Mountain Commerce Bancorp, Inc. Announces Third Quarter 2023 Results And Quarterly Cash Dividend
KNOXVILLE, Tenn., Oct. 23, 2023 /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, 2023.
The Company also announced today that its Board of Directors declared a quarterly cash dividend of $0.16 per common share, its twelfth consecutive quarterly dividend. The dividend is payable on December 1, 2023 to shareholders of record as of the close of business on November 6, 2023.
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, 2023. As further detailed in Appendix A and Appendix C to this press release, adjusted results (which are non-GAAP financial measures), reflect adjustments for realized and unrealized investment gains and losses, PPP fee accretion (net of the amortization of PPP deferred loan costs and one-time PPP bonuses), gains and losses from the sale of fixed assets, the provision for credit losses, the provision for (recovery of) unfunded loan commitments, and the impact of a fraudulent wire loss incurred in the second quarter of 2022 and a recovery associated with that loss in the first quarter of 2023. See Appendix B to this press release for more information on the Company's tax equivalent net interest margin. All financial information in this press release is unaudited.
For the Three Months Ended September 30, | ||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||
2023 | 2022 | |||||||||||
GAAP | Adjusted (1) | GAAP | Adjusted (1) | |||||||||
Net income | $ | 2,473 | 2,405 | $ | 5,322 | 5,994 | ||||||
Diluted earnings per share | $ | 0.40 | 0.39 | $ | 0.85 | 0.96 | ||||||
Return on average assets (ROAA) | 0.58 % | 0.56 % | 1.40 % | 1.58 % | ||||||||
Return on average equity | 8.19 % | 7.97 % | 18.36 % | 20.68 % | ||||||||
Noninterest expense to average assets | 1.34 % | 1.34 % | 1.49 % | 1.50 % | ||||||||
Net interest margin (tax equivalent) | 2.08 % | 2.08 % | 3.66 % | 3.65 % | ||||||||
Pre-tax, pre-provision earnings (1) | $ | 2,684 | $ | 7,807 | ||||||||
Pre-tax, pre-provision ROAA (1) | 0.63 % | 2.06 % | ||||||||||
(1) Represents a non-GAAP financial measure. See Appendix A to this press release for more information. | ||||||||||||
For the Nine Months Ended September 30, | ||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||
2023 | 2022 | |||||||||||
GAAP | Adjusted (1) | GAAP | Adjusted (1) | |||||||||
Net income | $ | 7,290 | 7,663 | $ | 14,652 | 17,486 | ||||||
Diluted earnings per share | $ | 1.17 | 1.23 | $ | 2.35 | 2.81 | ||||||
Return on average assets (ROAA) | 0.58 % | 0.61 % | 1.36 % | 1.63 % | ||||||||
Return on average equity | 8.08 % | 8.49 % | 16.66 % | 19.89 % | ||||||||
Noninterest expense to average assets | 1.42 % | 1.43 % | 1.58 % | 1.53 % | ||||||||
Net interest margin (tax equivalent) | 2.24 % | 2.24 % | 3.72 % | 3.69 % | ||||||||
Pre-tax, pre-provision earnings (1) | $ | 8,536 | $ | 20,891 | ||||||||
Pre-tax, pre-provision ROAA (1) | 0.68 % | 1.95 % | ||||||||||
(1) Represents a non-GAAP financial measure. See Appendix A to this press release for more information. | ||||||||||||
As of and for the | As of and for the | As of and for the | ||||||||
3 Months Ended | 3 Months Ended | 12 Months Ended | ||||||||
September 30, | June 30, | December 31, | ||||||||
2023 | 2023 | 2022 | ||||||||
(Dollars in thousands, except share data) | ||||||||||
Asset Quality | ||||||||||
Non-performing loans | $ | 607 | $ | 610 | $ | 1,277 | ||||
Real estate owned | $ | - | $ | - | $ | - | ||||
Non-performing assets | $ | 607 | $ | 610 | $ | 1,277 | ||||
Non-performing loans to total loans | 0.04 % | 0.04 % | 0.10 % | |||||||
Non-performing assets to total assets | 0.04 % | 0.04 % | 0.08 % | |||||||
Year-to-date net charge-offs | $ | 66 | $ | 49 | $ | 89 | ||||
Allowance for credit losses to non-performing loans | 1953.54 % | 1962.95 % | 990.21 % | |||||||
Allowance for credit losses to total loans | 0.83 % | 0.85 % | 0.96 % | |||||||
Other Data | ||||||||||
Cash dividends declared | $ | 0.160 | $ | 0.160 | $ | 0.160 | ||||
Shares outstanding | 6,364,666 | 6,365,096 | 6,361,494 | |||||||
Book and tangible book value per share (2) | $ | 18.78 | $ | 19.00 | $ | 18.43 | ||||
Accumulated other comprehensive income (loss) (AOCI) per share | (3.28) | (2.78) | (2.83) | |||||||
Book and tangible book value per share, excluding AOCI (1) (2) | 22.06 | $ | 21.78 | $ | 21.26 | |||||
Closing market price per common share | $ | 16.50 | $ | 16.50 | $ | 27.75 | ||||
Closing price to book value ratio | 87.86 % | 86.84 % | 150.53 % | |||||||
Tangible common equity to tangible assets ratio | 6.94 % | 7.04 % | 7.33 % | |||||||
Bank regulatory leverage ratio | 9.61 % | 9.72 % | 9.45 % | |||||||
(1) As further detailed in Appendix A and Appendix C to this press release, this is a non-GAAP financial measure | ||||||||||
(2) The Company does not have any intangible assets | ||||||||||
Five Quarter Trends
For the Three Months Ended | |||||||||||
(Dollars in thousands, except per share data) | |||||||||||
2023 | 2022 | ||||||||||
September 30 | June 30 | March 31 | December 31 | September 30 | |||||||
GAAP | GAAP | GAAP | GAAP | GAAP | |||||||
Net income | $ | 2,473 | $ | 2,459 | $ | 2,358 | $ | 3,788 | $ | 5,322 | |
Diluted earnings per share | $ | 0.40 | $ | 0.39 | $ | 0.38 | $ | 0.61 | $ | 0.85 | |
Return on average assets (ROAA) | 0.58 % | 0.59 % | 0.57 % | 0.96 % | 1.40 % | ||||||
Return on average equity | 8.19 % | 8.13 % | 7.89 % | 13.15 % | 18.36 % | ||||||
Noninterest expense to average assets | 1.34 % | 1.47 % | 1.47 % | 1.69 % | 1.49 % | ||||||
Net interest margin (tax equivalent) | 2.08 % | 2.09 % | 2.55 % | 3.22 % | 3.66 % | ||||||
2023 | 2022 | ||||||||||
September 30 | June 30 | March 31 | December 31 | September 30 | |||||||
Adjusted (1) | Adjusted (2) | Adjusted (2) | Adjusted (2) | Adjusted (1) | |||||||
Net income | $ | 2,405 | $ | 2,202 | $ | 3,055 | $ | 4,309 | $ | 5,994 | |
Diluted earnings per share | $ | 0.39 | $ | 0.35 | $ | 0.49 | $ | 0.69 | $ | 0.96 | |
Return on average assets (ROAA) | 0.56 % | 0.53 % | 0.74 % | 1.09 % | 1.58 % | ||||||
Return on average equity | 7.97 % | 7.28 % | 10.22 % | 14.96 % | 20.68 % | ||||||
Noninterest expense to average assets | 1.34 % | 1.47 % | 1.47 % | 1.68 % | 1.50 % | ||||||
Net interest margin (tax equivalent) | 2.08 % | 2.09 % | 2.55 % | 3.22 % | 3.65 % | ||||||
Pre-tax, pre-provision earnings | $ | 2,684 | $ | 2,315 | $ | 3,537 | $ | 5,145 | $ | 7,807 | |
Pre-tax, pre-provision ROAA | 0.63 % | 0.55 % | 0.86 % | 1.30 % | 2.06 % | ||||||
(1) Represents a non-GAAP financial measure. See Appendix A to this press release for more information. | |||||||||||
(2) Represents a non-GAAP financial measure. See Appendix C to this press release for more information. | |||||||||||
Management Commentary
William E. "Bill" Edwards, III, President and Chief Executive Officer of the Company, commented as follows:
"The third quarter of 2023 saw continued pressure on our cost of funds as financial institutions continue to aggressively compete for deposits. We are pleased, however, that our average yield on taxable loans increased 84 bp from 4.60% in the third quarter of 2022 to 5.44% in the third quarter of 2023, with recent average production yields of approximately 8%. However, the average rate paid on interest bearing liabilities increased 308 bp from 1.01% to 4.09% over the same period. We continue to experience very low levels of loan charge-offs and our allowance coverage of nonperforming loans was nearly 20 to 1 at September 30, 2023. From an asset quality perspective, our non-performing assets to total assets remained at historical lows of 0.04% at September 30, 2023, with no properties in real estate owned. We continue to remain disciplined on loan quality and pricing, and intend to prioritize the value of maintaining and growing our retail deposit base for the foreseeable future , which has grown over $120 million since September 30, 2022. Finally, we believe that our September 30, 2023 liquidity remains strong with available funding sources well in excess of our level of uninsured deposits.
We continue to work diligently on several projects located across our markets, including the following:
The construction of our Johnson City financial center continues with an expected completion date of mid-2024. This location, which has significant I-26 visibility, will be a major upgrade from our single existing branch in this market, and we believe the opening of this location will aid in our efforts to substantially grow our Johnson City and TriCities deposit market share. We expect to consolidate approximately 8,300 sf of leased space with an annual cost of $170 thousand into this building.
We continue to make repairs and improvements to our newest financial center in West Knoxville. In addition to providing a more visible and strategic geographic location, we also expect to consolidate approximately 8,900 sf of space that we currently lease with an annual cost of $210 thousand into this office once renovations are complete. This building is expected to be operational by October 30, 2023."
Net Interest Income
Net interest income decreased $4.9 million, or 38.2%, from $12.9 million for the three months ended September 30, 2022 to $8.0 million for the same period in 2023. The decrease between the periods was primarily the net result of the following factors:
Average interest-earning assets grew $170.4 million, or 11.7%, from $1.452 billion to $1.622 billion, driven primarily by increases in loans.
Average net interest-earning assets declined $88.1 million, or 21.4%, from $412.4 million to $324.3 million, due primarily to a $69.8 million decrease in noninterest bearing deposits and a $22.0 million increase in noninterest earning assets – primarily higher levels of fixed assets discussed below.
The average rate paid on interest-bearing liabilities increased 308 bp from 1.01% to 4.09%, while the average rate earned on interest-earning assets increased 97 bp from 4.38% to 5.35%, resulting in a decrease in tax-equivalent net interest margin from 3.66% to 2.08%. The increase in the average rate paid on interest-bearing liabilities was due to the rising rate environment and competitive funding pressures in our markets, which resulted in customers seeking higher rates on certificates of deposit and other interest-bearing accounts and the Company's cost of wholesale funding rising significantly.
The Company did not recognize any PPP loan origination fees, net of the amortization of deferred PPP loan costs, through net interest income during the three months ended September 30, 2023 and recognized only an immaterial amount during the three months ended September 30, 2022. No net PPP loan origination fees remain to be recognized as of September 30, 2023.
Net interest income decreased $11.7 million, or 31.6%, from $36.9 million for the nine months ended September 30, 2022 to $25.3 million for the same period in 2023. The decrease between the periods was primarily the net result of the following factors:
Average interest-earning assets grew $218.5 million, or 15.9%, from $1.375 billion to $1.594 billion, driven primarily by increases in loans.
Average net interest-earning assets declined $71.9 million, or 17.9%, from $402.4 million to $330.5 million, due primarily to a $48.9 million decrease in noninterest bearing deposits and a $26.5 million increase in noninterest earning assets - primarily higher levels of fixed assets discussed below.
The average rate paid on interest-bearing liabilities increased 308 bp from 0.63% to 3.71%, while the average rate earned on interest-earning assets increased 102 bp from 4.16% to 5.18%, resulting in a decrease in tax-equivalent net interest margin from 3.72% to 2.24%. The increase in the average rate paid on interest-bearing liabilities was due to the rising rate environment and competitive funding pressures in our markets, which resulted in customers seeking higher rates on certificates of deposit and other interest-bearing accounts and the Company's cost of wholesale funding rising significantly.
The Company recognized $0 and approximately $0.3 million of PPP loan origination fees, net of the amortization of deferred PPP loan costs, through net interest income during the nine months ended September 30, 2023 and 2022, respectively. No net PPP loan origination fees remain to be recognized as of September 30, 2023.
Rate Sensitivity
The Company has the following loans and funding subject to repricing of short-term (90 days or less) interest rates:
Federal | Short-Term | |||||
Prime | SOFR | Funds | FHLB | Total | ||
Loans | $ | 200,600 | 81,900 | - | - | 282,500 |
Funding | $ | - | - | 96,090 | 102,000 | 198,090 |
The Federal Reserve has increased the Federal Funds interest rate by 525 bp since December 31, 2021. Since that time, the Company has experienced the following cumulative impacts on its loan yields and deposit costs:
Cumulative Beta | ||
Loan Yields | Deposit Costs | |
Mar 31, 2022 | 128.0 % | 0.0 % |
Jun 30, 2022 | 32.0 % | 5.3 % |
Sep 30, 2022 | 24.7 % | 14.3 % |
Dec 31, 2022 | 25.4 % | 30.6 % |
Mar 31, 2023 | 26.1 % | 43.8 % |
Jun 30, 2023 | 27.8 % | 55.0 % |
Sep 30, 2023 | 30.7 % | 57.5 % |
Effective October 1, 2023, the Company entered into a $150 million notional amount pay-fixed swap with a term of 3 years. This swap, in addition to a $3.5 million securities restructuring, should improve the Company's exposure to interest rates in a rising rate environment.
Provision For Credit Losses
A provision for (recovery of) credit losses of ($0.4) million and $0.9 million was recognized for the three months ended September 30, 2023 and 2022, respectively. The recovery of credit losses recognized during the three months ended September 30, 2023 was primarily the result of an improvement in projected economic factors (GDP, unemployment and housing prices) and a reduction in the reserve for unfunded commitments, offset by additional provision expense related to loan growth.
A provision for (recovery of) credit losses of ($0.4) million and $2.0 million was recognized for the nine months ended September 30, 2023 and 2022, respectively. The recovery of credit losses recognized during the nine months ended September 30, 2023 was primarily the result of an improvement in projected economic factors (GDP, unemployment and housing prices) and a reduction in the reserve for unfunded commitments, offset by additional provision expense related to loan growth.
The Company continues to experience historically low levels of problem assets and charge-offs. The Company adopted the provisions of Accounting Standards Update No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments as of January 1, 2023. The following summarizes the impact of the adoption of ASU 2016-13:
Impact at | ||
Jan 1, 2023 | ||
(in millions) | ||
Decrease to allowance for credit losses | $ | (0.70) |
Increase to reserve for unfunded commitments | 0.70 | |
Net impact to shareholders equity | $ | - |
Noninterest Income
The following summarizes changes in the Company's noninterest income for the periods indicated:
Three Months Ended September 30 | |||||||||
(In thousands) | 2023 | 2022 | Change | ||||||
Service charges and fees | $ | 369 | 369 | - | |||||
Bank owned life insurance | 47 | 44 | 3 | ||||||
Realized gain (loss) on sale of investment securities available for sale | - | (42) | 42 | ||||||
Unrealized gain (loss) on equity securities | (50) | (171) | 121 | ||||||
Gain on sale of loans | 7 | 5 | 2 | ||||||
Loss on sale of fixed assets | (269) | - | (269) | ||||||
Wealth management | 158 | 175 | (17) | ||||||
Swap fees | 145 | - | 145 | ||||||
Limited partnership distributions | - | 96 | (96) | ||||||
Other | - | 22 | (22) | ||||||
$ | 407 | 498 | (91) | ||||||
Nine Months Ended September 30 | |||||||||
(In thousands) | 2023 | 2022 | Change | ||||||
Service charges and fees | $ | 1,137 | 1,080 | 57 | |||||
Bank owned life insurance | 139 | 131 | 8 | ||||||
Realized gain (loss) on sale of investment securities available for sale | (9) | (212) | 203 | ||||||
Unrealized gain (loss) on equity securities | (781) | (1,187) | 406 | ||||||
Gain on sale of loans | 21 | 29 | (8) | ||||||
Loss on sale of fixed assets | (200) | - | (200) | ||||||
Wealth management | 479 | 544 | (65) | ||||||
Swap fees | 365 | - | 365 | ||||||
Limited partnership distributions | - | 469 | (469) | ||||||
Other | 37 | 41 | (4) | ||||||
$ | 1,188 | 895 | 293 | ||||||
Noninterest income declined to $0.4 million in the third quarter of 2023 from $0.5 million in the same quarter of 2022. This decrease was primarily due to a $0.3 loss from the sale of the Company's former headquarters building in Erwin, TN during the third quarter of 2023. Unrealized losses on equity securities declined from the third quarter of 2022 as a result of an improvement in market conditions. The Company also recognized higher levels of swap fees during the third quarter of 2023 due to increased demand by customers for fixed rate loans. The Bank receives a fee for delivering the swap to a third party, but does not maintain a contractual obligation for the swap other than in the event of a default.
Noninterest income improved to $1.2 million for the nine months ended September 30, 2023 from $0.9 million in the same period of 2022. This increase was primarily due to a decline in unrealized losses on equity securities and realized losses on the sale of investment securities available for sale as a result of an improvement in market conditions. The Company also recognized higher levels of swap fees during the nine months ended September 30, 2023 due to increased demand by customers for fixed rate loans. Offsetting these increases was a $0.4 million decrease in distributions from limited partnerships, which tend to have an unpredictable level of distributions, and a $0.3 loss from the sale of the Company's former legacy bank headquarters building in Erwin, TN during the third quarter of 2023.
Noninterest Expense
The following summarizes changes in the Company's noninterest expense for the periods indicated:
Three Months Ended September 30 | ||||||
(In thousands) | 2023 | 2022 | Change | |||
Compensation and employee benefits | $ | 3,148 | 3,299 | (151) | ||
Occupancy | 568 | 452 | 116 | |||
Furniture and equipment | 166 | 176 | (10) | |||
Data processing | 536 | 536 | - | |||
FDIC insurance | 286 | 161 | 125 | |||
Office | 197 | 183 | 14 | |||
Advertising | 127 | 115 | 12 | |||
Professional fees | 421 | 405 | 16 | |||
Other noninterest expense | 277 | 310 | (33) | |||
$ | 5,726 | 5,637 | 89 | |||
Nine Months Ended September 30 | ||||||
(In thousands) | 2023 | 2022 | Change | |||
Compensation and employee benefits | $ | 9,807 | 9,416 | 391 | ||
Occupancy | 1,740 | 1,209 | 531 | |||
Furniture and equipment | 543 | 399 | 144 | |||
Data processing | 1,597 | 1,497 | 100 | |||
FDIC insurance | 874 | 491 | 383 | |||
Office | 603 | 523 | 80 | |||
Advertising | 392 | 264 | 128 | |||
Professional fees | 1,325 | 1,072 | 253 | |||
Other noninterest expense | 1,021 | 2,074 | (1,053) | |||
$ | 17,902 | 16,945 | 957 | |||
Noninterest expense increased $0.1 million, or 1.6%, from $5.6 million in the third quarter of 2022 to $5.7 million in the same period of 2023. Compensation and employee benefits decreased $0.2 million, or 4.6%, in the third quarter of 2023 compared to the same period in 2022 due primarily to a decrease in incentive accruals, offset by merit increases and an increase in benefit costs. Occupancy expense increased $0.1 million in the third quarter of 2023 compared to the third quarter of 2022 due to additional expense associated with the Company's new operations center and West Knoxville financial center. The Company expects to benefit from lower lease expense in future quarters due to the staggered closure schedule of certain leased office space that is being replaced by the facilities currently under construction. FDIC insurance increased $0.1 million in the third quarter of 2023 compared to the same period of 2022 due to a scheduled 2 bp increase in the assessment rate.
Noninterest expense increased $1.0 million, or 5.6%, from $16.9 million in the first nine months of 2022 to $17.9 million in the same period of 2023. Compensation and employee benefits increased $0.4 million, or 4.2%, in the first nine months of 2023 compared to the same period in 2022 due primarily to merit raises and increases in benefit costs, offset by a reduction in incentive accruals. Occupancy and furniture and equipment expense increased $0.7 million in the nine months ended September 30, 2023, compared to the same period of 2022, due to lease and furniture expense associated with the Company's new Brentwood financial center, as well as additional expense associated with the Company's new operations center and West Knoxville financial center. The Company should benefit from lower lease expense in future quarters due to the staggered closure schedule of certain leased office space that is being replaced by the facilities currently under construction. FDIC insurance increased $0.4 million in the first nine months of 2023 compared to the same period of 2022 due to a scheduled 2 bp increase in the assessment rate. Professional fees increased $0.3 million over the same periods as the Company has engaged a national accounting firm for its internal audit function and incurred additional audit expenses in conjunction with a required internal control audit. Other noninterest expense for the first nine months of 2022 included a $0.8 million loss associated with a fraudulent wire loss, offset by a $0.1 million recovery during the first nine months of 2023.
Income Taxes
The effective tax rates of the Company were as follows for the periods indicated
Three Months Ended September 30 | Nine Months Ended September 30 | |||
2023 | 2022 | 2023 | 2022 | |
20.10 % | 22.95 % | 18.28 % | 22.44 % | |
The Company's effective tax rate during the three and nine months ended September 30, 2023 decreased compared to the same periods in the prior year due to a decline in the Company's effective state tax rate from tax credits on certain loans. The Company's marginal tax rate of 26.14% is favorably impacted by certain sources of non-taxable income including bank-owned life insurance (BOLI), tax-free loans, and investments in tax-free municipal securities.
Balance Sheet
Total assets increased $121.1 million, or 7.6%, from $1.600 billion at December 31, 2022 to $1.721 billion at September 30, 2023. The change was primarily driven by the following factors:
Available for sale investment security balances decreased $13.0 million, or 9.4%, primarily due to principal paydowns and decreases in fair value.
The following summarizes the composition of the Company's available for sale investment securities portfolio (at fair value) as of September 30, 2023 and December 31, 2022:
September 30, 2023 | December 31, 2022 | |||||
Estimated | Net | Estimated | Net | |||
Fair | Unrealized | Fair | Unrealized | |||
Value | Gain (Loss) | Value | Gain (Loss) | |||
(in thousands) | ||||||
Agency MBS / CMO | $ | 15,309 | (2,798) | 17,086 | (2,232) | |
Agency multifamily (non-guaranteed) | 8,683 | (1,182) | 10,110 | (1,316) | ||
Agency student loan (98% guarantee) | 12,117 | 56 | 9,862 | (56) | ||
Business Development Companies | 3,902 | (514) | 3,795 | (626) | ||
Corporate | 23,144 | (3,340) | 24,531 | (2,487) | ||
Municipal | 25,377 | (9,119) | 26,464 | (8,264) | ||
Non-agency MBS / CMO | 39,179 | (11,455) | 45,577 | (9,514) | ||
$ | 127,711 | (28,351) | 137,425 | (24,495) | ||
Non-agency MBS/CMO's have an average credit-enhancement of approximately 37% as of September 30, 2023. Municipal securities are generally rated AA or higher.
The Company does not have any securities classified as held-to-maturity.
Loans receivable increased $118.8 million, or 9.0%, from $1.317 billion at December 31, 2022 to $1.436 billion at September 30, 2023. Increases over that period in residential and other construction, home equity, residential, multi-family, owner and non-owner occupied commercial, and commercial and industrial offset a reduction in consumer and farmland loans.
The following summarizes changes in loan balances over the last five quarters:
September 30, | June 30, | March 31, | December 31, | September 30, | |||||||
2023 | 2023 | 2023 | 2022 | 2022 | |||||||
(in thousands) | |||||||||||
Residential construction | $ | 39,824 | 40,309 | 47,170 | 35,774 | 31,170 | |||||
Other construction | 82,288 | 73,183 | 64,009 | 56,090 | 50,956 | ||||||
Farmland | 8,699 | 9,381 | 10,174 | 11,657 | 12,524 | ||||||
Home equity | 45,839 | 43,992 | 40,609 | 38,108 | 36,730 | ||||||
Residential | 446,215 | 434,780 | 437,143 | 423,646 | 393,752 | ||||||
Multi-family | 112,786 | 111,988 | 102,761 | 92,933 | 93,730 | ||||||
Owner-occupied commercial | 229,879 | 217,778 | 205,512 | 206,873 | 227,502 | ||||||
Non-owner occupied commercial | 317,651 | 324,883 | 299,093 | 297,811 | 281,027 | ||||||
Commercial & industrial | 142,685 | 134,188 | 140,022 | 140,151 | 134,329 | ||||||
PPP Program | 191 | 884 | 1,589 | 2,659 | 7,461 | ||||||
Consumer | 9,572 | 12,732 | 13,128 | 11,181 | 12,395 | ||||||
$ | 1,435,629 | 1,404,098 | 1,361,210 | 1,316,883 | 1,281,576 |
The following summarizes the industry components of the Company's non-owner occupied commercial real estate loans as of September 30, 2023:
Loan | % of Total | ||||
Balance | Loans | ||||
Retail | 70,476 | 5.0 % | |||
Hotels | 60,581 | 4.3 % | |||
Office | $ | 34,065 | 2.4 % | ||
Campground | 30,049 | 2.1 % | |||
Marina | 21,677 | 1.5 % | |||
Medical | 23,686 | 1.7 % | |||
Warehouse | 19,776 | 1.4 % | |||
Mini-storage | 19,342 | 1.4 % | |||
Vacation Rentals | 17,772 | 1.3 % | |||
Car Wash | 10,743 | 0.8 % | |||
Restaurant | 5,074 | 0.4 % | |||
Other | 4,410 | 0.3 % | |||
$ | 317,651 | 22.6 % | |||
Premises and equipment increased $13.4 million, or 40.7%, during the nine months ended September 30, 2023 primarily due to costs incurred for the construction of the new 23,000 sf Johnson City combined financial/corporate center as well as improvement costs on the recently purchased financial center in West Knoxville. As of September 30, 2023, approximately $12.6 million had been incurred related to the costs of the Johnson City and West Knoxville building projects, with remaining construction costs of approximately $10.0 million.
Total deposits increased $62.3 million, or 4.6%, from $1.346 billion at December 31, 2022 to $1.408 billion at September 30, 2023. An increase in retail and wholesale time deposits offset decreases in non-interest bearing transaction, NOW and money market and savings accounts. Wholesale time deposits consist primarily of brokered certificates of deposit with a maximum maturity of one year or less. The Company believes that the shift in product mix out of money market and savings accounts and into retail time deposits is primarily a result of the higher interest rates that the Company has offered on retail time deposits.
The following summarizes changes in deposit balances over the last five quarters:
September 30, | June 30, | March 31, | December 31, | September 30, | |||||||
2023 | 2023 | 2023 | 2022 | 2022 | |||||||
(in thousands) | |||||||||||
Non-interest bearing transaction | $ | 270,299 | 322,003 | 293,502 | 305,210 | 364,290 | |||||
NOW and money market | 250,920 | 266,777 | 314,636 | 321,028 | 312,132 | ||||||
Savings | 258,110 | 260,741 | 293,254 | 359,613 | 383,599 | ||||||
Retail time deposits | 382,708 | 355,367 | 277,408 | 179,626 | 89,886 | ||||||
Wholesale time deposits | 246,716 | 212,988 | 202,608 | 181,022 | 137,596 | ||||||
$ | 1,408,753 | 1,417,876 | 1,381,408 | 1,346,499 | 1,287,503 |
FHLB borrowings increased $47.0 million from December 31, 2022 and consisted of the following at September 30, 2023:
Amounts | Original | Current | Maturity | |
(000's) | Term | Rate | Date | |
$ | 52,000 | 2 weeks | 5.44 % | 10/04/23 |
50,000 | 3 months | 5.58 % | 11/30/23 | |
50,000 | 12 months | 5.27 % | 03/15/24 | |
$ | 152,000 | 5.43 % | ||
Total equity increased $2.3 million, or 1.9%, from $117.3 million at December 31, 2022 to $119.5 million at September 30, 2023. The following summarizes the components of the change in total shareholders' equity and tangible book value per share for the nine months ended September 30, 2023:
Total | Tangible | |||
Shareholders' | Book Value | |||
Equity | Per Share | |||
(In thousands) | ||||
December 31, 2022 | $ | 117,271 | 18.43 | |
Net income | 7,290 | 1.17 | ||
Dividends paid | (3,054) | (0.48) | ||
Stock compensation | 922 | 0.14 | ||
Share repurchases | (24) | (0.00) | ||
Change in fair value of investments available for sale | (2,883) | (0.45) | ||
September 30, 2023 | $ | 119,522 | 18.78 | * |
* Sum of the individual components may not equal the total | ||||
The Company's tangible equity to tangible assets ratio declined to 6.94% at September 30, 2023 from 7.33% at December 31, 2022, primarily as the result of a decline in net income and the fair value of investments available for sale combined with continued asset growth and dividends. The Company continues to manage its equity levels through a combination of controlled growth, share repurchases and dividends. The Company and Bank both remain well capitalized at September 30, 2023, with the Bank maintaining a regulatory leverage ratio of 9.61% at September 30, 2023.
Share Repurchases
The Company has an active authorization to repurchase up to $5 million of shares through March, 2024. The Company has not repurchased any shares during 2023 but is currently considering opportunistic purchases as its stock is currently trading below tangible and net book value.
Asset Quality
Non-performing loans to total loans decreased from 0.10% at December 31, 2022 to 0.04% at September 30, 2023. Non-performing assets to total assets decreased from 0.08% at December 31, 2022 to 0.04% at September 30, 2023. Other real estate owned balances remained at $0 at both December 31, 2022 and September 30, 2023. Net charge-offs of $66 thousand were recognized during the nine months ended September 30, 2023, compared to $89 thousand during the full year 2022. The allowance for credit losses to total loans declined to 0.83% at September 30, 2023 compared to 0.96% at December 31, 2022, primarily as a result of an improvement in projected economic factors. Coverage of non-performing loans by the allowance for credit losses was nearly 20 to 1 at September 30, 2023.
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 and Appendix C, 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 noninterest expense to average assets ratio, which are all non-GAAP financial measures. We also present in this press release and the accompanying tables pre-tax, pre-provision earnings, pre-tax, pre-provision return on average assets, and book and tangible book value per share excluding AOCI, 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) deterioration in the financial condition of our borrowers, including as a result of persistent inflationary pressures, resulting in significant increases in credit losses and provisions for those losses; (ii) 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; (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 deterioration of the economy in our market areas, including the negative impact of inflationary pressures on our customers and their businesses; (vi) the ability to grow and retain low-cost core deposits, including during times when uncertainty exists in the financial services sector; (vii) our ability to meet our liquidity needs without having to liquidate investment securities that we own while those securities are in a unrealized loss position as a result of the rising rate environment; (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) the ineffectiveness of our hedging strategies, or the unexpected counterparty failure or failure of the underlying hedges; (xv) 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; (xvi) changes in capital levels and loan underwriting, credit review or loss reserve policies associated with economic conditions, examination conclusions, or regulatory developments; (xvii) inadequate allowance for credit losses; (xviii) results of regulatory examinations; (xix) 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; (xx) the possibility of increased corporate or personal tax rates and the resulting reduction in our and our customers' businesses as a result of any such increases; (xxi) approval of the declaration of any dividend by our Board of Directors; (xxii) loss of key personnel; and (xxiii) 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 Middle and East Tennessee through 6 branches located in Brentwood, Erwin, Johnson City, Bearden / Knoxville, West Knoxville and Unicoi. The Bank focuses on responsive relationship banking of small and medium-sized businesses, professionals, affluent individuals, and those 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 Subsidiaries | ||||||||
Condensed Consolidated Statements of Income | ||||||||
(Amounts in thousands, except share data) | ||||||||
Three Months Ended | Nine Months Ended | |||||||
September 30, | September 30, | |||||||
2023 | 2022 | 2023 | 2022 | |||||
Interest income | ||||||||
Loans | $ | 19,015 | 13,957 | $ | 52,936 | 37,307 | ||
Investment securities - taxable | 1,274 | 1,090 | 3,886 | 3,159 | ||||
Investment securities - tax exempt | 39 | 94 | 117 | 294 | ||||
Dividends and other | 1,059 | 440 | 3,398 | 767 | ||||
21,387 | 15,581 | 60,337 | 41,527 | |||||
Interest expense | ||||||||
Savings | 1,760 | 506 | 4,902 | 1,004 | ||||
Interest bearing transaction accounts | 2,487 | 821 | 7,512 | 1,273 | ||||
Time certificates of deposit of $250,000 or more | 4,351 | 474 | 10,825 | 682 | ||||
Other time deposits | 2,615 | 135 | 5,617 | 252 | ||||
Total deposits | 11,213 | 1,936 | 28,856 | 3,211 | ||||
Senior debt | 405 | 141 | 1,042 | 344 | ||||
Subordinated debt | 163 | 164 | 493 | 493 | ||||
FHLB & FRB advances | 1,603 | 394 | 4,696 | 538 | ||||
13,384 | 2,635 | 35,087 | 4,586 | |||||
Net interest income | 8,003 | 12,946 | 25,250 | 36,941 | ||||
Provision for (recovery of) credit losses | (411) | 900 | (385) | 2,000 | ||||
Net interest income after provision for (recovery of) credit losses | 8,414 | 12,046 | 25,635 | 34,941 | ||||
Noninterest income | ||||||||
Service charges and fees | 369 | 369 | 1,137 | 1,080 | ||||
Bank owned life insurance | 47 | 44 | 139 | 131 | ||||
Realized gain (loss) on sale of investment securities available for sale | - | (42) | (9) | (212) | ||||
Unrealized loss on equity securities | (50) | (171) | (781) | (1,187) | ||||
Gain on sale of loans | 7 | 5 | 21 | 29 | ||||
Loss on sale of fixed assets | (269) | - | (200) | - | ||||
Wealth management | 158 | 175 | 479 | 544 | ||||
Swap fees | 145 | - | 365 | - | ||||
Limited partnership distributions | - | 96 | - | 469 | ||||
Other | - | 22 | 37 | 41 | ||||
407 | 498 | 1,188 | 895 | |||||
Noninterest expense | ||||||||
Compensation and employee benefits | 3,148 | 3,299 | 9,807 | 9,416 | ||||
Occupancy | 568 | 452 | 1,740 | 1,209 | ||||
Furniture and equipment | 166 | 176 | 543 | 399 | ||||
Data processing | 536 | 536 | 1,597 | 1,497 | ||||
FDIC insurance | 286 | 161 | 874 | 491 | ||||
Office | 197 | 183 | 603 | 523 | ||||
Advertising | 127 | 115 | 392 | 264 | ||||
Professional fees | 421 | 405 | 1,325 | 1,072 | ||||
Other noninterest expense | 277 | 310 | 1,021 | 2,074 | ||||
5,726 | 5,637 | 17,902 | 16,945 | |||||
Income before income taxes | 3,095 | 6,907 | 8,921 | 18,891 | ||||
Income taxes | 622 | 1,585 | 1,631 | 4,239 | ||||
Net income | $ | 2,473 | 5,322 | $ | 7,290 | 14,652 | ||
Earnings per common share: | ||||||||
Basic | $ | 0.40 | 0.86 | $ | 1.17 | 2.36 | ||
Diluted | $ | 0.40 | 0.85 | $ | 1.17 | 2.35 | ||
Weighted average common shares outstanding: | ||||||||
Basic | 6,240,403 | 6,209,436 | 6,231,237 | 6,200,883 | ||||
Diluted | 6,243,630 | 6,235,634 | 6,240,119 | 6,230,103 | ||||
Mountain Commerce Bancorp, Inc. and Subsidiaries | |||||||||
Condensed Consolidated Balance Sheets | |||||||||
(Amounts in thousands) | |||||||||
September 30, | June 30, | December 31, | |||||||
2023 | 2023 | 2022 | |||||||
Assets | |||||||||
Cash and due from banks | $ | 18,586 | $ | 16,753 | $ | 13,824 | |||
Interest-earning deposits in other banks | 59,928 | 86,361 | 64,816 | ||||||
Cash and cash equivalents | 78,514 | 103,114 | 78,640 | ||||||
Investments available for sale | 127,711 | 134,089 | 137,425 | ||||||
Equity securities | 1,742 | 5,046 | 5,750 | ||||||
Premises and equipment held for sale | 3,812 | 4,260 | 4,260 | ||||||
Loans receivable | 1,435,629 | 1,404,098 | 1,316,883 | ||||||
Allowance for credit losses | (11,858) | (11,974) | (12,645) | ||||||
Net loans receivable | 1,423,771 | 1,392,124 | 1,304,238 | ||||||
Premises and equipment, net | 46,323 | 41,440 | 32,932 | ||||||
Accrued interest receivable | 5,318 | 4,790 | 4,514 | ||||||
Bank owned life insurance | 9,915 | 9,867 | 9,776 | ||||||
Restricted stock | 8,170 | 9,525 | 7,143 | ||||||
Deferred tax assets, net | 10,835 | 9,794 | 10,271 | ||||||
Other assets | 5,001 | 4,643 | 5,111 | ||||||
Total assets | $ | 1,721,112 | $ | 1,718,692 | $ | 1,600,060 | |||
Liabilities and Shareholders' Equity | |||||||||
Noninterest-bearing | $ | 270,299 | $ | 322,003 | $ | 305,210 | |||
Interest-bearing | 891,738 | 882,885 | 860,267 | ||||||
Wholesale | 246,716 | 212,988 | 181,022 | ||||||
Total deposits | 1,408,753 | 1,417,876 | 1,346,499 | ||||||
FHLB borrowings | 152,000 | 140,000 | 105,000 | ||||||
Senior debt, net | 20,000 | 20,000 | 9,998 | ||||||
Subordinated debt, net | 9,903 | 9,893 | 9,866 | ||||||
Accrued interest payable | 1,699 | 1,279 | 885 | ||||||
Post-employment liabilities | 3,442 | 3,467 | 3,519 | ||||||
Other liabilities | 5,793 | 5,235 | 7,022 | ||||||
Total liabilities | 1,601,590 | 1,597,750 | 1,482,789 | ||||||
Total shareholders' equity | 119,522 | 120,942 | 117,271 | ||||||
Total liabilities and shareholders' equity | $ | 1,721,112 | $ | 1,718,692 | $ | 1,600,060 | |||
Appendix A - Reconciliation of Non-GAAP Financial Measures | |||||||
Three Months Ended | Nine Months Ended | ||||||
September 30 | September 30 | ||||||
(Dollars in thousands, except per share data) | (Dollars in thousands, except per share data) | ||||||
2023 | 2022 | 2023 | 2022 | ||||
Adjusted Net Income | |||||||
Net income (GAAP) | $ | 2,473 | 5,322 | $ | 7,290 | 14,652 | |
Realized (gain) loss on sale of investment securities | - | 42 | 9 | 212 | |||
Unrealized (gain) loss on equity securities | 50 | 171 | 781 | 1,187 | |||
Accretion of PPP fees, net | - | (39) | - | (285) | |||
(Gain) Loss on sale of fixed assets | 269 | - | 200 | - | |||
Provision for (recovery of) credit losses | (411) | 900 | (385) | 2,000 | |||
Provision for (recovery of) unfunded commitments | - | 86 | - | 148 | |||
Fraudulent wire loss (recovery) | - | (250) | (100) | 575 | |||
Tax effect of adjustments | 24 | (238) | (132) | (1,003) | |||
Adjusted net income (Non-GAAP) | $ | 2,405 | 5,994 | $ | 7,663 | 17,486 | |
Adjusted Diluted Earnings Per Share | |||||||
Diluted earnings per share (GAAP) | $ | 0.40 | 0.85 | $ | 1.17 | 2.35 | |
Realized (gain) loss on sale of investment securities | - | 0.01 | 0.00 | 0.03 | |||
Unrealized (gain) loss on equity securities | 0.01 | 0.03 | 0.13 | 0.19 | |||
Accretion of PPP fees, net | - | (0.01) | - | (0.05) | |||
(Gain)/Loss on sale of fixed assets | 0.04 | - | 0.03 | - | |||
Provision for (recovery of) credit losses | (0.07) | 0.14 | (0.06) | 0.32 | |||
Provision for (recovery of) unfunded commitments | - | 0.01 | - | 0.02 | |||
Fraudulent wire loss (recovery) | - | (0.04) | (0.02) | 0.09 | |||
Tax effect of adjustments | 0.00 | (0.04) | (0.02) | (0.16) | |||
Adjusted diluted earnings per share (Non-GAAP) | $ | 0.39 | 0.96 | $ | 1.23 | 2.81 | |
Adjusted Return on Average Assets | |||||||
Return on average assets (GAAP) | 0.58 % | 1.40 % | 0.58 % | 1.36 % | |||
Realized (gain) loss on sale of investment securities | 0.00 % | 0.01 % | 0.00 % | 0.02 % | |||
Unrealized (gain) loss on equity securities | 0.01 % | 0.05 % | 0.06 % | 0.11 % | |||
Accretion of PPP fees, net | 0.00 % | -0.01 % | 0.00 % | -0.03 % | |||
(Gain)/Loss on sale of fixed assets | 0.06 % | 0.00 % | 0.02 % | 0.00 % | |||
Provision for (recovery of) credit losses | -0.10 % | 0.24 % | -0.03 % | 0.19 % | |||
Provision for (recovery of) unfunded commitments | 0.00 % | 0.02 % | 0.00 % | 0.01 % | |||
Fraudulent wire loss (recovery) | 0.00 % | -0.07 % | -0.01 % | 0.05 % | |||
Tax effect of adjustments | 0.01 % | -0.06 % | -0.01 % | -0.09 % | |||
Adjusted return on average assets (Non-GAAP) | 0.56 % | 1.58 % | 0.61 % | 1.63 % | |||
Adjusted Return on Average Equity | |||||||
Return on average equity (GAAP) | 8.19 % | 18.36 % | 8.08 % | 16.66 % | |||
Realized (gain) loss on sale of investment securities | 0.00 % | 0.14 % | 0.01 % | 0.24 % | |||
Unrealized (gain) loss on equity securities | 0.17 % | 0.59 % | 0.87 % | 1.35 % | |||
Accretion of PPP fees, net | 0.00 % | -0.13 % | 0.00 % | -0.32 % | |||
(Gain)/Loss on sale of fixed assets | 0.89 % | 0.00 % | 0.22 % | 0.00 % | |||
Provision for (recovery of) credit losses | -1.36 % | 3.11 % | -0.43 % | 2.27 % | |||
Provision for (recovery of) unfunded commitments | 0.00 % | 0.30 % | 0.00 % | 0.17 % | |||
Fraudulent wire loss (recovery) | 0.00 % | -0.86 % | -0.11 % | 0.65 % | |||
Tax effect of adjustments | 0.08 % | -0.82 % | -0.15 % | -1.14 % | |||
Adjusted return on average equity (Non-GAAP) | 7.97 % | 20.68 % | 8.49 % | 19.89 % | |||
Appendix A - Reconciliation of Non-GAAP Financial Measures, Continued | |||||||
Three Months Ended | Nine Months Ended | ||||||
September 30 | September 30 | ||||||
(Dollars in thousands, except per share data) | (Dollars in thousands, except per share data) | ||||||
2023 | 2022 | 2023 | 2022 | ||||
Adjusted Noninterest Expense to Average Assets | |||||||
Noninterest expense to average assets (GAAP) | 1.34 % | 1.49 % | 1.42 % | 1.58 % | |||
Provision for (recovery of) unfunded commitments | 0.00 % | -0.01 % | 0.00 % | -0.01 % | |||
Fraudulent wire loss (recovery) | 0.00 % | 0.02 % | 0.01 % | -0.04 % | |||
Adjusted noninterest expense to average assets (Non-GAAP) | 1.34 % | 1.50 % | 1.43 % | 1.53 % | |||
Adjusted Net Interest Margin (tax-equivalent) (1) | |||||||
Net interest margin (tax-equivalent) (GAAP) | 2.08 % | 3.66 % | 2.24 % | 3.72 % | |||
Accretion of PPP fees, net | 0.00 % | -0.01 % | 0.00 % | -0.03 % | |||
Adjusted net interest margin (tax-equivalent) (Non-GAAP) | 2.08 % | 3.65 % | 2.24 % | 3.69 % | |||
Pre-tax, Pre-Provision Earnings | |||||||
Net income (GAAP) | $ | 2,473 | 5,322 | $ | 7,290 | 14,652 | |
Income taxes | 622 | 1,585 | 1,631 | 4,239 | |||
Provision for (recovery of) credit losses | (411) | 900 | (385) | 2,000 | |||
Pre-tax, pre-provision earnings (non-GAAP) | $ | 2,684 | 7,807 | $ | 8,536 | 20,891 | |
Pre-tax, Pre-Provision Return on Average Assets (ROAA) | |||||||
Return on average assets (GAAP) | 0.58 % | 1.40 % | $ | 0.58 % | 1.36 % | ||
Income taxes | 0.15 % | 0.42 % | 0.13 % | 0.39 % | |||
Provision for (recovery of) credit losses | -0.10 % | 0.24 % | -0.03 % | 0.19 % | |||
Pre-tax, pre-provision return on average assets (non-GAAP) | 0.63 % | 2.06 % | $ | 0.68 % | 1.95 % | ||
Book and Tangible Book Value Per Share, excluding AOCI | |||||||
Book and tangible book value per share (GAAP) | $ | 18.78 | 18.03 | ||||
Impact of AOCI per share | 3.28 | 2.92 | |||||
Book and tangible book value per share, excluding AOCI (non-GAAP) | $ | 22.06 | 20.95 | ||||
(1) See Appendix B to this press release for more information on tax equivalent net interest margin | |||||||
Appendix B - Tax Equivalent Net Interest Margin Analysis | |||||||||||
For the Three Months Ended September 30, | |||||||||||
2023 | 2022 | ||||||||||
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 | $ | 1,386,818 | 19,015 | 5.44 % | $ | 1,204,543 | 13,957 | 4.60 % | |||
Loans - tax exempt (2) | 28,935 | 492 | 6.75 % | 24,254 | 413 | 6.75 % | |||||
Investments - taxable | 131,461 | 1,274 | 3.84 % | 133,724 | 1,090 | 3.23 % | |||||
Investments - tax exempt (1) | 5,301 | 49 | 3.69 % | 12,683 | 119 | 3.72 % | |||||
Interest earning deposits | 60,571 | 720 | 4.72 % | 69,177 | 293 | 1.68 % | |||||
Other investments, at cost | 8,982 | 339 | 14.97 % | 7,298 | 147 | 7.99 % | |||||
Total interest-earning assets | 1,622,068 | 21,889 | 5.35 % | 1,451,679 | 16,018 | 4.38 % | |||||
Noninterest earning assets | 88,162 | 66,185 | |||||||||
Total assets | $ | 1,710,230 | $ | 1,517,864 | ` | ||||||
Interest-bearing liabilities: | |||||||||||
Interest-bearing transaction accounts | $ | 65,837 | 607 | 3.66 % | $ | 89,011 | 226 | 1.01 % | |||
Savings accounts | 259,887 | 1,760 | 2.69 % | 381,533 | 506 | 0.53 % | |||||
Money market accounts | 186,249 | 1,880 | 4.00 % | 196,702 | 595 | 1.20 % | |||||
Retail time deposits | 371,000 | 3,994 | 4.27 % | 84,903 | 166 | 0.78 % | |||||
Wholesale time deposits | 236,112 | 2,972 | 4.99 % | 163,861 | 443 | 1.07 % | |||||
Total interest bearing deposits | 1,119,085 | 11,213 | 3.98 % | 916,010 | 1,936 | 0.84 % | |||||
Senior debt | 20,000 | 405 | 8.03 % | 10,250 | 141 | 5.46 % | |||||
Subordinated debt | 9,898 | 163 | 6.53 % | 9,851 | 164 | 6.60 % | |||||
Federal Home Loan Bank & FRB advances | 148,739 | 1,603 | 4.28 % | 103,152 | 394 | 1.52 % | |||||
Total interest-bearing liabilities | 1,297,722 | 13,384 | 4.09 % | 1,039,263 | 2,635 | 1.01 % | |||||
Noninterest-bearing deposits | 280,651 | 350,448 | |||||||||
Other noninterest-bearing liabilities | 11,137 | 12,224 | |||||||||
Total liabilities | 1,589,510 | 1,401,935 | |||||||||
Total shareholders' equity | 120,720 | 115,929 | |||||||||
Total liabilities and shareholders' equity | $ | 1,710,230 | $ | 1,517,864 | |||||||
Tax-equivalent net interest income | 8,505 | 13,383 | |||||||||
Net interest-earning assets (3) | $ | 324,346 | $ | 412,416 | |||||||
Average interest-earning assets to interest- | |||||||||||
bearing liabilities | 125 % | 140 % | |||||||||
Tax-equivalent net interest rate spread (4) | 1.26 % | 3.37 % | |||||||||
Tax equivalent net interest margin (5) | 2.08 % | 3.66 % | |||||||||
(1) Tax exempt investments are calculated assuming a 21% federal tax rate | |||||||||||
(2) Tax exempt loans reflect the tax equivalent yield of a 5% state tax credit assuming a 26% federal and state tax rate | |||||||||||
(3) Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities | |||||||||||
(4) Tax-equivalent net interest rate spread represents the difference between the tax equivalent yield on average | |||||||||||
interest-earning assets and the cost of average interest-bearing liabilities. | |||||||||||
(5) Tax equivalent net interest margin represents tax equivalent net interest income divided by average total | |||||||||||
interest-earning assets | |||||||||||
Appendix B - Tax Equivalent Net Interest Margin Analysis | |||||||||||
For the Nine Months Ended September 30, | |||||||||||
2023 | 2022 | ||||||||||
Average | Average | ||||||||||
Outstanding | Yield / | Outstanding | Yield / | ||||||||
Balance | Interest | Rate | Balance | Interest | Rate | ||||||
(Dollars in thousands) | |||||||||||
Interest-earning Assets: | |||||||||||
Loans, including loans held for sale | $ | 1,340,148 | 52,936 | 5.28 % | $ | 1,126,386 | 37,307 | 4.43 % | |||
Loans - tax exempt (2) | 27,425 | 1,384 | 6.75 % | 24,432 | 1,233 | 6.75 % | |||||
Investments - taxable | 135,649 | 3,886 | 3.83 % | 138,225 | 3,159 | 3.06 % | |||||
Investments - tax exempt (1) | 5,380 | 148 | 3.68 % | 14,287 | 372 | 3.48 % | |||||
Interest earning deposits | 74,264 | 2,650 | 4.77 % | 65,112 | 404 | 0.83 % | |||||
Other investments, at cost | 11,077 | 749 | 9.04 % | 7,034 | 363 | 6.90 % | |||||
Total interest-earning assets | 1,593,943 | 61,753 | 5.18 % | 1,375,476 | 42,838 | 4.16 % | |||||
Noninterest earning assets | 82,531 | 56,058 | |||||||||
Total assets | $ | 1,676,474 | $ | 1,431,534 | |||||||
Interest-bearing liabilities: | |||||||||||
Interest-bearing transaction accounts | $ | 88,179 | 2,351 | 3.56 % | $ | 72,698 | 317 | 0.58 % | |||
Savings accounts | 289,039 | 4,902 | 2.27 % | 372,898 | 1,004 | 0.36 % | |||||
Money market accounts | 193,337 | 5,160 | 3.57 % | 184,901 | 957 | 0.69 % | |||||
Retail time deposits | 303,640 | 8,984 | 3.96 % | 78,589 | 326 | 0.55 % | |||||
Wholesale time deposits | 212,432 | 7,459 | 4.69 % | 148,706 | 607 | 0.55 % | |||||
Total interest bearing deposits | 1,086,627 | 28,856 | 3.55 % | 857,792 | 3,211 | 0.50 % | |||||
Senior debt | 17,000 | 1,042 | 8.20 % | 11,000 | 344 | 4.18 % | |||||
Subordinated debt | 9,885 | 493 | 6.67 % | 9,841 | 493 | 6.70 % | |||||
Federal Home Loan Bank & FRB advances | 149,908 | 4,696 | 4.19 % | 94,469 | 538 | 0.76 % | |||||
Total interest-bearing liabilities | 1,263,420 | 35,087 | 3.71 % | 973,102 | 4,586 | 0.63 % | |||||
Noninterest-bearing deposits | 281,830 | 330,732 | |||||||||
Other noninterest-bearing liabilities | 10,902 | 10,462 | |||||||||
Total liabilities | 1,556,152 | 1,314,296 | |||||||||
Total shareholders' equity | 120,322 | 117,238 | |||||||||
Total liabilities and shareholders' equity | $ | 1,676,474 | $ | 1,431,534 | |||||||
Tax-equivalent net interest income | 26,666 | 38,252 | |||||||||
Net interest-earning assets (3) | $ | 330,523 | $ | 402,374 | |||||||
Average interest-earning assets to interest- | |||||||||||
bearing liabilities | 126 % | 141 % | |||||||||
Tax-equivalent net interest rate spread (4) | 1.47 % | 3.53 % | |||||||||
Tax equivalent net interest margin (5) | 2.24 % | 3.72 % | |||||||||
(1) Tax exempt investments are calculated assuming a 21% federal tax rate | |||||||||||
(2) Tax exempt loans reflect the tax equivalent yield of a 5% state tax credit assuming a 26% federal and state tax rate | |||||||||||
(3) Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities | |||||||||||
(4) Tax-equivalent net interest rate spread represents the difference between the tax equivalent yield on average | |||||||||||
interest-earning assets and the cost of average interest-bearing liabilities. | |||||||||||
(5) Tax equivalent net interest margin represents tax equivalent net interest income divided by average total | |||||||||||
interest-earning assets | |||||||||||
Appendix C - Reconciliation of Prior Period Non-GAAP Financial Measures | ||||
Three Months Ended | ||||
(Dollars in thousands, except per share data) | ||||
June 30, 2023 | March 31, 2023 | December 31, 2022 | ||
Adjusted Net Income | ||||
Net income (GAAP) | $ | 2,459 | 2,358 | 3,788 |
Realized loss on sale of investment securities | (1) | 10 | 399 | |
Unrealized (gain) loss on equity securities | 214 | 516 | (68) | |
Accretion of PPP fees, net | - | - | (13) | |
(Gain)/Loss on sale of fixed assets | - | (69) | - | |
Provision for credit losses | (561) | 587 | 210 | |
Provision for (recovery of) unfunded commitments | - | - | 177 | |
Fraudulent wire recovery | - | (100) | - | |
Tax effect of adjustments | 91 | (247) | (184) | |
Adjusted net income (Non-GAAP) | $ | 2,202 | 3,055 | 4,309 |
Adjusted Diluted Earnings Per Share | ||||
Diluted earnings per share (GAAP) | $ | 0.39 | 0.38 | 0.61 |
Realized loss on sale of investment securities | (0.00) | 0.00 | 0.06 | |
Unrealized (gain) loss on equity securities | 0.03 | 0.08 | (0.01) | |
Accretion of PPP fees, net | - | - | (0.00) | |
(Gain)/Loss on sale of fixed assets | - | (0.01) | - | |
Provision for credit losses | (0.09) | 0.09 | 0.03 | |
Provision for (recovery of) unfunded commitments | - | - | 0.03 | |
Fraudulent wire recovery | - | (0.02) | - | |
Tax effect of adjustments | 0.01 | (0.04) | (0.03) | |
Adjusted diluted earnings per share (Non-GAAP) | $ | 0.35 | 0.49 | 0.69 |
Adjusted Return on Average Assets | ||||
Return on average assets (GAAP) | 0.59 % | 0.57 % | 0.96 % | |
Realized loss on sale of investment securities | 0.00 % | 0.00 % | 0.10 % | |
Unrealized (gain) loss on equity securities | 0.05 % | 0.13 % | -0.02 % | |
Accretion of PPP fees, net | 0.00 % | 0.00 % | 0.00 % | |
(Gain)/Loss on sale of fixed assets | 0.00 % | -0.02 % | 0.00 % | |
Provision for credit losses | -0.13 % | 0.14 % | 0.05 % | |
Provision for (recovery of) unfunded commitments | 0.00 % | 0.00 % | 0.04 % | |
Fraudulent wire recovery | 0.00 % | -0.02 % | 0.00 % | |
Tax effect of adjustments | 0.02 % | -0.06 % | -0.05 % | |
Adjusted return on average assets (Non-GAAP) | 0.53 % | 0.74 % | 1.09 % | |
Adjusted Return on Average Equity | ||||
Return on average equity (GAAP) | 8.13 % | 7.89 % | 13.15 % | |
Realized loss on sale of investment securities | 0.00 % | 0.03 % | 1.39 % | |
Unrealized (gain) loss on equity securities | 0.71 % | 1.73 % | -0.24 % | |
Accretion of PPP fees, net | 0.00 % | 0.00 % | -0.05 % | |
(Gain)/Loss on sale of fixed assets | 0.00 % | -0.23 % | 0.00 % | |
Provision for credit losses | -1.86 % | 1.96 % | 0.73 % | |
Provision for (recovery of) unfunded commitments | 0.00 % | 0.00 % | 0.61 % | |
Fraudulent wire recovery | 0.00 % | -0.33 % | 0.00 % | |
Tax effect of adjustments | 0.30 % | -0.83 % | -0.64 % | |
Adjusted return on average equity (Non-GAAP) | 7.28 % | 10.22 % | 14.96 % | |
Appendix C - Reconciliation of Prior Period Non-GAAP Financial Measures, Continued | ||||
Three Months Ended | ||||
(Dollars in thousands, except per share data) | ||||
June 30, 2023 | March 31, 2023 | December 31, 2022 | ||
Adjusted Noninterest Expense to Average Assets | ||||
Noninterest expense to average assets (GAAP) | 1.47 % | 1.47 % | 1.69 % | |
Provision for (recovery of) unfunded commitments | 0.00 % | 0.00 % | -0.01 % | |
Fraudulent wire recovery | 0.00 % | 0.01 % | 0.00 % | |
Adjusted noninterest expense to average assets (Non-GAAP) | 1.47 % | 1.47 % | 1.68 % | |
Adjusted Net Interest Margin (tax-equivalent) | ||||
Net interest margin (tax-equivalent) (GAAP) | 2.09 % | 2.55 % | 3.15 % | |
Accretion of PPP fees, net | 0.00 % | 0.00 % | 0.00 % | |
Adjusted net interest margin (tax-equivalent) (Non-GAAP) | 2.09 % | 2.55 % | 3.15 % | |
Pre-tax Pre-Provision Earnings | ||||
Net income (GAAP) | $ | 2,459 | 2,358 | 3,788 |
Income taxes | 417 | 592 | 1,147 | |
Provision for credit losses | (561) | 587 | 210 | |
Pre-tax Pre-provision earnings (non-GAAP) | $ | 2,315 | 3,537 | 5,145 |
Pre-tax Pre-Provision Return on Average Assets (ROAA) | ||||
Return on average assets (GAAP) | $ | 0.59 % | 0.57 % | 0.96 % |
Income taxes | 0.10 % | 0.14 % | 0.29 % | |
Provision for credit losses | -0.13 % | 0.14 % | 0.05 % | |
Pre-tax Pre-provision return on average assets (non-GAAP) | $ | 0.55 % | 0.86 % | 1.30 % |
Book and Tangible Book Value Per Share, excluding AOCI | ||||
Book and tangible book value per share (GAAP) | $ | 19.00 | 18.95 | 18.43 |
Impact of AOCI per share | 2.78 | 2.57 | 2.83 | |
Book and tangible book value per share, excluding AOCI (non-GAAP) | $ | 21.78 | 21.52 | 21.26 |
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SOURCE Mountain Commerce Bancorp, Inc.
