Chattanooga-based banking company First Security Group, Inc. reported a loss for the third quarter, largely because of a goodwill write-off taken during the period. Shares of FSG's stock closed at $3.68, down 2 cents from opening.
The parent of company of FSGBank took a $24.8 million after tax goodwill impairment charge during the quarter, leading to total loss of $28.6 million or $1.84 per diluted share during the quarter.
Company officials emphasized the write-off had no effect on the company's cash flows, liquidity or ability to conduct business.
"In light of the uncertain economic environment, we eliminated our intangible goodwill in the third quarter through a noncash 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.
Without the write-off, the banking company's losses totaled $3.9 million for the quarter compared to profit of $826,000 for the same period in 2008.
Banking analyst Jim Schutz of Sterne Agee & Leach Inc. said banks across the country have been writing off their goodwill.
"It really has nothing to do with their capital ratios, especially from a regulatory standpoint," Mr. Schutz said. "It's a noncash charge; they are simply writing off an intangible asset."
FSG's loss during the quarter, excluding the writedown, came in a little below Mr. Schutz' estimate. The reason, he said, was the bank was extra cautious and increased its loan loss reserves to $25.7 million from $19.3 million.
"They have a strong capital position, when you take a look at their asset quality numbers, they are probably a little better than most banks their size," Mr. Schutz said. "It's a matter of working out the problems they have and getting on with business."