Main Street Banks Reports 16 Percent Increase in Net Income

Share Name	Share Symbol	Market	Type
Main Street Banks (MM)	NASDAQ:MSBK	NASDAQ	Common Stock

Main Street Banks (NASDAQ:MSBK)
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Main Street Banks Reports 16 Percent Increase in Net Income ATLANTA, July 21 /PRNewswire-FirstCall/ -- Main Street Banks, Inc. (NASDAQ:MSBK), Atlanta's largest and highest performing community banking company, reported net income of $7.4 million for the three months ended June 30, 2004 compared to $6.4 million in the second quarter of 2003, an increase of 15.6 percent. Diluted earnings per share for the second quarter of 2004 were $0.37 versus $0.35 for the second quarter of 2003, a 5.7 percent increase. Net income for the six months ended June 30, 2004 was $15.0 million, a 24.0 percent increase over the $12.1 million reported in the same period of 2003. Diluted earnings per share for the six months ended June 30, 2004 were $0.75 versus $0.70 per share for the six months ended June 30, 2003, a 7.1 percent increase. Return on average assets was 1.41 percent for the second quarter of 2004 and return on average shareholder's equity was 13.8 percent. For the first six months of 2004, return on average assets was 1.47 percent and return on average shareholder's equity was 14.1 percent. Operating income for the second quarter of 2004 was $8.2 million, up 28.1 percent from the $6.4 million earned in the same period in 2003. This translates into second quarter operating earnings per diluted share of $0.41 versus $0.36 in the same period in 2003, representing a 13.9 percent increase. "Operating income excludes the impact of intangible amortization expense, the write-off of software which has become obsolete due to the Jack Henry core processing system conversion, the buy-out of a system related contract, and severance dollars paid in the reduction of 38 jobs that were associated with the core processing conversion and other productivity initiatives implemented during the second quarter of 2004," said chairman and chief executive officer Edward C. Milligan. Management believes operating earnings provides another appropriate measure of business performance for companies who have either completed acquisitions and created amortizable intangible assets or had unusual events. See attached tables showing the effects of the events on operating earnings and the comparison to GAAP earnings. Operating return on average tangible assets for the second quarter of 2004 was 1.65 percent and operating return on average tangible equity for the second quarter of 2004 was 29.5 percent. Operating income for the first six months of 2004 was $15.9 million, up 29.3 percent from the $12.3 million earned in the comparable six months in 2003. This translates into six-month operating earnings per diluted share of $0.80 versus $0.71 in the same period in 2003, up 12.7 percent. Operating return on average tangible assets for the first six months of 2004 was 1.64 percent and operating return on average tangible equity for the first six months of 2004 was 28.6 percent. "The second quarter of 2004 was another excellent quarter for Main Street Banks," said Milligan. "Our performance was driven by robust loan and deposit growth, a healthy net interest margin, and superior growth in non-interest income compared to the same period in 2003." Milligan continued, "We are gratified by our continued high performance and by our successful conversion to the Jack Henry Silverlake platform. Our company now operates seamlessly on one integrated system, and this conversion marks the completion of the integration of seven banks over the last three years. Having unified our banks under one charter and culture, we now have the right team, systems and structure to carry us far into the future." Strong Loan Growth Combined With Solid Credit Quality As of June 30, 2004, Main Street Banks' loans outstanding were $1.594 billion, reflecting an increase of $211 million or 15.3 percent, compared to the same period last year. Annualized net charge-offs decreased to 0.09 percent of average loans for the second quarter of 2004 from 0.39 percent in the second quarter of 2003. Non-performing assets increased modestly in the second quarter to 0.41 percent of assets from 0.37 percent at June 30, 2003. The allowance for loan losses at June 30, 2004 was $23.1 million and represented 1.45 percent of loans outstanding at the end of the period compared to $20.3 million and 1.47 percent of loans outstanding in the second quarter of 2003. During the quarter, a portion of the loan loss provision was released due to the expiration of recourse terms on a sold credit card loan portfolio and improving asset quality trends. Positive Trends in Transaction Deposits As of June 30, 2004, Main Street Banks' total deposits were $1.566 billion, reflecting an increase of $160 million, or 11.4 percent, compared to the same period last year. The Company's deposit mix continued to improve as low cost core deposits grew 13.7 percent over the same period from June 30, 2003, while reliance on high cost certificates of deposit was reduced through the company's disciplined pricing structure. Low cost core deposits totaled $820 million at June 30, 2004 compared to $721 million at the end of the second quarter of 2003, an increase of $99 million. Net Interest Margin Declines but Remains Healthy The company's net interest margin was 4.42 percent for the second quarter of 2004, down from 5.01 percent in the comparable period last year, but remained in the top quartile of the Company's peers. The reduction in margin over 2003 was primarily the result of the company's acquisitions of First Colony Bancshares in May 2003 and the First National Bank of Johns Creek in December 2002. Main Street's fully taxable equivalent net interest income totaled $20.5 million for the second quarter of 2004, an increase of $2.0 million or 10.8 percent, compared to the second quarter of 2003. Noninterest Income Up 32.1% Over Previous Year Compared to the second quarter of 2003, noninterest income grew at a healthy pace in the second quarter of 2004. The company reported total noninterest income of $7.4 million for the second quarter, an increase of 32.1 percent or $1.8 million over the second quarter of 2003. Solid growth in income from insurance agency commissions, securities gains, and service charge income contributed to this increase. Insurance agency revenue totaled $2.4 million for the second quarter of 2004, an increase of 100.0 percent or $1.2 million compared to the second quarter last year. The acquisition of Banks Moneyhan Hayes Insurance in January 2004 contributed 66.7% of this increase. Excluding the effect of the acquisition, insurance agency revenue increased 25.0% over the second quarter last year. Efficiency Remains Positive Main Street Bank's efficiency ratio for the second quarter of 2004 was 58.4 percent versus 53.9 percent for the second quarter of 2003. Noninterest expense for the second quarter of 2004 was $16.1 million, an increase of 25.8 percent, primarily due to the First Colony acquisition which occurred in the same quarter of the prior year, compared to noninterest expense in the second quarter of 2003. "We are proud of our excellent efficiency this year especially at a time when we have continued to invest heavily in our business through the enhancement of our management team, the conversion of our core systems and growth in our banking footprint," Milligan concluded. About Main Street Main Street Banks, Inc., a $2.1 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 and highest performing community banking company in the greater Atlanta 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. Such statements involve risks and uncertainties that may cause results to differ materially from those set forth in these statements. Main Street cautions readers that results and events subject to forward-looking statements could differ materially due to the following factors: possible changes in economic and business conditions; the ability of Main Street to integrate recent acquisitions and 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; the cost and other effects of legal and administrative cases; 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 filings with the Securities and Exchange Commission. This press release contains financial information determined by methods other than in accordance with Generally Accepted Accounting Principles ("GAAP"). Main Street Banks, Inc.'s management uses these non-GAAP measures in their analysis of the Company's performance. These measures adjust GAAP performance to exclude the effects of the amortization of intangibles in the determination of "cash basis" performance measures. These non-GAAP measures may also exclude other significant gains, losses or expenses that are unusual in nature and not expected to recur. Since these items and their impact on Main Street's performance are difficult to predict, management believes presentations of financial measures excluding the impact of these items provide useful supplemental information that is important to a proper understanding of the operating results of Main Street's core businesses. These disclosures should not be viewed as a substitute for results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. 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. today, please visit our web site at http://www.mainstreetbank.com/ . Replays of the conference call will be available through our web site until 5 p.m. (EDT) July 30. This press release contains forward-looking statements as defined by federal securities laws. These statements may address issues that involve significant risks, uncertainties, estimates and assumptions made by management. Actual results could differ materially from current projections. Please refer to Main Street Banks, Inc.'s filings with the Securities and Exchange Commission for a summary of important factors that could affect Main Street Banks, Inc.'s forward-looking statements. Main Street Banks, Inc. undertakes no obligation to revise these statements following the date of this press release. MAIN STREET BANKS, INC. AND SUBSIDIARIES AVERAGE BALANCE SHEET (Unaudited) Second First Quarter Quarter 2004 2004 ASSETS Cash and due from banks $38,220,151 $37,174,008 Interest-bearing deposits in banks 660,111 206,921 Federal funds sold and securities purchased under agreements to resell 357,846 13,733,915 Investment securities available for sale 270,851,196 249,633,094 Investment securities held to maturity 11,998,340 11,233,274 Other investments 21,352,832 20,172,234 Mortgage loans held for sale 7,860,559 4,685,417 Loans, net of unearned income 1,551,258,388 1,470,876,346 Allowance for loan losses (22,505,292) (21,409,245) Loans, net 1,528,753,096 1,449,467,101 Premises and equipment, net 46,440,339 43,622,711 Other real estate 2,584,703 2,813,337 Accrued interest receivable 7,874,920 7,614,443 Goodwill and other intangible assets 103,445,869 98,655,805 Bank owned life insurance 41,471,029 37,904,493 Other assets 14,863,167 10,054,978 Total assets $2,096,734,158 $1,986,971,731 LIABILITIES Total deposits $1,547,738,831 $1,466,086,785 Accrued interest payable 3,129,282 3,023,843 Federal Home Loan Bank advances 148,344,127 147,072,474 Federal funds purchased and securities sold under repurchase agreements 126,594,813 110,799,890 Trust preferred securities - - Subordinated debt 51,547,000 50,000,000 Other liabilities 4,329,275 4,717,074 Total liabilities 1,881,683,328 1,781,700,066 SHAREHOLDERS' EQUITY Common stock-no par value per share 107,346,374 102,361,167 Retained earnings 114,838,884 107,198,497 Accumulated other comprehensive income 1,655,161 4,501,139 Treasury stock (8,789,589) (8,789,138) Total shareholders' equity 215,050,830 205,271,665 Total liabilities and shareholders' equity $2,096,734,158 $1,986,971,731 MAIN STREET BANKS, INC. AND SUBSIDIARIES AVERAGE BALANCE SHEET (Unaudited) Fourth Third Second Quarter Quarter Quarter 2003 2003 2003 ASSETS Cash and due from banks $38,074,607 $39,800,995 $28,209,301 Interest-bearing deposits in banks 1,037,948 1,166,343 1,094,527 Federal funds sold and securities purchased under agreements to resell 35,288,778 1,812,613 3,693,932 Investment securities available for sale 248,724,785 248,487,509 258,072,188 Investment securities held to maturity 3,382,680 687,918 687,759 Other investments 18,799,718 14,659,477 11,012,217 Mortgage loans held for sale 3,841,104 7,258,692 5,225,069 Loans, net of unearned income 1,424,858,073 1,389,998,248 1,204,483,316 Allowance for loan losses (20,816,925) (20,335,059) (17,481,891) Loans, net 1,404,041,148 1,369,663,189 1,187,001,425 Premises and equipment, net 42,801,524 39,815,150 36,412,960 Other real estate 1,941,348 1,332,024 1,615,887 Accrued interest receivable 7,407,238 7,440,913 6,731,239 Goodwill and other intangible assets 95,040,910 94,944,727 41,978,424 Bank owned life insurance 35,462,722 34,875,340 32,463,339 Other assets 10,291,118 7,814,168 8,401,566 Total assets $1,946,135,628 $1,869,759,058 $1,622,599,833 LIABILITIES Total deposits $1,452,073,218 $1,423,029,046 $1,252,649,026 Accrued interest payable 3,133,317 3,245,698 3,252,074 Federal Home Loan Bank advances 191,157,159 149,870,653 130,617,494 Federal funds purchased and securities sold under repurchase agreements 47,439,961 42,395,574 40,343,740 Trust preferred securities 50,000,000 50,000,000 21,980,387 Subordinated debt - - - Other liabilities 5,956,643 11,626,540 18,939,291 Total liabilities 1,749,760,298 1,680,167,511 1,467,782,012 SHAREHOLDERS' EQUITY Common stock-no par value per share 99,587,649 97,619,793 67,369,211 Retained earnings 101,961,196 97,314,015 90,739,659 Accumulated other comprehensive income 3,615,380 3,445,861 5,496,040 Treasury stock (8,788,895) (8,788,122) (8,787,089) Total shareholders' equity 196,375,330 189,591,547 154,817,821 Total liabilities and shareholders' equity $1,946,135,628 $1,869,759,058 $1,622,599,833 MAIN STREET BANKS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (Unaudited) Second First Quarter Quarter 2004 2004 ASSETS Cash and due from banks $42,090,671 $31,901,310 Interest-bearing deposits in banks 1,078,334 588,694 Federal funds sold and securities purchased under agreements to resell 713,000 5,644,000 Investment securities available for sale 272,596,604 263,304,831 Investment securities held to maturity 11,998,436 11,998,297 Other investments 23,876,638 19,205,358 Mortgage loans held for sale 6,221,181 7,208,105 Loans, net of unearned income 1,594,290,721 1,511,436,809 Allowance for loan losses (23,118,946) (22,150,651) Loans, net 1,571,171,775 1,489,286,158 Premises and equipment, net 48,391,110 45,167,765 Other real estate 1,914,985 2,255,553 Accrued interest receivable 9,060,367 8,293,918 Goodwill and other intangible assets 103,514,753 103,381,314 Bank owned life insurance 41,006,405 41,595,547 Other assets 13,530,493 15,801,590 Total assets $2,147,164,752 $2,045,632,440 LIABILITIES Total deposits $1,566,290,310 $1,530,979,973 Accrued interest payable 3,284,308 3,210,642 Federal Home Loan Bank advances 166,337,747 156,471,522 Federal funds purchased and securities sold under repurchase agreements 142,324,882 83,930,239 Trust preferred securities - - Subordinated debt 51,547,000 51,547,000 Other liabilities 5,413,930 4,116,702 Total liabilities 1,935,198,177 1,830,256,078 SHAREHOLDERS' EQUITY Common stock-no par value per share 107,446,736 109,117,216 Retained earnings 116,073,951 109,299,987 Accumulated other comprehensive income (2,764,523) 5,748,748 Treasury stock (8,789,589) (8,789,589) Total shareholders' equity 211,966,575 215,376,362 Total liabilities and shareholders' equity $2,147,164,752 $2,045,632,440 MAIN STREET BANKS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (Unaudited) Fourth Third Second Quarter Quarter Quarter 2003 2003 2003 ASSETS Cash and due from banks $39,839,060 $39,559,729 $43,328,652 Interest-bearing deposits in banks 1,021,288 693,409 1,437,383 Federal funds sold and securities purchased under agreements to resell 31,819,619 15,919,619 6,452,619 Investment securities available for sale 247,391,640 247,867,031 287,014,644 Investment securities held to maturity 10,788,146 688,005 687,849 Other investments 19,651,370 17,081,869 12,550,140 Mortgage loans held for sale 5,670,625 6,490,437 6,926,692 Loans, net of unearned income 1,443,325,787 1,411,950,618 1,382,761,970 Allowance for loan losses (21,151,987) (20,765,377) (20,272,465) Loans, net 1,422,173,800 1,391,185,241 1,362,489,505 Premises and equipment, net 42,760,918 41,726,221 38,466,608 Other real estate 1,844,869 1,366,820 1,065,064 Accrued interest receivable 8,181,579 8,069,190 8,116,249 Goodwill and other intangible assets 96,237,492 94,919,932 94,826,459 Bank owned life insurance 35,773,237 35,274,639 34,526,510 Other assets 8,611,815 10,275,483 8,311,873 Total assets $1,971,765,458 $1,911,117,625 $1,906,200,247 LIABILITIES Total deposits $1,458,403,096 $1,437,640,769 $1,405,589,895 Accrued interest payable 3,020,265 3,343,309 3,445,084 Federal Home Loan Bank advances 210,605,296 159,739,071 167,872,846 Federal funds purchased and securities sold under repurchase agreements 43,859,277 61,575,200 39,814,872 Trust preferred securities 50,000,000 50,000,000 50,000,000 Subordinated debt - - - Other liabilities 5,334,408 4,753,559 48,782,256 Total liabilities 1,771,222,342 1,717,051,908 1,715,504,953 SHAREHOLDERS' EQUITY Common stock-no par value per share 100,875,984 99,454,457 99,007,084 Retained earnings 104,539,042 99,132,523 94,282,107 Accumulated other comprehensive income 3,917,179 4,267,326 6,193,192 Treasury stock (8,789,089) (8,788,589) (8,787,089) Total shareholders' equity 200,543,116 194,065,717 190,695,294 Total liabilities and shareholders' equity $1,971,765,458 $1,911,117,625 $1,906,200,247 MAIN STREET BANKS, INC. AND SUBSIDIARIES LOAN AND DEPOSIT STRATIFICATION (Unaudited) Second First Quarter Quarter 2004 2004 LOAN PORTFOLIO Real estate: Residential Mortgage $282,754,653 $280,453,804 Construction 348,685,270 314,171,269 Commercial real estate 795,114,435 762,815,561 Commercial and Industrial 132,379,349 116,735,287 Consumer 37,602,059 39,063,480 Unearned income (2,245,045) (1,802,592) Total loans $1,594,290,721 $1,511,436,809 Loan growth 5.5% 4.7% Loan growth, annualized 22.0% 19.0% DEPOSITS Non-interest bearing demand $232,319,420 $227,159,637 Interest bearing demand 109,183,366 112,043,973 Money Market 347,395,886 313,554,963 Savings 40,307,875 40,074,116 Total transaction accounts 729,206,548 692,832,689 Public funds - transaction 90,423,130 101,844,740 Total low cost core deposits 819,629,677 794,677,429 Time deposits - public funds 15,991,062 17,565,349 Time deposits 730,669,570 718,737,195 Total deposits $1,566,290,310 $1,530,979,973 Deposit growth 2.3% 5.0% Percentage low cost core to total deposits 52.3% 51.9% Percentage growth of low cost core deposits 3.1% 4.4% Annualized growth of low cost core deposits 12.6% 17.5% * The acquisition of First Colony Bank was completed in the second quarter of 2003 MAIN STREET BANKS, INC. AND SUBSIDIARIES LOAN AND DEPOSIT STRATIFICATION (Unaudited) Fourth Third Second Quarter Quarter Quarter 2003 2003 2003 LOAN PORTFOLIO Real estate: Residential Mortgage $269,357,951 $262,686,049 $254,249,140 Construction 304,045,641 332,971,587 349,508,658 Commercial real estate 711,208,711 654,262,301 612,342,600 Commercial and Industrial 118,242,893 120,508,759 120,771,227 Consumer 41,649,590 42,206,090 46,178,523 Unearned income (1,178,999) (684,168) (288,178) Total loans $1,443,325,787 $1,411,950,618 $1,382,761,970 Loan growth 2.2% 2.1% 31.9% * Loan growth, annualized 8.9% 8.5% 163.4% * DEPOSITS Non-interest bearing demand $222,595,661 $218,655,715 $210,380,963 Interest bearing demand 116,749,330 106,886,881 115,980,561 Money Market 266,913,040 287,898,967 278,897,227 Savings 40,000,806 39,182,173 40,302,482 Total transaction accounts 646,258,837 652,623,736 645,561,233 Public funds - transaction 115,258,296 84,061,089 75,593,528 Total low cost core deposits 761,517,133 736,684,825 721,154,761 Time deposits - public funds 10,741,662 21,788,712 17,412,493 Time deposits 686,444,301 679,167,232 667,022,641 Total deposits $1,458,703,096 $1,437,640,769 $1,405,589,895 Deposit growth 1.5% 2.3% 23.5% Percentage low cost core to total deposits 52.2% 51.2% 51.3% Percentage growth of low cost core deposits 3.4% 2.2% 21.6% * Annualized growth of low cost core deposits 13.6% 8.7% 113.9% * * The acquisition of First Colony Bank was completed in the second quarter of 2003 MAIN STREET BANKS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME (Unaudited) Second First Quarter Quarter 2004 2004 NET INTEREST INCOME Loan, including fees $25,473,584 $24,781,842 Interest on investment securities: Taxable 2,362,075 2,247,038 Non-taxable 388,746 417,657 Federal funds sold and repurchase agreements 3,751 30,399 Interest bearing deposits in banks 5,250 5,223 Interest on other investments 236,992 205,662 Total interest income 28,470,398 27,687,821 INTEREST EXPENSE Interest-bearing demand and money market 1,828,848 1,322,218 Savings 73,775 88,707 Time deposits 4,470,715 4,463,088 Other time deposits 64,462 55,813 Federal funds purchased 333,018 34,701 Federal Home Loan Bank advances 663,793 866,258 Interest expense on subordinated debentures 574,946 574,946 Other 241,599 355,692 Total interest expense 8,251,156 7,761,423 Net interest income 20,219,242 19,926,398 Provision for loan losses 1,310,000 1,561,000 Net interest income after provision for loan losses 18,909,242 18,365,398 NON-INTEREST INCOME Service charges on deposit accounts 2,023,191 1,880,521 Other customer service fees 352,392 356,795 Mortgage banking revenue 859,631 883,128 Investment brokerage revenue 185,330 315,080 Insurance agency revenue 2,370,375 2,771,701 Income from SBA lending 367,859 485,918 Other income 1,259,930 1,146,755 Total non-interest income 7,418,708 7,839,898 NON-INTEREST EXPENSE Salaries and other compensation 7,688,444 8,041,199 Employee benefits 1,519,972 1,640,263 Net occupancy and equipment expense 2,208,378 1,859,695 Data processing fees 223,450 557,301 Professional services 583,177 438,395 Communications and supplies 1,027,631 1,050,888 Regulatory agency assessments 101,250 91,126 Amortization of intangible assets 121,758 140,644 Other expense 2,660,021 1,759,524 Total non-interest expense 16,134,081 15,579,035 Income before income taxes 10,193,869 10,626,261 Income tax expense 2,802,851 3,029,516 Net income $7,391,018 $7,596,745 EARNINGS PER SHARE Basic $0.38 $0.39 Diluted $0.37 $0.38 WEIGHTED AVERAGE SHARES OUTSTANDING Basic 19,351,343 19,280,882 Diluted 19,974,058 19,910,810 CASH DIVIDENDS PER SHARE $0.135 $0.135 MAIN STREET BANKS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME (Unaudited) Fourth Third Second Quarter Quarter Quarter 2003 2003 2003 NET INTEREST INCOME Loan, including fees $24,045,242 $23,774,469 $21,418,754 Interest on investment securities: Taxable 2,136,462 1,952,469 2,144,684 Non-taxable 376,992 413,969 441,624 Federal funds sold and repurchase agreements 75,418 3,982 10,340 Interest bearing deposits in banks 9,114 4,700 5,653 Interest on other investments 204,453 160,278 110,900 Total interest income 26,847,681 26,309,867 24,131,955 INTEREST EXPENSE Interest-bearing demand and money market 1,288,087 1,533,317 1,527,968 Savings 89,583 80,733 88,382 Time deposits 4,261,858 4,179,155 3,067,821 Other time deposits 85,577 110,249 85,603 Federal funds purchased 36,153 19,308 7,496 Federal Home Loan Bank advances 795,729 679,715 564,029 Interest expense on subordinated debentures 580,102 580,096 237,006 Other 370,193 362,259 364,402 Total interest expense 7,507,282 7,544,832 5,942,707 Net interest income 19,340,399 18,765,035 18,189,248 Provision for loan losses 1,241,000 1,146,000 1,801,000 Net interest income after provision for loan losses 18,099,399 17,619,035 16,388,248 NON-INTEREST INCOME Service charges on deposit accounts 2,069,881 2,092,139 1,857,289 Other customer service fees 396,098 388,960 395,227 Mortgage banking revenue 711,660 1,118,464 865,347 Investment brokerage revenue 30,758 88,616 60,433 Insurance agency revenue 1,252,337 1,188,538 1,235,868 Income from SBA lending 434,799 405,936 504,925 Other income 2,000,907 1,253,128 715,782 Total non-interest income 6,896,440 6,535,781 5,634,871 NON-INTEREST EXPENSE Salaries and other compensation 6,956,283 6,799,573 6,203,214 Employee benefits 1,213,020 1,283,603 1,049,294 Net occupancy and equipment expense 2,003,525 1,772,929 1,528,317 Data processing fees 481,895 449,812 442,383 Professional services 363,319 824,785 585,609 Communications and supplies 1,168,727 983,575 756,953 Regulatory agency assessments 81,388 73,557 106,105 Amortization of intangible assets 106,800 106,750 91,112 Other expense 2,261,412 2,073,520 2,067,358 Total non-interest expense 14,636,369 14,368,104 12,830,345 Income before income taxes 10,359,470 9,786,712 9,192,774 Income tax expense 2,912,764 2,668,556 2,808,785 Net income $7,446,706 $7,118,156 $6,383,989 EARNINGS PER SHARE Basic $0.39 $0.38 $0.37 Diluted $0.38 $0.36 $0.35 WEIGHTED AVERAGE SHARES OUTSTANDING Basic 18,951,688 18,913,088 17,374,719 Diluted 19,645,157 19,602,219 18,059,948 CASH DIVIDENDS PER SHARE $0.120 $0.120 $0.120 MAIN STREET BANKS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME (Unaudited) Six months ended June 30, 2004 2003 NET INTEREST INCOME Loan, including fees $50,255,426 $40,352,707 Interest on investment securities: Taxable 4,609,113 4,219,798 Non-taxable 806,403 880,287 Federal funds sold and repurchase agreements 34,150 66,520 Interest bearing deposits in banks 10,473 14,866 Interest on other investments 442,654 142,641 Total interest income 56,158,219 45,676,819 INTEREST EXPENSE Interest-bearing demand and money market 3,151,066 2,913,806 Savings 162,482 178,186 Time deposits 8,933,803 7,250,646 Other time deposits 120,275 184,563 Federal funds purchased 367,719 20,729 Federal Home Loan Bank advances 1,530,051 794,140 Interest expense on subordinated debentures 1,149,892 292,408 Other 597,291 778,064 Total interest expense 16,012,579 12,412,542 Net interest income 40,145,640 33,264,277 Provision for loan losses 2,871,000 2,848,000 Net interest income after provision for loan losses 37,274,640 30,416,277 NON-INTEREST INCOME Service charges on deposit accounts 3,903,712 3,598,163 Other customer service fees 709,187 759,327 Mortgage banking revenue 1,742,759 1,511,722 Investment brokerage revenue 500,410 144,103 Insurance agency revenue 5,142,076 2,416,108 Income from SBA lending 853,777 884,179 Other income 2,406,685 1,597,968 Total non-interest income 15,258,606 10,911,570 NON-INTEREST EXPENSE Salaries and other compensation 15,729,643 11,818,105 Employee benefits 3,160,235 2,252,886 Net occupancy and equipment expense 4,068,073 2,884,415 Data processing fees 780,751 752,118 Professional services 1,021,572 961,789 Communications and supplies 2,078,519 1,584,003 Regulatory agency assessments 192,376 167,320 Amortization of intangible assets 262,402 150,949 Other expense 4,419,545 3,366,487 Total non-interest expense 31,713,116 23,938,072 Income before income taxes 20,820,130 17,389,775 Income tax expense 5,832,367 5,255,307 Net income $14,987,763 $12,134,468 EARNINGS PER SHARE Basic $0.78 $0.72 Diluted $0.75 $0.70 WEIGHTED AVERAGE SHARES OUTSTANDING Basic 19,316,112 16,769,565 Diluted 19,948,822 17,426,778 CASH DIVIDENDS PER SHARE $0.270 $0.240 MAIN STREET BANKS, INC. AND SUBSIDIARIES SUMMARY OF INTEREST RATES (TAX-EQUIVALENT*) (Unaudited) Second First Quarter Quarter 2004 2004 EARNING ASSETS Total interest earning assets (in thousands) $1,864,339 $1,770,541 Loans 6.58% 6.68% Investment securities 3.85% 4.49% Federal funds sold 1.12% 1.01% Loans held for sale 4.57% 5.25% FHLB stock & other 4.43% 4.03% Total interest earning assets 6.14% 6.29% INTEREST-BEARING LIABILITIES Total interest-bearing liabilities (in thousands) $1,874,225 $1,773,959 Demand deposits 0.93% 0.72% Demand deposits - public funds 1.02% 1.07% Time deposits 2.49% 2.49% Retail repurchases 1.75% 1.69% Federal funds purchased 1.25% 1.24% Federal Home Loan bank advances 1.80% 1.77% Securities sold under agreement to repurchase 4.57% 4.09% Subordinated debentures 4.55% 4.55% Net Cost of Funds 1.77% 1.76% NET INTEREST SPREAD Interest earning assets less interest-bearing liabilities (in thousands) $(9,885) $(3,418) Yield on earning assets less cost of interest-bearing liabilities 4.37% 4.53% NET INTEREST MARGIN Net interest income (tax equivalent) as a percentage of average earning assets 4.42% 4.59% MAIN STREET BANKS, INC. AND SUBSIDIARIES SUMMARY OF INTEREST RATES (TAX-EQUIVALENT*) (Unaudited) Fourth Third Second Quarter Quarter Quarter 2003 2003 2003 EARNING ASSETS Total interest earning assets (in thousands) $1,730,110 $1,660,522 $1,478,067 Loans 6.61% 6.70% 6.99% Investment securities 4.36% 4.11% 4.40% Federal funds sold 0.91% 1.14% 1.32% Loans held for sale 5.50% 5.66% 6.51% FHLB stock & other 4.36% 4.17% 6.25% Total interest earning assets 6.21% 6.35% 6.63% INTEREST-BEARING LIABILITIES Total interest-bearing liabilities (in thousands) $1,739,771 $1,664,361 $1,450,029 Demand deposits 0.68% 0.90% 1.03% Demand deposits - public funds 0.95% 0.73% 0.84% Time deposits 2.47% 2.44% 2.07% Retail repurchases 1.71% 1.90% 1.84% Federal funds purchased 1.25% 1.69% 1.67% Federal Home Loan bank advances 1.78% 1.81% 1.70% Securities sold under agreement to repurchase 4.09% 4.09% 4.02% Subordinated debentures 4.54% 4.54% 4.27% Net Cost of Funds 1.71% 1.80% 1.64% NET INTEREST SPREAD Interest earning assets less interest- bearing liabilities (in thousands) $(9,661) $(3,839) $28,038 Yield on earning assets less cost of interest-bearing liabilities 4.50% 4.55% 4.99% NET INTEREST MARGIN Net interest income (tax equivalent) as a percentage of average earning assets 4.49% 4.55% 5.01% MAIN STREET BANKS, INC. AND SUBSIDIARIES SUMMARY OF INTEREST RATES (TAX-EQUIVALENT*) (Unaudited) Six months ended June 30, 2004 2003 EARNING ASSETS Total interest earning assets (in thousands) $1,817,360 $1,368,044 Loans 6.67% 7.20% Investment securities 3.97% 9.54% Federal funds sold 0.89% 1.35% Loans held for sale 4.86% 9.60% FHLB stock & other 4.32% 3.53% Total interest earning assets 6.21% 6.82% INTEREST-BEARING LIABILITIES Total interest-bearing liabilities (in thousands) $1,823,186 $1,338,630 Demand deposits 0.83% 1.04% Demand deposits - public funds 1.07% 0.00% Time deposits 2.50% 2.57% Retail repurchases 1.70% 1.84% Federal funds purchased 1.26% 1.53% Federal Home Loan bank advances 1.80% 1.73% Securities sold under agreement to repurchase 4.30% 3.84% Subordinated debentures 4.58% 4.29% Net Cost of Funds 1.77% 2.15% NET INTEREST SPREAD Interest earning assets less interest-bearing liabilities (in thousands) $(5,826) $29,414 Yield on earning assets less cost of interest-bearing liabilities 4.45% 4.67% NET INTEREST MARGIN Net interest income (tax equivalent) as a percentage of average earning assets 4.50% 4.99% MAIN STREET BANKS, INC. AND SUBSIDIARIES LOAN QUALITY (Unaudited) Second First Quarter Quarter 2004 2004 RESERVE FOR POSSIBLE LOAN LOSSES Reserve for loan losses at beginning of period $22,150,651 $21,151,987 Reserves acquired through acquisition - - Provision for loan losses 1,310,000 1,561,000 Loans charged-off during the period (657,213) (650,138) Recoveries on loans previously charged-off 315,508 87,802 Net loans (charged-off) recovered during period (341,705) (562,336) Reserve for loan losses at end of period $23,118,946 $22,150,651 Net charge-offs to average loans, annualized 0.09% 0.15% Gross charge-offs to average loans, annualized 0.17% 0.18% Recoveries as a percentage of gross charge-offs 48.01% 13.51% Reserve for loan losses as a percentage of loans, at end of period 1.45% 1.47% NON-PERFORMING ASSETS Loans accounted for on a non-accrual basis $5,179,265 $4,822,135 Restructured loans - - Total non-performing loans 5,179,265 4,822,135 Foreclosed assets 3,730,693 2,255,553 Total non-performing assets $8,909,958 $7,077,688 Non-performing assets as a percentage of loans plus foreclosed assets, at end of period 0.56% 0.47% Non-performing assets as a percentage of total assets, at end of period 0.41% 0.35% Reserve for loan losses as a percentage of non-performing assets, at end of period 259.47% 312.96% Loans 90 days past due $6,296,329 $9,492,293 Loans 90 days past due as a percentage of loans, at end of period 0.39% 0.63% MAIN STREET BANKS, INC. AND SUBSIDIARIES LOAN QUALITY (Unaudited) Fourth Third Second Quarter Quarter Quarter 2003 2003 2003 RESERVE FOR POSSIBLE LOAN LOSSES Reserve for loan losses at beginning of period $20,765,377 $20,272,465 $15,390,616 Reserves acquired through acquisition - - 4,252,018 Provision for loan losses 1,241,000 1,146,000 1,801,000 Loans charged-off during the period (958,275) (784,950) (1,267,223) Recoveries on loans previously charged-off 103,885 131,862 96,054 Net loans (charged-off) recovered during period (854,390) (653,088) (1,171,169) Reserve for loan losses at end of period $21,151,987 $20,765,377 $20,272,465 Net charge-offs to average loans, annualized 0.24% 0.19% 0.39% Gross charge-offs to average loans, annualized 0.27% 0.23% 0.42% Recoveries as a percentage of gross charge-offs 10.84% 16.80% 7.58% Reserve for loan losses as a percentage of loans, at end of period 1.47% 1.47% 1.47% NON-PERFORMING ASSETS Loans accounted for on a non- accrual basis $11,548,489 $10,854,580 $6,068,538 Restructured loans - - - Total non-performing loans 11,548,489 10,854,580 6,068,538 Foreclosed assets 1,844,869 1,366,820 1,065,064 Total non-performing assets $13,393,358 $12,221,400 $7,133,602 Non-performing assets as a percentage of loans plus foreclosed assets, at end of period 0.93% 0.86% 0.52% Non-performing assets as a percentage of total assets, at end of period 0.68% 0.64% 0.37% Reserve for loan losses as a percentage of non-performing assets, at end of period 157.93% 169.91% 284.18% Loans 90 days past due $11,028,256 $10,867,283 $9,928,567 Loans 90 days past due as a percentage of loans, at end of period 0.76% 0.77% 0.72% MAIN STREET BANKS, INC. AND SUBSIDIARIES LOAN QUALITY (Unaudited) Six months ended June 30, 2004 2003 RESERVE FOR POSSIBLE LOAN LOSSES Reserve for loan losses at beginning of period $21,151,987 $14,588,582 Reserves acquired through acquisition - 4,252,018 Provision for loan losses 2,871,000 2,848,000 Loans charged-off during the period (1,307,351) (1,592,813) Recoveries on loans previously charged-off 403,310 176,678 Net loans (charged-off) recovered during period (904,041) (1,416,135) Reserve for loan losses at end of period $23,118,946 $20,272,465 Net charge-offs to average loans, annualized 0.12% 0.26% Gross charge-offs to average loans, annualized 0.17% 0.29% Recoveries as a percentage of gross charge-offs 30.85% 11.09% Reserve for loan losses as a percentage of loans, at end of period 1.45% 1.47% NON-PERFORMING ASSETS Loans accounted for on a non-accrual basis $5,179,265 $6,068,538 Restructured loans - - Total non-performing loans 5,179,265 6,068,538 Foreclosed assets 3,730,693 1,065,064 Total non-performing assets $8,909,958 $7,133,602 Non-performing assets as a percentage of loans plus foreclosed assets, at end of period 0.56% 0.52% Non-performing assets as a percentage of total assets, at end of period 0.41% 0.37% Reserve for loan losses as a percentage of non-performing assets, at end of period 259.47% 284.18% Loans 90 days past due $6,296,329 $9,928,567 Loans 90 days past due as a percentage of loans, at end of period 0.39% 0.72% MAIN STREET BANKS, INC. AND SUBSIDIARIES FINANCIAL HIGHLIGHTS (Unaudited) Second First Quarter Quarter 2004 2004 RESULTS OF OPERATIONS Net interest income $20,219,242 $19,926,398 Net interest income (tax equivalent) 20,487,674 20,204,931 Provision for loan losses 1,310,000 1,561,000 Non-interest income 7,418,708 7,839,898 Non-interest expense 16,134,081 15,579,035 Net income 7,391,018 7,596,745 AVERAGE BALANCE SHEET DATA (in thousands) Loans, net of unearned income 1,551,258 1,470,876 Investment securities 282,850 260,866 Earning assets 1,864,339 1,770,541 Total assets 2,096,734 1,986,972 Deposits 1,547,739 1,466,087 Shareholders' equity 215,051 205,272 PER COMMON SHARE Earnings per share - Basic $0.38 $0.39 Earnings per share - Diluted $0.37 $0.38 Book value per share as end of period $10.94 $11.14 End of period shares outstanding 19,381,000 19,340,676 Weighted average shares outstanding Basic 19,351,343 19,280,882 Diluted 19,974,058 19,910,810 STOCK PERFORMANCE Market Price: Closing $28.10 $27.34 High $28.82 $27.50 Low $25.62 $24.90 Trading volume 2,010,000 1,703,700 Cash dividend per share 0.135 0.135 Dividend payout ratio 36.48% 35.38% Price to earnings 18.88 17.82 Price to book value 2.57 2.46 PERFORMANCE RATIOS Return on average assets 1.41% 1.53% Return on average equity 13.75% 14.80% Average earning assets to average total assets 88.92% 89.11% Average loans as percentage of average deposits 100.23% 100.33% Net interest margin (tax equivalent) 4.42% 4.59% Average equity to average assets 10.26% 10.33% Non-interest income ratio 26.84% 28.24% Efficiency ratio 58.38% 56.11% ASSET QUALITY Total non-performing assets $8,909,958 $7,077,688 Non-performing assets as a percentage of loans plus foreclosed assets 0.56% 0.47% Net annualized (charge-offs) recoveries as a percentage of average assets 0.09% 0.15% Reserve for loan losses as a percentage of loans, at end of period 1.45% 1.47% OPERATING EARNINGS Net income $7,391,018 $7,596,745 Amortization of intangible assets, net 87,666 101,264 Job reductions 231,845 - Contract buyout, net 172,366 - Systems write-offs, net 342,104 - Operating income $8,224,998 $7,698,009 Operating earnings per share Basic $0.43 $0.40 Diluted $0.41 $0.39 Average tangible assets (in thousands) $1,993,288 $1,888,316 Average tangible equity (in thousands) 111,605 106,616 Operating return on average tangible assets 1.65% 1.63% Operating return on average tangible equity 29.48% 28.88% MAIN STREET BANKS, INC. AND SUBSIDIARIES FINANCIAL HIGHLIGHTS (Unaudited) Fourth Third Second Quarter Quarter Quarter 2003 2003 2003 RESULTS OF OPERATIONS Net interest income $19,340,399 $18,765,035 $18,189,248 Net interest income (tax equivalent) 19,591,290 19,036,194 18,474,237 Provision for loan losses 1,241,000 1,146,000 1,801,000 Non-interest income 6,896,440 6,535,781 5,634,871 Non-interest expense 14,636,369 14,368,104 12,830,345 Net income 7,446,706 7,118,156 6,383,989 AVERAGE BALANCE SHEET DATA (in thousands) Loans, net of unearned income 1,424,858 1,389,998 1,204,483 Investment securities 252,107 249,175 258,760 Earning assets 1,730,110 1,660,522 1,478,067 Total assets 1,946,136 1,869,759 1,622,600 Deposits 1,452,073 1,423,029 1,252,649 Shareholders' equity 196,375 189,592 154,818 PER COMMON SHARE Earnings per share - Basic $0.39 $0.38 $0.37 Earnings per share - Diluted $0.38 $0.36 $0.35 Book value per share as end of period $10.57 $10.25 $10.10 End of period shares outstanding 18,981,340 18,933,178 18,888,732 Weighted average shares outstanding Basic 18,951,688 18,913,088 17,374,719 Diluted 19,645,157 19,602,219 18,059,948 STOCK PERFORMANCE Market Price: Closing $26.52 $25.02 $24.94 High $27.92 $26.00 $25.40 Low $25.00 $23.37 $18.48 Trading volume 1,630,300 1,022,400 1,243,900 Cash dividend per share 0.120 0.120 0.120 Dividend payout ratio 31.66% 33.05% 33.95% Price to earnings 17.63 17.37 17.59 Price to book value 2.51 2.44 2.47 PERFORMANCE RATIOS Return on average assets 1.53% 1.52% 1.57% Return on average equity 15.17% 15.02% 16.49% Average earning assets to average total assets 89.20% 89.00% 91.47% Average loans as percentage of average deposits 98.13% 97.68% 96.15% Net interest margin (tax equivalent) 4.49% 4.55% 5.01% Average equity to average assets 10.09% 10.14% 9.54% Non-interest income ratio 26.29% 25.83% 23.65% Efficiency ratio 55.79% 56.79% 53.85% ASSET QUALITY Total non-performing assets $13,393,358 $12,221,400 $7,133,602 Non-performing assets as a percentage of loans plus foreclosed assets 0.93% 0.86% 0.52% Net annualized (charge-offs) recoveries as a percentage of average assets 0.24% 0.19% 0.39% Reserve for loan losses as a percentage of loans, at end of period 1.47% 1.47% 1.47% OPERATING EARNINGS Net income $7,446,706 $7,118,156 $6,383,989 Amortization of intangible assets, net 76,896 76,860 65,601 Job reductions - - - Contract buyout, net - - - Systems write-offs, net - - - Operating income $7,523,602 $7,195,016 $6,449,590 Operating earnings per share Basic $0.40 $0.38 $0.37 Diluted $0.38 $0.37 $0.36 Average tangible assets (in thousands) $1,851,095 $1,774,814 $1,580,621 Average tangible equity (in thousands) 101,334 94,647 112,839 Operating return on average tangible assets 1.63% 1.62% 1.63% Operating return on average tangible equity 29.70% 30.41% 22.86% MAIN STREET BANKS, INC. AND SUBSIDIARIES FINANCIAL HIGHLIGHTS (Unaudited) Six months ended June 30, 2004 2003 RESULTS OF OPERATIONS Net interest income $40,145,640 $33,264,277 Net interest income (tax equivalent) 40,692,605 33,838,043 Provision for loan losses 2,871,000 2,848,000 Non-interest income 15,258,606 10,911,570 Non-interest expense 31,713,116 23,938,072 Net income 14,987,763 12,134,468 AVERAGE BALANCE SHEET DATA (in thousands) Loans, net of unearned income 1,511,065 1,111,852 Investment securities 271,852 239,405 Earning assets 1,817,360 1,368,044 Total assets 2,043,147 1,500,566 Deposits 1,506,394 1,190,225 Shareholders' equity 212,461 145,445 PER COMMON SHARE Earnings per share - Basic $0.78 $0.72 Earnings per share - Diluted $0.75 $0.70 Book value per share as end of period $10.94 $10.10 End of period shares outstanding 19,381,000 18,888,732 Weighted average shares outstanding Basic 19,316,112 16,769,565 Diluted 19,948,822 17,426,778 STOCK PERFORMANCE Market Price: Closing $28.10 $24.94 High $28.82 $25.40 Low $24.90 $18.45 Trading volume 3,713,700 2,506,800 Cash dividend per share 0.270 0.240 Dividend payout ratio 35.94% 17.23% Price to earnings 18.60 17.76 Price to book value 2.57 2.47 PERFORMANCE RATIOS Return on average assets 1.47% 1.63% Return on average equity 14.11% 16.80% Average earning assets to average total assets 88.95% 71.77% Average loans as percentage of average deposits 100.31% 93.40% Net interest margin (tax equivalent) 4.50% 4.99% Average equity to average assets 10.40% 9.69% Non-interest income ratio 27.54% 24.70% Efficiency ratio 57.24% 54.19% ASSET QUALITY Total non-performing assets $8,909,958 $7,133,602 Non-performing assets as a percentage of loans plus foreclosed assets 0.56% 0.52% Net annualized (charge-offs) recoveries as a percentage of average assets 0.12% 0.26% Reserve for loan losses as a percentage of loans, at end of period 1.45% 1.47% OPERATING EARNINGS Net income $14,987,763 $12,134,468 Amortization of intangible assets, net 188,929 144,225 Job reductions 231,845 - Contract buyout, net 172,366 - Systems write-offs, net 342,104 - Operating income $15,923,007 $12,278,693 Operating earnings per share Basic $0.82 $0.73 Diluted $0.80 $0.71 Average tangible assets (in thousands) $1,942,071 $1,143,182 Average tangible equity (in thousands) 111,385 106,563 Operating return on average tangible assets 1.64% 1.74% Operating return on average tangible equity 28.59% 18.63% DATASOURCE: Main Street Banks, Inc. CONTACT: Edward C. Milligan, Chairman & CEO, +1-770-422-2888, or Samuel B. Hay III, President & COO, +1-770-385-2424, both of Main Street Banks, Inc. Web site: http://www.mainstreetbank.com/

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MSBK Main Street Banks (MM)