Mainstreet Bancshares, Inc. · NASDAQ:MNSB
Mainstreet Bancshares — Q3 2024 Earnings Presentation
47 slides from Mainstreet Bancshares's earnings presentation, Oct 28, 2024
Slide 1: Third Quarter 2024 Performance
Darrell Green, Director j E Seven-time Pro Bowl Third Quarter 2024 Performance FL 1990'6 All-Docade Team Hall of Fame inductee 2008 FF MainStreetBancshares, INC. wer sdowhsnniveraryait-Time Team Washington Ring of Fame
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 As such, actual
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 Full time employees: 201 Loudoun County Herndon McLean Assets per employee: $11.1 million Dulles Washington Fairfax A
Slide 4: The DC metropolitan market remains vibrant
The DC metropolitan market remains vibrant Strong employment & Strong Local Economy Unemployment rate Diverse opportunities 16 .0% 14 .0% • 14.8% .... 1111 Defense 16 Federal Tourism, 12 .0% Contracting Fortune 500 10.0% government hospitality, CACI Companies 10 .0% 9.4% conventions Lockheed Amazon
Slide 5: Key takeaways
Key takeaways projections assume future interest rate changes remain directionally consistent 1. 2024 financial performance is not indicative of future expectations. § Deposit costs will decrease, and the net interest margin will expand § The Allowance for Credit Losses (ACL) is directionally consis
Slide 6: Profitability
2024 performance is not indicative of future expectations 3Q24 3Q24 2Q24 1Q24 4Q23 YTD Profitability EPS $0.60 ($0.04) $0.27 $0.36 $0.61 Efficiency ratio 78.68% 81.45% 78.38% 75.77% 62.33% ROAA2 0.40% 0.05% 0.50% 0.65% 1.02% ROAE2 3.70% 0.47% 4.70% 5.97% 9.42% ROATCE2 4.60% 0.58% 5.85% 7.37% 11.63%
Slide 7: Deposit costs will decrease, and the net interest margin will expand
Deposit costs will decrease, and the net interest margin will expand Quarterly net interest margin1 Reversed Interest 5.00% 4.75% 4.72% Interest income Quarter reversed 4.50% 2024 Q1 $310,933 4.18% 4.25% 2024 Q2 $541,887 3.96% 3.98% 4.01% 4.00% 2024 Q3 $983,841 Total YTD $1,836,661 3.55% 3.50% 3.29%
Slide 8: Core deposits reflect community engagement
Core deposits reflect community engagement Deposits 3Q24 Deposit type / total deposits ($millions) Core 1 $1,471 78% 35% 33% 40% 41% 42% 41% 44% Non-core $423 22% 52% Total $1,894 100% 26% 18% 38% 21% 20% 18% 36% 24% Business Banking team continue to build new 39% 38% 38% 41% 38% relationships and g
Slide 9: Core Deposit growth is meaningful
Core Deposit growth is meaningful Attractive rates and well structured September 30, 2024 Balance Percent Weighted Weighted Type (millions) of total avg. rate maturity Non-interest-bearing DDA $348 24% Low-cost transactional 1 $53 4% 0.22% Interest bearing $608 41% 4.38% Term $462 31% 4.89% 7 mos To
Slide 10: Non-core deposits are well structured
Non-core deposits are well structured Flexible & diverse for anticipated interest rate environment September 30, 2024 Balance Percent Weighted Weighted Type (millions) of total avg. rate maturity Money market $50 12% 5.15% deposits Term with call option1 $183 43% 5.16% 38 mos Term $190 45% 4.69% 11
Slide 11: Loan portfolio dynamics are strong with a positive mark
Loan portfolio dynamics are strong with a positive mark Average new loan size1 and legal lending limit by year 3Q24 composition - Average New Loan Size • Legal Lending Lim it (000’s) $42,986 $34,104 $46,810 $47,417 C&I 5% Res. Real Estate 11% Construction 21% $28,430 $23,684 $21,354 Multi-Family 14%
Slide 12: Loan rate structure is well positioned
Loan rate structure is well positioned for stable or falling rates S e p t e m b e r 3 0 , 2 0 2 4 – To t a l L o a n s o f $ 1 . 8 B 61% rate resets 39% 55% with a weighted average floor beyond 6 rate of 6.65% rate resets up 17bp from months 1 within previous 6 months 2 quarter 1 Loans include all
Slide 13: CRE concentration is well managed
CRE concentration is well managed Investor CRE as a % of total capital 372% 364% 373% 373% 365% 367% 360% 141% 140% 139% 138% 130% 130% 118% 231% 224% 234% 235% 235% 237% 242% 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 ■ Investor CRE ■ Construction 13
Slide 14: Expect to see improvements in criticized levels
Expect to see improvements in criticized levels Relationships # of Principal balance Loan type (million) Expected outcome Properties are leased and paid as agreed. High Selling Real Estate 1 $3.7 probability of upgrading Properties in process of liquidation. High probability Hotel 1 $15.8 of success
Slide 15: Expect to see improvements in classified levels
Expect to see improvements in classified levels Relationships # of Principal balance Loan type (million) Expected outcome Commercial Real Properties are leased and paid as agreed. High Estate (leased) 2 $7.6 probability of upgrading Commercial Real Properties are being sold. High probability of Esta
Slide 16: Expect to see decline in nonperforming loans
Expect to see decline in nonperforming1 loans Relationships # of Principal balance Loan type (million) Expected outcome Sell out or Properties are complete or nearly complete and in the leased real process of being sold or leased up. Full collection estate 3 $12.2 expected. Properties in process of
Slide 17: Aggressively managing nonperforming loans
Aggressively managing nonperforming loans Nonperforming loan activity between Q2 and Q3 (million) Beginning balance : $20.7 Anticipate less than 1.25% Additions: 31.4 of the September 30, 2024 Dispositions: -21.8 nonperforming ending Charge-offs: -1.9 balance has an elevated Normal paydowns: -0.1 le
Slide 18: Cumulative losses through interest rate cycle remain well-below local peer average
Cumulative losses through interest rate cycle remain well-below local peer average Cumulative realized losses / Total assets 2.00 1.80 1.74 ? ■ MainStreet Bank Cumulative Realized Losses to 1.60 Total Assets 1 1.40 ■ Local Peer Banks Average Cumulative Realized Loss to Total Assets Loss Rate (%) 1.2
Slide 19: 2626 Pennsylvania Ave NW office to condo conversion
2626 Pennsylvania Ave NW office to condo conversion $11.9 million foreclosure Owners filed Chapter 11 bankruptcy Appraised value + guarantor support Rendering of luxury condo conversion We intend to aggressively pursue our rights and remedies in the bankruptcy proceeding 19
Slide 20: Continued loan growth with strong credit profiles
Continued loan growth with strong credit profiles Fueled by growing core deposits New loan originations 3Q20241 Weighted average LTV 1,2 is Residential 8% Commercial Real Estate 68% 35% Gov Con. 6% Weighted average rate is $82M C&I 13% Other 1% 7.80% Other Residential Constuction Construction 10% 27
Slide 21: CRE office exposure is low
CRE “office” exposure is low Current Balance of Office Por tfolio1 (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
Slide 22: 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 Risk Metrics1 (millions) Weighted Weighted Construction DC VA MD Other Total Interest Rate LTV Industrial $37 $1 $0 $0 $38 7.00% 57% Mixed Us
Slide 23: 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 24: 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 5.94% 72% Admin., Su
Slide 25: Earning asset stress-test shows continued strong capital ratios
Earning asset stress-test shows continued strong capital ratios post 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% 16.0% 15.5% 15.4% CET1 risk-based capital ratio 14.6% 14.9% 14.0% 14.0% 13.7% 13.4% 13.6% 7.0% Stress loss Estim
Slide 26: The Allowance for Credit Losses is directionally consistent with loan level and risk
The Allowance for Credit Losses (ACL) is directionally consistent with loan level and risk Allowance for credit losses / gross loans1 2 Allowance for credit losses2 1.16 2024 $18,327 2023 $16,506 ACL / Gross Loans 1.02 2022 $14,114 2021 $11,697 0.96 0.95 2020 $12,877 0.92 Preventative 2019 $9,584 Pr
Slide 27: Projections for remainder of 2024
Projections for remainder of 2024 • Estimated expense run rate with Avenu expenses for remainder of 2024 • Excluding non-recurring expenses of $594,0001, the run rate will be 50 basis points per month for Q4 • Avenu Version 1 • Software Amortization – $150K per month • Non-capitalized expenses – $38
Slide 28: Traditional deposit growth is a challenge in our market
Traditional deposit growth is a challenge in our market. The full Board is engaged and steadfast in its support of Avenu’s Banking-as-a-Service initiatives to overcome this challenge. The Board recently engaged the consulting firm FS Vector LLC to - § Provide a high-level review of the Avenu Banking
Slide 29: FS Vector Avenu platform report
F S V E CT O R >>»> Avenu platform report FS Vector is a Washington DC-based compliance, public policy, and business advisory firm serving banks, fintechs, regtechs, and other innovative companies. Clients gain the benefit of an extensive industry network that provides valuable insights, resources,
Slide 30: Banks' approaches to BaaS partnerships
F S V E CT O R >>»> Avenu platform report Banks’ approaches to BaaS partnerships can be divided into three broad categories, differentiated by who owns the key infrastructure and how oversight functions are performed. A short list of full-stack banks, including MainStreet Bank, control all the requi
Slide 31: Avenu compares favorably with peers
F S V E CT O R >>»> Avenu platform report Broadly, FS Vector finds that the Avenu platform compares favorably with peers in its ability to help MainStreet Bank meet the expectations of regulators for managing BaaS partnerships. This is a reflection of the Bank’s careful planning in the development o
Slide 32: Avenu development cost and timeline
F S V E CT O R >>»> Avenu platform report Finally, we note that the Bank has pursued an efficient approach for the development and launch of Avenu. While public information is limited and direct comparisons are hard to make, Avenu's development cost places it among the most economical of similar ban
Slide 33: FDIC Proposed Deposit Insurance Recordkeeping Rule
F S V E CT O R >>»> Avenu platform report FDIC Proposed Deposit Insurance Recordkeeping Rule for Banks’ Third-Party Accounts Ostensibly in response to the failure of Synapse and ensuing confusion, the FDIC published a notice of proposed rulemaking in September 2024 that sets specific record keeping
Slide 34: Summary of projections
F S V E CT O R >>»> Avenu platform report This approach and these figures are consistent with what we have done for similar exercises in the past. While every fintech is different, using a representative set of client profiles has proven to be a useful way to think about the ultimate shape, in terms
Slide 35: Avenu three-year projections
Avenu three-year projections B a s e l i n e F S Ve c t o r p r o j e c t i o n s + e x i s t i n g A v e n u 2025 2026 2027 (000’s) FS Vector Projected $132,581 $319,374 $505,415 balances 1 Existing Avenu balances $20,000 $20,000 $20,000 Total $152,581 $339,374 $525,415 Balance credit 2 $3,818 $9,0
Slide 36: Quarterly balance assumptions for Avenu
Quarterly balance assumptions for Avenu $000’s 2025 2026 2027 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Quarterly balance $34,120 $61,775 $105,884 $152,582 $199,280 $245,978 $292,676 $339,374 $386,072 $432,770 $479,468 $533,418 Nominal funds rate 1 4.40% 4.40% 4.40% 4.15% 3.40% 3.40% 3.40% 3.28% 2.90% 2.9
Slide 37: Avenu balance sheet
Avenu balance sheet Assets & liabilities September 30, 2024 (000’s) Computer software (Capitalized) $18,881 Other assets $69 Total assets $18,950 Non-interest-bearing deposits $17,965 Low-interest deposits $12,636 Total deposits $30,601 37
Slide 38: Avenu income statement
Avenu income statement Income Statement 2024 YTD (000’s) Service charge Income $528 Income from deposits 1 $1,143 Total income $1,671 Employee compensation $1,101 Other expenses $2,157 Compliance expenses $112 Total expense $3,370 Net Income before taxes -$1,699 1 Determined by using the weighted av
Slide 39: Version 1 of Avenu is now active
Version 1 of Avenu is now active Fintech partners joining Avenu Stage Fintechs Status Production 1 General release by mid-November Two in Alpha testing, two Sandbox 4 connecting to API’s Contract 1 Finishing App Waiting for CA license & debit card Waiting for licenses 1 functionality Pending 6 In di
Slide 40: Other financial metrics
Other financial metrics 40
Slide 41: Liquidity continues to be well-managed
Liquidity continues to be well-managed Quar terly liquidity monitoring results Metric 3Q24 2Q24 1Q24 4Q23 Liquidity coverage ratio (LCR)1 217% 122% 125% 133% Core deposit ratio 2 78% 78% 76% 74% Loan / Deposit Ratio 95% 102% 101% 102% FDIC insured / total deposits 3 77% 78% 78% 77% (millions) High q
Slide 42: Share performance during current rate cycle
Share performance during current rate cycle As of September 30, 2024 Nasdaq Capital Markets: MNSB Market capitalization: $140 million Close common stock price: $18.45 Preferred stock Nasdaq symbol: MNSBP /f/Nasdaq Price / Tangible Book Value: 78% Close preferred stock price: $23.49 Common shares out
Slide 43: 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 Trading on Depository 2018 $45M NASDAQ Share Offering ‘21 October Private Capital 2017
Slide 44: 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 3.7% 2 70% Subordinated debt $73 3.9% 3 23% Preferred Stock $27 7.5% 9% AOCI -$6 - -2% TOTAL $317 100% 1 Includes the Allowance for Credit Losses
Slide 45: Financial highlights
Financial highlights Year-End Financials Quarter-End Financials Q3’24 In $000 unless otherwise noted 2020 2021 2022 2023 LTM Q3’23 Q4’23 Q1’24 Q2’24 Q3’24 Interest Income 62,072 64,199 83,845 124,123 132,676 31,766 33,180 32,469 33,436 33,591 Interest Expense 16,095 10,663 13,836 48,176 68,832 12,99
Slide 46: Financial highlights - continued
Financial highlights - continued Year-End Financials Quarter-End Financials Q3’24 In $000 unless otherwise noted 2020 2021 2022 2023 LTM Q3’23 Q4’23 Q1’24 Q2’24 Q3’24 Performance Metrics (%) ROAA 1.05 1.32 1.53 1.38 0.55 1.30 1.02 0.65 0.50 0.05 ROAE 10.54 12.38 13.98 12.67 5.11 11.80 9.42 5.97 4.70
Slide 47: 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 LCR - L
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