First Security Group, Inc. (NASDAQ: FSGI) determined that it was appropriate to write off all goodwill from its balance sheet, which negatively affected earnings during the third quarter. Consequently, First Security posted a net loss available to common shareholders of $28.6 million, or $1.84 per diluted share, for the third quarter of 2009. The after tax goodwill impairment charge totaled $24.8 million and is a one-time, non-cash accounting adjustment that has no effect on cash flows, liquidity, tangible capital or the Company's ability to conduct business. The charge is due to the continued economic downturn and its implication on bank valuations. Because goodwill is excluded from regulatory capital, the impairment charge has no impact on the regulatory capital ratios of First Security or FSGBank, both of which remain "well capitalized" under regulatory requirements.
Excluding the impact of the goodwill impairment charge in the third quarter, First Security's net operating loss available to common shareholders was $3.9 million, or $0.25 per diluted share. The quarterly net operating results were primarily driven by loan loss provision of $9.3 million, as the Company bolstered its allowance by conservatively assessing the existing and emerging credit issues related to the national and regional economic slowdown and the corresponding increases in unemployment.
-- Capital: First Security's tangible capital ratio increased to 11.92 percent at September 30, 2009, from 11.84 percent at June 30, 2009, and well above the threshold for well-capitalized banks. Additionally, First Security's tangible common equity ratio improved to 9.32 percent as of September 30, 2009 from 9.26 percent as of June 30, 2009.
-- Allowance for Loan and Lease Losses: First Security's allowance increased to $25.7 million, or 2.66 percent of loans and leases, as of September 30, 2009 from $19.3 million, or 1.99 percent, as of June 30, 2009.
-- Net interest margin: First Security's net interest margin increased to 3.96 percent in the third quarter from 3.77 percent in the linked second quarter due to First Security's ability to reduce its cost of funding liabilities.
"In light of the uncertain economic environment, we eliminated our intangible goodwill in the third quarter through a non-cash accounting adjustment that does not affect cash or liquidity and has no impact on our regulatory or tangible capital ratios," said Rodger B. Holley, Chairman, CEO and President of First Security. "This non-cash charge does not impact our daily operations in any manner. In fact, our quarter-over-quarter underlying operational performance is encouraging. Core earnings, which consists of pre-tax revenue and non-interest expense before the goodwill impairment, improved by $178 thousand to $3.4 million in the third quarter over the linked quarter."
Net interest income increased $400 thousand, or 3.8 percent, to $10.9 million for the third quarter of 2009, compared to $10.5 million for the linked quarter. First Security's net interest margin improved 19 basis points to 3.96 percent in the third quarter from the linked quarter through a combination of reduced dependency on brokered deposits and certificate of deposits repricing at lower, current market rates. For the three and nine months ended September 30, 2009, net interest income declined from the comparable 2008 periods due to the Federal Reserve's interest rate reductions.
Non-interest income for the third quarter of 2009 improved by $93 thousand, or 3.5 percent, to $2.7 million over the linked quarter primarily due to an increase in fees and fair value adjustments on mortgages originated and sold in the secondary market. Excluding prior year gains on sales of investment securities, non-interest income decreased $174 thousand from the third quarter of 2008 to the third quarter of 2009 due primarily to lower service charges on bank accounts. On a year-to-date basis, non-interest income declined by $1.2 million, or 13.0 percent, from the 2008 period due mainly to lower service charge fees and mortgage origination fees.
For the third quarter of 2009, total non-interest expense of $37.4 million included a pre-tax, one-time, non-cash, estimated goodwill impairment loss of $27.2 million. First Security is currently conducting its annual goodwill impairment testing, based on the September 30, 2009 evaluation date. The estimate will be finalized upon completion of the goodwill impairment testing, which is currently estimating a full impairment charge. Excluding the goodwill impairment charge, non-interest operating expense was $10.2 million for the third quarter of 2009 compared to $9.9 million for the linked quarter and $9.7 million for the third quarter of 2008. The increase was primarily due to increased professional fees and holding costs on foreclosed properties. On a year-to-date basis, non-interest expense, excluding the goodwill impairment, decreased $473 thousand to $29.6 million in 2009 from $30.0 million in 2008, despite significantly rising FDIC insurance costs, which are beyond First Security's control.
Consistent with First Security's continued focus on controlling costs, a number of categories of noninterest expense in the third quarter of 2009 declined from the linked quarter, including salaries and benefits which decreased by $140 thousand, or 2.8 percent. On a year-to-date basis, salaries and benefits decreased by $1.3 million from 2008 to 2009. The number of full-time equivalent employees declined to 348 as of September 30, 2009, from 365 a year ago and 353 at June 30, 2009.
"While some economists have declared that 'the recession is over,' we anticipate that the lingering effects of the economic downturn will continue to place stress on businesses and borrowers in all markets," noted Mr. Holley. "As such, we aggressively built our loan loss reserve in the third quarter. We believe that this long-term view of our business and market area will help us manage our short-term challenges, and will also better prepare us for the opportunities that will accompany an extended and gradual economic recovery."
Non-performing assets increased modestly in the third quarter of 2009 from the linked quarter. Non-accrual loans and leases increased $4.7 million to $31.5 million at the end of the third quarter of 2009, from the linked quarter; the largest categories were construction and development (C&D) loans with $10.6 million, commercial and industrial (C&I) loans with $8.4 million and commercial leases with $5.1 million. Over the same time period, other real estate owned increased $1.3 million to $14.2 million; and repossessed assets increased $577 thousand to $2.1 million at September 30, 2009, from June 30, 2009. Additional detail on asset quality is available in the supplemental data following financial highlights.
As of September 30, 2009, the allowance for loan and lease losses was $25.7 million, or 2.66 percent of total loans, compared to $19.3 million, or 1.99 percent of total loans, as of June 30, 2009. At September 30, 2009, approximately 77 percent of the allowance was allocated to loan pools based on common characteristics in accordance with Financial Accounting Standard (FAS) No. 5, whereas the remainder of the allowance was allocated to impaired loans under FAS No. 114.
During the third quarter of 2009, net charge-offs declined to $2.9 million, or 1.18 percent annualized of average loans, compared to $6.9 million, or 2.82 percent annualized, in the linked quarter.
First Security continues its focus on strategically reducing certain balance sheet risks. During the third quarter of 2009, loan balances declined by $4.2 million, or 0.4 percent (1.7 percent annualized). This decline was concentrated in C&D loans of $7.1 million and 1-4 family residential loans of $4.0 million.
First Security's loan portfolio consists of in-market loans originated throughout its branch network. The loan portfolio is well diversified with 29.6 percent in 1-4 family residential, 24.2 percent in commercial real estate, 18.3 percent in C&D and 15.4 percent in C&I. Additional detail on the loan portfolio is available in the supplemental data following financial highlights.
At September 30, 2009, total deposits were $1.0 billion, a decline of 1.3 percent (5.3 percent annualized), compared to the end of the linked quarter. The decline was primarily due to an $8.8 million, or 6.8 percent (27.1 percent annualized), decline in brokered certificates of deposit. Core deposits, which include non-interest bearing demand deposit accounts, interest-bearing demand deposit accounts, savings and money markets and certificates of deposit of less than $100 thousand, increased to 60.5 percent of total deposits, from 60.1 percent in the linked quarter. At September 30, 2009, savings and money market accounts totaled $164.5 million, a 24.0 percent increase from one year ago. Total deposits increased $42.8 million, or 4.4 percent from September 30, 2008.
First Security maintains capital levels exceeding those for well-capitalized banks under applicable regulatory guidelines. The tangible equity to tangible assets ratio as of September 30, 2009 was 11.92 percent compared to 11.84 percent at June 30, 2009. Total stockholders' equity at the end of the third quarter of 2009 was $145.2 million, and included common stockholders' equity of $113.9 million and preferred stockholder's equity of $31.2 million.
"The entire financial industry is under pressure to reduce balance sheet risk and increase reserves to sustain recessionary losses," Mr. Holley concluded. "With our diversified loan portfolio, strong capital position and increased reserves, we are preparing for the possibility that credit conditions may deteriorate further in the near future; however, I remain optimistic. While the recovery may be slow and significant improvement may be several quarters away, we operate in a region that has excellent prospects for growth and job expansion. Furthermore, we have a team of experienced and dedicated bankers who continue to have success adding new customer relationships, and we continue focusing on our long term objective of consistent and sustainable core earnings growth."
First Security's executive management team will host a conference call and simultaneous webcast on Tuesday October 20, 2009, at 3:00 PM Eastern Daylight Time to discuss third quarter results. The webcast can be accessed live on First Security's website, www.FSGBank.com on the Corporate Information/Investor Relations page. A replay will be available approximately two hours after the live conference call ends, and will be archived on First Security's website for one month.
About First Security Group, Inc.
First Security Group, Inc. is a bank holding company headquartered in Chattanooga, Tennessee, with $1.2 billion in assets. Founded in 1999, First Security's community bank subsidiary, FSGBank, N.A. has 39 full-service banking offices along the interstate corridors of eastern and middle Tennessee and northern Georgia. In Dalton, Georgia, FSGBank operates under the name of Dalton Whitfield Bank; along the Interstate 40 corridor in Tennessee, FSGBank operates under the name of Jackson Bank & Trust. FSGBank provides retail and commercial banking services, trust and investment management, mortgage banking, financial planning, internet banking (www.FSGBank.com) and equipment leasing through its wholly-owned subsidiaries, Kenesaw Leasing and J&S Leasing.
This press release contains financial information determined by methods other than in accordance with generally accepted accounting principles in the United States of America (GAAP). First Security's management uses these "non-GAAP" measures in its analysis of First Security's performance. Non-GAAP measures typically adjust GAAP performance measures to exclude the effects of charges, expenses and gains related to the consummation of mergers and acquisitions, and costs related to the integration of merged entities. These non-GAAP measures may also exclude other significant gains, losses or expenses that are unusual in nature and not expected to recur. The non-GAAP measure of core earnings excludes the provision for loan and lease losses, income taxes, preferred stock dividends, accretion on preferred stock, and non-recurring items. Management believes presentations of financial measures excluding the impact of these items provide useful supplemental information that is important for a proper understanding of the operating results of First Security's business and its capacity to cover future credit losses through core earnings. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.
This news release contains comments or information that constitute forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1993) that are based on current expectations that involve a number of risks and uncertainties. These forward-looking statements include, among others, an estimated goodwill impairment charge and the assumptions underlying this estimate. Actual results may differ materially from the results expressed in forward-looking statements. Factors that might cause such a difference include changes in interest rates and interest rate relationships; demand for products and services; the degree of competition by traditional and non-traditional competitors; changes in banking regulation; changes in tax laws; changes in prices, levies, and assessments; the impact of technological advances; governmental and regulatory policy changes; the outcomes of contingencies; trends in customer behavior as well as their ability to repay loans; changes in the national and local economy; and other factors, including risk factors, referred to from time to time in filings made by First Security with the Securities and Exchange Commission. First Security undertakes no obligation to update or clarify forward-looking statements, whether as a result of new information, future events or otherwise.
Public companies, from time to time, become aware of rumors concerning their business. Investors are cautioned that in this age of instant communication and internet access, it may be important to avoid relying on rumors and unsubstantiated information. First Security complies with Federal and State law applicable to disclosure of information. Investors may be at significant risk in relying on unsubstantiated information from other sources.
First Security Group, Inc. and Subsidiary
Consolidated Balance Sheets
September 30, December 31, September 30,
(in thousands, except share data) 2009 2008 2008
(unaudited) (unaudited)
ASSETS
Cash & Due from Banks $ 14,711 $ 23,222 $ 26,822
Federal Funds Sold and Securities Purchased under Agreements to - - -
Resell
Cash and Cash Equivalents 14,711 23,222 26,822
Interest-Bearing Deposits in Banks 5,394 918 963
Securities Available-for-Sale 147,175 139,305 134,437
Loans Held for Sale 1,001 1,609 3,972
Loans 963,294 1,009,975 1,013,495
Total Loans 964,295 1,011,584 1,017,467
Less: Allowance for Loan and Lease Losses 25,686 17,385 13,335
938,609 994,199 1,004,132
Premises and Equipment, net 33,587 33,808 34,289
Goodwill - 27,156 27,156
Intangible Assets 2,012 2,404 2,592
Other Assets 61,420 55,215 51,622
TOTAL ASSETS $ 1,202,908 $ 1,276,227 $ 1,282,013
LIABILITIES
Deposits
Noninterest-Bearing Demand $ 146,820 $ 150,047 $ 162,631
Interest-Bearing Demand 61,502 61,402 62,031
Savings and Money Market Accounts 164,490 151,259 132,646
Certificates of Deposit of less than $100 thousand 244,127 249,978 256,727
Certificates of Deposit of $100 thousand or more 203,533 206,502 213,440
Brokered Deposits 198,815 257,098 149,045
Total Deposits 1,019,287 1,076,286 976,520
Federal Funds Purchased and Securities Sold under Agreements to 20,463 40,036 50,571
Repurchase
Security Deposits 1,444 2,078 2,118
Other Borrowings 7,724 2,777 92,780
Other Liabilities 8,801 10,806 11,493
Total Liabilities 1,057,719 1,131,983 1,133,482
STOCKHOLDERS' EQUITY
Preferred Stock - no par value 10,000,000 authorized; 33,000 31,248 - -
issued as of September 30, 2009; none issued as of December 31,
2008 and September 30, 2008
Common Stock - $.01 par value 50,000,000 shares authorized; 114 114 114
16,418,327 issued as of September 30, 2009; 16,419,883 issued as
of December 31, 2008; 16,419,883 issued as of September 30, 2008
Paid-In Surplus 111,999 111,777 111,927
Common Stock Warrants 2,006 - -
Unallocated ESOP Shares (6,446 ) (5,944 ) (3,856 )
(Accumulated Deficit) Retained Earnings (524 ) 32,387 36,487
Accumulated Other Comprehensive Income 6,792 5,910 3,859
Total Stockholders' Equity 145,189 144,244 148,531
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,202,908 $ 1,276,227 $ 1,282,013
First Security Group, Inc. and Subsidiary
Consolidated Income Statements
Three Months Ended Year-to-Date
September 30, September 30,
(in thousands except per share amounts) 2009 2008 2009 2008
(unaudited) (unaudited) (unaudited) (unaudited)
INTEREST INCOME
Loans, including fees $ 14,462 $ 17,505 $ 43,859 $ 53,616
Debt Securities - taxable 1,097 1,149 3,435 3,410
Debt Securities - non-taxable 396 395 1,200 1,184
Other 3 9 38 41
Total Interest Income 15,958 19,058 48,532 58,251
INTEREST EXPENSE
Interest-Bearing Demand Deposits 45 69 146 262
Savings Deposits and Money Market Accounts 384 548 1,255 1,754
Certificates of Deposit of less than $100 thousand 1,738 2,525 5,687 8,202
Certificates of Deposit of $100 thousand or more 1,530 2,206 4,934 7,242
Brokered Deposits 1,225 1,114 4,478 2,941
Other 136 900 395 3,223
Total Interest Expense 5,058 7,362 16,895 23,624
NET INTEREST INCOME 10,900 11,696 31,637 34,627
Provision for Loan and Lease Losses 9,280 3,960 20,469 7,091
NET INTEREST INCOME AFTER PROVISION
FOR LOAN AND LEASE LOSSES 1,620 7,736 11,168 27,536
NON-INTEREST INCOME
Service Charges on Deposit Accounts 1,184 1,338 3,501 3,950
Gain on Sales of Available for Sale Securities, net - 146 - 146
Other 1,553 1,573 4,331 4,911
Total Non-interest Income 2,737 3,057 7,832 9,007
NON-INTEREST EXPENSE
Salaries and Employee Benefits 4,903 5,105 15,303 16,629
Expense on Premises and Fixed Assets, net of rental income 1,493 1,583 4,525 4,970
Impairment of Goodwill 27,156 - 27,156 -
Other 3,811 3,017 9,731 8,433
Total Non-interest Expense 37,363 9,705 56,715 30,032
(LOSS) INCOME BEFORE INCOME TAX (BENEFIT) PROVISION (33,006 ) 1,088 (37,715 ) 6,511
Income Tax (Benefit) Provision (4,877 ) 262 (7,326 ) 1,838
NET (LOSS) INCOME (28,129 ) 826 (30,389 ) 4,673
Preferred Stock Dividends 412 - 1,196 -
Accretion on Preferred Stock Discount 90 - 254 -
NET (LOSS) INCOME AVAILABLE TO COMMON STOCKHOLDERS $ (28,631 ) $ 826 $ (31,839 ) $ 4,673
NET (LOSS) INCOME PER COMMON SHARE:
Net Income Per Common Share - basic $ (1.84 ) $ 0.05 $ (2.05 ) $ 0.29
Net Income Per Common Share - diluted $ (1.84 ) $ 0.05 $ (2.05 ) $ 0.29
Dividends Declared Per Common Share $ 0.01 $ 0.05 $ 0.07 $ 0.15
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
BASIC 15,543 16,065 15,539 16,087
DILUTED 15,543 16,159 15,539 16,243
First Security Group, Inc. and Subsidiary
Consolidated Financial Highlights
(unaudited)
(in thousands, except per share amounts and full-time equivalent
employees)
3rd Quarter 2nd Quarter 1st Quarter 4th Quarter 3rd Quarter Year-to-Date Year-to-Date
2009 2009 2009 2008 2008 September 30, September 30,
2009 2008
Earnings:
Net interest income $ 10,900 $ 10,500 $ 10,237 $ 10,600 $ 11,696 $ 31,637 $ 34,627
Provision for loan and lease losses $ 9,280 $ 6,196 $ 4,993 $ 8,662 $ 3,960 $ 20,469 $ 7,091
Non-interest income $ 2,737 $ 2,644 $ 2,451 $ 2,675 $ 3,057 $ 7,832 $ 9,007
Non-interest expense $ 37,363 $ 9,892 $ 9,460 $ 10,350 $ 9,705 $ 56,715 $ 30,032
Dividends and accretion on preferred stock $ 502 $ 500 $ 448 $ - $ - $ 1,450 $ -
Net (loss) income available to common stockholders $ (28,631 ) $ (1,908 ) $ (1,300 ) $ (3,312 ) $ 826 $ (31,839 ) $ 4,673
Earnings - Normalized
Non-interest operating expense (1) $ 10,207 $ 9,892 $ 9,460 $ 10,350 $ 9,705 $ 29,559 $ 30,032
Net operating income, net of tax (1) $ (3,869 ) $ (1,908 ) $ (1,300 ) $ (3,312 ) $ 826 $ (7,077 ) $ 4,673
Core earnings (2) $ 3,430 $ 3,252 $ 3,228 $ 2,925 $ 5,048 $ 9,910 $ 13,602
Per Share Data:
Net (loss) income available to common stockholders, basic $ (1.84 ) $ (0.12 ) $ (0.08 ) $ (0.21 ) $ 0.05 $ (2.05 ) $ 0.29
Net (loss) income available to common stockholders, diluted $ (1.84 ) $ (0.12 ) $ (0.08 ) $ (0.21 ) $ 0.05 $ (2.05 ) $ 0.29
Cash dividends declared on common shares $ 0.01 $ 0.01 $ 0.05 $ 0.05 $ 0.05 $ 0.07 $ 0.15
Book value per common share $ 6.94 $ 8.61 $ 8.76 $ 8.78 $ 9.05 $ 6.94 $ 9.05
Tangible book value per common share $ 6.82 $ 6.82 $ 6.97 $ 6.98 $ 7.23 $ 6.82 $ 7.23
Per Share Data - Normalized:
Net operating income, basic (1) $ (0.25 ) $ (0.12 ) $ (0.08 ) $ (0.21 ) $ 0.05 $ (0.46 ) $ 0.29
Net operating income, diluted (1) $ (0.25 ) $ (0.12 ) $ (0.08 ) $ (0.21 ) $ 0.05 $ (0.46 ) $ 0.29
Performance Ratios:
Return on average assets -9.30 % -0.61 % -0.40 % -1.04 % 0.26 % -3.37 % 0.50 %
Return on average common equity -80.88 % -5.28 % -3.57 % -8.98 % 2.22 % -29.51 % 4.18 %
Return on average tangible assets -9.52 % -0.62 % -0.41 % -1.06 % 0.27 % -3.45 % 0.51 %
Return on average tangible common equity -101.66 % -6.63 % -4.48 % -11.24 % 2.78 % -37.04 % 5.24 %
Net interest margin, taxable equivalent 3.96 % 3.77 % 3.63 % 3.74 % 4.13 % 3.78 % 4.18 %
Efficiency ratio 273.98 % 75.26 % 74.56 % 77.97 % 65.78 % 143.70 % 68.83 %
Non-interest income to net interest income and non-interest income 20.07 % 20.12 % 19.32 % 20.15 % 20.72 % 19.84 % 20.64 %
Performance Ratios - Normalized:
Operating return on average assets (1) -1.26 % -0.61 % -0.40 % -1.04 % 0.26 % -0.75 % 0.50 %
Operating return on average common equity (1) -10.93 % -5.28 % -3.57 % -8.98 % 2.22 % -6.56 % 4.18 %
Operating return on average tangible assets (1) -1.29 % -0.62 % -0.41 % -1.06 % 0.27 % -0.77 % 0.51 %
Operating return on average tangible common equity (1) -13.74 % -6.63 % -4.48 % -11.24 % 2.78 % -8.23 % 5.24 %
Core efficiency ratio (3) 71.13 % 71.64 % 70.69 % 68.98 % 63.16 % 71.16 % 66.32 %
Non-interest operating income to net interest income and 20.07 % 20.12 % 19.32 % 20.15 % 20.72 % 19.84 % 20.64 %
non-interest operating income (1)
Capital & Liquidity:
Total equity to total assets 12.07 % 13.93 % 13.73 % 11.30 % 11.59 % 12.07 % 11.59 %
Tangible equity to tangible assets 11.92 % 11.84 % 11.69 % 9.20 % 9.49 % 11.92 % 9.49 %
Tangible common equity to tangible assets 9.32 % 9.26 % 9.20 % 9.20 % 9.49 % 9.32 % 9.49 %
Total loans to total deposits 94.60 % 93.75 % 93.08 % 93.99 % 104.19 % 94.60 % 104.19 %
Asset Quality:
Net charge-offs $ 2,862 $ 6,944 $ 2,344 $ 4,606 $ 2,474 $ 12,150 $ 4,694
Net loans charged-off to average loans, annualized 1.18 % 2.82 % 0.94 % 1.82 % 0.98 % 1.65 % 0.63 %
Non-accrual loans $ 31,463 $ 26,782 $ 26,706 $ 18,453 $ 8,773 $ 31,463 $ 8,773
Other real estate owned $ 14,206 $ 12,930 $ 11,309 $ 7,145 $ 5,561 $ 14,206 $ 5,561
Repossessed assets $ 2,050 $ 1,473 $ 1,864 $ 1,680 $ 1,293 $ 2,050 $ 1,293
Non-performing assets (NPA) $ 47,719 $ 41,185 $ 39,879 $ 27,278 $ 15,627 $ 47,719 $ 15,627
NPA to total assets 3.97 % 3.33 % 3.13 % 2.14 % 1.22 % 3.97 % 1.22 %
Loans 90 days past due $ 3,377 $ 3,373 $ 5,413 $ 2,706 $ 2,250 $ 3,377 $ 2,250
NPA + loans 90 days past due to total assets 4.25 % 3.60 % 3.55 % 2.35 % 1.39 % 4.25 % 1.39 %
Allowance for loan and lease losses to total loans 2.66 % 1.99 % 2.02 % 1.72 % 1.31 % 2.66 % 1.31 %
Allowance for loan and lease losses to NPA 53.83 % 46.80 % 50.22 % 63.73 % 85.33 % 53.83 % 85.33 %
Period End Balances:
Loans $ 964,295 $ 968,493 $ 992,647 $ 1,011,584 $ 1,017,467 $ 964,295 $ 1,017,467
Intangible assets $ 2,012 $ 29,295 $ 29,425 $ 29,560 $ 29,748 $ 2,012 $ 29,748
Assets $ 1,202,908 $ 1,238,393 $ 1,274,385 $ 1,276,227 $ 1,282,013 $ 1,202,908 $ 1,282,013
Deposits $ 1,019,287 $ 1,033,046 $ 1,066,395 $ 1,076,286 $ 976,520 $ 1,019,287 $ 976,520
Common stockholders' equity $ 113,941 $ 141,305 $ 143,911 $ 144,244 $ 148,531 $ 113,941 $ 148,531
Total stockholders' equity $ 145,189 $ 172,463 $ 174,982 $ 144,244 $ 148,531 $ 145,189 $ 148,531
Common stock market capitalization $ 63,209 $ 62,388 $ 55,335 $ 75,860 $ 120,194 $ 63,209 $ 120,194
Full-time equivalent employees 348 353 361 361 365 348 365
Common shares outstanding 16,418 16,418 16,420 16,420 16,420 16,418 16,420
Average Balances:
Loans $ 966,677 $ 984,210 $ 999,954 $ 1,011,727 $ 1,011,609 $ 983,492 $ 992,563
Intangible assets $ 28,941 $ 29,365 $ 29,498 $ 29,677 $ 29,830 $ 29,266 $ 30,039
Earning assets $ 1,115,542 $ 1,142,338 $ 1,168,135 $ 1,150,799 $ 1,146,650 $ 1,144,254 $ 1,127,030
Assets $ 1,231,926 $ 1,258,363 $ 1,286,371 $ 1,274,674 $ 1,275,353 $ 1,258,687 $ 1,253,052
Deposits $ 1,024,105 $ 1,047,865 $ 1,075,316 $ 1,046,970 $ 950,473 $ 1,048,908 $ 926,800
Common stockholders' equity $ 141,600 $ 144,476 $ 145,588 $ 147,499 $ 148,824 $ 143,873 $ 149,040
Total stockholders' equity $ 172,779 $ 175,568 $ 172,815 $ 147,499 $ 148,824 $ 173,720 $ 149,040
Common shares outstanding, basic - wtd 15,543 15,503 15,573 15,817 16,065 15,539 16,087
Common shares outstanding, diluted - wtd 15,543 15,503 15,573 15,859 16,159 15,539 16,243
(1) These amounts and ratios are calculated using net
operating income (net of tax) which excludes certain non-recurring
items. Since these items and their impact on First Security's
performance are difficult to predict, management believes
presentation of financial measures excluding the impact of these
items provide useful supplemental information that is important
for a proper understanding of the operating results of First
Security's business. Refer to the following non-GAAP
reconciliation table for a detail of the non-recurring items.
(2) Core earnings measures total revenue and
noninterest expense excluding the goodwill impairment.The amount
excludes provision for loan and lease losses, income taxes
(benefits) and preferred stock dividends and accretion of
preferred stock from net income available to common
shareholders.Management believes presentation of core earnings
provides useful supplemental information that is important for a
proper understanding of the operating results of First Security's
business.Refer to the following non-GAAP reconciliation table
for detail of the excluded items.
(3) In accordance with SNL Financial practice, the core
efficiency ratio is calculated on a fully tax equivalent basis
excluding non-recurring items (see footnote (1) and
non-GAAP reconciliation table) and certain non-cash items, such as
amortization of intangibles, gains or losses on investment
securities and gains, losses and write-downs on foreclosed and
repossessed properties.
Non-GAAP Reconciliation Table
(in thousands, except per share data)
3rd Quarter 2nd Quarter 1st Quarter 4th Quarter 3rd Quarter Year-to-Date Year-to-Date
2009 2009 2009 2008 2008 September 30, September 30,
2009 2008
Return on average assets -9.30 % -0.61 % -0.40 % -1.04 % 0.26 % -3.37 % 0.50 %
Effect of intangible assets -0.22 % -0.01 % -0.01 % -0.02 % 0.01 % -0.08 % 0.01 %
Return on average tangible assets -9.52 % -0.62 % -0.41 % -1.06 % 0.27 % -3.45 % 0.51 %
Return on average common equity -80.88 % -5.28 % -3.57 % -8.98 % 2.22 % -29.51 % 4.18 %
Effect of intangible assets -20.78 % -1.35 % -0.91 % -2.26 % 0.56 % -7.53 % 1.06 %
Return on average common tangible equity -101.66 % -6.63 % -4.48 % -11.24 % 2.78 % -37.04 % 5.24 %
Total equity to total assets 12.07 % 13.93 % 13.73 % 11.30 % 11.59 % 12.07 % 11.59 %
Effect of intangible assets -0.15 % -2.09 % -2.04 % -2.10 % -2.10 % -0.15 % -2.10 %
Tangible equity to tangible assets 11.92 % 11.84 % 11.69 % 9.20 % 9.49 % 11.92 % 9.49 %
Efficiency ratio 273.98 % 75.26 % 74.56 % 77.97 % 65.78 % 143.70 % 68.83 %
Effect of non-recurring items -196.88 % - - - - -68.11 % -
Effect of non-cash items -4.78 % -2.36 % -2.57 % -7.74 % -1.62 % -3.18 % -1.45 %
Effect of net interest income, tax equivalent adjustment -1.19 % -1.26 % -1.30 % -1.25 % -1.00 % -1.25 % -1.06 %
Core efficiency ratio 71.13 % 71.64 % 70.69 % 68.98 % 63.16 % 71.16 % 66.32 %
Non-interest expense $ 37,363 $ 9,892 $ 9,460 $ 10,350 $ 9,705 $ 56,715 $ 30,032
Effect of impairment of goodwill (27,156 ) - - - - (27,156 ) -
Non-interest operating expense $ 10,207 $ 9,892 $ 9,460 $ 10,350 $ 9,705 $ 29,559 $ 30,032
Net income $ (28,631 ) $ (1,908 ) $ (1,300 ) $ (3,312 ) $ 826 $ (31,839 ) $ 4,673
Effect of non-recurring expenses, net of tax 24,762 - - - - 24,762 -
Net operating income, net of tax (3,869 ) (1,908 ) (1,300 ) (3,312 ) 826 (7,077 ) 4,673
Effect of provision for loan and lease losses 9,280 6,196 4,993 8,662 3,960 20,469 7,091
Effect of income tax (benefit) provision, excluding tax effect of (2,483) (1,536) (913) (2,425) 262 (4,932) 1,838
goodwill impairment
Effect of preferred stock dividends and discount accretion 502 500 448 - - 1,450 -
Core earnings $3,430 $3,252 $3,228 $2,925 $5,048 $9,910 $13,602
Total stockholders' equity $ 145,189 $ 172,463 $ 174,982 $ 144,244 $ 148,531 $ 145,189 $ 148,531
Effect of preferred stock (31,248 ) (31,158 ) (31,071 ) - - (31,248 ) -
Common stockholders' equity $ 113,941 $ 141,305 $ 143,911 $ 144,244 $ 148,531 $ 113,941 $ 148,531
Average total stockholders' equity $ 172,779 $ 175,568 $ 172,815 $ 147,499 $ 148,824 $ 173,720 $ 149,040
Effect of average preferred stock (31,179 ) (31,092 ) (27,227 ) - - (29,847 ) -
Average common stockholders' equity $ 141,600 $ 144,476 $ 145,588 $ 147,499 $ 148,824 $ 143,873 $ 149,040
Per Share Data
Book value per common share $ 6.94 $ 8.61 $ 8.76 $ 8.78 $ 9.05 $ 6.94 $ 9.05
Effect of intangible assets (0.12 ) (1.79 ) (1.79 ) (1.80 ) (1.82 ) (0.12 ) (1.82 )
Tangible book value per common share $ 6.82 $ 6.82 $ 6.97 $ 6.98 $ 7.23 $ 6.82 $ 7.23
Supplemental Data (in thousands)
Allowance for loan and lease losses $ 25,686 $ 19,275 $ 20,028 $ 17,385 $ 13,335 $ 25,686 $ 13,335
Net interest income, tax equivalent $ 11,126 $ 10,729 $ 10,469 $ 10,841 $ 11,924 $ 32,325 $ 35,309
Impairment of goodwill $ 27,156 $ - $ - $ - $ - $ 27,156 $ -
Amortization of intangibles $ 127 $ 129 $ 135 $ 188 $ 175 $ 391 $ 609
(Gain)/Loss on sales of available-for-sale securities, net $ - $ - $ - $ - $ (146 ) $ - $ (146 )
Gain on sales of foreclosed and repossessed property, leased $ (70 ) $ (146 ) $ (70 ) $ (72 ) $ (169 ) $ (286 ) $ (479 )
equipment, premises and equipment and loans
Losses on sales of foreclosed and repossessed property and premises $ 149 $ 82 $ 59 $ 149 $ 158 $ 290 $ 200
and equipment
Write-downs on foreclosed and repossessed property and other assets $ 120 $ 205 $ 182 $ 740 $ 109 $ 507 $ 245
Mortgage loan and related fees $ 385 $ 199 $ 242 $ 172 $ 335 $ 826 $ 1,271
Loans by Type
Loans secured by real estate -
Residential 1-4 family $ 284,811 $ 288,836 $ 294,314 $ 296,454 $ 284,256 $ 284,811 $ 284,256
Commercial 233,692 225,790 223,759 234,630 230,134 233,692 230,134
Construction 176,570 183,623 190,581 194,603 206,453 176,570 206,453
Multi-family and Farmland 37,461 33,847 36,541 34,273 33,114 37,461 33,114
Total loans secured by real estate 732,534 732,096 745,195 759,960 753,957 732,534 753,957
Commercial loans 148,473 150,472 162,534 157,906 166,024 148,473 166,024
Consumer installment loans 51,866 54,261 53,406 58,296 61,400 51,866 61,400
Leases, net of unearned income 24,679 26,784 29,117 30,873 33,663 24,679 33,663
Other 6,743 4,880 2,395 4,549 2,423 6,743 2,423
Total loans $ 964,295 $ 968,493 $ 992,647 $ 1,011,584 $ 1,017,467 $ 964,295 $ 1,017,467
Supplemental Data (continued)
Asset Quality Information
3rd Quarter 3rd Quarter 2nd Quarter 2nd Quarter 1st Quarter 1st Quarter Year-to-Date Year-to-Date
2009 2009 2009 2009 2009 2009 2009 2009
(in thousands) (units) (in thousands) (units) (in thousands) (units) (in thousands) (units)
Non-Accrual Loans and Leases - Activity
Beginning Balance $ 26,782 91 $ 26,706 70 $ 18,453 57 $ 18,453 57
Additions 11,081 9,643 12,589 33,313
Reductions (6,400) (9,567 ) (4,336 ) (20,303 )
Ending Balance $ 31,463 106 $ 26,782 91 $ 26,706 70 $ 31,463 106
Non-Accrual Loans and Leases - Classification
Construction/Development Loans $ 10,583 15 $ 8,706 9 $ 9,040 12 $ 10,583 15
Residential Real Estate Loans 3,758 32 3,713 30 2,179 18 3,758 32
Commercial Real Estate Loans 2,162 11 4,595 16 3,575 12 2,162 11
Commercial & Industrial Loans 8,432 25 3,160 15 6,904 20 8,432 25
Commercial Leases 5,064 21 5,126 16 3,523 4 5,064 21
Consumer and Other Loans 1,464 2 1,482 5 1,485 4 1,464 2
Total $ 31,463 106 $ 26,782 91 $ 26,706 70 $ 31,463 106
Other Real Estate Owned - Activity
Beginning Balance $ 12,930 61 $ 11,309 49 $ 7,145 51 $ 7,145 51
Additions 5,599 4,522 5,111 15,232
Reductions (4,323 ) (2,901 ) (947 ) (8,171 )
Ending Balance $ 14,206 68 $ 12,930 61 $ 11,309 49 $ 14,206 68
Other Real Estate Owned - Classification
Construction/Development Loans $ 6,339 31 $ 7,187 38 $ 5,484 30 $ 6,339 31
Residential Real Estate Loans 3,688 25 2,657 14 2,598 14 3,688 25
Commercial Real Estate Loans 4,179 12 3,086 9 3,227 5 4,179 12
Total $ 14,206 68 $ 12,930 61 $ 11,309 49 $ 14,206 68
Loans 90 Days Past Due - Classification
Construction/Development Loans $ 532 3 $ 94 4 $ 481 7 $ 532 3
Residential Real Estate Loans 1,145 19 795 12 765 13 1,145 19
Commercial Real Estate Loans 108 2 41 1 2,898 8 108 2
Commercial & Industrial Loans 67 4 59 6 673 12 67 4
Commercial Leases 1,307 36 2,308 24 478 13 1,307 36
Consumer and Other Loans 218 19 76 10 118 20 218 19
Total $ 3,377 83 $ 3,373 57 $ 5,413 73 $ 3,377 83
Repossessed Assets - Activity
Beginning Balance $ 1,473 56 $ 1,864 63 $ 1,680 56 $ 1,680 56
Additions 1,978 810 1,318 4,106
Reductions (1,401 ) (1,201 ) (1,134 ) (3,736 )
Ending Balance $ 2,050 163 $ 1,473 56 $ 1,864 63 $ 2,050 163
SOURCE: First Security Group, Inc.
First Security Group, Inc. Rodger B. Holley, Chairman, CEO and President, 423-308-2080 rholley@FSGBank.com or William L. (Chip) Lusk, Jr., EVP & CFO, 423-308-2070 clusk@FSGBank.com
Copyright Business Wire 2009 
