KNOXVILLE, Tenn., April 22, 2024 /PRNewswire/ -- Mountain Commerce Bancorp, Inc. (the "Company") (OTCQX:MCBI), the holding company for Mountain Commerce Bank (the "Bank"), today announced results and related data as of and for the three months ended March 31, 2024. The Company also announced today that its Board of Directors declared a quarterly cash dividend of $0.05 per common share, its fourteenth consecutive quarterly dividend.  The dividend is payable on June 3, 2024 to shareholders of record as of the close of business on May 6, 2024. Management Commentary William E. "Bill" Edwards, III, President and Chief Executive Officer of the Company, commented as follows: "While the first quarter of 2024 was a challenging quarter, we continue to focus on repositioning our balance sheet through targeted loan growth funded with higher levels of core (non-wholesale) deposits.  Consistent with those priorities, wholesale time deposits and FHLB advances declined $92.9M during the first quarter of 2024, while core deposits grew $159.5 million during the same period.   We are pleased that our average yield on taxable loans continues to increase, rising 55 bp to 5.66% in the first quarter of 2024 from 5.11% in the same quarter a year ago and 5.59% in the fourth quarter of 2023.  Our recent monthly results are suggesting that cost of deposits may have reached its peak during the first quarter of 2024, and we are anticipating improvement in our net interest margin in the coming quarters.  We continue to experience very low levels of loan charge-offs and non-performing assets, and our allowance coverage of nonperforming loans was greater than 15 to 1 at March 31, 2024 with no properties in real estate owned.  Liquidity remained strong as of March 31, 2024 with available funding sources in excess of our level of uninsured and uncollateralized deposits.  During this time of lower net interest income, we remain very focused on controlling noninterest expenses which declined to 1.30% of average assets during the first quarter of 2024 from 1.47% in the same quarter of 2023, which we believe is among the lowest in our per group.  With respect to our dividend, we remain committed to managing our tangible book value and ensuring that we have adequate capital for future growth. Construction of our Johnson City financial center continues with an expected opening date of July 1, 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 space we currently lease with an annual cost of $170 thousand into this building." Highlights The following tables highlight the trends that the Company believes are most relevant to understanding the performance of the Company as of and for the three months ended March 31, 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, and the impact of material one-time fraud losses or recoveries.  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 March 31, (Dollars in thousands, except per share data) 2024 2023 GAAP Adjusted (1) GAAP Adjusted (1) Net income $ 1,515 1,104 $ 2,358 3,055 Diluted earnings per share $ 0.24 0.18 $ 0.38 0.49 Return on average assets (ROAA) 0.34 % 0.25 % 0.57 % 0.74 % Return on average equity 4.92 % 3.59 % 7.89 % 10.22 % Noninterest expense to average assets 1.30 % 1.30 % 1.47 % 1.47 % Net interest margin (tax equivalent) 1.66 % 1.66 % 2.55 % 2.55 % Pre-tax, pre-provision earnings (1) $ 1,418 $ 3,537 Pre-tax, pre-provision ROAA (1) 0.32 % 0.86 % (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 3 Months Ended 12 Months Ended March 31, December 31, 2024 2023 (Dollars in thousands, except share data) Asset Quality Non-performing loans $ 805 $ 1,607 Real estate owned $ - $ - Non-performing assets $ 805 $ 1,607 Non-performing loans to total loans 0.06 % 0.11 % Non-performing assets to total assets 0.04 % 0.09 % Year-to-date net charge-offs (recoveries) $ (230) $ 459 Allowance for credit losses to non-performing loans 1559.38 % 811.08 % Allowance for credit losses to total loans 0.86 % 0.90 % Other Data Cash dividends declared $ 0.080 $ 0.640 Shares outstanding 6,376,660 6,352,725 Book and tangible book value per share (2) $ 19.46 $ 19.33 Accumulated other comprehensive income (loss) (AOCI) per share (2.55) (2.56) Book and tangible book value per share, excluding AOCI (1) (2) 22.01 $ 21.89 Closing market price per common share $ 18.25 $ 18.50 Closing price to book value ratio 93.79 % 95.71 % Tangible common equity to tangible assets ratio 6.88 % 7.07 % Bank regulatory leverage ratio 9.15 % 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) 2024 2023 March 31 December 31 September 30 June 30 March 31 GAAP GAAP GAAP GAAP GAAP Net income (loss) $ 1,515 $ (376) $ 2,473 $ 2,459 $ 2,358 Diluted earnings (loss) per share $ 0.24 $ (0) $ 0.40 $ 0.39 $ 0.38 Return on average assets (ROAA) 0.34 % -0.09 % 0.58 % 0.59 % 0.57 % Return on average equity 4.92 % -1.25 % 8.19 % 8.13 % 7.89 % Noninterest expense to average assets 1.30 % 1.48 % 1.34 % 1.47 % 1.47 % Net interest margin (tax equivalent) 1.66 % 1.98 % 2.08 % 2.09 % 2.55 % 2024 2023 March 31 December 31 September 30 June 30 March 31 Adjusted (1) Adjusted (2) Adjusted (2) Adjusted (2) Adjusted (1) Net income $ 1,104 $ 1,244 $ 2,405 $ 2,202 $ 3,055 Diluted earnings per share $ 0.18 $ 0.20 $ 0.39 $ 0.35 $ 0.49 Return on average assets (ROAA) 0.25 % 0.29 % 0.56 % 0.53 % 0.74 % Return on average equity 3.59 % 4.13 % 7.97 % 7.28 % 10.22 % Noninterest expense to average assets 1.30 % 1.48 % 1.34 % 1.47 % 1.47 % Net interest margin (tax equivalent) 1.66 % 1.98 % 2.08 % 2.09 % 2.55 % Pre-tax, pre-provision earnings $ 1,418 $ 1,182 $ 2,684 $ 2,315 $ 3,537 Pre-tax, pre-provision ROAA 0.32 % 0.27 % 0.63 % 0.55 % 0.86 % (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. Net Interest Income Net interest income decreased $3.0 million, or 31.6%, from $9.4 million for the three months ended March 31, 2023 to $6.4 million for the same period in 2024.  The decrease between the periods was primarily the net result of the following factors: Average interest-earning assets grew $111.5 million, or 7.1%, from $1.568 billion to $1.680 billion, driven primarily by increases in loans. Average net interest-earning assets declined $68.2 million, or 20.3%, from $336.8 million to $268.6 million, due primarily to a $56.3 million decrease in noninterest bearing deposits and a $26.9 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 150 bp from 3.08% to 4.58%, while the average rate earned on interest-earning assets increased 55 bp from 4.96% to 5.51%, resulting in a decrease in tax-equivalent net interest margin from 2.55% to 1.66%.  The increase in the average rate paid on interest-bearing liabilities was due to the heightened rate environment and competitive funding pressures in our markets throughout much of 2023, 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. Rate Sensitivity The Company has the following loans subject to repricing of interest rates as of March 31, 2024: Prime SOFR Treasury Total $ 186,400 85,700 20,600 292,700 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 %  Dec 31, 2023 33.5 % 62.3 %  Mar 31, 2024 33.9 % 67.6 % Effective October 1, 2023, the Company entered into a $150 million notional amount pay-fixed swap with a term of 3 years whereby the Company pays a fixed rate of 4.69% and receives the SOFR Compound rate. This swap has been accounted for as a fair value hedge of fixed-rate loans and 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 ($0.5) million and $0.6 million was recognized for the three months ended March 31, 2024 and 2023, respectively.  The recovery of credit losses recognized in the first quarter of 2024 was driven by the payoff of a $0.7 million loan with a full reserve established in the fourth quarter of 2023 as well limited loan growth. The Company continues to experience near historically low levels of problem assets and charge-offs.  Noninterest Income The following summarizes changes in the Company's noninterest income for the periods indicated: Three Months Ended March 31 (In thousands) 2024 2023 Change Service charges and fees $ 382 375 7 Bank owned life insurance 55 45 10 Realized gain (loss) on sale of investment securities available for sale 77 (10) 87 Realized and unrealized loss on equity securities (20) (516) 496 Gain (loss) on sale of loans (3) 3 (6) Gain on sale of fixed assets 30 69 (39) Wealth management 201 151 50 Swap fees 51 - 51 Limited partnership distributions - 48 (48) Other 9 (2) 11 Total noninterest income $ 782 163 619 Noninterest income increased to $0.8 million in the first quarter of 2024 from $0.2 million in the same quarter of 2023.  The following factors had an impact on noninterest income during these periods: An increase of $0.1 million in realized gains on the sale of investment securities available for sale compared to the first quarter of 2023.  During the first quarter of 2024, the Company sold approximately $8.0 million of securities at a gain of $77 thousand and utilized the proceeds to pay down wholesale borrowings. Realized and unrealized losses on equity securities improved by $0.5 million from the first quarter of 2023 as a result of the sale of preferred stock in which the Company had invested during the fourth quarter of 2023. The Company recognized a $0.1 million increase in swap fees from the first 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 Expense The following summarizes changes in the Company's noninterest expense for the periods indicated: Three Months Ended March 31 (In thousands) 2024 2023 Change Compensation and employee benefits $ 2,992 3,263 (271) Occupancy 588 615 (27) Furniture and equipment 245 193 52 Data processing 446 517 (71) FDIC insurance 383 233 150 Office 166 202 (36) Advertising 100 113 (13) Professional fees 599 579 20 Other noninterest expense 282 320 (38) Total noninterest expense $ 5,801 6,035 (234) Noninterest expense declined $0.2 million, or 3.9%, from $6.0 million in the first quarter of 2023 to $5.8 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 $0.3 million, or 8.3%, due primarily to a decrease in incentive accruals and a decline in FTE employees from 116 to 110, offset, in part, by merit increases and an increase in benefit costs.  FDIC insurance increased $0.2 million due to a growth in deposits and other Company specific risk factors. Income Taxes The effective tax rates of the Company were as follows for the periods indicated Three Months Ended March 31 2024 2023 19.71 % 20.07 % 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 $65.3 million, or 8.6%, from $1.738 billion at December 31, 2023 to $1.803 billion at March 31, 2024.  The change was primarily driven by the following factors: Cash and cash equivalents increased $71.3 million, or 103.4%, due to a decrease in lending volume  and an increased focus on core deposit growth. Available for sale investment security balances decreased $9.9 million, or 7.6%, primarily due to the sale of approximately $8.0 million of securities during the first quarter of 2024. The following summarizes the composition of the Company's available for sale investment securities portfolio (at fair value) as of March 31, 2024 and December 31, 2023: March 31, 2024 December 31, 2023 Estimated Net Estimated Net Fair Unrealized Fair Unrealized Value Gain (Loss) Value Gain (Loss) (in thousands) Agency MBS / CMO $ 12,462 (2,025) 12,870 (1,853) Agency multifamily (non-guaranteed) 8,965 (852) 8,944 (897) Agency floating rate 8,151 5 16,919 (41) Business Development Companies 3,415 (348) 3,420 (345) Corporate 23,908 (2,555) 23,801 (2,673) Municipal 26,267 (6,974) 26,465 (6,790) Non-agency MBS / CMO 37,127 (9,481) 37,805 (9,489) $ 120,295 (22,230) 130,224 (22,088) Non-agency MBS/CMO have an average credit-enhancement of approximately 33% as of March 31, 2024.  Municipal securities are generally rated AA or higher.  The Company did not have any securities classified as held-to-maturity as of March 31, 2024 and December 31, 2023. Loans receivable increased $2.5 million, or 0.2%, from $1.453 billion at December 31, 2023 to $1.455 billion at March 31, 2024.  The following summarizes changes in loan balances over the last five quarters: March 31, December 31, September 30, June 30, March 31, 2024 2023 2023