First Security Group, Inc. announced today it has hired Triumph Investment Managers, LLC and put the two top managers of the investment fund on the bank board to develop a plan to improve the performance of Chattanooga's biggest independent bank
Triumph will be paid $20,000 a month, and could be paid far more if it is able to successfully raise more capital and strengthen FSG Bank's business plan.
FSG announced the decision to hire Triumph and add new directors to its board after First Security CEO Rodger Holley resigned late last month.
Ralph "Gene" Coffman Jr., who was named to succeed Holley as head of the $1.2-billion asset bank, said he "looks forward to a close working relationship with Triumph." In a filing with the U.S. Securities and Exchange Commission, FSG said Triumph will work to "refine and further develop a comprehensive business plan" through possible changes in management, policies and organizational structure.
First Security has lost money over most of the past three years and its stock price has fallen below the $1 per share level required to maintain its listing on the Nasdaq stock exchange. FSG stock was initially issued at $10 per share in 2005. The bank borrowed $33 million from the federal Troubled Asset Relief Program and is operating under a consent order from the Federal Deposit Insurance Corp.
Coffman said he expects that employing Triumph and adding its top managers to the FSG board "will be beneficial to our shareholders and customers." The new directors added to FSG are Bob Keller and Jack Clarke, managing partners for Triumph.
Keller, 73, serves as chairman of Security Business Bancorp, a community bank based in San Diego, California; and as chairman of First State Bank, a community bank based in Cranford, N.J. Keller also is a director and chairman of the audit committee for Pennichuck Corp., a publicly traded water utility holding company in Nashua, N.H.
Clarke is the co-founder of The Baldwin & Clarke Companies, a diversified financial services organizations with over 36 years of experience advising regional financial institutions.
"As a long-time institutional shareholder of First Security, we recognize the unique and significant opportunities that exist within First Security's markets to build a strong and diversified financial institution," Keller said in a prepared statement. "At Triumph, we strive to invest in small cap community banks that have the potential to outperform their peers and create value for its shareholders. We believe that such an opportunity exists for First Security given the strong economic outlook in eastern and middle Tennessee and north Georgia and the Bank's position in the market."
First Security will pay Triumph $20,000 monthly. Following the completion of the preparation of First Security's strategic plan and FSG Bank obtaining compliance with the capital requirements set forth in its FDIC compliance order, First Security will pay Triumph an additional success payment of $500,000 and stock purchase warrants for 3.5 percent of the company's stock, according to SEC filings.