MainStreet Bancshares, Inc. Reports Strong Net Income as Interest Rates Rise

FAIRFAX, Va., July 25, 2022 /PRNewswire/ -- MainStreet Bancshares, Inc. (Nasdaq: MNSB & MNSBP), the holding company for MainStreet Bank, said its net interest margin widened as rates climbed in recent months, driving strong net income for the second quarter and six months ended June 30, 2022.

The Bank's loan portfolio is well positioned for increasing interest rates. "The FOMC's next announcement is due to be released on July 27 and based upon Street consensus we anticipate continued net interest margin expansion," said Jeff W. Dick, Chairman & CEO of MainStreet Bancshares, Inc. and MainStreet Bank.

"We have been anticipating this trend for some time and we strategically aligned our portfolio to flex as the economy shifts," Dick said. "Even as we focus on maintaining a rigorous credit culture, we are constantly looking to the future, sharpening our understanding of what clients demand in an evolving financial services market, and choosing to innovate."

A focal point of MainStreet Bank's innovation is its Avenu^™ Software as a Service (SaaS) and Banking as a Service (BaaS) platform. Dick and other MainStreet Bank executives will discuss quarterly and half-year earnings and preview business developments at Avenu™ during its virtual webcast and quarterly earnings call at 2 p.m. Eastern time today.

Net income totaled $5.9 million for three months ended June 30, and $11.4 million for the six months ended June 30. Net interest income totaled $16.1 million in the second quarter, 6% higher than the immediately preceding quarter and 24.1% higher than the comparable period in 2021. 

Rising interest rates propelled the net interest margin higher by 75 basis points to 3.95% for the quarter ended June 30, versus 3.20% a year earlier, on a tax equivalent basis. The Company's efficiency ratio remains solid at 55%. Total assets reached $1.8 billion in the second quarter, a 5.0% increase from a year earlier.

Quarterly results represent:

• 12.59% return on average equity
• 1.39% return on average assets
• $0.71 earnings per share of common stock (basic and diluted)
• $21.41 per common share book value

The level of Accumulated Other Comprehensive Income (AOCI) for the Company is low at -$6.56 million.  The level is consistent with the size and quality of the investment portfolio, as the Bank enjoys consistent strong in-market loan demand.

The average loans outstanding rose just over 4% since the first quarter of 2022, as the bank was able to capitalize on continued demand in a higher interest rate environment. Asset quality remains pristine, as the Company had zero non-performing assets as of quarter ended June 30. Noninterest-bearing deposits represent 36% of the $1.5 billion in total deposits, and 70% of total deposits are core deposits.

"We operate in a robust market in Northern Virginia and the Washington Metropolitan area, and loan demand remains steady," said Abdul Hersiburane, president of MainStreet Bank. "The surge in loan volume that occurred for banks nationwide during the height of the COVID crisis has normalized, and what we are seeing now is solid, steady, organic loan growth that reflects the confidence of businesses in this marketplace that they have opportunities to grow." He noted that federal Paycheck Protection Program loans now represent a negligible 0.3% of the bank's loan portfolio.

Avenu^™, a division of MainStreet Bank, that provides Software as a Service (SaaS) and Banking as a Service (BaaS), continued to generate significant customer interest as additional fintechs joined the queue for our proprietary software solution. We are currently onboarding our initial beta customer with an anticipated go-live date in the fourth quarter of 2022.

"Fintechs have a strong need for knowledgeable, credible partners who can help them manage risk and compliance obligations," said Todd Youngren, President of Avenu^™. "Preparing them to become fully compliant is a critical, intensive element of this process, and we are focusing our energy on getting that right. Following the beta stage, we anticipate that onboarding will be streamlined into a 60-day process."

Youngren noted that at the end of the first quarter, Avenu^™ had 10 fintechs queued up at various stages of progress, including four that have indicated they intend to move forward as soon as the beta process is complete. These prospects include entities that serve the domestic needs of foreign nationals and entities that serve the education and nonprofit industries.  Avenu has another 36 fintechs that have signed up to be "in the queue," and 128 fintechs that have signed up to receive updates and are actively monitoring our progress.

In addition to serving fintechs, the Avenu^™ team has a robust array of existing customers that include payment processors and money service businesses. These relationships have been integral in identifying the needs and services that fintechs need banks to provide in order to have a successful partnership. These relationships provide the Bank with additional noninterest income and a strong source of low-cost deposits that can be integrated into the Bank's traditional source of income generation, net interest margin. As a benchmark, Youngren noted, Avenu™ is favorably impacting profitability, with its customers providing $70 million in noninterest bearing deposits and $488,000 in noninterest income in the six months ended June 30, 2022.

Refer to our press release on October 25, 2021, for additional information on the Company's proprietary Avenu^™ solution. If you are a fintech looking to add payments and deposits to your solution, go to Avenu.bank and join the queue today.

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.