MainStreet Bancshares, Inc. (Nasdaq: MNSB & MNSBP), the holding company for MainStreet Bank, reported record net income of $15.7 million for 2020, which represents a 10.54% Return on Average Equity (ROAE), a 1.05% Return on Average Assets (ROAA) and $1.85 per share of common stock (basic and diluted).
Net interest income and noninterest income for the year-ended December 31, 2020 increased to $45.9 million and $7.5 million, respectively. Net interest income and noninterest income for the year-ended December 31, 2020 increased 16.5% and 54%, respectively, over the same period in 2019. The Company realized $2.6 million of the $5.8 million recognized as fee income from the Paycheck Protection Program (PPP) during the year.
Total assets were $1.6 billion, an increase of 29% from the previous year-end. Net loans were $1.3 billion as of December 31, 2020, which included $135 million of the original $173 million in loans related to the PPP (22% were forgiven/repaid during 2020). Asset quality remains strong with non-performing assets and Other Real Estate Owned (OREO) representing only 0.08% of total assets as of December 31, 2020.
Non-interest-bearing deposits were $371 million, representing 26% of total deposits as of December 31, 2020. Total deposits as of December 31, 2020 were $1.4 billion, and core deposits represent a healthy 72% of total deposits.
"The strong year-end results can be attributed to the Bank's breakneck performance in response to the pandemic, both at the start and throughout the entire year," said Abdul Hersiburane, President of MainStreet Bank. "The Bank worked with all borrowers in order to assist, where prudent, with providing meaningful liquidity through the Paycheck Protection Plan, the Main Street Lending Program, payment deferrals and/or shifting to interest-only payments for a period."
With the hospitality industry being most hard-hit, the team worked closely throughout the year with the 14 operating hotels in the Bank's portfolio. Since April 2020, monthly Smith Travel Research (STR) reports for the portfolio of hotels showed favorable trends for occupancy. As of January 2021, all previously reported borrowers with payment deferrals are scheduled to be back to making monthly payments.
The Company analyzed the loan portfolio and made a special pandemic provision to the Allowance for Loan and Lease Losses (ALLL) on June 30, 2020 in the amount of $4.5 million. That special provision included a $1.76 million loan outstanding for one Commercial & Industrial (C&I) borrower that was immediately and fully impacted by the pandemic, $2.0 million for commercial borrowers with potential liquidity concerns and $760,000 for the indirect auto portfolio.
"At its outset, we didn't have a good sense of the pandemic's potential to affect the U.S. Economy or our market," said Jeff W. Dick, Chairman & CEO of MainStreet Bancshares Inc. and MainStreet Bank. "As the year progressed, through a combination of federal programs and regulatory easing, our borrower's collective confidence started to return. The vaccine approval announcements in December gave confirmation that the end was in sight. As a result of the significant changes in data and information available, we determined it would be prudent to update our special pandemic loan loss provision."
The Company released $3.15 million from the Allowance for Loan and Lease Losses at year-end, as recapped in the table below.
| Fourth Quarter Changes to the Allowance for Loan and Lease Losses | |
| (000's) | |
| Beginning Balance September 30, 2020 | $14,345 |
| + Current Year Recovery (1) | 1,498 |
| - Release of Specific Reserve for Repaid Loan | 329 |
| - Release of Pandemic Provision for indirect loans (2) | 500 |
| - Release of Provision for Loans reclassified as Held for Sale (3) | 825 |
| + Provision for Quarter Growth | 186 |
| - Release of Loss Recovery | 1,498 |
| Ending Balance December 31, 2020 | $12,877 |
| (1) | The Bank recovered $1.498 million of a loan charged-off earlier in the year. |
| (2) | The indirect loan portfolio losses for the year were less than previous years, so $500,000 was released from the special pandemic provision for indirect loans. |
| (3) | The Company reclassified approximately $60 million in investor-owned commercial real estate loans as loans held for sale. The loan sale should take place in the first quarter of 2021 and the Company released the associated provision to the ALLL prior to year-end 2020. |
The $2.0 million that was previously allocated to commercial borrowers remains intact for the pandemic provision to the ALLL as of December 31, 2020.
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.
