MainStreet Bancshares, Inc. Reports Another Record Year

Bank Nets $22.2 Million and Improves Net Interest Margin

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Jan 20, 2022, 18:49 ET

FAIRFAX, Va., Jan. 20, 2022 /PRNewswire/ -- MainStreet Bancshares, Inc. (Nasdaq: MNSB & MNSBP), the holding company for MainStreet Bank, reported record net income of $22.2 million for 2021. Year-end results represent:

12.38% return on average equity
1.32% return on average assets
$2.65 per share of common stock (basic and diluted)
$20.94 per common share tangible book value

Net interest income of $53.5 million is up over 16% from last year. Steady loan rates and reduced funding costs propelled the net interest margin higher by 12 basis points to 3.33% in December 2021, versus 3.21% a year earlier. The Company's efficiency ratio remains solid at 55%.

"Going forward, the Company's balance sheet is positioned to respond well in a rising interest rate environment," said Tom Chmelik, CFO and Senior Executive VP of MainStreet Bancshares, Inc. and MainStreet Bank. "When the Federal Reserve initiates a rate increase, it should have a positive impact on the Company's earnings."

The portfolio of hotel loans continues to perform well, and asset quality remains pristine – as nonperforming assets represent a mere 0.05% of total assets.

The loan portfolio grew 4.1% in 2021. Excluding Paycheck Protection Program (PPP) loans, originations of $526 million were offset by paydowns and sales of $364 million. Paydowns in 2021 were significantly higher than normal, which was anticipated after the much lower than normal paydowns experienced in 2020. The balance of PPP loans at year-end was $58 million.

Non-interest-bearing deposits represent 38% of the $1.4 billion in total deposits, and 77% of total deposits are core deposits.

"The team committed significant time and energy to helping our customers navigate the PPP debt forgiveness process," said Abdul Hersiburane, President of MainStreet Bank. "While this is core to relationship banking, it was counter-productive to balance sheet growth in the short-run. We are very pleased to see the return of robust demand for traditional loans as businesses regain their footing and turn to us to support their growth."

The Company is also mapping out strategic initiatives in other areas. On October 25, 2021, the Company unveiled Avenu^™ - its Banking as a Service (BaaS) platform for fintechs. Avenu^™is a proprietary solution purpose built for its fintech partners. With Avenu^™, fintech's can be up-and-running as quickly as 60 days. The Company is planning to go live with Avenu^™ in the third quarter of 2022. If you are a fintech looking to add payments and deposits to your solution, go to Avenu.bank and join the queue today.

"The solution that the Avenu^™ team is developing will be transformational for the Company and the fintech community," said Jeff W. Dick, Chairman & CEO of MainStreet Bancshares, Inc. and MainStreet Bank. "We're demystifying the banking process by offering fintechs modern API connectivity to our robust fintech core. We're also providing a purpose-built training program on banking and compliance that will bring the fintech's team up-to-speed on all they need to know to operate in this space. The net result for the Company should be a significant increase in low-cost deposits and a new source for fee income."

ABOUT MAINSTREET BANK: MainStreet operates six branches in Herndon, Fairfax, 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 thousands of businesses in the metropolitan area.

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.

Contact: Jeff W. Dick, Chairman & CEO
(703) 481-4567

UNAUDITED CONSOLIDATED BALANCE SHEET INFORMATION
(In thousands, except share data)

	December 31, 2021		September 30, 2021		June 30, 2021		March 31, 2021		December 31, 2020
ASSETS
Cash and cash equivalents
Cash and due from banks	$	61,827	$	67,992	$	120,121	$	118,399	$	75,935
Federal funds sold		31,372		65,725		56,164		51,598		31,593
Total cash and cash equivalents		93,199		133,717		176,285		169,997		107,528
Investment securities available for sale, at fair value		99,913		171,603		165,791		180,028		147,414
Investment securities held to maturity, at carrying value		20,349		21,148		21,181		21,449		22,520
Restricted equity securities, at cost		15,609		9,972		9,994		9,642		4,616
Loans held for sale		—		—		—		—		57,006
Loans, net of allowance for loan losses of $11,697, $11,428, $11,133, $13,215, and $12,877, respectively		1,341,760		1,246,331		1,256,436		1,299,169		1,230,379
Premises and equipment, net		14,863		14,795		13,929		13,975		14,289
Other real estate owned, net		775		1,158		1,158		1,180		1,180
Accrued interest and other receivables		7,701		4,718		8,752		9,349		9,604
Computer software, net of amortization		2,493		1,165		—		—		—
Bank owned life insurance		36,241		35,987		35,736		25,518		25,341
Other assets		14,499		16,605		18,433		12,722		23,288
Total Assets	$	1,647,402	$	1,657,199	$	1,707,695	$	1,743,029	$	1,643,165
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Non-interest bearing deposits	$	530,678	$	475,157	$	486,001	$	492,463	$	370,497
Interest bearing DDA deposits		69,232		63,622		68,028		69,180		70,307
Savings and NOW deposits		85,175		79,556		72,353		72,259		74,099
Money market deposits		267,730		310,776		310,303		342,468		426,600
Time deposits		459,148		485,255		528,247		561,772		496,743
Total deposits		1,411,963		1,414,366		1,464,932		1,538,142		1,438,246
Subordinated debt		29,294		40,635		40,576		14,841		14,834
Other liabilities		17,357		18,169		22,559		17,868		22,420
Total Liabilities		1,458,614		1,473,170		1,528,067		1,570,851		1,475,500
Stockholders' Equity:
Preferred stock		27,263		27,263		27,263		27,263		27,263
Common stock		29,466		29,462		29,446		29,437		29,130
Capital surplus		67,668		67,152		66,667		66,233		66,116
Retained earnings		64,194		59,920		55,676		49,090		44,179
Accumulated other comprehensive income		197		232		576		155		977
Total Stockholders' Equity		188,788		184,029		179,628		172,178		167,665
Total Liabilities and Stockholders' Equity	$	1,647,402	$	1,657,199	$	1,707,695	$	1,743,029	$	1,643,165

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME INFORMATION
(In thousands, except share and per share data)

	Year-to-Date				Three Months Ended
	December 31, 2021		December 31, 2020		December 31, 2021		September 30, 2021		June 30, 2021		March 31, 2021		December 31, 2020
INTEREST INCOME:
Interest and fees on loans	$	61,743	$	59,634	$	15,532	$	15,162	$	15,257	$	15,792	$	15,933
Interest on investment securities		2,322		2,007		610		585		597		530		519
Interest on federal funds sold		134		431		61		38		20		15		15
Total interest income		64,199		62,072		16,203		15,785		15,874		16,337		16,467
INTEREST EXPENSE:
Interest on interest bearing DDA deposits		229		317		59		60		55		55		108
Interest on savings and NOW deposits		165		221		38		38		47		42		52
Interest on money market deposits		772		2,162		127		148		220		277		418
Interest on time deposits		7,613		12,322		1,574		1,795		1,994		2,250		2,583
Interest on Federal Home Loan Bank advances and other borrowings		—		107		—		—		—		—		—
Interest on subordinated debt		1,884		966		539		541		567		238		240
Total interest expense		10,663		16,095		2,337		2,582		2,883		2,862		3,401
Net interest income		53,536		45,977		13,866		13,203		12,991		13,475		13,066
Provision for (recovery of) loan losses		(1,175)		3,610		295		290		(2,080)		320		(2,950)
Net interest income after provision for (recovery of) loan losses		54,711		42,367		13,571		12,913		15,071		13,155		16,016
NON-INTEREST INCOME:
Deposit account service charges		2,426		1,916		624		642		621		539		509
Bank owned life insurance income		900		779		253		252		218		177		183
Loan swap fee income		83		3,510		83		—		—		—		833
Net gain on held-to-maturity securities		6		—		3		—		—		3		—
Net gain (loss) on sale of loans		847		33		413		(40)		130		344		—
Other fee income		1,848		1,213		247		632		586		383		378
Total other income		6,110		7,451		1,623		1,486		1,555		1,446		1,903
NON-INTEREST EXPENSES:
Salaries and employee benefits		19,305		17,937		5,029		4,847		4,663		4,767		4,746
Furniture and equipment expenses		2,468		2,128		726		716		500		526		601
Advertising and marketing		1,565		1,003		450		438		402		275		290
Occupancy expenses		1,541		1,270		449		399		387		306		360
Outside services		1,394		959		485		292		280		336		263
Administrative expenses		685		674		192		202		141		150		166
Other operating expenses		5,907		6,287		1,389		1,567		1,500		1,449		1,732
Total other expenses		32,865		30,258		8,720		8,461		7,873		7,809		8,158
Income before income tax expense		27,956		19,560		6,474		5,938		8,753		6,792		9,761
Income tax expense		5,785		3,843		1,660		1,155		1,627		1,342		2,051
Net Income		22,171		15,717		4,814		4,783		7,126		5,450		7,710
Preferred stock dividends		2,156		635		539		539		539		539		635
Net income available to common shareholders	$	20,015	$	15,082	$	4,275	$	4,244	$	6,587	$	4,911	$	7,075
Net income per common share, basic and diluted	$	2.65	$	1.85	$	0.56	$	0.56	$	0.87	$	0.65	$	0.92
Weighted average number of common shares, basic and diluted		7,559,310		8,131,334		7,595,062		7,571,214		7,546,452		7,523,547		7,700,470

UNAUDITED LOAN, DEPOSIT AND BORROWING DETAIL
*(In thousands)*

	December 31, 2021					September 30, 2021					December 31, 2020					Percentage Change
	$ Amount		% of Total			$ Amount		% of Total			$ Amount		% of Total			Last 3 Mos			Last 12 Mos
LOANS:
Construction and land development loans	$	337,173		24.8	%	$	327,004		25.9	%	$	324,906		26.0	%		3.1	%		3.8	%
Residential real estate loans		300,389		22.1	%		223,029		17.6	%		183,531		14.7	%		34.7	%		63.7	%
Commercial real estate loans		534,188		39.3	%		494,766		39.1	%		466,898		37.4	%		8.0	%		14.4	%
Commercial industrial loans - Other		105,675		7.8	%		102,747		8.1	%		94,847		7.6	%		2.8	%		11.4	%
Commercial industrial loans - PPP Loans		58,339		4.3	%		88,534		7.0	%		135,180		10.8	%		-34.1	%		-56.8	%
Consumer loans		23,171		1.7	%		27,740		2.3	%		44,073		3.5	%		-16.5	%		-47.4	%
Total Gross Loans	$	1,358,935		100.0	%	$	1,263,820		100.0	%	$	1,249,435		100.0	%		7.5	%		8.8	%
Less: Allowance for loan losses		(11,697)					(11,428)					(12,877)
Net deferred loan fees		(5,478)					(6,061)					(6,179)
Net Loans	$	1,341,760				$	1,246,331				$	1,230,379
DEPOSITS:
Non-interest bearing demand deposits	$	530,678		37.6	%	$	475,157		33.6	%	$	370,497		25.8	%		11.7	%		43.2	%
Interest-bearing demand deposits:
Demand deposits		69,232		4.9	%		63,622		4.5	%		70,307		4.9	%		8.8	%		-1.5	%
Savings and NOW deposits		85,175		6.0	%		79,556		5.6	%		74,099		5.2	%		7.1	%		14.9	%
Money market accounts		270,045		19.1	%		310,776		22.0	%		426,600		29.7	%		-13.1	%		-36.7	%
Certificates of deposit $250,000 or more		285,395		20.2	%		295,454		20.9	%		213,077		14.8	%		-3.4	%		33.9	%
Certificates of deposit less than $250,000		171,438		12.2	%		189,801		15.4	%		283,666		19.6	%		-9.7	%		-39.6	%
Total Deposits	$	1,411,963		100.0	%	$	1,414,366		100.0	%	$	1,438,246		100.0	%		-0.2	%		-1.8	%
BORROWINGS:
Subordinated debt		29,294		100.0	%		40,635		100.0	%		14,834		100.0	%		-27.9	%		97.5	%
Total Borrowings	$	29,294		100.0	%	$	40,635		100.0	%	$	14,834		100.0	%		-27.9	%		97.5	%
Total Deposits and Borrowings	$	1,441,257				$	1,455,001				$	1,453,080					-0.9	%		-0.8	%

Core customer funding sources ⁽¹⁾	$	1,108,177		76.9	%	$	1,097,948		75.5	%	$	1,046,087		72.0	%		0.9	%		5.9	%
Brokered and listing service sources ⁽²⁾		303,786		21.1	%		316,418		21.7	%		392,159		27.0	%		-4.0	%		-22.5	%
Subordinated debt ⁽³⁾		29,294		2.0	%		40,635		2.8	%		14,834		1.0	%		-27.9	%		97.5	%
Total Funding Sources	$	1,441,257		100.0	%	$	1,455,001		100.0	%	$	1,453,080		100.0	%		-0.9	%		-0.8	%


(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 December 31, 2021							For the three months ended December 31, 2020
	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)	$	1,277,828	$	15,532		4.82	%	$	1,311,726	$	15,933		4.83	%
Investment securities		115,712		610		2.09	%		85,084		519		2.43	%
Federal funds and interest-bearing deposits		192,442		61		0.13	%		171,933		15		0.03	%
Total interest earning assets	$	1,585,982	$	16,203		4.05	%	$	1,568,743	$	16,467		4.18	%
Other assets		87,072							71,013
Total assets	$	1,673,054						$	1,639,756
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Interest-bearing demand deposits	$	69,532	$	59		0.34	%	$	71,906	$	108		0.60	%
Savings and NOW deposits		82,048		38		0.18	%		70,542		52		0.29	%
Money market deposit accounts		296,063		127		0.17	%		390,645		418		0.43	%
Time deposits		466,190		1,574		1.34	%		509,963		2,583		2.02	%
Total interest-bearing deposits	$	913,833	$	1,798		0.78	%	$	1,043,056	$	3,161		1.21	%
Subordinated debt		40,297		539		5.31	%		14,823		240		6.44	%
FHLB borrowings		1		—		—			4,511		—		—
Total interest-bearing liabilities	$	954,131	$	2,337		0.97	%	$	1,062,390	$	3,401		1.27	%
Demand deposits and other liabilities		532,216							428,726
Total liabilities	$	1,486,347						$	1,491,116
Stockholders' Equity		186,707							148,043
Total Liabilities and Stockholders' Equity	$	1,673,054						$	1,639,159
Interest Rate Spread						3.08	%						2.91	%
Net Interest Income			$	13,866						$	13,066
Net Interest Margin						3.47	%						3.31	%
Net Interest Margin, excluding PPP loans⁽⁴⁾						3.32	%						3.19	%


(1)	Includes loans classified as non-accrual
(2)	Includes average PPP balances of $74.1 million, related interest income of approximately $185,000, and $1.0 million in PPP fees recognized for the three months ended December 31, 2021
(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 year ended December 31, 2021							For the year ended December 31, 2020
	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)	$	1,289,445	$	61,743		4.79	%	$	1,219,525	$	59,634		4.89	%
Investment securities		99,902		2,322		2.32	%		76,414		2,007		2.63	%
Federal funds and interest-bearing deposits		216,436		134		0.06	%		135,688		431		0.32	%
Total interest earning assets	$	1,605,783	$	64,199		4.00	%	$	1,431,627	$	62,072		4.34	%
Other assets		79,357							66,561
Total assets	$	1,685,140						$	1,498,188
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Interest-bearing demand deposits	$	67,897	$	229		0.34	%	$	37,431	$	317		0.85	%
Savings and NOW deposits		74,975		165		0.22	%		66,028		221		0.33	%
Money market deposit accounts		333,160		772		0.23	%		314,398		2,162		0.69	%
Time deposits		498,001		7,613		1.53	%		535,116		12,322		2.30	%
Total interest-bearing deposits	$	974,033	$	8,779		0.90	%	$	952,973	$	15,022		1.58	%
Subordinated debt		33,953		1,884		5.55	%		14,820		966		6.52	%
FHLB borrowings		—		—		—			6,189		107		1.73	%
Total interest-bearing liabilities	$	1,007,986	$	10,663		1.06	%	$	973,982	$	16,095		1.65	%
Demand deposits and other liabilities		498,031							375,046
Total liabilities	$	1,506,017						$	1,349,028
Stockholders' Equity		179,123							149,160
Total Liabilities and Stockholders' Equity	$	1,685,140						$	1,498,188
Interest Rate Spread						2.94	%						2.69	%
Net Interest Income			$	53,536						$	45,977
Net Interest Margin						3.33	%						3.21	%
Net Interest Margin, excluding PPP loans⁽⁴⁾						3.19	%						3.21	%


(1)	Includes loans classified as non-accrual and loans held for sale
(2)	Includes average PPP balances of $123.5 million, related interest income of approximately $1.2 million, and $5.0 million in PPP fees recognized for the year ended December 31, 2021
(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 Year Ended
	December 31,						December 31,
	2021			2020			2021			2020
*Per share Data and Shares Outstanding*
Earnings per common share (basic and diluted)	$	0.56		$	0.92		$	2.65		$	1.85
Book value per common share	$	21.27		$	18.86		$	21.27		$	18.86
Tangible book value per common share⁽²⁾	$	20.94		$	18.86		$	20.94		$	18.86
Weighted average common shares (basic and diluted)		7,595,062			7,700,470			7,559,310			8,131,334
Common shares outstanding at end of period		7,595,781			7,443,842			7,595,781			7,443,842
*Performance Ratios*
Return on average assets (annualized)		1.14	%		1.88	%		1.32	%		1.05	%
Return on average assets, excluding impact of PPP loans (annualized)⁽²⁾		0.90	%		1.61	%		1.02	%		0.87	%
Return on average equity (annualized)		10.23	%		18.44	%		12.38	%		10.54	%
Return on average common equity (annualized)		10.63	%		20.05	%		13.18	%		10.68	%
Yield on earning assets (annualized)		4.05	%		4.18	%		4.00	%		4.34	%
Cost of interest bearing liabilities (annualized)		0.97	%		1.27	%		1.06	%		1.65	%
Net interest spread		3.08	%		2.91	%		2.94	%		2.69	%
Net interest margin (annualized)		3.47	%		3.31	%		3.33	%		3.21	%
Net interest margin, excluding PPP loans (annualized)⁽²⁾		3.32	%		3.19	%		3.19	%		3.21	%
Noninterest income as a percentage of average assets (annualized)		0.38	%		0.46	%		0.36	%		0.50	%
Noninterest expense to average assets (annualized)		2.07	%		1.99	%		1.95	%		2.02	%
Efficiency ratio⁽³⁾		56.31	%		54.50	%		55.10	%		56.67	%
*Asset Quality*
Commercial real estate loans to total capital ⁽⁴⁾		367.88	%		365.80	%		367.88	%		365.80	%
Construction loans to total capital ⁽⁵⁾		148.30	%		171.42	%		148.30	%		171.42	%
Loans 30-89 days past due to total gross loans		0.01	%		0.01	%		0.01	%		0.01	%
Loans 90 days past due to total gross loans		0.00	%		0.00	%		0.00	%		0.00	%
Non-accrual loans to total gross loans		0.00	%		0.01	%		0.00	%		0.01	%
Other real estate owned	$	775		$	1,180		$	775		$	1,180
Non-performing assets	$	775		$	1,330		$	775		$	1,330
Non-performing assets to total assets		0.05	%		0.08	%		0.05	%		0.08	%
Non-performing assets to total assets, excluding PPP loans⁽²⁾		0.05	%		0.09	%		0.05	%		0.09	%
Allowance for loan losses to total gross loans		0.86	%		1.03	%		0.86	%		1.03	%
Allowance for loan losses to total loans, excluding PPP loans⁽²⁾		0.90	%		1.16	%		0.90	%		1.16	%
Allowance for loan losses to non-performing assets		15.09			9.68			15.09			9.68
Net loan charge-offs (recoveries)	$	26		$	(1,480)		$	5		$	317
Net charge-offs (recoveries) to average gross loans (annualized)		0.01	%		(0.45)	%		0.00	%		0.03	%
Net charge-offs (recoveries) to average gross loans, excluding PPP loans (annualized)⁽²⁾		0.01	%		(0.51)	%		0.00	%		0.03	%
*Regulatory Capital Ratios (Bank only)⁽¹⁾*
Total risk-based capital ratio		16.06	%		14.60	%		16.06	%		14.60	%
Tier 1 risk-based capital ratio		15.23	%		13.61	%		15.23	%		13.61	%
Leverage ratio		12.89	%		10.78	%		12.89	%		10.78	%
Common equity tier 1 ratio		15.23	%		13.61	%		15.23	%		13.61	%
*Other information*
Closing stock price	$	24.59		$	16.91		$	24.59		$	16.91
Equity / assets		11.46	%		10.20	%		11.46	%		10.20	%
Equity / assets, excluding PPP loans⁽²⁾		11.88	%		11.12	%		11.88	%		11.12	%
Average equity / average assets		11.16	%		9.96	%		10.63	%		10.00	%
Average equity / average assets, less average PPP loans⁽²⁾		11.68	%		11.29	%		11.47	%		10.80	%
Number of full time equivalent employees		138			126			138			126
# Full service branch offices		6			7			6			7


(1)	Regulatory capital ratios as of December 31, 2021 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
(4)	Commercial real estate includes non-owner occupied and construction loans as a percentage of Bank capital
(5)	Construction loans as a percentage of Bank capital

Reconciliation of Certain Non-GAAP Financial Measures
(Dollars In thousands)

	For the three months ended December 31,						For the year ended December 31,
		2021			2020			2021			2020
Paycheck Protection Program adjustment impact
Loans held for investment (GAAP)	$	1,358,935		$	1,249,435		$	1,358,935		$	1,249,435
Less: PPP loans		58,339			135,180			58,339			135,180
Loans held for investment, excluding PPP (non-GAAP)	$	1,300,596		$	1,114,255		$	1,300,596		$	1,114,255

Average loans held for investment (GAAP)	$	1,203,764		$	1,311,726		$	1,165,907		$	1,219,525
Less: Average PPP loans		74,064			157,787			123,538			116,690
Average loans held for investment, excluding PPP (non-GAAP)	$	1,129,700		$	1,153,939		$	1,042,369			1,102,835

	For the three months ended December 31,						For the year ended December 31,
		2021			2020			2021			2020
Net interest margin adjustment
Net interest income (GAAP)	$	13,866		$	13,066		$	53,536		$	45,977
Less: PPP fees recognized		1,015			1,363			4,973			2,598
Less: PPP interest income earned		185			394			1,235			1,167
Net interest income, excluding PPP income (non-GAAP)		12,666			11,309			47,328			42,212

Average interest earning assets (GAAP)		1,585,982			1,568,743			1,605,783			1,431,627
Less: average PPP loans		74,064			157,787			123,538			116,690
Average interest earning assets, excluding PPP (non-GAAP)		1,511,918			1,410,956			1,482,245			1,314,937

Net interest margin (GAAP)		3.47	%		3.31	%		3.33	%		3.21	%
Net interest margin, excluding PPP (non-GAAP)		3.32	%		3.19	%		3.19	%		3.21	%

	For the three months ended December 31,						For the year ended December 31,
		2021			2020			2021			2020
Total asset adjustment
Total assets (GAAP)	$	1,647,402		$	1,643,165		$	1,647,402		$	1,643,165
Less: PPP loans		58,339			135,180			58,339			135,180
Total assets, excluding PPP loans (non-GAAP)		1,589,063			1,507,985			1,589,063			1,507,985

Total equity (GAAP)		188,788			167,665			188,788			167,665
Equity / assets, excluding PPP loans (non-GAAP)		11.88	%		11.12	%		11.88	%		11.12	%

Average asset adjustment
Average assets (GAAP)		1,673,054			1,639,756			1,685,140			1,498,188
Less: average PPP loans		74,064			157,787			123,538			116,690
Total average assets, excluding average PPP loans		1,598,990			1,481,969			1,561,602			1,381,498

Total average equity (GAAP)		186,707			167,288			179,123			149,160
Average equity / average assets, excluding average PPP loans (non-GAAP)		11.68	%		11.29	%		11.47	%		10.80	%

	For the three months ended December 31,						For the year ended December 31,
		2021			2020			2021			2020
Return on Average Assets, adjusted
Net income (GAAP)	$	4,814		$	7,710		$	22,171		$	15,717
Less: PPP fees recognized		1,015			1,363			4,973			2,598
Less: PPP interest income earned		185			394			1,235			1,167
Net income, excluding PPP income (non-GAAP)		3,614			5,953			15,963			11,952

Average total assets		1,673,054			1,639,756			1,685,140			1,498,188
Less: average PPP loans		74,064			157,787			123,538			116,690
Average total assets, excluding PPP (non-GAAP)		1,598,990			1,481,969			1,561,602			1,381,498
Return on average assets, excluding PPP (non-GAAP)		0.90	%		1.61	%		1.02	%		0.87	%

	For the three months ended December 31,						For the year ended December 31,
		2021			2020			2021			2020
Nonperforming Assets to total assets, adjusted
Total nonperforming assets (GAAP)	$	775		$	1,330		$	775		$	1,330

Total assets (GAAP)		1,647,402			1,643,165			1,647,402			1,643,165
Less: PPP loans		58,339			135,180			58,339			135,180
Total assets, excluding PPP loans (non-GAAP)		1,589,063			1,507,985			1,589,063			1,507,985
Nonperforming assets to total assets, excluding PPP loans (non-GAAP)		0.05	%		0.09	%		0.05	%		0.09	%

	For the three months ended December 31,						For the year ended December 31,
		2021			2020			2021			2020
Allowance for loan losses, adjusted
Allowance for loan losses (GAAP)	$	11,697		$	12,877		$	11,697		$	12,877

Total gross loans (GAAP)		1,358,935			1,249,435			1,358,935			1,249,435
Less: PPP loans		58,339			135,180			58,339			135,180
Total gross loans, excluding PPP loans (non-GAAP)		1,300,596			1,114,255			1,300,596			1,114,255
Allowance for loan losses to total loans, excluding PPP (non-GAAP)		0.90	%		1.16	%		0.90	%		1.16	%
	For the three months ended December 31,						For the year ended December 31,
		2021			2020			2021			2020
Net charge-offs to average loans, adjusted
Total net charge-offs (recoveries) (GAAP)	$	26			(1,480)		$	5		$	317

Total average gross loans (GAAP)		1,203,764			1,311,726			1,165,907			1,219,525
Less: average PPP loans		74,064			157,787			123,538			116,690
Total average gross loans, excluding PPP loans (non-GAAP)		1,129,700			1,153,939			1,042,369			1,102,835
Net charge-offs (recoveries) to average gross loans, excluding PPP (annualized) (non-GAAP)		0.01	%		(0.51)	%		0.00	%		0.03	%

	For the three months ended December 31,						For the year ended December 31,
		2021			2020			2021			2020
Stockholders equity, adjusted
Total common stockholders equity	$	161,525			140,402		$	161,525		$	140,402
Less: intangible assets		2,493			—			2,493			—
Tangible common stockholders equity		159,032			140,402			159,032			140,402

Shares outstanding		7,595,781			7,443,842			7,595,781			7,443,842
Tangible book value per common share	$	20.94		$	18.86		$	20.94		$	18.86

SOURCE MainStreet Bancshares, Inc.

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