Mountain Commerce Bancorp, Inc. Announces Third Quarter 2024 Results And Quarterly Cash Dividend
KNOXVILLE, Tenn., Oct. 21, 2024 /PRNewswire/ -- Mountain Commerce Bancorp, Inc. (the "Company") (OTCQX:MCBI), the holding company for century-old Mountain Commerce Bank (the "Bank"), today announced results and related data as of and for the three and nine months ended September 30, 2024.
The Company also announced today that its Board of Directors declared a quarterly cash dividend of $0.05 per common share, its sixteenth consecutive quarterly dividend. The dividend is payable on December 2, 2024 to shareholders of record as of the close of business on November 4, 2024.
Management Commentary
William E. "Bill" Edwards, III, President and Chief Executive Officer of the Company, commented as follows:
"The third quarter of 2024 delivered further improvement in yields on interest-earning assets resulting in further increases in the Company's net interest margin, which improved from 2.00% in the second quarter of 2024 to 2.08% in the third quarter of 2024, and finished the quarter at 2.16% for the month of September 2024. The Company anticipates continued improvement in its net interest margin for the remainder of 2024 and throughout 2025 as the result of improved loan yields and improved funding costs resulting from the repricing of certificates of deposit that have already repriced or will reprice during 2025. We also believe we are well positioned for future changes in interest rates, whether these adjustments are up or down. We are pleased that our average yield on taxable loans continues to increase, rising 12 bp to 5.89% in the third quarter of 2024 from 5.77% in the second quarter of 2024 and rising 45 bp from the same quarter a year ago. Equally as important, our cost of funds remained steady at 3.70% in the second and third quarter of 2024 and declined 22bp from 3.92% in the first quarter of 2024. We continue to experience excellent asset quality with non-performing assets to total assets of 0.08%, no properties in real estate owned, and an allowance to non-performing loans coverage ratio of over 8x. Liquidity remained strong as of September 30, 2024 with available funding sources more than $100 million in excess of our level of uninsured and uncollateralized deposits. We remain very focused on controlling noninterest expenses which totaled 1.45% of average assets on an adjusted basis during the third quarter of 2024, which we believe is among the best in our peer group. Careful management of our dividend and asset growth has allowed our tangible common equity to tangible assets ratio to rise to 7.50% from 7.06% at June 30, 2024, with the Bank's leverage ratio remaining steady at 9.29% at September 30, 2024 compared to 9.31% at June 30, 2024. We continue to see excellent growth from our newest branches in Brentwood, West Knoxville and Johnson City and believe that these markets will continue to drive profitable growth for the Company.
While some of our markets were devastated by the recent storm and floods, we are thankful that our branches and employees sustained minimal damage. Additionally, we have an immaterial amount of loans in Unicoi County where most of the storm damage occurred and do not expect significant loan losses."
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, 2024. 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, gains and losses from the sale of fixed assets, the provision for or recovery of credit losses, the impact of material one-time fraud losses or recoveries, and software conversion expenses. 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)
2024
2023
GAAP
Adjusted (1)
GAAP
Adjusted (1)
Net income
$
2,992
2,203
$
2,473
2,405
Diluted earnings per share
$
0.48
0.35
$
0.40
0.39
Return on average assets (ROAA)
0.67 %
0.49 %
0.58 %
0.56 %
Return on average equity
9.17 %
6.75 %
8.19 %
7.97 %
Noninterest expense to average assets
1.46 %
1.45 %
1.34 %
1.34 %
Net interest margin (tax equivalent)
2.08 %
2.08 %
2.08 %
2.08 %
Pre-tax, pre-provision earnings (1)
$
2,450
$
2,684
Pre-tax, pre-provision ROAA (1)
0.55 %
0.00 %
(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)
2024
2023
GAAP
Adjusted (1)
GAAP
Adjusted (1)
Net income
$
6,830
5,273
$
7,290
7,663
Diluted earnings per share
$
1.09
0.84
$
1.17
1.23
Return on average assets (ROAA)
0.51 %
0.40 %
0.58 %
0.61 %
Return on average equity
7.22 %
5.58 %
8.08 %
8.49 %
Noninterest expense to average assets
1.37 %
1.36 %
1.42 %
1.43 %
Net interest margin (tax equivalent)
1.88 %
1.88 %
2.24 %
2.24 %
Pre-tax, pre-provision earnings (1)
$
6,315
$
8,536
Pre-tax, pre-provision ROAA (1)
0.47 %
0.68 %
(1) Represents a non-GAAP financial measure. See Appendix A to this press release for more information.
For the Three Months Ended
(Dollars in thousands, except per share data)
2024
2023
September 30
June 30
March 31
December 31
September 30
GAAP
GAAP
GAAP
GAAP
GAAP
Net income (loss)
$
2,992
2,324
$
1,515
$
(376)
$
2,473
Diluted earnings (loss) per share
$
0.48
0.37
$
0.24
$
(0.06)
$
0.40
Return on average assets (ROAA)
0.67 %
0.53 %
0.34 %
-0.09 %
0.58 %
Return on average equity
9.17 %
7.46 %
4.92 %
-1.25 %
8.19 %
Noninterest expense to average assets
1.46 %
1.36 %
1.30 %
1.48 %
1.34 %
Net interest margin (tax equivalent)
2.08 %
2.00 %
1.66 %
1.98 %
2.08 %
2024
2023
September 30
June 30
March 31
December 31
September 30
Adjusted (1)
Adjusted (2)
Adjusted (2)
Adjusted (2)
Adjusted (1)
Net income
$
2,203
1,966
$
1,104
$
1,244
$
2,405
Diluted earnings per share
$
0.35
0.31
$
0.18
$
0.20
$
0.39
Return on average assets (ROAA)
0.49 %
0.44 %
0.25 %
0.29 %
0.56 %
Return on average equity
6.75 %
6.31 %
3.59 %
4.13 %
7.97 %
Noninterest expense to average assets
1.45 %
1.36 %
1.30 %
1.48 %
1.34 %
Net interest margin (tax equivalent)
2.08 %
2.00 %
1.66 %
1.98 %
2.08 %
Pre-tax, pre-provision earnings
$
2,450
2,448
$
1,418
$
1,182
$
2,684
Pre-tax, pre-provision ROAA
0.55 %
0.55 %
0.32 %
0.27 %
0.63 %
(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.
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,
2024
2024
2023
(Dollars in thousands, except share data)
Asset Quality
Non-performing loans
$
1,381
$
1,381
$
1,607
Real estate owned
$
-
$
-
$
-
Non-performing assets
$
1,381
$
1,381
$
1,607
Non-performing loans to total loans
0.09 %
0.09 %
0.11 %
Non-performing assets to total assets
0.08 %
0.08 %
0.09 %
Year-to-date net charge-offs (recoveries)
$
(258)
$
(243)
$
459
Allowance for credit losses to non-performing loans
805.21 %
889.86 %
811.08 %
Allowance for credit losses to total loans
0.76 %
0.83 %
0.90 %
Other Data
Cash dividends declared
$
0.050
$
0.050
$
0.640
Shares outstanding
6,371,324
6,373,998
6,352,725
Book and tangible book value per share (2)
$
20.83
$
19.83
$
19.33
Accumulated other comprehensive income (loss) (AOCI) per share
(2.02)
(2.57)
(2.56)
Book and tangible book value per share, excluding AOCI (1) (2)
22.85
$
22.39
$
21.89
Closing market price per common share
$
20.98
$
16.87
$
18.50
Closing price to book value ratio
100.70 %
85.08 %
95.71 %
Tangible common equity to tangible assets ratio
7.50 %
7.06 %
7.07 %
Bank regulatory leverage ratio
9.29 %
9.31 %
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
Net Interest Income
Net interest income increased $0.3 million, or 3.1%, from $8.0 million for the three months ended September 30, 2023 to $8.3 million for the same period in 2024. The change between the periods was primarily the net result of the following factors:
Average interest-earning assets grew $50.9 million, or 3.1%, from $1.622 billion to $1.673 billion, driven primarily by increases in loans.
Average net interest-earning assets declined $25.4 million, or 7.8%, from $324.3 million to $298.9 million, due primarily to a $16.6 million decrease in noninterest bearing deposits and a $19.4 million increase in noninterest earning assets, primarily resulting from higher levels of fixed assets which are discussed below.
The average rate paid on interest-bearing liabilities increased 32 bp from 4.09% to 4.41%, while the average rate earned on interest-earning assets increased 35 bp from 5.35% to 5.70%, resulting in tax-equivalent net interest rate spread expanding by 3 bp to 1.29% from 1.26% and a consistent level of net interest margin of 2.08% in both periods.
Net interest income decreased $2.8 million, or 11.0%, from $25.3 million for the nine months ended September 30, 2023 to $22.5 million for the same period in 2024. The change between the periods was primarily the net result of the following factors:
Average interest-earning assets grew $78.2 million, or 4.9%, from $1.594 billion to $1.672 billion, driven primarily by increases in loans.
Average net interest-earning assets declined $47.7 million, or 14.4%, from $330.5 million to $282.8 million, due primarily to a $31.0 million decrease in noninterest bearing deposits and a $23.1 million increase in noninterest earning assets, primarily resulting from higher levels of fixed assets which are discussed below.
The average rate paid on interest-bearing liabilities increased 75 bp from 3.71% to 4.46%, while the average rate earned on interest-earning assets increased 40 bp from 5.18% to 5.58%, resulting in a decrease in tax-equivalent net interest rate spread from 1.47% to 1.13% and a decrease in tax-equivalent net interest margin from 2.24% to 1.88%.
Rate Sensitivity
The Company has the following assets subject to contractual repricing of interest rates as of September 30, 2024:
As of
September 30, 2024
Loans receivable
$
339,865
Investments available for sale
7,400
Interest rate swaps (notional)
225,000
$
572,265
Interest Rate Swaps
The Company has the following interest rate swaps hedging loans receivable as of September 30, 2024:
Estimated
Fair
Annual
Receive
Pay
Notional
Value
Earnings
Term
Maturity
Rate
Rate
Interest Rate Swap
$
150,000
(3,735)
405
3 Yrs
10/1/2026
4.96 %
4.69 %
Interest Rate Swap
75,000
(326)
938
2 Yrs
9/1/2026
4.96 %
3.71 %
$
225,000
(4,061)
1,343
Recovery Of Credit Losses
Three Months Ended September 30
2024
2023
Recovery of credit losses
$
1,282
411
Nine Months Ended September 30
2024
2023
Recovery of credit losses
$
2,250
385
The Company continues to experience near historically low levels of problem assets and charge-offs which, when combined with favorable economic factors, has resulted in minimal provisions for credit losses or reductions to our allowance for credit losses in recent periods. Additionally, the Company began recognizing industry benchmarks for expected recoveries during the third quarter of 2024 which had the effect of reducing the allowance for credit losses.
Noninterest Income
The following summarizes changes in the Company's noninterest income for the periods indicated:
Three Months Ended September 30
(In thousands)
2024
2023
Change
Service charges and fees
$
389
369
20
Bank owned life insurance
56
47
9
Realized and unrealized gain (loss) on equity securities
57
(50)
107
Gain on sale of loans
12
7
5
Loss on sale of fixed assets
-
(269)
269
Wealth management
193
158
35
Swap fees
-
145
(145)
Other
3
-
3
Total noninterest income
$
710
407
303
Noninterest income increased to $0.7 million in the third quarter of 2024 from $0.4 million in the same quarter of 2023. The following factors had an impact on noninterest income during these periods:
Realized and unrealized losses on equity securities improved by $0.1 million from the third quarter of 2023 as a result of the sale of the majority of the Company's equity securities during the fourth quarter of 2023 which were causing the realized and unrealized losses.
The Company incurred a $0.3 million loss on the sale of fixed assets from the sale of its former headquarters building during the third quarter of 2023.
The Company recognized a $0.1 million decrease in swap fees from the third quarter of 2023 due to a decline in the Company's lending volume. The Bank receives a fee for delivering the swap to a third party with our borrower as counterparty to the swap, but does not maintain a contractual obligation for the swap other than in the event of a default.
Nine Months Ended September 30
(In thousands)
2024
2023
Change
Service charges and fees
$
1,142
1,137
5
Bank owned life insurance
166
139
27
Realized gain (loss) on sale of investment securities available for sale
69
(9)
78
Realized and unrealized gain (loss) on equity securities
30
(781)
811
Gain on sale of loans
39
21
18
Gain (loss) on sale of fixed assets
30
(200)
230
Wealth management
611
479
132
Swap fees
51
365
(314)
Other
26
37
(11)
Total noninterest income
$
2,164
1,188
976
Noninterest income increased to $2.2 million for the nine months ended September 30, 2024 from $1.2 million in the same period of 2023. The following factors had an impact on noninterest income during these periods:
Realized and unrealized losses on equity securities improved by $0.8 million from the nine months ended September 30, 2023 as a result of the sale of the majority of the Company's equity securities during the fourth quarter of 2023 which were causing the realized and unrealized losses.
The Company incurred a $0.3 million loss on the sale of fixed assets from the sale of its former headquarters building during the third quarter of 2023.
Wealth management fees improved by $0.1 million from the 2023 to the 2024 period as a result of an improvement in equity market conditions.
The Company recognized a $0.3 million decrease in swap fees from the nine months ended June 30, 2023 due to a decline in the Company's lending volume. 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 Expense
The following summarizes changes in the Company's noninterest expense for the periods indicated:
Three Months Ended September 30
(In thousands)
2024
2023
Change
Compensation and employee benefits
$
2,904
3,148
(244)
Occupancy
780
568
212
Furniture and equipment
320
166
154
Data processing
955
536
419
FDIC insurance
371
286
85
Office
214
197
17
Advertising
121
127
(6)
Professional fees
441
421
20
Other noninterest expense
406
277
129
Total noninterest expense
$
6,512
5,726
786
Noninterest expense increased $0.8 million, or 13.7%, from $5.7 million in the third quarter of 2023 to $6.5 million in the same period of 2024. The following factors had an impact on changes in noninterest expense during these periods:
Compensation and employee benefits expense decreased $0.2 million, or 7.8%, due primarily to a decrease in incentive accruals and bonuses tied to 2024 performance and a decline in FTE employees from 115 to 108, offset, in part, by merit increases.
Occupancy and furniture and equipment expenses increased by a combined $0.4 million, or 49.9%, due to the opening of the Johnson City financial center on July 1, 2024, offset by the absence of expenses previously recorded for formerly leased facilities.
Data processing increased $0.4 million, or 78.1%, due primarily to a $0.3 million one-time payment to a vendor in connection with the termination of a software relationship.
Nine Months Ended September 30
(In thousands)
2024
2023
Change
Compensation and employee benefits
$
8,902
9,807
(905)
Occupancy
2,011
1,740
271
Furniture and equipment
834
543
291
Data processing
2,009
1,597
412
FDIC insurance
1,119
874
245
Office
560
603
(43)
Advertising
323
392
(69)
Professional fees
1,591
1,325
266
Other noninterest expense
982
1,021
(39)
Total noninterest expense
$
18,331
17,902
429
Noninterest expense increased $0.4 million, or 2.4%, from $17.9 million in the first nine months of 2023 to $18.3 million in the same period of 2024. The following factors had an impact on changes in noninterest expense during these periods:
Compensation and employee benefits decreased $0.9 million, or 9.2%, due primarily to a decrease in incentive accruals and bonuses tied to 2024 performance and a decline in FTE employees from 117 to 108, offset, in part, by merit increases.
Occupancy and furniture and equipment expenses increased by a combined $0.6 million, or 24.6%, due to the opening of the West Knoxville financial center on October 1, 2023 and Johnson City financial center on July 1, 2024, offset by the absence of expenses previously recorded for formerly leased facilities.
Data processing increased $0.4 million, or 25.8%, due primarily to a $0.3 million one-time payment to a vendor in connection with the termination of a software relationship.
FDIC insurance increased $0.2 million, or 28.0%, due primarily to an increase in average assets and the quarterly multiplier used to determine assessments.
Professional fees increased $0.3 million, or 20.0%, due to a change in the timing of recognizing certain auditing, regulatory and legal costs.
Income Taxes
The effective tax rates of the Company were as follows for the periods indicated
Three Months Ended September 30
2024
2023
19.83 %
20.10 %
Nine Months Ended September 30
2024
2023
20.26 %
18.28 %
The Company's tax rates for the three and nine months ended September 30, 2024 and 2023 reflect the impact of tax credits on certain loans which reduce the effective state tax rate to a nominal amount. The Company's marginal tax rate of 26.14% is also favorably impacted by certain sources of non-taxable income including bank-owned life insurance (BOLI) and investments in tax-free municipal securities.
Balance Sheet
Total assets increased 33.3 million, or 1.9%, from $1.738 billion at December 31, 2023 to $1.771 billion at September 30, 2024. The change was primarily driven by the following factors:
Cash and cash equivalents increased $17.0 million, or 24.7%, due to a decrease in new loan volumes and an increased focus on core deposit growth.
Available for sale investment security balances decreased $12.4 million, or 9.5%, primarily due to the sale of approximately $8.0 million of securities during the first quarter of 2024 and principal paydowns.
The following summarizes the composition of the Company's available for sale investment securities portfolio (at fair value) as of September 30, 2024 and December 31, 2023:
September 30, 2024
December 31, 2023
Estimated
Net
Estimated
Net
Fair
Unrealized
Fair
Unrealized
Value
Gain (Loss)
Value
Gain (Loss)
(in thousands)
Agency MBS / CMO
$
12,403
(1,566)
12,870
(1,853)
Agency multifamily (non-guaranteed)
7,237
(618)
8,944
(897)
Agency floating rate
6,998
15
16,919
(41)
Business Development Companies
3,500
(260)
3,420
(345)
Corporate
22,595
(1,867)
23,801
(2,673)
Municipal
27,443
(5,728)
26,465
(6,790)
Non-agency MBS / CMO
37,691
(7,428)
37,805
(9,489)
$
117,867
(17,452)
130,224
(22,088)
Non-agency MBS/CMO have an average credit-enhancement of approximately 32% as of September 30, 2024. Municipal securities are generally rated AA or higher.
The Company did not have any securities classified as held-to-maturity as of September 30, 2024 and December 31, 2023.
Loans receivable increased $19.6 ...
