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Mountain Commerce Bancorp, Inc. Announces Second Quarter 2020 Results

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KNOXVILLE, Tenn., July 27, 2020 /PRNewswire/ -- Mountain Commerce Bancorp, Inc. (the "Company") (OTCQX:MCBI), the holding company for Mountain Commerce Bank (the "Bank"), today announced earnings and related data as of and for the three and six months ended June 30, 2020.

Highlights

The following tables highlight the trends that the Company believes are most relevant to understanding the performance of the Company.  As further detailed in Appendix A to this press release, (i) adjusted results (which are non-GAAP financial measures) reflect adjustments for investment gains and losses and the impact of PPP fee amortization, net of costs and (ii) adjusted results excluding provision for loan losses (which are also non-GAAP financial measures.  See Appendix B to this press release for more information on our tax equivalent net interest margin.



For the Three Months Ended June 30,




(Dollars in thousands, except per share data)


















2020



2019







Adjusted







Adjusted







Excluding







Excluding



GAAP


Adjusted


Provision



GAAP


Adjusted


Provision

Net income

$

1,520


1,013


3,598


$

2,958


2,936


2,714

Pre-tax, pre-provision earnings


 N/A 


 N/A 


5,534



 N/A 


 N/A 


3,691

Net interest margin (tax equivalent)


3.08%


2.94%


2.94%



3.40%


3.40%


3.40%

Return on average assets


0.53%


0.35%


1.25%



1.38%


1.37%


1.27%

Return on average equity


6.32%


4.21%


14.96%



14.38%


14.27%


13.19%

Efficiency ratio


37.78%


40.93%


40.93%



50.26%


50.47%


50.47%

Diluted earnings per share

$

0.24


0.16


0.57


$

0.47


0.47


0.43































For the Six Months Ended June 30,




(Dollars in thousands, except per share data)


















2020



2019







Adjusted







Adjusted







Excluding







Excluding



GAAP


Adjusted


Provision



GAAP


Adjusted


Provision















Net income

$

3,806


3,299


6,988


$

5,847


6,043


5,489

Pre-tax, pre-provision earnings


N/A


N/A


10,119



N/A


N/A


7,070

Net interest margin (tax equivalent)


3.25%


3.17%


3.17%



3.38%


3.38%


3.38%

Return on average assets


0.73%


0.63%


1.34%



1.37%


1.41%


1.29%

Return on average equity


8.05%


6.98%


14.78%



14.56%


15.05%


13.67%

Efficiency ratio


41.78%


43.50%


43.50%



51.46%


50.53%


50.53%

Diluted earnings per share

$

0.60


0.52


1.11


$

0.93


0.96


0.88

 




As of



As of 



As of 




June 30,



December 31,



June 30,




2020



2019



2019














(Dollars in thousands, except share data)

Asset Quality










Non-performing loans

$

4,924


$

1,680


$

739


Real estate owned


1,438



4,973



6,009


Non-performing assets


6,362



6,653



6,748


Non-performing loans to total loans


0.53%



0.21%



0.10%


Non-performing assets to total assets


0.54%



0.73%



0.77%


Loans with COVID-19 related modifications (1)


191,500



N/A



N/A


Net charge-offs (recoveries)

$

27


$

270


$

248


Allowance for loan losses to non-performing loans


219.35%



347.14%



763.60%


Allowance for loan losses to total loans 


1.15%



0.72%



0.76%


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


1.30%



N/A



N/A











Other Data










Shares outstanding


6,286,003



6,249,053



6,190,647


Book and tangible book value per share (3)


15.37



14.57



13.61


Closing market price per common share


15.90



22.10



19.10


Closing price to book value ratio


103.43%



151.72%



140.38%


Equity to assets ratio


8.27%



10.04%



9.55%


Bank regulatory leverage ratio


10.01%



11.54%



11.25%


(1) Including both principal deferrals and interest only terms

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

(3) The Company does not have any intangible assets

Management Commentary

William E. "Bill" Edwards, III, President and Chief Executive Officer of the Company, commented, "We are pleased with our second quarter results which continued to be strong with our adjusted net income excluding the provision for loan losses increasing 33% from $2.7 million in the second quarter of 2019 to $3.6 million in the same quarter of 2020.  As a result of the continuing economic downturn, we adjusted several components of our allowance for loan losses model, which contributed to an additional $3.5 million of reserves in the second quarter of 2020, bringing our allowance to non-PPP loans to 1.30%.  During these uncertain times, we believe it is particularly important to operate efficiently, which is reflected in our lower adjusted efficiency ratio which dropped below 41% this quarter. The Company has also been a significant participant in the Paycheck Protection Program (PPP), funding 765 loans for over $107 million in principal amount and generating fee income of nearly $3.5 million, which will be recognized over the life of the PPP loans.  The Company recently announced that it successfully raised $10 million of subordinated debt in a private offering to institutional accredited investors.  This offering closed on July 15, 2020.  While we are currently well capitalized, the subordinated debt will provide an additional source of strength and capital for the Bank should our borrowers be more negatively impacted by the economic disruption associated with COVID-19 than we currently anticipate.  Finally, as we look ahead, we intend to look for opportunities to grow our franchise, while staying focused on what we do best – relationship banking."

Net Interest Income

Net interest income increased $1.5 million, or 22.2%, from $6.9 million for the three months ended June 30, 2019 to $8.5 million for the same period in 2020.  The increase between the periods was primarily the result of the following factors:

  • Average interest-earning assets grew $290.9 million, or 35.6%, from $817.5 million to $1.108 billion, due in part to PPP loans.
  • Average net interest-earning assets grew $106.6 million, or 65.1%, from $163.8 million to $270.4 million, funded by increases in noninterest bearing deposits and Federal Home Loan Bank (FHLB) / Federal Reserve Bank (FRB) borrowings.

These increases were partially offset by a decrease in net interest margin from 3.40% for the three months ended June 30, 2019 to 3.08% for the same period of 2020 as a result of increased liquidity and a decrease in the yield on interest-earning assets from 4.92% during the three months ended June 30, 2019 to 3.91% during the same period in 2020 due to lower yields on PPP loans, offset in part by lower funding costs.

Net interest income increased approximately $2.5 million, or 18.1%, from $13.7 million for the six months ended June 30, 2019 to $16.1 million for the same period in 2020.  The increase between the periods was primarily the result of the following factors:

  • Average interest-earning assets grew $186.1 million, or 22.8%, from $816.1 million to $1.002 billion.
  • Average net interest-earning assets grew $78.9 million, or 51.6%, from $152.9 million to $231.8 million, funded by increases in noninterest bearing deposits and FHLB / FRB borrowings.

These increases were partially offset by a decrease in net interest margin from 3.38% for the six months ended June 30, 2019 to 3.25% during the same period of 2020 as a result of increased liquidity and a decrease in the yield on interest-earning assets from 4.94% during the six months ended June 30, 2019 to 4.29% during the same period in 2020 due to lower yields on PPP loans, offset in part by lower funding costs.

The Company recognized approximately $0.4 million of net PPP loan origination fees through net interest income during the three and six months ended June 30, 2020.

Provision For Loan Losses

A provision for loan losses of $3.5 million and $5.0 million was recorded for the three and six months ended June 30, 2020, respectively, as a result of the Company increasing the qualitative factors in its allowance for loan loss model and increasing reserve factors on certain loans to borrowers more likely to be impacted by the COVID-19 pandemic.  A recovery of loan losses of $0.3 million and $0.8 million was recorded in the three and six months ended June 30, 2019, respectively.

Noninterest Income

Noninterest income decreased $0.1 million, or 11.0%, from $0.5 million in the second quarter of 2019 to $0.4 million in the same quarter of 2020.  The decrease was primarily due to modest declines in deposit fees and charges and gains on the sale of investments. 

Noninterest income increased $0.3 million, or 39.5%, from $0.9 million during the six months ended June 30, 2019 to $1.2 million during the same period of 2020.  The increase was primarily due to a loss on the sale of investments of $0.3 million during the six months ended June 30, 2019 and an increase in the gain on sale of loans during the six months ended June 30, 2020.

Noninterest Expense

Noninterest expense decreased approximately $0.4 million, or 9.6%, from $3.7 million in the second quarter of 2019 to $3.4 million in the second quarter of 2020.  This decrease was primarily the result of a decline in compensation and benefits expense of $0.3 million due to deferred loan origination costs on PPP loans.

Noninterest expense decreased $0.2 million, or 2.9%, from $7.5 million for the six months ended June 30, 2019 to $7.3 million for the same period of 2020.  This decrease was primarily the result of declines in compensation and benefits resulting from deferred loan origination costs on PPP loans, and residual data processing and real estate owned expenses, offset partially by increases in professional fees.

Income Taxes

The effective tax rate of the Company was 25.3% and 25.9% for the three months ended June 30, 2020 and 2019, respectively.  The effective tax rate of the Company was 25.7% and 25.2% for the six months ended June 30, 2020 and 2019, respectively.  The Company's marginal tax rate of 26.14% is favorably impacted by certain sources of non-taxable income including BOLI and investments in municipal securities.

Balance Sheet

Total assets increased $262.1 million, or 28.9%, from $906.7 million at December 31, 2019 to $1.169 billion at June 30, 2020.  The increase was primarily driven by the following factors:

  • Interest-earning deposits increased $109.2 million from $7.5 million at December 31, 2019 to $116.7 million at June 30, 2020. The increase was driven primarily by higher noninterest-bearing deposit balances resulting from PPP lending balances that remained on deposit at the Company as well as a general increase in customer deposit balances. The Company believes it is prudent to maintain higher levels of liquidity during the economic downturn.
  • Loans receivable increased $128.9 million, or 16.0%, from $807.4 million at December 31, 2019 to $936.3 million at June 30, 2019. $107.4 million of this increase resulted from PPP loans.

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



June 30,


March 31,


December 31,



2020


2020


2019



(Unaudited)


(Unaudited)


(Audited)

(in thousands)














Residential construction

$

17,238


20,950


21,560

Other construction


40,996


40,945


39,319

Farmland


8,592


8,391


8,429

Home equity


35,882


41,674


40,988

Residential 


211,443


203,180


196,614

Multi-family


26,606


26,980


27,065

Owner-occupied commercial 


149,646


137,289


134,977

Non-owner occupied commercial


253,280


256,197


252,158

Commercial & industrial


78,079


78,031


76,533

PPP Program


107,384


-


-

Consumer


7,194


10,947


9,797









$

936,340


824,584


807,440

Total deposits increased $142.1 million, or 18.7%, from $757.9 million at December 31, 2019 to $900.0 million at June 30, 2020.  In addition to the increase in noninterest-bearing deposit balances resulting principally from the PPP program, wholesale deposit balances increased $44.7 million, or 54.6%, from December 31, 2019 to June 30, 2020 due to the Company's decision to maintain higher levels of liquidity during the economic downturn. 

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



June 30,


March 31,


December 31,



2020


2020


2019



(Unaudited)


(Unaudited)


(Audited)

(in thousands)














Non-interest bearing transaction

$

215,202


134,498


138,848

NOW and money market


84,970


83,657


84,200

Savings


286,955


283,032


289,163

Retail time deposits


186,386


175,858


163,929

Wholesale time deposits


126,486


152,670


81,792









$

899,999


829,715


757,932

FHLB / FRB borrowings increased $113.0 million, or 322.8%, from $35.0 million at December 31, 2019 to $148.0 million at June 30, 2020.  $98.0 million of this increase related to borrowings from the FRB to fund PPP loans.

Total equity increased $5.6 million, or 6.1%, from $91.0 million at December 31, 2019 to $96.6 million at June 30, 2020.  This increase was primarily comprised of net income of $3.8 million and net improvement in the fair value of the Company's investments and derivatives of $1.6 million.  Tangible book value per share improved from $14.57 at December 31, 2019 to $15.37 at June 30, 2020.  Equity to assets declined from 10.04% at December 31, 2019 to 8.27% at June 30, 2020 because of the meaningful increase in total assets, including the PPP loans.

Asset Quality

Non-performing loans to total loans increased from 0.21% at December 31, 2019 to 0.53% at June 30, 2020.  The increase was due to the addition of 2 real estate secured relationships for which no loss is currently expected.  Non-performing assets to total assets decreased from 0.73% at December 31, 2019 to 0.54% at June 30, 2020, primarily as a result of the sale of several real estate owned properties.  Net charge-offs of $27 thousand were recognized during the first six months of 2020.  The allowance for loan losses to total loans (excluding PPP loans) increased from 0.72% at December 31, 2019 to 1.30% at June 30, 2020 and coverage of non-performing loans remains strong at 219.35% at June 30, 2020.

The Company had granted principal and/or interest deferrals on loans totaling $191.5 million in aggregate principal amount, or approximately 23% of its non-PPP loan portfolio, in response to COVID-19 as of June 30, 2020.  These deferrals were to customers in the following industries:



(in thousands)




Hotel

$

67,000

Mini-storage


21,800

Office building


19,800

Residential 1-4


13,800

Warehouse


13,400

Marina


9,300

Vacation cabins


9,100

Retail


7,900

Multi-family


5,900

Other industries


23,500


$

191,500

Other industries not detailed in the table above including restaurants, automobile, medical, entertainment, and others were individually below $5 million of exposure.  Approximately 57% of the deferrals involved principal, while 43% involved an interest only period.

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, and adjusted efficiency ratio, both including and excluding the provision for (recovery of) loan losses, which are all non-GAAP financial measures. We also present in this press release and the accompanying tables the allowance for loan losses to loans excluding PPP loans which is also a non-GAAP financial measure. 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 the emergence of widespread health emergencies or pandemics, including the magnitude and duration of the COVID-19 pandemic and its impact on general economic and financial market conditions and on our and our customers' business, results of operations, asset quality and financial condition; (iii) deterioration in the real estate market conditions in our market areas, (iv) the impact of increased competition with other financial institutions, including pricing pressures, and the resulting impact our results, including as a result of compression to our net interest margin, (v) the further deterioration of the economy in our market areas, (vi) 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, (vii) the ability to grow and retain low-cost core deposits, (viii) significant downturns in the business of one or more large customers, (ix) our inability to maintain the historical growth rate of our loan portfolio, (x) risks of expansion into new geographic or product markets, (xi) the possibility of increased compliance and operational costs as a result of increased regulatory oversight, (xii) our inability to comply with regulatory capital requirements, including those resulting from changes to capital calculation methodologies and required capital maintenance levels, (xiii) 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, (xiv) changes in capital levels and loan underwriting, credit review or loss reserve policies associated with economic conditions, examination conclusions, or regulatory developments, (xv) inadequate allowance for loan losses, (xvi) results of regulatory examinations, (xvii) 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, (xviii) the possibility of additional increases to compliance costs as a result of increased regulatory oversight, (xix) loss of key personnel, and (xx) 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. 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 of Mountain Commerce Bank.  The Company's shares of common stock trade on the OTCQX under the symbol "MCBI".

Mountain Commerce Bank is state-chartered financial institution that traces its history over a century and is headquartered in Knoxville, Tennessee serving 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

(Unaudited)

(Amounts in thousands, except share data)













Three Months Ended



Six Months Ended




June 30,



June 30,




2020

2019



2020

2019

Interest income









Loans

$

10,175

9,534


$

20,373

18,667


Investment securities - taxable


398

471



663

1,068


Investment securities - tax exempt


67

-



70

-


Other investments


118

129



235

242




10,758

10,134



21,341

19,977

Interest expense









Deposits


2,069

2,892



4,671

5,573


Other borrowings


73

112



198

318


Senior debt


150

202



299

396




2,292

3,206



5,168

6,287










Net interest income


8,466

6,928



16,173

13,690










Provision for (recovery of) loan losses


3,500

(300)



4,995

(750)










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


4,966

7,228



11,178

14,440










Noninterest income









Bank owned life insurance


33

37



67

74


Deposit fees and charges


101

132



236

259


Interchange income


37

43



82

80


Swap fees


11

-



256

228


Brokerage income


116

100



233

215


Gain (loss) on sale of investments


1

30



1

(266)


Gain on sale of loans


32

4



86

17


Other 


108

147



260

268




439

493



1,221

875

Noninterest expense









Compensation and benefits


1,632

2,071



4,011

4,267


Occupancy


619

578



1,175

1,124


Data processing


329

370



667

759


FDIC insurance


110

90



152

185


Advertising


74

65



120

105


Professional fees


199

183



455

354


Real estate owned


30

46



14

118


Other


378

327



681

583




3,371

3,730



7,275

7,495










Income before income taxes


2,034

3,991



5,124

7,820










Income taxes


514

1,033



1,318

1,973










Net income

$

1,520

2,958


$

3,806

5,847










Earnings per common share:









Basic

$

0.24

0.48


$

0.61

0.95


Diluted

$

0.24

0.47


$

0.60

0.93










Weighted average common shares outstanding:









Basic


6,286,003

6,190,647



6,278,907

6,186,689


Diluted


6,297,142

6,265,741



6,296,259

6,264,919

 

Mountain Commerce Bancorp, Inc. and Subsidiary

Condensed Consolidated Balance Sheets

(Amounts in thousands)














June 30,



December 31,



June 30,




2020



2019



2019




(Unaudited)



(Audited)



(Unaudited)

Assets



















Cash and due from banks

$

10,015


$

9,113


$

10,753

Interest-earning deposits


116,647



7,481



31,448


Cash and cash equivalents


126,662



16,594



42,201











Certificates of deposit


6,216



6,216



6,216

Investments available for sale


76,830



46,903



63,346

Loans held for sale


210



1,087



1











Loans receivable


936,340



807,440



740,611

Allowance for loans losses


(10,801)



(5,832)



(5,643)


Net loans receivable


925,539



801,608



734,968











Premises and equipment, net


11,368



11,513



11,641

Accrued interest receivable


4,389



2,640



2,603

Real estate owned


1,438



4,973



6,009

Bank owned life insurance


7,369



7,302



7,230

Restricted stock


2,611



2,179



1,816

Deferred tax assets, net 


1,612



1,887



1,833

Other assets


4,519



3,786



3,791











Total assets

$

1,168,763


$

906,688


$

881,655











Liabilities and Shareholders' Equity



















Noninterest-bearing

$

215,202


$

138,848


$

146,152

Interest-bearing


558,311



537,292



520,178

Wholesale


126,486



81,792



108,084


Total deposits


899,999



757,932



774,414











FHLB / FRB borrowings


147,988



35,000



-

Senior debt, net


15,051



15,987



15,986

Accrued interest payable


329



366



424

Post-employment liabilities


2,613



2,393



2,244

Other liabilities


6,151



3,986



4,360











Total liabilities


1,072,131



815,664



797,428











Total shareholders' equity


96,632



91,024



84,227











Total liabilities and shareholders' equity

$

1,168,763


$

906,688


$

881,655

 

Appendix A - Reconciliation of Non-GAAP Financial Measures (Unaudited)











Three Months Ended



Six Months Ended



June 30,



June 30,



(Dollars in thousands,
except per share data)



(Dollars in thousands,
except per share data)











2020

2019



2020

2019

Adjusted Net Income








Net income (GAAP)

$

1,520

2,958


$

3,806

5,847

Loss / (Gain) on sale of investments


(1)

(30)



(1)

266

Amortization of PPP fees, net


(686)

-



(686)

-

Tax effect of adjustments


180

8



180

(70)

Adjusted net income (Non-GAAP)


1,013

2,936



3,299

6,043

Provision for (recovery of) loan losses


3,500

(300)



4,995

(750)

Tax effect of provision for (recovery of) loan losses


(915)

78



(1,305)

196

Adjusted net income w/o provision for (recovery of) loan losses (Non-GAAP)

$

3,598

2,714


$

6,988

5,489









Adjusted Diluted Earnings Per Share








Diluted earnings per share (GAAP)

$

0.24

0.47


$

0.60

0.93

Loss / (Gain) on sale of investments


(0.00)

(0.00)



(0.00)

0.04

Amortization of PPP fees, net


(0.11)

-



(0.11)

-

Tax effect of adjustments


0.03

0.00



0.03

(0.01)

Adjusted diluted earnings per share (Non-GAAP)


0.16

0.47



0.52

0.96

Provision for (recovery of) loan losses


0.56

(0.05)



0.79

(0.12)

Tax effect of provision for (recovery of) loan losses


(0.15)

0.01



(0.21)

0.03

Adjusted diluted earnings per share w/o provision for (recovery of) loan losses (Non-GAAP)

$

0.57

0.43


$

1.11

0.88









Adjusted Return on Average Assets








Return on average assets (GAAP)


0.53%

1.38%



0.73%

1.37%

Loss / (Gain) on sale of investments


0.00%

-0.01%



0.00%

0.06%

Amortization of PPP fees, net


-0.24%

0.00%



-0.13%

0.00%

Tax effect of adjustments


0.06%

0.00%



0.03%

-0.02%

Adjusted return on average assets (Non-GAAP)


0.35%

1.37%



0.63%

1.41%

Provision for (recovery of) loan losses


1.22%

-0.14%



0.96%

-0.18%

Tax effect of provision for (recovery of) loan losses


-0.32%

0.04%



-0.25%

0.05%

Adjusted return on average assets w/o provision for (recovery of) loan losses (Non-GAAP)


1.25%

1.27%



1.34%

1.29%









Adjusted Return on Average Equity








Return on average equity (GAAP)


6.32%

14.38%



8.05%

14.56%

Loss / (Gain) on sale of investments


0.00%

-0.15%



0.00%

0.66%

Amortization of PPP fees, net


-2.85%

0.00%



-1.45%

0.00%

Tax effect of adjustments


0.75%

0.04%



0.38%

-0.17%

Adjusted return on average equity (Non-GAAP)


4.21%

14.27%



6.98%

15.05%

Provision for (recovery of) loan losses


14.55%

-1.46%



10.56%

-1.87%

Tax effect of provision for (recovery of) loan losses


-3.80%

0.38%



-2.76%

0.49%

Adjusted return on average equity w/o provision for (recovery of) loan losses (Non-GAAP)


14.96%

13.19%



14.78%

13.67%









Adjusted Efficiency Ratio








Efficiency ratio (GAAP)


37.78%

50.26%



41.78%

51.46%

Loss / (Gain) on sale of investments


0.00%

0.20%



0.00%

-0.92%

Amortization of PPP fees, net


3.15%

0.00%



1.72%

0.00%

Adjusted efficiency ratio (Non-GAAP)


40.93%

50.47%



43.50%

50.53%









Adjusted Net Interest Margin








Net interest margin (GAAP)


3.08%

3.40%



3.25%

3.38%

Amortization of PPP fees, net


-0.14%

0.00%



-0.08%

0.00%

Adjusted net interest margin (Non-GAAP)


2.94%

3.40%



3.17%

3.38%









Allowance to Non-PPP loans








Allowance to loans 


1.15%




1.15%


Impact of PPP loans


0.15%

N/A



0.15%

N/A

Allowance to non-PPP loans


1.30%




1.30%


 

Appendix B - Tax Equivalent Net Interest Margin Analysis (Unaudited)















For the Three Months Ended June 30,




2020



2019




Average





Average






Outstanding 


Yield / 



Outstanding 


Yield / 




Balance

Interest

Rate



Balance

Interest

Rate




(Dollars in thousands)

Interest-earning Assets:











Loans, including loans held for sale

$

905,868

10,175

4.52%


$

727,874

9,534

5.20%


Investments - taxable


59,128

398

2.71%



69,768

471

2.68%


Investments - tax exempt (1)


9,264

85

3.68%



-

-

0.00%


Interest earning deposits


97,622

30

0.12%



11,250

51

1.80%


Other investments, at cost


36,514

88

0.97%



8,652

78

3.58%


Total interest-earning assets


1,108,396

10,776

3.91%



817,544

10,134

4.92%


Noninterest earning assets


38,802





39,289




Total assets

$

1,147,198




$

856,833














Interest-bearing liabilities:











Interest-bearing transaction accounts

$

21,088

15

0.29%


$

21,305

28

0.52%


Savings accounts


283,692

564

0.80%



270,067

1,014

1.49%


Money market accounts


61,072

122

0.80%



48,293

189

1.55%


Retail time deposits


179,551

1,202

2.69%



180,183

1,005

2.21%


Wholesale time deposits


156,491

166

0.43%



111,964

656

2.32%


     Total interest bearing deposits


701,894

2,069

1.19%



631,812

2,892

1.82%













Federal Home Loan Bank & FRB advances


120,934

73

0.24%



5,956

111

7.39%


Senior debt


15,168

150

3.98%



16,000

203

5.03%


Total interest-bearing liabilities


837,996

2,292

1.10%



653,768

3,206

1.95%













Noninterest-bearing deposits


203,192





113,574




Other noninterest-bearing liabilities


9,807





7,197




Total liabilities


1,050,995





774,539















Total shareholders' equity


96,203





82,294




Total liabilities and shareholders' equity

$

1,147,198




$

856,833















Tax-equivalent net interest income



8,484





6,928














Net interest-earning assets (2)

$

270,400




$

163,776















Average interest-earning assets to interest-











     bearing liabilities


132%





125%















Tax-equivalent net interest rate spread (3)


2.81%





2.97%















Tax equivalent net interest margin (4)


3.08%





3.40%




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

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

(3)  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.

(4)  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 (Unaudited)















For the Six Months Ended June 30,




2020



2019




Average





Average






Outstanding 


Yield / 



Outstanding 


Yield / 




Balance

Interest

Rate



Balance

Interest

Rate




(Dollars in thousands)

Interest-earning Assets:











Loans, including loans held for sale

$

857,954

20,373

4.78%


$

719,111

18,667

5.23%


Investments - taxable


52,651

663

2.53%



77,996

1,068

2.76%


Investments - tax exempt (1)


4,814

89

3.70%



-

-

0.00%


Interest earning deposits


63,843

81

0.26%



10,395

89

1.73%


Other investments, at cost


22,975

154

1.35%



8,601

154

3.61%


Total interest-earning assets


1,002,237

21,360

4.29%



816,103

19,978

4.94%


Noninterest earning assets


37,483





38,276




Total assets

$

1,039,720




$

854,379














Interest-bearing liabilities:











Interest-bearing transaction accounts

$

20,963

42

0.40%


$

20,861

50

0.48%


Savings accounts


285,777

1,578

1.11%



276,357

2,033

1.48%


Money market accounts


60,846

323

1.07%



46,996

359

1.54%


Retail time deposits


173,529

1,778

2.06%



179,185

1,960

2.21%


Wholesale time deposits


135,223

950

1.41%



101,899

1,171

2.32%


     Total interest bearing deposits


676,338

4,671

1.39%



625,298

5,573

1.80%













Federal Home Loan Bank & FRB advances


78,643

198

0.51%



21,879

317

2.92%


Senior debt


15,428

299

3.90%



16,000

397

5.00%


Total interest-bearing liabilities


770,409

5,168

1.35%



663,177

6,287

1.91%













Noninterest-bearing deposits


165,927





105,125




Other noninterest-bearing liabilities


8,809





5,757




Total liabilities


945,145





774,059















Total shareholders' equity


94,575





80,320




Total liabilities and shareholders' equity

$

1,039,720




$

854,379















Tax-equivalent net interest income



16,192





13,691














Net interest-earning assets (2)

$

231,828




$

152,926















Average interest-earning assets to interest-











     bearing liabilities


130%





123%















Tax-equivalent net interest rate spread (3)


2.94%





3.02%















Tax equivalent net interest margin (4)


3.25%





3.38%




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

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

(3)  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.

(4)  Tax equivalent net interest margin represents tax equivalent net interest income divided by average total interest-earning assets

 

Cision View original content:http://www.prnewswire.com/news-releases/mountain-commerce-bancorp-inc-announces-second-quarter-2020-results-301099460.html

SOURCE Mountain Commerce Bancorp, Inc.

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