TNCC Tennessee Commerce Bancorp (TN) (MM)

Tennessee Commerce Bancorp, Inc. (NASDAQ: TNCC) today reported record net income, loans and deposits for the second quarter ended June�30,�2008. Net income rose to $1.8 million, or $0.38 per diluted share, for the second quarter of 2008, compared with $1.6 million, or $0.34�per diluted share, in the second quarter of 2007. �Tennessee Commerce reported record results in the second quarter and benefited from solid organic loan growth,� stated Mike Sapp, President of Tennessee Commerce Bancorp. �Our business bank operating model continued to deliver above average loan growth and very efficient operations. Our efficiency ratio of 41.9% for the second quarter was one of the best in the industry and our asset-to-employee ratio rose to $14.2 million, almost four times higher than the average for other Tennessee banks. �We remain very positive about our continued growth opportunities. We achieved $1 billion in assets during the second quarter due to continued loan demand from local business customers and the contribution from our new loan production offices opened earlier this year in Minneapolis and Atlanta. We are proud of the fact that all of our growth has been generated by our strong markets and our strategic focus on business customers, without any assistance from mergers or acquisitions,� continued Mr. Sapp. Second Quarter Highlights Net income rose 14.6% to $1.8 million, or $0.38 per diluted share Net loans increased 44.0% to a record $927.1 million Asset quality remained strong with a 1.23% loan loss reserve to loans Total deposits increased 39.8% to a record $955.2 million Operating efficiency ratio improved to 41.9%, one of the best in the industry Net interest income increased 26.3% to $8.4 million Net interest margin was 3.44% Gain on sale of loans rose 84.0% to $852,000 Raised $14.5 million in capital in a trust preferred offering Total risk-based capital was 10.3% and Tier 1 capital was 9.13% for the bank �We added $73.2 million in net new loans and sold an additional $10 million in loans in the second quarter,� stated Mr. Sapp. �Our excellent loan growth and higher net interest margins since the first quarter of this year were primary contributors to our net interest income rising 26.3% to a record $8.4 million compared with $6.6�million in the second quarter of last year. Strong demand for our loan syndications also resulted in a significant increase in gain on the sale of loans during the second quarter. �Our loan pipeline remains very strong going into the third quarter. We plan to syndicate a higher percentage of loans in the second half of 2008 to assist us in balancing loan growth with our capital base. Our goal is to manage our balance sheet to produce a solid return for our shareholders while maintaining our well-capitalized base,� continued Mr. Sapp. Net interest income rose 26.3% to $8.4 million in the second quarter of 2008 compared with $6.6�million in the second quarter of 2007. The growth in net interest income was due primarily to an increase in loans and loan fees, partially offset by a decrease in net interest margin due to lower rates since the second quarter of 2007. Net interest margin was 3.44% for the second quarter of 2008 compared with 3.89% in the second quarter of 2007. �Our net interest margin is up 14 basis points since the first quarter of this year,� noted Mr. Sapp. �Our margin growth benefited from our excellent average loan yield of 7.81% in the second quarter and lower average deposit costs compared with the linked first quarter. We expect our margin to improve in the third quarter as deposits reprice at lower rates. We also expect third quarter interest income will benefit from a large amount of loans that were closed late in the second quarter.� Provision for loan losses was $2.3 million in the second quarter of 2008, an increase from $1.5�million in the second quarter of last year. At the end of the second quarter, the allowance for loan losses was $11.5�million, or 1.23% of loans, compared with $8.6 million, or 1.32% of loans, in the year prior period. The increase in allowance for loan losses since last year was primarily related to the growth in the loan portfolio and an increase in non-performing assets since the second quarter of 2007. Charge-offs rose to $1.9 million in the second quarter of 2008 and included a loan totaling $525,000 that is currently in litigation. The Company expects a significant recovery of the amount charged-off on this credit. �We experienced some deterioration in the credit quality of our smaller national accounts as the year has progressed, particularly in the transportation sector,� noted Mr. Sapp. �This factor contributed to the increase in our non-performing assets and past due loans since the beginning of this year. As a result, we have reduced our lending to the transportation industry going forward. This has been a very good market for us and we will continue to evaluate our opportunities as the economy strengthens for this sector and fuel prices moderate. In the interim, we remain very proactive in monitoring and collecting these loans to minimize future losses. �We believe the diversification of our loan portfolio across a number of industries and markets will help insulate us from credit issues related to any single market,� continued Mr. Sapp. �We have no exposure to subprime loans and real estate represents only 36.2% of our portfolio at the end of the second quarter. We believe our reserves are adequate based on these factors.� Non interest income rose 31.6% in the second quarter of 2008 to $803,000 compared with $610,000 in the second quarter of 2007. Gain on sale of loans rose 84% to $852,000 compared with $463,000 in the second quarter of last year. The principle balance on loans sold in the second quarter of 2008 was $10�million compared with $14 million in the second quarter of 2007. Demand for loan sales remains strong with the Company�s correspondent banks. Non-interest expenses rose 24.3% to $3.9 million compared with $3.1 million in the second quarter of 2007. The was due primarily to higher professional fees related to increased compliance and audit costs incurred during the first half of 2008, and an increase in �other� expenses that include costs related to increased collection efforts. Tennessee Commerce was classified as a well-capitalized bank at the end of the second quarter. Total risk-based capital was 10.17% for the holding company and 10.3% for the bank compared with regulatory requirements of 10.0% for a well-capitalized bank and minimum regulatory requirements of 8.0%. Tier 1 capital was 9.0% for the holding company and 9.13% for the bank, both well above the requirement of 6.0% for a well-capitalized bank and minimum regulatory requirements of 4.0%. Average weighted diluted shares outstanding increased 2.1% to 4.9 million in the second quarter of 2008 from 4.8 million in the second quarter of 2007. Six Months Results Net income rose 6.8% to $3.2 million, or $0.66 per diluted share Net interest income increased 29.7% to $15.9 million Non interest income was $1.3 million Gain on sale of loans increased 10.8% to $1.4 million Non interest expenses were up 40.0% to $8.0 million �Tennessee Commerce is on track to report continued growth in the second half of 2008,� continued Mr. Sapp. �We believe our solid performance will benefit from our focus on the business banking community.� Net income rose 6.8% to $3.2 million for the first six months of 2008 compared with $3.0 million in the same period of 2007. Net income per diluted share increased 4.8% to $0.66 compared with $0.63 in the first six months of 2007. Net interest income rose 29.7% to $15.9 million, up from $12.2 million in the first six months of 2007. The growth in net interest income benefited from a 41.2% increase in earnings assets to $1.0 billion. Net interest margin was 3.37% for the 2008 period compared with 3.76% for the same period in 2007. Provision for loan losses was $3.9 million for the first six months of 2008 compared with $3.0�million for the same period in 2007. About Tennessee Commerce Bancorp, Inc. Tennessee Commerce Bancorp, Inc. is the parent company of Tennessee Commerce Bank. The Bank provides a wide range of banking services and is primarily focused on business accounts. Its corporate and banking offices are located in Franklin, Tennessee, and it has loan production offices in Birmingham, Alabama and Minneapolis. Tennessee Commerce Bancorp's stock is traded on the NASDAQ Global Market under the symbol TNCC. Information contained in this press release, other than historical information, may be considered forward-looking in nature and is subject to various risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or expected. Among the key factors that may have a direct bearing on Tennessee Commerce Bancorp's operating results, performance or financial condition are competition, changes in interest rates, the demand for its products and services, the ability to expand, and numerous other factors as set forth in the Corporation's filings with the Securities and Exchange Commission. Additional information concerning Tennessee Commerce can be accessed at www.tncommercebank.com. TENNESSEE COMMERCE BANCORP, INC. CONSOLIDATED BALANCE SHEETS JUNE 30, 2008 (UNAUDITED) AND DECEMBER�31, 2007 � � (dollars in thousands except share data) June 30, 2008 December 31, 2007 (1) ASSETS Cash and due from financial institutions $ 5,287 $ 5,236 Federal funds sold 909 9,573 Cash and cash equivalents 6,196 14,809 Securities available for sale 96,030 73,753 Loans 938,636 794,322 Allowance for loan losses (11,520 ) (10,321 ) Net loans 927,116 784,001 � Premises and equipment, net 1,453 1,413 Accrued interest receivable 6,881 5,901 Restricted equity securities 1,376 938 Deferred tax asset 436 � Income tax receivable � 1,886 Other assets 26,497 17,452 � Total assets $ 1,065,985 $ 900,153 � LIABILITIES AND SHAREHOLDERS� EQUITY Liabilities Deposits Non-interest bearing $ 21,235 $ 27,427 Interest-bearing 934,013 787,626 Total deposits 955,248 815,053 � Federal funds purchased 8,300 2,000 Accrued interest payable 2,982 2,292 Short-term borrowings 9,500 7,000 Accrued Bonuses 499 1,700 Long-term subordinated debt 23,198 8,248 Deferred tax liabilities � 139 Other liabilities 606 600 Total liabilities 1,000,333 837,032 Shareholders� equity Preferred stock, no par value. 1,000,000 shares authorized; none issued � � Common stock, $0.50 par value. 10,000,000 shares authorized at June 30, 2008 and December 31, 2007; 4,731,696 and 4,724,196 shares issued and outstanding at June 31, 2008 and December 31, 2007, respectively. 2,366 2,362 Additional paid-in capital 45,150 45,024 Retained earnings 18,647 15,426 Accumulated other comprehensive loss (511) � 309 Total shareholders� equity 65,652 63,121 � Total liabilities and shareholders� equity $ 1,065,985 $ 900,153 � (1)�The balance sheet at December�31, 2007 has been derived from the audited consolidated financial statements at that date but does not include all of the information and notes required by generally accepted accounting principles for complete financial statements. TENNESSEE COMMERCE BANCORP, INC. CONSOLIDATED STATEMENTS OF INCOME SIX MONTHS ENDED JUNE 30, 2008 AND 2007 THREE MONTHS ENDED JUNE 30, 2008 AND 2007 (UNAUDITED) � � Six Months Ended June 30, Three Months Ended June 30, 2008 � 2007 2008 � 2007 Interest income Loans, including fees $ 33,597 $ 25,985 $ 17,215 $ 13,886 Securities 2,177 1,587 1,144 823 Federal funds sold 141 251 70 143 Total interest income 35,915 27,823 18,429 14,852 � Interest expense Deposits 19,438 15,273 9,694 8,047 Other 619 319 339 159 Total interest expense 20,057 15,592 10,033 8,206 � Net interest income 15,858 12,231 8,396 6,646 � Provision for loan losses 3,940 3,000 2,340 1,500 � Net interest income after provision for loan losses 11,918 9,231 6,056 5,146 � Non-interest income Service charges on deposit accounts 49 69 25 32 Securities gains (losses) 30 10 � � Gain on sale of loans 1,418 1,280 852 463 Other (167 ) 73 (74 ) 115 Total non-interest income 1,330 1,432 803 610 � Non-interest expense Salaries and employee benefits 4,093 3,238 1,809 1,766 Occupancy and equipment 722 512 362 244 Data processing fees 534 505 249 279 Professional fees 904 492 529 254 Other 1,741 965 901 554 Total non-interest expense 7,994 5,712 3,850 3,097 � Income before income taxes 5,254 4,951 3,009 2,659 � Income tax expense 2,033 1,934 1,163 1,048 � Net income $ 3,221 $ 3,017 $ 1,846 $ 1,611 � Earnings per share (EPS): Basic EPS $ 0.68 $ 0.67 $ 0.39 $ 0.36 Diluted EPS 0.66 0.63 0.38 0.34 � Weighted average shares outstanding: Basic 4,730,707 4,517,133 4,731,696 4,502,985 Diluted 4,890,911 4,818,619 4,891,111 4,788,889 � TENNESSEE COMMERCE BANCORP, INC. Financial Highlights � (Dollars in thousands except ratios and share data) � � � 2008 2007 % Change Quarter To Date thru 6/30 Earnings: Net Interest Income $ 8,396 $ 6,646 26.33% Non-Interest Income 803 610 31.64% Provision for Loan Losses 2,340 1,500 56.00% Operating Expense 3,850 3,097 24.31% Operating Income 3,009 2,659 13.16% Applicable Tax 1,163 1,048 10.97% Net Income $ 1,846 $ 1,611 14.59% � At June 30 Total Assets $ 1,065,985 $ 751,392 41.87% Net Loans 927,116 643,901 43.98% Earning Assets 1,024,055 725,200 41.21% Allowance for Loan Losses 11,520 8,619 33.66% Deposits 955,248 683,385 39.78% Shareholders' Equity $ 65,652 $ 57,215 14.75% � Total Shares Outstanding 4,731,696 4,672,796 1.26% � Significant Ratios - 2nd Quarter Net Interest Margin 3.44% 3.89% Return on Average Assets 0.73% 0.91% Return on Average Equity 11.38% 11.71% Efficiency Ratio 41.85% 42.68% Loan Loss Reserve/Loans 1.23% 1.32% Capital/Assets 6.16% 7.61% Total risk-based capital 10.17% 10.92% Tier 1 capital 9.00% 9.67% TENNESSEE COMMERCE BANCORP, INC. ANALYSIS OF INTEREST INCOME AND EXPENSE, RATES AND YIELDS (UNAUDITED) � � Three Months Ended June 30, 2008 Three Months Ended June 30, 2007 (dollars in thousands) Average Balances � Interest Rates/ Yields Average Balances � Interest � Rates/ Yields Interest-earning assets: Loans $ 886,808 $ 17,215 7.81% $ 612,545 $ 13,886 9.09% Securities: Taxable 82,470 1,144 5.62% 60,692 823 5.39% Federal funds sold and other 14,054 70 2.00% 11,294 143 5.08% Total interest-earning assets 983,332 $ 18,249 7.54% 684,531 $ 14,852 8.70% Nonearning assets 34,293 23,032 Total assets $1,017,625 $ 707,563 � Interest-bearing liabilities: Interest-bearing deposits $ 897,607 $ 9,694 4.34% $ 619,053 $ 8,047 5.21% Federal funds purchased 8,229 61 2.98% 1,406 20 5.71% Subordinated debt 19,501 278 5.73% 8,248 139 6.76% Total interest-bearing liabilities 925,337 10,033 4.36% $ 628,707 8,206 5.24% Noninterest bearing deposits and other liabilities 27,018 23,690 Stockholders� equity 65,270 55,161 Total liabilities and equity $1,017,625 $ 707,558 Net interest income $ 8,396 $ 6,646 Net interest spread (1) 3.18% 3.46% Net interest margin (2) 3.44% 3.89% � (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 calculated on a tax equivalent basis divided by average interest-earning assets for the period. TENNESSEE COMMERCE BANCORP, INC. LOAN DATA (amounts in thousands) � � 6/30/08 3/31/08 6/30/07 LOAN BALANCES BY TYPE: Commercial and Industrial $ 556,056 $ 515,339 $ 415,285 Consumer 3,375 3,844 3,686 Real Estate: Construction 152,075 135,151 88,103 1-4 Family 34,165 32,842 28,620 Other 153,770 154,750 108,644 Total Real Estate 340,010 322,743 225,367 Other 39,195 23,022 8,182 Total $ 938,636 $ 864,948 $ 652,520 � ASSET QUALITY DATA: Nonaccrual Loans $ 5,566 $ 5,835 $ 3,877 Loans 90+ Days Past Due 3,245 2,065 1,408 Total Non-Performing Loans 8,811 7,900 5,285 Other Real Estate Owned 485 690 - Total Non-Performing Assets $ 9,296 $ 8,590 $ 5,285 � Non-Performing Loans to Total Loans 0.9% 0.9% 0.8% Non-Performing Assets to Total Loans and OREO 1.0% 1.0% 0.8% Allowance for Loan Losses to Non-Performing Loans 130.7% 139.7% 163.1% Allowance for Loan Losses to Total Loans 1.2% 1.3% 1.3% Loans 30+ Days Past Due to Total Loans 3.5% 2.6% 2.5% (loans not included in non-performing loans) Net Chargeoffs to Average Gross Loans 0.2% 0.1% 0.1% � � NET CHARGEOFFS FOR QUARTER $ 1,854 $ 887 $ 639