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

Rhea-AI Summary

Mountain Commerce Bancorp (MCBI) reported a strong financial performance for Q3 2021, achieving a net income of $5.6 million, up from $1.9 million in Q3 2020. Diluted earnings per share increased to $0.90, reflecting a 25% rise from the prior year. The company's board declared a quarterly cash dividend of $0.14 per share, marking a 4% increase and payable on December 1, 2021. Total assets surged by 16.6% year-over-year to $1.294 billion, driven by a notable rise in cash deposits and loans. Non-performing loans decreased significantly, indicating improved asset quality.

Positive

• Net income increased to $5.6 million, up 25% from Q3 2020.
• Diluted earnings per share rose to $0.90, up from $0.30 in Q3 2020.
• Quarterly cash dividend increased by 4% to $0.14.
• Total assets grew 16.6% to $1.294 billion.
• Non-performing loans decreased to 0.13% of total loans.

Negative

• Net charge-offs increased to $159,000 from $20,000 for the previous year.

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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