Tennessee Commerce surprises on the upside

After bank's first profit since Q4, president says 'Nashville continues to outperform'

Email | Print By Geert De Lombaerde

Tennessee Commerce Bancorp late on Monday said it earned $1.2 million in the third quarter, down 40 percent from a year ago but an $8 million improvement from its big second-quarter loss and much better than the small loss analysts had been expecting.

The Franklin-based bank’s profit included $375,000 in dividends paid as part of the U.S. Treasury’s TARP program as well as a $340,000 gain on the sale of loans, the first positive contribution from that line item this year. The bank also booked a $532,000 gain on the sale of about $21 million in securities during the quarter.

Other positives from the quarter included a much smaller provision for loan losses – $5.3 million versus more than $13 million in the second quarter – as well as a $900,000 drop in personnel costs and a 16-basis-point rise in net interest margin to 3.61 percent.

“We anticipate our continued focus on loan yields and managing costs will result in additional margin improvement,” said President Mike Sapp. “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.”

Sapp said Nashville’s economy remains in relatively good shape compared to other cities. The region’s “much stronger real estate market” was a major contributor in the drop in Tennessee Commerce’s past-due loans and other real estate owned, he added.

Loan growth during the quarter was 1.1 percent, down from 3.9 percent and 6.5 percent in the first two quarters of this year. Sapp and his team trimmed their bread-and-butter commercial/industrial loan holdings by $2.3 million and cut about $10 million from their construction portfolio.

“Based on our current capital ratios, we expect to moderate our fourth quarter’s loan growth as well,” Sapp said.

Shares of Tennessee Commerce (Ticker: TNCC) are likely to have a strong Tuesday after closing Monday at $4.04. They’ve lost 33 percent in 2009.