FSG Bank Had $1.4 Million Loss For 3rd Quarter

Thursday, November 14, 2013

First Security Group, Inc. (NASDAQ: FSGI), parent company of FSG Bank, on Thursday reported a net loss allocated to common shareholders of $1.4 million, or $0.02 per basic and diluted share, for the third quarter of 2013 as compared to a loss of $9.4 million, or $5.79 per basic and diluted share, for the same period in 2012. 

For the nine months ended September 30, 2013, First Security reported net income available to common shareholders of $12 million, or $0.

30 per basic and diluted share, as compared to a $23.5 million loss, of $14.54 per basic and diluted share, for the same period in 2012.

“The third quarter represents the first full quarter after the April recapitalization,” said Michael Kramer, First Security’s President and Chief Executive Officer. “While we are pleased with our continued improvement in our deposit mix and associated cost, it is essential that we achieve significant improvement in loan and revenue growth.”

For the third quarter of 2013, net interest income improved by $679 thousand, or 12.4%, to $6.2 million compared to $5.5 million for the linked second quarter of 2013. Total interest income contributed an additional $386 thousand during the third quarter as First Security reduced cash and invested in higher yielding investment securities. Total interest expense declined by $293 thousand through reductions in the costs of deposits as well as reductions in total deposits.

During the third quarter, First Security continued to improve its deposit mix by increasing pure deposits, defined as transaction-based accounts, while reducing higher cost customer CDs as well as reducing brokered CDs as they matured with available cash. During the third quarter, average pure deposits increased by $22.4 million, or 5.2% (20.7% annualized) to $454.4 million while customer CDs and brokered CDs decreased by $61.0 million, or 11.6% (46.3% annualized). As of September 30, 2013, pure deposits totaled 50.0% of total deposits as compared to 39.6% as of September 30, 2012. The changes in deposit mix resulted in the average rate paid on customer deposits improving from 0.64% to 0.57% and the overall cost of deposits improving from 0.96% to 0.86% comparing the second and third quarters of 2013.

With continued asset quality improvement and minimal charge-offs, First Security recorded a $1.6 million negative provision to the allowance for loan and lease losses for the quarter and a $1.8 million negative provision for the year. First Security realized net recoveries of $32 thousand during the third quarter of 2013 and $1.3 million in net charge-offs for the year to date period. Nonaccrual loans declined by $1.8 million to $6.8 million as of September 30, 2013 compared to $8.6 million as of June 30, 2013. Nonperforming loans to total loans improved to 1.37% as of September 30, 2013 as compared to 1.65% as of June 30, 2013. Based on the continued improvement in asset quality and minimal charge-offs, the negative provision was appropriate to reduce the allowance to total loans from 2.27% as of June 30, 2013 to 2.00% as of September 30, 2013.

Non-interest income remained consistent quarter-over-quarter at $2.5 million. Non-interest expense decreased by $1.5 million to $11.4 million for the third quarter of 2013 as compared to the second quarter of 2013. During the third quarter, First Security announced the pending consolidations of two branches to be completed by December 31, 2013 as well as an overall 10% reduction in full-time equivalent employees. The associated cost savings with the reduced workforce is approximately $2.2 million in salary and benefits annually with full realization to begin in the first quarter of 2014. Various other cost saving are anticipated to further reduce non-expense expense for 2014.

“Over the last several quarters, we have seen significant pricing and credit concessions from the competition that has inhibited our ability to grow loans with the quality and yields that we seek,” said John Haddock, First Security’s EVP and Chief Financial Officer. “At the same time, we have been evaluating certain niche lending initiatives and have begun to implement four distinct initiatives to offset the impact of these competitive pressures.”

First Security has announced the implementation of four niche lending opportunities. First, Tri-Net Direct is a new division focused on national net lease lending and includes three full-time employees. Tri-Net will originate construction of preleased “build to suit” projects and provide interim and long term financing to professional developers and private investors for commercial real estate on long term lease to tenants that are investment grade or have investment grade attributes. Second, First Security has partnered with a third-party that originates small balance, unsecured consumer loans, primarily associated with home improvement projects. Third, First Security has built an asset-based lending unit to serve as a community bank alternative for asset-based lending within our markets that should generate above average return on a risk-adjusted basis. The fourth initiative is a dedicated team focused on originating and selling government guaranteed loans, including SBA and USDA loan products.

“Our ability to supplement the lending activities of our traditional bankers with the niche lending initiatives should significantly enhance our ability to achieve our desired loan growth while providing value added services to our customers,” said CEO Kramer. “The return to core profitability is predominantly associated with our ability to increase loans and change our mix of earning assets.”


Lisa Baskette Joins Pinnacle As Mortgage Advisor

Lisa Baskette has joined Pinnacle Financial Partners as a senior vice president and mortgage advisor for the firm’s Shallowford Road office. She is based at the firm’s downtown office, 801 Broad St. until the Shallowford office is complete. Ms. Baskette, with 28 years of experience, served as a vice president and mortgage loan originator for Regions Bank. Prior roles included ... (click for more)

Flywheel Brands Welcomes Newest Member To Growing Team

Flywheel Brands, Inc. welcomed Adam Duggan as the newest team member of the Hixson-based print management company. Assuming the role of business development executive, Mr. Duggan will be supporting new clients in their efforts to generate momentum behind their brands and develop marketing strategies that yield the return they're seeking. His primary focus will be with those organizations ... (click for more)

2 Juveniles Arrested For Arson In Sevier County Fires

An investigation by special agents with the Tennessee Bureau of Investigation, National Park Service, Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) and the Sevier County Sheriff’s Office has resulted in charges being placed against two people in connection with the deadly wildfires in Sevier County.  Last week, at the request of 4 th  District Attorney General ... (click for more)

Shannon Whitfield Already At Work Eliminating Sole Commissioner Post In Walker County; Process To Take 4 Years

Shannon Whitfield is already at work eliminating the position he won by a landslide in the recent election. Mr. Whitfield, who takes over at 12:01 a.m. on Jan. 1 after a 16-year reign by Bebe Heiskell, noted, however, that it is a four-year process. He said the two House members and local senator are working with him on legislation that must first be approved. That should ... (click for more)

Vehicle Emissions Testing Causes More Pollution Than It Prevents - And Response

While a noble cause to make sure vehicles are operating efficiently with the minimum amount of pollutants, a simple analysis makes it somewhat evident the VET program in Chattanooga causes more pollution that it prevents.  Though I don't know how many vehicles are tested on an annual basis, if you assume an average round trip of 10 miles to the nearest testing station (five ... (click for more)

Roy Exum: You Can’t Sue You

The Hamilton County School Board will convene an hour earlier tomorrow to discuss “facilities” and the question of the hour is “Which ones?” Several communities are actively studying pulling away from the county’s Department of Education and the stew is thickening by the day. Now comes the revelation that school board attorney Scott Bennett has sent an email to the town of Signal ... (click for more)