EX-99.1 2 g13093exv99w1.htm EX-99.1 PRESS RELEASE EX-99.1 PRESS RELEASE
 

Exhibit 99.1
()
Mountain National Bancshares, Inc.
Contacts:
Dwight B. Grizzell, President & CEO
Michael L. Brown, Executive Vice President/COO
(865) 428-7990
MOUNTAIN NATIONAL BANCSHARES, INC.
ANNOUNCES FIRST QUARTER EARNINGS
     SEVIERVILLE, Tenn., May 2, 2008 — Mountain National Bancshares, Inc. (OTCBB: MNBT), (the “Company”) announced today its first quarter 2008 results of operations. Net income for the quarter was $791,000. Basic and diluted earnings per share were $0.32 and $0.31, respectively, for the first quarter of 2008. The Company’s net income was $901,000, or $0.42 and $0.39 for basic and diluted earnings per share, respectively, for the first quarter of 2007.
     The Company is the parent company of Mountain National Bank (the “Bank”), with consolidated total assets of approximately $575 million at March 31, 2008. The Bank operates eight full-service banking offices located in Sevier County, Tennessee and two full-service banking offices located in Blount County, Tennessee.
     Dwight B. Grizzell, the Company’s President & CEO, stated, “The recent reductions in interest rates by the Federal Open Markets Committee have presented challenges regarding our interest margins, however, our continued growth in assets and our branch expansion should provide opportunities to grow our assets during the remainder of 2008.” “Our historically low loan loss rates and delinquencies have continued to mitigate the compression of our interest margins. Management is actively reviewing all areas of expenses to determine where costs saving opportunities exist.”
     Our loan portfolio contains a significant balance of loans that reprice with changes in the prime rate and we have made an effort during the past year to reduce our exposure to rate changes by fixing rates on some of these loans. We have not increased our interest rate risk exposure appreciably since the term of these fixed rate loans are usually three years or less. Additionally, we should see our term deposit interest expense reprice to the current market rates during the next six to eight months and we believe that this will have a positive impact on our earnings.”

 


 

Credit quality
     As of March 31, 2008, the Bank had loans totaling approximately $3,088,000, which represents 0.74% of total loans, that were 30 days or more but less than 90 days past due and approximately $332,000, or 0.08% of total loans, in non-performing loans (loans past due 90 days or more and non-accrual loans). As of March 31, 2007, the Bank had loans totaling approximately $1,839,000, or 0.52% of total loans, that were 30 days or more but less than 90 days past due and approximately $790,000, or 0.22% of total loans, in non-performing loans. The increase in loans delinquent more than 30 days but less than 90 days was primarily loans 30 days past due but less than 60 days with a balance of approximately $3,048,000. The Bank generally is able to limit losses occurring in this category. The level of past due loans continues to be low as a percentage of total loans, and we do not anticipate a material increase in loan losses due to the delinquent loans at March 31, 2008.
     Net charge-offs during the first quarter of 2008 were $39,673, or 0.04% (annualized) of average loans, as compared to net charge-offs of $9,422, or 0.01% (annualized) of average loans, during the first quarter of 2007. The Bank’s provision for loan losses during the first quarter of 2008 was $195,000 as compared to $216,000 during the first quarter of 2007. Even though loans increased more than $61 million from March 31, 2007 to March 31 2008, the quality of the loan portfolio as evidenced by the low delinquency and charge off rates allowed management to reduce the provision funding over the comparable period in 2007.
Non-interest expense
     Non-interest expense increased $526,724 or 14.26% for the three month period ended March 31, 2008, as compared to the three month period ended March 31, 2007. The increase in non-interest expense relates to the continued expansion of the Bank and the increase in staff from 159 full time equivalent employees (“FTE’s”) at the end of the first quarter of 2007 as compared to 183 FTE’s at the end of the first quarter of 2008, an addition of twenty-four FTE’s. The related salary, benefit and occupancy expenses increased approximately $312,000 or 12.41% for the first quarter of 2008 as compared to the same period of 2007. Additionally, as compared to the first quarter of 2007, the Bank’s FDIC insurance increased over $67,000 due to the Deposit Insurance Reform Act of 2005 implementation and professional fees increased approximately $26,000 due to requirements of compliance with portions of Section 404 of the Sarbanes-Oxley Act.
Net interest income
     Although net interest income increased approximately $323,000, or 7.60%, for the first quarter of 2008 as compared to the first quarter of 2007, this increase was offset by the increase in non-interest expense mentioned above. The increase in net interest income was due, primarily, to the increase in the average balance of earning assets of approximately $55,379,000, or 12.60%, for the quarter ended March 31, 2008 compared to the quarter ended March 31, 2007. At March 31, 2008, total loans comprised 80.02% of the Bank’s earning assets. Average loans increased approximately $49,400,000, or 13.90%, and average investments increased approximately $6,000,000, or 7.20%, for the quarter ended March 31, 2008 compared to the quarter ended March 31, 2007.

2


 

Net income and earnings per share
     Net income decreased approximately $111,000 or 12.30% during the three month period ended March 31, 2008, as compared to the three month period ended March 31, 2007, primarily as a result of the increase in non interest expense. Basic and diluted earnings per share decreased from $0.42 and $0.39, respectively, for the three month period ended March 31, 2007 to $0.32 and $0.31, respectively, for the three month period ended March 31, 2008. Earnings per share decreased due primarily to an increase in the average number of shares outstanding as a result of option and warrant exercises as well as payment of a 5% stock dividend.
     Certain of the statements in this release may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words “expect,” “should,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate” and similar expressions are intended to identify such forward-looking statements, but other statements not based on historical information may also be considered forward-looking. All forward-looking statements are subject to risks, uncertainties and other facts that may cause the actual results, performance or achievements of Mountain National to differ materially from any results expressed or implied by such forward-looking statements. Such factors include, without limitation, the effects of future economic or business conditions; lack of sustained growth in the economy in the Sevier County and Blount County, Tennessee area; the effects of governmental monetary and fiscal policies, as well as legislative and regulatory changes, including changes in banking, securities and tax laws and regulations; the risks of changes in interest rates on the levels, composition and costs of deposits, loan demand, and the values of loan collateral, securities, and interest sensitive assets and liabilities; credit risks of borrowers; the effects of competition from a wide variety of local, regional, national and other providers of financial, investment, and insurance services; the failure of assumptions underlying the establishment of reserves for possible loan losses and other estimates; the risks of mergers, acquisitions and divestitures, including, without limitation, the related time and costs of implementing such transactions, integrating operations as part of these transactions and the possible failure to achieve expected gains, revenue growth and/or expense savings from such transactions; changes in accounting policies, rules and practices; changes in technology or products that may be more difficult, or costly, or less effective, than anticipated; the effects of war or other conflicts, acts of terrorism or other catastrophic events that may affect general economic conditions and other risks and uncertainties as detailed from time to time in the reports filed by Mountain National with the Securities and Exchange Commission.

3


 

MOUNTAIN NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
                 
    March 31,  
    2008     2007  
ASSETS
               
Cash and due from banks
  $ 10,463,221     $ 7,017,913  
Federal funds sold
    2,946,000       3,169,000  
 
           
Total cash and cash equivalents
    13,409,221       10,186,913  
Securities available for sale
    95,051,938       82,972,979  
Securities held to maturity, fair value $1,972,712 in 2008 and $2,064,160 in 2007
    2,045,767       1,949,463  
Restricted investments, at cost
    3,967,618       2,656,618  
Loans, net of allowance for loan losses of $4,129,681 in 2008 and $3,730,952 in 2007
    412,491,757       351,686,290  
Investment in partnership
    4,112,723       4,124,058  
Premises and equipment
    27,207,193       21,291,421  
Accrued interest receivable
    3,116,943       2,919,440  
Cash surrender value of life insurance
    10,737,939       8,401,190  
Other assets
    2,583,486       1,809,503  
 
           
Total assets
  $ 574,724,585     $ 487,997,875  
 
           
 
               
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
Deposits:
               
Noninterest-bearing demand deposits
  $ 48,495,631     $ 51,679,615  
NOW accounts
    94,750,760       85,940,915  
Money market accounts
    40,731,921       48,936,667  
Savings accounts
    11,262,797       8,530,626  
Time deposits
    209,497,542       187,156,362  
 
           
Total deposits
    404,738,651       382,244,185  
Federal funds purchased
    30,175,000       5,075,000  
Securities sold under agreements to repurchase
    5,671,442       5,765,951  
Accrued interest payable
    1,130,844       1,160,823  
Subordinated debentures
    13,403,000       13,403,000  
Federal Home Loan Bank advances
    68,600,000       43,434,670  
Other liabilities
    778,358       962,600  
 
           
Total liabilities
    524,497,295       452,046,229  
 
           
 
               
Commitments and contingencies
               
 
               
Shareholders’ equity:
               
Common stock, $1.00 par value; 10,000,000 shares authorized; issued and outstanding 2,631,537 shares at March 31, 2008 and 2,063,687 shares at March 31, 2007
    2,631,537       2,063,687  
Additional paid-in capital
    42,508,323       30,069,275  
Retained earnings
    5,080,479       4,290,317  
Accumulated other comprehensive gain (loss)
    6,951       (471,633 )
 
           
Total shareholders’ equity
    50,227,290       35,951,646  
 
           
Total liabilities and shareholders’ equity
  $ 574,724,585     $ 487,997,875  
 
           


 

MOUNTAIN NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
 
                 
    Three months ended March 31,  
    2008     2007  
INTEREST INCOME
               
Loans
  $ 8,046,863     $ 7,791,848  
Taxable securities
    925,005       822,743  
Tax-exempt securities
    168,669       151,538  
Federal funds sold and deposits in other banks
    14,246       21,067  
 
           
Total interest income
    9,154,783       8,787,196  
 
               
INTEREST EXPENSE
               
Deposits
    3,552,166       3,645,225  
Federal funds purchased
    64,086       74,750  
Repurchase agreements
    33,473       33,917  
Federal Home Loan Bank advances
    720,125       536,877  
Subordinated debentures
    217,112       251,220  
 
           
Total interest expense
    4,586,962       4,541,989  
Net interest income
    4,567,821       4,245,207  
Provision for loan losses
    195,000       216,000  
 
           
Net interest income after provision for loan losses
    4,372,821       4,029,207  
 
           
 
               
NONINTEREST INCOME
               
Service charges on deposit accounts
    345,867       327,467  
Other fees and commissions
    294,127       252,239  
Gain on sale of mortgage loans
    52,031       94,141  
Gain on sale of securities available for sale, net
    30,647        
Other noninterest income
    113,623       158,544  
 
           
Total noninterest income
    836,295       832,391  
 
           
 
               
NONINTEREST EXPENSE
               
Salaries and employee benefits
    2,520,471       2,266,359  
Occupancy expenses
    304,397       246,675  
Other operating expenses
    1,395,762       1,180,872  
 
           
Total noninterest expense
    4,220,630       3,693,906  
 
           
Income before income taxes
    988,486       1,167,692  
Income taxes
    197,906       266,214  
 
           
Net income
  $ 790,580     $ 901,478  
 
           
 
               
EARNINGS PER SHARE
               
Basic
  $ 0.32     $ 0.42  
Diluted
  $ 0.31     $ 0.39  


 

Net Interest Income Analysis
For the Three Months Ended March 31, 2008 and 2007

(in thousands, except rates)
                                                 
                    Interest        
    Average Balance     Income/Expense     Yield/Rate  
    2008     2007     2008     2007     2008     2007  
Interest-earning assets:
                                               
Loans
  $ 405,158     $ 355,758     $ 8,047     $ 7,792       7.99 %     8.88 %
Investment Securities:
                                               
Available for sale
    83,082       78,610       1,014       929       4.91 %     4.79 %
Held to maturity
    2,031       1,716       24       21       4.75 %     4.96 %
Equity securities
    3,847       2,656       56       24       5.85 %     3.66 %
 
                                   
Total securities
    88,960       82,982       1,094       974       4.95 %     4.76 %
Federal funds sold and other
    1,620       1,619       14       21       3.48 %     5.26 %
 
                                   
Total interest-earning assets
    495,738       440,359       9,155       8,787       7.43 %     8.09 %
Nonearning assets
    50,892       41,732                                  
 
                                           
Total Assets
  $ 546,630     $ 482,091                                  
 
                                           
 
                                               
Interest-bearing liabilities:
                                               
Interest bearing deposits:
                                               
Interest bearing demand deposits
    134,509       132,739       914       1,385       2.73 %     4.23 %
Savings deposits
    9,921       8,566       37       18       1.50 %     0.85 %
Time deposits
    209,713       181,878       2,601       2,242       4.99 %     5.00 %
 
                                   
Total interest bearing deposits
    354,143       323,183       3,552       3,645       4.03 %     4.57 %
Securities sold under agreements to repurchase
    4,393       5,029       34       34       3.11 %     2.74 %
Federal Home Loan Bank advances and other borrowings
    76,473       50,630       784       612       4.12 %     4.90 %
Subordinated debt
    13,403       13,403       217       251       6.51 %     7.59 %
 
                                   
Total interest-bearing liabilities
    448,412       392,245       4,587       4,542       4.11 %     4.70 %
Noninterest-bearing deposits
    45,593       52,063                              
 
                                       
Total deposits and interest- bearings liabilities
    494,005       444,308       4,587       4,542       3.73 %     4.15 %
 
                                           
Other liabilities
    2,605       2,602                                  
Shareholders’ equity
    50,020       35,181                                  
 
                                           
 
  $ 546,630     $ 482,091                                  
 
                                           
 
                                               
Net interest income
                  $ 4,568     $ 4,245                  
 
                                           
Net interest spread (1)
                                    3.32 %     3.39 %
Net interest margin (2)
                                    3.71 %     3.91 %
 
(1)   Yields realized on interest-earning assets less the rates paid on interest-bearing liabilities.
 
(2)   Net interest margin is the result of annualized net interest income divided by average interest-earning assets for the period.


 

Financial Highlights
Mountain National Bancshares, Inc. and Subsidiaries

(Dollars in thousands, except share data)
Unaudited
                         
    Three Months Ended March 31        
    2008     2007     Change  
EARNINGS
                       
Interest income
  $ 9,155     $ 8,787       4.2 %
Interest expense
    4,587       4,542       1.0  
Net interest income
    4,568       4,245       7.6  
Provision for loan losses
    195       216       (9.7 )
Noninterest income
    836       832       0.5  
Noninterest expense
    4,220       3,694       14.2  
Income taxes
    198       266       (25.6 )
Net income
    791       901       (12.2 )
 
                       
PER COMMON SHARE
                       
Earnings per share — basic
  $ 0.32     $ 0.42       (23.8 )%
Earnings per share — diluted
    0.31       0.39       (20.5 )
Cash dividends declared
                0.0  
Book value per share
    19.09       19.58       (2.5 )
Closing market price
    20.25       27.05       (25.1 )
 
                       
FINANCIAL RATIOS
                       
Return on average assets
    0.58 %     0.76 %   (18)bp
Return on average equity
    6.36       10.39       (403 )
Average equity to average assets
    9.15       7.30       185  
Net interest margin
    3.71       3.91       (20 )
Efficiency ratio
    78.10       72.75       535  
Effective tax rate
    20.02       22.80       (278 )
 
                       
PERIOD END BALANCES
                       
Securities
  $ 101,065     $ 87,579       15.4 %
Loans
    416,621       355,417       17.2  
Assets
    574,725       487,998       17.8  
Deposits
    404,739       382,244       5.9  
Repurchase agreements
    5,671       5,766       (1.6 )
Borrowings
    112,178       61,913       81.2  
Shareholders’ equity
    50,227       35,952       39.7  
 
                       
AVERAGE BALANCES
                       
Securities
  $ 88,960     $ 82,982       7.2 %
Loans
    405,158       355,758       13.9  
Interest-earning assets
    495,738       440,359       12.6  
Assets
    546,630       482,091       13.4  
Interest-bearing deposits
    354,143       323,183       9.6  
Deposits
    399,736       375,246       6.5  
Repurchase agreements
    4,393       5,029       (12.6 )
Borrowings
    89,876       64,033       40.4  
Shareholders’ equity
    50,020       35,181       42.2  

 


 

                         
    Three Months Ended March 31        
    2008     2007     Change  
CAPITAL
                       
Average shares outstanding — basic
    2,502,315       2,153,294       16.2 %
Average shares outstanding — diluted
    2,527,076       2,307,623       9.5  
Shares repurchased
                0.0  
Average price of shares repurchased
  $     $       0.0  
 
                       
ALLOWANCE FOR LOAN LOSSES
                       
Beginning balance
  $ 3,974     $ 3,524       12.8 %
Provision for loan losses
    195       216       (9.7 )
Charge-offs
    (53 )     (16 )     231.3  
Recoveries
    14       7       100.0  
 
                 
Ending balance
  $ 4,130     $ 3,731       10.7  
 
                       
NONPERFORMING LOANS
                       
Nonperforming loans:
                       
90 days past due
  $ 123     $ 790       (84.4 )%
Nonaccrual
    210             0.0  
 
                 
Total nonperforming loans
  $ 333     $ 790       (57.8 )
 
                       
ASSET QUALITY RATIOS
                       
Net chargeoffs (recoveries) to average loans
    0.04 %     0.01 %   3 bp
Nonperforming assets to total assets
    0.06       0.16       (10 )
Nonperforming loans to total loans
    0.08       0.22       (14 )
Allowance for loan losses to total loans
    0.99       1.05       (6 )
Allowance for loan losses to nonperforming loans
    12.40x       4.72x       768