Chattanooga’s FSG Bank battles back to profitability

Michael Kramer, FSG Bank

First Security Group, the Chattanooga-based holding company for FSG Bank, bounced back to its first profitable quarter in years after more than $140 million of losses since 2008.

FSG also regained its status as a billion-dollar bank, after slipping under $1 billion in assets during its turnaround.

Chattanooga’s biggest independent bank was badly battered by a loan portfolio that was highly exposed to the Great Recession, including vast tracts of real estate that became worthless after the housing bubble popped. FSG was forced to take bailout money from the U.S. Troubled Asset Relief Program, which led to the installation of U.S. Treasury-approved directors on its board.

But a 2013 recapitalization brought more than $90 million to bolster the bank’s cash reserves, allowing it to rid itself of bad assets, pay off TARP and begin making new loans. The bank’s officers signaled solidarity by buying stock in the company during the recapitalization, and executives expanded the company’s trust business in the wake of big banks that exited the Chattanooga market.

First Security Group earned $613,000 in the second quarter, or a penny per share, as net interest income climbed to $7.5 million from $5.5 million in the second quarter of 2013.