MSBK Main Street Banks (MM)

Main Street Banks Reports Second Quarter Earnings ATLANTA, July 20 /PRNewswire-FirstCall/ -- Main Street Banks, Inc. (NASDAQ:MSBK) reported net income of $5.8 million for the three months ended June 30, 2005 compared to $7.4 million in the second quarter of 2004. Diluted earnings per share for the second quarter of 2005 were $0.27 versus $0.37 for the second quarter of 2004. Net income for the six months ended June 30, 2005 was $14.0 million compared to $15.0 million in the same period of 2004. Diluted earnings per share for the six months ended June 30, 2005 were $0.64 versus $0.75 for the six months ended June 30, 2004. Return on average assets was 0.99 percent for the second quarter of 2005 and return on average shareholders equity was 8.2 percent. For the six months ended June 30, 2005, return on average assets was 1.19 percent and return on average shareholders equity was 9.9 percent. As previously announced, Main Street's second quarter results were impacted by the conclusions reached following a comprehensive review of a problem loan portfolio originated by a former lending officer. This problem portfolio was first identified and announced in November 2004. With the assistance of a nationally recognized auditing and consulting firm, the company conducted a review which identified an additional $2.6 million in charge-offs in the problem portfolio, against which the company had previously established specific reserves of $0.8 million. The company also identified other loans in the same problem portfolio which required an additional $0.5 million in specific reserves. The total resulting pre-tax impact from this portfolio on second quarter results was initially expected to be $2.3 million in additional loan loss provision expense. Since the completion of the review of the problem portfolio, the negative impact of the portfolio on second quarter 2005 earnings has been reduced. The company has taken $0.2 million in additional charge-offs which relieved $0.2 million of the $0.5 million of specific reserves identified above. In addition, the remaining $0.3 million of specific reserves were released following further review of collateral documentation. Including legal and other expenses, the total impact of this problem portfolio on second quarter 2005 earnings was approximately $2.1 million pre-tax and $1.3 million, or $0.06 per diluted share, after tax. "While we were disappointed by the findings of the review of this problem portfolio, we believe that all significant loan problems in this portfolio have been identified and that we have taken the necessary and appropriate actions to resolve this problem," said Samuel B. Hay III, chief executive officer. "Although second quarter results were dampened by these additional losses, our core business continues to operate normally. We have continued our internal growth, albeit at a somewhat slower pace compared to recent history, and improved our net interest margin with disciplined pricing efforts." Loan Growth Continues During the quarter ended, Main Street Banks' average loans outstanding were $1.760 billion, reflecting an increase of $209 million, or 13.5 percent, compared to the same period last year. Compared to the first quarter of 2005, annualized growth in average loans was 6.7 percent due to solid growth offset by higher than normal loan payoffs and the sale of $10.2 million of SBA 504 loans during the second quarter. Loan production levels remain healthy, however, as loans originated during the quarter were commensurate with originations in previous quarters. Loan Losses Elevated Due To Problem Portfolio Annualized net charge-offs for the second quarter of 2005 were 0.86% of average loans, compared to 0.09% in the second quarter of 2004 and 0.56% in the first quarter of 2005. Annualized net charge-offs from the problem portfolio amounted to 0.63% of average loans for the company. Excluding losses from the problem portfolio, the company's annualized net charge-offs as a percentage of average loans were 0.23% of average loans. The company expects loan losses to moderate significantly in the latter half of 2005. Nonperforming Assets Decline Nonperforming assets declined from 0.90% of assets at March 31, 2005 to 0.66% of assets at June 30, 2005. The improvement in asset quality resulted not only from charge-offs in the problem portfolio mentioned above, but also from reductions in nonperforming assets in the remainder of the company's loan portfolio. The allowance for loan losses at June 30, 2005 was $25.2 million and represented 1.43% of loans outstanding at the end of the period, compared to $23.1 million and 1.45% at June 30, 2004. Other asset quality measures showed improvement during the quarter, including internally criticized assets and delinquent loan levels. Due to these factors and the completion of the review of the problem portfolio, Main Street's outlook for asset quality for the remainder of 2005 is favorable. New Credit Initiatives Announced During the quarter, Main Street also announced several changes to its credit administration and credit review structure. These initiatives include adding staff to and expanding the scope of its regular credit review functions, implementing automated systems for identifying related credit relationships and for managing real estate construction loans, hiring a special assets officer to assist in problem loan resolution and expanding lender performance standards. The company is the final stages of implementing these initiatives and anticipates that they will assist management's efforts to strengthen its credit culture and improve processes in credit administration. Free Checking Program Shows Positive Signs During the quarter, Main Street continued to emphasize low cost core deposits through its High Performance Checking program. For the quarter ended June 30, 2005, average total deposits were $1.722 billion, compared to $1.548 billion in the second quarter of 2004, reflecting an increase of $174 million or 11.2%. Compared to the first quarter of 2005, average deposits increased $12 million or 2.8% on an annualized basis. The company's free consumer checking program, High Performance Checking, was launched in late March 2005 and is enhancing growth in checking balances and fee income. Excluding public funds, average checking balances totaled $356.3 million during the second quarter of 2005, compared to $340 million in the same period of 2004 and $336.3 million in the first quarter of 2005. These increases represent 4.8% growth year-to-year and 23.8% annualized growth from quarter to quarter. Account openings per banking center are currently 2.4 times the pace of openings in 2004 and the company is now planning to launch the business portion of High Performance Checking later this year. Net Interest Margin Rises 24 Basis Points Main Street's net interest margin was 4.42% for the second quarter of 2005, up from 4.18% for the first quarter of 2005 and flat with the 4.41% level in second quarter of 2004. The company was disciplined in pricing both loans and deposits as loan yields grew 46 basis points over first quarter 2005 levels, outpacing a 19 basis point increase in cost of funds. In commenting on the improvement in net interest margin, Hay continued, "Having historically had a strong net interest margin, we are pleased with the discipline our bankers have exhibited in this challenging rate environment and the resulting impact on the net interest margin." Noninterest Income Up 4.4% Over Second Quarter 2004 Compared to the second quarter of 2004, noninterest income grew 4.4% and was led by increases in deposit service charges and income from Small Business Administration loans. Noninterest income declined 2.3% in the second quarter of 2005 from first quarter 2005 due primarily to seasonally high insurance agency revenue in the first quarter. In addition, mortgage banking revenue and investment brokerage revenue were also down for the second quarter of 2005. Growth in checking balances is also contributing to an enhancement in service charge income. Income from SBA lending was higher than normal due to the sale of $10.2 million in loans from the SBA 504 program. Loans originated under this program are initially retained by the company and are periodically sold in bulk after certain seasoning requirements. Noninterest Expenses Rise Noninterest expenses totaled $17.3 million in the second quarter, rising $1.8 million or 11.6% over first quarter 2005 and 7.5% above the second quarter of 2004. The primary contributors to the growth in expenses were increased personnel related expenses of $0.4 million, the previously announced write-off of assets in the company's loan settlement services subsidiary of $0.4 million, commissions associated with the previously mentioned SBA loan sale of $0.2 million and increased regulatory compliance and audit expenses of $0.2 million. The remaining increase in expenses compared to first quarter 2005 are increased marketing costs due to the High Performance Checking program and additional legal expenses in part due to higher loan collection costs. As was previously announced, Main Street's income tax expense also included an additional income tax provision of $0.6 million in the second quarter. The company expects its effective tax rate to be approximately 31% for the remainder of 2005. New Chief Financial Officer Named In early May, Main Street announced that it had named David W. Brooks II as its executive vice president and chief financial officer. Prior to Main Street, Brooks was a 24 year finance and treasury veteran of Wachovia Corporation and the former Wachovia Corporation. Most recently, he served as Senior Vice President and Group Executive responsible for strategic planning, treasury policy and research, asset pricing, treasury risk management and Basel capital implementation in Charlotte, NC. His career with the former Wachovia Corporation also included responsibilities for treasury, funds transfer pricing, interest rate risk management, earnings forecasting, capital planning and balance sheet structure. At Main Street, Brooks now has responsibility for all financial functions, including accounting, finance and treasury and for investor relations. Risk Management and Administration Positions Added Main Street also recently promoted two senior officials of its primary subsidiary, Main Street Bank, to company posts. Gary S. Austin was named Executive Vice President, Risk Management, having served in a similar post for the banking subsidiary for the last eighteen months. Austin came to Main Street after serving three years at RBC Centura Bank in Rocky Mount, NC and 20 years at National City Corporation in accounting and risk management roles. At Main Street, Austin is now responsible for all risk management functions, including regulatory compliance, internal audit and credit review, and for integrating risk management into all strategic and tactical decisions by the company. The company also named Richard A. Blair as Executive Vice President, Administration and Operations. Blair previously had responsibility for the banking subsidiary's operations, purchasing and real estate management functions. In his new role, Blair also assumes oversight for information technology and certain loan processing functions. Blair has been employed with Main Street for two years. Prior to Main Street, he served for 27 years at Wachovia Corporation with responsibility for regional operational facilities in Georgia, North Carolina, South Carolina and Tennessee. In commenting on the quarter, Hay said, "Our second quarter results are disappointing to us both in terms of profitability and loan losses. After exhaustive efforts, we believe the problem loan portfolio is behind us and are pleased that nonperforming assets have declined as well. We also believe that we have made excellent progress on many fronts during the quarter. We have greatly enhanced our management team with the addition of David Brooks as CFO and the promotions of Gary Austin and Rick Blair. Despite significant competition for funding in our local markets, we were able to expand our net interest margin to 4.42%. We look forward to growing our business in the last half of the year." About Main Street Main Street Banks, Inc., a $2.4 billion asset, community-banking organization based in metropolitan Atlanta, provides a broad range of banking, brokerage, insurance, mortgage and payroll products and services through its 23 banking centers located in eighteen of Georgia's fastest growing communities. Main Street is the largest community banking organization in the Atlanta metropolitan area. Safe Harbor Statements made in this press release, other than those containing historical information, are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Act of 1995. The forward looking statements herein include, but are not limited to, the expected forecast for loan losses, nonperforming assets and net interest margin for the remainder of 2005, the accuracy of credit review results, the expected long-term value of the company's growth strategy, the future growth of business lines, the expected improvement in asset quality in the remainder of 2005, expected loan and deposit growth, expected loan losses, expected fee income growth, the expected success of the High Performance Checking program, the expected effect of an enhanced management team with recent additions and promotions, and the effectiveness of changes to credit processes. Such statements involve risks and uncertainties that may cause results to differ materially from those set forth herein, including: possible reversals in market, economic and business conditions; the prospects and performance of loans and borrowers; the ability to attract new customers; possible changes in monetary and fiscal policies, laws and regulations; the effects of easing of restrictions on participants in the financial services industry; possible changes in the credit worthiness of customers and the possible impairment of loans; the effects of changing interest rates and other risks and factors identified in the Company's annual report on Form 10-K for the year ended December 31, 2004 and other filings with the Securities and Exchange Commission. Main Street undertakes no obligation to update these statements following the date of this press release. In addition, Main Street, through its senior management, may from time to time make forward-looking public statements concerning the matters described herein. Such forward-looking statements are necessarily estimates reflecting the judgment of Main Street's senior management based upon current information and involve a number of risks and uncertainties. There can be no assurance that such factors or other factors will not affect the accuracy of such forward-looking statements. For additional information about Main Street Banks, Inc.'s financial performance, products and services, please visit our web site at http://www.mainstreetbank.com/. To hear a live webcast of Main Street Banks, Inc.'s second quarter earnings conference call at 10 a.m. (EDT) today, please visit our web site at http://www.mainstreetbank.com/. Beginning July 21, and for a limited time thereafter, listeners may access archived versions of the presentation via the website or at 1-800-839-4906. MAIN STREET BANKS, INC. FINANCIAL HIGHLIGHTS (Unaudited) Second First Quarter Quarter 2005 2005 RESULTS OF OPERATIONS Net interest income $22,980,484 $21,610,573 Net interest income (tax equivalent) 23,155,302 21,785,622 Provision for loan losses 4,050,000 2,208,555 Non-interest income 7,746,402 7,926,280 Non-interest expense 17,285,513 15,503,167 Net income 5,805,994 8,182,991 AVERAGE BALANCE SHEET DATA (in thousands) Loans, net of unearned income 1,759,766 1,731,089 Investment securities 309,483 316,742 Earning assets 2,100,824 2,090,508 Total assets 2,357,624 2,335,055 Deposits 1,722,226 1,709,580 Shareholders' equity 284,355 280,723 PER COMMON SHARE Earnings per share - Basic $0.27 $0.38 Earnings per share - Diluted $0.27 $0.38 Book value per share at end of period $13.42 $13.16 End of period shares outstanding 21,415,607 21,315,955 Weighted average shares outstanding Basic 21,375,087 21,277,737 Diluted 21,899,426 21,818,118 STOCK PERFORMANCE Market Price: Closing $25.46 $26.45 High $26.46 $35.34 Low $22.58 $26.35 Trading volume 3,824,400 4,241,000 Cash dividend per share 0.1525 0.1525 Dividend payout ratio 57.52% 40.66% Price to trailing twelve months earnings 17.8 17.2 Price to book value 1.90 2.01 PERFORMANCE RATIOS Return on average assets 0.99% 1.40% Return on average equity 8.17% 11.66% Average earning assets to average total assets 89.11% 89.53% Average loans as percentage of average deposits 102.18% 101.26% Net interest margin (tax equivalent) 4.42% 4.18% Average equity to average assets 12.06% 12.02% Non-interest income ratio 25.21% 26.84% Efficiency ratio 56.26% 52.49% ASSET QUALITY Total non-performing assets $15,637,850 $21,043,190 Non-performing assets as a percentage of loans plus foreclosed assets 0.88% 1.21% Net annualized (charge-offs) recoveries as a percentage of average loans 0.86% 0.56% Reserve for loan losses as a percentage of loans, at end of period 1.43% 1.43% OPERATING EARNINGS Net income $5,805,994 $8,182,991 Amortization of intangible assets, net 94,150 92,700 Job reductions - - Contract buyout, net - - Systems write-offs, net - - Operating income $5,900,144 $8,275,691 Operating earnings per share Basic $0.28 $0.39 Diluted $0.27 $0.38 Average tangible assets (in thousands) $2,255,383 $2,232,760 Average tangible equity (in thousands) 182,114 178,427 Operating return on average tangible assets 1.05% 1.48% Operating return on average tangible equity 12.96% 18.55% OPERATING BASIS Non-interest expense $17,142,861 $15,362,712 Net interest income 22,980,484 21,610,573 Non-interest income 7,746,402 7,926,280 Efficiency Ratio 55.79% 52.01% MAIN STREET BANKS, INC. FINANCIAL HIGHLIGHTS (Unaudited) Fourth Third Second Quarter Quarter Quarter 2004 2004 2004 RESULTS OF OPERATIONS Net interest income $21,430,713 $20,832,969 $20,219,242 Net interest income (tax equivalent) 21,612,019 21,021,094 20,419,505 Provision for loan losses 2,956,380 1,602,500 1,310,000 Non-interest income 7,541,744 7,821,682 7,418,708 Non-interest expense 15,410,405 15,494,210 16,134,081 Net income 7,698,582 8,263,915 7,391,018 AVERAGE BALANCE SHEET DATA (in thousands) Loans, net of unearned income 1,670,976 1,620,436 1,551,258 Investment securities 293,933 288,443 282,850 Earning assets 2,030,527 1,940,675 1,864,339 Total assets 2,271,783 2,176,797 2,096,734 Deposits 1,687,864 1,584,819 1,547,739 Shareholders' equity 234,796 218,058 215,051 PER COMMON SHARE Earnings per share - Basic $0.39 $0.43 $0.38 Earnings per share - Diluted $0.38 $0.41 $0.37 Book value per share at end of period $13.10 $11.43 $10.94 End of period shares outstanding 21,229,545 19,457,741 19,381,000 Weighted average shares outstanding Basic 19,756,947 19,428,145 19,351,343 Diluted 20,372,205 20,015,560 19,974,058 STOCK PERFORMANCE Market Price: Closing $34.93 $30.60 $28.10 High $34.93 $30.60 $28.82 Low $28.55 $26.46 $25.62 Trading volume 2,893,800 1,755,400 2,010,000 Cash dividend per share 0.1350 0.1350 0.1350 Dividend payout ratio 35.72% 32.70% 36.48% Price to trailing twelve months earnings 22.6 19.8 18.8 Price to book value 2.67 2.68 2.57 PERFORMANCE RATIOS Return on average assets 1.36% 1.52% 1.41% Return on average equity 13.12% 15.16% 13.75% Average earning assets to average total assets 89.38% 89.15% 88.92% Average loans as percentage of average deposits 99.00% 102.25% 100.23% Net interest margin (tax equivalent) 4.23% 4.31% 4.41% Average equity to average assets 10.34% 10.02% 10.26% Non-interest income ratio 26.03% 27.30% 26.84% Efficiency ratio 53.19% 54.07% 58.38% ASSET QUALITY Total non-performing assets $14,420,734 $5,845,129 $8,909,958 Non-performing assets as a percentage of loans plus foreclosed assets 0.85% 0.35% 0.56% Net annualized (charge-offs) recoveries as a percentage of average loans 0.48% 0.11% 0.09% Reserve for loan losses as a percentage of loans, at end of period 1.48% 1.47% 1.45% OPERATING EARNINGS Net income $7,698,582 $8,263,915 $7,391,018 Amortization of intangible assets, net 88,266 88,266 87,666 Job reductions - - 231,845 Contract buyout, net - - 172,366 Systems write-offs, net - - 342,104 Operating income $7,786,848 $8,352,181 $8,224,998 Operating earnings per share Basic $0.39 $0.43 $0.43 Diluted $0.38 $0.42 $0.41 Average tangible assets (in thousands) $2,168,483 $2,073,327 $1,993,288 Average tangible equity (in thousands) 131,496 114,588 111,605 Operating return on average tangible assets 1.44% 1.61% 1.65% Operating return on average tangible equity 23.69% 29.16% 29.48% OPERATING BASIS Non-interest expense $15,276,669 $15,360,474 $16,001,254 Net interest income 21,430,713 20,832,969 20,219,242 Non-interest income 7,541,744 7,821,682 7,418,708 Efficiency Ratio 52.73% 53.61% 57.90% MAIN STREET BANKS, INC. FINANCIAL HIGHLIGHTS (Unaudited) Six months ended June 30, 2005 2004 RESULTS OF OPERATIONS Net interest income $44,591,057 $40,145,640 Net interest income (tax equivalent) 44,940,924 40,561,060 Provision for loan losses 6,258,555 2,871,000 Non-interest income 15,672,682 15,258,606 Non-interest expense 32,788,680 31,713,116 Net income 13,988,985 14,987,763 AVERAGE BALANCE SHEET DATA (in thousands) Loans, net of unearned income 1,745,507 1,511,065 Investment securities 313,092 271,852 Earning assets 2,095,695 1,817,360 Total assets 2,346,402 2,043,147 Deposits 1,715,938 1,506,394 Shareholders' equity 282,549 212,461 PER COMMON SHARE Earnings per share - Basic $0.66 $0.78 Earnings per share - Diluted $0.64 $0.75 Book value per share at end of period $13.42 $10.94 End of period shares outstanding 21,415,607 19,381,000 Weighted average shares outstanding Basic 21,326,681 19,316,112 Diluted 21,788,863 19,948,822 STOCK PERFORMANCE Market Price: Closing $25.46 $28.10 High $35.34 $28.82 Low $22.58 $24.90 Trading volume 8,065,400 3,713,700 Cash dividend per share 0.3050 0.2700 Dividend payout ratio 47.64% 35.92% Price to trailing twelve months earnings 17.8 18.8 Price to book value 1.90 2.57 PERFORMANCE RATIOS Return on average assets 1.19% 1.47% Return on average equity 9.90% 14.11% Average earning assets to average total assets 89.32% 88.95% Average loans as percentage of average deposits 101.72% 100.31% Net interest margin (tax equivalent) 4.32% 4.50% Average equity to average assets 12.04% 10.40% Non-interest income ratio 26.01% 27.54% Efficiency ratio 54.41% 57.24% ASSET QUALITY Total non-performing assets $15,637,850 $8,909,958 Non-performing assets as a percentage of loans plus foreclosed assets 0.88% 0.56% Net annualized (charge-offs) recoveries as a percentage of average loans 0.71% 0.12% Reserve for loan losses as a percentage of loans, at end of period 1.43% 1.45% OPERATING EARNINGS Net income $13,988,985 $14,987,763 Amortization of intangible assets, net 186,850 188,929 Job reductions - 231,845 Contract buyout, net - 172,366 Systems write-offs, net - 342,104 Operating income $14,175,835 $15,923,007 Operating earnings per share Basic $0.66 $0.82 Diluted $0.65 $0.80 Average tangible assets (in thousands) $2,244,134 $1,942,071 Average tangible equity (in thousands) 180,281 111,385 Operating return on average tangible assets 1.26% 1.64% Operating return on average tangible equity 15.73% 28.59% OPERATING BASIS Non-interest expense $32,505,574 $31,426,859 Net interest income 44,591,057 40,145,640 Non-interest income 15,672,682 15,258,606 Efficiency Ratio 53.94% 56.72% MAIN STREET BANKS, INC. CONSOLIDATED AVERAGE BALANCE SHEET (Unaudited) Second First Quarter Quarter 2005 2005 ASSETS Cash and due from banks $38,036,348 $38,413,540 Interest-bearing deposits in banks 141,033 243,567 Federal funds sold and securities purchased under agreements to resell 885,618 13,026,003 Investment securities available for sale 298,152,668 305,185,107 Investment securities held to maturity 11,329,939 11,556,504 Other investments 25,327,171 24,575,322 Mortgage loans held for sale 5,221,734 4,833,054 Loans, net of unearned income 1,759,765,993 1,731,088,740 Allowance for loan losses (24,995,678) (25,278,951) Loans, net 1,734,770,315 1,705,809,789 Premises and equipment, net 53,253,079 53,664,240 Other real estate 2,620,025 2,254,889 Accrued interest receivable 9,761,184 9,721,005 Goodwill and other intangible assets 102,240,940 102,295,536 Bank owned life insurance 57,846,281 44,896,055 Other assets 18,037,491 18,580,516 Total assets $2,357,623,826 $2,335,055,127 LIABILITIES Total deposits $1,722,225,634 $1,709,580,366 Accrued interest payable 4,305,048 3,873,319 Federal Home Loan Bank advances 208,078,853 199,122,844 Federal funds purchased and securities sold under repurchase agreements 83,251,628 82,413,785 Subordinated debt 51,547,000 51,547,000 Other liabilities 3,860,957 7,795,279 Total liabilities 2,073,269,120 2,054,332,593 SHAREHOLDERS' EQUITY Common stock-no par value per share 162,787,929 161,945,001 Retained earnings 133,235,732 128,537,617 Accumulated other comprehensive income (2,879,366) (970,495) Treasury stock (8,789,589) (8,789,589) Total shareholders' equity 284,354,706 280,722,534 Total liabilities and shareholders' equity $2,357,623,826 $2,335,055,127 MAIN STREET BANKS, INC. CONSOLIDATED AVERAGE BALANCE SHEET (Unaudited) Fourth Third Second Quarter Quarter Quarter 2004 2004 2004 ASSETS Cash and due from banks $40,385,275 $39,565,158 $38,220,151 Interest-bearing deposits in banks 323,412 662,555 660,111 Federal funds sold and securities purchased under agreements to resell 36,014,795 1,037,646 357,846 Investment securities available for sale 282,198,873 276,497,775 270,851,196 Investment securities held to maturity 11,733,821 11,945,588 11,998,340 Other investments 21,866,256 24,140,813 21,352,832 Mortgage loans held for sale 7,413,513 5,954,007 7,860,559 Loans, net of unearned income 1,670,976,218 1,620,436,393 1,551,258,388 Allowance for loan losses (24,559,019) (23,402,241) (22,505,292) Loans, net 1,646,417,199 1,597,034,152 1,528,753,096 Premises and equipment, net 52,672,981 50,125,904 46,440,339 Other real estate 1,868,635 1,914,645 2,584,703 Accrued interest receivable 9,091,675 9,058,791 7,874,920 Goodwill and other intangible assets 103,299,382 103,470,116 103,445,869 Bank owned life insurance 41,722,058 41,191,340 41,471,029 Other assets 16,774,679 14,198,902 14,863,167 Total assets $2,271,782,554 $2,176,797,392 $2,096,734,158 LIABILITIES Total deposits $1,687,864,307 $1,584,818,716 $1,547,738,831 Accrued interest payable 3,678,457 3,312,458 3,129,282 Federal Home Loan Bank advances 205,771,676 158,242,407 148,344,127 Federal funds purchased and securities sold under repurchase agreements 80,364,169 153,386,148 126,594,813 Subordinated debt 51,547,000 51,547,000 51,547,000 Other liabilities 7,761,366 7,432,893 4,329,275 Total liabilities 2,036,986,975 1,958,739,621 1,881,683,328 SHAREHOLDERS' EQUITY Common stock-no par value per share 116,719,468 107,626,919 107,346,374 Retained earnings 126,192,533 120,402,848 114,838,884 Accumulated other comprehensive income 673,167 (1,182,407) 1,655,161 Treasury stock (8,789,589) (8,789,589) (8,789,589) Total shareholders' equity 234,795,579 218,057,771 215,050,830 Total liabilities and shareholders' equity $2,271,782,554 $2,176,797,392 $2,096,734,158 MAIN STREET BANKS, INC. CONSOLIDATED AVERAGE BALANCE SHEET (Unaudited) Six months ended June 30, 2005 2004 ASSETS Cash and due from banks $38,223,902 $37,096,382 Interest-bearing deposits in banks 192,017 415,548 Federal funds sold and securities purchased under agreements to resell 6,922,274 7,057,811 Investment securities available for sale 301,649,461 260,232,612 Investment securities held to maturity 11,442,595 11,619,323 Other investments 24,953,324 20,696,734 Mortgage loans held for sale 5,028,468 6,273,627 Loans, net of unearned income 1,745,506,585 1,511,064,500 Allowance for loan losses (25,136,532) (21,956,993) Loans, net 1,720,370,053 1,489,107,507 Premises and equipment, net 53,457,523 45,036,091 Other real estate 2,438,465 2,705,695 Accrued interest receivable 9,741,205 7,745,125 Goodwill and other intangible assets 102,268,087 101,075,802 Bank owned life insurance 51,406,942 39,699,635 Other assets 18,307,508 14,385,286 Total assets $2,346,401,824 $2,043,147,178 LIABILITIES Total deposits $1,715,937,933 $1,506,393,900 Accrued interest payable 4,090,376 3,077,639 Federal Home Loan Bank advances 203,625,589 147,751,919 Federal funds purchased and securities sold under repurchase agreements 82,835,021 118,596,695 Subordinated debt 51,547,000 50,443,500 Other liabilities 5,817,250 4,422,349 Total liabilities 2,063,853,169 1,830,686,002 SHAREHOLDERS' EQUITY Common stock-no par value per share 162,368,794 104,878,948 Retained earnings 130,899,654 113,363,335 Accumulated other comprehensive income (1,930,204) 3,008,257 Treasury stock (8,789,589) (8,789,364) Total shareholders' equity 282,548,655 212,461,176 Total liabilities and shareholders' equity $2,346,401,824 $2,043,147,178 MAIN STREET BANKS, INC. CONSOLIDATED END OF PERIOD BALANCE SHEET (Unaudited) Second First Quarter Quarter 2005 2005 ASSETS Cash and due from banks $35,632,553 $37,016,874 Interest-bearing deposits in banks 125,141 144,243 Federal funds sold and securities purchased under agreements to resell 355,123 1,241,968 Investment securities available for sale 304,031,061 288,157,730 Investment securities held to maturity 13,110,149 11,510,170 Other investments 26,073,954 22,378,119 Mortgage loans held for sale 8,633,024 5,915,770 Loans, net of unearned income 1,763,780,879 1,743,589,208 Allowance for loan losses (25,242,328) (24,983,997) Loans, net 1,738,538,551 1,718,605,211 Premises and equipment, net 53,101,387 53,248,494 Other real estate 4,094,710 1,888,882 Accrued interest receivable 10,012,138 9,577,443 Goodwill and other intangible assets 102,234,740 102,294,796 Bank owned life insurance 58,271,098 57,586,480 Other assets 17,209,180 18,672,474 Total assets $2,371,422,809 $2,328,238,654 LIABILITIES Total deposits $1,677,850,141 $1,746,438,371 Accrued interest payable 4,714,122 4,365,986 Federal Home Loan Bank advances 203,302,648 185,936,423 Federal funds purchased and securities sold under repurchase agreements 135,722,681 56,563,910 Subordinated debt 51,547,000 51,547,000 Other liabilities 10,803,254 2,897,625 Total liabilities 2,083,939,846 2,047,749,315 SHAREHOLDERS' EQUITY Common stock-no par value per share 163,109,671 162,418,990 Retained earnings 135,005,706 131,273,960 Accumulated other comprehensive income (1,842,825) (4,414,022) Treasury stock (8,789,589) (8,789,589) Total shareholders' equity 287,482,963 280,489,339 Total liabilities and shareholders' equity $2,371,422,809 $2,328,238,654 MAIN STREET BANKS, INC. CONSOLIDATED END OF PERIOD BALANCE SHEET (Unaudited) Fourth Third Second Quarter Quarter Quarter 2004 2004 2004 ASSETS Cash and due from banks $35,090,563 $55,719,486 $42,090,671 Interest-bearing deposits in banks 317,953 1,058,235 1,078,334 Federal funds sold and securities purchased under agreements to resell 35,812,949 24,410,000 713,000 Investment securities available for sale 315,520,771 282,814,235 272,596,604 Investment securities held to maturity 11,715,948 11,835,353 11,998,436 Other investments 23,781,977 23,040,424 23,876,638 Mortgage loans held for sale 4,562,962 6,931,843 6,221,181 Loans, net of unearned income 1,699,035,573 1,653,615,534 1,594,290,721 Allowance for loan losses (25,191,175) (24,256,034) (23,118,946) Loans, net 1,673,844,398 1,629,359,500 1,571,171,775 Premises and equipment, net 53,469,516 52,504,434 48,391,110 Other real estate 2,141,040 1,082,267 1,914,985 Accrued interest receivable 9,762,826 9,243,097 9,060,367 Goodwill and other intangible assets 102,169,572 103,392,163 103,514,753 Bank owned life insurance 42,056,525 41,528,162 41,006,405 Other assets 16,286,895 15,473,682 13,530,493 Total assets $2,326,533,895 $2,258,392,881 $2,147,164,752 LIABILITIES Total deposits $1,710,209,913 $1,630,286,409 $1,566,290,310 Accrued interest payable 3,955,183 3,488,406 3,284,308 Federal Home Loan Bank advances 201,070,198 226,203,972 166,337,747 Federal funds purchased and securities sold under repurchase agreements 73,367,456 115,191,909 142,324,882 Subordinated debt 51,547,000 51,547,000 51,547,000 Other liabilities 8,300,069 9,353,208 5,413,930 Total liabilities 2,048,449,819 2,036,070,904 1,935,198,177 SHAREHOLDERS' EQUITY Common stock-no par value per share 159,520,536 108,197,312 107,446,736 Retained earnings 127,566,247 121,717,798 116,073,951 Accumulated other comprehensive income (213,118) 1,196,456 (2,764,523) Treasury stock (8,789,589) (8,789,589) (8,789,589) Total shareholders' equity 278,084,076 222,321,977 211,966,575 Total liabilities and shareholders' equity $2,326,533,895 $2,258,392,881 $2,147,164,752 MAIN STREET BANKS, INC. LOAN AND DEPOSIT STRATIFICATION - AVERAGE BALANCE (Unaudited) Second First Quarter Quarter 2005 2005 LOAN PORTFOLIO Real estate: Residential Mortgage $294,195,800 $292,858,471 Construction 445,263,060 423,305,704 Commercial real estate 850,921,595 849,083,205 Commercial and Industrial 132,200,777 130,172,235 Consumer 40,522,214 38,727,904 Unearned income (3,337,453) (3,058,779) Total loans $1,759,765,993 $1,731,088,740 Loan growth 1.7% 3.6% Loan growth, annualized 6.6% 14.6% DEPOSITS Non-interest bearing demand $248,007,497 $236,034,860 Interest bearing demand 108,260,094 100,286,778 Money Market 418,816,788 424,103,093 Savings 38,493,959 39,130,954 Total transaction accounts 813,578,338 799,555,685 Public funds - transaction 129,016,632 136,729,949 Total low cost core deposits 942,594,970 936,285,634 Time deposits - public funds 6,498,787 8,639,465 Time deposits 773,131,877 764,655,267 Total deposits $1,722,225,634 $1,709,580,366 Deposit growth 0.7% 1.3% Deposit growth, annualized 3.0% 5.2% Percentage low cost core to total deposits 54.7% 54.8% Percentage growth of low cost core deposits 0.7% 3.1% Annualized growth of low cost core deposits 2.7% 12.7% MAIN STREET BANKS, INC. LOAN AND DEPOSIT STRATIFICATION - AVERAGE BALANCE (Unaudited) Fourth Third Second Quarter Quarter Quarter 2004 2004 2004 LOAN PORTFOLIO Real estate: Residential Mortgage $281,462,005 $273,432,769 $282,232,843 Construction 391,920,774 363,078,743 330,890,205 Commercial real estate 830,254,990 810,360,972 777,875,079 Commercial and Industrial 128,991,523 132,863,667 121,775,532 Consumer 41,144,935 43,192,305 40,504,974 Unearned income (2,798,009) (2,492,063) (2,020,245) Total loans $1,670,976,218 $1,620,436,393 $1,551,258,388 Loan growth 3.1% 4.5% 2.6% Loan growth, annualized 12.4% 17.7% 10.6% DEPOSITS Non-interest bearing demand $239,012,426 $236,870,114 $235,033,715 Interest bearing demand 101,438,793 101,844,880 104,994,476 Money Market 380,844,795 351,463,821 332,538,410 Savings 40,449,412 40,809,815 39,958,418 Total transaction accounts 761,745,426 730,988,630 712,525,019 Public funds - transaction 146,006,064 95,022,428 102,267,990 Total low cost core deposits 907,751,490 826,011,058 814,793,009 Time deposits - public funds 13,886,003 15,522,522 16,828,993 Time deposits 766,226,814 743,285,136 716,116,829 Total deposits $1,687,864,307 $1,584,818,716 $1,547,738,831 Deposit growth 6.5% 2.4% 1.1% Deposit growth, annualized 25.9% 9.5% 4.4% Percentage low cost core to total deposits 53.8% 52.1% 52.6% Percentage growth of low cost core deposits 9.9% 1.4% 2.5% Annualized growth of low cost core deposits 39.4% 5.5% 10.2% MAIN STREET BANKS, INC. CONSOLIDATED STATEMENT OF INCOME (Unaudited) Second First Quarter Quarter 2005 2005 NET INTEREST INCOME Loans, including fees $32,116,060 $29,590,608 Interest on investment securities: Taxable 2,748,206 2,761,476 Non-taxable 339,353 339,801 Federal funds sold and repurchase agreements 8,697 66,071 Interest bearing deposits in banks 12,168 12,052 Interest on other investments 236,682 189,875 Total interest income 35,461,166 32,959,883 INTEREST EXPENSE Interest-bearing demand and money market 3,643,040 3,500,665 Savings 66,256 62,247 Time deposits 5,748,930 5,192,482 Other time deposits 39,661 43,928 Federal funds purchased 633,879 457,841 Federal Home Loan Bank advances 1,455,212 1,178,544 Interest expense on subordinated debentures 826,424 748,720 Other 67,280 164,883 Total interest expense 12,480,682 11,349,310 Net interest income 22,980,484 21,610,573 Provision for loan losses 4,050,000 2,208,555 Net interest income after provision for loan losses 18,930,484 19,402,018 NON-INTEREST INCOME Service charges on deposit accounts 2,152,332 1,896,864 Other customer service fees 362,387 340,037 Mortgage banking revenue 680,997 692,322 Investment brokerage revenue 148,419 400,504 Insurance agency revenue 2,349,254 3,173,741 Income from SBA lending 1,538,549 829,381 Other income 514,464 593,431 Total non-interest income 7,746,402 7,926,280 NON-INTEREST EXPENSE Salaries and other compensation 8,578,707 7,932,171 Employee benefits 1,298,090 1,620,366 Net occupancy and equipment expense 2,114,375 2,051,501 Data processing fees 495,055 510,076 Professional services 828,967 468,973 Communications and supplies 987,939 962,022 Amortization of intangible assets 130,764 128,750 Other expense 2,851,616 1,829,308 Total non-interest expense 17,285,513 15,503,167 Income before income taxes 9,391,373 11,825,131 Income tax expense 3,585,379 3,642,140 Net income $5,805,994 $8,182,991 EARNINGS PER SHARE Basic $0.27 $0.38 Diluted $0.27 $0.38 WEIGHTED AVERAGE SHARES OUTSTANDING Basic 21,375,087 21,277,737 Diluted 21,899,426 21,818,118 CASH DIVIDENDS PER SHARE $0.1525 $0.1525 MAIN STREET BANKS, INC. CONSOLIDATED STATEMENT OF INCOME (Unaudited) Fourth Third Second Quarter Quarter Quarter 2004 2004 2004 NET INTEREST INCOME Loans, including fees $28,519,255 $26,809,369 $25,473,584 Interest on investment securities: Taxable 2,518,397 2,428,436 2,362,075 Non-taxable 351,946 365,183 388,746 Federal funds sold and repurchase agreements 147,716 2,111 3,751 Interest bearing deposits in banks 7,495 6,545 3,724 Interest on other investments 122,662 240,218 238,518 Total interest income 31,667,471 29,851,862 28,470,398 INTEREST EXPENSE Interest-bearing demand and money market 2,505,441 1,885,099 1,828,848 Savings 64,185 61,766 73,775 Time deposits 5,117,216 4,756,612 4,470,715 Other time deposits 65,963 64,442 64,462 Federal funds purchased 357,707 561,511 333,018 Federal Home Loan Bank advances 1,227,700 876,478 663,793 Interest expense on subordinated debentures 724,326 637,085 574,946 Other 174,220 175,900 241,599 Total interest expense 10,236,758 9,018,893 8,251,156 Net interest income 21,430,713 20,832,969 20,219,242 Provision for loan losses 2,956,380 1,602,500 1,310,000 Net interest income after provision for loan losses 18,474,333 19,230,469 18,909,242 NON-INTEREST INCOME Service charges on deposit accounts 2,047,804 2,165,224 2,023,191 Other customer service fees 375,445 276,909 352,392 Mortgage banking revenue 721,363 809,807 859,631 Investment brokerage revenue 194,241 133,479 185,330 Insurance agency revenue 2,393,185 2,514,479 2,370,375 Income from SBA lending 946,164 1,270,397 367,859 Other income 863,542 651,387 1,259,930 Total non-interest income 7,541,744 7,821,682 7,418,708 NON-INTEREST EXPENSE Salaries and other compensation 8,208,721 7,999,790 7,688,444 Employee benefits 1,195,115 1,170,201 1,519,972 Net occupancy and equipment expense 2,079,450 2,090,931 2,208,378 Data processing fees 554,645 325,617 223,450 Professional services 506,351 715,789 583,177 Communications and supplies 893,426 1,027,203 1,027,631 Amortization of intangible assets 122,591 122,591 121,758 Other expense 1,850,106 2,042,088 2,761,271 Total non-interest expense 15,410,405 15,494,210 16,134,081 Income before income taxes 10,605,672 11,557,941 10,193,869 Income tax expense 2,907,090 3,294,026 2,802,851 Net income $7,698,582 $8,263,915 $7,391,018 EARNINGS PER SHARE Basic $0.39 $0.43 $0.38 Diluted $0.38 $0.41 $0.37 WEIGHTED AVERAGE SHARES OUTSTANDING Basic 19,756,947 19,428,145 19,351,343 Diluted 20,372,205 20,015,560 19,974,058 CASH DIVIDENDS PER SHARE $0.1350 $0.1350 $0.1350 MAIN STREET BANKS, INC. CONSOLIDATED STATEMENT OF INCOME (Unaudited) Six months ended June 30, 2005 2004 NET INTEREST INCOME Loans, including fees $61,706,668 $50,255,426 Interest on investment securities: Taxable 5,509,682 4,609,113 Non-taxable 679,154 806,403 Federal funds sold and repurchase agreements 74,768 34,150 Interest bearing deposits in banks 24,220 8,947 Interest on other investments 426,557 444,180 Total interest income 68,421,049 56,158,219 INTEREST EXPENSE Interest-bearing demand and money market 7,143,705 3,151,066 Savings 128,503 162,482 Time deposits 10,941,412 8,933,803 Other time deposits 83,589 120,275 Federal funds purchased 1,091,720 367,719 Federal Home Loan Bank advances 2,633,756 1,530,051 Interest expense on subordinated debentures 1,575,144 1,149,892 Other 232,163 597,291 Total interest expense 23,829,992 16,012,579 Net interest income 44,591,057 40,145,640 Provision for loan losses 6,258,555 2,871,000 Net interest income after provision for loan losses 38,332,502 37,274,640 NON-INTEREST INCOME Service charges on deposit accounts 4,049,196 3,903,712 Other customer service fees 702,424 709,187 Mortgage banking revenue 1,373,319 1,742,759 Investment brokerage revenue 548,923 500,410 Insurance agency revenue 5,522,995 5,142,076 Income from SBA lending 2,367,930 853,777 Other income 1,107,895 2,406,685 Total non-interest income 15,672,682 15,258,606 NON-INTEREST EXPENSE Salaries and other compensation 16,510,878 15,729,643 Employee benefits 2,918,456 3,160,235 Net occupancy and equipment expense 4,165,876 4,068,073 Data processing fees 1,005,131 780,751 Professional services 1,297,940 1,021,572 Communications and supplies 1,949,961 2,078,519 Amortization of intangible assets 259,514 262,402 Other expense 4,680,924 4,611,921 Total non-interest expense 32,788,680 31,713,116 Income before income taxes 21,216,504 20,820,130 Income tax expense 7,227,519 5,832,367 Net income $13,988,985 $14,987,763 EARNINGS PER SHARE Basic $0.66 $0.78 Diluted $0.64 $0.75 WEIGHTED AVERAGE SHARES OUTSTANDING Basic 21,326,681 19,316,112 Diluted 21,788,863 19,948,822 CASH DIVIDENDS PER SHARE $0.3050 $0.2700 MAIN STREET BANKS, INC. SUMMARY OF INTEREST RATES (TAX-EQUIVALENT) (Unaudited) Second First Quarter Quarter 2005 2005 EARNING ASSETS Total interest earning assets (in thousands) $2,101,703 $2,092,064 Loans 7.30% 6.84% Investment securities 4.23% 4.15% Federal funds sold 2.70% 2.03% Loans held for sale 6.08% 5.87% FHLB stock & other 3.87% 3.60% Total interest earning assets 6.80% 6.36% INTEREST-BEARING LIABILITIES Total interest-bearing liabilities (in thousands) $2,065,982 $2,042,664 Demand deposits 1.51% 1.61% Demand deposits - public funds 1.99% 1.02% Time deposits 2.98% 2.72% Retail repurchases 1.71% 1.58% Federal funds purchased 3.44% 2.76% Federal Home Loan bank advances 2.81% 2.37% Securities sold under agreement to repurchase 4.89% 4.62% Subordinated debentures 6.43% 5.83% Net Cost of Funds 2.42% 2.23% NET INTEREST SPREAD Interest earning assets less interest- bearing liabilities (in thousands) $35,721 $49,400 Yield on earning assets less cost of interest-bearing liabilities and non-interest bearing liabilities 4.38% 4.13% NET INTEREST MARGIN Net interest income (tax equivalent) as a percentage of average earning assets 4.42% 4.18% MAIN STREET BANKS, INC. SUMMARY OF INTEREST RATES (TAX-EQUIVALENT) (Unaudited) Fourth Third Second Quarter Quarter Quarter 2004 2004 2004 EARNING ASSETS Total interest earning assets (in thousands) $2,030,527 $1,940,675 $1,864,339 Loans 6.77% 6.56% 6.58% Investment securities 4.13% 4.11% 4.20% Federal funds sold 1.63% 1.18% 1.12% Loans held for sale 4.65% 4.93% 4.57% FHLB stock & other 2.33% 3.96% 4.43% Total interest earning assets 6.20% 6.12% 6.14% INTEREST-BEARING LIABILITIES Total interest-bearing liabilities (in thousands) $2,025,547 $1,947,994 $1,874,225 Demand deposits 1.26% 0.92% 0.92% Demand deposits - public funds 0.43% 0.61% 1.05% Time deposits 2.72% 2.59% 2.49% Retail repurchases 1.62% 1.62% 1.69% Federal funds purchased 2.28% 1.68% 1.37% Federal Home Loan bank advances 2.37% 2.20% 1.80% Securities sold under agreement to repurchase 4.53% 4.53% 4.57% Subordinated debentures 5.59% 4.92% 4.49% Net Cost of Funds 2.01% 1.84% 1.77% NET INTEREST SPREAD Interest earning assets less interest- bearing liabilities (in thousands) $4,980 $(7,319) $(9,885) Yield on earning assets less cost of interest-bearing liabilities and non-interest bearing liabilities 4.19% 4.28% 4.37% NET INTEREST MARGIN Net interest income (tax equivalent) as a percentage of average earning assets 4.23% 4.31% 4.41% MAIN STREET BANKS, INC. SUMMARY OF INTEREST RATES (TAX-EQUIVALENT) (Unaudited) Six months ended June 30, 2005 2004 EARNING ASSETS Total interest earning assets (in thousands) $2,096,136 $1,817,360 Loans 7.11% 6.67% Investment securities 4.21% 3.97% Federal funds sold 2.34% 0.89% Loans held for sale 6.01% 4.86% FHLB stock & other 3.53% 4.32% Total interest earning assets 6.62% 6.21% INTEREST-BEARING LIABILITIES Total interest-bearing liabilities (in thousands) $2,054,387 $1,823,186 Demand deposits 1.57% 0.83% Demand deposits - public funds 1.50% 1.07% Time deposits 2.86% 2.50% Retail repurchases 1.65% 1.70% Federal funds purchased 3.20% 1.26% Federal Home Loan bank advances 2.61% 1.80% Securities sold under agreement to repurchase 4.71% 4.30% Subordinated debentures 6.16% 4.58% Net Cost of Funds 2.34% 1.77% NET INTEREST SPREAD Interest earning assets less interest- bearing liabilities (in thousands) $41,749 $(5,826) Yield on earning assets less cost of interest-bearing liabilities and non-interest bearing liabilities 4.28% 4.45% NET INTEREST MARGIN Net interest income (tax equivalent) as a percentage of average earning assets 4.32% 4.50% MAIN STREET BANKS, INC. LOAN QUALITY (Unaudited) Second First Quarter Quarter 2005 2005 RESERVE FOR POSSIBLE LOAN LOSSES Reserve for loan losses at beginning of period $24,983,997 $25,191,175 Reserves acquired through acquisition - - Provision for loan losses 4,050,000 2,208,555 Loans charged-off during the period (4,188,669) (3,553,825) Recoveries on loans previously charged-off 397,000 1,138,092 Net loans (charged-off) recovered during period (3,791,669) (2,415,733) Reserve for loan losses at end of period $25,242,328 $24,983,997 Net charge-offs to average loans, annualized 0.86% 0.56% Gross charge-offs to average loans, annualized 0.95% 0.82% Recoveries as a percentage of gross charge-offs 9.48% 32.02% Reserve for loan losses as a percentage of loans, at end of period 1.43% 1.43% NON-PERFORMING ASSETS Loans accounted for on a non-accrual basis $11,543,140 $19,036,696 Restructured loans - - Total non-performing loans 11,543,140 19,036,696 Foreclosed assets 4,094,710 2,006,494 Total non-performing assets $15,637,850 $21,043,190 Non-performing assets as a percentage of loans plus foreclosed assets, at end of period 0.88% 1.21% Non-performing assets as a percentage of total assets, at end of period 0.66% 0.90% Reserve for loan losses as a percentage of non-performing assets, at end of period 161.42% 118.73% Loans 90 days past due and still accruing $2,367,863 $4,222,658 Loans 90 days past due and still accruing as a percentage of loans, at end of period 0.13% 0.24% MAIN STREET BANKS, INC. LOAN QUALITY (Unaudited) Fourth Third Second Quarter Quarter Quarter 2004 2004 2004 RESERVE FOR POSSIBLE LOAN LOSSES Reserve for loan losses at beginning of period $24,256,034 $23,118,946 $22,150,651 Reserves acquired through acquisition - - - Provision for loan losses 2,956,380 1,602,500 1,310,000 Loans charged-off during the period (2,289,524) (1,103,582) (657,213) Recoveries on loans previously charged-off 268,285 638,170 315,508 Net loans (charged-off) recovered during period (2,021,239) (465,412) (341,705) Reserve for loan losses at end of period $25,191,175 $24,256,034 $23,118,946 Net charge-offs to average loans, annualized 0.48% 0.11% 0.09% Gross charge-offs to average loans, annualized 0.55% 0.27% 0.17% Recoveries as a percentage of gross charge-offs 11.72% 57.83% 48.01% Reserve for loan losses as a percentage of loans, at end of period 1.48% 1.47% 1.45% NON-PERFORMING ASSETS Loans accounted for on a non- accrual basis $12,254,820 $4,712,752 $5,179,265 Restructured loans - - - Total non-performing loans 12,254,820 4,712,752 5,179,265 Foreclosed assets 2,165,914 1,132,377 3,730,693 Total non-performing assets $14,420,734 $5,845,129 $8,909,958 Non-performing assets as a percentage of loans plus foreclosed assets, at end of period 0.85% 0.35% 0.56% Non-performing assets as a percentage of total assets, at end of period 0.62% 0.26% 0.41% Reserve for loan losses as a percentage of non-performing assets, at end of period 174.69% 414.98% 259.47% Loans 90 days past due and still accruing $5,657,986 $2,062,584 $3,628,399 Loans 90 days past due and still accruing as a percentage of loans, at end of period 0.33% 0.12% 0.23% MAIN STREET BANKS, INC. LOAN QUALITY (Unaudited) Six months ended June 30, 2005 2004 RESERVE FOR POSSIBLE LOAN LOSSES Reserve for loan losses at beginning of period $25,191,175 $21,151,987 Reserves acquired through acquisition - - Provision for loan losses 6,258,555 2,871,000 Loans charged-off during the period (7,742,494) (1,307,351) Recoveries on loans previously charged-off 1,535,092 403,310 Net loans (charged-off) recovered during period (6,207,402) (904,041) Reserve for loan losses at end of period $25,242,328 $23,118,946 Net charge-offs to average loans, annualized 0.71% 0.12% Gross charge-offs to average loans, annualized 0.89% 0.17% Recoveries as a percentage of gross charge-offs 19.83% 30.85% Reserve for loan losses as a percentage of loans, at end of period 1.43% 1.45% NON-PERFORMING ASSETS Loans accounted for on a non-accrual basis $11,543,140 $5,179,265 Restructured loans - - Total non-performing loans 11,543,140 5,179,265 Foreclosed assets 4,094,710 3,730,693 Total non-performing assets $15,637,850 $8,909,958 Non-performing assets as a percentage of loans plus foreclosed assets, at end of period 0.88% 0.56% Non-performing assets as a percentage of total assets, at end of period 0.66% 0.41% Reserve for loan losses as a percentage of non-performing assets, at end of period 161.42% 259.47% Loans 90 days past due and still accruing $2,367,863 $3,628,399 Loans 90 days past due and still accruing as a percentage of loans, at end of period 0.13% 0.23% DATASOURCE: Main Street Banks, Inc. CONTACT: Samuel B. Hay III, President and CEO, or David W. Brooks II, Executive Vice President and CFO of Main Street Banks, +1-770-786-3441 Web site: http://www.mainstreetbank.com/

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