FSG Bank Has Turnaround With $11.4 Million 2013 Gain After $39.6 Million Loss For 2012

Tuesday, February 25, 2014

First Security Group, Inc., parent of FSG Bank, reported a gain of $11.4 million for 2013 as compared to a loss of $39.6 million for 2012.

For the fourth quarter of 2013, First Security reported a net loss allocated to common shareholders of $646,000, as compared to a $1.4 million loss in the third quarter of 2013 and a $16.1 million loss for the fourth quarter of 2012.

“Last fall, we stated that it was essential to achieve significant improvement in loan and revenue growth,” said Michael Kramer, First Security’s president and chief executive officer. “With nearly $50 million of loan growth and over $1 million of improvement in non-interest expense in the fourth quarter, the momentum towards a return to operating profitability is real and within reach.”

During the fourth quarter of 2013, loans increased $48.5 million, or 9.1 percent (36.3 percent annualized) to $583.1 million. Commercial real estate loans increased $39.3 million, residential 1-4 family loans increased $7.1 million and commercial and industrial loans increased $4.5 million.

For the fourth quarter of 2013, net interest income improved by $313,000, or 5.1 percent, to $6.5 million compared to $6.2 million for the linked third quarter of 2013. Total interest income declined by $22,000 primarily due to lower interest income on investment securities as FSG sold approximately $22.8 million of investment securities to support higher yielding loan growth. As a majority of the fourth quarter loan growth was achieved in the latter half of the quarter, the full income impact will be realized in the first quarter of 2014. Total interest expense improved by $335,000 through reductions in the costs of deposits as well as reductions in total deposits.

“Taking a step back and reviewing the steady quarterly improvement from each consecutive quarter in 2013, we reduced non-interest expense by at least $1 million each quarter while, at the same time, increasing total revenues (net interest income plus non-interest income) by an average of nearly $500 thousand each quarter,” said John Haddock, First Security’s EVP and chief financial officer. “While we will remain focused on improving our operational efficiencies in 2014, we will also continue to actively restructure our earning asset mix by growing loans and reducing the excess liquidity in our investment portfolio to improve our overall yield and margin.”

During the fourth quarter, First Security continued to improve its deposit mix by deploying excess liquidity to reduce higher cost customer CDs and brokered deposits as they matured and by increasing pure deposits, defined as transaction-based accounts. During the fourth quarter, average customer CDs and brokered deposits decreased by $60.8 million, or 12.3 percent while pure deposits increased by $7.9 million, or 1.8 percent (7.1 percent annualized) to $452.5 million. During the fourth quarter, the changes in deposit mix resulted in the average rate paid on customer deposits improving from 0.56 percent to 0.48 percent and the overall cost of deposits improving from 0.84 percent to 0.74 percent. As of December 31, 2013, pure deposits totaled 52 percent of total deposits as compared to 40.9 percent as of Dec. 31, 2012.

With continued asset quality improvement and minimal charge-offs, First Security recorded a $955,000 negative provision to the allowance for loan and lease losses for the quarter and a $2.7 million negative provision for the year. First Security realized net recoveries of $754,000 during the fourth quarter of 2013 and $565,000 in net charge-offs for the year. Nonaccrual loans increased by $400,000 to $7.2 million as of Dec. 31, 2013, compared to $6.8 million as of Sept. 30, 2013.

Nonperforming loans to total loans was 1.39 percent as of Dec. 31, 2013, as compared to 1.37 percent as of Sept. 30, 2013. Based on the continued stability in asset quality and the net recoveries, the negative provision was necessary to adjust the allowance for loan losses to the company’s current estimate of $10.5 million. The ratio of the allowance to total loans declined from two percent as of Sept. 30, 2013, to 1.80 percent as of Dec. 31, 2013.

Non-interest expense decreased by $1.0 million to $10.1 million for the fourth quarter of 2013 as compared to the third quarter of 2013. During the fourth quarter, First Security completed the consolidation of two branches and announced the pending consolidations of two branches to be completed by mid-2014. As of Dec. 31, 2013, full-time equivalent employees declined to 285 as compared to 313 as of Sept. 30, 2013, and 329 as of Dec. 31, 2012. The associated cost savings with the reduced workforce is at least $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-interest expense for 2014.

“Significant progress was made in the fourth quarter, but we recognize that we have significant work remaining to realize our full potential following the recapitalization,” said CEO Kramer. “We remain confident in our ability to build a top-tier community bank in our strong East Tennessee markets.”

First Security Group, Inc. is a bank holding company headquartered in Chattanooga with $1 billion in assets. Founded in 1999, First Security’s community bank subsidiary, FSG Bank, N.A. has 28 full-service banking offices along the interstate corridors of eastern and middle Tennessee and northern Georgia. In Dalton, FSG Bank operates under the name of Dalton Whitfield Bank; along the Interstate 40 corridor in Tennessee, FSG Bank operates under the name of Jackson Bank & Trust. FSGBank provides retail and commercial banking services, trust and investment management, mortgage banking, financial planning and Internet banking.


Bicyclist Hit By BMW In North Chattanooga Files $250,000 Lawsuit

A bicyclist who was hit by a BMW BX3 in North Chattanooga has filed a $250,000 lawsuit. Joel Hunt sued Julian B. Bell III and Riley Bell, driver of the BMW. In the incident last Aug. 23, the suit says Riley Bell "approached the intersection at Frazier Avenue and Tremont Street. Riley Bell proceeded through the intersection hitting Mr. Hunt's bicycle knocking Mr. Hunt off his ... (click for more)

Former Tennessee State Museum Employee Uses Scheme To Take Thousands

A new investigative report from the Tennessee Comptroller of the Treasury reveals that a former administrative services assistant with the Tennessee State Museum took $61,892.04 in taxpayer money. The Comptroller’s Office worked with the chief investigator from the Office of the Tennessee Attorney General to complete its investigation. In February, investigators began to ... (click for more)

Black Creek TIF Decision-Who Guards The Hen House?

Citizens of Chattanooga were invited to give public comment before their own Industrial Development Board Aug. 15. They arrived to find foxes guarding their hen house.  Many thought the meeting was their opportunity to seek redress in the ill-conceived Black Creek Tax Increment Financing plan. However, they learned it was a sham orchestrated by both the past and present ... (click for more)

Roy Exum: Chief Delmore: ‘You Blew It!”

Far more than 50,000 people, most police officers and law enforcement authorities, have gone to a website, “LawOfficer.com” to read a scathing letter that first appeared on Sunday. Veteran lawman Ed Delmore, who became the Police Chief in Gulf Shores, Ala., after a brilliant career as the “Top Cop” in St. Louis (which he still loves), has written what was entitled, “An Open Letter ... (click for more)

McCallie's JaVaughn Craig Still Improving At Quarterback

(This is the 14th in a series of preseason stories on new high school football coaches, or veteran coaches at a different school, and top players in the Chattanooga area) JaVaughn Craig was the starting quarterback for McCallie all season a year ago, but it wasn’t originally planned like that. Craig was a wide receiver when he resumed his football career ... (click for more)

Hixson Beats Silverdale For Second Volleyball Win

There's something about that second set that gives the Hixson Lady Wildcats trouble. Hixson lost the second set in Monday's volleyball opener against Sale Creek.  They did the same thing against the Silverdale Seahawks on Tuesday, but just like Monday's match, the Lady Wildcats came out on top, 3-1. Hixson won the first set with ease, 25-11.  Silverdale evened the  ... (click for more)