Main Street Banks (NASDAQ:MSBK)
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Main Street Banks Lowers 2005 Earnings Forecast
ATLANTA, March 7 /PRNewswire-FirstCall/ -- Main Street Banks, Inc.
(NASDAQ:MSBK) announced today that it has lowered its forecast for 2005
earnings per share growth over 2004 to between five and eight percent due to a
flat net interest margin, investment in internal growth, a higher effective tax
rate and the early adoption of FAS 123R. The company also announced that due
to the demolition and reconstruction of a banking center, it expects diluted
earnings per share to be between $0.36 and $0.38 per share in the first quarter
of 2005.
Main Street's net interest margin has remained flat during the current rising
interest rate environment. Strong demand for variable rate loans, a flattening
yield curve and higher cost funds used to support rapid loan growth have
hindered expected margin expansion. Through February 28, Main Street's net
loans have increased 19.1% on an annualized basis since year-end.
Main Street continues its emphasis on internal growth. The company believes
that the opening of the Midtown Atlanta Banking Center in late December and
continued hiring in the midst of significant market disruption will provide
sustainable value in the long-term. This growth, however, has increased
overhead costs in the short-run. Construction also continues on the company's
previously announced banking center locations at The Galleria and in Suwanee,
Georgia.
In December 2004, Main Street issued 1.725 million common shares in an equity
offering. The shares issued represented 8.9% of shares outstanding prior to
the offering and this dilution has impacted earnings per share growth more than
was previously expected. The company anticipates investing the proceeds in
personnel and banking facilities as it pursues internal growth in the dynamic
metropolitan Atlanta market.
For 2005, Main Street expects to experience an effective tax rate of
approximately 31%, compared to a rate of 28% during 2004. This rate increase
is planned due to changes in the level of tax-advantaged loans and investments
and is impacted by federal and state tax planning strategies.
To provide for consistency in 2005, Main Street will adopt FAS 123R early and
will begin expensing stock options in the first quarter of 2005. The company
expects the adoption of FAS 123R to reduce 2005 annual earnings by
approximately $0.03 per share.
Main Street also expects first quarter 2005 results to be impacted by the
replacement of a banking center in Conyers, Georgia. This center has been
demolished to provide for the recent opening of a full-service banking center
which was newly constructed. The non-cash, onetime write-off of the facility
is expected to reduce first quarter 2005 earnings by approximately $0.02 per
share.
Main Street continues to enjoy and foresee strong growth in its main business
lines. In commenting on the announcement, Samuel B. Hay III, president and
CEO, said, "Our core banking business remains strong, despite the short-term
growing pains announced today. In addition, our other businesses are in line
with previous expectations for contributing to our bottom line in 2005. We
also expect nonperforming assets to decline during the current quarter and
foresee continued improvement in asset quality for the remainder of 2005."
Main Street expects to return to its previous target of 12 to 15 percent
earnings per share growth in 2006. The company is currently enhancing its
deposit product offering and launching a free checking program under the name
"High Performance Checking." The program is expected to improve Main Street's
success in attracting core deposits from and relationships with retail clients,
and features aggressive mail marketing and significant promotional activities
and incentives.
About Main Street
Main Street Banks, Inc., a $2.3 billion asset, community banking organization
based in metropolitan Atlanta, provides a broad range of banking, brokerage,
insurance, and mortgage 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.
Cautionary Statement Regarding Forward-Looking Information
Statements contained in this press release which are not historical facts 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 earnings per
share growth in 2005 and for earnings per share in the first quarter of 2005,
the expected use of proceeds from the recent common stock offering, the
expected long-term value of growth strategy, the future growth of business
lines, the expected improvement in asset quality in 2005, and the expected
success of the High Performance Checking program. 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/A for the year ended December 31, 2003 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 best
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.
DATASOURCE: Main Street Banks, Inc.
CONTACT: Samuel B. Hay III, President & CEO of Main Street Banks,
+1-770-385-2424
Web site: http://www.mainstreetbank.com/