published Friday, April 30th, 2010

First Security Group reports 1st-quarter net loss


by Tamara Best

First Security Group Inc. reported Thursday a first-quarter net loss, and subsidiary FSGBank agreed with federal regulators to implement steps to bolster the bank.

The Chattanooga-based bank holding company posted a net loss of $1.6 million, or 10 cents per diluted share, for the quarter.

A year ago, the company reported a net loss of $1.3 million, or 8 cents per diluted share.

Rodger B. Holley, chairman, CEO and president of First Security, cited the company's progress in the past six months on the road to profitability.

"We have fortified the balance sheet with liquid assets, strengthened our credit underwriting processes, reduced balance sheet risks and controlled our overhead expenses," he said. "These initiatives will position us to return to profitability and growth as the economy improves."

The consensus analyst estimate was the company would lose 12 cents per share.

In a consent order between FSGBank and the Office of the Controller of the Currency, the bank agreed to make the following improvements:

* Appoint a committee to oversee the Bank's compliance with the Order within 15 days. The company said it already has appointed such a panel consisting of the bank's independent directors -- Randall L. Gibson, Carol H. Jackson, Ralph L. Kendall and D. Ray Marler.

* Develop and submit to the OCC for review a written strategic plan covering at least a three-year period. The review must include objectives for the overall risk profile, earnings performance, growth, balance sheet mix, off-balance sheet activities, liability structure, capital adequacy and reduction in the volume of nonperforming assets.

* Develop and submit to the OCC for review a written capital plan covering at least a three-year period.

* Review and revise its existing credit policy to improve the bank's loan portfolio management as well as policies related to leasing, retail credit and collateral exceptions.

* Review and revise its existing written concentration management program and adopt plans to reduce the risk of exposure to any concentration deemed imprudent.

Mr. Holley said management is working diligently to "ensure full compliance with the order to improve the bank," with strategic improvements including stress testing of the loan portfolio and capital position and reducing balance sheet risks, among other measures.

Mr. Holley said the company has taken a close look at its credit risk management, implementing a centralized approach to lending. First Security has hired two senior officers and two special asset officers and believes it will help "improve consistency, increase quality and provide higher levels of operational efficiency," he said.

Phil Beaudette, who serves as chief credit officer, has led the way in restructuring and expanding the credit administration of the firm, the company said.

ABOUT THE COMPANY

FSGBank has 39 full-service banking offices in Tennessee and Georgia.

Mr. Holley said that "combining our commitment to capital with the proactive measures taken though our strategic initiatives, First Security will be in a position of strength as the economy transitions from recession to recovery."

In a conference call with analysts, First Security's management emphasized confidence in the company's return to profitability due to its restructuring efforts and business opportunities in the city.

First Security shares closed Thursday at $3.10, up 4 cents.

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