FSG Bank Carries Out $91.1 Million Recapitalization

  • Friday, April 12, 2013

First Security Group, Inc., parent company of Chattanooga-based FSG Bank, has carried out a recapitalization of over $91 million, officials said Friday.

Officials said the bank completed its previously announced recapitalization, including the restructuring of its TARP CPP preferred stock.

On Thursday, the bank issued approximately 9.9 million shares of its common stock to the U.S. Treasury for full satisfaction of the Treasury’s TARP CPP investment in the company. The Treasury immediately sold the common stock to institutional and other accredited investors previously identified by the company at $1.50 per share.

On Friday, the bank issued an additional approximately 50.8 million shares of common stock at $1.50 per share to institutional and other accredited investors. In aggregate, investors purchased 60,735,000 shares for $91.1 million. The recapitalization was previously announced on Feb. 26.

“We extend our appreciation to our new shareholders in having the confidence to invest in our markets, our company and most importantly, our people,” said Michael Kramer, president and chief executive officer of First Security. “With the Recapitalization complete, our full attention can be directed to further improving and growing our banking franchise.”

Officials said on Friday the company "downstreamed approximately $65 million in capital to FSG Bank in order to improve FSG Bank’s regulatory capital ratios and to support future balance sheet growth. The combined effects of the additional capital and the previously announced and completed loan sale are expected to result in an improved risk profile, enhanced profitability and compliance with most, but not all, aspects of the regulatory orders of the company and FSG Bank."

“When building our management team, we focused on their individual and collective abilities to develop and communicate a successful business strategy to new investors and then to implement that strategy,” said Larry Mauldin, chairman of the board. “They have exceeded our expectations on the capital raise and now we can continue our efforts to grow FSG Bank and serve our communities.”

Sandler O’Neill + Partners, L.P. and Raymond James Financial, Inc. acted as financial advisors and placement agents for First Security Group, Inc. in connection with the offering. Bryan Cave LLP acted as legal counsel to First Security Group, Inc. in connection with the recapitalization. Sandler O’Neill Mortgage Finance, L.P., an affiliate of Sandler O’Neill + Partners, L.P., acted as exclusive financial advisor to First Security Group, Inc. in connection with the loan sale.

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