TNCC Tennessee Commerce Bancorp (TN) (MM)

Tennessee Commerce Bancorp, Inc. (NASDAQ:TNCC) today reported financial results for the third quarter ended September 30, 2009. The Company reported net income available to common shareholders of $1.2 million, or $0.25 per diluted share, for the third quarter of 2009, compared with net income of $1.9 million, or $0.39 per diluted share, for the third quarter of 2008.

“Tennessee Commerce’s $1.2 million in third quarter net income was the result of progress we made in reducing our provision for loan losses and strengthening our key drivers of profitability since the first half of this year,” stated Mike Sapp, President of Tennessee Commerce Bancorp. “We reported solid growth in our net margin compared with the linked second quarter of 2009, as well as improvement in loan sales. We also strengthened our allowance for loan losses as part of our strategy to protect our capital base. We expect these factors will contribute to continued net income growth in the fourth quarter.

“Our third quarter’s profitability was due to gain on loan sales, margin improvement and a continuing reduction in loan losses. Our net interest income rose 23.2% to $11.4 million in the third quarter due to continued growth in loans and solid improvement in our net interest margin,” continued Mr. Sapp. “Net loans rose 15.7% to a record $1.1 billion. The net interest margin improved 15 basis points to 3.61% compared with 3.46% in the third quarter of last year. We anticipate our continued focus on loan yields and managing costs will result in additional margin improvement.”

Third Quarter Highlights

• Net loans increased 15.7%, from the third quarter of 2008, to $1.1 billion
• Allowance for loan losses was strengthened to 1.70% of total loans
• Total deposits increased 21.6%, from the third quarter of 2008, to $1.2 billion
• Operating efficiency ratio improved to 39.28%, one of the best in the industry
• Net interest income increased 23.2%, from the third quarter of 2008 to $11.4 million
• Net interest margin improved to 3.61%
• Total risk-based capital was 10.68% and Tier 1 capital was 9.43% for the bank

“This was our third consecutive quarterly increase in our net interest margin,” stated CFO Frank Perez. “This reflects our focus on improving loan pricing. We also made significant progress in reducing our non-core funding sources to improve our funding costs. These steps contributed to our 118 basis point reduction in deposit costs since the third quarter of 2008 and 30 basis point improvement from the linked second quarter of 2009.”

Provision for loan losses was $5.3 million in the third quarter of 2009 and was down substantially from $13.1 million reported in the linked second quarter of 2009. The decrease in the provision for loan losses benefited from a 53.2% drop in charge offs to $4.5 million in the third quarter of 2009 compared with $9.6 million in the linked second quarter of 2009. At the end of the third quarter, the allowance for loan losses was strengthened to $19.7 million, or 1.70% of loans, up from $18.9 million, or 1.65% in the linked second quarter of 2009. The provision for loan losses was $1.9 million and the allowance for loan losses was $12.2 million, or 1.22% of loans, in the year prior period.

“Our provision for loan losses is down significantly from earlier this year due to our aggressive stance on managing problem loans,” noted Mr. Sapp. “We also experienced a reduction in past due loans, including those 30 days past due, 31-89 days past due and 90+ days past due. Nashville continues to outperform other markets, including a much stronger real estate market, that is reflected in the reduction of our past due loans and OREO over the past quarter.

“Our total non-performing assets were up less than 1% from the linked second quarter of 2009, primarily due to a significant reduction in OREO, offset partially by an increase in nonaccrual loans. We remain diligent in reducing our non-performing loans, foreclosed real estate and repossessed assets to improve our credit quality, minimize losses and protect our capital base,” continued Mr. Sapp.

Total non-performing loans were $30.2 million in the third quarter of 2009 compared with $25.6 million in the linked second quarter of 2009. After the close of the third quarter, we reduced non-performing assets by an additional $2.75 million. Other real estate owned and repossessed assets were $1.3 million and $22.1 million respectively in the third quarter of 2009. In the third quarter of 2008, non-performing loans totaled $14.2 million and other real estate owned and repossessed assets were $1.1 million and $11.1 million, respectively. The transportation sector of our loan portfolio continues to lag due to economic conditions.

Non-interest income rose to $1.4 million in the third quarter of 2009 compared with $98,000 in the third quarter of last year. The growth in non-interest income benefited from an increase in gains on security sales, sales of loan pools and other income. Security gains rose to $532,000 in the third quarter of 2009 compared with a loss of $97,000 on security sales in the third quarter of 2008. Sales of loan pools generated $340,000 in the third quarter of 2009, including a $218,000 loss on sale of loans due to fee reversals on buy-backs of small ticket loan pools. This compares with a $1,000 net gain on loan sales in the third quarter of 2008. Other income rose to $440,000 and included a $203,000 gain on sales of repossessed assets in the transportation sector.

Non-interest expenses rose 12.9% to $5.0 million compared with $4.4 million in the third quarter of 2008. The increase was due to an increase in FDIC insurance premiums and a special FDIC assessment combined with higher costs related to loan portfolio management and additional staffing expense. The cost for FDIC insurance and special assessment increased to $717,000 in the third quarter of 2009 compared with $170,000 in the third quarter of 2008. Costs associated with other real estate owned, repossessed assets and increased collection efforts were included in other non-interest expenses and rose to $478,000 in the third quarter of 2009 compared with $249,000 in the third quarter of 2008.

Total risk-based capital was 10.59% for the holding company and 10.68% 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 9.34% for the holding company and 9.43% for the bank, both well above the requirement of 6.0% for a well-capitalized bank and minimum regulatory requirements of 4.0%.

“We slowed our loan growth in the third quarter as we maintained our focus on loan quality and preserving our strong capital base,” continued Mr. Sapp. “We believe it is very important to maintain our capital ratios well above those required by the bank’s regulators as a buffer to the continued weakness in the economy. Based on our current capital ratios, we expect to moderate our fourth quarter’s loan growth as well.

“We filed an S-3 with the Securities and Exchange Commission and our shareholders approved an increase in our authorized shares in July. We believe these steps will put us in better position to take advantage of market opportunities to further strengthen our capital base in the future,” concluded Mr. Sapp.

Tennessee Commerce’s efficiency ratio was 39.28% in the third quarter of 2009 which is one of the best efficiency ratios in the industry and its asset-to-employee ratio of $15.3 million is almost four times higher than the average for other Tennessee banks.

Nine Months Results

For the first nine months of 2009, Tennessee Commerce reported a net loss available to common shareholders of $8.4 million compared with net income of $5.1 million for the first nine months of 2008. Net loss per diluted share was $1.77 compared with net income per diluted share of $1.05 in the first nine months of 2008. The 2009 year-to-date loss was primarily due to higher charge offs in the first half of 2009 combined with significant additions to the allowance for loan losses.

Net interest income rose 26.2% to $31.7 million, up from $25.1 million in the first nine months of 2008 based on a 23.2% increase in average earnings assets to $1.2 billion. Net interest margin was 3.49% for the 2009 period compared with 3.40% for the same period in 2008.

Provision for loan losses was $26.9 million for the first nine months of 2009 compared with $5.8 million for the same period in 2008.

Non interest loss for the first nine months of 2009 was $181,000 compared with non interest income of $1.4 million in the first nine months of 2008. The 2009 non interest loss was due primarily to losses on loan sales and repossessed assets in the first half of the year.

Non-interest expenses rose to $16.3 million in the first nine months of 2009 compared with $12.4 million in the first nine months of 2008. The increase was due primarily to higher costs associated with other real estate owned, repossessed assets and increased collection efforts.

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.

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 SEPTEMBER 30, 2009 (UNAUDITED) AND DECEMBER 31, 2008   (Dollars in thousands except share data)     2009     2008 ASSETS Cash and due from financial institutions $ 17,038 $ 5,260 Federal funds sold   8,660     35,538   Cash and cash equivalents 25,698 40,798   Securities available for sale 86,000 101,290   Loans 1,159,705 1,036,725 Allowance for loan losses   (19,690 )   (13,454 ) Net loans 1,140,015 1,023,271   Premises and equipment, net 2,057 2,330 Accrued interest receivable 8,799 8,115 Restricted equity securities 2,169 1,685 Income tax receivable 2,037 4,430 Other assets   68,976     36,165     Total assets $ 1,335,751   $ 1,218,084     LIABILITIES AND SHAREHOLDERS’ EQUITY Liabilities Deposits Noninterest-bearing $ 25,714 $ 24,217 Interest-bearing   1,176,571     1,044,926   Total deposits 1,202,285 1,069,143   FHLB advances — — Federal funds purchased — — Accrued interest payable 2,537 3,315 Accrued dividend payable 188 — Short-term borrowings 10,000 10,000 Accrued bonuses 52 917 Deferred tax liability 3,190 8,695 Other liabilities 1,549 1,069 Long-term subordinated debt   23,198     23,198   Total liabilities 1,242,999 1,116,337 Shareholders’ equity Preferred stock, 1,000,000 shares authorized; 30,000 shares of $0.50 par value Fixed Rate Cumulative Perpetual, Series A issued and outstanding at September 30, 2009 and December 31, 2008, respectively 15,000 15,000 Common stock, $0.50 par value; 20,000,000 shares authorized at September 30, 2009 and 10,000,000 shares authorized at December 31, 2008; 4,742,944 and 4,731,696 shares issued and outstanding at September, 2009 and December 31, 2008, respectively 2,371 2,366 Common stock warrants 453 453 Additional paid-in capital 60,321 59,946 Retained earnings 14,780 23,180 Accumulated other comprehensive income   (153 )   802   Total shareholders’ equity 92,772 101,747   Total liabilities and shareholders’ equity $ 1,335,771   $ 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.

 

See accompanying notes to consolidated financial statements.   TENNESSEE COMMERCE BANCORP, INC. CONSOLIDATED STATEMENTS OF INCOME NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 THREE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED)       Nine Months Ended     Three Months Ended September 30, September 30, (Dollars in thousands, except share data) 2009     2008 2009     2008 Interest income Loans, including fees $ 55,904 $ 52,125 $ 19,334 $ 18,528 Securities 4,089 3,398 1,301 1,221 Federal funds sold   12     148     7     7   Total interest income 60,005 55,671 20,642 19,756   Interest expense Deposits 26,807 29,340 8,724 9,902 Other   1,483     1,199     494     580   Total interest expense   28,290     30,539     9,218     10,482     Net interest income 31,715 25,132 11,424 9,274   Provision for loan losses   26,889     5,790     5,250     1,850     Net interest income after provision for loan losses 4,826 19,342 6,174 7,424   Non-interest income Service charges on deposit accounts 132 89 41 40 Securities gains (losses) 870 (67 ) 532 (97 ) Gain on sale of loans (649 ) 1,419 340 1 Other   (534 )   (13 )   440     154   Total non-interest income $ (181 ) 1,428 1,353 98   Non-interest expense Salaries and employee benefits 7,428 6,151 2,088 2,058 Occupancy and equipment 1,186 1,037 394 315 Data processing fees 1,148 910 449 376 Professional fees 1,393 1,531 405 627 Other   5,182     2,811     1,683     1,070   Total non-interest expense   16,337     12,440     5,019     4,446     Income before income taxes (11,692 ) 8,330 2,508 3,076   Income tax expense   (4,463 ) $ 3,223     972   $ 1,190   Net income (7,229 ) 5,107 1,536 1,886 CPP Preferred dividends   (1,171 )   —     (375 )   —     Net income available to common shareholders $ (8,400 ) $ 5,107   $ 1,161   $ 1,886     Earnings per share (EPS): Basic EPS $ (1.77 ) $ 1.08 $ 0.25 $ 0.40 Diluted EPS (1.77 ) 1.05 0.25 0.39   Weighted average shares outstanding: Basic 4,733,882 4,731,039 4,736,823 4,731,696 Diluted 4,733,882 4,878,150 4,736,823 4,851,831   See accompanying notes to consolidated financial statements.  

Tennessee Commerce Bancorp, Inc.

Financial Highlights   (Dollars in thousands except ratios and share data)       2009     2008     % Change For the Quarter Ending 9/30 Earnings: Net Interest Income $ 11,424 $ 9,274 23.18 % Non-Interest Income 1,353 98 1280.61 % Provision for Loan Losses 5,250 1,850 183.78 % Operating Expense   5,019     4,446   12.89 % Operating Income 2,508 3,076 -18.47 % Applicable Tax   972     1,190   -18.32 % Net Income 1,536 1,886 -18.56 % Preferred Dividends   375     -   100.00 % Net Income Available to Common Shareholders $ 1,161   $ 1,886   -38.44 %   At September 30 Total Assets $ 1,335,751 $ 1,106,058 20.77 % Net Loans 1,140,015 985,648 15.66 % Earning Assets 1,234,675 1,062,299 16.23 % Allowance for Loan Losses 19,690 12,191 61.51 % Deposits 1,202,285 988,664 21.61 % Shareholders' Equity $ 92,772 $ 67,352 37.74 %   Total Shares Outstanding 4,742,944 4,731,696 0.24 %   Significant Ratios - 3rd Quarter Net Interest Margin 3.61 % 3.46 % 4.34 % Return on Average Assets 0.34 % 0.68 % -49.60 % Return on Average Common Equity 7.46 % 11.35 % -34.30 % Efficiency Ratio 39.28 % 47.44 % -17.20 % Loan Loss Reserve/Loans 1.70 % 1.22 % 38.97 % Capital/Assets 6.95 % 6.09 % 14.06 % Basic Earnings per Share - YTD $ 0.25 $ 0.40 -37.50 % Diluted Earnings per Share - YTD $ 0.25 $ 0.39 -35.90 %   TENNESSEE COMMERCE BANCORP, INC. ANALYSIS OF INTEREST INCOME AND EXPENSE, RATES AND YIELDS (UNAUDITED)       Three Months Ended September 30,     Three Months Ended September 30, 2009 2008 Average         Average Average         Average (Dollars in thousands) Balance Interest Rate Balance Interest Rate ASSETS   Interest earning assets Securities (taxable) (1) $ 101,978 $ 1,301 4.96 % $ 87,356 $ 1,221 5.47 % Loans (2) (3) 1,139,510 19,334 6.73 % 975,487 18,528 7.56 % Federal funds sold   10,707     7 0.26 %   1,553     7 1.79 % Total interest earning assets 1,252,195 20,642 6.53 % 1,064,396 19,756 7.37 %   Non-interest earning assets Cash and due from banks 9,495 3,936 Net fixed assets and equipment 2,118 2,358 Accrued interest and other assets   79,468     32,041     Total assets $ 1,343,276   $ 1,102,731     LIABILITIES AND SHAREHOLDERS’ EQUITY   Interest bearing liabilities Deposits (other than demand) $ 1,184,337 $ 8,724 2.92 % $ 961,777 $ 9,902 4.10 % Federal funds purchased 1,401 8 2.27 % 15,377 115 2.98 % Subordinated debt   33,198     486 5.81 %   32,736     465 5.65 % Total interest bearing liabilities 1,218,936   9,218 3.00 % 1,009,890   10,482 4.13 %   Non-interest bearing liabilities Non-interest bearing demand deposits 25,383 23,328 Other liabilities 7,606 3,428 Shareholders’ equity   91,351     66,085     Total liabilities and shareholders’ equity $ 1,343,276   $ 1,102,731     Net Interest Spread 3.53 % 3.24 %   Net Interest Margin 3.61 % 3.46 %   (1) Unrealized gain (loss) of $(1,997) and $(1,399) is excluded from yield calculation for the nine months ended September 30, 2009 and 2008, respectively.

(2) Non-accrual loans are included in average loan balances and loan fees of $3,951 and $3,698 are included in interest income for the three months ended September 30, 2009 and 2008, respectively.

(3) Loans are presented net of allowance for loan loss   TENNESSEE COMMERCE BANCORP, INC. ANALYSIS OF INTEREST INCOME AND EXPENSE, RATES AND YIELDS (UNAUDITED)       Nine Months Ended September 30,     Nine Months Ended September 30, 2009 2008 Average         Average Average         Average (Dollars in thousands) Balance Interest Rate Balance Interest Rate ASSETS   Interest earning assets Securities (taxable) (1) $ 104,123 $ 4,089 5.21 % $ 81,985 $ 3,398 5.53 % Loans (2) (3) 1,103,463 55,904 6.77 % 896,241 52,125 7.77 % Federal funds sold   7,434     12 0.22 %   7,854     148 2.52 % Total interest earning assets 1,215,020 60,005 6.60 % 986,080 55,671 7.54 %   Non-interest earning assets Cash and due from banks 8,905 3,612 Net fixed assets and equipment 2,205 1,760 Accrued interest and other assets   68,587     28,826     Total assets $ 1,294,717   $ 1,020,278     LIABILITIES AND SHAREHOLDERS’ EQUITY   Interest bearing liabilities Deposits (other than demand) $ 1,118,552 $ 26,807 3.20 % $ 895,780 $ 29,340 4.38 % Federal funds purchased 16,596 75 0.60 % 9,204 206 2.99 % Subordinated debt   33,198     1,408 5.67 %   22,605     993 5.87 % Total interest bearing liabilities 1,168,346   28,290 3.24 % 927,589   30,539 4.40 %   Non-interest bearing liabilities Non-interest bearing demand deposits 23,855 23,870 Other liabilities 6,873 3,749 Shareholders’ equity   95,643     65,070     Total liabilities and shareholders’ equity $ 1,294,717   $ 1,020,278     Net Interest Spread 3.36 % 3.14 %   Net Interest Margin 3.49 % 3.40 %   (1) Unrealized gain (loss) of $(843) and $(31) is excluded from yield calculation for the nine months ended September 30, 2009 and 2008, respectively.

(2) Non-accrual loans are included in average loan balances and loan fees of $3,951 and $3,698 are included in interest income for the three months ended September 30, 2009 and 2008, respectively.

(3) Loans are presented net of allowance for loan loss   TENNESSEE COMMERCE BANCORP, INC. LOAN DATA   (amounts in thousands)                     9/30/2009 6/30/2009 3/31/2009 12/31/2008 9/30/2008 LOAN BALANCES BY TYPE: Commercial and Industrial $ 637,016 $ 639,287 $ 635,943 $ 589,518 $ 580,501 Consumer 3,421 3,827 3,628 3,572 3,479 Real Estate: Construction 206,512 216,208 202,034 181,638 165,511 1-4 Family 40,033 37,988 38,257 37,822 38,128 Other   198,653     175,510     172,771     171,150     162,283   Total Real Estate 445,198 429,706 413,062 390,610 365,922 Other   74,070     74,299     51,309     53,025     47,937   Total $ 1,159,705   $ 1,147,119   $ 1,103,942   $ 1,036,725   $ 997,839     ASSET QUALITY DATA: Nonaccrual Loans $ 28,854 $ 23,332 $ 24,342 $ 11,603 $ 9,834 Loans 90+ Days Past Due   1,332     2,240     9,605     18,788     4,398   Total Non-Performing Loans 30,186 25,572 33,947 30,391 14,232 Other Real Estate Owned   1,254     5,635     5,045     5,764     1,126   Total Non-Performing Assets $ 31,440 $ 31,207 $ 38,992 $ 36,155 $ 15,358   Non-Performing Loans to Total Loans 2.6 % 2.2 % 3.1 % 2.9 % 1.4 % Non-Performing Assets to Total Loans and OREO 2.7 % 2.7 % 3.5 % 3.5 % 1.5 % Allowance for Loan Losses to Non-Performing Loans 65.2 % 74.1 % 45.4 % 44.3 % 85.7 % Allowance for Loan Losses to Total Loans 1.7 % 1.7 % 1.4 % 1.3 % 1.2 % Loans 30+ Days Past Due to Total Loans 3.0 % 3.3 % 4.9 % 4.5 % 3.0 % (loans not included in non-performing loans) Net Chargeoffs to Average Gross Loans 0.4 % 0.9 % 0.6 % 0.2 % 0.1 %     NET CHARGEOFFS FOR QUARTER $ 4,498 $ 9,611 $ 6,544 $ 2,058 $ 1,179   Transportation & Other Equipment : Nonaccrual Loans (included above) $ 10,486 $ 2,850 $ 7,838 $ 6,952 $ 5,875 Loans 90+ Days Past Due (included above) 1,311 2,240 1,196 2,119 1,815

Repossessions

$ 21,262 $ 16,363 $ 11,657 $ 10,363 $ 10,215   TENNESSEE COMMERCE BANCORP, INC. FINANCIAL HIGHLIGHTS (Dollars in thousands, except per share amounts)       2009 Q3     2009 Q2     2009 Q1     2008 Q4     2008 Q3 Total Assets $ 1,335,751 $ 1,339,539 $ 1,275,134 $ 1,218,084 $ 1,106,058 Total Net Loans 1,140,015 1,128,181 1,088,518 1,023,271 985,648 Total Deposits 1,202,285 1,203,681 1,095,307 1,069,143 988,664 Reserves/ Loans (%) 1.70 % 1.65 % 1.40 % 1.30 % 1.22 % Common Equity 63,163 61,141 68,472 72,200 67,352 Tangible Common Equity 63,163 61,141 68,472 72,200 67,352 Net Interest Income 11,424 10,451 9,840 9,819 9,274 Operating Revenue 12,777 8,890 9,867 12,685 9,372

Net Income (Loss) Available to Common Shareholders

1,161 (6,901 ) (2,660 ) 2,647 1,886 Diluted Earnings (Loss) Per Share $ 0.25 $ (1.46 ) $ (0.56 ) $ 0.55 $ 0.39 ROAA 0.34 % -2.13 % -0.86 % 0.91 % 0.68 % ROAE 7.46 % -42.50 % -15.22 % 13.86 % 11.35 % Net Interest Margin 3.61 % 3.45 % 3.39 % 3.48 % 3.46 % Tangible Equity/ Total Assets 4.73 % 4.56 % 5.37 % 5.93 % 6.09 % Total Capital Ratio - Bank 10.68 % 10.53 % 10.61 % 11.01 % 10.18 % Total Capital Ratio - Corporation 10.59 % 10.49 % 11.40 % 12.42 % 9.86 %