Tennesse

Mountain Commerce Bancorp, Inc. Announces Second Quarter 2021 Results and 4% Increase in Quarterly Cash Dividend

KNOXVILLE, Tenn., July 26, 2021 /PRNewswire/ -- Mountain Commerce Bancorp, Inc. (the "Company") (OTCQX: MCBI), the holding company for Mountain Commerce Bank (the "Bank"), today announced earnings and related data as of and for the three and six months ended June 30, 2021.

The Company also announced today that its Board of Directors declared a quarterly cash dividend of $0.135 per common share, representing a 4% increase from the $0.13 cash dividend declared in the prior quarter.  The dividend is payable on September 1, 2021 to shareholders of record as of the close of business on August 9, 2021.

Highlights

The following tables highlight the trends that the Company believes are most relevant to understanding the performance of the Company as of and for the three and six months ended June 30, 2021.  As further detailed in Appendix A to this press release, adjusted results (which are non-GAAP financial measures), reflect adjustments for realized and unrealized investment gains and losses, the impact of PPP fee accretion (net of the amortization of PPP deferred loan costs and one-time PPP bonuses), gains and losses from the sale of REO, the provision for (recovery of) loan losses, and the provision for (recovery of) unfunded loan commitments.  See Appendix B to this press release for more information on our tax equivalent net interest margin.  All financial information in this press release is unaudited.



For the Three Months Ended June 30,



(Dollars in thousands, except per share data)













2021



2020













GAAP


Adjusted (1)



GAAP


Adjusted (1)

Net income

$

8,034


4,603


$

1,520


3,679

Diluted earnings per share

$

1.28


0.73


$

0.24


0.58

Return on average assets (ROAA)


2.75%


1.57%



0.53%


1.28%

Return on average equity


29.00%


16.62%



6.32%


15.30%

Efficiency ratio


35.87%


41.22%



37.86%


41.85%

Net interest margin (tax equivalent)


3.79%


3.49%



3.08%


2.94%











Pre-tax, pre-provision earnings (1)

$



7,172


$



5,534

Pre-tax, pre-provision ROAA (1)




2.45%





1.93%











(1) Represents a non-GAAP financial measure.  See Appendix A to this press release for more information.

































For the Six Months Ended June 30,



(Dollars in thousands, except per share data)













2021



2020













GAAP


Adjusted (1)



GAAP


Adjusted (1)

Net income

$

12,894


8,916


$

3,806


7,069

Diluted earnings per share

$

2.05


1.42


$

0.60


1.12

Return on average assets (ROAA)


2.25%


1.55%



0.73%


1.36%

Return on average equity


23.77%


16.44%



8.05%


14.95%

Efficiency ratio


37.82%


42.02%



41.82%


43.92%

Net interest margin (tax equivalent)


3.81%


3.52%



3.25%


3.17%











Pre-tax, pre-provision earnings (1)

$



13,569


$



10,119

Pre-tax, pre-provision ROAA (1)




2.37%





1.95%











(1) Represents a non-GAAP financial measure.  See Appendix A to this press release for more information.

 




As of



As of



As of




June 30,



March 31,



December 31,




2021



2021



2020














(Dollars in thousands, except share data)

Asset Quality










Non-performing loans

$

2,356


$

1,699


$

1,801


Real estate owned

$

1,206


$

1,378


$

-


Non-performing assets

$

3,562


$

3,077


$

1,801


Non-performing loans to total loans


0.24%



0.18%



0.19%


Non-performing assets to total assets


0.29%



0.27%



0.16%


Loans with COVID-19 related modifications (1)

$

-


$

6,797


$

-


Net charge-offs (period ended)

$

140


$

155


$

20


Allowance for loan losses to non-performing loans


410.57%



774.46%



739.20%


Allowance for loan losses to total loans 


0.97%



1.38%



1.42%


Allowance for loan losses to non-PPP loans (2)


1.04%



1.53%



1.56%











Other Data










Core deposits

$

786,535


$

681,402


$

620,576


Cash dividends declared

$

0.130


$

0.125


$

-


Shares outstanding


6,324,003



6,291,003



6,286,003


Book and tangible book value per share (3)

$

18.23


$

17.06


$

16.52


Closing market price per common share

$

26.20


$

23.80


$

20.50


Closing price to book value ratio


143.70%



139.51%



124.10%


Equity to assets ratio


9.31%



9.36%



9.36%


Bank regulatory leverage ratio


10.61%



10.43%



10.11%












(1) Including both principal deferrals and interest only terms









(2) As further detailed in Appendix A to this press release, allowance for loan losses to non-PPP loans is a 


     non-GAAP financial measure










(3) The Company does not have any intangible assets









Management Commentary

William E. "Bill" Edwards, III, President and Chief Executive Officer of the Company, commented, "We are pleased to report another record quarter for the Company which saw adjusted net income (non-GAAP) increase 25% from $3.7 million in the second quarter of 2020 to $4.6 million in the same quarter of 2021, while adjusted earnings per diluted share (non-GAAP) increased 26% from $0.58 to $0.73 over the same periods.  We finalized our participation in the second round of PPP during the current quarter after lending $41 million and earning $1.9 million in fees.  As a result of continued strong credit quality, we recognized $3.5 million in loan loss allowance recoveries during the current quarter after adjusting certain qualitative factors of our allowance calculation.  Our allowance to non-PPP loans (non-GAAP) was 1.04% at June 30, 2021, and I am happy to report that our COVID-related modifications were $0 as of June 30, 2021.  We continue to remain highly focused on delivering strong returns to our shareholders, which we believe is reflected in our adjusted return on average equity (non-GAAP) increasing from 15.30% in the second quarter of 2020 to 16.62% in the same period of 2021, a year-over-year increase of 8.6%.  From an asset quality perspective, our non-performing assets to total assets remain low at 0.29% at June 30, 2021, up slightly from 0.16% at December 31, 2020.  Finally, in order to provide an additional source of liquidity and increased returns for our shareholders, we announced a $5 million share repurchase authorization on April 12, 2021, and increased our quarterly dividend by 4% to $0.135 per quarter.  We did not repurchase any shares as of June 30, 2021."

Net Interest Income

Net interest income increased $2.0 million, or 23.5%, from $8.5 million for the three months ended June 30, 2020 to $10.5 million for the same period in 2021.  The increase between the periods was primarily the result of the following factors:

  • Average net interest-earning assets grew $63.9 million, or 23.6%, from $270.4 million to $334.3 million, funded by increases in noninterest bearing deposits and an increase in shareholders' equity.
  • The average rate paid on interest-bearing liabilities dropped 55.5% from 1.10% to 0.49%, while the average rate earned on interest-earning assets increased 5.9% from 3.91% to 4.14%, driving an increase in tax-equivalent net interest margin from 3.08% to 3.79%.

The Company recognized approximately $0.8 million and $0.7 million of PPP loan origination fees, net of the amortization of deferred PPP loan costs and payment of PPP management bonuses, through net interest income during the three months ended June 30, 2021 and 2020, respectively.

Net interest income increased $4.3 million, or 26.7%, from $16.2 million for the six months ended June 30, 2020 to $20.5 million for the same period in 2021.  The increase between the periods was primarily the result of the following factors:

  • Average interest-earning assets grew $105.4, or 10.5%, from $1.002 billion to $1.108 billion, driven by increases in loans and investment securities.
  • Average net interest-earning assets grew $85.1 million, or 36.7%, from $231.8 million to $316.9 million, funded by increases in noninterest bearing deposits and an increase in shareholders' equity.
  • The average rate paid on interest-bearing liabilities dropped 58.5% from 1.35% to 0.56%, while the average rate earned on interest-earning assets decreased slightly from 4.29% to 4.21%, driving an increase in tax-equivalent net interest margin from 3.25% to 3.81%.

The Company recognized approximately $1.7 million and $0.7 million of PPP loan origination fees, net of the amortization of deferred PPP loan costs and payment of PPP management bonuses, through net interest income during the six months ended June 30, 2021 and 2020, respectively.

Provision For Loan Losses

A recovery of loan losses of $3.5 million was recorded for the three and six months ended June 30, 2021 as the result of a declining and de minimis level of COVID-related loan modifications, continued strong asset quality, and continued strengthening of the economy in our primary markets.  A provision for loan losses of $3.5 million and $5.0 million was recorded for the three and six months ended June 30, 2020, respectively, as a result of the Company increasing the qualitative factors in its allowance for loan loss model and increasing reserve factors on certain loans to borrowers we viewed then as more likely to be impacted by the COVID-19 pandemic. 

Noninterest Income

Noninterest income increased $0.3 million, or 66.3%, from $0.4 million in the second quarter of 2020 to $0.7 million in the same quarter of 2021, due primarily to increases in service charges and fee income, unrealized gains on equity securities, and gains on the sale of loans.

Noninterest income increased $0.1 million, or 9.6%, from $1.2 million for the six months ended June 30, 2020 to $1.3 million in the same period of 2021, due primarily to increases in service charges and fee income, unrealized gains on equity securities, gains on the sale of loans, and wealth management fees, offset by a decrease of $0.3 million in swap fees.

Noninterest Expense

Noninterest expense increased $0.6 million, or 19.0%, from $3.4 million in the second quarter of 2020 to $4.0 million in the same period of 2021.  The increase was primarily the result of a $0.7 million increase in compensation and employee benefits, due in part to $0.3 million of deferred PPP compensation costs during the second quarter of 2020 compared to $0.1 million during the same period in 2021, offset by a $0.2 million decrease in other noninterest expense due to a $0.2 million decrease in the reserve for unfunded loan commitments during the quarter ended June 30, 2021.

Noninterest expense increased $1.0 million, or 13.4%, from $7.3 million for the first six months of 2020 to $8.3 million in the same period of 2021.  The increase was primarily the result of a $0.7 million increase in compensation and employee benefits, due in part to $0.3 million of deferred PPP compensation costs during the first six months of 2020 compared to $0.1 million during the same period in 2021, as well as increases in data processing expense and FDIC insurance. Offsetting these increases was a $0.1 million decrease in other noninterest expense due to a decrease in the reserve for unfunded loan commitments during the six months ended June 30, 2021.

Income Taxes

The effective tax rate of the Company was 24.7% and 25.3% for the three months ended June 30, 2021 and 2020, respectively.  The effective tax rate of the Company was 24.5% and 25.7% for the six months ended June 30, 2021 and 2020, respectively.  The Company's marginal tax rate of 26.14% is favorably impacted by certain sources of non-taxable income including bank-owned life insurance (BOLI), tax-free loans and investments in tax-free municipal securities.  The Company's effective tax rate declined during the 2021 periods compared to the same periods in 2020 due primarily to increased investments in tax-free municipal securities and investments in certain loans eligible for a 5% state tax credit.

Balance Sheet

Total assets increased $128.2 million, or 11.5%, from $1.110 billion at December 31, 2020 to $1.238 billion at June 30, 2021.  The increase was primarily driven by the following factors:

  • Cash and cash equivalents increased $35.5 million, or 49.0%, from $72.4 million at December 31, 2020 to $107.8 million at June 30, 2021.
  • Investments available for sale increased $22.9 million, or 29.7%, from $77.3 million at December 31, 2020 to $100.2 million at June 30, 2021 as the Company took advantage of a steepening yield curve to invest excess liquidity.
  • Loans receivable increased $58.5 million, or 6.2%, from $935.5 million at December 31, 2020 to $993.9 million at June 30, 2021.  Increases in residential, owner-occupied and non-owner occupied commercial, and commercial and industrial lending offset a $17.6 million reduction in PPP loans.

The following summarizes changes in loan balances over the last five quarters:



June 30,


March 31,


December 31,


September 30,


June 30,



2021


2021


2020


2020


2020

(in thousands)






















Residential construction

$

16,795


13,037


14,805


17,772


17,238

Other construction


38,121


33,720


35,361


39,858


40,996

Farmland


5,488


6,322


7,943


8,430


8,592

Home equity


30,601


32,281


32,543


35,833


35,882

Residential 


257,048


240,606


224,288


218,872


211,234

Multi-family


47,063


45,703


42,666


27,758


26,606

Owner-occupied commercial 


185,213


168,442


170,683


150,402


149,646

Non-owner occupied commercial


248,789


233,142


234,751


257,907


253,280

Commercial & industrial


90,048


76,421


80,380


73,234


74,107

PPP Program


63,861


96,147


81,465


107,723


107,384

Consumer


10,919


10,891


10,597


10,359


11,375













$

993,946


956,712


935,482


948,148


936,340



993,946


956,712


935,482


948,148


936,340

 

  • Premises and equipment increased $3.5 million due to the Company purchasing the land for a second financial center it expects to construct in Knoxville, TN.
  • Total deposits increased $68.5 million, or 7.4%, from $921.9 million at December 31, 2020 to $990.4 million at June 30, 2021.  The primary driver of this increase was a $82.1 million, or 39.4%, increase in noninterest-bearing deposit balances from $208.3 million to $290.3 million, as well as a $77.7 million, or 80.7%, increase in NOW and money market accounts.  These increases were offset by a $97.5 million decrease in retail and wholesale time deposits, as customers continue to prefer shorter maturities as a result of the historically low interest rates.

The following summarizes changes in deposit balances over the last five quarters:



June 30,


March 31,


December 31,


September 30,


June 30,



2021


2021


2020


2020


2020

(in thousands)






















Non-interest bearing transaction

$

290,305


250,069


208,250


221,300


215,202

NOW and money market


173,924


105,641


96,243


86,931


84,930

Savings


322,306


325,692


316,083


306,119


286,995

Retail time deposits


117,641


138,989


173,305


196,188


186,386

Wholesale time deposits


86,196


134,994


128,015


88,831


126,486













$

990,372


955,385


921,896


899,369


899,999



990,372


955,385


921,896


899,369


899,999

FHLB borrowings of $100.0 million at March 31, 2021 represent a $50.0 million 3-month floating rate advance swapped to a fixed rate through March 2025, as well as a $50.0 million 6-month fixed rate advance that matures in October, 2021.

Total equity increased $11.5 million, or 11.0%, from $103.8 million at December 31, 2020 to $115.3 million at June 30, 2021.  This increase was primarily comprised of net income of $12.9 million, offset by dividends paid of $1.6 million.  Tangible book value per share improved from $16.52 at December 31, 2020 to $18.23 at June 30, 2021, an annualized increase of greater than 20%.  Equity to assets was 9.31% at June 30, 2021, largely unchanged from 9.36% at December 31, 2020.  The Company and Bank both remain well capitalized at June 30, 2021.

Asset Quality

Non-performing loans to total loans increased slightly from 0.19% at December 31, 2020 to 0.24% at June 30, 2021.  Non-performing assets to total assets increased from 0.16% at December 31, 2020 to 0.29% at June 30, 2021, due to the foreclosure of a single agricultural property during the first quarter of 2021 in the amount of $1.4 million.  This property has a 90% government guarantee and no material loss is expected.  Net charge-offs of $140 thousand were recognized during the first six months of 2021 compared to $20 thousand during the full year ended December 31, 2020.  The allowance for loan losses to total loans decreased from 1.42% (1.56% excluding PPP loans) at December 31, 2020 to 0.97% (1.04% excluding PPP loans) at June 30, 2021 due to a $3.5 million recovery for loan losses recognized during the second quarter of 2021.  Coverage of non-performing loans by the allowance for loan losses remained strong at 410.6% at June 30, 2021. 

During the first quarter of 2021, the Company granted a modification on a $6.8 million loan in the hotel industry that experienced COVID-related construction delays.  This loan returned to normal payment status during the second quarter of 2021 and there were no COVID-related modifications in place as of June 30, 2021.  Pursuant to interagency guidance, the Company has elected to not consider qualifying loans modified under the CARES Act as troubled debt restructurings.

The following summarizes the outstanding loans as of the applicable period with COVID-related modifications by customer industry:



June 30,


March 31,


December 31,


September 30,


June 30,



2021


2021


2020


2020


2020

(in thousands)






















Office building

$

-


-


-


10,345


19,800

Warehouse


-


-


-


9,691


13,400

Residential 1-4


-


-


-


3,985


13,800

Retail


-


-


-


3,138


7,900

Vacant real estate


-


-


-


2,513


2,767

Medical


-


-


-


1,719


2,856

Campground


-


-


-


1,564


1,564

Equipment


-


-


-


1,100


1,982

Vacation cabins


-


-


-


1,069


9,100

Restaurants


-


-


-


1,029


1,964

Hotel


-


6,797


-


917


67,000

Mini-storage


-


-


-


-


21,800

Marina


-


-


-


-


9,300

Multi-family


-


-


-


-


5,900

Other industries


-


-


-


2,988


12,367













$

-


6,797


-


40,058


191,500

Non-GAAP Financial Measures

Statements included in this press release include non-GAAP financial measures and should be read along with the accompanying tables in Appendix A, which provide a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures.  This press release and the accompanying tables discuss financial measures such as adjusted net income, adjusted diluted earnings per share, adjusted return on average assets, adjusted return on average equity, adjusted net interest margin (tax equivalent), and adjusted efficiency ratio, which are all non-GAAP financial measures. We also present in this press release and the accompanying tables pre-tax, pre-provision earnings, pre-tax, pre-provision return on average assets, and the allowance for loan losses to loans excluding PPP loans which are also non-GAAP financial measures. We believe that such non-GAAP financial measures are useful because they enhance the ability of investors and management to evaluate and compare the Company's operating results from period to period in a meaningful manner.  Non-GAAP financial measures should not be considered as an alternative to any measure of performance calculated pursuant to GAAP, nor are they necessarily comparable to non-GAAP financial measures that may be presented by other companies.  Investors should consider the Company's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Company.  Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the Company's results or financial condition as reported under GAAP.

Forward-Looking Statements

This press release contains forward-looking statements. The words "expect," "intend," "should," "may," "could," "believe," "suspect," "anticipate," "seek," "plan," "estimate" and similar expressions are intended to identify such forward-looking statements, but other statements not based on historical fact may also be considered forward-looking. Such forward-looking statements involve known and unknown risks and uncertainties that include, without limitation, (i) further deterioration in the financial condition of our borrowers resulting in significant increases in loan losses and provisions for those losses, (ii) the effects of new outbreaks of COVID-19 (including as a result of variants) and actions taken by government officials to curb its spread, and its impact on general economic and financial market conditions and on our and our customers' business, results of operations, asset quality and financial condition; (iii) the efficacy of COVID-19 vaccines against the virus, including new variants, and public acceptance of those vaccines; (iv) deterioration in the real estate market conditions in our market areas, (v) the impact of increased competition with other financial institutions, including pricing pressures, and the resulting impact on our results, including as a result of compression to our net interest margin, (vi) the deterioration of the economy in our market areas, (vii) fluctuations or differences in interest rates on loans or deposits from those that we are modeling or anticipating, including as a result of our inability to better match deposit rates with the changes in the short-term rate environment, or that affect the yield curve, (viii) the ability to grow and retain low-cost core deposits, (ix) significant downturns in the business of one or more large customers, (x) effectiveness of our asset management activities in improving, resolving or liquidating lower quality assets, (xi) our inability to maintain the historical, long-term growth rate of our loan portfolio, (xii) risks of expansion into new geographic or product markets, (xiii) the possibility of increased compliance and operational costs as a result of increased regulatory oversight, (xiv) our inability to comply with regulatory capital requirements, including those resulting from changes to capital calculation methodologies and required capital maintenance levels, (xv) changes in state or Federal regulations, policies, or legislation applicable to banks and other financial service providers, including regulatory or legislative developments arising out of current unsettled conditions in the economy, (xvi) changes in capital levels and loan underwriting, credit review or loss reserve policies associated with economic conditions, examination conclusions, or regulatory developments, (xvii) inadequate allowance for loan losses, (xviii) results of regulatory examinations, (xix) the vulnerability of our network and online banking portals, and the systems of parties with whom we contract, to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss and other security breaches, (xx) the possibility of increased corporate or personal tax rates and the resulting reduction in our and our customers' businesses as a result of any such increases, (xxi) approval of the declaration of any dividend by our Board of Directors, (xxii) loss of key personnel, (xxiii) adverse results (including costs, fines, reputational harm and/or other negative effects) from current or future obligatory litigation, examinations or other legal and/or regulatory actions, and (xxiv) the negative impact of possible future inflationary pressures.  These risks and uncertainties may cause our actual results or performance to be materially different from any future results or performance expressed or implied by such forward-looking statements. Our future operating results depend on a number of factors which were derived utilizing numerous assumptions that could cause actual results to differ materially from those projected in forward-looking statements.

About Mountain Commerce Bancorp, Inc. and Mountain Commerce Bank

Mountain Commerce Bancorp, Inc. is the holding company for Mountain Commerce Bank.  The Company's shares of common stock trade on the OTCQX under the symbol "MCBI".

Mountain Commerce Bank is a state-chartered financial institution headquartered in Knoxville, TN. The Bank traces its history back over a century and serves East Tennessee through 5 branches located in Erwin, Johnson City, Knoxville and Unicoi.  The Bank focuses on relationship banking of small and medium-sized businesses and high net worth individuals who value the personal service and attention that only a community bank can offer.  For further information, please visit us at www.mcb.com

 

Mountain Commerce Bancorp, Inc. and Subsidiary

Condensed Consolidated Statements of Income

(Amounts in thousands, except share data)













Three Months Ended



Six Months Ended




June 30,



June 30,




2021

2020



2021

2020

Interest income









Loans

$

10,699

10,175


$

21,363

20,373


Investment securities - taxable


581

397



1,069

663


Investment securities - tax exempt


89

67



167

70


Dividends and other


48

119



100

235




11,417

10,758



22,699

21,341

Interest expense








  Deposits









Savings


208

564



460

1,578


Interest bearing transaction accounts


78

138



146

365


Time certificates of deposit of $250,000 or more


139

656



432

1,285


Other time deposits


157

712



398

1,443


     Total deposits


582

2,070



1,436

4,671


Senior debt


120

150



233

299


Subordinated debt


163

1



327

4


FHLB & FRB advances


98

71



219

194




963

2,292



2,215

5,168










Net interest income


10,454

8,466



20,484

16,173










Provision for (recovery of) loan losses


(3,500)

3,500



(3,500)

4,995










Net interest income after provision for (recovery of) loan losses


13,954

4,966



23,984

11,178










Noninterest income









Service charges and fee income


347

267



640

564


Bank owned life insurance


45

33



76

67


Realized gain on sale of investment securities available for sale


2

1



3

1


Unrealized gains on equity securities


74

-



75

-


Gain on sale of loans


102

33



205

97


Impairment of premises and equipment


-

(44)



-

(44)


Wealth management


142

116



306

233


Swap fees


-

11



-

256


Other noninterest income


18

22



33

47




730

439



1,338

1,221

Noninterest expense









Compensation and employee benefits


2,369

1,632



4,688

4,011


Occupancy


328

336



688

674


Furniture and equipment


127

125



275

214


Data processing


379

329



774

667


FDIC insurance


114

110



229

152


Office


183

159



346

287


Advertising


91

74



133

120


Professional fees


306

194



524

450


Real estate owned


(19)

30



11

14


Other noninterest expense


134

382



585

686




4,012

3,371



8,253

7,275










Income before income taxes


10,672

2,034



17,069

5,124










Income taxes


2,638

514



4,175

1,318










Net income

$

8,034

1,520


$

12,894

3,806










Earnings per common share:









Basic

$

1.28

0.24


$

2.06

0.61


Diluted

$

1.28

0.24


$

2.05

0.60










Weighted average common shares outstanding:









Basic


6,270,403

6,286,003



6,269,559

6,278,907


Diluted


6,278,677

6,297,142



6,275,354

6,296,259

 

Mountain Commerce Bancorp, Inc. and Subsidiary

Condensed Consolidated Balance Sheets

(Amounts in thousands)














June 30,



March 31,



December 31,




2021



2021



2020

Assets



















Cash and due from banks

$

9,546


$

11,768


$

14,287

Interest-earning deposits in other banks


98,296



57,750



58,081


Cash and cash equivalents


107,842



69,518



72,368











Investments available for sale


100,219



91,165



77,290

Equity securities


4,238



3,630



3,630

Loans held for sale


118



1,107



418











Loans receivable


993,946



956,712



935,482

Allowance for loans losses


(9,673)



(13,158)



(13,313)


Net loans receivable


984,273



943,554



922,169











Premises and equipment, net


14,949



11,382



11,438

Accrued interest receivable


3,000



3,654



4,247

Real estate owned


1,206



1,378



-

Bank owned life insurance


9,511



9,465



7,435

Restricted stock


5,951



3,701



2,951

Deferred tax assets, net 


3,024



3,478



3,611

Other assets


3,818



4,167



4,413











Total assets

$

1,238,149


$

1,146,199


$

1,109,970











Liabilities and Shareholders' Equity



















Noninterest-bearing

$

290,305


$

250,069


$

208,250

Interest-bearing


613,871



570,322



585,631

Wholesale


86,196



134,994



128,015


Total deposits


990,372



955,385



921,896











FHLB / FRB borrowings


100,000



50,000



50,000

Senior debt, net


12,995



13,495



13,994

Subordinated debt, net


9,804



9,790



9,778

Accrued interest payable


427



292



495

Post-employment liabilities


3,145



3,065



2,992

Other liabilities


6,107



6,850



6,974











Total liabilities


1,122,850



1,038,877



1,006,129











Total shareholders' equity


115,299



107,322



103,841











Total liabilities and shareholders' equity

$

1,238,149


$

1,146,199


$

1,109,970

 

Appendix A - Reconciliation of Non-GAAP Financial Measures 











Three Months Ended



Six Months Ended



June 30



June 30



(Dollars in thousands, except per share data)



(Dollars in thousands, except per share data)











2021

2020



2021

2020

Adjusted Net Income








Net income (GAAP)

$

8,034

1,520


$

12,894

3,806

Realized gain on sale of investment securities


(2)

(1)



(3)

(1)

Unrealized gains on equity securities


(74)

-



(75)

-

Accretion of PPP fees, net


(795)

(686)



(1,669)

(686)

Loss (gain) from sale of REO


(49)

-



(49)

-

Provision for (recovery of) loan losses


(3,500)

3,500



(3,500)

4,995

Provision for (recovery of) unfunded commitments


(225)

110



(90)

110

Tax effect of adjustments


1,214

(764)



1,408

(1,155)

Adjusted net income (Non-GAAP)

$

4,603

3,679


$

8,916

7,069









Adjusted Diluted Earnings Per Share








Diluted earnings per share (GAAP)

$

1.28

0.24


$

2.05

0.60

Realized gain on sale of investment securities


(0.00)

(0.00)



(0.00)

(0.00)

Unrealized gains on equity securities


(0.01)

-



(0.01)

-

Accretion of PPP fees, net


(0.13)

(0.11)



(0.27)

(0.11)

Loss (gain) from sale of REO


(0.01)

-



(0.01)

-

Provision for (recovery of) loan losses


(0.56)

0.56



(0.56)

0.79

Provision for (recovery of) unfunded commitments


(0.04)

0.02



(0.01)

0.02

Tax effect of adjustments


0.19

(0.12)



0.22

(0.18)

Adjusted net income (Non-GAAP)

$

0.73

0.58


$

1.42

1.12









Adjusted Return on Average Assets








Return on average assets (GAAP)


2.75%

0.53%



2.25%

0.73%

Realized gain on sale of investment securities


0.00%

0.00%



0.00%

0.00%

Unrealized gains on equity securities


-0.03%

0.00%



-0.01%

0.00%

Accretion of PPP fees, net


-0.27%

-0.24%



-0.29%

-0.13%

Loss (gain) from sale of REO


-0.02%

0.00%



-0.01%

0.00%

Provision for (recovery of) loan losses


-1.20%

1.22%



-0.61%

0.96%

Provision for (recovery of) unfunded commitments


-0.08%

0.04%



-0.02%

0.02%

Tax effect of adjustments


0.42%

-0.27%



0.25%

-0.22%

Adjusted return on average assets (Non-GAAP)


1.57%

1.28%



1.55%

1.36%









Adjusted Return on Average Equity








Return on average equity (GAAP)


29.00%

6.32%



23.77%

8.05%

Realized gain on sale of investment securities


-0.01%

0.00%



-0.01%

0.00%

Unrealized gains on equity securities


-0.27%

0.00%



-0.14%

0.00%

Accretion of PPP fees, net


-2.87%

-2.85%



-3.08%

-1.45%

Loss (gain) from sale of REO


-0.18%

0.00%



-0.09%

0.00%

Provision for (recovery of) loan losses


-12.63%

14.55%



-6.45%

10.56%

Provision for (recovery of) unfunded commitments


-0.81%

0.46%



-0.17%

0.23%

Tax effect of adjustments


4.38%

-3.18%



2.60%

-2.44%

Adjusted return on average equity (Non-GAAP)


16.62%

15.30%



16.44%

14.95%









Adjusted Efficiency Ratio








Efficiency ratio (GAAP)


35.87%

37.86%



37.82%

41.82%

Realized gain on sale of investment securities


0.01%

0.00%



0.00%

0.00%

Unrealized gains on equity securities


0.24%

0.00%



0.13%

0.00%

Accretion of PPP fees, net


2.39%

5.28%



3.35%

2.74%

Loss (gain) from sale of REO


0.44%

0.00%



0.22%

0.00%

Provision for (recovery of) unfunded commitments


2.01%

-1.24%



0.41%

-0.63%

Adjusted efficiency ratio (Non-GAAP) *


41.22%

41.85%



42.02%

43.92%

     * Sum of the individual components may not equal the total. 






   

 

Appendix A - Reconciliation of Non-GAAP Financial Measures, Continued











Three Months Ended



Six Months Ended



June 30,



June 30,



(Dollars in thousands, except per share data)



(Dollars in thousands, except per share data)











2021

2020



2021

2020

Adjusted Net Interest Margin (tax-equivalent) (1)








Net interest margin (tax-equivalent) (GAAP)


3.79%

3.08%



3.81%

3.25%

Accretion of PPP fees, net


-0.30%

-0.14%



-0.29%

-0.08%

Adjusted net interest margin (tax-equivalent) (Non-GAAP)


3.49%

2.94%



3.52%

3.17%









Allowance to Non-PPP loans








Allowance to loans (GAAP)


0.97%

1.15%



1.38%

1.15%

Impact of PPP loans


0.07%

0.15%



0.15%

0.15%

Allowance to non-PPP loans (non-GAAP)


1.04%

1.30%



1.53%

1.30%









Pre-tax Pre-Provision Earnings








Net income (GAAP)

$

8,034

1,520


$

12,894

3,806

Income taxes


2,638

514



4,175

1,318

Provision for (recovery of) loan losses


(3,500)

3,500



(3,500)

4,995

Pre-tax Pre-provision earnings (non-GAAP)

$

7,172

5,534


$

13,569

10,119









Pre-tax Pre-Provision Return on Average Assets (ROAA)








Return on average assets (GAAP)

$

2.75%

0.53%


$

2.25%

0.73%

Income taxes


0.90%

0.18%



0.73%

0.25%

Provision for (recovery of) loan losses


-1.20%

1.22%



-0.60%

0.96%

Pre-tax Pre-provision return on average assets (non-GAAP)

$

2.45%

1.93%


$

2.37%

1.95%

















(1) See Appendix B to this press release for more information on tax equivalent net interest margin

 

Appendix B - Tax Equivalent Net Interest Margin Analysis 


























For the Three Months Ended June 30,




2021



2020




Average





Average






Outstanding 


Yield / 



Outstanding 


Yield / 




Balance

Interest

Rate



Balance

Interest

Rate




(Dollars in thousands)

Interest-earning Assets:











Loans - taxable, including loans held for sale

$

955,178

10,699

4.49%


$

905,868

10,175

4.52%


Loans - tax exempt (2)


11,446

193

6.76%



-

-

0.00%


Investments - taxable


85,553

581

2.72%



59,128

397

2.70%


Investments - tax exempt (1)


13,402

113

3.37%



9,264

85

3.68%


Interest earning deposits


53,603

9

0.07%



97,622

30

0.12%


Other investments, at cost


9,052

39

1.73%



36,514

88

0.97%


Total interest-earning assets


1,128,234

11,634

4.14%



1,108,396

10,775

3.91%


Noninterest earning assets


41,124





38,802




Total assets

$

1,169,358




$

1,147,198














Interest-bearing liabilities:











Interest-bearing transaction accounts

$

30,027

10

0.13%


$

21,088

15

0.29%


Savings accounts


326,025

209

0.26%



283,692

564

0.80%


Money market accounts


101,549

67

0.26%



61,072

123

0.81%


Retail time deposits


129,196

233

0.72%



179,552

902

2.02%


Wholesale time deposits


91,954

63

0.27%



156,490

466

1.20%


     Total interest bearing deposits


678,751

582

0.34%



701,894

2,070

1.19%













Federal Home Loan Bank & FRB advances


92,308

98

0.43%



120,934

72

0.24%


Senior debt


13,125

120

3.67%



15,176

150

3.98%


Subordinated debt


9,792

163

6.68%



-

-

0.00%


Total interest-bearing liabilities


793,976

963

0.49%



838,004

2,292

1.10%













Noninterest-bearing deposits


256,365





203,192




Other noninterest-bearing liabilities


8,206





9,799




Total liabilities


1,058,547





1,050,995















Total shareholders' equity


110,811





96,203




Total liabilities and shareholders' equity

$

1,169,358




$

1,147,198















Tax-equivalent net interest income



10,671





8,483














Net interest-earning assets (3)

$

334,258




$

270,392















Average interest-earning assets to interest-











     bearing liabilities


142%





132%















Tax-equivalent net interest rate spread (4)


3.65%





2.81%















Tax equivalent net interest margin (5)


3.79%





3.08%















(1)  Tax exempt investments are calculated giving effect to a 21% federal tax rate


(2)  Tax exempt loans reflect the tax equivalent yield of a 5% state tax credit


(3)  Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities


(4)  Tax-equivalent net interest rate spread represents the difference between the tax equivalent yield on average


       interest-earning assets and the cost of average interest-bearing liabilities.


(5)  Tax equivalent net interest margin represents tax equivalent net interest income divided by average total 


       interest-earning assets

 

Appendix B - Tax Equivalent Net Interest Margin Analysis 


























For the Six Months Ended June 30,




2021



2020




Average





Average






Outstanding 


Yield / 



Outstanding 


Yield / 




Balance

Interest

Rate



Balance

Interest

Rate




(Dollars in thousands)

Interest-earning Assets:











Loans, including loans held for sale

$

935,436

21,363

4.61%


$

857,954

20,373

4.78%


Loans - tax exempt (1)


11,508

385

6.75%



-

-

0.00%


Investments - taxable


77,381

1,069

2.79%



52,651

663

2.53%


Investments - tax exempt (2)


12,723

211

3.35%



4,814

89

3.70%


Interest earning deposits


62,769

25

0.08%



63,843

81

0.26%


Other investments, at cost


7,832

75

1.93%



22,977

154

1.35%


Total interest-earning assets


1,107,648

23,128

4.21%



1,002,239

21,360

4.29%


Noninterest earning assets


39,673





37,481




Total assets

$

1,147,321




$

1,039,720














Interest-bearing liabilities:











Interest-bearing transaction accounts

$

30,615

18

0.12%


$

20,963

42

0.40%


Savings accounts


324,963

460

0.29%



285,777

1,578

1.11%


Money market accounts


85,760

128

0.30%



60,846

323

1.07%


Retail time deposits


141,812

639

0.91%



173,533

1,778

2.06%


Wholesale time deposits


113,197

191

0.34%



135,219

950

1.41%


     Total interest bearing deposits


696,347

1,436

0.42%



676,338

4,671

1.39%













Federal Home Loan Bank & FRB advances


71,271

219

0.62%



78,643

198

0.51%


Senior debt


13,357

233

3.52%



15,438

299

3.89%


Subordinated debt


9,785

327

6.74%



-

-

0.00%


Total interest-bearing liabilities


790,760

2,215

0.56%



770,419

5,168

1.35%













Noninterest-bearing deposits


239,231





165,927




Other noninterest-bearing liabilities


8,853





8,799




Total liabilities


1,038,844





945,145















Total shareholders' equity


108,477





94,575




Total liabilities and shareholders' equity

$

1,147,321




$

1,039,720















Tax-equivalent net interest income



20,913





16,192














Net interest-earning assets (3)

$

316,888




$

231,820















Average interest-earning assets to interest-











     bearing liabilities


140%





130%















Tax-equivalent net interest rate spread (4)


3.65%





2.94%















Tax equivalent net interest margin (5)


3.81%





3.25%















(1)  Tax exempt investments are calculated giving effect to a 21% federal tax rate


(2)  Tax exempt loans reflect the tax equivalent yield of a 5% state tax credit


(3)  Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities


(4)  Tax-equivalent net interest rate spread represents the difference between the tax equivalent yield on average


       interest-earning assets and the cost of average interest-bearing liabilities.


(5)  Tax equivalent net interest margin represents tax equivalent net interest income divided by average total 


       interest-earning assets

 

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SOURCE Mountain Commerce Bancorp, Inc.