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.”


LBMC Technology Solutions Named To Intacct President's Club

LBMC Technology Solutions, LLC, a business software and technology consulting firm, and a member of the LBMC Family of Companies, has been named to Intacct’s 2015 President's Club.   Intacct, a provider of best-in-class cloud ERP software, awards this sales and customer satisfaction award annually to its top-performing channel partners, recognized value added resellers and ... (click for more)

Tennessee July Unemployment Rate Remains Unchanged

County unemployment rates for July 2015, released Thursday, show the rates increased in 53 counties, decreased in 21, and remained the same in 21 counties. Specific county information for July is available here . Davidson County had the state’s lowest major metropolitan rate in July at 4.9 percent, unchanged from June. Knox County was 5.4 percent in July, up from 5.3 the previous ... (click for more)

With Census Rising, Erlanger Scrambling To Find Hospital Beds

With the census climbing at Erlanger Health System, hospital officials are scrambling to find available hospital beds. Rob Brooks, chief operating officer, said 12 rooms were opened up at Erlanger North in Red Bank. He said some of those are utilized for main campus patients who may actually be ready to go home but still have a Medicare-required three-day stay. He said the freed-up ... (click for more)

Brent Pickard Was Man Shot And Killed By Deputies; 4 From Sheriff's Office On Administrative Leave During City Investigation

Brent Pickard, 46, was the man who was shot and killed by county deputies on Wednesday night after a chase ended on Highway 153.. Four Hamilton County deputies were placed on leave, pending the investigation. At Pine Mar, Pickard crashed and shots were fired resulting in his death.  District Attorney General Neal Pinkston has asked Chattanooga Police to investigate ... (click for more)

Vote To Save Graduate Medical Education Funding

As a resident physician at UT College of Medicine Chattanooga, I know first-hand the impact Medicare financing for Graduate Medical Education has on physician education and access to care for patients in our community and communities all over the country.  GME funding provides medical school graduates the opportunity to complete the required years of clinical residency training ... (click for more)

Roy Exum: Quaker Oats & Stuff

Some genius in the Quaker Oats marketing department came up with a novel idea last summer with the theme: “What if you had the chance to do something you have always wanted to do … but you had to start today?” Somehow Michael Hope and his family – that includes three children – got to be interviewed and, when his 10-year-old daughter Lauren was asked, she said she always wanted ... (click for more)