.9% 3 23% Preferred Stock $27 7.5% 9% AOCI -$8 - -3% TOTAL $315 100% 1 Includes the Allowance for Credit Losses
Slide 25: Projections for remainder of 2024
Projections for remainder of 2024 • Estimated expense run rate to increase 2.0% per month • Single-digit loan growth for remainder of year 25
Slide 26: Why did we choose Banking as a Service as a strategy?
Why did we choose Banking as a Service as a strategy? I ~ ,.,----+---__, ~~ -----+' ------._ vefU-Batf :ii irect~sion r ba~ore, o ling y hav o-on relationship wi our dev. lo ent platform, b~nd , ust ers. There are d fe tu res, lay ch stacks mpromises to compliance dards. 26
Slide 27: Branch strategy vs technology strategy
Branch strategy vs technology strategy 15 branch expansion Banking as a Service average $2 billion bank has high barrier to entry and 22-25 branches, we have 6 little competition assumptions assumptions annual fixed cost per lease Amortize tech over 10 • and buildout is $130k x 15 Yr 1 DDA $5 millio
Slide 28: Traditional branch deposit gathering has forever changed
Traditional branch deposit gathering has forever changed for community banks Changing customer perceptions • little concern over the number of, or location of accounts • digital access = convenience, and convenience is everything • yield chasers find “better” alternatives online • few people under 6
Slide 29: Branch vs technology - if you build it, will they come?
Branch vs technology - if you build it, will they come? 15 branch expansion Banking as a Service average $2 billion bank has high barrier to entry and 22-25 branches, we have 6 little competition assumptions assumptions annual fixed cost per lease Amortize tech over 10 and buildout is $130k x 15 yea
Slide 30: Do consumers go to branches?
Do consumers go to branches? or is a branching strategy now just a field of dreams? 30
Slide 31: Embedded finance will become all-pervasive by 2030
Embedded finance will become all-pervasive by 2030 1 Small and medium-sized Consumer segment business segment will be worth will account for $120 billion $150 billion 1 Coauthored by BCG & QED Investors, June 2024, Prudence, Profits, and Growth, 2nd edition 31
Slide 32: But…
But… 32
Slide 33: The BaaS field is littered with consent orders
The BaaS field is littered with consent orders and the bones of middleware ) SINCE MARCH 2023, THE ) ) THREE PRUDENTIAL BANK ) SUPERVISORS HAVE ) CONSENT ORDER ISSUED CONSENT ORDERS ) ) TO 12 BANKS ) ) 33
Slide 34: Banking is a highly regulated industry
Banking is a highly regulated industry Each time a bank gets it wrong, the regulatory bar rises higher • Our objective has always been to build a compliant solution • version 1.0 was to be 85% automated with regtech 1 • version 1.1 was to be 90% automated with regtech • version 1.2 was to be 100% au
Slide 35: Time to launch vs time to resolve a Consent Order
Time to launch vs time to resolve a Consent Order Avenu build commenced 15 quarters AV Ready to launch to build Q1 2021 Q3 2024 Delay launch 4 quarters to meet rising regulatory bar vs 4-5 years to work through regulatory Consent Order 35
Slide 36: Avenu on the horizon
Avenu on the horizon Fi n t e c h p a r t n e rs j o i n i n g Ave n u 7 Number of Status fintech partners in production 1 in sandbox 1 underway contract signed, starting integration 5 waiting for licenses to proceed pending decision by fintech 2 3 5 nearing decision 36
Slide 37: Avenu spend to-date is efficient
Avenu spend to-date is efficient Assets & liabilities June 30, 2024 (000’s) Computer software (Capitalized) $17,205 Other assets $72 Total assets $17,277 Non-interest-bearing deposits $19,538 Interest-bearing deposits $1,690 Total deposits $21,228 37
Slide 38: Avenu performance
Avenu performance Income Statement 2024 YTD (000’s) Service charge Income $309 Income from deposits 1 $825 Total income $1,134 Employee compensation $776 Other expenses $1,462 Compliance expenses $77 Total expense $2,315 Net Income before taxes -$1,181 1 Determined by using the weighted average Effe
Slide 39: Strategic balance sheet growth
Strategic balance sheet growth March 2022 $44M April 2019 January April 2021 Sub-Debt Became 2017 September $30M Offering SEC $15M Sub- Registrant 2020 Sub-Debt Debt August and Began $28.75M Offering ‘22 Offering 2018 Trading on Depository $45M NASDAQ Share Offering ‘21 October $2,094 Private Capita
Slide 40: Financial highlights
Financial highlights Year-End Financials Quarter-End Financials In $000 unless otherwise noted Q2’24 2020 2021 2022 2023 LTM Q2’23 Q3’23 Q4’23 Q1’24 Q2’24 Interest Income 62,072 64,199 83,845 124,123 130,473 30,706 31,694 33,078 32,374 33,327 Interest Expense 16,095 10,663 13,836 48,176 64,227 11,43
Slide 41: Financial highlights - continued
Financial highlights - continued Year-End Financials Quarter-End Financials Q2’24 In $000 unless otherwise noted 2020 2021 2022 2023 LTM Q2’23 Q3’23 Q4’23 Q1’24 Q2’24 Performance Metrics (%) ROAA 1.05 1.32 1.53 1.38 0.86 1.46 1.30 1.02 0.65 0.50 ROAE 10.54 12.38 13.98 12.67 7.96 13.40 11.80 9.42 5.9
Slide 42: Definitions
Definitions GAAP - Generally Accepted Accounting Principles CRE - Commercial Real Estate EPS – Earnings Per Share AOCI - Accumulated Other Comprehensive ROAA - Return on Average Assets Income ROAE - Return on Average Equity TBV - Tangible Book Value ROATCE - Return on Average Tangible Common Equity
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