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.”


Nektur Marketing Opens In Chattanooga

Nektur Marketing in opening in Chattanooga with a focus on helping businesses grow. Carlos Pielago said, "Aligning your brand with the customers searching for your product or services  is a growing challenge for today’s business owner. Nektur was formed to help you meet that challenge by providing practical online marketing solutions to grow your business. "We not only ... (click for more)

Decosimo’s Brian Joyce Earns Certification As Common Security Framework Practitioner

Decosimo announced that Brian Joyce has earned the designation of certified common security framework practitioner from the Health Information Trust Alliance. As the director of Information Technology and Security for Decosimo,  Mr. Joyce oversees all aspects of the firm’s IT needs, including planning, design and implementation of network systems. He is also responsible ... (click for more)

City Set To Move Ahead On Study For Light Rail System; But Some Council Members Skeptical

City officials are set to move ahead in applying for a grant to study setting up a light rail system in Chattanooga, though some City Council members are skeptical. Blythe Bailey, city transportation director, said it might cost $20 million to set up a system that would use the Missionary Ridge Tunnel to go from downtown to the Chattanooga Airport as well as the Enterprise South ... (click for more)

Funeral Arrangements Set For Renee Card Monroe, Killed Monday In ATV Accident

Funeral arrangements have been set for Renee Card Monroe, 60, who was killed, along with her two grandchildren, Reagan and Jaxson Cohen, in an ATV accident on Monday when their ATV toppled into a pond. A lifelong resident of Chattanooga, Ms. Monroe was an active member of Eastwood Baptist Church where she helped lead a small Bible study group. Ms. Monroe was an entrepreneur ... (click for more)

UAW Is Dropping Appeal Because Of Opposition

Let's tell the truth here: the UAW attempted infiltration of the Nissan plant in Smyrna, Tenn. a couple of years back and lost. They appealed to the NLRB three times and each time the vote went against the UAW more and more.   When you consider the local political opposition, citizenry and worker opposition, sentiment toward the UAW is even more staggering in Chattanooga ... (click for more)

Roy Exum: Clemson Prayer And Much More

Clemson’s football program, which has won 11 games in each of the past two years and was ranked 8 th in the nation after whipping Ohio State in this year’s Orange Bowl, has just been “blind-sided.” The Freedom from Religion Foundation claims Coach Dabo Sweeney and his staff are doing far too much “to promote Christianity to their student athletes.” Clemson promptly roared back ... (click for more)