Update 2:30 p.m.: In an 8-K filing, Tennessee Commerce execs say they added $5 million to their allowance for loan losses as of March 31, adding that they believe that money, combined with other actions, has " satisfied the regulatory directive in the report of examination."
As originally reported:
Regulators have officially classified Tennessee Commerce Bank as ‘troubled’ and may soon require its parent company to nearly double the money it sets aside to cover potential loan losses. The agencies and company executives have entered into talks about enforcement actions regulators are preparing.
Shares of Franklin-based Tennessee Commerce Bancorp are down more than 10 percent this morning to their lowest level since last November.
In their annual report to the Securities and Exchange Commission — which had been delayed two weeks because of the regulators’ recently concluded examination — Tennessee Commerce officials wrote that officials at the Federal Deposit Insurance Corp. and the Tennessee Department of Financial Institutions want the bank add about $16 million to its allowance for loan losses. The company ended 2010 with an allowance of $20 million, down from $31 million the year before.
The allowance boost would cover the three quarters from October 2009 to June 2010, but any restatement is expected to also include third-quarter 2010 results. Bank officials say they plan to appeal the regulators’ report, which they say contains “various inaccuracies […], including the required impairment charges.”
“We do not concur with this amount and our regulators have not provided us with their methodology,” executives said in their filing. “We strongly disagree with many of the findings in the report of examination, especially the factors giving rise to the need to restate our prior financial statements, primarily due to differences in our loan and lease loss impairment analysis.”
As of 10:20 a.m., shares of Tennessee Commerce (Ticker: TNCC) were changing hands at $3.94, down 11.3 percent from where they closed Friday trading.
Tennessee Commerce’s 10-K also outlines the various steps regulators could take as they seek to return Tennessee Commerce to health. Among the wide range of options: Boosting capital ratios, improving its sensitivity to market risk, selling off assets and liabilities and addressing “potential regulatory violations as well as management's performance in addressing the foregoing perceived deficiencies.”
The latest round of regulatory scrutiny for Tennessee Commerce — last August, Federal Reserve officials told the company it needed written permission to issue parent-company debt or pay dividends — also has put at risk its dividends. While Fed officials earlier this year approved dividend payouts on the holding company’s preferred stock and trust preferred securities, the recent examination’s findings puts future payments in doubt.
- ALEX B FRUIN INHERITANCE TRUST; CANDACE F STEFANSIC INHERITANCE TRUST; CANDANCE F STEFANSIC INHERITANCE TRUST; FRUIN, ALEX B TRUSTEE; FRUIN ALEX B INHERITANCE TRUST; STEFANSIC, CANDACE F TRUSTEE; STEFANSIC CANDACE F INHERITANCE TRUST; STEFANSIC CANDANCE F INHERITANCE TRUST
- ROSS, BRIDGETT D
- COOKE, ETHEN LANYARD TRUSTEE; COOKE, ETHEN LEWIS ESTATE
- JACOBS, JESSICA ALEXANDRA; JACOBS, ERIKA BESS