Mainstreet Bancshares, Inc. · NASDAQ:MNSB
Mainstreet Bancshares — Q2 2023 Earnings Presentation
53 slides from Mainstreet Bancshares's earnings presentation, Jul 24, 2023
Slide 1: Second Quarter 2023
Nasdaq: mnsb second quarter 2023 J MainStreetBancshares, Inc. July 24, 2023
Slide 2: Forward-looking statements and additional information
Forward-looking statements and additional information Statements in this presentation which are not historical are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private
Slide 3: About us
About us Bank established: May 26, 2004 Headquarters: Fairfax, VA Branches: 6 D.C. Metro Area Full time employees: 19 Assets per employee ($MM): $10.9 Holding company established: Feb 11, 2016 Common stock Nasdaq symbol: MNSB Close common stock price !: $22.66 Common shares outstanding!: 4,522,207 M
Slide 4: The National Capital region is robust
The National Capital region is robust Strong Employment Market Analysis | + Home to >10% of all federal employees + Data Center Alley * * More than 70 data centers * Sustains 70% of U.S. internet traffic + High Median Household Income? * Loudoun County ranked #1 * Fairfax County ranked #4 + 16 Fortu
Slide 5: Financial metrics are excellent
Financial metrics are excellent EPS $1.86 $0.85 $1.01 $0.71 Efficiency Ratio 53.48% 54.04% 52.97% 54.61% ROAA? 1.60% 1.46% 1.75% 1.39% Profitability ROAE? 14.87% 13.40% 16.40% 12.59% ROATCE? 18.13% 16.44% 19.82% 13.38% Net Interest Margin! 2 4.45% 4.21% 4.69% 3.95% Net Loans ($000) $1,637,484 $1,637
Slide 6: Risk metrics reflect strong management
Risk metrics reflect strong management Liquidity Coverage Ratio (LCR) * 124% 118% 185% Loan-to-Deposit Ratio 104% 100% 95% Core Deposit Ratio 74% 71% 72% FDIC Insured/ Total Deposits ? 76% 73% 57% Secured Line Available Balance $494M $436M $421M Unsecured Line Available Balance $99M $129M $104M Tier
Slide 7: What we anticipate for the second half of 2023 and beyond
wt y + Whatwe anticipate for the second half of 2023 and beyond a + Inflationis declining but continues above the Fed's target. Fed signaling another rate rise - likely will only see one more 25 bp increase in July. Rates should remain flat into mid-2024. Adjusting interest rate sensitivity \\\ 7 *
Slide 8: Assumptions for second half of 2023
Assumptions for second half of 2023 Projections: + Monthly expense rate between 2.5 - 3.0% for remainder of the year (this includes $120k per month for software amortization). + One rate hike of 25bp for the remainder of the year. General Statements: + Preservation of capital is a priority. Intend t
Slide 9: Cybersecurity
4 cybersecurity
Slide 10: Strong focus on managing cybersecurity
Strong focus on managing cybersecurity Team Matt McCrory SVP, CISO Powlos Million Cyber Security Operations Analyst/ DevSec MarKeisha Snaith Sr. Cyber Security Operations Analyst /OpsSec / GRC Steven Yousef Cyber Security Operations Analyst/ OpSec Bernardo Guichardo Sr. Cyber Security Operations Ana
Slide 11: Liquidity metrics
4 liquidity metrics
Slide 12: Liquidity is strong and well-managed
Liquidity is strong and well-managed Quarterly liquidity monitoring results Met 2022 | 3a22 | 4a22 | 1023 | 2023 ae oS is iS SEB Daily liquidity monitoring is Liquidity Coverage Ratio (LCR)' 185% 211% 97% 118% 124% robust and effective Core Deposit Ratio 72% 74% 77% 71% 74% Significant liquidity FDI
Slide 13: Net interest margin
«4 net interest margin
Slide 14: Net interest margin is excellent
Net interest margin is excellent Net interest income & net interest margin ‘ 2Q22 3Q22 4022 1023 2023 1. Quarter-end NIM with tax-equivalent yield Impact to NIM over past 4 quarters 4 3.95% NIM Loan Other_—Retail& Other NIM (22022) Income Income Wholesale Expenses (Q2 2023) Deposits 14
Slide 15: Net interest margin forecast is good
Net interest margin forecast is good NIM trailing twelve months with projections" Highlights Baseline model reflects 25bp rate rise in 443% aoe 4 3O% en y July then flat rates for remainder of 2023 oo with a 4.24% NIM. 430% 4 19% Se, 424% o 4.10% 4.23% High-rate scenario reflects three rates 3.88 in
Slide 16: Deposit metrics
4 deposit metrics
Slide 17: Deposit shift consistent with national trend
Deposit shift consistent with national trend Deposit type as a percentage of total deposits 26% Tl go, eat 24% 39% 27% 24% 2018 2019 2020 2021 m Interest-Bearing DDAs = Non-Interest Bearing DDAs <3 36% Bi 36% im 20% 24% 2Q22 3Q22 4Q22 1Q23 2Q23 Time Deposits June 30, 2023 deposits —E Core aepests $1
Slide 18: Core deposits a healthy 74% of total deposits
Core deposits a healthy 74% of total deposits Core deposit mix ($MM) = Non-Interest Bearing (NIBs), excl. Avenu Interest Bearing, Non- Maturity CDs & Time Deposits = Avenu NIBs Highlights SE * $352M in CDs + Weighted avg maturity date of April 2024 + Weighted avg rate of 3.71% + $443M in interest-be
Slide 19: Non-core deposits are well-structured
Non-core deposits are well-structured Non-core deposits are 26% of deposits Highlights + $69MM in callable CDs * Bank holds call option lm Wholesale CDs + Avg call is Feb. 2024 + Avg maturity is Nov. 2026 + Weighted avg rate is 5.16% ™ Callable Wholesale CDs + $280MM in wholesale CDs + Avg maturity
Slide 20: Most accounts are FDIC insured
Most accounts are FDIC insured Deposits ($MM) & FDIC Insurance’ Average Balance’ | balance | % of total Deposits | accounts | (billion) | ($000) accounts FDIC. 9 ected 153,591 $1.158 $8 12% Not 9, iaeured 635 $0.445 $702 28% TOTAL | 154,226 | $1.603 $10 100% Highlights es + 72% of deposits accounts
Slide 21: Deposit rate shift concentrated in 1Q 2023
Deposit rate shift concentrated in 1Q 2023 Effective Fed Funds Rate & Cost of Deposits Highlights 6.00% — —-Cost of Deposits Added $110M in wholesale Giese Me tRE ASR ~~" funds at the tail-end of Q1. Goh - Attractive Avg rate 4.88% - Avg duration of 3+ Years - Approximately 50% of balances are calla
Slide 22: Bank diligently managing deposit rates
Bank diligently managing deposit rates Acct Type Bus. Checking Bus. Savings Bus. Money Market Treasury Market 1-Month CD 3-Month CD 6-Month CD. 18-Month CD 1-Year CD 2,3,4,5-Year CDs Posted deposit rates Balance 2Q23 (00's) $382,207 $9,154 $243,883 $69,293 $4 $6,162 $57,255 $79,380 $228,938 $232,476
Slide 23: Loan metrics
4 loan metrics
Slide 24: Fixed and Floating Loan Status
Fixed and Floating Loan Status + Floating Rate Loans Booked YTD 2023: + $73MM with weighted avg floor rate of 7.68% + $115MM in total floating rate loans booked + Weighted avg rate for all new loans of 8.46% + Fixed Rate Loans Booked YTD 2023: + $102MN in total fixed rate loans booked + Weighted avg
Slide 25: Fixing loans and adding floors...
Fixing loans and adding floors... Total loan balance (000's) $1,439 $1,466 $1,598 $1,609 $1,657 Weighted average Int rate 4.54% 5.13% 5.88% 6.14% 6.98% Total floating rate balance (000's) $1,010 $1,025 $1,115 $1,118 $1,080 Weighted avg. floating Int rate 5.24% 6.21% 7.24% 7.65% 7.81% Floating as a %
Slide 26: Loan portfolio dynamics are consistent
Loan portfolio dynamics are consistent Average loan size! and legal lending limit by year 2Q23 portfolio composition 2 (000's) $42,986 uaa mmm Average Loan Size Construction =e=1egal Lending Limit $34,10- 25% $28,430 $23,684 Comm. Real Estate 44% 2017 2018 «= 2019S «2020.» «2021.2 2022-2023 YTD 1. A
Slide 27: Loan performance metrics are good
Loan performance metrics are good Allowance! & Non-Performing Assets Highlights | + 4% loan growth year-to-date $12,500 0.00% + Zero non-performing assets 1922 2022 3Q22 4Q22 2023 + Beganusing the Current Expected wm ACL wO=NPAs / Assets Credit Loss (CECL) methodology in 2023 Reconciliation of Loan
Slide 28: Loan portfolio is high quality
Loan portfolio is high quality Investor CRE as a % of total capital Excellent cumulative credit performance De | 370.6 3661 3701 3775 37212 363.43 Net Lifetime Origination Charge- NCO to Balance Offs Original 2004 - Present Lifetime Lifetime Balance Investor CRE‘ $4.0 bil $0 ~0 bps Other Com? $1.7 b
Slide 29: Loan portfolio quality is good
Loan portfolio quality is good Internal watch list loans over five quarters (dollar amounts in millions) Criticized loans Classified loans 6/30/2022 s 8 | ae #2 5 28 383 4 $16.1 2) $20.5 9/30/2022 ‘S 8 | 26 fe 88 28 83 1 $0.7 6 $11.3 12/31/2022 s 8 | ae #2 5 28 383 4 $9.6 3/31/2023 ‘S 8 | 26 fe 88 2
Slide 30: Nominal exposure to office space
Nominal exposure to office space C4 Current Balance of Office Portfolio as of June 30, 2023 Category ($ Millions) ne Mixed use $0.6 Office space - Office conversion : tores Medical = Under construction $9.4 Total $10 WeightedavgLTV 34% Location MD VA Other Total $2.8 | $3.1 = $6.5 $1.9 | $11 2 $12.9
Slide 31: Construction loans
Construction loans Construction Balance by Collateral and Progress $193.113 48% AZ $102,779 Vi ° $49,614 5 $23,703 $1 ses 4 od eS Ss e < < & s fo} RS N s Balance ($000) Avg. Construction Project Progress % 86% $9,397 31
Slide 32: Well diversified commercial real estate loan portfolio
Well diversified commercial real estate loan ©) portfolio distribution within the Bank’s lending footprint \ is 32
Slide 33: New Q2 CRE loans are in good sectors
New Q2 CRE loans are in good sectors Origination Amount Weighted Avg ($000) Rate Avg Maturity Besaae 13 $25,463 8.85% Sep. 2024 Industrial 8) $21,972 7.93% Jul. 2028 Multi-Family 6 $20,031 7.55% Aug. 2028 Retail 4 $5,785 7.34% Sep. 2031 Office 1 $199 7.00% Apr. 2033 Total 29 $73,450 8.10% Jul. 2027
Slide 34: Stress metrics
4 stress metrics
Slide 35: Capital remains strong after stress results
Capital remains strong after stress results Component Construction Investor CRE All Other Loans HTM Securities AFS Securities Swap Portfolio BOLI Totals CET1-RBC Ratio % 1. Tax-Effective loss Outstanding ($000) $421,277 675,581 561,135 15,590 70,905 37,763 $1,782,251 Current 15.37% Stress Loss! ($00
Slide 36: Stress test results good over five qtrs
Stress test results good over five qtrs Earning assets stress test loss estimates! Asset Type 2Q22 3Q22 4Q22 ($ 000's) Investor CRE & Conetniclion $11,407 $9,602 $11,712 All Other Loans 10,721 10,184 11,216 AFS Securities 5,183 7,107 6,751 HTM Securities 8 318 126 Other Assets? 10) 10) 10) Stress Lo
Slide 37: Notional exposure for securities portfolio
FUL Notional exposure for securities portfolio Current Security type balance Available-for-Sale MBS, CMO, CMBS $8,970 Municipals $21,091 SBA $3,167 Corporates $9,470 CRA Eligible $28,206 Held-to-Maturity All, Less CRA. $14,518 CRA Eligible $1,072 gain / loss (000’s) ($1,304) ($3,268) ($37) ($1,631)
Slide 38: Avenu
AV Avenu
Slide 39: Avenu is Live
Slide 40: Avenu version costs are well-managed
Avenu" version 1 costs are well-managed Balance Sheet June 30, 2023 (000’s) Computer software $12,267 Other assets $91 Total assets $12,358 Non-interest-bearing deposits 943 895 Interest-bearing deposits $2,263 Total deposits $46,158 <0 The Avenu team has been judicious in cost- monitoring and expen
Slide 41: Avenu legacy performance is good
Avenu" legacy performance is good Income Statement through June 30, 2023 (000’s) Service charge Income $458 Production team is fully- Income from deposits ‘ $1,028 staffed and has taken control . , of product development. Total income $1,486 Employee compensation $687 Capitalized development costs w
Slide 42: Avenu is open for traffic
Avenu" is open for traffic Opportunities in the BaaS space continue to grow Projected’ range of opportunities 2023 2024 New DDA balances $5M - $25M $50M - $125M New fees < $100k $400k - $1.25M V Live with first client (currently hardening and scaling) Vv 4clients have signed the agreement to go forw
Slide 43: History, capital structure & performance
4 history, capital structure & performance
Slide 44: ESG journey is underway
ESG journey is underway C4 Environmental Stewardship Bank is “branch lite”, which translates into less traffic. We recycle in every area including electronic waste. Charging stations for electric vehicles. Nearly all company vehicles are electric or hybrid. Employees can telecommute. Approximately 1
Slide 45: We serve our community
We serve our community August 22, 2022 Public Disclosure (Excerpt 1) COMMUNITY REINVESTMENT ACT PERFORMANCE EVALUATION INSTITUTION’S CRA RATING: This institution is rated: Outstanding. The Lending Test is rated: Outstanding. The Community Development Test is rated: Outstanding. 1 To view the Communi
Slide 46: Smart balance sheet growth
$576 Smart balance sheet growth $808 $345 ad 7 soap $283 $272 $277 $146 Py $83 $106 Se —— |_| 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Q2 = .
Slide 47: Capital stack is well structured
Capital stack is well structured Outstanding Percent of Component ($000) Rate/Return Capital Stack Common Stock $208,832 | 14.46% 2 69.57% Subordinated debt $72,444 3.90% 24.13% Preferred Stock $27,263 7.50% 9.08% AOCI -$8,346 ' -2.78% TOTAL $300,193 100.00% | Includes the Allowance for Credit Losse
Slide 48: Current Price / TBV is a bargain
Current Price / TBV is a bargain Tangible Book 9.68 $29.00 Value —Warket Value $27.00 25.66 $25.00 $23.00 $21.00 : Dividend Dividend —_ Dividend bse 19.00 0.05 0.05 0.05 s o oo Difidend —Difidend —_Difidend $17.00 $0.10 $0.10 $0.10 ~soee ena annannanannnanngaen2an22eaas SSSASKRANNQNQNANAQAQNQANANANK
Slide 49: MNSB outperforms peer banks
MNSB outperforms peer banks -18% -35% —=MNSB CBNK EGBN ~45% JMSB —-SASR —FDVA 55% FVCB —-FRST -——BRBS 52% 65% 30-Dec-22 30-Jan-23 28-Feb-23 31-Mar-23 30-Apr-23 31-May-23 30-Jun-23 Graphic is the percentage change from December 31, 2022, to June 30, 2023. Data is from Yahoo Finance
Slide 50: Financial highlights
4 financial highlights
Slide 51: Financial highlights
Financial highlights In $000unlessotherwise noted 2018 Year-End Financials, 2019 2020 2021 223 L™ Quarter-End Financials Q2°22 _Q3'22__Q4'22_Q1'23 _Q2'23 Interest Income 43,836 88,813 62,072 64,199 83,845) 18813 21,913 2572-28645 30,706 Interest Expense 12666 19,377 16.095 10,663 __ 13.836 2602 3817
Slide 52: Financial highlights - continued
Financial highlights - continued In $000unless otherwise noted 2018 Year-End Financials, 92°23 2019 2020 2021 2022 LIM Quarter-End Financials Q1'22 _Q3'22_Q4'22_Q1'23_Q2’23 Net Interest Margin (%) Net Interest Margin - Tax Equivalent Vie ae 349 ase ass 305 ath==a7O.~««we at eee ‘21251 197034 140402
Slide 53: MainStreet Bancshares, Inc.
<o MainStreet Bancshares, Inc. second quarter 2023
MainStreet Bancshares — Q2 2023 Earnings Presentation on 6ix