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Christopher "Kit" Menkin is of editor (, an internet trade publication for the finance/leasing industry. He has 46 years experience in the finance/leasing industry as well as being a founder of a commercial regional bank and serving on several company... More
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  • Tennessee Bank Fails, Las Vegas Bank Can't Find Buyer 0 comments
    Jun 11, 2013 1:24 PM

    by Christopher Menkin

    The 12 branches of Mountain National Bank, Sevierville, Tennessee, were closed with First Tennessee Bank, National Association, Memphis, Tennessee, to assume all of the deposits. Founded November, 23, 1998 the bank had 127 full time employees as of March 31, 2013 at their four offices in Sevierville, three offices at Maryville, two at Gatlinburg and two at Pigeon Forge, and one in Seymour. They had opened their seventh office 2005 in Pigeon Forge then one each in Maryville 2008, 2008, and 2009, and third branch in Sevierville in 2008 and their fourth in 2009.

    The non-current loans shot up to $11.9 million in 2008, and 2009 it hit the fan: non-current going from $197,000 in 2008 to $11.9 million in 2008, then $40.6 million in 2009 and worse yet a $3.9 million loss in 2009, following right after the opening of these new branches in towns were they already had branches. Not the growth of employees, too.

    2006 150
    2007 173
    2008 175
    2009 181
    2010 150
    2011 140
    2012 126

    The non-current, losses, charge offs got worse as did the net equity:

    (in millions, unless otherwise)

    Net Equity
    2006 $44.3
    2007 $59.9
    2008 $63.3
    2009 $59.7
    2010 $48.4
    2011 $10.9
    2012 $9.8
    03/31 $8.6

    2006 $4.4
    2007 $4.6
    2008 $3.8
    2009 -$3.9
    2010 $10.0 ($9.975)
    2011 -$38.8
    2012 -$1.5
    03/31 -$820,000

    Non-Current Loans
    2006 $470,000
    2007 $197,000
    2008 $11.9
    2009 $40.6
    2010 $52.0
    2011 $36.4
    2012 $30.8
    03/31 $33.0

    Charge Offs
    2006 $25,000 ($25,000 1-4 family, $18,000 individual. -$18,000 nonfarm/nonresidential.)
    2007 $533,000 ($250,000 nonfarm/nonrs.,$159,000, $95,000 individual, $44,000 comm./industrial)
    2008 $957,000 ( $686,000 constr./devlop, $155,000 commercial, $86,ooo individual,$24,000 1-4 family, $6,000 nonfarm/nonresidential.)
    2009 $5.6 ( $3.0 constr./devlop,$367,000 nonfarm/nonres, $327,000 commercial/ind., $262,000 individual, $250,000 multifamily,
    2010 $9.6 ($5.0 const./devlop, $1.7 nonfarm/nonres, $230,000 individuals, $212,000 commercial industrial.
    2011 $28.3 ($14.4 const./devlop,$3.5 nonfarm/nonres., $1.4 multifamily, $240,000 individuals, $156,000 commercial/industrial)
    2012 $5.5 ($2.0 nonfarm/nonres,$2.0 1-4 family, $402,000 constr.devlop, $533,000 commercial/industrial, $278,000 individuals)
    03/31 $193,000 ($461,000 1-4 family, $26,000 individuals, -$433,000 const./dev., -$6,000 commercial/industrial).

    Construction and Land, 1-4 family multiple residential, Multiple Family Residential, Non-Farm Non-Residential loans.

    03/31: Tier 1 risk-based capital ratio:2.62%

    History of Mountain National Bank

    IPO of stock was in July 1998; sold $12 million in 3 weeks to 1500 investors

    Main Office: 300 E. Main Street, Sevierville, TN 37862
    Opened November 23, 1998
    Gatlinburg Branch: 960 E. Parkway, Gatlinburg, TN 37738
    Opened March 22, 1999
    Gatlinburg Parkway Branch: 745 Parkway, Gatlinburg, TN 37738
    Opened May 17, 1999
    Pigeon Forge Branch: 3104 Teaster Lane, Pigeon Forge, TN 37863
    Opened November 8, 1999
    Seymour Branch: 10641 Chapman Hwy., Seymour, TN 37865
    Opened August 15, 2002
    Kodak Branch, Sevierville: 2140 Winfield Dunn Parkway, Sevierville, TN
    Opened June 19, 2003
    Pigeon Forge Branch: 242 Wears Valley Rd., Pigeon Forge, TN 37863
    Opened October 31st, 2005
    West Maryville Branch: 2403 US Highway 411 South, Maryville, TN 37801
    Opened October 5, 2007
    Collier Drive Branch, Sevierville: 470 Collier Drive, Sevierville, TN 37862
    Opened January 25, 2008
    Justice Center Branch, Maryville: 2002 E. Lamar Alexander Parkway, Maryville, TN 37804
    Opened April 14, 2008
    Maryville Regional Branch, Maryville: 1820 Broadway, Maryville TN 37801
    Opened January 26, 2009
    Newport Highway Branch, Sevierville: 305 New Riverside Drive, Sevierville, TN 37862
    Opened June 8, 2009

    Let's look at the board of directors, who opened branch offices in the wrong time, and many in the same cities, which is also part of this explanation of why the bank failed:

    Michael L. Brown served as President and Chief Operating Officer of Mountain National Bank, and of the parent company, Mountain National Bancshares, Inc. As one of the founding Executive Officers, he has been with the bank since 1998, and his banking career has spanned over 30 years. His daily duties include the oversight of four major areas of the bank: Information Technology, Bank Operations, Human Resources and Real Estate Acquisition/Development. He also is actively involved in corporate governance issues at both the bank and holding company levels.

    Gary A. Helton, owner/general manager, volunteer Chevrolet, Sevierville.

    Charlie R. Johnson, attorney, consultant for Signature Title Company, former mayor of Sevierville, owner of Oak Haven Resort, cabin rental company.

    Sam L. Larg, owner of S.L.L, real estate and promotions

    Jeffrey Jay Monson, retired from TRW, "has commercial/residential r3eal estate interests in Green and Sevier Counties.

    Linda N. Ogle, president of Riverside Motor Lodge and Tiverside Towers, real estate.

    Michael C. Ownby, President of Ownby Insurance Service, "He is also Chief Manager of MSP Enterprises LLC, which invests in various real estateventures and stock investments."

    John M. Parker, Sr., participated in many business ventures, "John has also been very involved in real estate development of several residential subdivisions in Sevier County and many surrounding counties contributing to the growth of these areas."

    Ruth A. Reams is retired from Reams Drug Store where she assisted her husband in the operation of the family business for many years.

    Mountain National Bank Board of Directors

    You get the idea, all but one are involved in real estate. Their main interest and livelihood and view is real estate. This has been a typical board of banks that have failed with little other type of business background or banking background or financial background, mostly involved very one sided in what took the bank down. Their business friends, relationships, and drive was in one view as you would put blinders on a horse.

    "If you're looking for Tennessee Real Estate in Sevier County which includes Pigeon Forge, Sevierville and Gatlinburg, where there is something for everyone, exciting attractions, spectacular shows, outdoor adventures, fishing, hiking, shopping and a wide variety of restaurants."

    Ten Pages of homes and property for sale in "Smoky Mountain"

    Dolly Parton born January 19,1946 Sevierville

    Dollywood Theme Park is located in Pigeon Forge, Tennessee; also the site of the Southern Gospel Museum and Hall of Fame, sponsored by the Southern Gospel Music Association, an independent non-profit corporation.

    Pigeon Forge, Tennessee

    Single-family new house construction building permits:
    1997: 36 buildings, average cost: $108,200
    1998: 37 buildings, average cost: $135,000
    1999: 64 buildings, average cost: $114,000
    2000: 67 buildings, average cost: $105,500
    2001: 77 buildings, average cost: $101,900
    2002: 115 buildings, average cost: $104,700
    2003: 144 buildings, average cost: $86,500
    2004: 92 buildings, average cost: $143,500
    2005: 139 buildings, average cost: $120,500
    2006: 67 buildings, average cost: $158,100
    2007: 130 buildings, average cost: $109,300
    2008: 38 buildings, average cost: $160,500
    2009: 38 buildings, average cost: $131,900
    2010: 55 buildings, average cost: $98,900
    2011: 39 buildings, average cost: $104,300

    Sevierville Vacation Home
    4 BR / 5BA / Sleeps 8-12
    $195 - 275 a nt (NYSEARCA:USD)

    "As of the census of 2000, there were 11,757 people, 5,002 households, and 3,206 families residing in the city",_Tennessee

    "Like other towns situated along the Parkway in Sevier County, Sevierville has reaped the benefits of the burgeoning tourism industry brought on by the development of the Great Smoky Mountains National Park. As of 2004, nearly fifty percent of businesses based in Sevierville were linked to tourism. For example, there are over 2,000 hotel and motel rooms in the city today, generating more than $500,000(USD) in hotel-motel tax revenues each year."

    Court Avenue, developed in 1901 as part of
    Sevierville's new commercial district
    (Same source as above)

    Why visit Sevierville:

    Cabin rentals:

    As of March 31, 2013, Mountain National Bank had approximately $437.3 million in total assets and $373.4 million in total deposits. In addition to assuming all of the deposits of the failed bank, First Tennessee Bank, National Association agreed to purchase essentially all of the failed bank's assets.

    The FDIC estimates that cost to the Deposit Insurance Fund will be $33.5 million. Compared to other alternatives, First Tennessee Bank, National Association's acquisition was the least costly resolution for the FDIC's DIF.

    1st Commerce Bank, North Las Vegas, Nevada, was closed with the FDIC becoming the receiver. To protect depositors, the FDIC entered into a purchase and assumption agreement with Plaza Bank, Irvine, California, to assume all of the deposits of 1st Commerce Bank. Deposits will continue to be insured by the FDIC.

    Founded October 18, 2006 the bank had five full time employees. In year-end 2008 there were 15 full time employees. It never made a year-end net profit from the very beginning and in 2010 had a negative equity of $175,000.

    1st commerce Bank was part of Capitol Bancorp, Lansing, Michigan, reportedly at one time owned 60 banks, many in trouble, and according to Las Vegas Review-Journal, was seeking to sell its two banks in Nevada: Bank of Las Vegas and 1st Commerce Bank in Nevada.

    In 2009, Capital Bancorp owned four community banks in Nevada, agreeing to sell 1st commerce for $8.25 million, but it did not go through. July 13, 2010 the FDIC said 1st Commerce "...must increase its capital, hire a consultant on top managers and change lending practices under an amended regulatory order."

    In October, 2010 attorney Jason Awad announced he was going to be buying 1st Commerce from Capital Bancorp.

    The end of 2012 Capital Bancorp was still trying to merge or sell off 1st Commercial Bank. At the time, Capital Bancorp owned 12 banks in nine states. The president and CEO of Bank of Las Vegas told the Las Vegas Review-Journal 1st Commercial Bank "...too small to be profitable."

    "'It's not doing a lot, (except) servicing what it has," he said. "It was the fifth bank we chartered here. Our long-term plan is to merge it with Bank of Las Vegas.

    "'Our long-term plan is to merge it with Bank of Las Vegas.'

    "Atkinson said Capital Bancorp has inquired whether regulators would approve the merger but held off moving forward. He said now was the time to reconsider seeking approval to merge.

    "It wouldn't be the first time Capital Bancorp has merged local banks. In January 2010, the recession forced Capital Bancorp to merge Desert Community Bank, Red Rock Community Bank and Black Mountain Community Bank into Bank of Las Vegas.

    "Capital Bancorp opened 1st Commerce Bank in October 2006. Atkinson said the bank was affected by the recession and banking crisis, never allowing it to expand."

    A view of the equity, year-end losses since opening, as well as non-current loans show why the bank was never merged or any purchase finalized.

    (in millions, unless otherwise)

    Net Equity
    2006 $7.5
    2007 $7.0
    2008 $5.8
    2009 $2.8
    2010 -$175,000
    2011 $730,000
    2012 $454,000
    03/31 $528,000

    2006 -$432,000
    2007 -$578,000
    2008 -$1.1
    2009 -$3.0
    2010 -$4.5
    2011 -$2.6
    2012 -$595,000
    03/31 $74,000

    Non-Current Loans
    2006 0
    2007 0
    2008 $1.0
    2009 $7.5
    2010 $5.3
    2011 $4.0
    2012 $1.3
    03/31 $1.3

    Charge Offs
    2006 0
    2007 0
    2008 $679,000 ($679,000 commercial/industrial)
    2009 $233,000 ($147,000 1-4 family, $77,000 nonfarm/nonres, $9,000 individuals.)
    2010 $3.8 ($1.9 nonfarm/nonres,$1.2 commercial/ind., $630,000 construction/development,$32,000 individuals)
    2011 $632,000 ($425,000, $301,000, -94,000 commercial/industrial)
    2012 $472,000 ($609,000 nonfarm/nonres., -$142,000 commercial/industrial.)
    03/31 -$15,000 (-$14,000 commercial/industrial, -$1,000 nonfarm/nonres.)

    Construction and Land, 1-4 family multiple residential, Multiple Family Residential, Non-Farm Non-Residential loans.

    March 31, 2013: Tier 1 risk-based capital ratio: 3.46%

    As of March 31, 2013, 1st Commerce Bank had approximately $20.2 million in total assets and $19.6 million in total deposits. In addition to assuming all of the deposits of the failed bank, Plaza Bank agreed to purchase essentially all of the failed bank's assets.

    The FDIC and Plaza Bank entered into a loss-share transaction on $12.2 million of 1st Commerce Bank's assets. Plaza Bank will share in the losses on the asset pools covered under the loss-share agreement. The loss-share transaction is projected to maximize returns on the assets covered by keeping them in the private sector.

    The FDIC estimates that cost to the Deposit Insurance Fund will be $9.4 million.

    List of Bank Failures:

    Bank Beat:

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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