FRANKLIN, Tenn., July 28, 2011 (GLOBE NEWSWIRE) -- Tennessee Commerce Bancorp, Inc. (Nasdaq:TNCC), the bank holding company of Tennessee Commerce Bank (the "Bank"), today reported financial results for the second quarter ended June 30, 2011. The Company reported a net loss of $12.2 million for the quarter ended June 30, 2011, compared with net income of $1.5 million for the same period in 2010. The net loss per diluted common share was $1.00 compared to net income per diluted common share of $0.26 for the same period in 2010.
The net loss for the quarter ended June 30, 2011 was primarily driven by a $10.2 million write down of repossessed equipment and interest income reversals of $2.5 million on loans that were placed on non-accrual. Additionally, provision expense of $10.0 million for the quarter ended June 30, 2011 was $1.1 million higher than the $8.9 million provision expense recorded for the quarter ended March 31, 2011. The provision expense for the quarter provided 127% coverage of net charge-offs of $7.9 million and increased the allowance for loans and lease losses to 2.44% from 2.16% for the quarter ended March 31, 2011. Combined, these charges account for $0.69 of the reported net loss for the quarter ended June 30, 2011.
The write down on repossessions was mainly attributed to aggressive measures taken on repossessed assets, mainly transportation equipment, in accordance with our existing plan of accelerated reduction and pursuant to an agreement with the Tennessee Department of Financial Institutions granting an extension on holding periods for this type of asset. The agreement requires the bank to charge off all non-real estate repossessed assets that are older than six months. The write downs that are included in the current quarter cover all required charge-offs through the end of the third quarter of 2011. In accordance with the agreement, the Bank needs to dispose of an additional $4.4 million from the books during the fourth quarter of 2011 and the first half of 2012.
Assets decreased $39.1 million or 2.6%% compared to the quarter ended March, 31, 2011. The decrease in assets was mainly attributable to a decrease of $51.8 million in loans, $15.8 million in securities available-for-sale, and $13.0 in repossessed assets offset by an increase in cash and cash equivalents of $35.6 million. The change in the asset mix has decreased the Bank's risk weighted assets by $49.4 million when compared to the quarter ended March 31, 2011.
Total deposits increased $42.8 million or 3.3% compared to the fourth quarter of 2010. Interest bearing deposits drove the increase in deposits with an increase of $24.4 million while non-interest bearing deposits increased $18.4 million.
The net interest margin decreased from 3.89% for the quarter ended March 31, 2011, to 2.92% for the quarter ended June 30, 2011. The yield on loans decreased to 5.25% for the three months ended June 30, 2011 compared to 6.28% for the quarter ended March 31, 2011. Loan interest income reversals of $2.5 million or 73 basis points combined with a decrease of $44.0 million in the average loan balance were the main drivers to the decreased loan yield for the quarter ended June 30, 2011. The cost of interest bearing liabilities improved to 1.90% for the quarter ended June 30, 2011 compared to 2.04% for the quarter ended March 31, 2011.
Total non-performing assets increased to $163.7 million or 73.4% at June 30, 2011, compared to $94.4 million at March 31, 2011. The increase is mainly attributed to approximately $65.0 million in loans that will be subject to a Debt Previously Contracted (DPC) workout. This workout would result in a conversion of approximately $30.0 of substandard debt into an earning asset. Additionally, four credits totaling $27.8 million were added to non-accruals during the quarter while three credits totaling $3.0 million were removed from non-accrual by way of charge-off or transferred to other real estate owned.
As a result of the Bank entering into a written agreement with the Federal Deposit Insurance Corporation (FDIC) during the second quarter, the Bank has to achieve and maintain a tier 1 leverage capital ratio of 8.50%, a tier 1 risk based capital ratio of 10.00% and a total risk based capital ratio of 11.50% by no later than December 31, 2011. At June 30, 2011 the Bank had a tier 1 leverage ratio of 7.35%, a tier 1 risk based capital ratio of 9.21% and a total risk based capital ratio of 10.47%. The holding company had a tier 1 leverage ratio of 8.31%, a tier 1 risk based ratio of 10.37% and a total risk based ratio of 11.64%.
The management team of Tennessee Commerce Bancorp, Inc. will host a conference call at 10:00 AM CT. to discuss the results for the quarter, compliance with the written agreement with the FDIC as well as the plan to return to profitability and to reduce non-performing assets over the next four quarters.
Second Quarter Conference Call
Schedule this webcast into MS-Outlook calendar (click open when prompted):
http://apps.shareholder.com/PNWOutlook/t.aspx?m=48767&k=91B14F4B
Toll-free: 877-312-8781
Conference ID: 84134808
Listen via Internet: http://investor.shareholder.com/media/eventdetail.cfm?eventid=99835&CompanyID=ABEA-2G5D9Z&e=1&mediaKey=B8DF282067CD208270C595F65354F2C4
Tennessee Commerce will provide an online, real-time webcast and rebroadcast of its first quarter earnings conference call to be held at 11:00 a.m. Eastern on July 28, 2011. The live broadcast will be available online at http://www.tncommercebank.com under the Investor Relations tab.
An audio replay of the conference call will be available approximately two hours after the call's completion on our website at http://www.tncommercebank.com under the Investor Relations tab or by dialing one of the following Dial-In Numbers and the Conference ID shown below:
Encore Dial In #: (855) 859-2056 Encore Dial In #: (404) 537-3406
The recording will be available from: 07/28/2011 14:00 to 08/05/2011 23:59 Conference ID number: 84134808
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 office is located in Franklin, Tennessee. Tennessee Commerce Bancorp's stock is traded on the NASDAQ Global Market under the symbol TNCC.
Additional information concerning Tennessee Commerce can be accessed at www.tncommercebank.com.
Forward Looking Statements
This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements about our regional economy and non-GAAP financial measures. Forward-looking statements can be identified by the use of the words "anticipate," "believe," "expect," "outlook," "estimate," "continue," "predict," "project", "intend," "could" and "should," and other words of similar meaning. These forward-looking statements express management's current expectations or forecasts of future events and, by their nature, are subject to risks and uncertainties and there are a number of factors that could cause actual results to differ materially from those in such statements. Factors that might cause such a difference include, but are not limited to, the resolution of our recent regulatory examination, the effects of future economic, business and market conditions and changes, domestic and foreign, that may affect general economic conditions, governmental monetary and fiscal policies, negative developments in the financial services industry and U.S. and global credit markets, fluctuations in interest rates, changes in accounting policies, rules and practices, other matters discussed in this press release and other factors identified in the Company's Annual Report on Form 10-K and other periodic filings with the Securities and Exchange Commission.
These forward-looking statements are made only as of the date of this press release, and Tennessee Commerce undertakes no obligation to release revisions to these forward-looking statements to reflect events or conditions after the date of this release. Tennessee Commerce is not responsible for updating the information contained in this press release beyond the published date, or for changes made to this document by wire services or Internet services.
| TENNESSEE COMMERCE BANCORP, INC. | |||||
| FINANCIAL HIGHLIGHTS | |||||
| THREE MONTHS ENDED JUNE 30, 2011, MARCH 31, 2011 AND JUNE 30, 2010 | |||||
| June 30, | March 31, | June 30, | Percent change vs. | ||
| (Dollars in thousands, except per share data) | 2011 | 2011 | 2010 | 1Q '11 | 2Q '10 |
| INCOME STATEMENT: | |||||
| Net interest income | $ 9,937 | $ 13,153 | $ 13,343 | -24.45% | -25.53% |
| Provision for loan losses | 9,990 | 8,948 | 4,450 | 11.65% | 124.49% |
| Other non interest (loss) income | (12,211) | (1,973) | 617 | 518.91% | -2079.09% |
| Securities (losses) gains | (322) | (119) | 277 | 170.59% | -216.25% |
| Total non-interest expense | 6,585 | 6,588 | 6,711 | -0.05% | -1.88% |
| (Loss) income before income taxes | (19,171) | (4,475) | 3,076 | 328.40% | -723.24% |
| Income tax (benefit) expense | (7,398) | (1,651) | 1,190 | 348.09% | -721.68% |
| Net (loss) income | $ (11,773) | $ (2,824) | $ 1,886 | 316.89% | -724.23% |
| Preferred dividends | (377) | (375) | (375) | 0.53% | 0.53% |
| Net (loss) income available to common shareholders | $ (12,150) | $ (3,199) | $ 1,511 | 279.81% | -904.10% |
| MARKET DATA: | |||||
| Earnings per share - basic (b) | $ (1.00) | $ (0.26) | $ 0.27 | 283.38% | -469.19% |
| Earnings per share - diluted (b) | (1.00) | (0.26) | 0.26 | 283.38% | -483.38% |
| Book value per share at period end | 6.27 | 7.05 | 12.51 | -11.06% | -49.88% |
| Stock price at period end | 2.60 | 4.90 | 6.45 | -46.94% | -59.69% |
| Market capitalization at period end | 31,737,072 | 59,764,810 | 36,432,077 | -46.90% | -12.89% |
| Weighted average common shares - basic (a) | 12,197,006 | 12,195,301 | 5,648,384 | 0.01% | 115.94% |
| Weighted average common shares - diluted (a) | 12,197,006 | 12,195,301 | 5,737,048 | 0.01% | 112.60% |
| Common share outstanding at period end | 12,206,566 | 12,196,900 | 5,648,384 | 0.08% | 116.11% |
| PERFORMANCE RATIOS: | |||||
| Annualized return on average assets (a)(b) | -3.08% | -0.88% | 0.44% | 250.45% | -799.86% |
| Annualized return on average common equity (a)(b) | -57.99% | -14.64% | 8.73% | 296.12% | -764.55% |
| Yield on loans | 5.25% | 6.28% | 6.80% | -16.40% | -22.79% |
| Yield on investments | 3.66% | 3.39% | 4.39% | 7.96% | -16.63% |
| Yield on earning assets | 4.94% | 5.89% | 6.57% | -16.13% | -24.81% |
| Cost of interest bearing deposits | 1.90% | 2.04% | 2.27% | -6.86% | -16.30% |
| Cost of borrowings | 4.75% | 4.73% | 5.73% | 0.42% | -17.10% |
| Cost of paying liabilities | 1.94% | 2.09% | 2.36% | -7.18% | -17.80% |
| Net interest margin (annualized) | 2.92% | 3.89% | 4.25% | -24.94% | -31.29% |
| OTHER RATIOS (NON GAAP): | |||||
| Efficiency ratio (g) | NM | 59.56% | 47.14% | ||
| Annualized return on average tangible assets | -3.08% | -0.88% | 0.44% | 250.45% | -800.90% |
| Annualized return on average tangible common equity | -57.99% | -14.64% | 8.73% | 296.12% | -764.29% |
| Tangible book value per common share (d) | $ 6.27 | $ 7.05 | $ 12.51 | -11.07% | -49.86% |
| TENNESSEE COMMERCE BANCORP, INC. | |||||
| FINANCIAL HIGHLIGHTS (CONTINUED) | |||||
| THREE MONTHS ENDED JUNE 30, 2011, MARCH 31, 2011 AND JUNE 30, 2010 | |||||
| June 30, | March 31, | June 30, | Percent change vs. | ||
| (Dollars in thousands, except per share data) | 2011 | 2011 | 2010 | 1Q '11 | 2Q '10 |
| BALANCE SHEET: | |||||
| Securities available for sale | $ 166,801 | $ 182,644 | $ 92,887 | -8.67% | 79.57% |
| Loans, gross | 1,156,808 | 1,208,610 | 1,197,059 | -4.29% | -3.36% |
| Allowance for loan losses | (28,205) | (26,114) | (20,346) | 8.01% | 38.63% |
| Other real estate owned | 6,879 | 2,284 | 795 | 201.18% | 765.28% |
| Total assets | 1,482,203 | 1,521,343 | 1,389,528 | -2.57% | 6.67% |
| Total deposits | 1,341,894 | 1,370,057 | 1,243,456 | -2.06% | 7.92% |
| Borrowings | 25,070 | 25,232 | 26,100 | -0.64% | -3.95% |
| Shareholders' equity | 106,938 | 116,210 | 100,782 | -7.98% | 6.11% |
| Common Equity | 76,938 | 86,210 | 70,782 | -10.76% | 8.70% |
| Tangible common equity (d) | 76,714 | 86,010 | 70,651 | -10.81% | 8.58% |
| Nonperforming loans | 137,677 | 59,089 | 34,140 | 133.00% | 303.27% |
| Nonperforming assets | 163,685 | 94,444 | 74,214 | 73.31% | 120.56% |
| Past due 90 day loans and accruing | 4,362 | 5,357 | 2,943 | -18.57% | 48.22% |
| ASSET QUALITY RATIOS: | |||||
| Loans as a % of period end assets | 78.05% | 79.44% | 86.15% | -1.76% | -9.40% |
| Nonperforming loans as a % period end loans | 11.90% | 4.89% | 2.85% | 143.43% | 317.30% |
| Past due 90 day loans as a % period end loans | 0.38% | 0.44% | 0.25% | -14.93% | 53.37% |
| Nonperforming assets / Period end loans + OREO | 14.07% | 7.80% | 6.20% | 80.35% | 127.03% |
| Allowance for loan losses as a % of period end loans | 2.44% | 2.16% | 1.70% | 12.84% | 43.45% |
| Net-charge offs | $ 7,899 | $ 4,297 | $ 4,214 | 83.83% | 87.45% |
| Annualized net charge-offs as a percent of average loans (a) | 2.63% | 1.42% | 1.44% | 84.87% | 81.85% |
| CAPITAL & LIQUIDITY: | |||||
| Total equity / Period end assets | 7.21% | 7.64% | 7.25% | -5.55% | -0.53% |
| Common equity / Period end assets | 5.19% | 5.67% | 5.09% | -8.40% | 1.90% |
| Tangible common equity (d) / Tangible assets (f) | 5.18% | 5.65% | 5.08% | -8.45% | 1.79% |
| Average equity / Average assets (a) | 7.23% | 8.04% | 7.24% | -10.09% | -0.14% |
| Average equity / Average deposits (a) | 8.02% | 8.99% | 8.15% | -10.77% | -1.53% |
| Average loans / Average deposits (a) | 81.51% | 91.42% | 95.71% | -10.84% | -14.83% |
| TENNESSEE COMMERCE BANCORP, INC. | |||
| FINANCIAL HIGHLIGHTS (CONTINUED) | |||
| THREE MONTHS ENDED JUNE 30, 2011, MARCH 31, 2011 AND JUNE 30, 2010 | |||
| (a) Averages are for the quarters ended June 30, 2011, March 31, 2011 and June 30, 2010 | |||
| (b) Reported measure uses net income available to common shareholders | |||
| (c) Net income available to common shareholders for each period divided by average tangible common equity during the applicable period. Average tangible shareholders' equity during the applicable period less (i) average preferred stock during the applicable period and (ii) average goodwill and other intangibles during the period. | |||
| RECONCILIATION OF AVERAGE SHAREHOLDERS' EQUITY TO AVERAGE TANGIBLE COMMON EQUITY | |||
| THREE MONTHS ENDED | |||
| June 30, 2011 | March 31, 2011 | June 30, 2010 | |
| AVERAGE SHAREHOLDERS' EQUITY | $ 114,246 | $ 118,593 | $ 99,571 |
| Less: average preferred stock, net of discount | 29,759 | 29,736 | 29,668 |
| Less: warrant | 453 | 453 | 453 |
| Less: average goodwill and other intangibles | -- | -- | -- |
| AVERAGE TANGIBLE COMMON EQUITY | $ 84,034 | $ 88,404 | $ 69,450 |
| (d) Tangible common equity equals ending shareholders' equity less preferred stock, net of discount, warrant and goodwill and other intangibles, in each case at the end of the period. | |||
| RECONCILIATION OF SHAREHOLDERS' EQUITY TO TANGIBLE COMMON EQUITY | |||
| THREE MONTHS ENDED | |||
| June 30, 2011 | March 31, 2011 | June 30, 2010 | |
| SHAREHOLDERS' EQUITY | $ 106,938 | $ 116,210 | $ 100,782 |
| Less: preferred stock, net of discount | 29,771 | 29,747 | 29,678 |
| Less: warrant | 453 | 453 | 453 |
| Less: goodwill and other intangibles | -- | -- | -- |
| TANGIBLE COMMON EQUITY | $ 76,714 | $ 86,010 | $ 70,651 |
| (e) Net income available to common shareholders for each period divided by average tangible assets during the period. Average tangible assets equals average assets less average goodwill and other intangibles | |||
| RECONCILIATION OF AVERAGE ASSETS TO AVERAGE TANGIBLE ASSETS | |||
| THREE MONTHS ENDED | |||
| June 30, 2011 | March 31, 2011 | June 30, 2010 | |
| AVERAGE ASSETS | $ 1,580,224 | $ 1,474,808 | $ 1,375,357 |
| Less: average goodwill and other intangibles | -- | -- | -- |
| AVERAGE TANGIBLE ASSETS | $ 1,580,224 | $ 1,474,808 | $ 1,375,357 |
| (f) Tangible common equity divided by tangible assets. Tangible assets equals total assets less goodwill and other intangibles. | |||
| RECONCILIATION OF TOTAL ASSETS TO TANGIBLE ASSETS | |||
| THREE MONTHS ENDED | |||
| June 30, 2011 | March 31, 2011 | June 30, 2010 | |
| TOTAL ASSETS | $ 1,482,203 | $ 1,521,343 | $ 1,389,528 |
| Less: goodwill and other intangibles | -- | -- | -- |
| TANGIBLE ASSETS | $ 1,482,203 | $ 1,521,343 | $ 1,389,528 |
| RECONCILIATION OF EFFICIENCY RATIO | |||
| THREE MONTHS ENDED | |||
| June 30, 2011 | March 31, 2011 | June 30, 2010 | |
| NON-INTEREST EXPENSE | $ -- | $ 6,588 | $ 6,711 |
| NET-INTEREST INCOME | -- | 13,153 | 13,343 |
| NON-INTEREST INCOME | -- | (2,092) | 894 |
| NET REVENUES | -- | 11,061 | 14,237 |
| EFFICIENCY RATIO | NM | 59.56% | 47.14% |
| (g) Efficiency ratio is calculated by dividing net revenues into non-interest expense. NM - Not Meaningful | |||
| (h) Common book value at period end equals shareholders' equity less preferred stock, net of discount and warrant, in each case at end of period | |||
| TENNESSEE COMMERCE BANCORP, INC. | ||||
| CONSOLIDATED STATEMENTS OF INCOME | ||||
| SIX AND THREE MONTHS ENDED JUNE 30, 2011 AND 2010 | ||||
| (UNAUDITED) | ||||
| Six Months Ended | Three Months Ended | |||
| June 30, | June 30, | June 30, | June 30, | |
| (Dollars in thousands, except per share data) | 2011 | 2010 | 2011 | 2010 |
| Interest income | ||||
| Loans, including fees | $ 33,858 | $ 39,104 | $ 15,195 | $ 19,840 |
| Securities | 2,787 | 2,003 | 1,539 | 766 |
| Federal funds sold | 110 | 13 | 94 | 11 |
| Total interest income | 36,755 | 41,120 | 16,828 | 20,617 |
| Interest expense | ||||
| Deposits | 13,069 | 13,495 | 6,592 | 6,774 |
| Other | 596 | 1,033 | 299 | 500 |
| Total interest expense | 13,665 | 14,528 | 6,891 | 7,274 |
| Net interest income | 23,090 | 26,592 | 9,937 | 13,343 |
| Provision for loan losses | 18,938 | 9,050 | 9,990 | 4,450 |
| Net interest income after provision for loan losses | 4,152 | 17,542 | (53) | 8,893 |
| Non-interest income | ||||
| Service charges on deposit accounts | 29 | 60 | (4) | 33 |
| Securities (loss) gains | (441) | 696 | (322) | 277 |
| Gain (loss) on sale of loans | 184 | 778 | (317) | 778 |
| Loss on repossession | (14,909) | (2,256) | (12,176) | (1,170) |
| Other | 512 | 2,303 | 286 | 976 |
| Total non-interest (loss) income | (14,625) | 1,581 | (12,533) | 894 |
| Non-interest expense | ||||
| Salaries and employee benefits | 4,202 | 5,376 | 1,784 | 2,661 |
| Occupancy and equipment | 1,024 | 923 | 535 | 446 |
| Data processing fees | 1,066 | 1,007 | 551 | 473 |
| FDIC expense | 1,751 | 1,061 | 911 | 515 |
| Professional fees | 1,507 | 1,074 | 929 | 523 |
| Other | 3,623 | 3,779 | 1,875 | 2,093 |
| Total non-interest expense | 13,173 | 13,220 | 6,585 | 6,711 |
| (Loss) income before income taxes | (23,646) | 5,903 | (19,171) | 3,076 |
| Income tax (benefit) expense | (9,049) | 2,288 | (7,398) | 1,190 |
| Net (loss) income | (14,597) | 3,615 | (11,773) | 1,886 |
| Preferred dividends | (752) | (750) | (377) | (375) |
| Net (loss) income available to common shareholders | $ (15,349) | $ 2,865 | $ (12,150) | $ 1,511 |
| Earnings (loss) per share (EPS): | ||||
| Basic EPS | $ (1.26) | $ 0.51 | $ (1.00) | $ 0.27 |
| Diluted EPS | (1.26) | 0.50 | (1.00) | 0.26 |
| Weighted average shares outstanding: | ||||
| Basic | 12,196,307 | 5,647,884 | 12,197,006 | 5,648,384 |
| Diluted | 12,196,307 | 5,718,903 | 12,197,006 | 5,737,048 |
| TENNESSEE COMMERCE BANCORP, INC. | |||
| CONSOLIDATED BALANCE SHEETS | |||
| JUNE 30, 2011 (UNAUDITED), DECEMBER 31, 2010 AND JUNE 30, 2010 (UNAUDITED) | |||
| June 30, | December 31, | June 30, | |
| (Dollars in thousands, except per share data) | 2011 | 2010 | 2010 |
| ASSETS | |||
| Cash and due from banks | $ 10,843 | $ 6,521 | $ 9,277 |
| Federal funds sold | 85,258 | 14,214 | 11,610 |
| Cash and cash equivalents | 96,101 | 20,735 | 20,887 |
| Securities available for sale | 166,801 | 127,650 | 92,887 |
| Loans | 1,156,808 | 1,229,811 | 1,197,059 |
| Allowance for loan losses | (28,205) | (21,463) | (20,346) |
| Net loans | 1,128,603 | 1,208,348 | 1,176,713 |
| Premises and equipment, net | 2,054 | 2,335 | 2,482 |
| Accrued interest receivable | 10,185 | 8,746 | 8,545 |
| Restricted equity securities | 2,459 | 2,459 | 2,169 |
| Income tax receivable | 7,717 | 418 | -- |
| Bank-owned life insurance | 28,290 | 27,969 | 27,571 |
| Other real estate owned | 6,879 | 2,888 | 795 |
| Repossessions | 14,767 | 30,635 | 36,336 |
| Other assets | 18,347 | 20,983 | 21,143 |
| Total assets | $ 1,482,203 | $ 1,453,166 | $ 1,389,528 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||
| Liabilities | |||
| Deposits | |||
| Non-interest-bearing | $ 43,836 | $ 25,486 | $ 24,553 |
| Interest-bearing | 1,298,058 | 1,273,565 | 1,218,903 |
| Total deposits | 1,341,894 | 1,299,051 | 1,243,456 |
| Accrued interest payable | 1,622 | 1,408 | 1,390 |
| Accrued dividend payable | 564 | 187 | 187 |
| Short-term borrowings | 1,872 | -- | 8,750 |
| Other liabilities | 6,115 | 7,762 | 8,863 |
| Long-term subordinated debt and other borrowings | 23,198 | 25,421 | 26,100 |
| Total liabilities | 1,375,265 | 1,333,829 | 1,288,746 |
| 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 June 30, 2011, December 31, 2010 and June 30, 2010 | 15,000 | 15,000 | 15,000 |
| Common stock, $0.50 par value; 20,000,000 shares authorized at June 30, 2011, December 31, 2010 and June 30, 2010; -----12,206,566, 12,194,884 and 5,648,384 shares issued and outstanding at June 30, 2011, December 31, 2010 and June 30, 2010, respectively | 6,098 | 6,097 | 2,824 |
| Common stock warrant | 453 | 453 | 453 |
| Additional paid-in capital | 84,726 | 84,391 | 63,507 |
| Retained earnings | 2,651 | 18,000 | 18,921 |
| Accumulated other comprehensive loss | (1,990) | (4,604) | 77 |
| Total shareholders' equity | 106,938 | 119,337 | 100,782 |
| Total liabilities and shareholders' equity | $ 1,482,203 | $ 1,453,166 | $ 1,389,528 |
| (1) The balance sheet at December 31, 2010 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. | ||||||||||||
| AVERAGE BALANCE SHEET | ||||||||||||
| SIX AND THREE MONTHS ENDED JUNE 30, 2011 AND JUNE 30, 2010 | ||||||||||||
| Six Months | Six Months | Three Months | Three Months | |||||||||
| Ended June 30, | Ended June 30, | Ended June 30, | Ended June 30, | |||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||
| Average | Average | Average | Average | Average | Average | Average | Average | |||||
| Balance | Interest | Rate | Balance | Interest | Rate | Balance | Interest | Rate | Balance | Interest | Rate | |
| ASSETS | ||||||||||||
| Interest earning assets | ||||||||||||
| Securities (taxable) (1) | $ 152,346 | $ 2,787 | 3.53% | $ 84,940 | $ 2,003 | 4.71% | $ 162,477 | $ 1,539 | 3.66% | $ 69,766 | $ 766 | 4.39% |
| Loans (2) (3) | 1,183,219 | 33,858 | 5.77% | 1,163,888 | 39,104 | 6.78% | 1,160,831 | 15,195 | 5.25% | 1,169,762 | 19,840 | 6.80% |
| Federal funds sold | 27,155 | 110 | 0.82% | 11,329 | 13 | 0.23% | 37,101 | 94 | 1.02% | 18,933 | 11 | 0.23% |
| Total interest earning assets | 1,362,720 | 36,755 | 5.41% | 1,260,157 | 41,120 | 6.58% | 1,360,409 | 16,828 | 4.94% | 1,258,461 | 20,617 | 6.57% |
| Non-interest earning assets | ||||||||||||
| Cash and due from banks | 72,226 | 12,380 | 128,610 | 16,136 | ||||||||
| Net fixed assets and equipment | 2,202 | 2,057 | 2,130 | 2,146 | ||||||||
| Accrued interest and other assets | 90,659 | 98,859 | 89,075 | 98,614 | ||||||||
| Total assets | $ 1,527,807 | $ 1,373,453 | $ 1,580,224 | $ 1,375,357 | ||||||||
| LIABILITIES AND SHAREHOLDERS EQUITY | ||||||||||||
| Interest-bearing liabilities | ||||||||||||
| Deposits (other than demand) | 1,340,213 | 13,069 | 1.97% | 1,204,675 | 13,495 | 2.26% | 1,391,081 | 6,592 | 1.90% | 1,199,311 | 6,774 | 2.27% |
| Federal funds purchased | 3,422 | 2 | 0.12% | 2,002 | 8 | 0.80% | 6,624 | 1 | 0.06% | 105 | -- | -- % |
| Subordinated debt | 25,256 | 594 | 4.74% | 35,595 | 1,025 | 5.81% | 25,155 | 298 | 4.75% | 35,030 | 500 | 5.73% |
| Total interest-bearing liabilities | 1,368,891 | 13,665 | 2.01% | 1,242,272 | 14,528 | 2.36% | 1,422,860 | 6,891 | 1.94% | 1,234,446 | 7,274 | 2.36% |
| Non-interest bearing liabilities | ||||||||||||
| Non-interest bearing demand deposits | 32,077 | 22,977 | 33,063 | 22,897 | ||||||||
| Other liabilities | 10,389 | 9,819 | 10,055 | 18,443 | ||||||||
| Shareholders' equity | 116,450 | 98,365 | 114,246 | 99,571 | ||||||||
| Total liabilities and shareholders' equity | $ 1,527,807 | $ 1,373,433 | $ 1,580,224 | $ 1,375,357 | ||||||||
| Net interest spread | 3.40% | 4.22% | 3.00% | 4.21% | ||||||||
| Net interest margin | 3.40% | 4.25% | 2.92% | 4.25% | ||||||||
| (1) Unrealized losses of $6,706 and $882 for the six months ended June 30, 2011 and 2010, respectively. Unrealized losses of $6,150 and $234 for the three months ended June 30, 2011 and 2010, respectively. | ||||||||||||
| (2) Non-accrual loans are included in average loan balances, and loan fees of $1,214 and $3,067 are included in interest income for the six months ended June 30, 2011 and 2010, respectively. | ||||||||||||
| Non-accrual loans are included in average loan balances, and loan fees of $544 and $1,562 are included in interest income for the six months ended June 30, 2011 and 2010, respectively. | ||||||||||||
| (3) Loans are presented net of ALLL | ||||||||||||
| TENNESSEE COMMERCE BANCORP, INC. | |||||
| CONSOLIDATED STATEMENTS OF INCOME | |||||
| LINKED QUARTERS | |||||
| (UNAUDITED) | |||||
| 2nd QTR | 1st QTR | 4th QTR | 3rd QTR | 2nd QTR | |
| (Dollars in thousands, except per share data) | 2011 | 2011 | 2010 | 2010 | 2010 |
| Interest income | |||||
| Loans, including fees | $ 15,195 | $ 18,663 | $ 19,818 | $ 18,998 | $ 19,840 |
| Securities | 1,539 | 1,248 | 895 | 489 | 766 |
| Federal funds sold | 94 | 16 | 34 | 24 | 11 |
| Total interest income | 16,828 | 19,927 | 20,747 | 19,511 | 20,617 |
| Interest expense | |||||
| Deposits | 6,592 | 6,477 | 6,856 | 6,811 | 6,774 |
| Other | 299 | 297 | 311 | 367 | 500 |
| Total interest expense | 6,891 | 6,774 | 7,167 | 7,178 | 7,274 |
| Net interest income | 9,937 | 13,153 | 13,580 | 12,333 | 13,343 |
| Provision for loan losses | 9,990 | 8,948 | 3,768 | 7,193 | 4,450 |
| Net interest income after provision for loan losses | (53) | 4,205 | 9,812 | 5,140 | 8,893 |
| Non-interest income | |||||
| Service charges on deposit accounts | (4) | 33 | 32 | 30 | 33 |
| Securities gains | (322) | (119) | 153 | 38 | 277 |
| Gain (loss) on sale of loans | (317) | 501 | 635 | 135 | 778 |
| Loss on repossession | (12,176) | (2,733) | (1,564) | (2,180) | (1,170) |
| Other | 286 | 226 | 251 | 3,272 | 976 |
| Total non-interest (loss) income | (12,533) | (2,092) | (493) | 1,295 | 894 |
| Non-interest expense | |||||
| Salaries and employee benefits | 1,784 | 2,418 | 3,836 | 2,859 | 2,661 |
| Occupancy and equipment | 535 | 489 | 558 | 551 | 446 |
| Data processing fees | 551 | 515 | 501 | 522 | 473 |
| FDIC expense | 911 | 840 | 1,252 | 1,288 | 515 |
| Professional fees | 929 | 578 | 725 | 1,212 | 523 |
| Other | 1,875 | 1,748 | 1,254 | 1,887 | 2,093 |
| Total non-interest expense | 6,585 | 6,588 | 8,126 | 8,319 | 6,711 |
| (Loss) income before income taxes | (19,171) | (4,475) | 1,193 | (1,884) | 3,076 |
| Income tax expense (benefit) | (7,398) | (1,651) | 265 | (785) | 1,190 |
| Net (loss) income | (11,773) | (2,824) | 928 | (1,099) | 1,886 |
| Preferred dividends | (377) | (375) | (375) | (375) | (375) |
| Net (loss) income available to common shareholders | $ (12,150) | $ (3,199) | $ 553 | $ (1,474) | $ 1,511 |
| Earnings (loss) per share (EPS): | |||||
| Basic EPS | $ (1.00) | $ (0.26) | $ 0.05 | $ (0.16) | $ 0.27 |
| Diluted EPS | (1.00) | (0.26) | 0.05 | (0.16) | 0.26 |
| Weighted average shares outstanding: | |||||
| Basic | 12,197,006 | 12,195,301 | 12,194,884 | 9,277,422 | 5,648,384 |
| Diluted | 12,197,006 | 12,195,301 | 12,194,884 | 9,277,422 | 5,737,048 |
| TENNESSEE COMMERCE BANCORP, INC. | |||||
| CONSOLIDATED STATEMENTS OF INCOME | |||||
| LINKED QUARTERS | |||||
| (UNAUDITED) | |||||
| 2nd QTR | 1st QTR | 4th QTR | 3rd QTR | 2nd QTR | |
| (Dollars in thousands, except per share data) | 2011 | 2011 | 2010 | 2010 | 2010 |
| Other income: | |||||
| Income from fiduciary activities | $ 3 | $ 1 | $ -- | $ 1 | $ -- |
| Credit card income | 28 | 16 | 13 | 24 | 16 |
| ATM fees | -- | -- | -- | -- | 11 |
| Bank owned life insurance income | 157 | 164 | 193 | 205 | 211 |
| MMAX income | 38 | 32 | 32 | 30 | 27 |
| Other | 60 | 13 | 14 | 3,012 | 711 |
| Total other income | 286 | 226 | 252 | 3,272 | 976 |
| Other expenses | |||||
| Supplies | 36 | 39 | 36 | 28 | 48 |
| Advertising | 42 | 7 | 32 | 17 | 25 |
| Amortization - software | 46 | 62 | 38 | 36 | 36 |
| Mileage | 12 | 10 | 16 | 13 | 13 |
| Travel expense | 86 | 65 | 120 | 102 | 77 |
| Public Relations | 94 | 98 | 57 | 50 | 46 |
| Loan expense | 223 | 89 | (143) | 435 | 123 |
| Loan collections expense | 738 | 862 | 707 | 652 | 810 |
| Donations | 27 | 12 | 29 | 42 | 287 |
| Directors expense | 118 | 127 | 46 | 33 | 82 |
| Postage | 9 | 17 | 13 | 14 | 4 |
| Telephone | 30 | 30 | 27 | 24 | 25 |
| Check expense | 11 | 11 | 11 | 8 | 9 |
| CDAR's fee expense | -- | -- | 1 | 5 | 2 |
| Subs & dues | 76 | 72 | 75 | 45 | 47 |
| State banking fees | 9 | 55 | 64 | 65 | 64 |
| Franchise tax expense | 42 | 42 | 58 | 42 | 68 |
| Losses other than loans | 86 | 10 | 1 | -- | 33 |
| Miscellaneous expense | 17 | 19 | (78) | 112 | 121 |
| ATM / debit card expense | 5 | -- | 2 | 4 | (4) |
| Credit card expense | 65 | 47 | 34 | 59 | 32 |
| Warrant expense | 23 | 23 | 23 | 23 | 23 |
| Insurance | 79 | 20 | 30 | 30 | 46 |
| Investor relations | 1 | 31 | 55 | 48 | 76 |
| Total other expense | 1,875 | 1,748 | 1,254 | 1,887 | 2,093 |
| TENNESSEE COMMERCE BANCORP, INC. | ||||
| CONSOLIDATED STATEMENTS OF INCOME | ||||
| ASSET QUALITY INFORMATION | ||||
| FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND YEARS ENDED DECEMBER 31, 2010, 2009 & 2008 | ||||
| June 30, | December 31, | December 31, | December 31, | |
| (Dollars in thousands, except ratios) | 2011 | 2010 | 2009 | 2008 |
| Allowance for loan losses: | ||||
| Allowance for loan loss beginning of the period | $ 21,463 | $ 19,913 | $ 13,454 | $ 10,321 |
| Charge-offs | 12,280 | 18,868 | 26,085 | 6,099 |
| Recoveries | 84 | 407 | 1,505 | 121 |
| Net charge-offs | 12,196 | 18,461 | 24,580 | 5,978 |
| Provision for loan losses | 18,938 | 20,011 | 31,039 | 9,111 |
| Allowance for loan losses, end of period | $ 28,205 | $ 21,463 | $ 19,913 | $ 13,454 |
| General Reserve Trends: | ||||
| Allowance for loan losses, end of period | $ 28,205 | $ 21,463 | $ 19,913 | $ 13,454 |
| Specific reserves | 17,729 | 9,610 | 6,580 | 11,603 |
| General reserves | $ 10,476 | $ 11,853 | $ 13,333 | $ 1,851 |
| Total loans | $ 1,156,808 | $ 1,229,811 | $ 1,171,301 | $ 1,036,725 |
| Impaired commercial loans | 157,707 | 45,552 | 28,547 | 10,789 |
| Impaired real estate loans | ||||
| Construction | 2,944 | 4,096 | 11,367 | -- |
| 1-4 Family | 5,583 | 5,581 | 671 | 20 |
| Other | 69,498 | 32,474 | 508 | 783 |
| Consumer | -- | -- | 11 | |
| Total impaired loans | 235,732 | 87,703 | 41,093 | 11,603 |
| Non impaired loans | $ 921,076 | $ 1,142,108 | $ 1,130,208 | $ 1,025,122 |
| Asset Quality Ratios: | ||||
| Net charge-offs as a % of average assets (annualized) | 1.61% | 1.25% | 1.96% | 0.57% |
| Allowance for loan losses as a % of period end loans | 2.44% | 1.75% | 1.70% | 1.30% |
| General reserves as a % of non-impaired loans | 1.14% | 1.04% | 1.18% | 0.18% |
| Non-performing assets: | ||||
| Nonaccrual loans | 135,984 | 52,315 | 19,151 | 11,603 |
| Troubled debt | 1,693 | 1,705 | 109 | 668 |
| Total non-performing loans | 137,677 | 54,020 | 19,260 | 12,271 |
| Loans past due 90 days or more | 4,362 | 3,608 | 1,328 | 18,788 |
| Repossessions | 14,767 | 30,635 | 36,951 | 15,395 |
| Other real estate owned | 6,879 | 2,888 | 814 | 5,764 |
| Total non-performing assets | 163,685 | 91,151 | 58,353 | 52,218 |
| Percentage of non-performing loans to period end loans | 11.90% | 4.39% | 1.64% | 1.18% |
| Percentage of non-performing assets to period end loans | 14.15% | 7.41% | 4.98% | 5.04% |
| Percentage of non-performing assets to period end assets | 11.84% | 6.27% | 4.22% | 4.29% |
| Impaired Commercial Loan Portfolio Information | ||||
| Remaining principal balance | $ 157,707 | $ 45,552 | $ 28,547 | $ 10,789 |
| Specific reserve | 14,933 | 8,160 | 5,080 | 2,978 |
| Book value, after specific reserve | $ 142,774 | $ 37,392 | $ 23,467 | $ 7,811 |
| Impaired real estate loans - Construction | ||||
| Remaining principal balance | $ 2,944 | $ 4,096 | $ 11,367 | $ -- |
| Specific reserve | -- | 950 | 400 | -- |
| Book value, after specific reserve | $ 2,944 | $ 3,146 | $ 10,967 | $ -- |
| Impaired real estate loans - 1 - 4 Family | ||||
| Remaining principal balance | $ 5,583 | $ 5,581 | $ 671 | $ 20 |
| Specific reserve | 461 | 500 | -- | 6 |
| Book value, after specific reserve | $ 5,122 | $ 5,081 | $ 671 | $ 14 |
| Impaired real estate loans - Other | ||||
| Remaining principal balance | $ 69,498 | $ 32,474 | $ 508 | $ 783 |
| Specific reserve | 2,335 | -- | 100 | 216 |
| Book value, after specific reserve | $ 67,163 | $ 32,474 | $ 408 | $ 567 |
| Impaired Consumer loans | ||||
| Remaining principal balance | $ -- | $ -- | $ -- | $ 11 |
| Specific reserve | -- | -- | -- | 3 |
| Book value, after specific reserve | $ -- | $ -- | $ -- | $ 8 |
The table below represents credit exposure for each loan category by internally assigned grades at June 30, 2011, December 31, 2010 and June 30, 2010, respectively. The grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled or at all. The internal credit risk grading system is based on similarly graded loans. Credit risk grades are refreshed each quarter as they become available, at which time management analyzes the resulting scores, as well as other factors, to track loan performance.
| Real estate - Construction | Real estate - 1-4 family | |||||
| June 30, | December 31, | June 30, | June 30, | December 31, | June 30, | |
| (Dollars in thousands) | 2011 | 2010 | 2010 | 2011 | 2010 | 2010 |
| Pass | $ 105,390 | $ 88,000 | $ 85,398 | $ 32,765 | $ 30,525 | $ 38,371 |
| Management Attention | 8,913 | 22,993 | 36,050 | 2,883 | 3,704 | 3,891 |
| Special Mention | -- | -- | 801 | 2,663 | 2,114 | 561 |
| Substandard | 3,585 | 4,889 | 8,938 | 4,767 | 5,258 | 768 |
| Doubtful | -- | -- | -- | 295 | 500 | -- |
| Total | $ 117,888 | $ 115,882 | $ 131,187 | $ 43,373 | $ 42,101 | $ 43,591 |
| Real estate - Other | Commercial, financial and agricultural | |||||
| June 30, | December 31, | June 30, | June 30, | December 31, | June 30, | |
| (Dollars in thousands) | 2011 | 2010 | 2010 | 2011 | 2010 | 2010 |
| Pass | $ 233,918 | $ 246,146 | $ 218,890 | $ 424,525 | $ 585,273 | $ 593,768 |
| Management Attention | 3,773 | 18,153 | 47,529 | 5,521 | 22,027 | 22,558 |
| Special Mention | 167 | 10,164 | 418 | 47,451 | 19,275 | 884 |
| Substandard | 70,044 | 32,943 | 1,906 | 115,448 | 42,184 | 33,801 |
| Doubtful | -- | -- | -- | 764 | 1,455 | 1,138 |
| Total | $ 307,902 | $ 307,406 | $ 268,743 | $ 593,709 | $ 670,214 | $ 652,149 |
| Consumer | Tax leases | |||||
| June 30, | December 31, | June 30, | June 30, | December 31, | June 30, | |
| (Dollars in thousands) | 2011 | 2010 | 2010 | 2011 | 2010 | 2010 |
| Pass | $ 3,205 | $ 3,610 | $ 3,554 | $ 90,459 | $ 112,543 | $ 97,753 |
| Management Attention | 49 | 66 | $ 45 | |||
| Special Mention | 35 | -- | -- | -- | -- | -- |
| Substandard | 182 | 16 | 37 | -- | -- | -- |
| Doubtful | 6 | -- | -- | -- | -- | -- |
| Total | $ 3,477 | $ 3,692 | $ 3,636 | $ 90,459 | $ 112,543 | $ 97,753 |
The Corporation internally assigns grades as follows:
- Pass
- Superior - Loans substantially exceed all of the Bank's underwriting criteria, and credit risk is minimal. Common factors for loans in this category are high liquidity, minimum risk, strong ratios, excellent character and repayment ability, and low handling costs. The Borrower's paying capacity is very strong with favorable trends. Borrower will exceed its peers in its industry in financial performance. All loans fully secured by cash or other highly liquid collateral, where such collateral is held by Tennessee Commerce Bank, will be classified here as well.
- Excellent - Assets in this category conform to, or exceed, all of the Bank's underwriting criteria and reflect a below average level of risk. The borrower's earnings, liquidity, and capitalization compare favorably to typical companies in its industry. The loan is well structured and serviced and payment history is good. Secondary sources of repayment are considered to be good, and the borrower consistently complies with all major covenants.
- Good - Assets of this grade conform to substantially all of the Bank's underwriting criteria and evidence an average level of credit risk. These assets display more susceptibility to economic, technological or political changes. Borrower's repayment capacity is considered to be adequate, the credit is appropriately structured and serviced, and payment history is satisfactory.
- Average - Assets conform to most of the Bank's underwriting criteria and evidence an acceptable level of credit risk. These loans require an average level of servicing and show more reliance on collateral and guaranties to preclude a loss to the Bank, should material adverse trends develop. If the borrower is a company, its earnings, liquidity, and capitalization approximate peer group averages.
- Management Attention - Loans have most of the same credit risk characteristics as loans rated in other pass categories. However, the occurrence or potential occurrence of an event has been identified which would materially increase the level of credit risk. Such events might include an adverse or negative trend in financial performance or a specific event which has negatively impacted the borrower. These loans require close monitoring by the Loan Officer, Chief Credit Officer and Special Assets. Management Attention is considered a temporary classification, whereby the asset quality is either improved or moved to a more adverse classification for further management. Management Attention credits are not considered "classified" assets.
- Special Mention - A credit is classified as Special Mention if repayment risk increases substantially. Causes may include deteriorating financial performance or lack of adequate collateral. Generally, these loans represent assets where the Bank's ability to substantially affect the outcome has diminished to some degree. Loans that have been restructured due to a change in terms, payment required, or capitalization of interest will be classified as Special Mention. Such actions may be necessary to minimize or avoid loss to the bank. All Special Mention credits are managed by Special Assets.
- Substandard - Substandard loans are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well- defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected. Substandard loans will generally be placed on non-accrual status
- Doubtful - Full payment of these loans is questionable and serious problems exist to a point where a partial loss is likely. Weaknesses make collection or liquidation in full, based on currently existing facts, conditions, and values highly improbable. Collateral coverage should be closely examined, and specific reserves should be placed on these assets for the amount of potential principal losses if they can be reasonably estimated.