KNOXVILLE, Tenn., July 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 and six months ended June 30, 2024. The Company also announced today that its Board of Directors declared a quarterly cash dividend of $0.05 per common share, its fifteenth consecutive quarterly dividend.  The dividend is payable on September 2, 2024 to shareholders of record as of the close of business on August 5, 2024. Management Commentary William E. "Bill" Edwards, III, President and Chief Executive Officer of the Company, commented as follows: "The second quarter of 2024 appears to have been a turning point for the Company's net interest margin, which improved from 1.66% in the first quarter of 2024 to 2.00% in the second quarter of 2024, and finished the quarter at 2.08% for the month of June, 2024.  Net interest income represents approximately 90% of the Company's revenue and is a key driver of the Company's earnings.  Our recent results from our deposit pricing initiatives suggest that our cost of deposit trends have reversed course during the first quarter of 2024, and we are anticipating continued improvement in our net interest margin for the remainder of 2024 and into the start of 2025.  We are pleased that our average yield on taxable loans continues to increase, rising 11 bp to 5.77% from 5.66% in the first quarter of 2024 and 49 bp from the same quarter a year ago.  Equally as important, the Company's cost of funds declined 22bp from 3.92% in the first quarter of 2024 to 3.70% in the current quarter, although still elevated from 3.23% in the second quarter of 2023.  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 nearly 9x.  Liquidity remained strong as of June 30, 2024 with available funding sources more than $50 million 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 1.36% of average assets during the second quarter of 2024 from 1.47% in the same quarter of 2023, which we believe is among the lowest in our peer group.  Our dividend for the quarter remains unchanged from the prior quarter as we continue to manage our tangible book value and ensure that we have adequate capital for future growth. Construction of our Johnson City financial center was completed and this new facility opened for business on schedule on July 1, 2024.  This location, which has significant I-26 visibility, is 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 significantly grow our Johnson City and TriCities deposit market share." 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 six months ended June 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, 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 June 30, (Dollars in thousands, except per share data) 2024 2023 GAAP Adjusted (1) GAAP Adjusted (1) Net income $ 2,324 1,966 $ 2,459 2,202 Diluted earnings per share $ 0.37 0.31 $ 0.39 0.35 Return on average assets (ROAA) 0.53 % 0.44 % 0.59 % 0.53 % Return on average equity 7.46 % 6.31 % 8.13 % 7.28 % Noninterest expense to average assets 1.36 % 1.36 % 1.47 % 1.47 % Net interest margin (tax equivalent) 2.00 % 2.00 % 2.09 % 2.09 % Pre-tax, pre-provision earnings (1) $ 2,448 $ 2,315 Pre-tax, pre-provision ROAA (1) 0.55 % 0.55 % (1) Represents a non-GAAP financial measure.  See Appendix A to this press release for more information.   For the Six Months Ended June 30, (Dollars in thousands, except per share data) 2024 2023 GAAP Adjusted (1) GAAP Adjusted (1) Net income $ 3,839 3,071 $ 4,817 5,258 Diluted earnings per share $ 0.61 0.49 $ 0.77 0.84 Return on average assets (ROAA) 0.86 % 0.69 % 0.58 % 0.63 % Return on average equity 12.40 % 9.92 % 8.02 % 8.75 % Noninterest expense to average assets 1.33 % 1.33 % 1.47 % 1.47 % Net interest margin (tax equivalent) 1.80 % 1.80 % 2.32 % 2.32 % Pre-tax, pre-provision earnings (1) $ 3,866 $ 5,852 Pre-tax, pre-provision ROAA (1) 0.87 % 0.71 % (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 June 30, March 31, December 31, 2024 2024 2023 (Dollars in thousands, except share data) Asset Quality Non-performing loans $ 1,381 $ 805 $ 1,607 Real estate owned $ - $ - $ - Non-performing assets $ 1,381 $ 805 $ 1,607 Non-performing loans to total loans 0.09 % 0.06 % 0.11 % Non-performing assets to total assets 0.08 % 0.04 % 0.09 % Year-to-date net charge-offs (recoveries) $ (243) $ (230) $ 459 Allowance for credit losses to non-performing loans 889.86 % 1559.38 % 811.08 % Allowance for credit losses to total loans  0.83 % 0.86 % 0.90 % Other Data Cash dividends declared $ 0.050 $ 0.080 $ 0.640 Shares outstanding 6,373,998 6,376,660 6,352,725 Book and tangible book value per share (2) $ 19.83 $ 19.46 $ 19.33 Accumulated other comprehensive income (loss) (AOCI) per share (2.57) (2.55) (2.56) Book and tangible book value per share, excluding AOCI (1) (2) 22.39 $ 22.01 $ 21.89 Closing market price per common share $ 16.87 $ 18.25 $ 18.50 Closing price to book value ratio 85.08 % 93.79 % 95.71 % Tangible common equity to tangible assets ratio 7.06 % 6.88 % 7.07 % Bank regulatory leverage ratio 9.31 % 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 June 30 March 31 December 31 September 30 June 30 GAAP GAAP GAAP GAAP GAAP Net income (loss) $ 2,324 $ 1,515 $ (376) $ 2,473 $ 2,459 Diluted earnings (loss) per share  $ 0.37 $ 0.24 $ (0.06) $ 0.40 $ 0.39 Return on average assets (ROAA)  0.53 % 0.34 % -0.09 % 0.58 % 0.59 % Return on average equity  7.46 % 4.92 % -1.25 % 8.19 % 8.13 % Noninterest expense to average assets 1.36 % 1.30 % 1.48 % 1.34 % 1.47 % Net interest margin (tax equivalent) 2.00 % 1.66 % 1.98 % 2.08 % 2.09 % 2024 2023 June 30 March 31 December 31 September 30 June 30 Adjusted (1) Adjusted (2) Adjusted (2) Adjusted (2) Adjusted (1) Net income  $ 1,966 $ 1,104 $ 1,244 $ 2,405 $ 2,202 Diluted earnings per share  $ 0.31 $ 0.18 $ 0.20 $ 0.39 $ 0.35 Return on average assets (ROAA)  0.44 % 0.25 % 0.29 % 0.56 % 0.53 % Return on average equity  6.31 % 3.59 % 4.13 % 7.97 % 7.28 % Noninterest expense to average assets 1.36 % 1.30 % 1.48 % 1.34 % 1.47 % Net interest margin (tax equivalent) 2.00 % 1.66 % 1.98 % 2.08 % 2.09 % Pre-tax, pre-provision earnings $ 2,448 $ 1,418 $ 1,182 $ 2,684 $ 2,315 Pre-tax, pre-provision ROAA  0.55 % 0.32 % 0.27 % 0.63 % 0.55 % (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 $0.05 million, or 0.6%, from $7.83 million for the three months ended June 30, 2023 to $7.79 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 $73.4 million, or 4.6%, from $1.591 billion to $1.664 billion, driven primarily by increases in loans. Average net interest-earning assets declined $47.5 million, or 14.5%, from $329.0 million to $281.4 million, due primarily to a $28.1 million decrease in noninterest bearing deposits and a $22.9 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 44 bp from 3.93% to 4.37%, while the average rate earned on interest-earning assets increased 42 bp from 5.21% to 5.63%, resulting in a decrease in tax-equivalent net interest margin from 2.09% to 2.00%. Net interest income decreased $3.0 million, or 17.5%, from $17.2 million for the six months ended June 30, 2023 to $14.2 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 $121.3 million, or 7.7%, from $1.580 billion to $1.701 billion, driven primarily by increases in loans. Average net interest-earning assets declined $29.5 million, or 8.9%, from $333.4 million to $303.9 million, due primarily to a $38.4 million decrease in noninterest bearing deposits and a $4.3 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 97 bp from 3.51% to 4.48%, while the average rate earned on interest-earning assets increased 39 bp from 5.09% to 5.48%, resulting in a decrease in tax-equivalent net interest margin from 2.32% to 1.80%. Rate Sensitivity The Company has the following loans subject to repricing of interest rates as of June 30, 2024: Prime SOFR Treasury Total $ 188,558 97,860 21,370 307,788 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 %  Jun 30, 2024  36.0 % 65.1 % 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.  The Company currently receives approximately $1.0 million per year in net proceeds from the swap. 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 June 30, 2024 and 2023, respectively. A provision for (recovery of) credit losses of ($1.0) million and $0.02 million was recognized for the six months ended June 30, 2024 and 2023, respectively.  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 or negative provisions in recent periods.  Noninterest Income The following summarizes changes in the Company's noninterest income for the periods indicated: Three Months Ended June 30 (In thousands) 2024 2023 Change Service charges and fees $ 371 393 (22) Bank owned life insurance 55 46 9 Realized gain (loss) on sale of investment securities available for sale (8) 1 (9) Realized and unrealized loss on equity securities (7) (214) 207 Gain (loss) on sale of loans 29 10 19 Gain on sale of fixed assets - - - Wealth management 217 170 47 Swap fees - 173 (173) Limited partnership distributions - - - Other 15 39 (24) Total noninterest income $ 672 618 54 Noninterest income increased to $0.7 million in the second quarter of 2024 from $0.6 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 $0.2 million from the second quarter of 2023 as a result of the sale of the majority of the Company's equity securities during the fourth quarter of 2023. The Company recognized a $0.2 million decrease in swap fees from the second 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.   Six Months Ended June 30 (In thousands) 2024 2023 Change Service charges and fees $ 753 768 (15) Bank owned life insurance 110 92 18 Realized gain (loss) on sale of investment securities available for sale 69 (9) 78 Realized and unrealized loss on equity securities (27) (731) 704 Gain on sale of loans 26 13 13 Gain on sale of fixed assets 30 69 (39) Wealth management 418 321 97 Swap fees 51 220 (169) Limited partnership distributions - - - Other 24 37 (13) Total noninterest income $ 1,454 780 674 Noninterest income increased to $1.5 million for the six months ended June 30, 2024 from $0.8 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 $0.7 million from the six months ended June 30, 2023 as a result of the sale of the majority of the Company's equity securities during the fourth quarter of 2023. The Company recognized a $0.2 million decrease in swap fees from the six 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 June 30 (In thousands) 2024 2023 Change Compensation and employee benefits $ 3,005 3,396 (391) Occupancy 643 558 85 Furniture and equipment 269 184 85 Data processing 608 544 64 FDIC insurance 364 353 11 Office 180 205 (25) Advertising 102 154 (52) Professional fees 551 324 227 Other noninterest expense 295 424 (129) Total noninterest expense $ 6,017 6,142 (125) Noninterest expense declined $0.1 million, or 2.0%, from $6.1 million in the second quarter of 2023 to $6.0 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 $0.4 million, or 11.5%, due primarily to a decrease in incentive accruals and a decline in FTE employees from 115 to 107, offset, in part, by merit increases and an increase in benefit costs. Professional fees increased $0.2 million, or 70%, due to a change in the timing of recognizing certain auditing, regulatory and legal costs.   Six Months Ended June 30 (In thousands) 2024 2023 Change Compensation and employee benefits $ 5,997 6,659 (662) Occupancy 1,231 1,173 58 Furniture and equipment 514 376 138 Data processing 1,054 1,061 (7) FDIC insurance 747 587 160 Office 346 407 (61) Advertising 202 267 (65) Professional fees 1,150 903 247 Other noninterest expense 577 744 (167) Total noninterest expense $ 11,818 12,177 (359) Noninterest expense declined $0.4 million, or 2.9%, from $12.2 million in the first six months of 2023 to $11.8 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 $0.6 million, or 9.9%, due primarily to a decrease in incentive accruals and a decline in FTE employees from 115 to 107, offset, in part, by merit increases and an increase in benefit costs. Furniture and equipment expense increased $0.1 million, or 36.7%, due primarily to increased depreciation expense for the West Knoxville financial center, which opened for business during the fourth quarter of 2023. FDIC insurance increased $0.2 million, or 27.2%, due to an increase in average assets and the quarterly multiplier used to calculate the assessment. Professional fees increased $0.2 million, or 27.4%, 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 June 30 Six Months Ended June 30 2024 2023 2024 2023 21.14 % 14.50 % 20.58 % 17.32 % The Company's tax rates for the three and six months ended June 30, 2023 were unusually low due to the recognition of tax credits on certain loans for state tax purposes.  The Company's tax rates for the three and six months ended June 30, 2024 reflect a more normalized tax rate.  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 $52.7 million, or 3.0%, from $1.738 billion at December 31, 2023 to $1.790 billion at June 30, 2024.  The change was primarily driven by the following factors: Cash and cash equivalents increased $45.5 million, or 66.0%, due to a decrease in new loan volumes and an increased focus on core deposit growth. Available for sale investment security balances decreased $13.2 million, or 10.1%, 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 June 30, 2024 and December 31, 2023: June 30, 2024 December 31, 2023 Estimated Net Estimated Net Fair Unrealized Fair Unrealized Value Gain (Loss) Value Gain (Loss) (in thousands) Agency MBS / CMO $ 12,163 (2,085) 12,870 (1,853) Agency multifamily (non-guaranteed) 7,046 (835) 8,944 (897) Agency floating rate 7,593 28 16,919 (41) Business Development Companies 3,395 (367) 3,420 (345) Corporate 23,774 (2,678) 23,801 (2,673) Municipal 26,078 (7,107) 26,465 (6,790) Non-agency MBS / CMO 37,000 (9,139) 37,805 (9,489) $ 117,048 (22,182) 130,224 (22,088) Non-agency MBS/CMO have an average credit-enhancement of approximately 31% as of June 30, 2024.  Municipal securities are generally rated AA or higher.  The Company did not have any securities classified as held-to-maturity as of June 30, 2024 and December 31, 2023. Loans receivable increased $19.3 million, or 1.3%, from $1.453 billion at December 31, 2023 to $1.472 billion at June 30, 2024. The Company is actively managing its exposure to commercial real estate and has a regulatory commercial real estate concentration of 322% of total risk-based capital as of June 30, 2024. The following summarizes changes in loan balances over the last five quarters:   June 30, March 31, December 31, September 30, June 30, 2024 2024 2023 2023 2023 (in thousands)