The board of FSG Bank has called a shareholders' meeting for Sept. 13 to consider a reverse stock split that is aimed at bolstering the value of the stock at the Chattanooga-based bank that had $46.4 million in losses in 2010.
Officials said, "Reducing the number of outstanding shares of our common stock through the reverse stock split is intended, absent other factors, to increase the per share market price of our common stock."
First Security, parent firm of FSG Bank, received a notice from the
NASDAQ Stock Market on April 4 that its common stock had closed below $1 per share for 30 consecutive business days, and was, therefore, not in compliance with NASDAQ marketplace rules.
FSG officials also said they have adjusted management pay downward from that received by the previous leadership.
Rodger B. Holley, who resigned as chairman and chief executive officer on April 21 after serving for 11 years, was paid $358,800 in 2008, 2009 and 2010.
The current chairman and chief executive officer, Ralph Coffman, is paid $250,000.
John R. Haddock, who replaced William L. “Chip” Lusk Jr., as chief financial officer in February, is paid $190,000. Mr. Lusk received $205,517 in 2010.
Officials said under terms of the Holley contract the bank still has over $2 million in payment obligations to him. He is to receive monthly payments for 15 years after reaching age 65. Mr. Lusk has a similar agreement, but his payout is pegged at $31,364.
Mr. Holley is also the largest holder of the bank stocks.
The shareholders will be asked to approve a slate of seven bank directors. They are Mr. Coffman, John J. Clarke Jr., William Hall, Carol H. Jackson, Robert P. Keller, Ralph Kendall and Kelly Kirkland.
Several directors have resigned recently, including Ray Marler, who had headed the compensation committee.
A bank disclosure statement concerning Mr. Marler said, "During 2010 and 2009, we entered into certain sale transactions with Ray Marler, a former director. We sold repossessed assets to companies owned by Mr. Marler. Gross proceeds to FSGBank during 2010 totaled $67,000. During 2009, companies owned by Mr. Marler purchased repossessed assets through a dealer. The proceeds for the 2009 purchases totaled $20,000. We also utilized Mr. Marler’s companies for certain services associated with other real estate owned. Payments for these services totaled $6,000 and $7,000 for the years ended December 31, 2010 and 2009, respectively."
Another bank disclosure involves director Kirkland. It says, "During 2009, 2010 and 2011, Bruce Goodwin, Inc., a general construction firm located in Chattanooga, Tennessee, has provided a variety of construction work for us. One of Bruce Goodwin, Inc.’s salaried project managers was Mike Kirkland, who is the spouse of Kelly Kirkland, a director. Prior to his retirement on June 15, 2011, Mr. Kirkland ccasionally worked on projects at Bruce Goodwin, Inc. for First Security, but his compensation was not affected by work done for First Security. Bruce Goodwin, Inc. is wholly-owned by Bruce Goodwin, who is Mr. Kirkland’s brother-in-law. First Security has paid Bruce Goodwin, Inc. a total of $105,000 in 2008, $1.18 million in 2009, $329,000 in 2010 and $90,000 to date in 2011. First Security believes the construction work provided by Bruce Goodwin, Inc. was done in the ordinary course of business and on substantially the same terms as those prevailing at the time for comparable transactions."
Payment to directors for 2010 were $5,000 to J.C. Harold Anders, $44,000 to Randall Gibson, $12,365 to Mr. Hall, $50,250 to Ms. Jackson, $50,250 to Mr. Kendall, $2,500 to William Kilbride, $65,500 to Mr. Marler, $39,400 to Ralph Mathews Jr. and $21,615 to Tim T. Morris.
Annually, on or about the annual meeting date, each non-employee director is paid a $19,500 retainer fee for the next year’s service up to the next annual meeting, it was stated. Directors earn additional amounts for attending meetings and serving on committees.
On Jan. 19, 2010, First Security settled a $2.3 million arbitration claim made in 2009 by Lloyd L. Montgomery, III, its former president and chief operating officer, by agreeing to pay Mr. Montgomery $500,000 pursuant to a settlement agreement.
The federal government holds 33,000 shares of the bank since FSG on Jan. 9, 2009, completed a transaction with the United States Treasury under the Troubled Asset Relief Program Capital Purchase Program (TARP CPP). Under the TARP CPP, First Security sold 33,000 shares of its Series A Cumulative Perpetual Preferred Stock, which bears an initial dividend rate of 5 percent increasing to 9 percent after five years, to the Treasury in exchange for an investment of $33 million. In addition, the Treasury received a warrant for the purchase of 823,627 shares of First Security’s Common Stock. One of the conditions of participation in the TARP CPP is that First Security comply with certain limits on its compensation of its executive officers.