CHATTANOOGA, Tenn., Jan. 26, 2006 (PRIMEZONE) -- First Security Group, Inc. (Nasdaq:FSGI), a community bank holding company serving middle and eastern Tennessee and northern Georgia, today reported results for the fiscal year and fourth quarter of 2005.
-- Net income for the year was $9.6 million, an increase of
124.3% over net income for 2004. Excluding extraordinary
gains in both years and non-recurring 2005 items, net
operating income for 2005 was $7.7 million, an increase
of 122.3%.
-- Diluted net income per share was $0.64 for 2005, an increase
of 93.9% over per share income in the prior year. Excluding
extraordinary and non-recurring items, diluted net operating
income per share was $0.52 for 2005, up 92.6%. Results also
reflect a 15.5% increase in average diluted shares from the
2005 third quarter initial public offering.
-- Fourth quarter 2005 net income was $2.3 million, an increase
of 16.4% from the $1.9 million reported in the fourth quarter
of 2004; excluding extraordinary items in both years and
non-recurring items in 2005, quarterly operating earnings
were $2.6 million, an increase of 124.8% over the prior-year
period.
-- For the 2005 and 2004 fourth quarters, diluted EPS was
$0.13 and $0.15, respectively. On an operating basis,
diluted EPS was $0.15 in 2005 and $0.09 in 2004, an increase
of 66.7%. Per share results were also impacted by the
38.7% increase in average diluted shares as the result of
the third quarter 2005 stock offering.
-- Total assets grew 35.7% over the last twelve months to $1.0
billion, of which $87 million, or 11.4%, was organic.
-- Total revenue increased 39.3% over the prior year, to $49.3
million.
-- FSGBank, N.A., the banking subsidiary of First Security,
opened two de novo branches in the fourth quarter of 2005:
one each in Varnell, Georgia and Cleveland, Tennessee.
Including Jackson Bank & Trust, acquired on August 31,
First Security added seven branches in 2005.
-- First Security declared its first ever cash dividend of
$0.025 per share in the fourth quarter of 2005.
Net income for fiscal 2005 was $9.6 million, an increase of 124.3 percent from the $4.3 million reported for the prior fiscal year. Earnings for 2005 include an extraordinary $3.5 million pre-tax gain ($2.2 million after-tax) reported in the third quarter resulting from the determination by First Security that an obligation associated with certain tax liabilities assumed in a prior acquisition had become remote. Non-recurring items for fiscal 2005 totaled $510,000 pre-tax ($346,000 after-tax), including expenses of $308,000 related to the impairment of long-lived assets, $157,000 related to severance and $234,000 related to the acquisition of Jackson Bank & Trust. The one-time expenses were offset by non-recurring income of $173,000 from the recovery of a previously disposed repossessed asset and $16,000 related to reinsurance underwriting activities. Earnings for the 2004 period include an extraordinary gain of $1.3 million pre-tax ($785,000 after-tax) relating to purchase accounting adjustments for the October 1, 2004 acquisition of Kenesaw Leasing, Inc. and J&S Leasing, Inc. Excluding these one-time items, net operating income for 2005 was $7.7 million compared with $3.5 million for the prior-year period, an increase of 122.3 percent.
Diluted net income per share was $0.64 in fiscal 2005 compared with $0.33 reported for the prior year, an increase of 93.9 percent. Diluted net operating income per share, excluding extraordinary gains and non-recurring expenses, was $0.52 for the current year, an increase of 92.6 percent over 2004. The 2005 per share results also reflect the impact of First Security's stock offering of 4.9 million shares in the third quarter; average diluted shares increased by 1,998,000, or 15.5 percent, above that of last year.
For the fourth quarter of 2005, First Security reported net income of $2.3 million, an increase of 16.4 percent above the $1.9 million reported in the fourth quarter of 2004. Earnings for the current period include non-recurring integration costs of $196,000 thousand ($133,000 after-tax) related to the acquisition of Jackson Bank & Trust, and $210,000 in taxes associated with the recognition of the extraordinary gain in the previous quarter. The prior-year fourth quarter includes the extraordinary gain relating to the 2004 acquisition of the leasing companies. Excluding these one-time and extraordinary items, net operating income for the fourth quarter of 2005 was $2.6 million, an increase of 124.8 percent over the prior-year period.
On a diluted per share basis, fourth quarter 2005 net income was $0.13 compared to $0.15 for the prior-year period; net operating income was $0.15 per diluted share compared to $0.09 for the prior-year period, an increase of 66.7 percent. Per share results for the fourth quarter of 2005 also reflect the impact of First Security's stock offering; average diluted shares increased by 4,993,000, or 38.7%, above average shares for the prior-year quarter.
Rodger B. Holley, Chairman, President and CEO of First Security, commented, "We are pleased to complete our first year as a newly-public company with strong earnings growth, an expanded footprint in attractive markets, and improved efficiencies even as we dedicated key resources to the addition of seven full-service banking offices.
"Since our inception in 1999," Mr. Holley continued, "we have expanded into markets where there is a need for hometown relationship banking. Our growth strategy will continue in 2006, further expanding our presence in markets under-served by community banks. In addition to the two de novo branches we opened in Cleveland, Tennessee and Varnell, Georgia in 2005, our 2006 plan includes one de novo office in Knoxville and one in our new Cookeville Region, the emerging growth corridor along Interstate 40 that runs between Nashville and Knoxville, Tennessee. We also plan to open our 8th banking office and a new corporate headquarters building, both in Chattanooga, in the latter half of the year. We look forward to leveraging these infrastructure investments as we build increasingly profitable relationships with new and existing customers."
Total revenue, comprised of net interest income and non-interest income, was $49.3 million for fiscal 2005, an increase of 39.3 percent over the $35.4 million reported for the fiscal year 2004. Net interest income increased 40.3 percent over the prior year, reaching $40.4 million; year-over-year growth reflects the combination of a 30.9 percent increase in average earning assets and a 32 basis point improvement in the net interest margin to 5.15 percent. Mr. Holley noted that the fourth quarter 2004 acquisition of Kenesaw Leasing and J&S Leasing contributed significantly to the 2005 improvement in net interest margin.
Non-interest income for fiscal 2005 was $8.8 million, a 35.2 percent increase above the $6.5 million earned in 2004. Excluding the impact of investment securities transactions in both years, and $427,000 of non-recurring items in 2005, non-interest income increased 32.2 percent to $8.5 million; the primary factors contributing to the $2.1 million growth in recurring fee income were increased BOLI income, up $530,000; and overdraft charges, up $381,000.
For the fourth quarter of 2005, total revenue was $14.0 million compared with $10.7 million for the year-earlier quarter, an increase of 31.0 percent. Net interest income increased 30.3 percent to $11.6 million, driven by a 39.1 percent increase in average earning assets, partially offset by a 32 basis point decline in the net interest margin to 5.06 percent. The margin decline over the course of the year reflects modest compression, compounded in the fourth quarter by the addition of $104.3 million in lower-margined loans from Jackson Bank & Trust. Non-interest income increased 34.2 percent to $2.4 million; excluding losses on the sale of securities in the fourth quarter of 2005, non-interest income increased 40.8 percent, mainly from BOLI, service charges, trust fees and POS income.
Non-interest expense for fiscal 2005 was $35.4 million, an increase of 30.4 percent over the $27.1 million incurred in the prior year. Excluding 2005 non-recurring expenses of $937,000, non-interest expense increased 26.9 percent to $34.4 million. The $7.3 million increase in recurring operating expense primarily reflects the acquisition of Kenesaw Leasing and J&S Leasing in October 2004, additional investment to support corporate growth and four month's inclusion of Jackson Bank & Trust's results. Salaries and benefits, up 30.0 percent due to acquisitions, represented the largest dollar increase in recurring salary expense; the 50 FTE increase in employees on a year over year basis relates to Jackson Bank & Trust and the opening of two de novo branches. The core efficiency ratio improved to 66.34 percent for 2005 compared with 73.04 percent for the prior-year period.
For the fourth quarter of 2005, non-interest expense was $10.0 million compared with $7.8 million for the fourth quarter of 2004, an increase of 28.7 percent. Excluding non-recurring expenses of $196,000 in the current period, non-interest expense increased 26.2 percent to $9.8 million. Salaries, benefits and occupancy expense, excluding the impact of one-time items, increased 23.9 percent, reflecting the acquisition of Jackson Bank & Trust. The core efficiency ratio improved to 62.35 percent for the fourth quarter of 2005 compared with 68.56 percent for the prior-year fourth quarter.
Asset quality continues to improve, with net charge-offs for the year reduced to $2.4 million, or 0.36 percent of average loans, compared with $2.9 million, or 0.57 percent of average loans in 2004. Mr. Holley noted, "We aggressively worked out a number of problem loans during the year; OREO, repossessed assets and 90-day delinquencies all showed marked improvement." Non-performing assets plus delinquencies declined to $5.8 million or 0.56 percent of total assets at December 31, 2005, compared with $7.5 million or 0.70 percent for the preceding quarter, and $7.0 million or 0.92 percent twelve months ago. Loan loss reserves were 1.35 percent of total loans at December 31, 2005.
Total assets were $1.0 billion at December 31, 2005, an increase of $274.0 million, or 35.7 percent, above year-earlier levels. Loan growth was $156.3 million or 26.4 percent for the twelve-month period, of which Jackson Bank & Trust contributed approximately $104.3 million or 66.7 percent of this growth; organic growth within FSGBank's community banking franchise accounted for $52.0 million, or 8.8 percent. The loan categories with the largest increases year over year were residential mortgage loans, up $71.3 million or 50.2%, to $213.4 million, and construction/land development loans, up $47.7 million or 59.1 percent, to $128.3 million. Commercial real estate grew $17.1 million or 12.3 percent to $156.2 million.
Deposits increased $221.0 million, or 34.5 percent, to $861.5 million; Jackson Bank & Trust contributed approximately $140.4 million, or 63.5 percent, of total deposit growth. Organic growth was approximately $80.6 million, or 12.6 percent. At December 31, 2005, core deposits (demand, savings, money market and retail time deposits) were $615.9 million, up 31.3 percent year over year. At year-end 2005, they comprised 71.5 percent of total deposits compared to 73.2 percent of total deposits for 2004. Brokered deposits were $89.6 million, or 10.4 percent of the deposit portfolio at year-end; they are primarily used to match fund First Security's leasing portfolio.
Shareholders' equity at December 31, 2005 was $138.4 million, a twelve-month increase of $51.9 million, or 60.1 percent. The majority of this reflects $44.7 million in proceeds from the issuance of 4.9 million shares during the 2005 third quarter. Total shares outstanding at quarter-end were 17,654,000. First Security's tangible leverage at quarter-end was 10.5 percent. Mr. Holley concluded, "We are pleased with our markets, our people and our prospects for the future. While 2006 may present certain challenges for the banking industry, we believe we are well positioned to continue our growth and profitability momentum."
Webcast and Conference Call Information
First Security's executive management team will host a conference call and simultaneous webcast on Thursday, January 26 at 3:00 PM Eastern Time to discuss fourth quarter results. The webcast can be accessed live on the Company'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 the Company's website for one month.
About First Security Group, Inc.
First Security Group, Inc. is a bank holding company headquartered in Chattanooga, TN with $1.0 billion in assets. Founded in 1999, First Security's community bank subsidiary, FSGBank, N.A. has 37 full-service banking offices along the interstate corridors of middle and eastern Tennessee and northern Georgia. In Dalton, GA, FSGBank operates six full-service banking offices under the name of Dalton Whitfield Bank and two offices under the name Primer Banco Seguro (PBS); PBS serves the region's rapidly growing Latino population. FSGBank also operates under the name of Jackson Bank & Trust along the I-40 corridor. FSGBank provides retail and commercial banking services, trust and investment management, mortgage banking, asset-based lending, financial planning, Internet banking (www.FSGBank.com) and equipment leasing through its wholly-owned subsidiaries, Kenesaw Leasing, Inc. and J & S Leasing, Inc.
Non-GAAP Financial Measures
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 their 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. Since these items and their impact on First Security's performance are difficult to predict, 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 core business. 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.
Forward-Looking Statements
This news release contains comments or information that constitute forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) that are based on current expectations that involve a number of risks and uncertainties. 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.
The First Security Group, Inc. logo can be found at:http://www.primezone.com/newsroom/prs/?pkgid=1833
First Security Group, Inc.
Consolidated Financial Highlights
(Unaudited)
(Amounts in thousands, except per share amounts
and full-time equivalent employees)
----------------------------------------------
4th Quarter 3rd Quarter 2nd Quarter 1st Quarter
2005 2005 2005 2005
---------- ---------- ---------- ----------
Earnings:
Net interest income $ 11,609 $ 10,391 $ 9,440 $ 9,001
Provision for loan
losses $ 243 $ 693 $ 843 $ 1,143
Non-interest income $ 2,364 $ 2,388 $ 2,388 $ 1,707
Non-interest expense $ 10,041 $ 9,154 $ 8,212 $ 7,966
Net income, before
extraordinary items $ 2,472 $ 1,923 $ 1,895 $ 1,106
Extraordinary items,
net of tax $ (210) $ 2,385 $ -- --
Net income $ 2,262 $ 4,308 $ 1,895 $ 1,106
Earnings -- Normalized
Non-interest income,
adjusted (b) $ 2,364 $ 2,388 $ 1,961 $ 1,707
Non-interest expense,
adjusted (b) $ 9,845 $ 8,651 $ 7,974 $ 7,966
Net operating income,
net of tax (b) $ 2,605 $ 2,265 $ 1,766 $ 1,106
Per Share Data:
Net income before
extraordinary items,
basic $ 0.14 $ 0.13 $ 0.15 $ 0.09
Net income, basic $ 0.13 $ 0.28 $ 0.15 $ 0.09
Net income before
extraordinary items,
diluted $ 0.14 $ 0.12 $ 0.15 $ 0.09
Net income, diluted $ 0.13 $ 0.28 $ 0.15 $ 0.09
Cash dividends
declared $ 0.03 $ -- $ -- $ --
Book value $ 7.84 $ 7.84 $ 7.01 $ 6.81
Tangible book value $ 6.00 $ 6.14 $ 5.83 $ 5.62
Per Share Data --
Normalized:
Net operating income,
basic (b) $ 0.15 $ 0.15 $ 0.14 $ 0.09
Net operating income,
diluted (b) $ 0.15 $ 0.14 $ 0.14 $ 0.09
Performance Ratios:
Return on average
assets (a) 0.95% 0.84% 0.93% 0.57%
Return on average
equity (a) 7.17% 6.76% 8.57% 5.13%
Return on average
tangible assets (a) 0.98% 0.86% 0.95% 0.58%
Return on average
tangible equity (a) 9.33% 8.20% 10.32% 6.22%
Net interest margin,
taxable equivalent 5.06% 5.11% 5.22% 5.19%
Efficiency ratio (a) 71.86% 71.63% 69.43% 74.39%
Non-interest income to
net interest income
and non-interest
income (a) 16.92% 18.69% 20.19% 15.94%
Performance Ratios --
Normalized
Operating return on
average assets (b) 1.00% 0.99% 0.87% 0.57%
Operating return on
average equity (b) 7.55% 7.96% 7.99% 5.13%
Operating return on
average tangible
assets (b) 1.03% 1.01% 0.89% 0.58%
Operating return on
average tangible
equity (b) 9.83% 9.66% 9.62% 6.22%
Core efficiency
ratio (a) (c) 62.35% 64.47% 68.60% 71.32%
Non-interest income,
adjusted to net
interest income and
non-interest income,
adjusted (b) 16.92% 18.69% 17.20% 15.94%
Capital & Liquidity:
Average equity to
average assets 13.21% 12.44% 10.88% 11.05%
Average tangible
equity to average
tangible assets 10.47% 10.48% 9.20% 9.29%
Average loans to
average deposits 87.05% 89.24% 89.49% 92.53%
Asset Quality:
Net charge-offs $ 641 $ 600 $ 544 $ 589
Net loans charged-off
to average loans,
annualized 0.34% 0.36% 0.35% 0.39%
Non-accrual loans $ 1,314 $ 1,114 $ 1,226 $ 1,794
Other real estate
owned $ 1,552 $ 1,394 $ 1,813 $ 1,547
Repossessed assets $ 1,891 $ 2,037 $ 2,716 $ 2,828
Non-performing assets
(NPA) $ 4,757 $ 4,545 $ 5,755 $ 6,169
NPA to total assets 0.46% 0.43% 0.69% 0.77%
Loans 90 days past due $ 1,042 $ 2,905 $ 966 $ 666
NPA + loans 90 days
past due to total
assets 0.56% 0.70% 0.81% 0.86%
Allowance for loan
losses to total loans 1.35% 1.42% 1.47% 1.44%
Allowance for loan
losses to NPA 212.76% 231.44% 159.25% 143.72%
Period End Balances:
Total loans $ 748,659 $ 742,250 $ 623,986 $ 614,417
Intangible assets $ 32,463 $ 30,026 $ 14,933 $ 15,093
Total assets $1,040,692 $1,061,999 $ 831,254 $ 797,772
Deposits $ 861,507 $ 854,076 $ 708,008 $ 668,361
Stockholders' equity $ 138,389 $ 138,044 $ 89,216 $ 86,621
Common stock market
capitalization $ 171,950 $ 171,610 $ 117,790 $ 117,716
Full-time equivalent
employees 358 361 319 326
Common shares
outstanding -- basic,
period end 17,654 17,601 12,734 12,726
Common shares
outstanding --
diluted, period end 17,942 17,909 13,015 12,994
Average Balances:
Loans $ 744,411 $ 668,040 $ 620,185 $ 603,152
Intangible assets $ 31,946 $ 20,113 $ 15,019 $ 15,189
Total earning assets $ 929,063 $ 821,480 $ 737,664 $ 719,123
Total assets $1,044,501 $ 915,065 $ 813,172 $ 780,715
Deposits $ 855,158 $ 748,603 $ 693,037 $ 651,865
Stockholders' equity $ 137,964 $ 113,867 $ 88,459 $ 86,286
Shares outstanding,
basic 17,603 15,353 12,733 12,722
Shares outstanding,
diluted 17,908 15,661 13,014 12,992
YTD YTD
4th Quarter December 31, December 31,
2004 2005 2004
---------- ---------- ----------
Earnings:
Net interest income $ 8,908 $ 40,441 $ 28,830
Provision for loan losses $ 1,374 $ 2,922 $ 3,399
Non-interest income $ 1,762 $ 8,847 $ 6,544
Non-interest expense $ 7,802 $ 35,373 $ 27,128
Net income, before
extraordinary items $ 1,159 $ 7,398 $ 3,482
Extraordinary items, net
of tax $ 785 $ 2,175 $ 785
Net income $ 1,944 $ 9,571 $ 4,267
Earnings -- Normalized
Non-interest income,
adjusted (b) $ 1,762 $ 8,420 $ 6,544
Non-interest expense,
adjusted (b) $ 7,802 $ 34,436 $ 27,128
Net operating income,
net of tax (b) $ 1,159 $ 7,742 $ 3,482
Per Share Data:
Net income before
extraordinary items,
basic $ 0.09 $ 0.51 $ 0.28
Net income, basic $ 0.15 $ 0.65 $ 0.34
Net income before
extraordinary items,
diluted $ 0.09 $ 0.50 $ 0.27
Net income, diluted $ 0.15 $ 0.64 $ 0.33
Cash dividends declared $ -- $ 0.03 $ --
Book value $ 6.80 $ 7.84 $ 6.80
Tangible book value $ 5.60 $ 6.00 $ 5.60
Per Share Data --
Normalized:
Net operating income,
basic (b) $ 0.09 $ 0.53 $ 0.28
Net operating income,
diluted (b) $ 0.09 $ 0.52 $ 0.27
Performance Ratios:
Return on average
assets (a) 0.63% 0.83% 0.51%
Return on average
equity (a) 5.39% 6.88% 4.16%
Return on average
tangible assets (a) 0.64% 0.85% 0.53%
Return on average
tangible equity (a) 6.55% 8.45% 5.10%
Net interest margin,
taxable equivalent 5.38% 5.15% 4.83%
Efficiency ratio (a) 73.12% 71.77% 76.69%
Non-interest income to
net interest income and
non-interest income (a) 16.51% 17.95% 18.50%
Performance Ratios --
Normalized
Operating return on
average assets (b) 0.63% 0.87% 0.51%
Operating return on
average equity (b) 5.39% 7.20% 4.16%
Operating return on
average tangible
assets (b) 0.64% 0.89% 0.53%
Operating return on
average tangible
equity (b) 6.55% 8.84% 5.10%
Core efficiency
ratio (a) (c) 68.56% 66.34% 73.04%
Non-interest income,
adjusted to net
interest income and
non-interest income,
adjusted (b) 16.51% 17.23% 18.50%
Capital & Liquidity:
Average equity to
average assets 11.70% 12.12% 12.36%
Average tangible equity
to average tangible
assets 9.82% 10.10% 10.34%
Average loans to average
deposits 95.21% 89.53% 91.92%
Asset Quality:
Net charge-offs $ 521 $ 2,374 $ 2,925
Net loans charged-off to
average loans,
annualized 0.37% 0.36% 0.57%
Non-accrual loans $ 985 $ 1,314 $ 985
Other real estate owned $ 2,338 $ 1,552 $ 2,338
Repossessed assets $ 2,472 $ 1,891 $ 2,472
Non-performing assets
(NPA) $ 5,795 $ 4,757 $ 5,795
NPA to total assets 0.76% 0.46% 0.76%
Loans 90 days past due $ 1,230 $ 1,042 $ 1,230
NPA + loans 90 days past
due to total assets 0.92% 0.56% 0.92%
Allowance for loan
losses to total loans 1.40% 1.35% 1.40%
Allowance for loan
losses to NPA 143.43% 212.76% 143.43%
Period End Balances:
Total loans $ 592,357 $ 748,659 $ 592,357
Intangible assets $ 15,274 $ 32,463 $ 15,274
Total assets $ 766,691 $1,040,692 $ 766,691
Deposits $ 640,526 $ 861,507 $ 640,526
Stockholders' equity $ 86,445 $ 138,389 $ 86,445
Common stock market
capitalization $ 105,833 $ 171,950 $ 105,833
Full-time equivalent
employees 308 358 308
Common shares
outstanding -- basic,
period end 12,705 17,654 12,705
Common shares
outstanding -- diluted,
period end 12,915 17,919 12,915
Average Balances:
Loans $ 564,274 $ 657,928 $ 514,479
Intangible assets $ 15,271 $ 19,924 $ 15,296
Total earning assets $ 668,086 $ 799,109 $ 610,585
Total assets $ 736,052 $ 886,946 $ 676,381
Deposits $ 592,692 $ 734,869 $ 559,695
Stockholders' equity $ 86,083 $ 107,499 $ 83,630
Shares outstanding,
basic 12,705 14,618 12,705
Shares outstanding,
diluted 12,915 14,910 12,912
(a) These ratios are calculated using net income, before
extraordinary items.
(b) These amounts and ratios are calculated using net operating
income (net of tax) which excludes extraordinary items as
defined by GAAP and 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 core
business. Refer to the following non-GAAP reconciliation table
for a detail of the non-recurring items.
(c) In accordance with SNL Financial practice, the core efficiency
ratio is calculated on a fully tax equivalent basis excluding
non-recurring items (see footnote (b) 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.
First Security Group, Inc.
Non-GAAP Reconciliation Table
(Amounts in thousands)
-----------------------------------------------
4th Quarter 3rd Quarter 2nd Quarter 1st Quarter
2005 2005 2005 2005
---------- --------- --------- ---------
Return on average
assets 0.95% 0.84% 0.93% 0.57%
Effect of intangible
assets 0.03% 0.02% 0.02% 0.01%
---------- --------- --------- ---------
Return on average
tangible assets 0.98% 0.86% 0.95% 0.58%
========== ========= ========= =========
Return of average
equity 7.17% 6.76% 8.57% 5.13%
Effect of intangible
assets 2.16% 1.44% 1.75% 1.09%
---------- --------- --------- ---------
Return on average
tangible equity 9.33% 8.20% 10.32% 6.22%
========== ========= ========= =========
Return on average
assets 0.95% 0.84% 0.93% 0.57%
Effect of non-
recurring items 0.05% 0.15% -0.06% --
---------- --------- --------- ---------
Operating return on
average assets 1.00% 0.99% 0.87% 0.57%
Effect of average
intangible assets 0.03% 0.02% 0.02% 0.01%
---------- --------- --------- ---------
Operating return on
average tangible
assets 1.03% 1.01% 0.89% 0.58%
========== ========= ========= =========
Return on average
equity 7.17% 6.76% 8.57% 5.13%
Effect of non-
recurring items 0.38% 1.20% -0.58% --
---------- --------- --------- ---------
Operating return on
average equity 7.55% 7.96% 7.99% 5.13%
Effect on average
intangible assets 2.28% 1.70% 1.63% 1.09%
--------- --------- --------- ---------
Operating return on
average tangible
equity 9.83% 9.66% 9.62% 6.22%
========= ========= ========= =========
Average equity to
average assets 13.21% 12.44% 10.88% 11.05%
Effect of average
intangible assets -2.74% -1.96% -1.68% -1.76%
---------- --------- --------- ---------
Average tangible
equity to average
tangible assets 10.47% 10.48% 9.20% 9.29%
========== ========= ========= =========
Efficiency ratio 71.86% 71.63% 69.43% 74.39%
Effect of non-
recurring items -1.37% -3.90% 0.47% 0.00%
Effect of non-cash
items -7.09% -2.26% -0.34% -1.99%
Effect of net
interest income,
tax equivalent
adjustment -1.05% -1.00% -0.96% -1.08%
--------- --------- --------- ---------
Core efficiency ratio 62.35% 64.47% 68.60% 71.32%
========= ========= ========= =========
Non-interest expense $ 10,041 $ 9,154 $ 8,212 $ 7,966
Severance -- (157) -- --
Impairment of long-
lived assets -- (308) -- --
Jackson Bank & Trust
integration costs
and other (196) (38) -- --
Reinsurance
underwriting
expense -- -- (238) --
---------- --------- --------- ---------
Non-interest expense,
adjusted $ 9,845 $ 8,651 $ 7,974 $ 7,966
========== ========= ========= =========
Non-interest income $ 2,364 $ 2,388 $ 2,388 $ 1,707
Recovery on
previously disposed
repossessed asset -- -- (173) --
Reinsurance
underwriting
revenue -- -- (254) --
---------- --------- --------- ---------
Non-interest income,
adjusted $ 2,364 $ 2,388 $ 1,961 $ 1,707
========== ========= ========= =========
Net income $ 2,262 $ 4,308 $ 1,895 $ 1,106
Extraordinary gain,
net of tax 210 (2,385) -- --
Non-recurring
expenses (income),
net of tax 133 342 (129) --
---------- --------- --------- ---------
Net operating income,
net of tax $ 2,605 $ 2,265 $ 1,766 $ 1,106
========== ========= ========= =========
Per Common Share:
Book value $ 7.84 $ 7.84 $ 7.01 $ 6.81
Effect of intangible
assets (1.84) (1.70) (1.18) (1.19)
---------- --------- --------- ---------
Tangible book value $ 6.00 $ 6.14 $ 5.83 $ 5.62
========== ========= ========= =========
Net income, basic $ 0.13 $ 0.28 $ 0.15 $ 0.09
Effect of
extraordinary and
non-recurring
items, net of tax 0.02 (0.13) (0.01) --
---------- --------- --------- ---------
Net operating income,
basic $ 0.15 $ 0.15 $ 0.14 $ 0.09
========== ========= ========= =========
Net income, diluted $ 0.13 $ 0.28 $ 0.15 $ 0.09
Effect of
extraordinary and
non-recurring
items, net of tax 0.02 (0.14) (0.01) --
---------- --------- --------- ---------
Net operating income,
diluted $ 0.15 $ 0.14 $ 0.14 $ 0.09
========== ========= ========= =========
Year-to-Date Year-to-Date
4th Quarter December 31, December 31,
2004 2005 2004
--------- ---------- ----------
Return on average assets 0.63% 0.83% 0.51%
Effect of intangible
assets 0.01% 0.02% 0.02%
--------- ---------- ----------
Return on average
tangible assets 0.64% 0.85% 0.53%
========= ========== ==========
Return of average equity 5.39% 6.88% 4.16%
Effect of intangible
assets 1.16% 1.57% 0.94%
--------- ---------- ----------
Return on average
tangible equity 6.55% 8.45% 5.10%
========= ========== ==========
Return on average assets 0.63% 0.83% 0.51%
Effect of non-recurring
items -- 0.04% --
--------- ---------- ----------
Operating return on
average assets 0.63% 0.87% 0.51%
Effect of average
intangible assets 0.01% 0.02% 0.02%
--------- ---------- -----------
Operating return on
average tangible assets 0.64% 0.89% 0.53%
========= ========== ==========
Return on average equity 5.39% 6.88% 4.16%
Effect of non-recurring
items -- 0.32% --
--------- ---------- ----------
Operating return on
average equity 5.39% 7.20% 4.16%
Effect on average
intangible assets 1.16% 1.64% 0.94%
--------- ---------- ----------
Operating return on
average tangible equity 6.55% 8.84% 5.10%
========= ========== ==========
Average equity to
average assets 11.70% 12.12% 12.36%
Effect of average
intangible assets -1.88% -2.02% -2.02%
--------- ---------- ----------
Average tangible equity
to average tangible
assets 9.82% 10.10% 10.34%
========= ========== ==========
Efficiency ratio 73.12% 71.77% 76.69%
Effect of non-recurring
items 0.00% -1.32% 0.00%
Effect of non-cash
items -3.49% -3.12% -2.66%
Effect of net interest
income, tax equivalent
adjustment -1.07% -0.99% -0.99%
--------- ---------- ----------
Core efficiency ratio 68.56% 66.34% 73.04%
========= ========== ==========
Non-interest expense $ 7,802 $ 35,373 $ 27,128
Severance -- (157) --
Impairment of long-
lived assets -- (308) --
Jackson Bank & Trust
integration costs and
other -- (234) --
Reinsurance
underwriting expense -- (238) --
--------- ---------- ----------
Non-interest expense,
adjusted $ 7,802 $ 34,436 $ 27,128
========= ========== ==========
Non-interest income $ 1,762 $ 8,847 $ 6,544
Recovery on previously
disposed repossessed
asset -- (173) --
Reinsurance
underwriting revenue -- (254) --
--------- ---------- ----------
Non-interest income,
adjusted $ 1,762 $ 8,420 $ 6,544
========= ========== ==========
Net income $ 1,944 $ 9,571 $ 4,267
Extraordinary gain, net
of tax (785) (2,175) (785)
Non-recurring expenses
(income), net of tax -- 346 --
--------- ---------- ----------
Net operating income,
net of tax $ 1,159 $ 7,742 $ 3,482
========= ========== ==========
Per Common Share:
Book value $ 6.80 $ 7.84 $ 6.80
Effect of intangible
assets (1.20) (1.84) (1.20)
--------- ---------- ----------
Tangible book value $ 5.60 $ 6.00 $ 5.60
========= ========== ==========
Net income, basic $ 0.15 $ 0.65 $ 0.34
Effect of extraordinary
and non-recurring
items, net of tax (0.06) (0.12) (0.06)
--------- ---------- ----------
Net operating income,
basic $ 0.09 $ 0.53 $ 0.28
========= ========== ==========
Net income, diluted $ 0.15 $ 0.64 $ 0.33
Effect of extraordinary
and non-recurring
items, net of tax (0.06) (0.12) (0.06)
--------- ---------- ----------
Net operating income,
diluted $ 0.09 $ 0.52 $ 0.27
========= ========== ==========
First Security Group, Inc. and Subsidiary
Consolidated Income Statements
(In thousands, Three Months Ended Year-to-Date
except per December 31 December 31
share amounts) 2005 2004 2005 2004
-------------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited)
-------------------------------------------------------------------
INTEREST INCOME
Loans,
including
fees $ 14,978 $ 10,631 $ 50,774 $ 34,327
Debt Securities
-taxable 1,189 629 3,698 2,239
Debt Securities
-non-taxable 396 252 1,191 873
Other 303 64 641 150
Total Interest ---------------------- ----------------------
Income 16,866 11,576 56,304 37,589
---------------------- ----------------------
INTEREST EXPENSE
Interest Bearing
Demand Deposits 157 49 433 183
Savings Deposits
and Money Market
Accounts 697 335 2,138 1,144
Certificates of
Deposit of $100
thousand or more 1,420 701 4,136 2,522
Certificates of
Deposit of less
than $100
thousand 1,985 996 5,645 3,988
Brokered
Certificates of
Deposit 842 197 2,987 263
Other 156 390 524 659
Total Interest ---------------------- ----------------------
Expense 5,257 2,668 15,863 8,759
---------------------- ----------------------
NET INTEREST
INCOME 11,609 8,908 40,441 28,830
Provision for
Loan Losses 243 1,374 2,922 3,399
---------------------- ----------------------
NET INTEREST INCOME
AFTER PROVISION
FOR LOAN LOSSES 11,366 7,534 37,519 25,431
---------------------- ----------------------
NONINTEREST INCOME
Service Charges
on Deposit
Accounts 1,242 1,007 4,221 3,873
Gain (Loss) on
Sales of
Available-for
-Sale Securities,
net (117) -- (117) 84
Other 1,239 755 4,743 2,587
Total
Noninterest
Income 2,364 1,762 8,847 6,544
NONINTEREST
EXPENSES
Salaries and
Employee Benefits 5,166 4,167 19,428 14,776
Expense on
Premises and
Fixed Assets,
net of rental
income 1,510 1,175 5,606 4,262
Other 3,365 2,460 10,339 8,090
---------------------- ----------------------
Total
Noninterest
Expenses 10,041 7,802 35,373 27,128
---------------------- ----------------------
INCOME BEFORE
INCOME TAX
PROVISION 3,689 1,494 10,993 4,847
Income Tax
Provision 1,217 335 3,597 1,365
---------------------- ----------------------
NET INCOME BEFORE
EXTRAORDINARY ITEM 2,472 1,159 7,396 3,482
Extraordinary
Gain on Business
Combination,
net of tax (210) 785 2,175 785
---------- ---------- ---------- ----------
NET INCOME $ 2,262 $ 1,944 $ 9,571 $ 4,267
========== ========== ========== ==========
NET INCOME PER
SHARE:
Net Income Per
Share Before
Extraordinary
Item -- Basic $ 0.14 $ 0.09 $ 0.51 $ 0.28
Extraordinary
Item -- Basic $ (0.01) $ 0.06 $ 0.14 $ 0.06
Net Income Per
Share -- Basic $ 0.13 $ 0.15 $ 0.65 $ 0.34
Net Income Per
Share Before
Extraordinary
Item -- Diluted $ 0.14 $ 0.09 $ 0.50 $ 0.27
Extraordinary
Item -- Diluted $ (0.01) $ 0.06 $ 0.14 $ 0.06
Net Income Per
Share -- Diluted $ 0.13 $ 0.15 $ 0.64 $ 0.33
First Security Group, Inc. and Subsidiary
Consolidated Balance Sheets
December 31, 2005 and 2004
2005 2004
---------------------------------------------------------------------
(in thousands) (Unaudited)
ASSETS
Cash and Due from Banks $ 23,917 $ 15,935
Federal Funds Sold and
Securities Purchased under
Agreements to Resell 17,835 --
----------- -----------
Cash and Cash Equivalents 41,752 15,935
----------- -----------
Interest-Bearing Deposits in Banks 1,153 605
----------- -----------
Securities Available For Sale 155,993 110,023
----------- -----------
Loans Held for Sale 4,244 6,073
Loans 744,415 586,284
----------- -----------
Total Loans 748,659 592,357
Less: Allowance for Loan Losses 10,121 8,312
----------- -----------
738,538 584,045
----------- -----------
Premises and Equipment, net 31,604 26,295
----------- -----------
Goodwill 27,032 12,430
----------- -----------
Intangible Assets 5,431 2,844
----------- -----------
Other Assets 39,189 14,514
----------- -----------
TOTAL ASSETS $1,040,692 $ 766,691
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES
Deposits
Noninterest -- Bearing Demand $ 153,278 $ 109,325
Interest -- Bearing Demand 75,123 54,454
----------- -----------
228,401 163,779
----------- -----------
Savings and Money Market Accounts 152,901 147,342
Time Deposits:
Certificates of Deposit of $100
thousand or more 156,134 106,474
Certificates of Deposit less
than $100 thousand 234,501 157,886
Brokered Certificates of Deposit 89,570 65,045
----------- -----------
480,205 329,405
----------- -----------
Total Deposits 861,507 640,526
Federal Funds Purchased and
Securities Sold under Agreements
to Repurchase 16,894 23,255
Security Deposits 4,094 3,379
Other Borrowings 10,150 4,150
Other Liabilities 9,658 8,936
----------- -----------
Total Liabilities 902,303 680,246
----------- -----------
STOCKHOLDERS' EQUITY
Common stock -- $.01 par value --
20,000,000 shares authorized;
17,653,833 issued as of December 31,
2005; 12,705,044 issued as of
December 31, 2004 122 88
Paid-In Surplus 123,030 77,981
Unallocated ESOP Shares (91) --
Retained Earnings 17,392 8,262
Accumulated Other Comprehensive
(Loss) Income (1,579) 114
Deferred Compensation on
Restricted Stock (485) --
----------- -----------
Total Stockholders' Equity 138,389 86,445
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 1,040,692 $ 766,691
=========== ===========