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 24th - 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.
"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.
