MainStreet Bancshares, Inc. - FORM 8-K - EX-99.1

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8-K - 8-K - MainStreet Bancshares, Inc.	mnsb-8k_20201019.htm

Exhibit 99.1




PRESS RELEASE			Contact: Jeff W. Dick, Chairman & CEO
HOLD FOR RELEASE: October 20, 2020, 8:00 AM ET			(703) 481-4567

MainStreet Bancshares, Inc. Reports Record Third Quarter Earnings

Fairfax, Virginia – October 20, 2020 - MainStreet Bancshares, Inc. (Nasdaq: MNSB & MNSBP), the holding company for MainStreet Bank, reported record earnings of $5.2 million for the third quarter of 2020. The quarter was propelled by $2.9 million of non-interest income and a favorable funding trend that produced $11.9 million of net interest income for the quarter.

Year-to-date September 30, 2020 the Company reported net income of $8.0 million, which represents a 0.74% return on average assets and 7.46% return on average equity, or $0.97 per share of common stock (basic and diluted). Net interest income and noninterest income for the nine months ended September 30, 2020 increased to $32.9 million and $5.6 million, respectively. Net interest income and noninterest income for the nine months ended September 30, 2020 increased 12.6% and 50.9%, respectively, over the same period in 2019.

The Company collected $5.8 million from the Paycheck Protection Program (PPP), with $1.2 million realized during the nine months ended September 30, 2020.

Total assets were $1.6 billion and net loans were $1.3 billion as of September 30, 2020, which included $173.1 million in loans related to the PPP. Asset quality remains strong with non-performing assets representing only 0.17% of total assets as of September 30, 2020.

Non-interest-bearing deposits were $416.6 million, representing 29.4% of total deposits as of September 30, 2020. Total deposits as of September 30, 2020 were $1.4 billion, and core deposits represent 75% of total deposits.

Starting from a position of strong asset quality, the Company completed a “worst-case” assessment of the loan portfolio assuming unforeseen liquidity issues caused by the pandemic-induced recession. As a result of the assessment, the Company made a special $4.5 million provision to the Allowance for Loan and Lease Losses (ALLL) in addition to the normal $1.1 million provision as of June 30, 2020, which took earnings negative for the quarter. The September 30, 2020 ALLL also reflects a strengthened provision, currently at 1.27% of total loans (net of PPP loans). Capital levels remain strong.

Pandemic Recession

At the onset of the pandemic, the Company structured two payment deferral programs aimed at preserving borrower liquidity. The first program was offered to all commercial borrowers, no questions asked, on March 24^t^h - at a time where little was known about the state of the pandemic. The Bank assisted 195 borrowers by deferring two months of principal and interest payments. This represented 22.5% of the total loan portfolio dollars outstanding.

The second program started on May 4, 2020 as a negotiated solution and a maximum deferment of 12-months of principal and interest (consistent with the Federal Reserve Board's, Main Street Lending program). Borrowers agreed to enact restrictive covenants aimed to preserve liquidity in order to participate.

Of the 42 borrowers (7.4% of net loans) that participated in the second program, 16 remain in deferred status (3.3% of net loans) as of September 30, 2020.

The Bank’s hotel portfolio was initially a significant concern, as the hospitality industry was hit particularly hard by the recession. However, the portfolio is faring well, with average occupancy data for the hotels

approximating 50% during August, up significantly from March and April. Only 5 of the 14 operating hotels in the portfolio remain in payment deferral status. Refer to the chart entitled Outstanding Loan Deferments below for additional information.


Outstanding Loan Deferments
Loan Type	Number of Months Deferred				Total Deferred	Number of Borrowers
Loan Type	1	2	3	4	Total Deferred	Number of Borrowers
	(000’s)
Residential mortgages	$2,165				$2,165	1
Owner-occupied commercial real estate	$441	$1,747		$235	$2,423	3
Investor-owned commercial real estate	$4,518	$26,924	$7,040		$38,482	8
- Hotels		22,600	7,040		29,640	5
- Office	993	4,324			5,317	2
- Other	3,525				3,525	1
Commercial & industrial	$606		$3,000		$3,606	3
Consumer	$64				$64	1
Total	$7,794	$28,671	$10,040	$235	$46,740	16

“We’re doing everything we can to work with our customers during this pandemic-induced recession and it seems to be working so far,” said Jeff W. Dick, Chairman & CEO of MainStreet Bancshares, Inc and MainStreet Bank. “With the election just a fortnight away, we are optimistic that the post-election Congress and Administration will take swift action to provide meaningful additional stimulus to continue our path toward economic recovery.”

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 well over 1,000 businesses in the metropolitan area.

MainStreet Bank has a full complement of payment solutions for financial technology companies and has nationally known market leaders on-staff 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.

UNAUDITED CONSOLIDATED BALANCE SHEET INFORMATION

(In thousands, except share data)

	September 30, 2020		June 30, 2020		March 31, 2020		December 31, 2019		September 30, 2019
ASSETS
Cash and cash equivalents
Cash and due from banks	$	102,480	$	55,273	$	62,098	$	53,376	$	52,580
Federal funds sold		25,074		21,081		10,677		11,468		19,432
Total cash and cash equivalents		127,554		76,354		72,775		64,844		72,012
Investment securities available for sale, at fair value		118,844		91,823		102,191		92,791		88,198
Investment securities held to maturity, at carrying value		23,114		23,843		23,878		23,914		24,410
Restricted equity securities, at cost		4,616		5,041		5,041		6,157		4,882
Loans, net of allowance for loan losses of $14,346, $13,731, $9,898, $9,584, and $9,370, respectively		1,279,899		1,259,012		1,059,628		1,030,425		992,609
Premises and equipment, net		14,474		14,416		14,666		14,153		14,109
Other real estate owned, net		1,580		1,175		1,207		1,207		1,207
Accrued interest and other receivables		8,579		7,458		4,809		5,420		5,373
Bank owned life insurance		25,157		24,959		24,761		24,562		19,381
Other assets		26,371		24,786		20,786		13,885		11,414
Total Assets	$	1,630,188	$	1,528,867	$	1,329,742	$	1,277,358	$	1,233,595
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Non-interest bearing deposits	$	416,648	$	388,104	$	240,979	$	252,707	$	218,087
Interest bearing DDA deposits		72,807		18,266		16,846		53,707		54,438
Savings and NOW deposits		69,015		65,876		60,454		63,015		63,746
Money market deposits		348,146		332,246		265,443		141,337		125,716
Time deposits		510,429		537,840		559,489		560,857		601,896
Total deposits		1,417,045		1,342,332		1,143,211		1,071,623		1,063,883
Federal Home Loan Bank advances and other borrowings		—		10,000		10,000		40,000		10,000
Subordinated debt		14,827		14,819		14,812		14,805		14,798
Other liabilities		25,055		21,546		21,424		13,896		11,697
Total Liabilities		1,456,927		1,388,697		1,189,447		1,140,324		1,100,378
Stockholders’ Equity:
Preferred stock, $1 par value - 2,000,000 shares authorized
Non-cumulative perpetual, 28,750 shares issued and outstanding		27,527		—		—		—		—
Common stock, par value $4 per share, authorized 10,000,000 shares; issued and outstanding, 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, 8,260,259 shares at September 30, 2019 including 160,961 unvested shares.		32,460		32,433		32,418		32,397		32,397
Capital surplus		75,217		74,850		74,482		75,117		74,860
Retained earnings		37,105		31,933		32,567		29,097		25,535
Accumulated other comprehensive income		952		954		828		423		425
Total Stockholders’ Equity		173,261		140,170		140,295		137,034		133,217
Total Liabilities and Stockholders’ Equity	$	1,630,188	$	1,528,867	$	1,329,742	$	1,277,358	$	1,233,595

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME INFORMATION

(In thousands, except share and per share data)

	Year-to-Date				Three Months Ended
	September 30, 2020		September 30, 2019		September 30, 2020		June 30, 2020			March 31, 2020		December 31, 2019		September 30, 2019
INTEREST INCOME:
Interest and fees on loans	$	43,702	$	40,985	$	15,083	$	14,399		$	14,220	$	14,223	$	14,192
Interest on investment securities		1,488		1,668		491		496			501		534		497
Interest on federal funds sold		416		1,132		12		9			395		271		412
Total interest income		45,606		43,785		15,586		14,904			15,116		15,028		15,101
INTEREST EXPENSE:
Interest on interest bearing DDA deposits		209		803		56		36			117		195		275
Interest on savings and NOW deposits		169		218		55		50			64		71		71
Interest on money market deposits		1,742		1,889		490		474			778		489		539
Interest on time deposits		9,740		10,466		2,841		3,333			3,566		3,730		3,900
Interest on Federal Home Loan Bank advances and other borrowings		107		457		13		44			50		92		76
Interest on subordinated debt		727		723		245		241			241		244		244
Total interest expense		12,694		14,556		3,700		4,178			4,816		4,821		5,105
Net interest income		32,912		29,229		11,886		10,726			10,300		10,207		9,996
Provision for loan losses		6,560		1,260		635		5,575			350		358		185
Net interest income after provision for loan losses		26,352		27,969		11,251		5,151			9,950		9,849		9,811
NON-INTEREST INCOME:
Deposit account service charges		1,407		1,208		487		433			487		460		392
Bank owned life insurance income		596		317		199		198			199		181		106
Loan swap fee income		2,677		878		1,851		423			403		111		407
Net gain on available-for-sale securities		—		5		—		—			—		—		—
Net gains on sale of loans		33		566		33		—			—		—		303
Other fee income		877		730		288		264			325		407		228
Total other income		5,590		3,704		2,858		1,318			1,414		1,158		1,436
NON-INTEREST EXPENSES:
Salaries and employee benefits		13,191		11,597		4,495		4,263			4,433		4,179		3,890
Furniture and equipment expenses		1,528		1,271		574		500			454		457		451
Advertising and marketing		713		531		266		191			256		375		235
Occupancy expenses		910		644		332		311			267		221		214
Outside services		696		694		215		205			276		169		306
Administrative expenses		508		533		167		177			164		198		190
Other operating expenses		4,595		3,404		1,589		1,713			1,293		1,104		1,203
Total other expenses		22,141		18,674		7,638		7,360			7,143		6,703		6,489
Income before income tax (benefit)		9,801		12,999		6,471		(891	)		4,221		4,304		4,758
Income tax expense (benefit)		1,793		2,612		1,299		(257	)		751		742		1,049
Net income (loss) available to common shareholders	$	8,008	$	10,387	$	5,172	$	(634	)	$	3,470	$	3,562	$	3,709
Net income (loss) per common share, basic and diluted	$	0.97	$	1.26	$	0.63	$	(0.08	)	$	0.42	$	0.43	$	0.45
Weighted average number of common shares, basic and diluted		8,274,419		8,248,284		8,272,570		8,263,370			8,287,317		8,260,259		8,251,672

UNAUDITED LOAN, DEPOSIT AND BORROWING DETAIL

(In thousands)

	September 30, 2020						June 30, 2020						September 30, 2019						Percentage Change
	$ Amount			% of Total			$ Amount			% of Total			$ Amount			% of Total			Last 3 Mos			Last 12 Mos
LOANS:
Construction and land development loans	$	325,516			25.0	%	$	284,843			22.2	%	$	207,441			20.7	%		14.3	%		56.9	%
Residential real estate loans		157,518			12.1	%		169,924			13.3	%		162,801			16.2	%		-7.3	%		-3.2	%
Commercial real estate loans		505,201			38.8	%		497,279			38.8	%		434,735			43.3	%		1.6	%		16.2	%
Commercial industrial loans - Other		88,884			6.8	%		96,640			7.5	%		115,902			11.5	%		-8.0	%		-23.3	%
Commercial industrial loans - PPP Loans		173,075			13.3	%		171,650			13.5	%		—			0.0	%		0.8	%		100.0	%
Consumer loans		51,505			4.0	%		60,166			4.7	%		83,013			8.3	%		-14.4	%		-38.0	%
Total Gross Loans	$	1,301,699			100.0	%	$	1,280,502			100.0	%	$	1,003,892			100.0	%		1.7	%		29.7	%
Less: Allowance for loan losses		(14,346	)					(13,731	)					(9,370	)
Net deferred loan fees		(7,454	)					(7,759	)					(1,913	)
Net Loans	$	1,279,899					$	1,259,012					$	992,609
DEPOSITS:
Non-interest bearing demand deposits	$	416,648			29.4	%	$	388,104			28.9	%	$	218,087			20.5	%		7.4	%		91.0	%
Interest-bearing demand deposits:
Demand deposits		72,807			5.1	%		18,266			1.4	%		54,438			5.1	%		298.6	%		33.7	%
Savings and NOW deposits		69,015			4.9	%		65,876			4.9	%		63,746			6.0	%		4.8	%		8.3	%
Money market accounts		348,146			24.6	%		332,246			24.8	%		125,716			11.8	%		4.8	%		176.9	%
Certificates of deposit $250,000 or more		211,800			14.9	%		213,051			15.9	%		239,719			22.4	%		-0.6	%		-11.6	%
Certificates of deposit less than $250,000		298,629			24.1	%		324,789			24.1	%		362,177			34.2	%		-8.1	%		-17.5	%
Total Deposits	$	1,417,045			100.0	%	$	1,342,332			100.0	%	$	1,063,883			100.0	%		5.6	%		33.2	%
BORROWINGS:
Federal Home Loan Bank advances		—			0.0	%		10,000			40.3	%		10,000			40.3	%		-100.0	%		-100.0	%
Subordinated debt		14,827			100.0	%		14,819			59.7	%		14,798			59.7	%		0.1	%		0.2	%
Total Borrowings	$	14,827			100.0	%	$	24,819			100.0	%	$	24,798			100.0	%		-40.3	%		-40.2	%
Total Deposits and Borrowings	$	1,431,872					$	1,367,151					$	1,088,681						4.7	%		31.5	%

Core customer funding sources ⁽¹⁾	$	1,066,236			74.5	%	$	939,474			68.7	%	$	655,631			60.2	%		13.5	%		62.6	%
Brokered and listing service sources ⁽²⁾		350,809			24.5	%		402,858			29.5	%		408,252			37.5	%		-12.9	%		-14.1	%
Federal Home Loan Bank advances		—			0.0	%		10,000			0.7	%		10,000			0.9	%		-100.0	%		-100.0	%
Subordinated debt ⁽³⁾		14,827			1.0	%		14,819			1.1	%		14,798			1.4	%		0.1	%		0.2	%
Total Funding Sources	$	1,431,872			100.0	%	$	1,367,151			100.0	%	$	1,088,681			100.0	%		4.7	%		31.5	%

(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 September 30, 2020							For the three months ended September 30, 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)	$	1,292,566	$	15,083		4.67	%	$	996,777	$	14,192		5.70	%
Investment securities		73,486		491		2.67	%		71,182		497		2.79	%
Federal funds and interest-bearing deposits		108,666		12		0.04	%		82,056		412		2.01	%
Total interest earning assets	$	1,474,718	$	15,586		4.23	%	$	1,150,015	$	15,101		5.25	%
Other assets		65,665							43,524
Total assets	$	1,540,383						$	1,193,539
Liabilities and Stockholders’ Equity:
Interest-bearing liabilities:
Interest-bearing demand deposits	$	26,469	$	56		0.85	%	$	58,510	$	275		1.88	%
Money market deposit accounts		332,750		490		0.59	%		117,717		539		1.83	%
Savings and NOW deposits		62,066		55		0.35	%		62,975		71		0.45	%
Time deposits		522,995		2,841		2.17	%		587,537		3,900		2.66	%
Total interest-bearing deposits	$	944,280	$	3,442		1.46	%	$	826,739	$	4,785		2.32	%
Federal funds and repos purchased		—		—		—			—		—		—
Subordinated debt		14,823		245		6.61	%		14,795		244		6.60	%
FHLB borrowings		4,511		13		1.15	%		11,522		76		2.64	%
Total interest-bearing liabilities	$	963,614	$	3,700		1.54	%	$	853,056	$	5,105		2.39	%
Demand deposits and other liabilities		428,726							209,125
Total liabilities	$	1,392,340						$	1,062,181
Stockholders’ Equity		148,043							131,358
Total Liabilities and Stockholders’ Equity	$	1,540,383						$	1,193,539
Interest Rate Spread						2.69	%						2.86	%
Net Interest Income			$	11,886						$	9,996
Net Interest Margin						3.22	%						3.48	%
Net Interest Margin, excluding PPP loans⁽⁴⁾						3.32	%						3.48	%

(1)	Includes loans classified as non-accrual

(2)	Includes average PPP balances of $172.7 million and related interest income of approximately $432,000 for the three months ended September 30, 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 nine months ended September 30, 2020							For the nine months ended September 30, 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)	$	1,188,565	$	43,702		4.90	%	$	970,708	$	40,985		5.63	%
Investment securities		73,504		1,488		2.70	%		71,069		1,668		3.13	%
Federal funds and interest-bearing deposits		123,217		416		0.45	%		72,011		1,132		2.10	%
Total interest earning assets	$	1,385,286	$	45,606		4.39	%	$	1,113,788	$	43,785		5.24	%
Other assets		65,368							41,883
Total assets	$	1,450,654						$	1,155,671
Liabilities and Stockholders’ Equity:
Interest-bearing liabilities:
Interest-bearing demand deposits	$	25,847	$	209		1.08	%	$	57,517	$	803		1.86	%
Money market deposit accounts		288,836		1,742		0.80	%		128,122		1,889		1.97	%
Savings and NOW deposits		64,513		169		0.35	%		61,418		218		0.47	%
Time deposits		543,531		9,740		2.39	%		535,083		10,466		2.61	%
Total interest-bearing deposits	$	922,727	$	11,860		1.71	%	$	782,140	$	13,376		2.28	%
Federal funds and repos purchased		—		—		0.00	%		46		—		0.00	%
Subordinated debt		14,816		727		6.54	%		14,788		723		6.52	%
FHLB borrowings		8,266		107		1.73	%		23,114		457		2.64	%
Total interest-bearing liabilities	$	945,809	$	12,694		1.79	%	$	820,088	$	14,556		2.37	%
Demand deposits and other liabilities		361,771							208,328
Total liabilities	$	1,307,580						$	1,028,416
Stockholders’ Equity		143,074							127,255
Total Liabilities and Stockholders’ Equity	$	1,450,654						$	1,155,671
Interest Rate Spread						2.60	%						2.87	%
Net Interest Income			$	32,912						$	29,229
Net Interest Margin						3.17	%						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 $102.9 million and related interest income of approximately $772,000 for the three months ended September 30, 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 Nine Months Ended
	September 30,						September 30,
	2020			2019			2020			2019
Per share Data and Shares Outstanding
Earnings (losses) per common share (basic and diluted)	$	0.63		$	0.45		$	0.97		$	1.26
Book value per common share	$	17.63		$	16.13		$	17.63		$	16.13
Weighted average common shares (basic and diluted)		8,272,570			8,251,672			8,274,419			8,248,284
Common shares outstanding at end of period		8,277,837			8,260,259			8,277,837			8,260,259
Performance Ratios
Return on average assets (annualized)		1.34	%		1.24	%		0.74	%		1.20	%
Return on average assets, excluding impact of PPP loans (annualized)⁽²⁾		1.20	%		1.24	%		0.59	%		1.20	%
Return on average equity (annualized)		13.97	%		11.29	%		7.46	%		10.88	%
Yield on earning assets (annualized)		4.23	%		5.25	%		4.39	%		5.24	%
Cost of interest bearing liabilities (annualized)		1.54	%		2.39	%		1.79	%		2.37	%
Net interest spread		2.69	%		2.86	%		2.60	%		2.87	%
Net interest margin (annualized)		3.22	%		3.48	%		3.17	%		3.50	%
Net interest margin, excluding PPP loans (annualized)⁽²⁾		3.32	%		3.48	%		3.21	%		3.50	%
Noninterest income as a percentage of average assets (annualized)		0.74	%		0.48	%		0.51	%		0.43	%
Noninterest expense to average assets (annualized)		1.98	%		2.17	%		2.03	%		2.15	%
Efficiency ratio⁽³⁾		51.80	%		56.76	%		57.50	%		56.70	%
Asset Quality
Loans 30-89 days past due to total gross loans		0.08	%		0.01	%		0.08	%		0.01	%
Loans 90 days past due to total gross loans		0.08	%		0.00	%		0.08	%		0.00	%
Non-accrual loans to total gross loans		0.10	%		0.00	%		0.10	%		0.00	%
Other real estate owned	$	1,580		$	1,207		$	1,580		$	1,207
Non-performing assets	$	2,822		$	1,220		$	2,822		$	1,220
Non-performing assets to total assets		0.17	%		0.10	%		0.17	%		0.10	%
Non-performing assets to total assets, excluding PPP loans⁽²⁾		0.19	%		0.10	%		0.19	%		0.10	%
Allowance for loan losses to total gross loans		1.10	%		0.94	%		1.10	%		0.94	%
Allowance for loan losses to total loans, excluding PPP loans⁽²⁾		1.27	%		0.94	%		1.27	%		0.94	%
Allowance for loan losses to non-performing assets		5.08			7.68			5.08			7.68
Net loan charge-offs (recoveries)	$	20		$	—		$	1,798		$	721
Net charge-offs to average gross loans (annualized)		0.01	%		0.00	%		0.20	%		0.10	%
Net charge-offs to average gross loans, excluding PPP loans (annualized)⁽²⁾		0.01	%		0.00	%		0.22	%		0.10	%
Troubled debt restructurings (total)
Performing in accordance with modified terms	$	—		$	1,488		$	—		$	1,488
Not performing in accordance with modified terms	$	—		$	—		$	—		$	—
Regulatory Capital Ratios (Bank only)⁽¹⁾
Total risk-based capital ratio		13.39	%		13.60	%		13.39	%		13.60	%
Tier 1 risk-based capital ratio		12.27	%		12.77	%		12.27	%		12.77	%
Leverage ratio		10.19	%		12.52	%		10.19	%		12.52	%
Common equity tier 1 ratio		12.27	%		12.77	%		12.27	%		12.77	%
Other information
Closing stock price	$	12.24		$	21.05		$	12.24		$	21.05
Equity / assets		10.63	%		10.79	%		10.63	%		10.79	%
Equity / assets, excluding PPP loans⁽²⁾		11.89	%		10.79	%		11.89	%		10.79	%
Average equity / average assets		9.61	%		11.01	%		9.86	%		11.01	%
Average equity / average assets, less average PPP loans⁽²⁾		10.82	%		11.01	%		10.62	%		11.01	%
Number of full time equivalent employees		123			118			123			118
# Full service branch offices		7			6			7			6

(1)	Regulatory capital ratios as of September 30, 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 September 30,				For the nine months ended September 30,
		2020		2019		2020		2019
Pre-tax pre-provision earnings
Net income (GAAP)	$	5,172	$	3,709	$	8,008	$	10,387
Tax expense (benefit)		1,299		1,049		1,793		2,612
Provision for loan losses		635		185		6,560		1,260
Pre-tax pre-provision earnings (non-GAAP)	$	7,106	$	4,943	$	16,361	$	14,259

	For the three months ended September 30,				For the nine months ended September 30,
		2020		2019		2020		2019
Paycheck Protection Program adjustment impact
Loans held for investment (GAAP)	$	1,301,699	$	1,001,979	$	1,301,699	$	1,001,979
Less: PPP loans		173,075		—		173,075		—
Loans held for investment, excluding PPP (non-GAAP)	$	1,128,624	$	1,001,979	$	1,128,624	$	1,001,979

Average loans held for investment (GAAP)	$	1,292,566	$	996,777	$	1,188,565	$	970,708
Less: Average PPP loans		172,659		—		102,891		—
Average loans held for investment, excluding PPP (non-GAAP)	$	1,119,907	$	996,777	$	1,085,674		970,708

	For the three months ended September 30,						For the nine months ended September 30,
		2020			2019			2020			2019
Net interest margin adjustment
Net interest income (GAAP)	$	11,886		$	9,996		$	32,912		$	29,229
Less: PPP fees recognized		644			—			1,235			—
Less: PPP interest income earned		432			—			772			—
Net interest income, excluding PPP income (non-GAAP)		10,810			9,996			30,905			29,229

Average interest earning assets (GAAP)		1,474,718			1,150,015			1,385,286			1,113,788
Less: average PPP loans		172,659			—			102,891			—
Average interest earning assets, excluding PPP (non-GAAP)		1,302,059			1,150,015			1,282,395			1,113,788
Net interest margin, excluding PPP (non-GAAP)		3.32	%		3.48	%		3.21	%		3.50	%

	For the three months ended September 30,						For the nine months ended September 30,
		2020			2019			2020			2019
Total asset adjustment
Total assets (GAAP)	$	1,630,188		$	1,233,595		$	1,630,188		$	1,233,595
Less: PPP loans		173,075			—			173,075			—
Total assets, excluding PPP loans (non-GAAP)		1,457,113			1,233,595			1,457,113			1,233,595
Total equity (GAAP)		173,261			133,217			173,261			133,217
Equity / assets, excluding PPP loans (non-GAAP)		11.89	%		10.80	%		11.89	%		10.80	%

Average asset adjustment
Average assets (GAAP)		1,540,383			1,193,539			1,450,654			1,155,671
Less: average PPP loans		172,659			—			102,891			—
Total average assets, excluding average PPP loans		1,367,724			1,193,539			1,347,763			1,155,671
Total average equity (GAAP)		148,043			131,358			143,074			127,240
Average equity / average assets, excluding average PPP loans (non-GAAP)		10.82	%		11.01	%		10.62	%		11.01	%

	For the three months ended September 30,						For the nine months ended September 30,
		2020			2019			2020			2019
Return on Average Assets, adjusted
Net income (GAAP)	$	5,172		$	3,709		$	8,008		$	10,387
Less: PPP fees recognized		644			—			1,235			—
Less: PPP interest income		432			—			772			—
Net income, excluding PPP income (non-GAAP)		4,096			3,709			6,001			10,387
Average total assets		1,540,383			1,193,539			1,450,654			1,155,671
Less: average PPP loans		172,659			—			102,891			—
Average total assets, excluding PPP (non-GAAP)		1,367,724			1,193,539			1,347,763			1,155,671
Return on average assets, excluding PPP (non-GAAP)		1.20	%		1.24	%		0.59	%		1.20	%

	For the three months ended September 30,						For the nine months ended September 30,
		2020			2019			2020			2019
Nonperforming Assets to total assets, adjusted
Total nonperforming assets (GAAP)	$	2,822		$	1,207		$	2,822		$	1,207
Total assets (GAAP)		1,630,675			1,234,276			1,630,675			1,234,276
Less: PPP loans		173,075			—			173,075			—
Total assets, excluding PPP loans (non-GAAP)		1,457,600			1,234,276			1,457,600			1,234,276
Nonperforming assets to total assets, excluding PPP loans (non-GAAP)		0.19	%		0.10	%		0.19	%		0.10	%

	For the three months ended September 30,						For the nine months ended September 30,
		2020			2019			2020			2019
Allowance for loan losses, adjusted
Allowance for loan losses (GAAP)	$	14,346		$	9,370		$	14,346		$	9,370
Total gross loans (GAAP)		1,301,699			1,001,979			1,301,699			1,001,979
Less: PPP loans		173,075			—			173,075			—
Total gross loans, excluding PPP loans (non-GAAP)		1,128,624			1,001,979			1,128,624			1,001,979
Allowance for loan losses to total loans, excluding PPP (non-GAAP)		1.27	%		0.94	%		1.27	%		0.94	%

	For the three months ended September 30,					For the nine months ended September 30,
		2020			2019		2020			2019
Net charge-offs to average loans, adjusted
Total net charge-offs (GAAP)	$	20			—	$	1,798		$	721
Total average gross loans (GAAP)		1,284,024			995,972		1,186,289			970,913
Less: average PPP loans		172,659			—		102,891			—
Total average gross loans, excluding PPP loans (non-GAAP)		1,111,365			995,972		1,083,398			970,913
Net charge-offs to average gross loans, excluding PPP (annualized) (non-GAAP)		0.01	%	N/A			0.22	%		0.10	%

MainStreet Bancshares, Inc. - FORM 8-K - EX-99.1 - October 20, 2020

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MainStreet Bancshares, Inc. Reports