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.”


Attorneys Batts And Taylor Elected To Lead State Drug Court Association

The Tennessee Association of Drug Court Professionals has elected attorneys Kevin Batts and Richard Taylor to leadership positions in the statewide group. Mr. Batts will serve as president and Mr. Taylor will serve as vice president of the association in 2015. Mr. Batts is director of the Drug Court in the 23rd Judicial District, serving five counties of Middle Tennessee. He ... (click for more)

Karen Tindell And Kelly Still Join Southern Community Bank

Robert Stahl, Chattanooga city president of Southern Community Bank, announced Karen Tindell and Kelly Still have joined the Chattanooga branch. “Karen joins the staff as assistant vice president and Kelly joins the staff as a commercial lender,” said Mr. Stahl.  “Together Karen and Kelly collectively have over 50 years’ experience in the financial industry with regional ... (click for more)

2 Suspects Sought In Armed Robbery At Highway 153 Long John Silver's

Police are searching for two suspects in an armed robbery that happened Friday morning. At approximately  8:10  a.m. the Chattanooga Police Department responded to 5317 Highway 153 for a robbery at the Long John Silver's.  Officers discovered that two black men, wearing hoodies and masks, entered the Long John Silver's and forced the assistant manager ... (click for more)

Fire Causes $30,000 In Damages At Scenic City Concrete

Chattanooga firefighters responded to a reported structure fire shortly after  10 p.m. Thursday  at Scenic City Concrete Pumping, located at 2903 South Orchard Knob Avenue. Captain Donny McMillian with Engine 9 said smoke was visible when the first firefighters arrived. Captain McMillian said the firefighters had to force their way through a locked gate and into ... (click for more)

Please Don't Close The Piccadilly Cafeteria At Hamilton Place - And Response

Oh, no. The Piccadilly Cafeteria at Hamilton Place is closing.  Its last day is Christmas Eve.  I will miss the great food they have there but most of all I will miss their servers, cashiers and waitresses.  They are all so friendly and accommodating.  They make it like it’s a home-style restaurant. I sure wish there was some way that Hamilton Place and ... (click for more)

Roy Exum: God Bless Cathy & Co.

The secret to the whole thing is not getting caught but somebody at the Toys R Us store in Framingham, Mass., had a camera when Cathy O’Grady was very quietly paying off all the layaway balances at the popular location last week. The picture snaked its way onto social media sites and her friends quickly recognized the area’s most famous “layaway angel.” Then somebody in nearby ... (click for more)