Larry Mauldin, director and chairman of the board at Chattanooga-based FSGBank.

It's been a rough couple of years, but FSGBank executives told shareholders on Wednesday that the battered billion-dollar bank is back on track.

FSGBank was bailed out by federal taxpayers during the economic crisis, as bundles of real estate loans defaulted and left the bank with lots of foreclosed properties and operating losses. Federal regulators appointed two board members to help oversee the bank, and it was nearly removed from the NASDAQ.

But with a new board, a fresh management team and a recent round of investment financed by a recapitalization earlier this year, officials said the bank is working its way back to a healthy state.

"I believe we're on the right track," said Larry Mauldin, the retired SunTrust executive who joined FSGBank in 2012 as chairman of the board. "We're showing signs of improving our results. There is a sense of urgency."

Net interest income continued to fall in 2012, dipping to $23.6 million from $27.8 million in 2011, roughly half the $45 million that the bank earned in 2008. The company lost $39.6 million in 2012, for a total of $146.5 million lost during the recession so far.

But an infusion of $91 million during the company's recapitalization, and a push to increase deposits and lending activity should turn those negative numbers into positive results, said Michael Kramer, president and CEO of the bank.

"We're talking about commercial loans, and we're really talking about owner-managed businesses or professionally-managed businesses with closely-related owners," Kramer told shareholders.

Kramer hired a handful of former SunTrust wealth management executives in 2012 to bolster relationships with local small business owners.

And the bank has sold off much of its foreclosed property, decreasing bad assets 76 percent to $48.6 million from $201.2 million at the height of the financial crisis.

Kramer also plans to continue the bank's drive to boost deposits, relying more on fees from customer transactions than interest from risky loans.

"These customers are sticky, they build relationships with you and these folks actually have accounts that generate fees," he said. "The fee businesses are critical to the long-term future of the company."

But none of these things can happen without a culture of accountability, he said. Unspoken in his remarks was a criticism of FSGBank founder and CEO Rodger Holley, who left the bank in 2011 under a federal consent order, after a company report identified a "failure to establish a culture of integrity and high ethical standards, including ineffective internal communication of what constitutes proper business practices, compliance with the code of conduct and ethical behavior generally."

The next step for chief financial officer John Haddock is to finalize the bank's recapitalization, which could raise more than $100 million when complete, and begin working toward becoming consistently profitable, he said. The recapitalization includes an ongoing offer to existing shareholders to buy shares in the company at the $1.50 per share price paid by the outside investors earlier this year.

FSGBank stock closed Wednesday at $2.33 per share.

"The recap was one of the most significant milestones in company history," Haddock said. "This actually helps us to rebuild FSG."

Contact staff writer Ellis Smith at esmith@timesfreepress.com or 423-757-6315.