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Mountain Commerce Bancorp, Inc. Announces Third Quarter 2020 Results

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KNOXVILLE, Tenn., Oct. 26, 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 nine months ended September 30, 2020.

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, 2020.  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, the impact of PPP fee amortization, net of the amortization of PPP deferred loan costs and one-time PPP bonuses, and gains and losses from the sale of REO and (ii) adjusted results excluding provisions (which are also non-GAAP financial measures) further reflect adjustments for the provisions for credit losses, including the provision for loan losses and the provision for unfunded loan commitments.  See Appendix B to this press release for more information on our tax equivalent net interest margin.



For the Three Months Ended September 30,




(Dollars in thousands, except per share data)


















2020



2019







Adjusted







Adjusted







Excluding







Excluding



GAAP


Adjusted


Provisions



GAAP


Adjusted


Provisions

Net income

$

1,856


1,982


4,082


$

3,172


3,189


3,189

Net interest margin (tax equivalent)


3.30%


3.16%


3.16%



3.43%


3.43%


3.43%

Return on average assets


0.64%


0.69%


1.41%



1.44%


1.44%


1.44%

Return on average equity


7.55%


8.06%


16.60%



14.77%


14.85%


14.85%

Efficiency ratio


51.63%


43.88%


43.88%



48.62%


49.18%


49.18%

Diluted earnings per share

$

0.30


0.32


0.65


$

0.51


0.51


0.51















Pre-tax, pre-provision earnings (1)






4,730







4,291















(1) As further detailed in Appendix A to this press release, Pre-tax, pre-provision earnings is a non-GAAP financial measure













































For the Nine Months Ended September 30,




(Dollars in thousands, except per share data)


















2020



2019







Adjusted







Adjusted







Excluding







Excluding



GAAP


Adjusted


Provisions



GAAP


Adjusted


Provisions















Net income

$

5,662


5,281


11,152


$

9,018


9,213


8,659

Net interest margin (tax equivalent)


3.27%


3.17%


3.17%



3.40%


3.40%


3.40%

Return on average assets


0.70%


0.65%


1.38%



1.39%


1.42%


1.34%

Return on average equity


7.87%


7.34%


15.51%



14.63%


14.95%


14.05%

Efficiency ratio


45.33%


43.87%


43.87%



50.43%


50.06%


50.06%

Diluted earnings per share

$

0.90


0.84


1.78


$

1.44


1.47


1.38















Pre-tax, pre-provision earnings (1)






14,849







11,360















(1) As further detailed in Appendix A to this press release, Pre-tax, pre-provision earnings is a non-GAAP financial measure

 




As of



As of 



As of 




September 30,



June 30,



December 31,




2020



2020



2019














(Dollars in thousands, except share data)

Asset Quality










Non-performing loans

$

2,134


$

4,924


$

1,680


Real estate owned


401



1,438



4,973


Non-performing assets


2,535



6,362



6,653


Non-performing loans to total loans


0.23%



0.53%



0.21%


Non-performing assets to total assets


0.22%



0.54%



0.73%


Loans with COVID-19 related modifications (1)


40,058



191,500



N/A


Net charge-offs

$

23


$

27


$

270


Allowance for loan losses to non-performing loans


623.71%



219.35%



347.20%


Allowance for loan losses to total loans 


1.40%



1.15%



0.72%


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


1.58%



1.30%



N/A











Other Data










Shares outstanding


6,286,003



6,286,003



6,249,053


Book and tangible book value per share (3)


15.74



15.37



14.57


Closing market price per common share


15.40



15.90



22.10


Closing price to book value ratio


97.86%



103.43%



151.72%


Equity to assets ratio


8.78%



8.27%



10.04%


Bank regulatory leverage ratio


10.20%



10.01%



11.54%












(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 once again pleased with our strong quarterly results which saw adjusted net income excluding the provisions for credit losses (non-GAAP) increase 28% from $3.2 million in the third quarter of 2019 to $4.1 million in the same quarter of 2020, while adjusted earnings per diluted share excluding the provisions for credit losses (non-GAAP) increased 27% from $0.51 to $0.65 over the same periods.  As a result of the continuing economic recession, we adjusted several components of our allowance for loan losses model, which contributed to an additional $2.5 million of allowance for loan losses in the third quarter of 2020, bringing our allowance to non-PPP loans (non-GAAP) to 1.58%.  We continue to remain highly focused on delivering a strong return to our shareholders, which is reflected in our adjusted return on average equity excluding the provisions for credit losses (non-GAAP) increasing from 14.9% in the third quarter of 2019 to 16.7% in the same period of 2020.  Finally, we were very pleased to see loan balances with COVID-related modifications drop from $191.5 million at June 30, 2020 to $40.1 million, or less than 5% of non-PPP loans, at September 30, 2020.  We expect further reductions in these balances during the fourth quarter of 2020."

Net Interest Income

Net interest income increased $1.9 million, or 26.5%, from $7.3 million for the three months ended September 30, 2019 to $9.2 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 $271.3 million, or 32.1%, from $845.4 million to $1.117 billion, due in part to PPP loans.
  • Average net interest-earning assets grew $89.0 million, or 47.1%, from $188.9 million to $277.9 million, funded by increases in noninterest bearing deposits and an increase in shareholders' equity.
  • The rate paid on interest-bearing liabilities dropped 50.1% from 1.90% to 0.94%.

These increases were partially offset by a decrease in net interest margin from 3.43% for the three months ended September 30, 2019 to 3.30% for the same period of 2020 as a result of increased liquidity and a decrease in the yield on interest-earning assets from 4.90% during the three months ended September 30, 2019 to 4.00% during the same period in 2020 due, in part, to lower yields on PPP loans.

Net interest income increased approximately $4.4 million, or 21.0%, from $21.0 million for the nine months ended September 30, 2019 to $25.4 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 $214.7 million, or 26.0%, from $826.0 million to $1.041 billion, due in part to PPP loans.
  • Average net interest-earning assets grew $81.8 million, or 50.0%, from $165.0 million to $246.8 million, funded by increases in noninterest bearing deposits and an increase in shareholders' equity.
  • The rate paid on interest-bearing liabilities dropped 37.1% from 1.91% to 1.20%.

These increases were partially offset by a decrease in net interest margin from 3.40% for the nine months ended September 30, 2019 to 3.27% during 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 nine months ended September 30, 2019 to 4.18% during the same period in 2020 due, in part,  to lower yields on PPP loans.

The Company recognized approximately $0.4 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 three and nine months ended September 30, 2020, respectively.

Provision For Loan Losses

A provision for loan losses of $2.5 million and $7.5 million was recorded 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 more likely to be impacted by the economic recession.  A recovery of loan losses of $0 and $0.8 million was recorded in the three and nine months ended September 30, 2019, respectively.

Noninterest Income

Noninterest income decreased $0.5 million, or 46.1%, from $1.1 million in the third quarter of 2019 to $0.6 million in the same quarter of 2020, due primarily to a $0.3 million decline in swap brokerage fees.

Noninterest income decreased $0.1 million, or 7.2%, from $1.9 million during the nine months ended September 30, 2019 to $1.8 million during the same period of 2020.  The decrease was primarily due to the $0.3 million decline in swap brokerage fees discussed above, partially offset by an increase in the gain on the sale of investments and an increase in the gain on sale of loans

Noninterest Expense

Noninterest expense increased $1.0 million, or 24.9%, from $4.1 million in the third quarter of 2019 to $5.1 million in the same period of 2020.  The increase was primarily the result of a $0.5 million increase in compensation and benefits expense due primarily to one-time, PPP-related bonuses paid to certain employees.  Other noninterest expense increased $0.3 million due to an increase in the reserve for unfunded loan commitments.

Noninterest expense increased $0.8 million, or 6.8%, from $11.6 million for the nine months ended September 30, 2019 to $12.3 million for the same period of 2020.  This increase was primarily the result of the $0.5 million PPP-related bonuses and $0.3 million increase in the reserve for unfunded loan commitments discussed above.

Income Taxes

The effective tax rate of the Company was 16.6% and 26.1% for the three months ended September 30, 2020 and 2019, respectively.  The effective tax rate of the Company was 23.0% and 25.5% for the nine months ended September 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, tax-free loans and investments in municipal securities.  The Company's effective tax rate declined during the three and nine months ended September 30, 2020 due primarily to an investment of approximately $11.2 million made during the third quarter of 2020 in certain loans eligible for a 5% state tax credit.

Balance Sheet

Total assets increased $220.3 million, or 24.3%, from $906.7 million at December 31, 2019 to $1.127 billion at September 30, 2020.  The increase was primarily driven by the following factors:

  • Loans receivable increased $140.7 million, or 17.4%, from $807.4 million at December 31, 2019 to $948.1 million at September 30, 2020. $107.7 million of this increase resulted from PPP loans.
  • Interest-earning deposits in other banks increased $50.1 million from $7.5 million at December 31, 2019 to $57.5 million at September 30, 2020. The Company believes it is prudent to maintain higher levels of liquidity during the economic recession.
  • Investments available for sale increased $36.4 million from $46.9 million to $83.3 million as proceeds from higher deposit and borrowing levels were invested partially in investment securities.

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



September 30,


June 30,


March 31,


December 31,



2020


2020


2020


2019



(Unaudited)


(Unaudited)


(Unaudited)


(Audited)

(in thousands)


















Residential construction

$

17,772


17,238


20,950


21,560

Other construction


39,858


40,996


40,944


39,319

Farmland


8,430


8,592


8,391


8,429

Home equity


35,833


35,882


41,674


40,988

Residential 


218,872


211,234


203,030


196,614

Multi-family


27,758


26,606


26,980


27,065

Owner-occupied commercial 


150,402


149,646


137,289


134,977

Non-owner occupied commercial


257,907


253,280


256,197


252,158

Commercial & industrial


73,234


74,107


78,031


76,533

PPP Program


107,723


107,384


-


-

Consumer


10,359


11,375


11,098


9,797











$

948,148


936,340


824,584


807,440

Total deposits increased $141.4 million, or 18.7%, from $757.9 million at December 31, 2019 to $899.4 million at September 30, 2020.  The increase in noninterest-bearing deposit balances of $82.5 million during that period was largely unrelated to PPP loan balances, which should improve the Company's ability to retain such balances in the immediate future.

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



September 30,


June 30,


March 31,


December 31,



2020


2020


2020


2019



(Unaudited)


(Unaudited)


(Unaudited)


(Audited)

(in thousands)


















Non-interest bearing transaction

$

221,300


215,202


134,498


138,848

NOW and money market


86,931


84,930


83,658


84,201

Savings


306,119


286,995


283,032


289,163

Retail time deposits


196,188


186,386


175,857


163,928

Wholesale time deposits


88,831


126,486


152,670


81,792











$

899,369


899,999


829,715


757,932

FHLB / FRB borrowings increased $61.9 million, or 76.9%, from $35.0 million at December 31, 2019 to $96.9 million at September 30, 2020.  $46.9 million of this increase related to borrowings from the FRB to fund PPP loans, which we expect to pay back as the related loans are forgiven or repaid.

On July 15, 2020, the Company issued $10.0 million aggregate principal amount of 6.00% Fixed-to-Floating Rate Subordinated Notes due 2030 in a private offering to institutional accredited investors. The notes will initially bear interest at a fixed rate of 6.00% per annum, payable semi-annually in arrears. From and including July 15, 2025 to, but excluding, the maturity date or early redemption date, the interest rate will reset quarterly to an annual floating rate equal to the then current three-month term SOFR (provided, however, that in the event three-month term SOFR is less than zero, three-month term SOFR shall be deemed to be zero), plus 593 basis points, with interest during this period payable quarterly in arrears. The notes are redeemable by the Company, in whole or in part, on or after July 15, 2025, and at any time, in whole but not in part, upon the occurrence of certain events.

Total equity increased $7.9 million, or 8.7%, from $91.0 million at December 31, 2019 to $98.9 million at September 30, 2020.  This increase was primarily comprised of net income of $5.7 million.  Tangible book value per share improved from $14.57 at December 31, 2019 to $15.74 at September 30, 2020.  Equity to assets declined from 10.04% at December 31, 2019 to 8.78% at September 30, 2020 because of the meaningful increase in total assets, including the PPP loans.

Asset Quality

Non-performing loans to total loans increased slightly from 0.21% at December 31, 2019 to 0.23% at September 30, 2020.  Non-performing assets to total assets decreased from 0.73% at December 31, 2019 to 0.22% at September 30, 2020, primarily as a result of the sale of several real estate owned properties which declined $4.6 million over the same period.  Net charge-offs of $23 thousand were recognized during the first nine months of 2020.  The allowance for loan losses to total loans increased from 0.72% at December 31, 2019 to 1.40% at September 30, 2020 (1.58% excluding PPP loans) and coverage of non-performing loans remained strong at 623.71% at September 30, 2020.  Pursuant to interagency guidance, the Company has elected to not consider loans modified under the CARES Act as troubled debt restructurings or non-performing loans.

During the first six months of 2020, the Company granted principal and/or interest deferrals on loans in response to the COVID-19 pandemic.  As noted below, the balance of loans with COVID-related modifications decreased from $191.5 million at June 30, 2020 to $40.1 million at September 30, 2020.  The Company has not granted any additional deferrals past the six-month maximum deferral period it initially offered borrowers.  The following summarizes the outstanding loans with COVID-related modifications as of September 30, 2020 and June 30, 2020 by customer industry:



September 30,


June 30,



2020


2020



(Unaudited)


(Unaudited)








(in thousands)






Office building

$

10,345


19,800

Warehouse


9,691


13,400

Residential 1-4


3,985


13,800

Retail


3,138


7,900

Vacant real estate


2,513


2,767

Medical


1,719


2,856

Campground


1,564


1,564

Equipment


1,100


1,982

Vacation cabins


1,069


9,100

Restaurants


1,029


1,964

Hotel


917


67,000

Mini-storage


-


21,800

Marina


-


9,300

Multi-family


-


5,900

Other industries


2,988


12,367







$

40,058


191,500

Non-GAAP Financial Measures

Statements included in this press release include non-GAAP financial measures and should be read along with the accompanying tables in Appendix A, which provide a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures.  This press release and the accompanying tables discuss financial measures such as adjusted net income, adjusted diluted earnings per share, adjusted return on average assets, adjusted return on average equity, adjusted net interest margin (tax equivalent), and adjusted efficiency ratio, both including and excluding the provisions for (recovery of) credit losses, which are all non-GAAP financial measures. We also present in this press release and the accompanying tables pre-tax, pre-provision earnings 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 further 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 on 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) effectiveness of our asset management activities in improving, resolving or liquidating lower quality assets, (x) our inability to maintain the historical growth rate of our loan portfolio, (xi) risks of expansion into new geographic or product markets, (xii) the possibility of increased compliance and operational costs as a result of increased regulatory oversight, (xiii) our inability to comply with regulatory capital requirements, including those resulting from changes to capital calculation methodologies and required capital maintenance levels, (xiv) 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, (xv) changes in capital levels and loan underwriting, credit review or loss reserve policies associated with economic conditions, examination conclusions, or regulatory developments, (xvi) inadequate allowance for loan losses, (xvii) results of regulatory examinations, (xviii) 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, (xix) the possibility of additional increases to compliance costs as a result of increased regulatory oversight, (xx) loss of key personnel, and (xxi) 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 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

(Unaudited)

(Amounts in thousands, except share data)













Three Months Ended



Nine Months Ended




September 30,



September 30,




2020

2019



2020

2019

Interest income









Loans

$

10,548

9,890


$

30,921

28,558


Investment securities - taxable


482

362



1,146

1,430


Investment securities - tax exempt


79

-



148

-


Other investments


97

195



333

437




11,206

10,447



32,548

30,425

Interest expense









Deposits


1,654

2,947



6,325

8,520


Other borrowings


122

7



320

324


Senior debt


96

194



396

591


Subordinated debt


100

-



100

-




1,972

3,148



7,141

9,435










Net interest income


9,234

7,299



25,407

20,990










Provision for (recovery of) loan losses


2,505

-



7,500

(750)










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


6,729

7,299



17,907

21,740










Noninterest income









Bank owned life insurance


33

37



100

111


Deposit fees and charges


116

157



352

416


Interchange income


44

43



126

123


Swap fees


-

302



256

530


Brokerage income


120

110



352

325


Realized gain (loss) on investments


54

95



55

(171)


Gain on sale of loans


33

24



119

41


Other 


168

285



429

552




568

1,053



1,789

1,927

Noninterest expense









Compensation and benefits


2,811

2,333



6,821

6,600


Occupancy


569

548



1,744

1,672


Data processing


366

355



1,032

1,115


FDIC insurance


152

31



304

216


Advertising


58

54



179

160


Professional fees


206

191



661

545


Real estate owned


281

246



294

364


Other


629

303



1,312

885




5,072

4,061



12,347

11,557










Income before income taxes


2,225

4,291



7,349

12,110










Income taxes


369

1,119



1,687

3,092










Net income

$

1,856

3,172


$

5,662

9,018










Earnings per common share:









Basic

$

0.30

0.51


$

0.91

1.46


Diluted

$

0.30

0.51


$

0.90

1.44










Weighted average common shares outstanding:









Basic


6,255,670

6,195,343



6,254,844

6,189,605


Diluted


6,266,429

6,270,935



6,269,814

6,268,798










 

Mountain Commerce Bancorp, Inc. and Subsidiary

Condensed Consolidated Balance Sheets

(Amounts in thousands)














September 30,



June 30,



December 31,




2020



2020



2019




(Unaudited)



(Unaudited)



(Audited)

Assets



















Cash and due from banks

$

11,079


$

10,015


$

9,113

Interest-earning deposits in other banks


57,546



116,647



7,481


Cash and cash equivalents


68,625



126,662



16,594











Certificates of deposit


6,216



6,216



6,216

Investments available for sale


83,328



76,830



46,903

Loans held for sale


130



210



1,087











Loans receivable


948,148



936,340



807,440

Allowance for loans losses


(13,310)



(10,801)



(5,833)


Net loans receivable


934,838



925,539



801,607











Premises and equipment, net


12,026



11,368



11,513

Accrued interest receivable


5,051



4,389



2,640

Real estate owned


401



1,438



4,973

Bank owned life insurance


7,402



7,369



7,302

Restricted stock


2,951



2,611



2,179

Deferred tax assets, net 


1,497



1,612



1,888

Other assets


4,499



4,519



3,786











Total assets

$

1,126,964


$

1,168,763


$

906,688











Liabilities and Shareholders' Equity



















Noninterest-bearing

$

221,300


$

215,202


$

138,848

Interest-bearing


589,238



558,311



537,292

Wholesale


88,831



126,486



81,792


Total deposits


899,369



899,999



757,932











FHLB / FRB borrowings


96,916



147,988



35,000

Senior debt, net


14,588



15,051



15,987

Subordinated debt, net


9,759



-



-

Accrued interest payable


382



329



366

Post-employment liabilities


2,810



2,613



2,393

Other liabilities


4,220



6,151



3,986











Total liabilities


1,028,044



1,072,131



815,664











Total shareholders' equity


98,920



96,632



91,024











Total liabilities and shareholders' equity

$

1,126,964


$

1,168,763


$

906,688

 

 

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











Three Months Ended



Nine Months Ended



September 30,



September 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)

$

1,856

3,172


$

5,662

9,018

Loss / (Gain) on sale of investments


(54)

(95)



(55)

171

Amortization of PPP fees, net


(29)

-



(715)

-

Loss from sale of REO


254

118



254

93

Tax effect of adjustments


(45)

(6)



135

(69)

Adjusted net income (Non-GAAP)


1,982

3,189



5,281

9,213

Provision for (recovery of) credit losses


2,843

-



7,948

(750)

Tax effect of provision for (recovery of) credit losses


(743)

-



(2,077)

196

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

$

4,082

3,189


$

11,152

8,659









Adjusted Diluted Earnings Per Share








Diluted earnings per share (GAAP)

$

0.30

0.51


$

0.90

1.44

Loss / (Gain) on sale of investments


(0.01)

(0.02)



(0.01)

0.03

Amortization of PPP fees, net


(0.00)

-



(0.11)

-

Loss from sale of REO


0.04

0.02



0.04

0.01

Tax effect of adjustments


(0.01)

(0.00)



0.02

(0.01)

Adjusted diluted earnings per share (Non-GAAP)


0.32

0.51



0.84

1.47

Provision for (recovery of) credit losses


0.45

-



1.27

(0.12)

Tax effect of provision for (recovery of) credit losses


(0.12)

-



(0.33)

0.03

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

$

0.65

0.51


$

1.78

1.38









Adjusted Return on Average Assets








Return on average assets (GAAP)


0.64%

1.44%



0.70%

1.39%

Loss / (Gain) on sale of investments


-0.02%

-0.04%



-0.01%

0.03%

Amortization of PPP fees, net


-0.01%

0.00%



-0.09%

0.00%

Loss from sale of REO


0.09%

0.05%



0.03%

0.01%

Tax effect of adjustments


-0.02%

0.00%



0.02%

-0.01%

Adjusted return on average assets (Non-GAAP)


0.69%

1.44%



0.65%

1.42%

Provision for (recovery of) credit losses


0.98%

0.00%



0.98%

-0.12%

Tax effect of provision for (recovery of) credit losses


-0.26%

0.00%



-0.26%

0.03%

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


1.41%

1.44%



1.38%

1.34%









Adjusted Return on Average Equity








Return on average equity (GAAP)


7.55%

14.77%



7.87%

14.63%

Loss / (Gain) on sale of investments


-0.22%

-0.44%



-0.08%

0.28%

Amortization of PPP fees, net


-0.12%

0.00%



-0.99%

0.00%

Loss from sale of REO


1.03%

0.55%



0.35%

0.15%

Tax effect of adjustments


-0.18%

-0.03%



0.19%

-0.11%

Adjusted return on average equity (Non-GAAP)


8.06%

14.85%



7.34%

14.95%

Provision for (recovery of) credit losses


11.56%

0.00%



11.05%

-1.22%

Tax effect of provision for (recovery of) credit losses


-3.02%

0.00%



-2.89%

0.32%

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


16.60%

14.85%



15.51%

14.05%









Adjusted Efficiency Ratio








Efficiency ratio (GAAP)


51.63%

48.62%



45.33%

50.43%

Loss / (Gain) on sale of investments


0.25%

0.56%



0.09%

-0.37%

Amortization of PPP fees, net


1.98%

0.00%



1.03%

0.00%

Loss from sale of REO


-2.71%

0.00%



-0.97%

0.00%

Reserve for unfunded commitments


-3.66%

0.00%



-1.61%

0.00%

Adjusted efficiency ratio (Non-GAAP)


43.88%

49.18%



43.87%

50.06%

































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











2020

2019



2020

2019

Adjusted Net Interest Margin








Net interest margin (GAAP)


3.30%

3.43%



3.27%

3.40%

Amortization of PPP fees, net


-0.14%

0.00%



-0.10%

0.00%

Adjusted net interest margin (Non-GAAP)


3.16%

3.43%



3.17%

3.40%









Allowance to Non-PPP loans








Allowance to loans 


1.40%




1.40%


Impact of PPP loans


0.18%

N/A



0.18%

N/A

Allowance to non-PPP loans


1.58%




1.58%










Pre-tax Pre-Provision Earnings








Net income (GAAP)


1,856

3,172



5,662

9,018

Income taxes


369

1,119



1,687

3,092

Provision for (recovery of) loan losses


2,505

-



7,500

(750)

Pre-tax Pre-provision earnings


4,730

4,291



14,849

11,360

 

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


























For the Three Months Ended September 30,




2020



2019




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

$

930,523

10,548

4.51%


$

750,849

9,890

5.23%


Investments - taxable


66,667

482

2.88%



60,841

362

2.36%


Investments - tax exempt (1)


11,934

100

3.33%



-

-

0.00%


Interest earning deposits


63,311

17

0.11%



25,045

120

1.90%


Other investments, at cost


44,336

80

0.72%



8,694

75

3.42%


Total interest-earning assets


1,116,771

11,227

4.00%



845,429

10,447

4.90%


Noninterest earning assets


40,644





38,311




Total assets

$

1,157,415




$

883,740














Interest-bearing liabilities:











Interest-bearing transaction accounts

$

21,549

9

0.17%


$

18,974

26

0.54%


Savings accounts


296,749

430

0.58%



282,634

1,128

1.58%


Money market accounts


62,520

80

0.51%



57,086

231

1.61%


Retail time deposits


196,357

883

1.79%



178,830

1,015

2.25%


Wholesale time deposits


109,651

252

0.91%



95,468

547

2.27%


     Total interest bearing deposits


686,826

1,654

0.96%



632,992

2,947

1.85%













Federal Home Loan Bank & FRB advances


130,004

122

0.37%



7,533

7

0.37%


Senior debt


14,704

96

2.60%



16,000

194

4.81%


Subordinate debt


7,333

100

5.43%



-

-

0.00%


Total interest-bearing liabilities


838,867

1,972

0.94%



656,525

3,148

1.90%













Noninterest-bearing deposits


211,516





133,071




Other noninterest-bearing liabilities


8,642





8,235




Total liabilities


1,059,025





797,831















Total shareholders' equity


98,390





85,909




Total liabilities and shareholders' equity

$

1,157,415




$

883,740















Tax-equivalent net interest income



9,255





7,299














Net interest-earning assets (2)

$

277,904




$

188,904















Average interest-earning assets to interest-











     bearing liabilities


133%





129%















Tax-equivalent net interest rate spread (3)


3.06%





3.00%















Tax equivalent net interest margin (4)


3.30%





3.43%















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





(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 Nine Months Ended September 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

$

882,320

30,921

4.68%


$

729,806

28,558

5.23%


Investments - taxable


57,356

1,146

2.67%



72,214

1,430

2.65%


Investments - tax exempt (1)


7,205

187

3.47%



-

-

0.00%


Interest earning deposits


63,664

99

0.21%



15,332

208

1.81%


Other investments, at cost


30,148

234

1.04%



8,632

229

3.55%


Total interest-earning assets


1,040,693

32,587

4.18%



825,984

30,425

4.92%


Noninterest earning assets


38,545





38,290




Total assets

$

1,079,238




$

864,274














Interest-bearing liabilities:











Interest-bearing transaction accounts

$

21,160

50

0.32%


$

20,225

76

0.50%


Savings accounts


289,461

2,008

0.93%



278,473

3,161

1.52%


Money market accounts


61,408

403

0.88%



50,396

590

1.57%


Retail time deposits


181,194

2,662

1.96%



179,065

2,975

2.22%


Wholesale time deposits


126,637

1,202

1.27%



99,732

1,718

2.30%


     Total interest bearing deposits


679,860

6,325

1.24%



627,891

8,520

1.81%













Federal Home Loan Bank & FRB advances


95,889

320

0.45%



17,044

324

2.54%


Senior debt


15,176

396

3.49%



16,000

591

4.94%


Subordinate debt


2,933

100

4.55%



-

-

0.00%


Total interest-bearing liabilities


793,858

7,141

1.20%



660,935

9,435

1.91%













Noninterest-bearing deposits


180,772





114,547




Other noninterest-bearing liabilities


8,713





6,627




Total liabilities


983,343





782,109















Total shareholders' equity


95,895





82,165




Total liabilities and shareholders' equity

$

1,079,238




$

864,274















Tax-equivalent net interest income



25,446





20,990














Net interest-earning assets (2)

$

246,835




$

165,049















Average interest-earning assets to interest-











     bearing liabilities


131%





125%















Tax-equivalent net interest rate spread (3)


2.98%





3.02%















Tax equivalent net interest margin (4)


3.27%





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





















 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/mountain-commerce-bancorp-inc-announces-third-quarter-2020-results-301158841.html

SOURCE Mountain Commerce Bank

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