Knoxville, Tennessee, April 26, 2021 – 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 ended March 31, 2021.
The Company also announced today that its Board of Directors declared a quarterly cash dividend of $0.13 per common share, representing a 4% increase from the $0.125 cash dividend declared in the prior quarter. The dividend is payable on June 1, 2021 to shareholders of record as of the close of business on May 12, 2021.


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 ended March 31, 2021. As further detailed in Appendix A to this press release, adjusted results (which are non-GAAP financial measures) reflect adjustments for realized investment gains and losses, the impact of PPP fee accretion (net of the amortization of PPP deferred loan costs and one-time PPP bonuses), gains and losses from the sale of REO, 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. All financial information in this press release is unaudited.

Management Commentary

William E. “Bill” Edwards, III, President and Chief Executive Officer of the Company, commented, “We are pleased to start out 2021 with another successful quarter which saw adjusted net income (non-GAAP) increase 27% from $3.4 million in the first quarter of 2020 to $4.3 million in the same quarter of 2021, while adjusted earnings per diluted share (non-GAAP) increased 28% from $0.54 to $0.69 over the same period. I am proud to say that we have continued to support our clients and communities by actively participating in the second round of PPP, where we have loaned nearly $37 million and earned $1.7 million in fees as of March 31, 2021. Our allowance to non-PPP loans (non-GAAP) currently stands at 1.53%, and I am happy to report that our COVID-related modifications consist of only one $6.8 million hotel relationship as of March 31, 2021. Based on this and continued strong asset quality and positive signs in the economies in our markets, we did not provide any additional allowance for loan losses in the first quarter of 2021. We continue to remain highly focused on delivering strong returns to our shareholders, which we believe is reflected in our adjusted return on average equity (non-GAAP) increasing from 14.60% in the first quarter of 2020 to 16.30% in the same period of 2021, a year-over-year increase of 11.6%. From an asset quality perspective, our non-performing assets to total assets remain low at 0.27% at March 31, 2021, up slightly from 0.16% at December 31, 2020. Finally, in order to provide an additional source of liquidity and increased returns for our shareholders, we announced a $5 million share repurchase authorization on April 12, 2021, and increased our quarterly dividend by 4% to $0.13 per quarter.”

Net Interest Income

Net interest income increased $2.3 million, or 30.2%, from $7.7 million for the three months ended March 31, 2020 to $10.0 million for the same period in 2021. The increase between the periods was primarily the result of the following factors:

  • Average interest-earning assets grew $190.8 million, or 21.3%, from $896.1 million to $1.087 billion, due in part to PPP loans.
  • Average net interest-earning assets grew $106.1 million, or 54.9%, from $193.2 million to $299.3 million, funded by increases in noninterest bearing deposits and an increase in shareholders’ equity.
  • The average rate paid on interest-bearing liabilities dropped 61.2% from 1.65% to 0.64%, driving an increase in tax-equivalent net interest margin from 3.46% to 3.82%.

The Company recognized approximately $0.7 million and $0 of PPP loan origination fees, net of the amortization of deferred PPP loan costs, through net interest income during the three months ended March 31, 2021 and 2020, respectively.

Provision For Loan Losses

No provision for loan losses was recorded during the three months ended March 31, 2021 as the result of a minimal level of COVID-related loan modifications, continued strong asset quality, and continued strengthening of the economy in our primary markets. A provision for loan losses of $1.5 million was recorded for the three months ended March 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 we viewed then as more likely to be impacted by the COVID-19 pandemic.

Noninterest Income

Noninterest income decreased $0.2 million, or 22.2%, from $0.8 million in the first quarter of 2020 to $0.6 million in the same quarter of 2021, due primarily to a $0.2 million decline in swap brokerage fees, which was partially offset by an increase in gain on sale of loans and wealth management fees.

Noninterest Expense

Noninterest expense increased $0.3 million, or 8.7%, from $3.9 million in the first quarter of 2020 to $4.2 million in the same period of 2021. The increase was primarily the result of a $0.1 million increase in FDIC insurance due to the expiration of certain credits, and a $0.1 million increase in Other noninterest expense due to an increase in the reserve for unfunded loan commitments.

Income Taxes

The effective tax rate of the Company was 24.0% and 26.0% for the three months ended March 31, 2021 and 2020, respectively. 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. The Company’s effective tax rate declined during the three months ended March 31, 2021 compared to the same period in 2020 due primarily to increased investments in tax-free municipal securities and investments in certain loans eligible for a 5% state tax credit.

Balance Sheet

Total assets increased $36.2 million, or 3.3%, from $1.110 billion at December 31, 2020 to $1.146 billion at March 31, 2021. The increase was primarily driven by the following factors:

  • Investments available for sale increased $13.9 million, or 18.0%, from $77.3 million at December 31, 2020 to $91.2 million at March 31, 2021 as the Company took advantage of a steepening yield curve to invest excess liquidity.
  • Loans receivable increased $21.2 million, or 2.3%, from $935.5 million at December 31, 2020 to $956.7 million at March 31, 2021. Substantially all of this increase resulted from $36.8 million of additional PPP loans originated during the first quarter of 2021 as well as a $16.3 million increase in residential loans.

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

Total deposits increased $33.5 million, or 3.6%, from $921.9 million at December 31, 2020 to $955.4 million at March 31, 2021. The primary driver of this increase was a $41.8 million, or 20.1%, increase in noninterest-bearing deposit balances from $208.3 million to $250.1 million.
The following summarizes changes in deposit balances over the last five quarters:

FHLB borrowings of $50.0 million at March 31, 2021 represent a 3-month floating rate advance swapped to a fixed rate through March 2025.
Total equity increased $3.5 million, or 3.4%, from $103.8 million at December 31, 2020 to $107.3 million at March 31, 2021. This increase was primarily comprised of net income of $4.9 million and an improvement in the value of the interest rate swap of $0.6 million, offset by a decline in the net unrealized gains on investments available for sale of $1.3 million and dividends paid of $0.8 million. Tangible book value per share improved from $16.52 at December 31, 2020 to $17.06 at March 31, 2021, an annualized increase of 13.1%. Equity to assets was 9.36% at both March 31, 2021 and December 31, 2020. The Company and Bank both remain well capitalized.

Asset Quality

Non-performing loans to total loans decreased slightly from 0.19% at December 31, 2020 to 0.18% at March 31, 2021. Non-performing assets to total assets increased from 0.16% at December 31, 2020 to 0.27% at March 31, 2021, due to the foreclosure of a single agricultural property during the first quarter of 2021 in the amount of $1.4 million. This property has a 90% government guarantee and no material loss is expected. Net charge-offs of $155 thousand were recognized during the first quarter of 2021 compared to $20 thousand during the full year ended December 31, 2020. The allowance for loan losses to total loans decreased slightly from 1.42% (1.56% excluding PPP loans) at December 31, 2020 to 1.38% (1.53% excluding PPP loans) at March 31, 2021, and coverage of non-performing loans by the allowance remained strong at 774.5% at March 31, 2021.
During the first quarter of 2021, the Company granted a modification on a $6.8 million loan in the hotel industry that experienced COVID-related construction delays. As of March 31, 2021, this is the only COVID-related loan modification outstanding. Pursuant to interagency guidance, the Company has elected to not consider loans modified under the CARES Act as troubled debt restructurings.
The following summarizes the outstanding loans as of the applicable period with COVID-related modifications by customer industry:

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, 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 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 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 increased corporate or personal tax rates and the resulting reduction in our and our customers’ businesses as a result of any such increases, (xx) approval of the declaration of any dividend by our Board of Directors, (xxi) loss of key personnel, (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, and (xxiii) the negative impact of possible future inflationary pressures. 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

Appendix A – Reconciliation of Non-GAAP Financial Measures

Appendix B – Tax Equivalent Net Interest Margin Analysis