TNCC Tennessee Commerce Bancorp (TN) (MM)

Tennessee Commerce Bancorp, Inc. (NASDAQ: TNCC) today reported financial results for the first quarter ended March 31, 2009. The Company reported a net loss available to common shareholders of $2.6�million or $0.54 per diluted share for the first quarter of 2009 compared with net income of $1.4 million or $0.28 per diluted share for the year-earlier period.

�Tennessee Commerce reported continued growth in loans and deposits in the first quarter; however, our loss for the quarter was mainly attributable to write-downs related to other real estate owned and a significant increase in our loan loss provision,� stated Mike Sapp, President of Tennessee Commerce Bancorp. �The $8.5�million loan loss provision for the first quarter of 2009 included a $2.8 million write-down in other real estate owned, $4.5�million in additional charge-offs, and a $1.2 million addition to our reserve for loan losses. In addition, we experienced a significant decrease in loan pool sales during the first quarter that further reduced our earnings potential.

�The fundamentals of our business remain sound. We originated $92.9 million in new loans during the first quarter, reflecting the demand from our diversified customer base. Our middle Tennessee market has shown more resiliency to the recession and continues to outperform our other markets. Our outlook for loan growth in 2009 remains positive, although at a lower growth rate than in prior years.�

First Quarter Highlights

• Net loans increased 27% to a record $1.1 billion
• Allowance for loan losses was strengthened to 1.40% of total loans
• Total deposits increased 27% to a record $1.1 billion
• Operating efficiency ratio was 49.99%, one of the best in the industry
• Net interest income increased 32% to $9.8 million
• Net interest margin was 3.39%
• Total risk-based capital was 10.61% and Tier 1 capital was 9.36% for the bank

Interest income rose 11% to $19.5 million, up from $17.5 million in the first quarter of 2008. The growth in interest income was primarily due to a 27.4% increase in average loans to $1.1 billion for the first quarter of 2009. Net interest income rose 32% to $9.8 million for the first quarter of 2009 compared with $7.5�million for the first quarter of 2008. Net interest margin rose to 3.39% in the first quarter of 2009 compared with 3.30% in the first quarter of 2008.

�Our continued loan demand has allowed us to focus on funding those loans with solid credit and higher yields,� continued Mr. Sapp. �We increased our core yield on loans by approximately 15 basis points in the first quarter compared with the fourth quarter. Our improved loan yields combined with the reduction of cost of funds resulted in a 9 basis point improvement in our net interest margin compared with the first quarter of last year, even though interest rates have dropped significantly since last year.�

Provision for loan losses rose to $8.5 million for the first quarter of 2009 compared with $1.6 million for the first quarter of 2008. The first quarter provision for loan losses was affected by an increase in non-performing loans and charge-offs. Net charge-offs were $6.5 million in the first quarter of 2009 compared with $887,000 in year-earlier period. Net charge-offs to average loans totaled 0.6% in the first quarter of 2009 compared with 0.1% in the prior-year period. At the end of the first quarter, the allowance for loan losses was $15.4�million, or 1.4% of loans, and increased from $13.5 million, or 1.3% of loans at the end of 2008. Net interest income after the provision for loan losses declined to $1.3 million, down from $5.9 million in the prior year�s first quarter.

�Our non-performing loans, including other real estate owned, rose to $39.0 million at the end of the first quarter of 2009. This is an increase of $2.8 million from the fourth quarter of 2008 and is largely due to the addition of two large real estate based loans,� noted Frank Perez, Chief Financial Officer of Tennessee Commerce Bancorp. �We have no exposure to sub-prime loans and real estate represents only about 37.4% of our portfolio at the end of the first quarter. We are maintaining our very aggressive stance in monitoring credit quality and believe our allowance for loan losses is adequate based on current reviews of our loan portfolio.�

Non-interest income declined to $27,000 compared with $527,000 in the first quarter of 2008. Tennessee Commerce sold approximately $2.7 million in loans during the first quarter of 2009 for a net loss of $360,000 ($0.07 per share after tax) compared with loan sales of $7.6 million in the first quarter of 2008 that contributed a net gain of $566,000 ($0.11 per share after tax) on the sale of loans. Security gains increased to $418,000 in the first quarter of 2009 compared with $30,000 in the year-earlier period.

�Loan sales were minimal in the first quarter,� continued Mr. Perez. �We believe the low volume of loan sales to other banks was due, in part, to the changing regulatory environment following the transition to the new federal administration. Our first quarter gain on loan sales was more than offset by fee reversals related to early payoffs and repurchases of loan pools during the quarter. Typically, we would have expected that loan sales contribute about 25% of our pre-tax income. We expect loan sales to improve as the regulatory climate and the economic environment begin to stabilize. In addition, we expect to broaden the potential for future loan sales based on our recent alliance with the Independent Community Bankers of America (ICBA).�

Non-interest expenses rose 19.0% to $4.9 million compared with $4.1 million in the first quarter of 2008. The increase was due primarily to higher other non-interest expenses that included a significant increase in FDIC insurance premiums and higher costs related to loan portfolio management. The FDIC quarterly assessment combined with the accrual for the one-time assessment fee totaled approximately $477,000 in the first quarter of 2009, up from $157,000 in the first quarter of 2008.

Net loss available to common shareholders was $2.6 million, or $0.54 per diluted share, for the first quarter of 2009 compared with net income of $1.4�million, or $0.28 per diluted share, in the same period of 2008. The 2009 results includes $421,000 dividend and accretion on the preferred stock issued to the U.S. Treasury.

Tennessee Commerce Bancorp, Inc. continues to maintain a well-capitalized status at the end of the first quarter with a Tier 1 capital ratio of 10.16% at the holding company level and 9.36% at the bank level. The Tier 1 capital ratio at the bank level remains significantly above the minimum regulatory requirement of 6.0% for a well-capitalized bank and minimum regulatory requirement of 4.0%. Total risk-based capital was 11.40% for the holding company and 10.61% for the bank compared with regulatory requirements of 10.0% for a well-capitalized bank and minimum regulatory requirements of 8.0%.

Average weighted diluted shares outstanding decreased slightly to 4.858 million in the first quarter of 2009 from 4.891 million in the first quarter of 2008. The decrease in average weighted shares outstanding was due to certain stock options being excluded from the most recent quarter�s calculation since they were anti-dilutive shares.

Tennessee Commerce�s efficiency ratio improved to 49.99% in the first quarter of 2009 compared with 51.87% in the first quarter of 2008.

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 Atlanta, Birmingham and Minneapolis. Tennessee Commerce Bancorp's�stock is traded on the NASDAQ Global Market under the symbol TNCC. Additional�information concerning Tennessee Commerce Bancorp can be accessed at www.tncommercebank.com.

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.

TENNESSEE COMMERCE BANCORP, INC. CONSOLIDATED BALANCE SHEETS MARCH 31, 2009 (UNAUDITED) AND DECEMBER 31, 2008 � (Dollars in thousands except share data) � � 2009 � � � 2008 � ASSETS � Cash and due from financial institutions

$

5,754

$

5,260

Federal funds sold � 25 � � 35,538 � Cash and cash equivalents 5,779 40,798 Securities available for sale 100,013 101,290 Loans 1,103,942 1,036,725 Allowance for loan losses � (15,424 ) � (13,454 ) Net loans 1,088,518 1,023,271 Premises and equipment, net 2,230 2,330 Accrued interest receivable 8,689 8,115 Restricted equity securities 2,152 1,685 Income tax receivable 5,832 4,430 Other assets � 61,921 � � 36,165 � Total assets

$

1,275,134

�

$

1,218,084

� LIABILITIES AND SHAREHOLDERS� EQUITY Liabilities Deposits Noninterest-bearing

$

23,258

$

24,217

Interest-bearing � 1,072,049 � � 1,044,926 � Total deposits 1,095,307 1,069,143 FHLB advances 15,153

�

�

Federal funds purchased 20,479

�

�

Accrued interest payable 3,268 3,315 Accrued dividend payable 188

�

�

Short-term borrowings 10,000 10,000 Accrued bonuses � 917 Deferred tax liability 8,404 8,695 Other liabilities 1,095 1,069 Long-term subordinated debt � 23,198 � � 23,198 � Total liabilities 1,177,092 1,116,337 Shareholders� equity

Preferred stock, 1,000,000 shares authorized; 30,000 shares of $0.50 par value FixedRate Cumulative Perpetual, Series A issued and outstanding at March 31, 2009 andDecember 31, 2007, respectively

15,000 15,000

Common stock, $0.50 par value; 10,000,000 shares authorized at March 31, 2009 andDecember 31, 2008; 4,731,696 and 4,731,696 shares issued and outstanding atMarch 31, 2009 and December 31, 2008, respectively

2,366 2,366 Common stock warrants 453 453 Additional paid-in capital 60,014 59,946 Retained earnings 20,543 23,180 Accumulated other comprehensive income � (334 ) � 802 � Total shareholders� equity 98,042 101,747 Total liabilities and shareholders� equity

$

1,275,134

�

$

1,218,084

�

�

(1) The balance sheet at December 31, 2008 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 THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (UNAUDITED) � Three Months Ended March 31, (Dollars in thousands, except share data) � � 2009 � � � 2008 � Interest income Loans, including fees

$

17,896

$

16,382

Securities 1,555 1,033 Federal funds sold � 5 � � 71 � Total interest income 19,456 17,486 Interest expense Deposits 9,129 9,744 Other � 487 � � 280 � Total interest expense � 9,616 � � 10,024 � Net interest income 9,840 7,462 Provision for loan losses �

8,514

� � 1,600 � Net interest income after provision for loan losses 1,326 5,862 Non-interest income Service charges on deposit accounts 43 24 Securities gains (losses) 418 30 Gain (loss) on sale of loans (360 ) 566 Other � (74 ) � (93 ) Total non-interest income 27 527 Non-interest expense Salaries and employee benefits 2,349 2,284 Occupancy and equipment 410 360 Data processing fees 304 285 Professional fees 390 375 Other � 1,480 � � 840 � Total non-interest expense � 4,933 � � 4,144 � Income (loss) before income taxes (3,580 ) 2,245 Income tax expense (benefit) � (1,364 ) � 870 � Net income (2,216 ) 1,375 CPP Preferred dividends � (421 ) � � � Net income (loss) available to common shareholders

$

(2,637

)

$

1,375

� Earnings per share (EPS): Basic EPS

$

(0.56

)

$

0.29

Diluted EPS (0.54 ) 0.28 Weighted average shares outstanding: Basic 4,731,696 4,729,718 Diluted 4,858,364 4,890,711 � TENNESSEE COMMERCE BANCORP, INC. FINANCIAL HIGHLIGHTS � (Dollars in thousands except ratios and share data) � �

2009

�

2008

�

% Change

Year To Date thru 3/31 Earnings: Net Interest Income $ 9,840 $ 7,462 31.87 % Non-Interest Income 27 527 -94.88 % Provision for Loan Losses 8,514 1,600 432.13 % Operating Expense 4,933 4,144 19.04 % Operating Income (3,580 ) 2,245 Applicable Tax � (1,364 ) � 870 � Net Income (2,216 ) 1,375 Preferred Dividends � (421 ) � - � Net Income Available to Common Shareholders $ (2,637 ) $ 1,375 � � At March 31 Total Assets $ 1,275,134 $ 964,435 32.22 % Net Loans 1,088,518 853,914 27.47 % Earning Assets 1,188,556 925,989 28.36 % Allowance for Loan Losses 15,424 11,034 39.79 % Deposits 1,095,307 861,549 27.13 % Shareholders' Equity $ 98,042 $ 64,929 51.00 % � Total Shares Outstanding 4,731,696 4,731,696 0.00 % � Significant Ratios - YTD Net Interest Margin 3.39 % 3.30 % Return on Average Assets -0.86 % 0.59 % Return on Average Common Equity -15.22 % 8.60 % Efficiency Ratio 49.99 % 51.87 % Loan Loss Reserve/Loans 1.40 % 1.28 % Capital/Assets 7.69 % 6.73 % Basic Earnings per Share - YTD $ (0.56 ) $ 0.29 Diluted Earnings per Share - YTD $ (0.54 ) $ 0.28 � TENNESSEE COMMERCE BANCORP, INC. ANALYSIS OF INTEREST INCOME AND EXPENSE, RATES AND YIELDS (UNAUDITED) � � Three Months Ended March 31, � Three Months Ended March 31, 2009 2008 Average � Average Average � � Average (Dollars in thousands) Balance Interest Rate Balance Interest Rate ASSETS Interest earning assets

Securities (taxable) (1)

$

114,115

$

1,555

�

5.52 %

$

76,070

$

1,033

�

5.51 % Loans (2) (3) 1,052,076 17,896 6.90 % 825,558 16,382 7.98 % Federal funds sold � 10,169 � 5 � 0.20 % � 8,024 � 71 � 3.56 % Total interest earning assets 1,176,360 19,456 6.71 % 909,652 17,486 7.74 % Non-interest earning assets Cash and due from banks 5,973 4,412 Net fixed assets and equipment 2,290 1,454 Accrued interest and other assets � 56,874 � 24,056 Total assets

$

1,241,497

$

939,574

LIABILITIES AND SHAREHOLDERS� EQUITY Interest bearing liabilities Deposits (other than demand)

$

1,054,630

$

9,129

�

3.51 %

$

827,232

$

9,744

�

4.74 % Federal funds purchased 20,328 35 0.70 % 3,939 30 3.06 % Subordinated debt � 33,198 � 452 � 5.52 % � 15,413 � 250 � 6.52 % Total interest bearing liabilities 1,108,156 � 9,616 � 3.52 % 846,584 � 10,024 � 4.76 % Non-interest bearing liabilities

Non-interest bearing demand

deposits

21,748 25,755 Other liabilities 11,319 3,269 Shareholders� equity � 100,274 � 63,966 Total liabilities and shareholders� equity

$

1,241,497

$

939,574

� Net Interest Spread 3.19 % 2.98 % Net Interest Margin 3.39 % 3.30 %

�

(1) � Unrealized gain (loss) of $(94) and $715 is excluded from yield calculation for the three months ended March 31, 2009 and 2008, respectively. � (2) Non-accrual loans are included in average loan balances and loan fees of $1,974 and $816 are included in interest income for the three months ended March 31, 2009 and 2008, respectively. � (3) Loans are presented net of allowance for loan loss � TENNESSEE COMMERCE BANCORP, INC. LOAN DATA �

(amounts in thousands)

� � � � � �

3/31/2009

12/31/2008

9/30/2008

6/30/08

3/31/08

LOAN BALANCES BY TYPE: Commercial and Industrial $ 635,943 $ 589,518 $ 580,501 $ 556,056 $ 515,339 Consumer 3,628 3,572 3,479 3,375 3,844 Real Estate: Construction 202,034 181,638 165,511 152,075 135,151 1-4 Family 38,257 37,822 38,128 34,165 32,842 Other 172,771 � 171,150 � 162,283 � 153,770 � 154,750 � Total Real Estate 413,062 390,610 365,922 340,010 322,743 Other 51,309 � 53,025 � 47,937 � 39,195 � 23,022 � Total $ 1,103,942 � $ 1,036,725 � $ 997,839 � $ 938,636 � $ 864,948 � � ASSET QUALITY DATA: Nonaccrual Loans $ 24,342 $ 11,603 $ 9,834 $ 5,566 $ 5,835 Loans 90+ Days Past Due 9,605 � 18,788 � 4,398 � 3,245 � 2,065 � Total Non-Performing Loans 33,947 30,391 14,232 8,811 7,900 Other Real Estate Owned 5,045 � 5,764 � 1,126 � 485 � 690 � Total Non-Performing Assets $ 38,992 $ 36,155 $ 15,358 $ 9,296 $ 8,590 � Non-Performing Loans to Total Loans 3.1 % 2.9 % 1.4 % 0.9 % 0.9 % Non-Performing Assets to Total Loans and OREO 3.5 % 3.5 % 1.5 % 1.0 % 1.0 % Allowance for Loan Losses to Non-Performing Loans 45.4 % 44.3 % 85.7 % 130.7 % 139.7 % Allowance for Loan Losses to Total Loans 1.4 % 1.3 % 1.2 % 1.2 % 1.3 % Loans 30+ Days Past Due to Total Loans 4.9 % 4.5 % 3.0 % 3.5 % 2.6 % (loans not included in non-performing loans) Net Chargeoffs to Average Gross Loans 0.6 % 0.2 % 0.1 % 0.2 % 0.1 % � � NET CHARGEOFFS FOR QUARTER $ 6,544 $ 2,058 $ 1,179 $ 1,854 $ 887 �