MainStreet Bancshares, Inc. Reports Record Second Quarter 2021 Earnings

News provided by

Jul 20, 2021, 08:00 ET

FAIRFAX, Va., July 20, 2021 /PRNewswire/ -- MainStreet Bancshares, Inc. (Nasdaq: MNSB & MNSBP), the holding company for MainStreet Bank, reported net income of $7.1 million for the second quarter of 2021. This represents a 16.3% Return on Average Equity, a 1.7% Return on Average Assets, $0.87 per share of common stock (basic and diluted), and a book value of $20.18 per common share.

Net interest income of $13.0 million and noninterest income of $1.6 million for the quarter-ended June 30, 2021 are up 21% and 18% respectively from the same period in 2020.

MainStreet Bank Headquarters 10089 Fairfax Blvd Fairfax, Virginia 22030 (PRNewsfoto/MainStreet Bancshares, Inc.)

The Company's cost of funds for the quarter-ended June 30, 2021 is 1.1%, which is improved 37% from the same period a year earlier. The Company remains focused on reducing funding costs, increasing fee income, and improving operating efficiency. The Company's efficiency ratio is 54% for the quarter-ended June 30, 2021, an 11% improvement from the 61% efficiency ratio reported for the same period a year ago.

Total assets were $1.7 billion on June 30, 2021, an increase of 12% from June 30, 2020. Net loans were $1.3 billion on June 30, 2021, which includes the SBA forgiveness of $55 million of Paycheck Protection Program loan balances during the quarter. Asset quality continues to be strong with non-performing assets representing 0.07% of total assets on June 30, 2021.

Non-interest bearing deposits represent a solid one-third of the $1.5 billion in total deposits as of June 30, 2021. In addition, 74% of the Company's total deposits are designated as "core deposits".

A year ago, the Company made a special provision to the Allowance for Loan and Lease Losses (ALLL) based upon an assessment of the potential impact from the COVID 19 pandemic. At that time little was known about the pandemic. A year later and despite the pandemic, the loan portfolio remains strong and continues to perform well. The local economy also continues to be robust and is quickly recovering from the effects of the pandemic. The Company updated its assessment as of June 30, 2021 and decided to release $2.1 million of that special provision. The table below provides a recap of activities relating to the special COVID provision over the past 12 months ending June 30, 2021.

June 30, 2020 Special COVID Provision Adjustments
(000's)
Starting Balance June 30, 2020	$4,522
+ COVID Provision for loans originated between 6/30/2020 and 6/30/2021	658
- Release for recovered/repaid loan 12/31/2020	1,460
- Charged off loan 12/31/2020	300
- Release for indirect loans 03/31/2021	760
- Release for commercial portfolio 6/30/2021	2,135
Ending Balance June 30, 2021	$525

The $525,000 ending balance represents a 40 basis-point special COVID provision for the portfolio of hotel loans. The portfolio of hotel loans is experiencing month-on-month improvements in occupancy rates and room rates, but the Company determined that it is prudent to maintain a special provision for the portfolio of hotel loans.

"Our mid-year performance is the result of a strong effort across every part of the Company," said Abdul Hersiburane, President of MainStreet Bank. "We continue to work very closely with our customers; as a community bank, our success is a direct reflection of our customer's success. To that end, we are focused on growing new client relationships who appreciate the high level of quality and service that comes standard from MainStreet Bank."

"As a Company that embraced leading-edge technology from the start, I am pleased to report that we performed exceptionally well throughout the pandemic," said Jeff W. Dick, Chairman & CEO of MainStreet Bancshares, Inc. and MainStreet Bank. "That same focus on technology provides us with a platform to scale the delivery of our products and services as we grow, and to continue to improve upon our operating efficiency. But the true value of our Company is derived from the team of people who bring that technology to life each day – whether from home or at the office."

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 thousands of businesses in the metropolitan area.

MainStreet Bank has a full complement of payment solutions for financial technology companies and has a team 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.

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

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

	June 30, 2021		March 31, 2021		December 31, 2020		September 30, 2020		June 30, 2020
ASSETS
Cash and cash equivalents
Cash and due from banks	$	120,121	$	118,399	$	75,935	$	102,480	$	55,273
Federal funds sold		56,164		51,598		31,593		25,074		21,081
Total cash and cash equivalents		176,285		169,997		107,528		127,554		76,354
Investment securities available for sale, at fair value		165,791		180,028		147,414		118,844		91,823
Investment securities held to maturity, at carrying value		26,136		26,427		22,520		23,114		23,843
Restricted equity securities, at cost		5,039		4,664		4,616		4,616		5,041
Loans held for sale		—		—		57,006		—		—
Loans, net of allowance for loan losses of $11,133, $13,215, $12,877, $14,346, and $13,731, respectively		1,256,436		1,299,169		1,230,379		1,279,899		1,259,012
Premises and equipment, net		13,929		13,975		14,289		14,474		14,416
Other real estate owned, net		1,158		1,180		1,180		1,580		1,175
Accrued interest and other receivables		8,752		9,349		9,604		8,579		7,458
Bank owned life insurance		35,736		25,518		25,341		25,157		24,959
Other assets		18,433		12,722		23,288		26,371		24,786
Total Assets	$	1,707,695	$	1,743,029	$	1,643,165	$	1,630,188	$	1,528,867
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Non-interest bearing deposits	$	486,001	$	492,463	$	370,497	$	416,648	$	388,104
Interest bearing DDA deposits		68,028		69,180		70,307		72,807		18,266
Savings and NOW deposits		72,353		72,259		74,099		69,015		65,876
Money market deposits		310,303		342,468		426,600		348,146		332,246
Time deposits		528,247		561,772		496,743		510,429		537,840
Total deposits		1,464,932		1,538,142		1,438,246		1,417,045		1,342,332
Federal Home Loan Bank advances and other borrowings		—		—		—		—		10,000
Subordinated debt		40,576		14,841		14,834		14,827		14,819
Other liabilities		22,559		17,868		22,420		25,055		21,546
Total Liabilities		1,528,067		1,570,851		1,475,500		1,456,927		1,388,697
Stockholders' Equity:
Preferred stock		27,263		27,263		27,263		27,527		—
Common stock		29,446		29,437		29,130		32,460		32,433
Capital surplus		66,667		66,233		66,116		75,217		74,850
Retained earnings		55,676		49,090		44,179		37,105		31,933
Accumulated other comprehensive income		576		155		977		952		954
Total Stockholders' Equity		179,628		172,178		167,665		173,261		140,170
Total Liabilities and Stockholders' Equity	$	1,707,695	$	1,743,029	$	1,643,165	$	1,630,188	$	1,528,867

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

	Year-to-Date				Three Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		March 31, 2021		December 31, 2020		September 30, 2020		June 30, 2020
INTEREST INCOME:
Interest and fees on loans	$	31,049	$	28,619	$	15,257	$	15,792	$	15,933	$	15,083	$	14,399
Interest on investment securities		1,127		997		597		530		519		491		496
Interest on federal funds sold		35		404		20		15		15		12		9
Total interest income		32,211		30,020		15,874		16,337		16,467		15,586		14,904
INTEREST EXPENSE:
Interest on interest bearing DDA deposits		110		153		55		55		108		56		36
Interest on savings and NOW deposits		89		114		47		42		52		55		50
Interest on money market deposits		497		1,252		220		277		418		490		474
Interest on time deposits		4,244		6,900		1,994		2,250		2,583		2,841		3,333
Interest on Federal Home Loan Bank advances and other borrowings		—		94		—		—		—		13		44
Interest on subordinated debt		805		482		567		238		240		245		241
Total interest expense		5,745		8,995		2,883		2,862		3,401		3,700		4,178
Net interest income		26,466		21,025		12,991		13,475		13,066		11,886		10,726
Provision for (recovery of) loan losses		(1,760)		5,925		(2,080)		320		(2,950)		635		5,575
Net interest income after provision for (recovery of) loan losses		28,226		15,100		15,071		13,155		16,016		11,251		5,151
NON-INTEREST INCOME:
Deposit account service charges		1,160		920		621		539		509		487		433
Bank owned life insurance income		395		397		218		177		183		199		198
Loan swap fee income		—		826		—		—		833		1,851		423
Net gain on held-to-maturity securities		3		—		—		3		—		—		—
Net gain on sale of loans		474		—		130		344		—		33		—
Other fee income		969		589		586		383		378		288		264
Total other income		3,001		2,732		1,555		1,446		1,903		2,858		1,318
NON-INTEREST EXPENSES:
Salaries and employee benefits		9,430		8,696		4,663		4,767		4,746		4,495		4,263
Furniture and equipment expenses		1,026		954		500		526		601		574		500
Advertising and marketing		677		447		402		275		290		266		191
Occupancy expenses		693		578		387		306		360		332		311
Outside services		616		481		280		336		263		215		205
Administrative expenses		291		341		141		150		166		167		177
Other operating expenses		2,950		3,005		1,500		1,449		1,732		1,589		1,713
Total other expenses		15,683		14,502		7,873		7,809		8,158		7,638		7,360
Income before income tax expense (benefit)		15,544		3,330		8,753		6,792		9,761		6,471		(891)
Income tax expense (benefit)		2,969		494		1,627		1,342		2,051		1,299		(257)
Net Income (loss)		12,575		2,836		7,126		5,450		7,710		5,172		(634)
Preferred stock dividends		1,078		—		539		539		635		—		—
Net income (loss) available to common shareholders		11,497	$	2,836	$	6,587	$	4,911	$	7,075	$	5,172	$	(634)
Net income (loss) per common share, basic and diluted		1.53	$	0.34	$	0.87	$	0.65	$	0.92	$	0.63	$	(0.08)
Weighted average number of common shares, basic and diluted		7,535,061		8,275,344		7,546,452		7,523,547		7,700,470		8,272,570		8,263,370

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

	June 30, 2021					March 31, 2021					June 30, 2020					Percentage Change
	$ Amount		% of Total			$ Amount		% of Total			$ Amount		% of Total			Last 3 Mos			Last 12 Mos
LOANS:
Construction and land development loans	$	328,480		25.8	%	$	327,393		24.8	%	$	283,971		22.2	%		0.3	%		15.7	%
Residential real estate loans		190,426		14.9	%		181,649		13.8	%		171,411		13.4	%		4.8	%		11.1	%
Commercial real estate loans		503,514		39.5	%		499,133		37.8	%		497,279		38.8	%		0.9	%		1.3	%
Commercial industrial loans - Other		93,837		7.4	%		92,680		7.0	%		96,640		7.6	%		1.2	%		-2.9	%
Commercial industrial loans - PPP Loans		124,578		9.8	%		179,835		13.6	%		171,650		13.4	%		-30.7	%		-27.4	%
Consumer loans		33,643		2.6	%		39,564		3.0	%		59,551		4.6	%		-15.0	%		-43.5	%
Total Gross Loans	$	1,274,478		100.0	%	$	1,320,254		100.0	%	$	1,280,502		100.0	%		-3.5	%		-0.5	%
Less: Allowance for loan losses		(11,133)					(13,215)					(13,731)
Net deferred loan fees		(6,909)					(7,870)					(7,759)
Net Loans	$	1,256,436				$	1,299,169				$	1,259,012
DEPOSITS:
Non-interest bearing demand deposits	$	486,001		33.2	%		492,463		32.0	%	$	388,104		28.9	%		-1.3	%		25.2	%
Interest-bearing demand deposits:
Demand deposits		68,028		4.6	%		69,180		4.5	%		18,266		1.4	%		-1.7	%		272.4	%
Savings and NOW deposits		72,353		4.9	%		72,259		4.7	%		65,876		4.9	%		0.1	%		9.8	%
Money market accounts		310,303		21.2	%		342,468		22.3	%		332,246		24.8	%		-9.4	%		-6.6	%
Certificates of deposit $250,000 or more		303,769		20.7	%		287,154		18.7	%		213,051		15.9	%		5.8	%		42.6	%
Certificates of deposit less than $250,000		224,478		15.4	%		274,618		17.8	%		324,789		24.1	%		-18.3	%		-30.9	%
Total Deposits	$	1,464,932		100.0	%	$	1,538,142		100.0	%	$	1,342,332		100.0	%		-4.8	%		9.1	%
BORROWINGS:
Federal Home Loan Bank advances		—		0.0	%		—		0.0	%		10,000		40.3	%		0.0	%		-100.0	%
Subordinated debt		40,576		100.0	%		14,841		100.0	%		14,819		59.7	%		173.4	%		173.8	%
Total Borrowings	$	40,576		100.0	%	$	14,841		100.0	%	$	24,819		100.0	%		173.4	%		63.5	%
Total Deposits and Borrowings	$	1,505,508				$	1,552,983				$	1,367,151					-3.1	%		10.1	%

Core customer funding sources ⁽¹⁾	$	1,118,795		74.3	%	$	1,159,207		74.6	%	$	939,474		68.7	%		-3.5	%		19.1	%
Brokered and listing service sources ⁽²⁾		346,137		23.0	%		378,935		24.4	%		402,858		29.5	%		-8.7	%		-14.1	%
Federal Home Loan Bank advances		—		0.0	%		—		0.0	%		10,000		0.7	%		0.0	%		-100.0	%
Subordinated debt ⁽³⁾		40,576		2.7	%		14,841		1.0	%		14,819		1.1	%		173.4	%		173.8	%
Total Funding Sources	$	1,505,508		100.0	%	$	1,552,983		100.0	%	$	1,367,151		100.0	%		-3.1	%		10.1	%


(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 June 30, 2021							For the three months ended June 30, 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)	$	1,302,722	$	15,257		4.70	%	$	1,213,250	$	14,399		4.76	%
Investment securities		90,820		597		2.64	%		73,186		496		2.72	%
Federal funds and interest-bearing deposits		245,257		20		0.03	%		126,164		9		0.03	%
Total interest earning assets	$	1,638,799	$	15,874		3.89	%	$	1,412,600	$	14,904		4.23	%
Other assets		69,950							69,741
Total assets	$	1,708,749						$	1,482,341
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Interest-bearing demand deposits	$	68,714	$	55		0.32	%	$	17,507	$	36		0.82	%
Money market deposit accounts		322,332		220		0.27	%		303,118		474		0.63	%
Savings and NOW deposits		71,747		47		0.26	%		62,733		50		0.32	%
Time deposits		538,766		1,994		1.48	%		548,728		3,333		2.44	%
Total interest-bearing deposits	$	1,001,559	$	2,316		0.93	%	$	932,086	$	3,893		1.68	%
Federal funds and repos purchased		1		—		—			1		—		—
Subordinated debt		39,716		567		5.73	%		14,816		241		6.52	%
FHLB borrowings		—		—		—			10,000		44		1.76	%
Total interest-bearing liabilities	$	1,041,276	$	2,883		1.11	%	$	956,903	$	4,178		1.75	%
Demand deposits and other liabilities		491,857							383,480
Total liabilities	$	1,533,133						$	1,340,383
Stockholders' Equity		175,616							141,958
Total Liabilities and Stockholders' Equity	$	1,708,749						$	1,482,341
Interest Rate Spread						2.78	%						2.48	%
Net Interest Income			$	12,991						$	10,726
Net Interest Margin						3.18	%						3.05	%
Net Interest Margin, excluding PPP loans⁽⁴⁾						3.10	%						3.08	%


(1)	Includes loans classified as non-accrual
(2)	Includes average PPP balances of $161.8 million and related interest income of approximately $404,000 for the three months ended June 30, 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 six months ended June 30, 2021							For the six months ended June 30, 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)	$	1,311,085	$	31,049		4.78	%	$	1,135,995	$	28,619		5.08	%
Investment securities		90,347		1,127		2.52	%		73,512		997		2.73	%
Federal funds and interest-bearing deposits		219,648		35		0.03	%		131,239		404		0.62	%
Total interest earning assets	$	1,621,080	$	32,211		4.01	%	$	1,340,746	$	30,020		4.52	%
Other assets		70,337							64,550
Total assets	$	1,691,417						$	1,405,296
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Interest-bearing demand deposits	$	68,556	$	110		0.32	%	$	25,532	$	153		1.21	%
Money market deposit accounts		367,424		497		0.27	%		266,638		1,252		0.95	%
Savings and NOW deposits		70,875		89		0.25	%		62,716		114		0.37	%
Time deposits		509,465		4,244		1.68	%		557,921		6,900		2.49	%
Total interest-bearing deposits	$	1,016,320	$	4,940		0.98	%	$	912,807	$	8,419		1.86	%
Federal funds and repos purchased		—		—		—			1		—		—
Subordinated debt		27,346		805		5.94	%		14,813		482		6.56	%
FHLB borrowings		—		—		—			10,165		94		1.86	%
Total interest-bearing liabilities	$	1,043,666	$	5,745		1.11	%	$	937,786	$	8,995		1.93	%
Demand deposits and other liabilities		474,566							326,949
Total liabilities	$	1,518,232						$	1,264,735
Stockholders' Equity		173,185							140,561
Total Liabilities and Stockholders' Equity	$	1,691,417						$	1,405,296
Interest Rate Spread						2.90	%						2.59	%
Net Interest Income			$	26,466						$	21,025
Net Interest Margin						3.29	%						3.16	%
Net Interest Margin, excluding PPP loans⁽⁴⁾						3.15	%						3.18	%


(1)	Includes loans classified as non-accrual and loans held for sale
(2)	Includes average PPP balances of $158.0 million and related interest income of approximately $709,000 for the three months ended June 30, 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 Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
*Per share Data and Shares Outstanding*
Earnings per common share (basic and diluted)	$	0.87		$	(0.08)		$	1.53		$	0.34
Book value per common share	$	20.18		$	16.96		$	20.18		$	16.96
Weighted average common shares (basic and diluted)		7,546,452			8,263,370			7,535,061			8,275,344
Common shares outstanding at end of period		7,549,398			8,263,941			7,549,398			8,263,941
*Performance Ratios*
Return on average assets (annualized)		1.67	%		(0.17)	%		1.50	%		0.41	%
Return on average assets, excluding impact of PPP loans (annualized)⁽²⁾		1.44	%		(0.47)	%		1.18	%		0.29	%
Return on average equity (annualized)		16.28	%		(1.79)	%		14.64	%		4.07	%
Return on average common equity (annualized)		17.81	%		(1.79)	%		15.89	%		4.07	%
Yield on earning assets (annualized)		3.89	%		4.23	%		4.01	%		4.52	%
Cost of interest bearing liabilities (annualized)		1.11	%		1.75	%		1.11	%		1.93	%
Net interest spread		2.78	%		2.48	%		2.90	%		2.59	%
Net interest margin (annualized)		3.18	%		3.05	%		3.29	%		3.16	%
Net interest margin, excluding PPP loans (annualized)⁽²⁾		3.10	%		3.08	%		3.15	%		3.18	%
Noninterest income as a percentage of average assets (annualized)		0.37	%		0.36	%		0.36	%		0.39	%
Noninterest expense to average assets (annualized)		1.85	%		1.99	%		1.87	%		2.08	%
Efficiency ratio⁽³⁾		54.12	%		61.11	%		53.22	%		61.04	%
*Asset Quality*
Commercial real estate loans to total capital ⁽⁴⁾		346.23	%		405.25	%		346.23	%		405.25	%
Construction loans to total capital ⁽⁵⁾		154.63	%		170.04	%		154.63	%		170.04	%
Loans 30-89 days past due to total gross loans		0.07	%		0.01	%		0.07	%		0.01	%
Loans 90 days past due to total gross loans		0.00	%		0.23	%		0.00	%		0.23	%
Non-accrual loans to total gross loans		0.00	%		0.24	%		0.00	%		0.24	%
Other real estate owned	$	1,158		$	1,175		$	1,158		$	1,175
Non-performing assets	$	1,158		$	4,225		$	1,158		$	4,225
Non-performing assets to total assets		0.07	%		0.28	%		0.07	%		0.28	%
Non-performing assets to total assets, excluding PPP loans⁽²⁾		0.07	%		0.31	%		0.07	%		0.31	%
Allowance for loan losses to total gross loans		0.87	%		1.21	%		0.87	%		1.21	%
Allowance for loan losses to total loans, excluding PPP loans⁽²⁾		0.97	%		1.24	%		0.97	%		1.24	%
Allowance for loan losses to non-performing assets		9.61			3.66			9.61			3.66
Net loan charge-offs (recoveries)	$	2		$	1,742		$	(16)		$	1,778
Net charge-offs (recoveries) to average gross loans (annualized)		0.00	%		0.58	%		0.00	%		0.30	%
Net charge-offs (recoveries) to average gross loans, excluding PPP loans (annualized)⁽²⁾		0.00	%		0.65	%		0.00	%		0.32	%
Troubled debt restructurings (total)
Performing in accordance with modified terms	$	—		$	—		$	—		$	—
Not performing in accordance with modified terms	$	—		$	—		$	—		$	—
*Regulatory Capital Ratios (Bank only)⁽¹⁾*
Total risk-based capital ratio		16.25	%		13.26	%		16.25	%		13.26	%
Tier 1 risk-based capital ratio		15.40	%		12.16	%		15.40	%		12.16	%
Leverage ratio		11.78	%		10.23	%		11.78	%		10.23	%
Common equity tier 1 ratio		15.40	%		12.16	%		15.40	%		12.16	%
*Other information*
Closing stock price	$	22.58		$	13.20		$	22.58		$	13.20
Equity / assets		10.52	%		9.17	%		10.52	%		9.17	%
Equity / assets, excluding PPP loans⁽²⁾		11.34	%		10.33	%		11.34	%		10.33	%
Average equity / average assets		10.28	%		9.58	%		10.24	%		10.00	%
Average equity / average assets, less average PPP loans⁽²⁾		11.35	%		10.54	%		11.29	%		10.51	%
Number of full time equivalent employees		129			121			129			121
# Full service branch offices		7			7			7			7


(1)	Regulatory capital ratios as of June 30, 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 June 30,						For the six months ended June 30,
		2021			2020			2021			2020
Paycheck Protection Program adjustment impact
Loans held for investment (GAAP)	$	1,274,478		$	1,280,502		$	1,274,478		$	1,280,502
Less: PPP loans		124,578			171,650			124,578			171,650
Loans held for investment, excluding PPP (non-GAAP)	$	1,149,900		$	1,108,852		$	1,149,900		$	1,108,852

Average loans held for investment (GAAP)	$	1,302,722		$	1,213,250		$	1,311,085		$	1,135,995
Less: Average PPP loans		161,784			135,247			158,029			67,623
Average loans held for investment, excluding PPP (non-GAAP)	$	1,140,938		$	1,078,003		$	1,153,056			1,068,372

	For the three months ended June 30,						For the six months ended June 30,
		2021			2020			2021			2020
Net interest margin adjustment
Net interest income (GAAP)	$	12,991		$	10,726		$	26,466		$	21,025
Less: PPP fees recognized		1,180			591			2,821			591
Less: PPP interest income earned		404			337			790			337
Net interest income, excluding PPP income (non-GAAP)		11,407			9,798			22,855			20,097

Average interest earning assets (GAAP)		1,638,799			1,412,600			1,621,080			1,340,746
Less: average PPP loans		161,784			135,247			158,029			67,623
Average interest earning assets, excluding PPP (non-GAAP)		1,477,015			1,277,353			1,463,051			1,273,123

Net interest margin (GAAP)		3.18	%		3.05	%		3.29	%		3.16	%
Net interest margin, excluding PPP (non-GAAP)		3.10	%		3.08	%		3.15	%		3.18	%

	For the three months ended June 30,						For the six months ended June 30,
		2021			2020			2021			2020
Total asset adjustment
Total assets (GAAP)	$	1,707,695		$	1,528,867		$	1,707,695		$	1,528,867
Less: PPP loans		124,578			171,650			124,578			171,650
Total assets, excluding PPP loans (non-GAAP)		1,583,117			1,357,217			1,583,117			1,357,217
Total equity (GAAP)		179,628			140,170			179,628			140,170
Equity / assets, excluding PPP loans (non-GAAP)		11.35	%		10.33	%		11.35	%		10.33	%

Average asset adjustment
Average assets (GAAP)		1,708,749			1,482,341			1,691,417			1,405,297
Less: average PPP loans		161,784			135,247			158,029			67,623
Total average assets, excluding average PPP loans		1,546,965			1,347,094			1,533,388			1,337,674
Total average equity (GAAP)		175,616			141,958			173,185			140,561
Average equity / average assets, excluding average PPP loans (non-GAAP)		11.35	%		10.54	%		11.29	%		10.51	%

	For the three months ended June 30,						For the six months ended June 30,
		2021			2020			2021			2020
Return on Average Assets, adjusted
Net income (loss) (GAAP)	$	7,126		$	(634)		$	12,575		$	2,836
Less: PPP fees recognized		1,180			591			2,821			591
Less: PPP interest income earned		404			337			790			337
Net income (loss), excluding PPP income (non-GAAP)		5,542			(1,562)			8,964			1,908
Average total assets		1,708,749			1,482,341			1,691,417			1,405,297
Less: average PPP loans		161,784			135,247			158,029			67,623
Average total assets, excluding PPP (non-GAAP)		1,546,965			1,347,094			1,533,388			1,337,674
Return on average assets, excluding PPP (non-GAAP)		1.44	%		(0.47)	%		1.18	%		0.29	%

	For the three months ended June 30,						For the six months ended June 30,
		2021			2020			2021			2020
Nonperforming Assets to total assets, adjusted
Total nonperforming assets (GAAP)	$	1,158		$	4,225		$	1,158		$	4,225
Total assets (GAAP)		1,707,695			1,528,867			1,707,695			1,528,867
Less: PPP loans		124,578			171,650			124,578			171,650
Total assets, excluding PPP loans (non-GAAP)		1,583,117			1,357,217			1,583,117			1,357,217
Nonperforming assets to total assets, excluding PPP loans (non-GAAP)		0.07	%		0.31	%		0.07	%		0.31	%

	For the three months ended June 30,						For the six months ended June 30,
		2021			2020			2021			2020
Allowance for loan losses, adjusted
Allowance for loan losses (GAAP)	$	11,133		$	13,731		$	11,133		$	13,731
Total gross loans (GAAP)		1,274,478			1,280,502			1,274,478			1,280,502
Less: PPP loans		124,578			171,650			124,578			171,650
Total gross loans, excluding PPP loans (non-GAAP)		1,149,900			1,108,852			1,149,900			1,108,852
Allowance for loan losses to total loans, excluding PPP (non-GAAP)		0.97	%		1.24	%		0.97	%		1.24	%

	For the three months ended June 30,						For the six months ended June 30,
		2021			2020			2021			2020
Net charge-offs to average loans, adjusted
Total net charge-offs (recoveries) (GAAP)	$	2			1,742		$	(16)		$	1,778
Total average gross loans (GAAP)		1,302,722			1,213,250			1,311,085			1,136,885
Less: average PPP loans		161,784			135,247			158,029			67,623
Total average gross loans, excluding PPP loans (non-GAAP)		1,140,938			1,078,003			1,153,056			1,069,262
Net charge-offs (recoveries) to average gross loans, excluding PPP (annualized) (non-GAAP)		0.00	%		0.65	%		0.00	%		0.32	%