CHATTANOOGA, Tenn., Oct. 24, 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 third quarter and first nine months of 2006. Net income and diluted earnings per share for the third quarter of 2006 were $2.9 million and $0.16, respectively. Third quarter 2005 net income of $4.3 million, or $0.28 per diluted share, included an extraordinary after-tax gain of $2.4 million or $0.16; excluding this gain, third quarter 2006 earnings were 51.1 percent and 33.3 percent, respectively, above prior-year third quarter earnings of $1.9 million, or $0.12 per diluted share.
Financial results include the assets, liabilities and results of operations for Jackson Bank & Trust (Jackson Bank), which was acquired by First Security on August 31, 2005. Per share results also reflect the impact of First Security's stock offering of 4.9 million shares in the third quarter of 2005; average diluted shares for the third quarter of 2006 increased by 1,968,000, or 12.6 percent, above last year's third quarter.
For the first nine months of 2006, First Security reported net income of $8.2 million, or $0.46 per diluted share. For the 2005 nine-month period, earnings were $7.3 million, or $0.53 per diluted share. Excluding the 2005 extraordinary after-tax gain of $2.4 million, or $0.18 per share, year-to-date 2006 earnings and earnings per share were 66.5 percent and 31.4 percent, respectively, above the $4.9 million, or $0.35 per diluted share, reported for the prior-year period.
Highlights of the third quarter include:
-- Net operating income for the third quarter of 2006 rose 28.3 percent compared to the same period in 2005. On a per share basis, diluted net operating income increased 14.3 percent, from $0.14 to $0.16. For the nine months year-to-date, net operating income rose 59.5 percent; diluted net operating income per share increased 24.3 percent, from $0.37 to $0.46. Net operating income for the three and nine month 2005 periods excluded a $2.4 million extraordinary gain, as well as non-recurring expenses, net of tax, of $342,000 and $213,000, respectively.
-- Total revenue increased 16.8 percent over the third quarter of 2005. Net interest income rose 17.0 percent compared to the prior-year period, reflecting growth in average earning assets of 18.6 percent. Non-interest income increased 16.2 percent above the third quarter of 2005 as First Security continues to build a well-diversified stream of fee income.
-- Year-over-year, loans grew $83.5 million or 11.2 percent. Construction & land development loans accounted for the largest increase, up $47.3 million or 43.0 percent; combined, all commercial real estate loans accounted for 41.3 percent of loans at September 30, 2006 compared with 37.9 percent a year earlier.
-- First Security continues to achieve economies through its operating leverage and integration initiatives. The core efficiency ratio improved to 63.84 percent for the third quarter of 2006 compared with 64.47 percent for the prior-year period, and 64.45 percent for the linked quarter.
Rodger B. Holley, Chairman, President and CEO of First Security, commented, "Our performance continues to be consistent in an environment where many banks are finding it increasingly difficult to maintain a balance of growth and profitability. We have always pursued this balance, and it dictates our current strategy as well. In the current interest rate environment, funding has become the limiting factor that governs loan growth for many banks; however, we have several sources of liquidity that allow us to pursue sound opportunities and maintain the relationships so important to a community bank like First Security. This quarter reflects our expertise, our flexibility and our increasing efficiency as we manage successfully in this challenging climate."
Total revenue, comprised of net interest income and non-interest income, was $14.9 million for the third quarter of 2006, an increase of 16.8 percent over the $12.8 million reported for the third quarter of 2005. Net interest income reached $12.2 million, an increase of 17.0 percent over the prior-year period. Year-over-year growth reflects an 18.6 percent increase in average earning assets, partially offset by a 6 basis point decline in net interest margin to 5.05 percent. On a sequential basis, third quarter net interest income was unchanged from the second quarter as a 22 basis point decline in the margin completely offset a 2.7 percent increase in average earning assets. Mr. Holley continued, "This is the eighth consecutive quarter we reported a net interest margin above five percent, well above our southeast peers, and our strong loan growth has continued to offset the rising cost of funds. As we continue to manage within the present interest rate environment, we will pursue core deposits strategies and other funding sources to maintain our growth momentum."
First Security continues to build a diversified stream of fee income. Non-interest income for the third quarter of 2006 was $2.8 million, up $388,000 or 16.2 percent above the $2.4 million earned in the third quarter of 2005. While $101,000 of this increase came from Jackson Bank, the remaining $287,000 or 74.0 percent of the increase was organic. Service charges on deposit accounts increased $116,000, or 10.4 percent; other non-interest income increased by $272,000, or 21.3 percent, due primarily to increases in trust fees, point-of-sale fees and gains on sales of leased equipment. Compared with the linked second quarter, non-interest income rose $110,000, or 4.1 percent.
Non-interest expense for the third quarter was $10.0 million, an increase of $877,000, or 9.6 percent, over the $9.2 million reported in the third quarter of 2005. Jackson Bank accounted for $623,000 or 71.0 percent of the increase. The balance of the increase was additional spending to support corporate growth and de novo branching activity. Compared to the linked quarter, third quarter operating expenses were virtually unchanged, down 0.4 percent. The core efficiency ratio improved to 63.84 percent for the third quarter of 2006 compared with 64.47 percent for the prior-year third quarter, and 64.45 percent for the linked quarter.
Asset quality remains sound. The level of non-performing assets plus loans 90 days or more past due has remained steady within a five basis point range -- between 51 basis points to 56 basis points of total assets -- throughout the prior four quarter periods. "Although this level of problem loans is not unreasonable compared to banks of similar size and geography, we would like to see our asset quality continue to improve," added Mr. Holley.
Non-performing assets plus delinquencies were $6.1 million, or 0.55 percent of total assets at September 30, 2006, compared with $5.7 million, or 0.52 percent of total assets for the linked quarter, and $7.5 million, or 0.70 percent, at September 30, 2005. Net charge-offs for the current quarter were $914,000, or 0.45 percent of average loans on an annualized basis, as First Security aggressively charged off a large problem loan this quarter. This compares with $468,000, or 0.24 percent of average loans for the second quarter, and $600,000 or 0.36 percent of average loans for the third quarter of 2005. As anticipated, the loan loss reserve continues to decline as a percent of total loans, approaching the previously-disclosed corporate expectation of 1.15 percent of loans. At September 30, 2006, the allowance was 1.19 percent of total loans compared with 1.42 percent a year ago.
Total assets were $1.1 billion at September 30, 2006, an increase of $48.1 million, or 4.5 percent above year-earlier levels. Total loans were $825.7 million, up $83.5 million, or 11.2 percent, over the same twelve-month period, as First Security converted surplus liquidity into higher-yielding assets. The bank has managed to maintain loan growth consistently throughout the year. For the most recent quarter, total loans grew $25.5 million, or 12.8 percent annualized, compared with 11.2 percent for the past twelve months. All of First Security's loan growth during the past twelve month period has been organic.
Commercial real estate-related loans, including construction & land development loans (19.1 percent of total loans); commercial real estate (21.1 percent of total); and multi-family loans (1.1 percent) together accounted for $340.7 million in outstandings at September 30, 2006, or approximately 41.3 percent of First Security's portfolio. These three commercial RE loan categories grew 21.0 percent over the past twelve months, increasing from 37.9 percent of total loans for the year-earlier period.
Deposits were $913.6 million at September 30, 2006, up $59.5 million, or 7.0 percent, since the prior-year quarter-end. Core deposits (demand, savings, money market and retail time deposits) were $632.9 million at September 30, 2006, up 1.8 percent year-over-year; they comprised 69.3 percent of total deposits compared to 72.8 percent a year ago. First Security has been successful at attracting and retaining a high level of non-interest bearing demand deposits, which accounted for approximately 19 percent of total deposits consistently throughout the year. Mr. Holley commented on First Security's success with its customers in this area: "We develop relationships where transaction accounts are an integral part of the service we provide. We ask for balances, even in commercial relationships, whenever we can." On a year-over-year basis, non-interest bearing demand deposit growth of 9.8 percent outpaced total deposit growth, exclusive of brokered deposits, of 8.5 percent.
Shareholders' equity at September 30, 2006 was $141.5 million, a twelve-month increase of $3.5 million, or 2.5 percent. Total shares outstanding at quarter-end were 17,746,000. First Security's tangible leverage ratio at quarter-end was 10.2 percent.
Web Cast and Conference Call Information
First Security's executive management team will host a conference call and simultaneous web cast on Tuesday, October 24, 2006 at 3:00 p.m. Eastern Time to discuss third quarter results. The web cast can be accessed live on the 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 can be accessed via the First Security's website for one month or via phone by dialing 877-660-6853, Account No. 286 Conference ID No. 207350 through Midnight, ET, November 1, 2006.
About First Security Group, Inc.
First Security Group, Inc. is a bank holding company headquartered in Chattanooga, TN with $1.1 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.
The First Security Group, Inc. logo is available at http://www.primezone.com/newsroom/prs/?pkgid=1833
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.
First Security Group, Inc. and Subsidiary
Consolidated Balance Sheets
(in thousands, except share data)
Sept. 30, Dec. 31, Sept. 30,
2006 2005 2005
(unaudited) (unaudited)
---------------------------------------------------------------------
ASSETS
Cash & Due from Banks $ 25,500 $ 23,917 $ 23,743
Federal Funds Sold and
Securities Purchased
under Agreements to Resell -- 17,835 48,800
---------- ---------- ----------
Cash and Cash Equivalents 25,500 41,752 72,543
---------- ---------- ----------
Interest-Bearing Deposits
in Bank 2,888 1,153 9,090
---------- ---------- ----------
Securities Available-for-Sale 159,727 155,993 148,132
---------- ---------- ----------
Loans Held for Sale 5,125 4,244 6,597
Loans 820,620 744,415 735,653
---------- ---------- ----------
Total Loans 825,745 748,659 742,250
Less: Allowance for Loan Losses 9,862 10,121 10,519
---------- ---------- ----------
815,883 738,538 731,731
---------- ---------- ----------
Premises and Equipment, net 33,939 31,604 30,698
---------- ---------- ----------
Goodwill 27,156 27,032 24,314
---------- ---------- ----------
Intangible Assets 4,441 5,431 5,712
---------- ---------- ----------
Other Assets 40,531 39,189 39,779
---------- ---------- ----------
TOTAL ASSETS $1,110,065 $1,040,692 $1,061,999
========== ========== ==========
LIABILITIES
Deposits
Noninterest-Bearing Demand $ 176,544 $ 153,278 $ 160,844
Interest-Bearing Demand 66,541 75,123 77,557
---------- ---------- ----------
243,085 228,401 238,401
---------- ---------- ----------
Savings and Money Market
Accounts 137,859 152,901 158,186
---------- ---------- ----------
Time Deposits:
Certificates of Deposit
of $100 thousand or more 193,758 156,134 140,269
Certificates of Deposit of
less than $100 thousand 251,939 234,501 224,892
Brokered Certificates of Deposit 86,944 89,570 92,328
---------- ---------- ----------
532,641 480,205 457,489
---------- ---------- ----------
Total Deposits 913,585 861,507 854,076
Federal Funds Purchased and
Securities Sold under
Agreements to Repurchase 30,377 16,894 18,797
Security Deposits 4,170 4,094 3,738
Other Borrowings 8,141 10,150 13,153
Other Liabilities 12,248 9,658 34,191
---------- ---------- ----------
Total Liabilities 968,521 902,303 923,955
---------- ---------- ----------
STOCKHOLDERS' EQUITY
Common stock - $.01 par value
50,000,000 shares authorized
as of September 30, 2006;
20,000,000 shares authorized
as of December 31, 2005 and
September 30, 2005;
17,746,278 issued as of
September 30, 2006;
17,653,833 issued as of
December 31, 2005;
17,600,960 issued as of
September 30, 2005 123 122 122
Paid-In Surplus 124,097 122,545 122,877
Unallocated ESOP Shares (5,562) (91) --
Retained Earnings 24,264 17,392 15,571
Accumulated Other
Comprehensive Loss (1,378) (1,579) (526)
---------- ---------- ----------
Total Stockholders' Equity 141,544 138,389 138,044
---------- ---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,110,065 $1,040,692 $1,061,999
========== ========== ==========
First Security Group, Inc. and Subsidiary
Consolidated Statements of Income
(unaudited)
(in thousands except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
---------------------------------------------------------------------
INTEREST INCOME
Loans, including fees $17,611 $13,117 $50,002 $35,796
Debt securities - taxable 1,330 914 3,920 2,509
Debt securities - non-taxable 397 302 1,166 796
Other 46 243 258 337
------- ------- ------- -------
Total Interest Income 19,384 14,576 55,346 39,438
------- ------- ------- -------
INTEREST EXPENSE
Interest Bearing Demand
Deposits 142 123 464 276
Savings Deposits and Money
Market Accounts 759 511 2,111 1,441
Certificates of Deposit of
$100 thousand or more 2,276 1,081 5,870 2,716
Certificates of Deposit of
less than $100 thousand 2,742 1,471 7,378 3,659
Brokered Certificates
of Deposit 936 862 2,690 2,146
Other 373 137 743 368
------- ------- ------- -------
Total Interest Expense 7,228 4,185 19,256 10,606
------- ------- ------- -------
NET INTEREST INCOME 12,156 10,391 36,090 28,832
Provision for Loan Losses 600 693 1,743 2,679
------- ------- ------- -------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 11,556 9,698 34,347 26,153
------- ------- ------- -------
NONINTEREST INCOME
Service Charges on Deposit
Accounts 1,229 1,113 3,594 2,979
Other 1,547 1,275 4,284 3,504
------- ------- ------- -------
Total Noninterest Income 2,776 2,388 7,878 6,483
------- ------- ------- -------
NONINTEREST EXPENSE
Salaries and Employee Benefits 5,654 5,100 16,769 14,262
Expense on Premises and Fixed
Assets, net of rental income 1,655 1,449 5,045 4,096
Other 2,722 2,605 8,332 6,974
------- ------- ------- -------
Total Noninterest Expense 10,031 9,154 30,146 25,332
------- ------- ------- -------
INCOME BEFORE INCOME
TAX PROVISION 4,301 2,932 12,079 7,304
Income Tax Provision 1,395 1,009 3,883 2,380
------- ------- ------- -------
NET INCOME BEFORE
EXTRAORDINARY ITEM 2,906 1,923 8,196 4,924
Extraordinary Gain on Business
Combination, net of tax -- 2,385 -- 2,385
------- ------- ------- -------
NET INCOME $ 2,906 $ 4,308 $ 8,196 $ 7,309
======= ======= ======= =======
NET INCOME PER SHARE:
Net Income Per Share Before
Extraordinary Item - basic $ 0.17 $ 0.13 $ 0.47 $ 0.36
Net Income Per Share - basic $ 0.17 $ 0.28 $ 0.47 $ 0.54
Net Income Per Share Before
Extraordinary Item - diluted $ 0.16 $ 0.12 $ 0.46 $ 0.35
Net Income Per Share - diluted $ 0.16 $ 0.28 $ 0.46 $ 0.53
First Security Group, Inc.
Consolidated Financial Highlights
(unaudited)
(in thousands, except per share amounts and
full-time equivalent employees)
---------------------------------------------------------------------
3rd Qtr 2nd Qtr 1st Qtr 4th Qtr
2006 2006 2006 2005
---------- ---------- ---------- ----------
Earnings:
Net interest
income $ 12,156 $ 12,169 $ 11,765 $ 11,609
Provision for
loan losses $ 600 $ 600 $ 543 $ 243
Non-interest
income $ 2,776 $ 2,666 $ 2,436 $ 2,364
Non-interest
expense $ 10,031 $ 10,076 $ 10,039 $ 10,041
Net income,
before
extraordinary
items $ 2,906 $ 2,816 $ 2,474 $ 2,472
Extraordinary
items, net of tax $ -- $ -- $ -- $ (210)
Net income $ 2,906 $ 2,816 $ 2,474 $ 2,262
Earnings
- Normalized
Non-interest
operating
income (b) $ 2,776 $ 2,666 $ 2,436 $ 2,364
Non-interest
operating
expense (b) $ 10,031 $ 10,076 $ 10,039 $ 9,845
Net operating
income, net of
tax (b) $ 2,906 $ 2,816 $ 2,474 $ 2,605
Per Share Data:
Net income before
extraordinary
items, basic $ 0.17 $ 0.16 $ 0.14 $ 0.14
Net income, basic $ 0.17 $ 0.16 $ 0.14 $ 0.13
Net income before
extraordinary items,
diluted $ 0.16 $ 0.16 $ 0.14 $ 0.14
Net income, diluted $ 0.16 $ 0.16 $ 0.14 $ 0.13
Cash dividends
declared $ 0.03 $ 0.03 $ 0.03 $ 0.03
Book value $ 7.98 $ 7.85 $ 7.86 $ 7.84
Tangible book value $ 6.20 $ 6.04 $ 6.04 $ 6.00
Per Share Data
- Normalized:
Net operating income,
basic (b) $ 0.17 $ 0.16 $ 0.14 $ 0.15
Net operating income,
diluted (b) $ 0.16 $ 0.16 $ 0.14 $ 0.15
Performance Ratios:
Return on average
assets (a) 1.06% 1.06% 0.95% 0.95%
Return on average
equity (a) 8.31% 8.09% 7.11% 7.17%
Return on average
tangible assets (a) 1.09% 1.09% 0.98% 0.98%
Return on average
tangible equity (a) 10.74% 10.49% 9.21% 9.33%
Net interest margin,
taxable equivalent 5.05% 5.27% 5.27% 5.06%
Efficiency ratio (a) 67.18% 67.92% 70.69% 71.86%
Non-interest income
to net interest
income and non-
interest income (a) 18.59% 17.97% 17.15% 16.92%
Performance
Ratios - Normalized:
Operating return on
average assets (b) 1.06% 1.06% 0.95% 1.00%
Operating return on
average equity (b) 8.31% 8.09% 7.11% 7.55%
Operating return on
average tangible
assets (b) 1.09% 1.09% 0.98% 1.03%
Operating return on
average tangible
equity (b) 10.74% 10.49% 9.21% 9.83%
Core efficiency
ratio (a)(c) 63.84% 64.45% 66.07% 62.35%
Non-interest operating
income to net
interest income and
non-interest
operating income (b) 18.59% 17.97% 17.15% 16.92%
Capital & Liquidity:
Total equity to total
assets 12.75% 12.65% 13.01% 13.30%
Tangible equity to
tangible assets 10.19% 10.03% 10.30% 10.51%
Total loans to total
deposits 90.39% 88.19% 86.87% 86.90%
Asset Quality:
Net charge-offs $ 914 $ 468 $ 531 $ 641
Net loans charged-
off to average loans,
annualized 0.45% 0.24% 0.28% 0.34%
Non-accrual loans $ 679 $ 696 $ 1,119 $ 1,314
Other real estate
owned $ 2,298 $ 1,986 $ 2,110 $ 1,552
Repossessed assets $ 1,556 $ 995 $ 1,251 $ 1,891
Non-performing
assets (NPA) $ 4,533 $ 3,677 $ 4,480 $ 4,757
NPA to total assets 0.41% 0.34% 0.42% 0.46%
Loans 90 days past
due $ 1,593 $ 2,011 $ 904 $ 1,042
NPA + loans 90 days
past due to total
assets 0.55% 0.52% 0.51% 0.56%
Allowance for loan
losses to total
loans 1.19% 1.28% 1.32% 1.35%
Allowance for loan
losses to NPA 217.56% 277.54% 225.51% 212.76%
Period End Balances:
Loans $ 825,745 $ 800,213 $ 766,622 $ 748,659
Intangible assets $ 31,597 $ 31,729 $ 32,026 $ 32,463
Assets $1,110,065 $1,089,332 $1,062,009 $1,040,692
Deposits $ 913,585 $ 907,355 $ 882,492 $ 861,507
Stockholders'
equity $ 141,544 $ 137,791 $ 138,141 $ 138,389
Common stock market
capitalization $ 204,434 $ 203,684 $ 194,193 $ 171,950
Full-time equivalent
employees 360 355 361 358
Shares outstanding,
basic 17,746 17,559 17,574 17,654
Shares outstanding,
diluted 18,123 17,934 17,934 17,942
Average Balances:
Loans $ 812,611 $ 785,397 $ 753,872 $ 744,411
Intangible assets $ 31,635 $ 31,897 $ 31,784 $ 31,946
Earning assets $ 973,950 $ 948,049 $ 924,752 $ 929,063
Assets $1,094,474 $1,066,523 $1,043,280 $1,044,501
Deposits $ 897,739 $ 883,351 $ 860,499 $ 855,158
Stockholders'
equity $ 139,872 $ 139,315 $ 139,281 $ 137,964
Shares outstanding,
basic - wtd 17,218 17,342 17,489 17,603
Shares outstanding,
diluted - wtd 17,629 17,759 17,852 17,908
---------- ---------- ----------
YTD YTD
3rd Quarter Sept. 30, Sept. 30,
2005 2006 2005
---------- ---------- ----------
Earnings:
Net interest income $ 10,391 $ 36,090 $ 28,832
Provision for loan losses $ 693 $ 1,743 $ 2,679
Non-interest income $ 2,388 $ 7,878 $ 6,483
Non-interest expense $ 9,154 $ 30,146 $ 25,332
Net income, before
extraordinary items $ 1,923 $ 8,196 $ 4,924
Extraordinary items,
net of tax $ 2,385 $ -- $ 2,385
Net income $ 4,308 $ 8,196 $ 7,309
Earnings - Normalized
Non-interest operating
income (b) $ 2,388 $ 7,878 $ 6,056
Non-interest operating
expense (b) $ 8,651 $ 30,146 $ 24,591
Net operating income,
net of tax (b) $ 2,265 $ 8,196 $ 5,137
Per Share Data:
Net income before
extraordinary items, basic $ 0.13 $ 0.47 $ 0.36
Net income, basic $ 0.28 $ 0.47 $ 0.54
Net income before
extraordinary items, diluted $ 0.12 $ 0.46 $ 0.35
Net income, diluted $ 0.28 $ 0.46 $ 0.53
Cash dividends declared $ -- $ 0.08 $ --
Book value $ 7.84 $ 7.98 $ 7.84
Tangible book value $ 6.14 $ 6.20 $ 6.14
Per Share Data - Normalized:
Net operating income,
basic (b) $ 0.15 $ 0.47 $ 0.38
Net operating income,
diluted (b) $ 0.14 $ 0.46 $ 0.37
Performance Ratios:
Return on average assets (a) 0.84% 1.02% 0.78%
Return on average equity (a) 6.76% 7.83% 6.85%
Return on average tangible
assets (a) 0.86% 1.05% 0.80%
Return on average tangible
equity (a) 8.20% 10.14% 8.30%
Net interest margin, taxable
equivalent 5.11% 5.18% 5.17%
Efficiency ratio (a) 71.63% 68.56% 71.73%
Non-interest income to net
interest income and non-
interest income (a) 18.69% 17.92% 18.36%
Performance Ratios - Normalized:
Operating return on
average assets (b) 0.99% 1.02% 0.82%
Operating return on average
equity (b) 7.96% 7.83% 7.14%
Operating return on average
tangible assets (b) 1.01% 1.05% 0.84%
Operating return on average
tangible equity (b) 9.66% 10.14% 8.66%
Core efficiency ratio (a)(c) 64.47% 64.87% 67.97%
Non-interest operating income
to net interest income and
non-interest operating
income (b) 18.69% 17.92% 17.36%
Capital & Liquidity:
Total equity to total assets 13.00% 12.75% 13.00%
Tangible equity to tangible
assets 10.47% 10.19% 10.47%
Total loans to total deposits 86.91% 90.39% 86.91%
Asset Quality:
Net charge-offs $ 600 $ 1,913 $ 1,733
Net loans charged-off to
average loans, annualized 0.36% 0.33% 0.37%
Non-accrual loans $ 1,114 $ 679 $ 1,114
Other real estate owned $ 1,394 $ 2,298 $ 1,394
Repossessed assets $ 2,037 $ 1,556 $ 2,037
Non-performing assets (NPA) $ 4,545 $ 4,533 $ 4,545
NPA to total assets 0.43% 0.41% 0.43%
Loans 90 days past due $ 2,905 $ 1,593 $ 2,905
NPA + loans 90 days past due
to total assets 0.70% 0.55% 0.70%
Allowance for loan losses to
total loans 1.42% 1.19% 1.42%
Allowance for loan losses
to NPA 231.44% 217.56% 231.44%
Period End Balances:
Loans $ 742,250 $ 825,745 $ 742,250
Intangible assets $ 30,026 $ 31,597 $ 30,026
Assets $1,061,999 $1,110,065 $1,061,999
Deposits $ 854,076 $ 913,585 $ 854,076
Stockholders' equity $ 138,044 $ 141,544 $ 138,044
Common stock market
capitalization $ 171,610 $ 204,434 $ 171,610
Full-time equivalent employees 361 360 361
Shares outstanding, basic 17,601 17,746 17,601
Shares outstanding, diluted 17,909 18,123 17,909
Average Balances:
Loans $ 668,040 $ 784,185 $ 630,697
Intangible assets $ 20,113 $ 31,772 $ 16,792
Earning assets $ 821,480 $ 949,096 $ 758,140
Assets $ 915,065 $1,068,280 $ 836,416
Deposits $ 748,603 $ 880,591 $ 698,203
Stockholders' equity $ 113,867 $ 139,559 $ 95,902
Shares outstanding,
basic - wtd 15,353 17,349 13,612
Shares outstanding,
diluted - wtd 15,661 17,741 13,899
(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 available-for-sale securities and
gains, losses and write-downs on foreclosed and repossessed
properties, leased equipment, and premises and equipment.
First Security Group, Inc.
Non-GAAP Reconciliation Table
(in thousands, except per share data)
---------------------------------------------------------------------
3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr
2006 2006 2006 2005 2005
------- ------- ------- ------- -------
Return on average
assets 1.06% 1.06% 0.95% 0.95% 0.84%
Effect of
intangible assets 0.03% 0.03% 0.03% 0.03% 0.02%
------- ------- ------- ------- -------
Return on average
tangible assets 1.09% 1.09% 0.98% 0.98% 0.86%
======= ======= ======= ======= =======
Return of average
equity 8.31% 8.09% 7.11% 7.17% 6.76%
Effect of intangible
assets 2.43% 2.40% 2.10% 2.16% 1.44%
------- ------- ------- ------- -------
Return on average
tangible equity 10.74% 10.49% 9.21% 9.33% 8.20%
======= ======= ======= ======= =======
Return on average
assets 1.06% 1.06% 0.95% 0.95% 0.84%
Effect of non-
recurring items -- -- -- 0.05% 0.15%
------- ------- ------- ------- -------
Operating return on
average assets 1.06% 1.06% 0.95% 1.00% 0.99%
Effect of average
intangible assets 0.03% 0.03% 0.03% 0.03% 0.02%
------- ------- ------- ------- -------
Operating return on
average tangible
assets 1.09% 1.09% 0.98% 1.03% 1.01%
======= ======= ======= ======= =======
Return on average
equity 8.31% 8.09% 7.11% 7.17% 6.76%
Effect of non-
recurring items -- -- -- 0.38% 1.20%
------- ------- ------- ------- -------
Operating return on
average equity 8.31% 8.09% 7.11% 7.55% 7.96%
Effect on average
intangible assets 2.43% 2.40% 2.10% 2.28% 1.70%
------- ------- ------- ------- -------
Operating return on
average tangible
equity 10.74% 10.49% 9.21% 9.83% 9.66%
======= ======= ======= ======= =======
Total equity to total
assets 12.75% 12.65% 13.01% 13.30% 13.00%
Effect of average
intangible assets -2.56% -2.62% -2.71% -2.79% -2.53%
------- ------- ------- ------- -------
Tangible equity to
tangible assets 10.19% 10.03% 10.30% 10.51% 10.47%
======= ======= ======= ======= =======
Efficiency ratio 67.18% 67.92% 70.69% 71.86% 71.63%
Effect of non-
recurring items -- -- -- -1.37% -3.90%
Effect of non-cash
items -2.29% -2.23% -3.41% -7.09% -2.26%
Effect of net interest
income, tax equivalent
adjustment -1.05% -1.24% -1.21% -1.05% -1.00%
------- ------- ------- ------- -------
Core efficiency ratio 63.84% 64.45% 66.07% 62.35% 64.47%
======= ======= ======= ======= =======
Non-interest income $ 2,776 $ 2,666 $ 2,436 $ 2,364 $ 2,388
Recovery on previously
disposed repossessed
asset -- -- -- -- --
Reinsurance under-
writing revenue -- -- -- -- --
------- ------- ------- ------- -------
Non-interest
operating income $ 2,776 $ 2,666 $ 2,436 $ 2,364 $ 2,388
======= ======= ======= ======= =======
Non-interest expense $10,031 $10,076 $10,039 $10,041 $ 9,154
Severance -- -- -- -- (157)
Impairment of long-
lived assets -- -- -- -- (308)
Jackson Bank & Trust
integration costs
and other -- -- -- (196) (38)
Reinsurance under-
writing expense -- -- -- -- --
------- ------- ------- ------- -------
Non-interest
operating expense $10,031 $10,076 $10,039 $ 9,845 $ 8,651
======= ======= ======= ======= =======
Net income $ 2,906 $ 2,816 $ 2,474 $ 2,262 $ 4,308
Extraordinary gain,
net of tax -- -- -- 210 (2,385)
Non-recurring expenses,
net of tax -- -- -- 133 342
------- ------- ------- ------- -------
Net operating income,
net of tax $ 2,906 $ 2,816 $ 2,474 $ 2,605 $ 2,265
======= ======= ======= ======= =======
Per Share Data:
Book value $ 7.98 $ 7.85 $ 7.86 $ 7.84 $ 7.84
Effect of intangible
assets (1.78) (1.81) (1.82) (1.84) (1.70)
------- ------- ------- ------- -------
Tangible book value $ 6.20 $ 6.04 $ 6.04 $ 6.00 $ 6.14
======= ======= ======= ======= =======
Net income, basic $ 0.17 $ 0.16 $ 0.14 $ 0.13 $ 0.28
Effect of extra-
ordinary and non-
recurring items,
net of tax -- -- -- 0.02 (0.13)
------- ------- ------- ------- -------
Net operating income,
basic $ 0.17 $ 0.16 $ 0.14 $ 0.15 $ 0.15
======= ======= ======= ======= =======
Net income, diluted $ 0.16 $ 0.16 $ 0.14 $ 0.13 $ 0.28
Effect of extra-
ordinary and non-
recurring items,
net of tax -- -- -- 0.02 (0.14)
------- ------- ------- ------- -------
Net operating income,
diluted $ 0.16 $ 0.16 $ 0.14 $ 0.15 $ 0.14
======= ======= ======= ======= =======
Supplemental Data
Allowance for loan
losses $ 9,862 $10,205 $10,103 $10,121 $10,519
Net interest income,
tax equivalent $12,398 $12,453 $12,022 $11,846 $10,587
Amortization of
intangibles $ 323 $ 326 $ 341 $ 334 $ 254
Gain on sales of
available-for-sale
securities, net $ -- $ -- $ -- $ 117 $ --
Gain on foreclosed and
repossessed property,
leased equipment, and
premises and
equipment $ (219) $ (121) $ (100) $ (45) $ (61)
Losses on foreclosed
and repossessed
property and premises
and equipment $ 63 $ 39 $ 11 $ 69 $ 28
Write-downs on
foreclosed and
repossessed property $ 98 $ 45 $ 200 $ 537 $ 43
Mortgage loan and
related fees $ 405 $ 408 $ 258 $ 355 $ 419
Year-to-Date
September 30,
2006 2005
-------- --------
Return on average assets 1.02% 0.78%
Effect of intangible assets 0.03% 0.02%
-------- --------
Return on average tangible assets 1.05% 0.80%
======== ========
Return of average equity 7.83% 6.85%
Effect of intangible assets 2.31% 1.45%
-------- --------
Return on average tangible equity 10.14% 8.30%
======== ========
Return on average assets 1.02% 0.78%
Effect of non-recurring items -- 0.04%
-------- --------
Operating return on average assets 1.02% 0.82%
Effect of average intangible assets 0.03% 0.02%
-------- --------
Operating return on
average tangible assets 1.05% 0.84%
======== ========
Return on average equity 7.83% 6.85%
Effect of non-recurring items -- 0.29%
-------- --------
Operating return on average equity 7.83% 7.14%
Effect on average intangible assets 2.31% 1.52%
-------- --------
Operating return on average tangible equity 10.14% 8.66%
======== ========
Total equity to total assets 12.75% 13.00%
Effect of average intangible assets -2.56% -2.53%
-------- --------
Tangible equity to tangible assets 10.19% 10.47%
======== ========
Efficiency ratio 68.56% 71.73%
Effect of non-recurring items -- -1.27%
Effect of non-cash items -2.63% -1.53%
Effect of net interest income,
tax equivalent adjustment -1.06% -0.96%
-------- --------
Core efficiency ratio 64.87% 67.97%
======== ========
Non-interest income $ 7,878 $ 6,483
Recovery on previously disposed
repossessed asset -- (173)
Reinsurance underwriting revenue -- (254)
Non-interest operating income $ 7,878 $ 6,056
======== ========
Non-interest expense $ 30,146 $ 25,332
Severance -- (157)
Impairment of long-lived assets -- (308)
Jackson Bank & Trust integration
costs and other -- (38)
Reinsurance underwriting expense -- (238)
-------- --------
Non-interest operating expense $ 30,146 $ 24,591
======== ========
Net income $ 8,196 $ 7,309
Extraordinary gain, net of tax -- (2,385)
Non-recurring expenses, net of tax -- 213
-------- --------
Net operating income, net of tax $ 8,196 $ 5,137
======== ========
Per Share Data:
Book value $ 7.98 $ 7.84
Effect of intangible assets (1.78) (1.70)
-------- --------
Tangible book value $ 6.20 $ 6.14
======== ========
Net income, basic $ 0.47 $ 0.54
Effect of extraordinary
and non-recurring items,
net of tax -- (0.16)
-------- --------
Net operating income, basic $ 0.47 $ 0.38
======== ========
Net income, diluted $ 0.46 $ 0.53
Effect of extraordinary and
non-recurring items, net of tax -- (0.16)
-------- --------
Net operating income, diluted $ 0.46 $ 0.37
======== ========
Supplemental Data
Allowance for loan losses $ 9,862 $ 10,519
Net interest income, tax equivalent $ 36,802 $ 29,320
Amortization of intangibles $ 990 $ 595
Gain on sales of available-for-sale
securities, net $ -- $ --
Gain on foreclosed and repossessed
property, leased equipment,
and premises and equipment $ (440) $ (336)
Losses on foreclosed and
repossessed property and
premises and equipment $ 113 $ 78
Write-downs on foreclosed
and repossessed property $ 343 $ 103
Mortgage loan and related fees $ 1,071 $ 1,115