FSGBank CEO gets 3% raise for 2008

The top executive at one of Chattanooga’s locally owned banks saw a slight increase in his total compensation last year, but an expert says in cases where the bank turned a profit, the raise was deserved.

First Security Group Inc., the parent company of FSGBank, managed to eke out net income of $1.4 million in 2008 — undeniably a bad year for banks.

First Security Chief Executive Officer Rodger B. Holley earned the increase in his compensation, said Paul Lapides, director of the Corporate Governance Center at Kennesaw State University near Atlanta.

Mr. Holley’s total compensation was valued at just under $840,000, representing a 3 percent increase, which according to Mr. Lapides is “certainly in the realm of reasonable compensation.”

Though his total compensation increased in 2008, 44 percent of that total came from a $370,000 contribution to Mr. Holley’s pension, according to the company’s proxy statement filed with the Securities and Exchange Commission.

His base salary for the year was $358,800, an increase of 5.5 percent from 2007. Without the pension contribution, Mr. Holley’s total compensation would have been $469,528, including stock and option awards and other compensation.

None of the top three executives, who in 2008 also included Lloyd L. “Monty” Montgomery III and William L. “Chip” Lusk Jr., received a cash bonus for the year, according to the proxy statement. Mr. Montgomery left the bank earlier this month though he remains a director.

While scoring a profit for the year, First Security reported a net loss of $3.3 million for the fourth quarter, compared to net income of $3.1 million in the prior-year period. The company’s 2008 annual income was down 88 percent from $11.4 million in 2007.

“First Security’s 2008 performance directly impacted the compensation of our executive officers,” Mr. Lusk said. “Our compensation committee, comprised entirely of independent directors, decided not to grant any bonuses or other incentive compensation based on our performance, and to not award any increase in the base salary of our executive officers. As a result, our executives’ cash compensation fell by over 12 percent in 2008 from 2007 levels.”

The bank’s decision to freeze the salaries of all of the bank’s top executives in 2009 also signals the bank is doing the right thing, Mr. Lapides said.

“I applaud them for that,” he said. “If you want people to follow you, you have to give them a reason to follow you.”