Mainstreet Bancshares, Inc. · NASDAQ:MNSB
Mainstreet Bancshares — Q1 2024 Earnings Presentation
46 slides from Mainstreet Bancshares's earnings presentation, Apr 22, 2024
Slide 1: 1st Quarter 2024 Performance
Te —j-\- Ee =|=\= STANDARDS = iliemmendinn 1st Quarter 2024 Performance
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: Much has been written of late about banks offering Banking-as-a-Service
Much has been written of late about the banks that offered Banking-as-a-Service through intermediaries… 3
Slide 4: Banking-as-a-service banks: 'There is a reckoning'
Banking-as-a-service banks: ‘There is a reckoning’ By Miriam Cross. February 7, 2024 The quickening waves of consent orders slamming into financial institutions engaged in banking-as-a- service is spurring change among banks who want to “Financial institutions get it right. have been forced by Banks
Slide 5: Small group of BaaS banks logs big number of enforcement actions
Small group of banking-as-a-service banks logs big number of enforcement actions Author Yizhu Wang, Thomas Mason US banks with financial technology partnerships accounted for an outsized share of severe enforcement actions in “US banks with 2023. In 2023, banks that provide banking as a service fina
Slide 6: Regulatory scrutiny will likely separate committed banks
“Regulatory scrutiny will likely separate committed banks...” Excerpts from: Hrushka, Anna (1-22-24) BaaS to require strong commitment, investment in 2024, experts say, Banking Dive Financial Analytics 6
Slide 7: Where Is Banking-As-A-Service Headed In 2024?
Where Is Banking-As-A-Service Headed In 2024? Kate Drew Contributor When looking toward the future of the fintech industry in 2024, one of the most salient questions is what developments we may see in Banking-as-a-Service, or BaaS. The truth is many of the most jarring headlines have involved “That
Slide 8: Opportunities are boundless for banks providing BaaS responsibly
We believe the opportunities are boundless for banks that provide Banking-as-a-Service in a responsible way 8
Slide 9: We've said it from the start
We’ve said it from the start What 6 years of providing Banking as a Service taught us We need our own: • Distributed Ledger • Integrated CIP, KYC, BSA & AML technology • Integrated Compliance & Complaint Management • Integrated Monitoring Systems • Leading Edge Cybersecurity systems • Compliance & M
Slide 10: American Banker: Virginia bank wants to rewrite the rules for BaaS
AMERICAN BANKER, This Virginia bank wants to rewrite the rules for banking as a service By John Reosti | February 22, 2024 HA . . ’ MainStreet Bancshares in Fairfax, Virginia, says 2024 should be a transformational year for its 2-year-old Avenu banking-as-a-service subsidiary. monsitj - stock.adobe.
Slide 11: Put our bank in your app
Put our bankin your app. Banking delivered Avenu offers the only embedded banking solution that connects you and your applications directly and seamlessly to a banking core, our banking core. We are not a sponsor bank without our own technology, and we are not a middleware software company without o
Slide 12: Avenu is in full production
Avenu is in full production first client is completing final pre-scale refactoring The next two fintechs are coming up to speed at a much faster pace 12
Slide 13: Avenu on the horizon
Avenu on the horizon Status of fintech partners joining Avenu Number of fintech Status partners in production near production in sandbox 1 2 1 6 underway contract signed, starting integration 1 11 negotiating contract 1 waiting for licenses to proceed 2 pending decision by fintech 9 nearing decision
Slide 14: Avenu technology group
Avenu technology group a high-performing team Chief Exec. Officer Avenu President Chief Information Chief Risk Officer 1 Security Officer 1 Chief Technology Chief Security Chief Compliance Project Engineer Officer Officer Manager 1 systems 4 cyber 2 compliance 3 project architect operations analysts
Slide 15: Avenu spend to-date is efficient and legacy deposits are faring well
Avenu spend to-date is efficient and legacy deposits are faring well A s s e t s & l i a b i l i t i e s M a r. 3 1 , 2 0 2 4 (000’s) We will start Computer software $15,272 amortizing Other assets $77 capitalized assets Total capitalized assets $15,349 in May 2024 Non-interest-bearing deposits $37,
Slide 16: Avenu legacy performance is good
Avenu legacy performance is good Income Statement 2024 YTD (000’s) Service charge Income $154 Income from deposits 1 $465 Total income $619 Employee compensation $363 Other expenses $597 Compliance expenses $38 Total expense $998 Net Income before taxes -$379 1 Determined by using the weighted avera
Slide 17: Avenu breakeven
Avenu breakeven Estimated breakeven occurs when we achieve and sustain $225 million in deposits 17
Slide 18: MainStreet Bank
~~ MainStreet >< Bank _—_
Slide 19: Branch lite business model
Branch lite business model excellent for maintaining low overhead expenses Bank established: May 26, 2004 Headquarters: Fairfax, VA Leesburg D.C. Metro Area Branches: 6 Loudoun County Full time employees: 191 Dulles Herndon McLean Washington Assets per employee: $10.8 million Fairfax Arlington Distr
Slide 20: Diverse primary market
Diverse primary market federal government provides stability, doesn’t define market Strong employment Diverse opportunities 16.0% US Unemploy ment Rate 14.0% 14.7% DC MSA Unempl oyment Rate Defense 16 12.0% Federal Tourism, Contracting Fortune 500 10.0% government hospitality, 10.0% CACI Companies 9
Slide 21: Share price impacted by externalities
Share price impacted by externalities investor sentiment is down for market sector As-Of March 31, 2024 Nasdaq Capital Markets: MNSB Market capitalization: $138.3 million Close common stock price: $18.16 Preferred stock Nasdaq symbol: MNSBP Tangible Book Value: $23.66 Close preferred stock price: $2
Slide 22: Strategic balance sheet growth
Strategic balance sheet growth March 2022 April 2019 January September $44M Became April 2021 2017 2020 Sub-Debt SEC $30M $15M Sub- $28.75M Offering Registrant Sub-Debt Debt Depository and Began Offering ‘22 Offering August Trading on Share Offering 2018 $2,070 NASDAQ ‘21 October $45M Capital $2,035
Slide 23: Financial performance dipped slightly
Financial performance dipped slightly we have confidence in our strategy and the Company remains strong and focused 1Q24 4Q23 3Q23 2Q23 EPS $0.36 $0.61 $0.77 $0.85 Profitability Efficiency Ratio 75.77% 62.33% 58.49% 54.04% ROAA2 0.65% 1.02% 1.30% 1.46% ROAE2 5.97% 9.42% 11.80% 13.40% ROATCE2 7.37% 9
Slide 24: Liquidity is strong and well-managed
Liquidity is strong and well-managed Quarterly liquidity monitoring results 125% Metric 1Q24 4Q23 3Q23 2Q23 Liquidity coverage ratio (LCR)1 125% 133% 164% 124% Core deposit ratio 2 76% 74% 68% 70% FDIC insured / total deposits 3 78% 77% 76% 76% LCR (millions) High quality liquid assets4 $189 $180 $1
Slide 25: Loan beta strong throughout cycle
Loan beta strong throughout cycle funding costs presented challenges over past 2 quarters Performance against effective Fed Funds Rate Cost of Funds 52% 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% prici
Slide 26: Net interest margin decline is starting to flatten
Net interest margin decline is starting to flatten ability to control funding cost is key Quarterly net interest margin 5.00% MNSB NIM 4.80% 4.70% 4.69% 4.60% 4.40% 4.21% 4.20% 4.14% 4.00% 3.93% 3.97% 3.95% 3.80% 3.60% 3.49% 3.40% 3.20% 3.24% 3.00% 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 26
Slide 27: Deposit shift consistent with rate environment
Deposit shift consistent with rate environment Deposit type / total deposits 35% 33% 40% 44% 42% 41% 42% 50% 52% 26% 38% 23% 21% 20% 36% 24% 23% 24% 39% 35% 38% 38% 27% 29% 32% 24% 24% 2018 2019 2020 2021 2022 2Q23 3Q23 4Q23 1Q24 Interest-Bearing DDAs Non-Interest Bearing DDAs Time Deposits 1 Bank-d
Slide 28: Core deposits are well structured
Core deposits are well structured March 31, 2024 Balance Percent Weighted Weighted Type (millions) of Total Avg. Rate Maturity Non-interest-bearing DDA $349 26% Interest-bearing DDA $557 42% 4.43% N/A Term $407 31% 4.67% 8 mos Total core deposits $1,313 100.0% 3.32% N/A Core deposits represent 76% o
Slide 29: Non-core deposits are well structured
Non-core deposits are well structured and represent 24% of total deposits March 31, 2024 Type Balance Percent Weighted Weighted (millions) of Total Avg. Rate Maturity Money market deposits $102 24.2% 5.45% N/A 41% Listing service CDs $32 7.5% 4.83% 3 mos of term Term $114 27.2% 3.97% 6 mos deposits
Slide 30: Loan rate structure is well-suited
Loan rate structure is well-suited for anticipated future interest rate environment March 31, 2024 56% have 64% of loans are 36% floors with an average fixed-rate1 rate of of loans are floating-rate 2 6.29% 1 “Fixed” loans include all loans with a repricing date more than 6-months from quarter-end 2
Slide 31: Laddered repricing for fixed-rate loans
Laddered repricing for fixed-rate loans fixed-rate repricing timeline shows good distribution over 5 years Loan repricing as of March 31, 2024 $214 million 28% $115 million 15% Fixed-rate beyond 2028 loans total $68 million through 2033, the average annual $765 9% repricing is $43 million $32 millio
Slide 32: Loan portfolio dynamics are good
Loan portfolio dynamics are good Average new loan size1 and legal lending limit by year 1Q24 composition 2 (000’s) $46,810 $47,158 Average New Loan Size $42,986 Legal Lending Limit $34,104 Res. Real Construction $28,430 Estate 23% 26% $23,684 $1.7 $21,354 $3,323 C&I 4% $12,519 billion $2,330 $2,309
Slide 33: Investor CRE concentration is lower this quarter
Investor CRE concentration is lower this quarter Investor CRE as a percent of total capital 377% 372% 373% 373% 365% 364% 137% 141% 139% 138% 130% 140% 240% 231% 224% 234% 235% 235% 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 Investor CRE Construction 33
Slide 34: Loan portfolio quality is good
Loan portfolio quality is good Criticized & classified loans over five quarters 3/31/2023 6/30/2023 9/30/2023 12/31/2023 3/31/2024 Number of Number of Number of Number of Number of Current balance balance balance balance balance Current Current Current Current Current Balance in loans loans loans lo
Slide 35: New Q1 loans are in good sectors
New Q1 loans are in good sectors good rates and strong loan-to-values New loan originations 1Q2024 Origination Weighted # of Amount Weighted Avg Loan-to- Sector Loans (million) Avg Rate Value Commercial Use 8 $20 7.51% 45% Multi-Family 1 $3 7.25% 74% Residential 6 $2 7.74% 51% Residential 8 $13 9.04
Slide 36: Pure CRE office exposure is nominal
Pure CRE “office” exposure is nominal Current Balance of Office Por tfolio 1 (m illions) Location Category DC MD VA Other Total Mixed Use $0.6 $2.7 $3.1 - $6.4 $15 million Exposure to Office Building $1.3 $1.9 $5.3 - $8.5 mixed-use Medical - $22.4 $15.1 $0.5 $38.0 buildings and Office to Residential
Slide 37: 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 Interest Weighted Construction DC VA MD Other Total Rate LTV Hospitality - - $11 - $11 9.50% 63% Industrial
Slide 38: 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 $7
Slide 39: 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 Construction DC VA MD Other Total Rate LTV Accommodation & Food Services $15 $11 $3 $6 $35 5.59% 69% Admin & Support
Slide 40: 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 $220 1 8.98%2 71% Subordinated debt $73 3.90% 3 23% Preferred Stock $27 7.50% 9% AOCI -$8 - -3% TOTAL $312 100% 1 Includes the Allowance for Credit Losse
Slide 41: Capital remains strong after stress test results
Capital remains strong after stress test results for all earning assets March 31, 2024 stress test results Earning asset Outstanding Stress test1 component ($000) ($000) Construction $408,903 -$4,091 Investor CRE $737,494 -$8,124 All Other Loans $601,730 -$18,320 AFS Securities $68,998 -$7,930 HTM S
Slide 42: Stress test results good over five quarters
Stress test results good over five quarters 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 r a t i o s 15.8% 15.8% 16.1% 15.5% 15.4% 14.6% 14.9% 14.0% 14.0% 13.4% 7.0% Stress loss Estimates $29,350 $32,539 $35,661 $31,840 $38,667 (000’s) 1Q23 2Q23 3Q23 4Q23 1Q24 Post-stress CET1 / RBC
Slide 43: Projections for remainder of 2024
Projections for remainder of 2024 a transformative year • Estimated expense run rate to increase 1.2% per month • Avenu deposit goal is $225 million in 2024 • Avenu fee income goal is $2 million in 2024 • Low single-digit loan growth for 2024 43
Slide 44: Financial highlights
Financial highlights Year-End Financials Quarter-End Financials In $000 unless otherwise noted Q1’24 2020 2021 2022 2023 LTM Q1’23 Q2’23 Q3’23 Q4’23 Q1’24 Interest Income 62,072 64,199 83,845 124,123 127,852 28,645 30,706 31,694 33,078 32,374 Interest Expense 16,095 10,663 13,836 48,176 57,623 7,554
Slide 45: Financial highlights - continued
Financial highlights - continued Year-End Financials Quarter-End Financials Q1’24 In $000 unless otherwise noted 2020 2021 2022 2023 LTM Q1’23 Q2’23 Q3’23 Q4’23 Q1’24 Performance Metrics (%) ROAA 1.05 1.32 1.53 1.38 1.10 1.75 1.46 1.30 1.02 0.65 ROAE 10.54 12.38 13.98 12.67 10.11 16.40 13.40 11.80 9
Slide 46: Definitions
Definitions GAAP - Generally Accepted Accounting Principles CRE - Commercial Real Estate EPS - Earnings-per-Share AOCI - Accumulated Other Comprehensive Income ROAA - Return on Average Assets TBV - Tangible Book Value ROAE - Return on Average Equity LCR - Liquidity Coverage Ratio ROATCE - Return on
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