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Mountain Commerce Bancorp, Inc. Announces Fourth Quarter 2020 Results And Commencement of Quarterly Cash Dividend

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KNOXVILLE, Tenn., Jan. 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 months and year ended December 31, 2020.

The Company also announced today that its Board of Directors declared the Company's first ever quarterly cash dividend of $0.125 per common share.  The dividend is payable on March 1, 2021 to shareholders of record as of the close of business on February 5, 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 months and year ended December 31, 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 accretion, net of the amortization of PPP deferred loan costs and one-time PPP bonuses, and gains and losses from the sale of REO and impairment of premises 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 December 31,



(Dollars in thousands, except per share data)

















2020



2019







Adjusted







Adjusted







Excluding







Excluding



GAAP


Adjusted


Provisions



GAAP


Adjusted


Provisions

Net income

$

4,508


4,230


4,195


$

3,336


3,188


3,344

Net interest margin (tax equivalent)


3.74%


3.37%


3.37%



3.55%


3.55%


3.55%

Return on average assets


1.60%


1.50%


1.49%



1.49%


1.42%


1.49%

Return on average equity


17.82%


16.72%


16.58%



14.95%


14.29%


14.99%

Efficiency ratio


42.49%


43.47%


43.47%



44.71%


46.63%


46.63%

Diluted earnings per share

$

0.72


0.68


0.67


$

0.53


0.51


0.53















Pre-tax, pre-provision earnings (1)






5,733







4,691















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













































For the Twelve Months Ended December 31,



(Dollars in thousands, except per share data)

















2020



2019







Adjusted







Adjusted







Excluding







Excluding



GAAP


Adjusted


Provisions



GAAP


Adjusted


Provisions















Net income

$

10,170


9,441


15,276


$

12,354


12,443


12,045

Net interest margin (tax equivalent)


3.39%


3.23%


3.23%



3.44%


3.44%


3.44%

Return on average assets


0.93%


0.87%


1.40%



1.42%


1.43%


1.38%

Return on average equity


10.45%


9.70%


15.70%



14.72%


14.83%


14.35%

Efficiency ratio


44.55%


43.95%


43.95%



48.88%


48.67%


48.67%

Diluted earnings per share

$

1.62


1.51


2.44


$

1.97


1.98


1.92















Pre-tax, pre-provision earnings (1)






20,582







16,051















(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 




December 31,



September 30,



December 31,




2020



2020



2019














(Dollars in thousands, except share data)

Asset Quality










Non-performing loans

$

1,801


$

2,134


$

1,680


Real estate owned


-



401



4,973


Non-performing assets


1,801



2,535



6,653


Non-performing loans to total loans


0.19%



0.23%



0.21%


Non-performing assets to total assets


0.16%



0.22%



0.73%


Loans with COVID-19 related modifications (1)


-



40,058



N/A


Net charge-offs

$

20


$

23


$

270


Allowance for loan losses to non-performing loans


739.20%



623.71%



347.20%


Allowance for loan losses to total loans 


1.42%



1.40%



0.72%


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


1.56%



1.58%



N/A











Other Data










Shares outstanding


6,286,003



6,286,003



6,249,053


Book and tangible book value per share (3)


16.52



15.74



14.57


Closing market price per common share


20.50



15.40



22.10


Closing price to book value ratio


124.10%



97.86%



151.72%


Equity to assets ratio


9.36%



8.78%



10.04%


Bank regulatory leverage ratio


10.11%



10.20%



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 happy to finish out 2020 with another successful quarter which saw adjusted net income excluding the provisions for credit losses (non-GAAP) increase 25% from $3.3 million in the fourth quarter of 2019 to $4.2 million in the same quarter of 2020, while adjusted earnings per diluted share excluding the provisions for credit losses (non-GAAP) increased 26% from $0.53 to $0.67 over the same period.  Our allowance to non-PPP loans (non-GAAP) currently stands at 1.56%, and I am happy to report that our COVID-related modifications dropped to $0 at December 31, 2020.  Based on this and other considerations, we did not provide any additional allowance for loan losses in the current quarter.  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 15.0% in the fourth quarter of 2019 to 16.6% in the same period of 2020, a year-over-year increase of 10.7%.  From an asset quality perspective, we were very pleased to sell the last of our REO properties during the current quarter and finish the year with only 0.16% non-performing assets to total assets.  Finally, our earnings and capital are now at a level that we are able to start rewarding our shareholders with our first ever quarterly cash dividend of $0.125 per share."

Net Interest Income

Net interest income increased $2.4 million, or 30.7%, from $7.7 million for the three months ended December 31, 2019 to $10.0 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 $231.2 million, or 26.9%, from $858.3 million to $1.089 billion, due in part to PPP loans.
  • Average net interest-earning assets grew $89.0 million, or 44.7%, from $199.3 million to $288.4 million, funded by increases in noninterest bearing deposits and an increase in shareholders' equity.
  • The rate paid on interest-bearing liabilities dropped 116.9% from 1.80% to 0.83%, driving an increase in tax-equivalent net interest margin from 3.55% to 3.74%.

Net interest income increased approximately $6.8 million, or 23.6%, from $28.7 million for the year ended December 31, 2019 to $35.4 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 $218.8 million, or 26.2%, from $834.1 million to $1.053 billion, due in part to PPP loans.
  • Average net interest-earning assets grew $83.7 million, or 48.2%, from $173.7 million to $257.4 million, funded by increases in noninterest bearing deposits and an increase in shareholders' equity.
  • The rate paid on interest-bearing liabilities dropped 69.4% from 1.88% to 1.11%.

These factors were partially offset by a decrease in net interest margin from 3.44% for the year ended December 31, 2019 to 3.39% during the same period of 2020 as a result of increased on-balance sheet liquidity and a decrease in the yield on interest-earning assets from 4.93% during the year ended December 31, 2019 to 4.23% during the same period in 2020 due, in part, to lower yields on PPP loans.

The Company recognized approximately $1.0 million and $1.7 million of PPP loan origination fees, net of the amortization of deferred PPP loan costs, through net interest income during the three and twelve months ended December 31, 2020, respectively.

Provision For Loan Losses

A provision for loan losses of $7.5 million was recorded for the year ended December 31, 2020 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.  The Company did not record any additional provision for loan losses during the fourth quarter of 2020.  A provision for (recovery of) loan losses of $0.2 million and ($0.5) million was recorded for the three and twelve months ended December 31, 2019, respectively.

Noninterest Income

Noninterest income decreased $0.7 million, or 89.0%, from $0.8 million in the fourth quarter of 2019 to $0.1 million in the same quarter of 2020, due primarily to a $0.2 million decline in swap brokerage fees and a $0.5 million one-time write-down recorded on the Company's previous headquarters building which it expects to sell at a loss.

Noninterest income decreased $0.9 million, or 31.3%, from $2.7 million during the year ended December 31, 2019 to $1.9 million during the same period of 2020.  The decrease was primarily due to a $0.5 million decline in swap brokerage fees and a $0.5 million write-down on the Company's previous headquarters building discussed above, partially offset by a $0.2 million increase in the gain on sale of investments.

Noninterest Expense

Noninterest expense increased $0.6 million, or 15.8%, from $3.8 million in the fourth quarter of 2019 to $4.4 million in the same period of 2020.  The increase was primarily the result of a $0.5 million increase in compensation and benefits and a $0.2 million loss on the sale of the Company's final REO property, partially offset by a $0.1 million reduction in occupancy expense.

Noninterest expense increased $1.4 million, or 9.0%, from $15.4 million for the year ended December 31, 2019 to $16.7 million for the same period of 2020.  This increase was primarily the result of a $0.7 million increase in compensation and benefits, of which $0.4 million related to one-time PPP bonuses, a $0.3 million increase in the loss on sale of REO as the Company liquidated its remaining REO properties, and a $0.4 million increase in the reserve for unfunded loan commitments.

Income Taxes

The effective tax rate of the Company was 21.4% and 25.5% for the three months ended December 31, 2020 and 2019, respectively.  The effective tax rate of the Company was 22.3% and 25.5% for the years ended December 31, 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 twelve months ended December 31, 2020 due primarily to investments in certain loans eligible for a 5% state tax credit.

Balance Sheet

Total assets increased $203.3 million, or 22.4%, from $906.7 million at December 31, 2019 to $1.110 billion at December 31, 2020.  The increase was primarily driven by the following factors:

  • Loans receivable increased $128.0 million, or 15.9%, from $807.4 million at December 31, 2019 to $935.5 million at December 31, 2020.  Approximately $81 million of this increase resulted from PPP loans. 
  • Interest-earning deposits in other banks increased $50.6 million from $7.5 million at December 31, 2019 to $58.1 million at December 31, 2020, reflecting the Company's decision to maintain higher levels of on-balance sheet liquidity as a result of the COVID-19 pandemic.
  • Investments available for sale increased $34.0 million from $46.9 million at December 31, 2019 to $80.9 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 four quarters:



December 31,


September 30,


June 30,


March 31,


December 31,



2020


2020


2020


2020


2019

(in thousands)






















Residential construction

$

14,805


17,772


17,238


20,950


21,560

Other construction


35,361


39,858


40,996


40,944


39,319

Farmland


7,943


8,430


8,592


8,391


8,429

Home equity


32,543


35,833


35,882


41,674


40,988

Residential 


224,288


218,872


211,234


203,030


196,614

Multi-family


42,666


27,758


26,606


26,980


27,065

Owner-occupied commercial 


170,683


150,402


149,646


137,289


134,977

Non-owner occupied commercial


234,751


257,907


253,280


256,197


252,158

Commercial & industrial


80,380


73,234


74,107


78,031


76,533

PPP Program


81,465


107,723


107,384


-


-

Consumer


10,597


10,359


11,375


11,098


9,797













$

935,482


948,148


936,340


824,584


807,440

Total deposits increased $164.0 million, or 21.6%, from $757.9 million at December 31, 2019 to $921.9 million at December 31, 2020.  The primary driver of this increase was a $69.4 million increase in noninterest-bearing deposit balances from $138.9 million to $208.2 million.  The Company also issued a $50.0 million brokered-CD at an interest rate of 0.15% during the fourth quarter of 2020 in order to pay off its remaining Federal Reserve PPPLF borrowings.

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



December 31,


September 30,


June 30,


March 31,


December 31,



2020


2020


2020


2020


2019

(in thousands)






















Non-interest bearing transaction

$

208,250


221,300


215,202


134,498


138,848

NOW and money market


96,243


86,931


84,930


83,658


84,201

Savings


316,083


306,119


286,995


283,032


289,163

Retail time deposits


173,305


196,188


186,386


175,857


163,928

Wholesale time deposits


128,015


88,831


126,486


152,670


81,792













$

921,896


899,369


899,999


829,715


757,932

FHLB borrowings of $50.0 million at December 31, 2020 represent a 3-month floating rate advance swapped to a fixed rate through March 2025. 

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 $12.8 million, or 14.1%, from $91.0 million at December 31, 2019 to $103.8 million at December 31, 2020.  This increase was primarily comprised of net income of $10.2 million, as well as an increase in the unrealized gain on investments available for sale.  Tangible book value per share improved from $14.57 at December 31, 2019 to $16.52 at December 31, 2020.  Equity to assets declined from 10.04% at December 31, 2019 to 9.36% at December 31, 2020 because of the significant increase in total assets, including the PPP loans.  The Company and Bank remain well capitalized.

Asset Quality

Non-performing loans to total loans decreased slightly from 0.21% at December 31, 2019 to 0.19% at December 31, 2020.  Non-performing assets to total assets decreased from 0.73% at December 31, 2019 to 0.16% at December 31, 2020, primarily as a result of the sale of the Company's remaining $5.0 million of real estate owned properties over the same period.  Net charge-offs of $20 thousand were recognized during 2020 compared to $270 thousand during 2019.  The allowance for loan losses to total loans increased from 0.72% at December 31, 2019 to 1.42% at December 31, 2020 (1.56% excluding PPP loans) and coverage of non-performing loans remained strong at 739.2% at December 31, 2020.  Pursuant to interagency guidance, the Company has elected to not consider loans modified under the CARES Act as troubled debt restructurings.

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 $0 at December 31, 2020 as all modified loans returned to pre-modification payment levels. 

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



December 31,


September 30,


June 30,



2020


2020


2020

(in thousands)














Office building

$

-


10,345


19,800

Warehouse


-


9,691


13,400

Residential 1-4


-


3,985


13,800

Retail


-


3,138


7,900

Vacant real estate


-


2,513


2,767

Medical


-


1,719


2,856

Campground


-


1,564


1,564

Equipment


-


1,100


1,982

Vacation cabins


-


1,069


9,100

Restaurants


-


1,029


1,964

Hotel


-


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, long-term 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) approval of the declaration of any dividend by our Board of Directors, (xxi) loss of key personnel, and (xxii) 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

(Amounts in thousands, except share data)













Three Months Ended



Twelve Months Ended




December 31,



December 31,




2020

2019



2020

2019

Interest income









Loans

$

11,057

10,245


$

41,978

38,802


Investment securities - taxable


484

294



1,631

1,724


Investment securities - tax exempt


78

-



225

-


Other investments


81

126



414

563




11,700

10,665



44,248

41,089

Interest expense









Deposits


1,211

2,764



7,536

11,284


Other borrowings


175

44



495

368


Senior debt


102

176



498

767


Subordinated debt


175

-



275

-




1,663

2,984



8,804

12,419










Net interest income


10,037

7,681



35,444

28,670










Provision for (recovery of) loan losses


-

212



7,500

(538)










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


10,037

7,469



27,944

29,208










Noninterest income









Bank owned life insurance


33

36



133

147


Deposit fees and charges


101

128



453

544


Interchange income


48

42



174

165


Swap fees


-

227



256

757


Brokerage income


120

119



472

444


Realized gain (loss) on investments


55

72



110

(100)


Gain on sale of loans


54

34



174

75


Other 


(323)

146



105

699




88

804



1,877

2,731

Noninterest expense









Compensation and benefits


2,746

2,283



9,567

8,882


Occupancy


617

750



2,361

2,422


Data processing


368

264



1,401

1,378


FDIC insurance


122

11



426

227


Advertising


51

71



230

231


Professional fees


194

321



835

866


Real estate owned


33

(249)



327

115


Other


261

343



1,592

1,229




4,392

3,794



16,739

15,350










Income before income taxes


5,733

4,479



13,082

16,589










Income taxes


1,225

1,143



2,912

4,235










Net income

$

4,508

3,336


$

10,170

12,354










Earnings per common share:









Basic

$

0.72

0.54


$

1.62

1.98


Diluted

$

0.72

0.53


$

1.62

1.97










Weighted average common shares outstanding:









Basic


6,257,858

6,213,648



6,260,045

6,236,595


Diluted


6,260,520

6,270,935



6,272,931

6,268,798

 

Mountain Commerce Bancorp, Inc. and Subsidiary

Condensed Consolidated Balance Sheets

(Amounts in thousands)














December 31,



September 30,



December 31,




2020



2020



2019

Assets



















Cash and due from banks

$

14,287


$

11,079


$

9,113

Interest-earning deposits in other banks


58,081



57,546



7,481


Cash and cash equivalents


72,368



68,625



16,594











Certificates of deposit


-



6,216



6,216

Investments available for sale


80,919



83,328



46,903

Loans held for sale


418



130



1,087











Loans receivable


935,482



948,148



807,440

Allowance for loans losses


(13,313)



(13,310)



(5,833)


Net loans receivable


922,169



934,838



801,607











Premises and equipment, net


11,437



12,026



11,513

Accrued interest receivable


4,247



5,051



2,640

Real estate owned


-



401



4,973

Bank owned life insurance


7,435



7,402



7,302

Restricted stock


2,951



2,951



2,179

Deferred tax assets, net 


3,611



1,497



1,888

Other assets


4,415



4,499



3,786











Total assets

$

1,109,970


$

1,126,964


$

906,688











Liabilities and Shareholders' Equity



















Noninterest-bearing

$

208,250


$

221,300


$

138,848

Interest-bearing


585,631



589,238



537,292

Wholesale


128,015



88,831



81,792


Total deposits


921,896



899,369



757,932











FHLB / FRB borrowings


50,000



96,916



35,000

Senior debt, net


14,000



14,588



15,987

Subordinated debt, net


9,772



9,759



-

Accrued interest payable


495



382



366

Post-employment liabilities


2,992



2,810



2,393

Other liabilities


6,974



4,220



3,986











Total liabilities


1,006,129



1,028,044



815,664











Total shareholders' equity


103,841



98,920



91,024











Total liabilities and shareholders' equity

$

1,109,970


$

1,126,964


$

906,688

 

Appendix A - Reconciliation of Non-GAAP Financial Measures 










Three Months Ended


Twelve Months Ended



December 31,


December 31,



(Dollars in thousands, except per share data)


(Dollars in thousands, except per share data)










2020

2019


2020

2019

Adjusted Net Income







Net income (GAAP)

$

4,508

3,336


10,170

12,354

Loss / (Gain) on sale of investments


(55)

(72)


(110)

100

Accretion of PPP fees, net


(1,016)

-


(1,731)

-

Loss from sale of REO and impairment of premises


695

(129)


854

20

Tax effect of adjustments


98

53


258

(31)

Adjusted net income (Non-GAAP)


4,230

3,188


9,441

12,443

Provision for (recovery of) credit losses


(48)

212


7,900

(538)

Tax effect of provision for (recovery of) credit losses


13

(55)


(2,065)

141

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

$

4,195

3,344


15,276

12,045








Adjusted Diluted Earnings Per Share







Diluted earnings per share (GAAP)

$

0.72

0.53


1.62

1.97

Loss / (Gain) on sale of investments


(0.01)

(0.01)


(0.02)

0.02

Accretion of PPP fees, net


(0.16)

-


(0.28)

-

Loss from sale of REO and impairment of premises


0.11

(0.02)


0.14

0.00

Tax effect of adjustments


0.02

0.01


0.04

(0.01)

Adjusted diluted earnings per share (Non-GAAP)


0.68

0.51


1.51

1.98

Provision for (recovery of) credit losses


(0.01)

0.03


1.26

(0.09)

Tax effect of provision for (recovery of) credit losses


0.00

(0.01)


(0.33)

0.02

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

$

0.67

0.53


2.44

1.92








Adjusted Return on Average Assets







Return on average assets (GAAP)


1.60%

1.49%


0.93%

1.42%

Loss / (Gain) on sale of investments


-0.02%

-0.03%


-0.01%

0.01%

Accretion of PPP fees, net


-0.36%

0.00%


-0.16%

0.00%

Loss from sale of REO and impairment of premises


0.25%

-0.06%


0.08%

0.00%

Tax effect of adjustments


0.03%

0.02%


0.02%

0.00%

Adjusted return on average assets (Non-GAAP)


1.50%

1.42%


0.87%

1.43%

Provision for (recovery of) credit losses


-0.02%

0.09%


0.72%

-0.06%

Tax effect of provision for (recovery of) credit losses


0.00%

-0.02%


-0.19%

0.02%

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


1.49%

1.49%


1.40%

1.38%








Adjusted Return on Average Equity







Return on average equity (GAAP)


17.82%

14.95%


10.45%

14.72%

Loss / (Gain) on sale of investments


-0.22%

-0.32%


-0.11%

0.12%

Accretion of PPP fees, net


-4.02%

0.00%


-1.78%

0.00%

Loss from sale of REO and impairment of premises


2.75%

-0.58%


0.88%

0.02%

Tax effect of adjustments


0.39%

0.24%


0.27%

-0.04%

Adjusted return on average equity (Non-GAAP)


16.72%

14.29%


9.70%

14.83%

Provision for (recovery of) credit losses


-0.19%

0.95%


8.12%

-0.64%

Tax effect of provision for (recovery of) credit losses


0.05%

-0.25%


-2.12%

0.17%

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


16.58%

14.99%


15.70%

14.35%








Adjusted Efficiency Ratio







Efficiency ratio (GAAP)


42.49%

44.71%


44.55%

48.88%

Loss / (Gain) on sale of investments


N/M

N/M


N/M

N/M

Accretion of PPP fees, net


N/M

N/M


N/M

N/M

Loss from sale of REO and impairment of premises


N/M

N/M


N/M

N/M

Reserve for unfunded commitments


N/M

N/M


N/M

N/M

Adjusted efficiency ratio (Non-GAAP)


43.47%

46.63%


43.95%

48.67%

N/M - Not Meaningful







 

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










Three Months Ended


Twelve Months Ended



December 31,


December 31,



(Dollars in thousands, except per share data)


(Dollars in thousands, except per share data)










2020

2019


2020

2019

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







Net interest margin (tax-equivalent) (GAAP)


3.74%

3.55%


3.39%

3.44%

Accretion of PPP fees, net


-0.37%

0.00%


-0.16%

0.00%

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


3.37%

3.55%


3.23%

3.44%








Allowance to Non-PPP loans







Allowance to loans (GAAP)


1.42%



1.42%


Impact of PPP loans


0.14%

N/A


0.14%

N/A

Allowance to non-PPP loans (non-GAAP)


1.56%



1.56%









Pre-tax Pre-Provision Earnings







Net income (GAAP)


4,508

3,336


10,170

12,354

Income taxes


1,225

1,143


2,912

4,235

Provision for (recovery of) loan losses


-

212


7,500

(538)

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


5,733

4,691


20,582

16,051








(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 December 31,




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

$

921,698

11,057

4.77%


$

789,955

10,245

5.15%


Loans - tax exempt (1)


11,262

191

6.75%



-

-

0.00%


Investments - taxable


66,400

484

2.90%



48,634

294

2.40%


Investments - tax exempt (2)


11,425

99

3.44%



-

-

0.00%


Interest earning deposits


67,479

15

0.09%



10,900

53

1.93%


Other investments, at cost


11,212

66

2.34%



8,812

73

3.29%


Total interest-earning assets


1,089,476

11,912

4.35%



858,301

10,665

4.93%


Noninterest earning assets


36,952





37,766




Total assets

$

1,126,428




$

896,067














Interest-bearing liabilities:











Interest-bearing transaction accounts

$

29,027

6

0.08%


$

19,055

27

0.56%


Savings accounts


311,802

252

0.32%



296,010

1,171

1.57%


Money market accounts


65,195

58

0.35%



60,779

234

1.53%


Retail time deposits


186,403

719

1.53%



168,046

928

2.19%


Wholesale time deposits


125,588

176

0.56%



81,139

404

1.98%


     Total interest bearing deposits


718,015

1,211

0.67%



625,029

2,764

1.75%













Federal Home Loan Bank & FRB advances


59,178

175

1.18%



17,943

44

0.97%


Senior debt


14,147

102

2.87%



16,000

176

4.36%


Subordinate debt


9,765

175

7.13%



-

-

0.00%


Total interest-bearing liabilities


801,105

1,663

0.83%



658,972

2,984

1.80%













Noninterest-bearing deposits


216,235





139,849




Other noninterest-bearing liabilities


7,900





8,001




Total liabilities


1,025,240





806,822















Total shareholders' equity


101,188





89,245




Total liabilities and shareholders' equity

$

1,126,428




$

896,067















Tax-equivalent net interest income



10,249





7,681














Net interest-earning assets (3)

$

288,371




$

199,329















Average interest-earning assets to interest-











     bearing liabilities


136%





130%















Tax-equivalent net interest rate spread (4)


3.52%





3.13%















Tax equivalent net interest margin (5)


3.74%





3.55%















(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 Twelve Months Ended December 31,




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

$

892,150

41,978

4.71%


$

744,967

38,802

5.21%


Loans - tax exempt (1)


2,899

196

6.76%



-

-

0.00%


Investments - taxable


59,630

1,631

2.74%



66,271

1,724

2.60%


Investments - tax exempt (2)


8,265

285

3.45%



-

-

0.00%


Interest earning deposits


64,623

114

0.18%



14,215

262

1.84%


Other investments, at cost


25,388

300

1.18%



8,678

301

3.47%


Total interest-earning assets


1,052,955

44,504

4.23%



834,131

41,089

4.93%


Noninterest earning assets


38,145





38,156




Total assets

$

1,091,100




$

872,287














Interest-bearing liabilities:











Interest-bearing transaction accounts

$

23,137

56

0.24%


$

19,930

104

0.52%


Savings accounts


295,076

2,260

0.77%



282,893

4,331

1.53%


Money market accounts


62,361

461

0.74%



53,013

824

1.55%


Retail time deposits


182,504

3,381

1.85%



176,288

3,903

2.21%


Wholesale time deposits


126,373

1,378

1.09%



95,045

2,122

2.23%


     Total interest bearing deposits


689,451

7,536

1.09%



627,169

11,284

1.80%













Federal Home Loan Bank & FRB advances


86,661

495

0.57%



17,271

368

2.13%


Senior debt


14,905

498

3.34%



16,000

767

4.79%


Subordinate debt


4,510

275

6.10%



-

-

0.00%


Total interest-bearing liabilities


795,527

8,804

1.11%



660,440

12,419

1.88%













Noninterest-bearing deposits


189,761





120,924




Other noninterest-bearing liabilities


8,521





6,996




Total liabilities


993,809





788,360















Total shareholders' equity


97,291





83,927




Total liabilities and shareholders' equity

$

1,091,100




$

872,287















Tax-equivalent net interest income



35,700





28,670














Net interest-earning assets (3)

$

257,428




$

173,691















Average interest-earning assets to interest-











     bearing liabilities


132%





126%















Tax-equivalent net interest rate spread (4)


3.12%





3.05%















Tax equivalent net interest margin (5)


3.39%





3.44%















(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










 

Cision View original content:http://www.prnewswire.com/news-releases/mountain-commerce-bancorp-inc-announces-fourth-quarter-2020-results-and-commencement-of-quarterly-cash-dividend-301212939.html

SOURCE Mountain Commerce Bank

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