Tennessee Commerce Bancorp Inc. in Franklin, Tenn., could be looking to sell itself after a year-to-date loss has left it "critically undercapitalized" in the eyes of regulators.
The $1.2 billion-asset company said Tuesday that it lost $120 million in the first nine months of the year, compared to a profit of $1.4 million in the same period last year, due largely to a $92.6 million loan-loss provision it booked in the third quarter.
The company said that the loss has left its bank subsidiary, Tennessee Commerce Bank, with a Tier 1 capital-to-assets ratio of 0.95% and total risk-based capital ratio of 2.34%, both well below regulatory minimums. Under the Federal Deposit Insurance Act, a bank that is deemed critically undercapitalized could be seized by regulators within 90 days unless it finds sufficient capital or merges with another depository institution.
In a news release, Tennessee Commerce said that "due to the results of the third quarter" it has hired the investment firms Macquarrie Capital and FIG Partners "to assist in evaluating all possible strategic alternatives."
The provision expense relates primarily to $76.3 million in loan losses and $12.1 million in specific reserves on classified loans identified by the Federal Deposit Insurance Corp. and the Tennessee Department of Financial Institutions during an ongoing examination. It is still unclear how much of the loss would be taken in the third quarter because the company said it also needs to restate its results for the second quarter, in which it initially reported a loss of $12.3 million.
Meanwhile, Tennessee Commerce said that credit quality at two banks in which it had
In very heavy trading Tuesday, Tennessee Commerce's shares rose more than 36% Tuesday, to close at 18 cents. The stock has lost more than 96% of its value since the start of the year.
