Despite turmoil, Tennessee Commerce posts record gains

Friday, July 20, 2007 at 12:48am

If Wall Street was ever concerned about the quick departure of three Tennessee Commerce Bancorp directors, analysts — and trading prices — did not reflect that concern Thursday.

In its second quarter report, company officials said Thursday that second quarter performance broke company records for net income, net loans and total deposits. The firm is parent to Tennessee Commerce Bank, one of the area’s only locally based financial institutions targeted to the needs of business.

Net income increased nearly 73 percent to $1.6 million. Net loans rose 50 percent to $643.9 million, and net deposits rose 48 percent to $683 million.

The company did have several large transactions from the first quarter that buoyed second quarter results, Tennessee Commerce President Mike Sapp said in a conference call with analysts. But the quarterly results were not unlike previous posts from the company, which have indicated continuing growth in assets, income and loans.

“We continue to operate our business model in a way that translates into more efficient operations than our peers,” Sapp said.

As a measure of company efficiency, Tennessee Commerce reported average assets per employee of $12.5 million. The industry average is $2.9 million per employee, according to the company.

1.5 million shares were added when the company went public in July of last year, stunting the growth of earnings per share. The company projects accelerated per-share growth in coming quarters.

In regards to the director departures, Sapp said a recent increase in executive compensation — which the departing directors cited as their reason for leaving — was instituted by a majority board vote to “restore some parity with our peers” after three years of high company growth and static base pay for the executive team.

“The result of the departure of these directors is a more streamlined board of directors that is ready to move forward and support managers in achieving our goals,” Sapp said.

Other than Sapp’s statement, analysts on the conference call didn’t bring up the matter. Tennessee Commerce share prices increased 6.5 percent over the course of the day, from $23.85 to $25.51. The increase more than regained the ground lost yesterday, when share prices fell by 55 cents after the departure of the three board members was announced.

The three departing board members — Winston Hickman, Regg Swanson and Fowler Low – all resigned within the last two weeks, following a decision made by the board in early June to increase compensation for the company’s four executive leaders.

Annual base pay for Sapp and CEO Art Helf more than doubled to $400,000 each. CAO H. Lamar Cox and CFO George Fort also saw large raises.

Fort said Wednesday that the pay increases were the result of recommendations from an Atlanta-based consulting company, which compared Tennessee Commerce to peer group banks in making its recommendations.

Hickman, Swanson and Low were all founding members of the board. Hickman is a principal of T.W. Frierson Construction and Design Systems Builders. Low is a retired Genesco executive, and Swanson is president of STAR Physical Therapy.

Tennessee Commerce has headquarters and offices in Franklin, and a loan production office in Birmingham, Ala. Launched in 2000, the company is parent to Tennessee Commerce Bank. Tennessee Commerce Bank employs 50 at its Franklin headquarters and bank, as well as one loan officer at the office in Birmingham.

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