Tennesse

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

KNOXVILLE, Tenn., Oct. 25, 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 nine months ended September 30, 2021.

The Company also announced today that its Board of Directors declared a quarterly cash dividend of $0.14 per common share, representing a 4% increase from the $0.135 cash dividend declared in the prior quarter and our third consecutive quarterly dividend increase.  The dividend is payable on December 1, 2021 to shareholders of record as of the close of business on November 8, 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 nine months ended September 30, 2021.  As further detailed in Appendix A and C 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 September 30,





(Dollars in thousands, except per share data)















2021



2020













GAAP


Adjusted (1)



GAAP


Adjusted (1)

Net income

$

5,621


5,095


$

1,856


4,082

Diluted earnings per share

$

0.90


0.81


$

0.30


0.65

Return on average assets (ROAA)


1.79%


1.62%



0.64%


1.41%

Return on average equity


19.22%


17.42%



7.55%


16.60%

Efficiency ratio


38.55%


41.15%



51.74%


43.98%

Net interest margin (tax equivalent)


3.84%


3.51%



3.30%


3.16%











Pre-tax, pre-provision earnings (1)

$



7,401


$



4,730

Pre-tax, pre-provision ROAA (1)




2.36%





1.63%











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

 



For the Nine Months Ended September 30,



(Dollars in thousands, except per share data)













2021



2020













GAAP


Adjusted (1)



GAAP


Adjusted (1)

Net income

$

18,516


14,012


$

5,662


11,152

Diluted earnings per share

$

2.95


2.23


$

0.90


1.78

Return on average assets (ROAA)


2.09%


1.58%



0.70%


1.38%

Return on average equity


22.20%


16.80%



7.87%


15.51%

Efficiency ratio


38.07%


41.71%



45.40%


43.94%

Net interest margin (tax equivalent)


3.78%


3.47%



3.27%


3.17%











Pre-tax, pre-provision earnings (1)

$



20,971


$



14,849

Pre-tax, pre-provision ROAA (1)




2.36%





1.83%











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

 




As of and for the



As of and for the



As of and for the




3 Months Ended



3 Months Ended



12 Months Ended




September 30,



June 30,



December 31,




2021



2021



2020














(Dollars in thousands, except share data)

Asset Quality










Non-performing loans

$

1,318


$

2,356


$

1,801


Real estate owned

$

-


$

1,206


$

-


Non-performing assets

$

1,318


$

3,562


$

1,801


Non-performing loans to total loans


0.13%



0.24%



0.19%


Non-performing assets to total assets


0.10%



0.29%



0.16%


Loans with COVID-19 related modifications (1)

$

-


$

-


$

-


Net charge-offs (period ended)

$

159


$

140


$

20


Allowance for loan losses to non-performing loans


747.65%



410.57%



739.20%


Allowance for loan losses to total loans 


0.97%



0.97%



1.42%


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


1.01%



1.04%



1.56%











Other Data










Core deposits

$

839,779


$

786,535


$

681,402


Cash dividends declared

$

0.135


$

0.130


$

-


Shares outstanding


6,283,403



6,324,003



6,286,003


Book and tangible book value per share (3)

$

18.69


$

18.23


$

16.52


Closing market price per common share

$

27.76


$

26.20


$

20.50


Closing price to book value ratio


148.57%



143.70%



124.10%


Equity to assets ratio


9.07%



9.31%



9.36%


Bank regulatory leverage ratio


10.25%



10.61%



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






 

 

Five Quarter Trends




For the Three Months Ended



(Dollars in thousands, except per share data)














2021


2020



September 30


June 30


March 31


December 31


September 30



Adjusted (1)


Adjusted (2)


Adjusted (2)


Adjusted (2)


Adjusted (1)

Net income 

$

5,095

$

4,603

$

4,313

$

4,195

$

4,082

Diluted earnings per share 

$

0.81

$

0.73

$

0.69

$

0.67

$

0.65

Return on average assets (ROAA) 


1.62%


1.57%


1.53%


1.49%


1.41%

Return on average equity 


17.42%


16.62%


16.30%


16.58%


16.60%

Efficiency ratio


41.15%


41.22%


42.85%


43.47%


43.88%

Net interest margin (tax equivalent)


3.51%


3.49%


3.48%


3.37%


3.16%












Pre-tax, pre-provision earnings

$

7,401

$

7,172

$

6,397

$

5,733

$

4,730

Pre-tax, pre-provision ROAA 


2.36%


2.45%


2.27%


2.04%


1.63%














2021


2020



September 30


June 30


March 31


December 31


September 30



GAAP


GAAP


GAAP


GAAP


GAAP

Net income 

$

5,621

$

8,034

$

4,860

$

4,508

$

1,856

Diluted earnings per share 

$

0.90

$

1.28

$

0.77

$

0.72

$

0.30

Return on average assets (ROAA) 


1.79%


2.75%


1.73%


1.60%


0.64%

Return on average equity 


19.22%


29.00%


18.36%


17.82%


7.55%

Efficiency ratio


38.55%


35.87%


39.87%


42.49%


51.74%

Net interest margin (tax equivalent)


3.84%


3.79%


3.82%


3.74%


3.30%












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


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


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 $4.1 million in the third quarter of 2020 to $5.1 million in the same quarter of 2021, while adjusted earnings per diluted share (non-GAAP) increased 25% from $0.65 to $0.81 over the same periods.  During the current quarter, we repurchased 80.5 thousand shares of our stock at a cost of $2.23 million, which positively impacted our earnings per diluted share.  Along with strong earnings, these repurchases helped increase our adjusted return on average equity (non-GAAP) to a record 17.42%.  The allowance to non-PPP loans (non-GAAP) was 1.01% at September 30, 2021 after recording a provision for loan losses of $200 thousand during the current quarter, and I am happy to report that our COVID-related modifications remained at $0 as of September 30, 2021.  From an asset quality perspective, we successfully liquidated our remaining real estate owned during the current quarter, which helped to lower our non-performing assets to total assets to 0.10% at September 30, 2021, down from 0.16% at December 31, 2020.  Finally, we are pleased to announce that we have increased our quarterly dividend by 4% to $0.14 per quarter, our third consecutive quarterly increase."

Net Interest Income

Net interest income increased $2.2 million, or 23.4%, from $9.2 million for the three months ended September 30, 2020 to $11.4 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 $94.0 or 8.4%, from $1.117 billion to $1.211 billion, driven by increases in loans, interest-earning deposits and investment securities.
  • Average net interest-earning assets grew $95.9 million, or 34.5%, from $277.9 million to $373.8 million, funded by increases in noninterest bearing deposits and an increase in shareholders' equity.
  • The average rate paid on interest-bearing liabilities dropped 55.3% from 0.94% to 0.42%, while the average rate earned on interest-earning assets increased 3.25% from 4.00% to 4.13%, driving an increase in tax-equivalent net interest margin from 3.30% to 3.84%.

The Company recognized approximately $1.0 million and $0.4 million of PPP loan origination fees, net of the amortization of deferred PPP loan costs, through net interest income during the three months ended September 30, 2021 and 2020, respectively.

Net interest income increased $6.5 million, or 25.5%, from $25.4 million for the nine months ended September 30, 2020 to $31.9 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 $101.7 million, or 9.8%, from $1.041 billion to $1.142 billion, driven by increases in loans and investment securities.
  • Average net interest-earning assets grew $89.2 million, or 36.1%, from $246.8 million to $336.1 million, funded by increases in noninterest bearing deposits and an increase in shareholders' equity.
  • The average rate paid on interest-bearing liabilities dropped 56.7% from 1.20% to 0.52%, while the average rate earned on interest-earning assets decreased slightly from 4.18% to 4.14%, driving an increase in tax-equivalent net interest margin from 3.27% to 3.78%.

The Company recognized approximately $2.6 million and $0.8 million of PPP loan origination fees, net of the amortization of deferred PPP loan costs, through net interest income during the nine months ended September 30, 2021 and 2020, respectively.

Provision For Loan Losses

A provision for loan losses of $0.2 million was recorded for the three months ended September 30, 2021, primarily as a result of continued loan growth.  A recovery of loan losses of $3.3 million was recorded during the nine months ended September 30, 2021 as the Company decreased the qualitative factors in its allowance for loan loss model in response to a declining and de minimis levels of COVID-related loan modifications, continued strong asset quality, and continued strengthening of the economy in our primary markets.  The Company recorded a provision for loan losses of $2.5 million and $7.5 million for the three and nine months ended September 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 negatively impacted by the COVID-19 pandemic. 

Noninterest Income

Noninterest income increased $0.1 million, or 13.7%, from $0.6 million in the third quarter of 2020 to $0.7 million in the same quarter of 2021.  This increase was due primarily to increases in service charges and fee income as a result of increases in transaction deposit balances, gains on the sale of loans as a result of continued low interest rates, and wealth management fees as a result of increases in equity market values, offset by a $0.1 million decline in unrealized gains on equity securities.

Noninterest income increased $0.2 million, or 10.9%, from $1.8 million for the nine months ended September 30, 2020 to $2.0 million in the same period of 2021.  This increase was due primarily to increases in service charges and fee income as a result of increases in transaction deposit balances, gains on the sale of loans as a result of continued low interest rates, and wealth management fees as a result of increases in equity market values, offset by a decline in swap fees as the Company has focused on longer duration loans.

Noninterest Expense

Noninterest expense decreased $0.4 million, or 8.5%, from $5.1 million in the third quarter of 2020 to $4.6 million in the same period of 2021.  The decrease was primarily the result of the following:

  • $0.2 million decrease in compensation and employee benefits, due to $0.4 million of PPP bonuses that were paid during the third quarter of 2020;
  • $0.2 million decrease in real estate owned expense as a result of lower revels of real estate owned; and
  • $0.3 million decrease in other noninterest expense as a result of a $0.3 million increase in the reserve for unfunded commitments in the third quarter of 2020 as compared to a nominal amount in the same period of 2021.

Noninterest expense increased $0.5 million, or 4.4%, from $12.3 million for the first nine months of 2020 to $12.9 million in the same period of 2021.  The increase was primarily the result of the following:

  • a $0.5 million, or 6.8%, increase in compensation and employee benefits, due in part to $0.3 million of deferred PPP compensation costs during the first nine months of 2020 compared to $0.1 million during the same period in 2021, as well as normal increases in compensation and benefit costs, offset by $0.4 million of PPP bonuses that were paid during the third quarter of 2020;
  • $0.2 million increase in data processing expense due to continued growth in the number of loan and deposit accounts.

Offsetting these increases was a $0.4 million decrease in other noninterest expense due to a decrease in the reserve for unfunded loan commitments during the nine months ended September 30, 2021.

Income Taxes

The effective tax rate of the Company was 21.9% and 16.6% for the three months ended September 30, 2021 and 2020, respectively.  The effective tax rate of the Company was 23.7% and 22.9% for the nine months ended September 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 increased during the 2021 periods compared to the same periods in 2020 due primarily to the timing and amount of certain investments in loans eligible for a 5% state tax credit.

Balance Sheet

Total assets increased $184.0 million, or 16.6%, from $1.110 billion at December 31, 2020 to $1.294 billion at September 30, 2021.  The increase was primarily driven by the following factors:

  • Cash and cash equivalents increased $61.6 million, or 85.1%, from $72.4 million at December 31, 2020 to $134.0 million at September 30, 2021, as the Company continues to experience significant growth in deposits which has been only partially invested in investment securities and loans.
  • Investments available for sale increased $34.8 million, or 45.0%, from $77.3 million at December 31, 2020 to $112.1 million at September 30, 2021, as the Company took advantage of a steepening yield curve to invest excess liquidity.
  • Loans receivable increased $76.1 million, or 8.1%, from $935.5 million at December 31, 2020 to $1.012 billion at September 30, 2021. Increases in residential, owner-occupied and non-owner occupied commercial, and commercial and industrial lending offset a $63.3 million reduction in PPP loans.

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



September 30,


June 30,


March 31,


December 31,


September 30,



2021


2021


2021


2020


2020

(in thousands)






















Residential construction

$

17,505


16,795


13,037


14,805


17,772

Other construction


35,234


38,121


33,720


35,361


39,858

Farmland


7,559


5,488


6,322


7,943


8,430

Home equity


31,270


30,601


32,281


32,543


35,833

Residential 


286,873


257,048


240,606


224,288


218,872

Multi-family


51,293


47,063


45,703


42,666


27,758

Owner-occupied commercial 


182,379


185,213


168,442


170,683


150,402

Non-owner occupied commercial


255,488


248,789


233,142


234,751


257,907

Commercial & industrial


99,914


90,048


76,421


80,380


73,234

PPP Program


32,882


63,861


96,147


81,465


107,723

Consumer


11,227


10,919


10,891


10,597


10,359













$

1,011,624


993,946


956,712


935,482


948,148

 

  • Premises and equipment increased $4.6 million due to the Company purchasing the land for an operations center it expects to construct in Johnson City, TN and a second stand-alone financial center it expects to construct in Knoxville, TN. The Company previously purchased the land for a financial center in Johnson City, TN that it now intends to use to consolidate certain existing locations.

    The operations center will replace certain leased space the Company currently occupies and is expected to be in use by the end of 2022.  The Johnson City, TN and Knoxville, TN financial centers are expected to be completed during 2023 and 2024, respectively.

  • Total deposits increased $123.1 million, or 13.4%, from $921.9 million at December 31, 2020 to $1.045 billion at September 30, 2021.  The primary driver of this increase was a $106.2 million, or 51.0%, increase in noninterest-bearing deposit balances from $208.3 million to $314.4 million, as well as a $94.1 million, or 97.8%, increase in NOW and money market accounts.  These increases were offset by a $75.8 million, or 43.7%, decrease in retail time deposits, as customers continue to prefer shorter maturities as a result of the historically low interest rates.  Wholesale time deposits, which consist primarily of brokered certificates of deposit with a maximum maturity of one year, also declined between December 31, 2020 and September 30, 2021.

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



September 30,


June 30,


March 31,


December 31,


September 30,



2021


2021


2021


2020


2020

(in thousands)






















Non-interest bearing transaction

$

314,426


290,305


250,069


208,250


221,300

NOW and money market


190,351


173,924


105,641


96,243


86,931

Savings


335,002


322,306


325,692


316,083


306,119

Retail time deposits


97,493


117,641


138,989


173,305


196,188

Wholesale time deposits


107,712


86,196


134,994


128,015


88,831













$

1,044,984


990,372


955,385


921,896


899,369

 

  • FHLB borrowings of $100.0 million at September 30, 2021 consist of the following:

 


Amounts


Current


(000's)

Term

Rate





$

50,000

3 Month

0.22%


50,000

6 Month

0.22%

$

100,000


0.22%

During the quarter ended September 30, 2021, the Bank terminated its interest rate swap on the 3 month FHLB advance noted above for a gain of approximately $0.2 million, which will be recognized as a reduction of interest expense through the original interest rate swap term of March, 2025.

  • Total equity increased $13.6 million, or 13.1%, from $103.8 million at December 31, 2020 to $117.4 million at September 30, 2021.  This increase was primarily comprised of net income of $18.5 million, offset by dividends paid of $2.5 million, share repurchases of $2.2 million and a net decline in the value of investments and derivatives of $0.6 million

During the three and nine months ended September 30, 2021, the Company repurchased the following shares of its common stock:











Shares



Total



Cost



Remaining

Repurchased



Cost 



Per Share



Authorization

(dollars in thousands, except share data)









$

5,000

12,500


$

343


$

27.40



4,657

27,500



770



28.00



3,887

15,000



413



27.50



3,475

19,541



537



27.50



2,938

5,996



165



27.50



2,773











80,537


$

2,227


$

27.66




Tangible book value per share improved from $16.52 at December 31, 2020 to $18.69 at September 30, 2021, an annualized increase of greater than 17%.  The Company's equity to assets ratio was 9.07% at September 30, 2021, down from 9.36% at December 31, 2020.  The Company continues to manage its equity levels through a combination of share repurchases and dividends.  The Company and Bank both remain well capitalized at September 30, 2021.

Asset Quality

Non-performing loans to total loans decreased from 0.19% at December 31, 2020 to 0.13% at September 30, 2021.  Non-performing assets to total assets decreased from 0.16% at December 31, 2020 to 0.10% at September 30, 2021.  During the quarter ended September 30, 2021, the Company successfully liquidated the agricultural property it foreclosed upon during the first quarter of 2021 at a nominal loss.  Net charge-offs of $159 thousand were recognized during the first nine 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% (1.01% excluding PPP loans) at September 30, 2021 due to a $3.3 million recovery for loan losses recognized during the first nine months of 2021.  Coverage of non-performing loans by the allowance for loan losses remained strong at more than 7 to 1 at September 30, 2021. 

There were no COVID-related modifications in place as of September 30, 2021.  Pursuant to interagency guidance, the Company has elected to not consider qualifying loans modified under the CARES Act as troubled debt restructurings.

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 actions taken by governmental officials to curb the spread of the virus, and the resulting impact on general economic and financial market conditions and on our customers' business, results of operations, asset quality and financial condition; (iii) further public acceptance of the vaccines that were developed against the virus as well as the decisions of governmental agencies with respect to vaccines, including recommendations related to booster shots and requirements that seek to mandate that individuals receive or employers require that their employees receive the vaccine; (iv) those vaccines' efficacy against the virus, including new variants; (v) deterioration in the real estate market conditions in our market areas, (vi) 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, (vii) the deterioration of the economy in our market areas, (viii) 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, (ix) the ability to grow and retain low-cost core deposits, (x) significant downturns in the business of one or more large customers, (xi) effectiveness of our asset management activities in improving, resolving or liquidating lower quality assets, (xii) our inability to maintain the historical, long-term growth rate of our loan portfolio, (xiii) risks of expansion into new geographic or product markets, (xiv) the possibility of increased compliance and operational costs as a result of increased regulatory oversight, (xv) our inability to comply with regulatory capital requirements, including those resulting from changes to capital calculation methodologies and required capital maintenance levels, (xvi) 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, (xvii) changes in capital levels and loan underwriting, credit review or loss reserve policies associated with economic conditions, examination conclusions, or regulatory developments, (xviii) inadequate allowance for loan losses, (xix) results of regulatory examinations, (xx) 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, (xxi) 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, (xxii) approval of the declaration of any dividend by our Board of Directors, (xxiii) loss of key personnel, (xxiv) 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 (xxv) 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



Nine Months Ended




September 30,



September 30,




2021

2020



2021

2020

Interest income









Loans

$

11,471

10,548


$

32,835

30,921


Investment securities - taxable


625

455



1,693

1,118


Investment securities - tax exempt


95

89



262

159


Dividends and other


97

114



197

350




12,288

11,206



34,987

32,548

Interest expense









Savings


209

430



669

2,008


Interest bearing transaction accounts


97

88



244

453


Time certificates of deposit of $250,000 or more


84

533



516

1,817


Other time deposits


112

603



510

2,047


     Total deposits


502

1,654



1,939

6,325


Senior debt


106

96



338

395


Subordinated debt


164

112



491

117


FHLB & FRB advances


119

110



338

304




891

1,972



3,106

7,141










Net interest income


11,397

9,234



31,881

25,407










Provision for (recovery of) loan losses


200

2,505



(3,300)

7,500










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


11,197

6,729



35,181

17,907










Noninterest income









Service charges and fee income


342

306



982

870


Bank owned life insurance


45

33



121

100


Realized gain (loss) on sale of investment securities available for sale


1

(5)



4

(5)


Unrealized gain (loss) on equity securities


(10)

59



65

59


Gain on sale of loans


102

49



307

146


Impairment of premises and equipment


-

-



-

(44)


Wealth management


157

119



462

352


Swap fees


-

-



-

256


Other noninterest income


9

7



43

55




646

568



1,984

1,789

Noninterest expense









Compensation and employee benefits


2,598

2,811



7,287

6,822


Occupancy


366

320



1,054

994


Furniture and equipment


120

104



394

318


Data processing


478

365



1,251

1,032


FDIC insurance


121

152



351

304


Office


178

145



523

432


Advertising


54

58



187

179


Professional fees


256

192



780

641


Real estate owned


120

281



131

294


Other noninterest expense


351

644



936

1,331




4,642

5,072



12,894

12,347










Income before income taxes


7,201

2,225



24,271

7,349










Income taxes


1,580

369



5,755

1,687










Net income

$

5,621

1,856


$

18,516

5,662










Net income available to common shareholders

$

5,574

1,856


$

18,402

5,662










Earnings per common share:









Basic

$

0.90

0.30


$

2.96

0.91


Diluted

$

0.90

0.30


$

2.95

0.90










Weighted average common shares outstanding:









Basic


6,188,206

6,255,670



6,221,159

6,254,844


Diluted


6,201,777

6,266,429



6,229,165

6,269,814

 

Mountain Commerce Bancorp, Inc. and Subsidiary

Condensed Consolidated Balance Sheets

(Amounts in thousands)














September 30,



June 30,



December 31,




2021



2021



2020

Assets



















Cash and due from banks

$

12,393


$

9,546


$

14,287

Interest-earning deposits in other banks


121,565



98,296



58,081


Cash and cash equivalents


133,958



107,842



72,368











Investments available for sale


112,067



100,219



77,290

Equity securities


4,602



4,238



3,630

Loans held for sale


512



118



418











Loans receivable


1,011,624



993,946



935,482

Allowance for loans losses


(9,854)



(9,673)



(13,313)


Net loans receivable


1,001,770



984,273



922,169











Premises and equipment, net


16,059



14,949



11,438

Accrued interest receivable


2,810



3,000



4,247

Real estate owned


-



1,206



-

Bank owned life insurance


9,555



9,511



7,435

Restricted stock


5,951



5,951



2,951

Deferred tax assets, net 


2,059



3,024



3,611

Other assets


4,635



3,818



4,413











Total assets

$

1,293,978


$

1,238,149


$

1,109,970











Liabilities and Shareholders' Equity



















Noninterest-bearing

$

314,426


$

290,305


$

208,250

Interest-bearing


622,846



613,871



585,631

Wholesale


107,712



86,196



128,015


Total deposits


1,044,984



990,372



921,896











FHLB / FRB borrowings


100,000



100,000



50,000

Senior debt, net


12,495



12,995



13,994

Subordinated debt, net


9,814



9,804



9,778

Accrued interest payable


258



427



495

Post-employment liabilities


3,223



3,145



2,992

Other liabilities


5,798



6,107



6,974











Total liabilities


1,176,572



1,122,850



1,006,129











Total shareholders' equity


117,406



115,299



103,841











Total liabilities and shareholders' equity

$

1,293,978


$

1,238,149


$

1,109,970

 

Appendix A - Reconciliation of Non-GAAP Financial Measures 











Three Months Ended



Nine Months Ended



September 30



September 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)

$

5,621

1,856


$

18,516

5,662

Realized (gain) loss on sale of investment securities


(1)

5



(4)

5

Unrealized (gain) loss on equity securities


10

(59)



(65)

(59)

Accretion of PPP fees, net


(1,026)

(29)



(2,695)

(715)

Loss (gain) from sale of REO


100

254



51

254

Provision for (recovery of) loan losses


200

2,505



(3,300)

7,500

Provision for (recovery of) unfunded commitments


5

338



(85)

448

Tax effect of adjustments


186

(788)



1,594

(1,943)

Adjusted net income (Non-GAAP)

$

5,095

4,082


$

14,012

11,152









Adjusted Diluted Earnings Per Share








Diluted earnings per share (GAAP)

$

0.90

0.30


$

2.95

0.90

Realized (gain) loss on sale of investment securities


(0.00)

0.00



(0.00)

0.00

Unrealized (gain) loss on equity securities


0.00

(0.01)



(0.01)

(0.01)

Accretion of PPP fees, net


(0.17)

(0.00)



(0.43)

(0.11)

Loss (gain) from sale of REO


0.02

0.04



0.01

0.04

Provision for (recovery of) loan losses


0.03

0.40



(0.53)

1.20

Provision for (recovery of) unfunded commitments


0.00

0.05



(0.01)

0.07

Tax effect of adjustments


0.03

(0.13)



0.26

(0.31)

Adjusted diluted earnings per share (Non-GAAP)

$

0.81

0.65


$

2.23

1.78









Adjusted Return on Average Assets








Return on average assets (GAAP)


1.79%

0.64%



2.09%

0.70%

Realized (gain) loss on sale of investment securities


0.00%

0.00%



0.00%

0.00%

Unrealized (gain) loss on equity securities


0.00%

-0.02%



-0.01%

-0.01%

Accretion of PPP fees, net


-0.33%

-0.01%



-0.30%

-0.09%

Loss (gain) from sale of REO


0.03%

0.09%



0.01%

0.03%

Provision for (recovery of) loan losses


0.06%

0.87%



-0.37%

0.93%

Provision for (recovery of) unfunded commitments


0.00%

0.12%



-0.01%

0.06%

Tax effect of adjustments


0.06%

-0.27%



0.18%

-0.24%

Adjusted return on average assets (Non-GAAP)


1.62%

1.41%



1.58%

1.38%









Adjusted Return on Average Equity








Return on average equity (GAAP)


19.22%

7.55%



22.20%

7.87%

Realized (gain) loss on sale of investment securities


0.00%

0.02%



0.00%

0.01%

Unrealized (gain) loss on equity securities


0.03%

-0.24%



-0.08%

-0.08%

Accretion of PPP fees, net


-3.51%

-0.12%



-3.23%

-0.99%

Loss (gain) from sale of REO


0.34%

1.03%



0.06%

0.35%

Provision for (recovery of) loan losses


0.68%

10.18%



-3.96%

10.43%

Provision for (recovery of) unfunded commitments


0.02%

1.37%



-0.10%

0.62%

Tax effect of adjustments


0.64%

-3.20%



1.91%

-2.70%

Adjusted return on average equity (Non-GAAP)


17.42%

16.60%



16.80%

15.51%









Adjusted Efficiency Ratio








Efficiency ratio (GAAP)


38.55%

51.74%



38.07%

45.40%

Realized (gain) loss on sale of investment securities


0.00%

-0.02%



0.01%

0.01%

Unrealized (gain) loss on equity securities


-0.04%

0.32%



0.08%

0.10%

Accretion of PPP fees, net


3.58%

-1.72%



3.44%

1.10%

Loss (gain) from sale of REO


-0.84%

-2.59%



-0.15%

-0.93%

Provision for (recovery of) unfunded commitments


-0.05%

-3.44%



0.26%

-1.65%

Adjusted efficiency ratio (Non-GAAP) *


41.15%

43.98%



41.71%

43.94%

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
























































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











Three Months Ended



Nine Months Ended



September 30,



September 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)


3.84%

3.30%



3.78%

3.27%

Accretion of PPP fees, net


-0.34%

-0.14%



-0.31%

-0.10%

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


3.51%

3.16%



3.47%

3.17%









Allowance to Non-PPP loans








Allowance to loans (GAAP)


0.97%

1.40%



0.97%

1.40%

Impact of PPP loans


0.03%

0.18%



0.03%

0.18%

Allowance to non-PPP loans (non-GAAP)


1.01%

1.58%



1.01%

1.58%









Pre-tax Pre-Provision Earnings








Net income (GAAP)

$

5,621

1,856


$

18,516

5,662

Income taxes


1,580

369



5,755

1,687

Provision for (recovery of) loan losses


200

2,505



(3,300)

7,500

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

$

7,401

4,730


$

20,971

14,849









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








Return on average assets (GAAP)

$

1.79%

0.64%


$

2.09%

0.70%

Income taxes


0.50%

0.13%



0.65%

0.21%

Provision for (recovery of) loan losses


0.06%

0.87%



-0.37%

0.93%

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

$

2.36%

1.63%


$

2.36%

1.83%

















(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 September 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

$

972,008

11,471

4.68%


$

930,523

10,548

4.51%


Loans - tax exempt (2)


17,802

303

6.75%



-

-

0.00%


Investments - taxable


92,539

625

2.68%



66,667

455

2.72%


Investments - tax exempt (1)


15,078

120

3.16%



11,934

113

3.77%


Interest earning deposits


102,685

36

0.14%



63,311

44

0.28%


Other investments, at cost


10,667

61

2.27%



44,336

70

0.63%


Total interest-earning assets


1,210,779

12,616

4.13%



1,116,771

11,230

4.00%


Noninterest earning assets


43,967





40,644




Total assets

$

1,254,746




$

1,157,415














Interest-bearing liabilities:











Interest-bearing transaction accounts

$

57,030

20

0.14%


$

21,549

9

0.17%


Savings accounts


328,837

209

0.25%



296,749

430

0.58%


Money market accounts


121,751

77

0.25%



62,520

80

0.51%


Retail time deposits


109,664

133

0.48%



196,357

883

1.79%


Wholesale time deposits


97,169

63

0.26%



109,651

252

0.91%


     Total interest bearing deposits


714,451

502

0.28%



686,826

1,654

0.96%













Federal Home Loan Bank & FRB advances


100,000

119

0.47%



130,004

110

0.34%


Senior debt


12,750

106

3.30%



14,704

96

2.60%


Subordinated debt


9,804

164

6.64%



7,333

112

6.08%


Total interest-bearing liabilities


837,005

891

0.42%



838,867

1,972

0.94%













Noninterest-bearing deposits


290,634





211,516




Other noninterest-bearing liabilities


10,131





8,642




Total liabilities


1,137,770





1,059,025















Total shareholders' equity


116,976





98,390




Total liabilities and shareholders' equity

$

1,254,746




$

1,157,415















Tax-equivalent net interest income



11,725





9,258














Net interest-earning assets (3)

$

373,774




$

277,904















Average interest-earning assets to interest-bearing liabilities


145%





133%















Tax-equivalent net interest rate spread (4)


3.71%





3.07%















Tax equivalent net interest margin (5)


3.84%





3.30%















(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 Nine Months Ended September 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

$

954,379

32,835

4.60%


$

882,320

30,921

4.68%


Loans - tax exempt (2)


7,010

354

6.75%



-

-

0.00%


Investments - taxable


82,490

1,693

2.71%



57,356

1,118

2.60%


Investments - tax exempt (1)


13,516

332

3.28%



7,205

201

3.73%


Interest earning deposits


76,221

61

0.11%



63,664

99

0.21%


Other investments, at cost


8,787

136

2.07%



30,148

251

1.11%


Total interest-earning assets


1,142,403

35,411

4.14%



1,040,693

32,590

4.18%


Noninterest earning assets


41,120





38,545




Total assets

$

1,183,523




$

1,079,238














Interest-bearing liabilities:











Interest-bearing transaction accounts

$

40,799

39

0.13%


$

21,160

50

0.32%


Savings accounts


326,269

669

0.27%



289,461

2,008

0.93%


Money market accounts


96,607

204

0.28%



61,408

403

0.88%


Retail time deposits


130,979

773

0.79%



181,194

2,662

1.96%


Wholesale time deposits


107,795

254

0.32%



126,637

1,202

1.27%


     Total interest bearing deposits


702,449

1,939

0.37%



679,860

6,325

1.24%













Federal Home Loan Bank & FRB advances


80,952

338

0.56%



95,889

304

0.42%


Senior debt


13,150

338

3.44%



15,176

395

3.48%


Subordinated debt


9,791

491

6.70%



2,933

117

5.33%


Total interest-bearing liabilities


806,342

3,106

0.52%



793,858

7,141

1.20%













Noninterest-bearing deposits


257,028





180,772




Other noninterest-bearing liabilities


8,958





8,713




Total liabilities


1,072,328





983,343















Total shareholders' equity


111,195





95,895




Total liabilities and shareholders' equity

$

1,183,523




$

1,079,238















Tax-equivalent net interest income



32,305





25,449














Net interest-earning assets (3)

$

336,061




$

246,835


























 Average interest-earning assets to interest-bearing liabilities


142%





131%















Tax-equivalent net interest rate spread (4)


3.63%





2.98%















Tax equivalent net interest margin (5)


3.78%





3.27%















(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 C - Reconciliation of Prior Period Non-GAAP Financial Measures 








Three Months Ended



(Dollars in thousands, except per share data)








June 30, 2021

March 30, 2021

December 31, 2020

Adjusted Net Income





Net income (GAAP)

$

8,034

4,860

4,508

Realized (gain) loss on sale of investment securities


(2)

(1)

(55)

Unrealized (gain) loss on equity securities


(74)

(1)

(1,016)

Accretion of PPP fees, net


(795)

(874)

695

Loss (gain) from sale of REO


(49)

-

98

Provision for (recovery of) loan losses


(3,500)

-

4,230

Provision for (recovery of) unfunded commitments


(225)

135

(48)

Tax effect of adjustments


1,214

193

13

Adjusted net income (Non-GAAP)

$

4,603

4,313

4,195






Adjusted Diluted Earnings Per Share





Diluted earnings per share (GAAP)

$

1.28

0.77

0.72

Realized (gain) loss on sale of investment securities


(0.00)

(0.00)

(0.01)

Unrealized (gain) loss on equity securities


(0.01)

(0.00)

(0.16)

Accretion of PPP fees, net


(0.13)

(0.14)

0.11

Loss (gain) from sale of REO


(0.01)

-

0.02

Provision for (recovery of) loan losses


(0.56)

-

0.68

Provision for (recovery of) unfunded commitments


(0.04)

0.02

(0.01)

Tax effect of adjustments


0.19

0.03

0.00

Adjusted diluted earnings per share (Non-GAAP)

$

0.73

0.69

0.67






Adjusted Return on Average Assets





Return on average assets (GAAP)


2.75%

1.73%

1.60%

Realized (gain) loss on sale of investment securities


0.00%

0.00%

-0.02%

Unrealized (gain) loss on equity securities


-0.03%

0.00%

-0.36%

Accretion of PPP fees, net


-0.27%

-0.31%

0.25%

Loss (gain) from sale of REO


-0.02%

0.00%

0.03%

Provision for (recovery of) loan losses


-1.20%

0.00%

1.50%

Provision for (recovery of) unfunded commitments


-0.08%

0.05%

-0.02%

Tax effect of adjustments


0.42%

0.07%

0.00%

Adjusted return on average assets (Non-GAAP)


1.57%

1.53%

1.49%






Adjusted Return on Average Equity





Return on average equity (GAAP)


29.00%

18.36%

17.82%

Realized (gain) loss on sale of investment securities


-0.01%

0.00%

-0.22%

Unrealized (gain) loss on equity securities


-0.27%

0.00%

-4.02%

Accretion of PPP fees, net


-2.87%

-3.30%

2.75%

Loss (gain) from sale of REO


-0.18%

0.00%

0.39%

Provision for (recovery of) loan losses


-12.63%

0.00%

16.72%

Provision for (recovery of) unfunded commitments


-0.81%

0.51%

-0.19%

Tax effect of adjustments


4.38%

0.73%

0.05%

Adjusted return on average equity (Non-GAAP)


16.62%

16.30%

16.58%






Adjusted Efficiency Ratio





Efficiency ratio (GAAP)


35.87%

39.87%

42.49%

Realized (gain) loss on sale of investment securities


0.01%

N/M

N/M

Unrealized (gain) loss on equity securities


0.24%

N/M

N/M

Accretion of PPP fees, net


2.39%

N/M

N/M

Loss (gain) from sale of REO


0.44%

N/M

N/M

Provision for (recovery of) unfunded commitments


2.01%

N/M

N/M

Adjusted efficiency ratio (Non-GAAP) *


41.22%

42.85%

43.47%

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










Adjusted Net Interest Margin (tax-equivalent)





Net interest margin (tax-equivalent) (GAAP)


3.79%

3.82%

3.74%

Accretion of PPP fees, net


-0.30%

-0.34%

-0.37%

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


3.49%

3.48%

3.37%






Pre-tax Pre-Provision Earnings





Net income (GAAP)

$

8,034

4,860

4,508

Income taxes


2,638

1,537

1,225

Provision for (recovery of) loan losses


(3,500)

-

-

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

$

7,172

6,397

5,733






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





Return on average assets (GAAP)

$

2.75%

1.73%

1.60%

Income taxes


0.90%

0.55%

0.44%

Provision for (recovery of) loan losses


-1.20%

0.00%

0.00%

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

$

2.45%

2.27%

2.04%

 

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SOURCE Mountain Commerce Bancorp, Inc.