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.


Latest Hamilton County Jail Booking Report - And Mug Shots

Here is the latest jail booking report from Hamilton County: BAKER, PHILLIP SCOTT AIRPORT INN LEE HIGHWAY RM 128 CHATTANOOGA, 37421 36 Hamilton County DRUGS GENERAL CATEGORY FOR RESALE (METH) LIGHT LAW VIOLATION FORGERY POSSESSION OF DRUG PARAPHERNALIA FINANCIAL RESPONSIBILITY CONTRABAND IN PENAL INSTITUTIONS REGISTRATION, UNLAWFUL REMOVAL OF DECAL OR ... (click for more)

Police Blotter: Vandals Hit Vehicle Testing Center

Vandals hit the vehicle testing center on Riverfront Parkway, spraying a wall with blue paint. It read CORE 1...FAM. Envirotest officials said the cleanup cost $100. * * * A firearm was left in a rental car, according to officials of Enterprise on W. 20th Street. Police said the Rossi M88 .38-caliber chrome revolver belongs to Jenks Parker. Also left in the car ... (click for more)

Why Ferguson Matters In Chattanooga

The recent verdict in Ferguson has thrown race relations in the spotlight again. It is far too easy to get caught up in the debate as to who was right. But the plain fact is that the community lost, the police force lost and the nation lost. So why does Ferguson matter in Chattanooga? Because a police force mainly composed of whites got into a conflict with a community mainly ... (click for more)

Roy Exum: A Grand Thanksgiving Feast

I’m not really sure how it all came about but a few days before Thanksgiving last year, what was usually a crowded table had dwindled down to just Mother, Aunt Martha and me. Just the idea of getting dressed up made both of them tired, which happens when you are 89 and 87, respectively, and the thought of preparing the traditional feast brought only further groans so I announced ... (click for more)

Maston, Cameron Power Tyner Past Hixson, 69-60

When Darren Maston transferred from Ooltewah to Tyner prior to last season, he was a role player on a team that had eight talented, experienced seniors. Now, Maston is being asked to fill an expanded role as a scorer and leader. He did both rather well Tuesday night as Tyner opened the 2014-15 season with a 69-60 District 6-AA victory over Hixson on the Wildcats’ floor. ... (click for more)

Unbeaten Soddy Daisy Rolls Past Rhea County

The Soddy Daisy Trojans remained unbeaten after four games in basketball, including Tuesday night's 70-31 romp over the visiting Rhea County Golden Eagles, but please keep in mind that Rhea County is still playing football and at least seven regulars on the basketball court are still trying to win a state title on the gridiron. Preston Pugh scored on a layup with 6:39 to play ... (click for more)