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.


Police Chief Fletcher Announces Picks For Top Leadership

Police Chief Fred Fletcher Wednesday made his picks for top leadership, releasing the names of 15 newly promoted individuals from within the Chattanooga Police Department. This announcement comes several weeks after Chief Fletcher was appointed.  “I am honored to announce today’s promotions," said Chief Fletcher.  "Together these individuals have served our community ... (click for more)

Corker Says Probe To Point Directly At Russia

Appearing on MSNBC’s Daily Rundown on Wednesday to discuss the missile strike on Malaysian Airlines flight MH17 over Ukraine, Senator Bob Corker said the investigation is “going to point directly at Russia.” He said there is bipartisan support for the U.S. “to act alone without Europe” in expanding existing sanctions against significant Russian entities in the energy, financial ... (click for more)

The Truth From Weston’s Sister - And Response (3)

I try not to read the negative articles and opinions about my older brother. Growing up around politics, I learned a long time ago that thick skin is not only necessary, it’s paramount. But this time, the lies and the rumors and the inaccurate information has gone too far. It’s too ridiculous for me to ignore. So let’s clear a few things up: Weston and I do not “come ... (click for more)

Roy Exum: Say It Ain't So, Larry Joe!

Larry Joe Wheelon, the tainted horse trainer who was charged with 18 counts of aggravated animal cruelty when his barn was raided in April of 2013 and some animals were sored so badly that they could barely walk, finally went to a court hearing in Blount County on Wednesday and his steps toward Judge Tammy Harrington’s bench were decidedly heavy. My goodness, yours would have been ... (click for more)

Mocs Picked First In SoCon Polls

The Chattanooga Mocs football team is the pick of litter in the Southern Conference. Coming off its first league title since 1984, the SoCon coaches and media deemed the Mocs the team to beat in 2014.   “It means we have good players,” Head Coach  Russ Huesman  said. “There is a long way to go from now until late November (when the regular season ends). ... (click for more)

Soddy-Daisy's Wright Commits To MTSU Baseball

Soddy-Daisy’s Andy Wright, a rising senior and dual-threat player, has made a non-binding verbal commitment to play baseball at Middle Tennessee State University. Wright, a pitcher/third baseman, chose the Conference USA Blue Raiders over Belmont, Air Force, Navy, UT-Martin and Carson-Newman. “I’m glad to get this (decision) off my back so I can enjoy my senior year,” Wright ... (click for more)