Start-up bank tops bad-loan list

FDIC data shows area banks' profits plummeted in spring

Email | Print By Geert De Lombaerde

This is not how the story was supposed to unfold.

In the middle of a fierce credit crunch, established banks were supposed to tighten their commercial lending reins to preserve capital. That would open up more doors for the region’s start-up banks, whose pristine balance sheets would let them bring in the loans they chose and say no to business with greater potential to go sour.

But the plot took a much different turn for one-year-old Avenue Bank in the second quarter.

Led by former Union Planters and Regions area chief Ron Samuels, Avenue continued to grow quickly, adding $87 million to its March 31 asset base of $205 million, according to data from the Federal Deposit Insurance Corp.

But it also ended the first half with 3.2 percent of its total loans and leases in nonperforming status and almost 8 percent of its $62 million commercial and industrial loan portfolio in the same status.

Because banks are required to set aside cash to cover potential losses from bad loans, Avenue – which has opened four offices since the summer of 2007 – posted a $5.2 million loss during the second quarter when it should have taken another step toward breaking even. The loan loss provision alone took almost $4 million out of the bottom line.

In a voice message to NashvillePost.com, Samuels said the increase stems from two loans “we’re concerned about” and that Avenue has been putting aside more money for loss reserves than many of its peers.

Doing so is easier for Avenue thanks to a $75 million pre-launch financing round. Despite the second-quarter hiccup, the bank still has more than enough capital to satisfy regulatory requirements.

As eye-catching as Avenue’s numbers are, they also point to the credit issues battering the banking sector, which is dealing with what many market watchers say is an unprecedented financial upheaval.

FDIC numbers show that, as a group, the banks based in Middle Tennessee or doing most of their business here earned $16.7 million last quarter – down 40 percent from the first three months of the year.

Another major contributor to that drop was The Bank of Nashville, which booked a $1.9 million loss as it, too, dealt, with problem loans. Vice President Anne Livingston said the unit of multi-state holding company Synovus, has been aggressively charging off problem loans rather than keeping them on the books.

Other tidbits from banks' second-quarter filings with the FDIC:

• After five of 23 area banks posted first-quarter losses, eight did so last quarter. The three newcomers to the list – Bank of Nashville as well younger Wilson County bank First Freedom and CedarStone – lost a combined $2.9 million in the spring after averaging profits of $575,000 per quarter over the past year.

• Linked-quarter loan growth slowed to 4.5 percent, its slowest pace since the fall of 2007. Without fast-growing Pinnacle Financial Partners and Tennessee Commerce, growth was just 3.5 percent – less than a quarter of the pace of a year ago.

For a snapshot of local banks’ financial status as of June 30, click here.