There's nothing wrong in wanting to run the ball a lot. "We believethe low volume of loan sales to other banks was due, in part, to the changingregulatory environment following the transition to the new federaladministration. Our first quarter gain on loan sales was more than offset by feereversals related to early payoffs and repurchases of loan pools during thequarter. Typically, we would have expected that loan sales contribute about 25%of our pre-tax income.

Tennessee Commerce sold approximately $2.7 million in loansduring the first quarter of 2009 for a net loss of $360,000 ($0.07 per shareafter tax) compared with loan sales of $7.6 million in the first quarter of 2008that contributed a net gain of $566,000 ($0.11 per share after tax) on the saleof loans. "Our non-performing loans, including other real estate owned, rose to $39.0million at the end of the first quarter of 2009. This is an increase of $2.8million from the fourth quarter of 2008 and is largely due to the addition oftwo large real estate based loans," noted Frank Perez, Chief Financial Officerof Tennessee Commerce Bancorp. "We have no exposure to sub-prime loans and realestate represents only about 37.4% of our portfolio at the end of the firstquarter. We are maintaining our very aggressive stance in monitoring creditquality and believe our allowance for loan losses is adequate based on currentreviews of our loan portfolio." Non-interest income declined to $27,000 compared with $527,000 in the firstquarter of 2008. Net interest income after the provision for loan lossesdeclined to $1.3 million, down from $5.9 million in the prior year`s firstquarter. At the end of the first quarter, the allowance for loan losses was $15.4million, or 1.4% of loans, and increased from $13.5 million, or 1.3% of loans atthe end of 2008.

The first quarterprovision for loan losses was affected by an increase in non-performing loansand charge-offs. Net charge-offs were $6.5 million in the first quarter of 2009compared with $887,000 in year-earlier period. Net charge-offs to average loanstotaled 0.6% in the first quarter of 2009 compared with 0.1% in the prior-yearperiod. Net interest margin rose to3.39% in the first quarter of 2009 compared with 3.30% in the first quarter of2008. "Our continued loan demand has allowed us to focus on funding those loans withsolid credit and higher yields," continued Mr Sapp.