First Security (FSGI) 8-K First Security Group Announces Return to Profitability

First Security Group, Inc. and Subsidiary

Consolidated Financial Highlights

(unaudited)

	2nd Quarter			1st Quarter			4th Quarter			3rd Quarter			2nd Quarter			Year-to-Date
	2014			2014			2013			2013			2013			June 30, 2014			June 30, 2013
	(in thousands, except per share amounts and full-time equivalent employees)
Earnings:
Net interest income	$	7,545		$	6,925		$	6,478		$	6,165		$	5,486		$	14,470		$	10,726
Credit for loan and lease losses	$	(270	)	$	(972	)	$	(955	)	$	(1,632	)	$	(826	)	$	(1,242	)	$	(148	)
Non-interest income1	$	3,030		$	2,635		$	2,188		$	2,292		$	2,190		$	5,665		$	4,204
Non-interest expense1	$	10,101		$	10,445		$	10,150		$	11,197		$	12,578		$	20,546		$	26,414
Income tax provision (benefit)	$	131		$	132		$	119		$	322		$	(83	)	$	263		$	36
Dividends and accretion on preferred stock	$	—		$	—		$	—		$	—		$	(858	)	$	—		$	(1,381	)
Effect of exchange on preferred stock to common stock	$	—		$	—		$	—		$	—		$	26,179		$	—		$	26,179
Net income available (loss allocated) to common stockholders	$	613		$	(45	)	$	(648	)	$	(1,430	)	$	21,328		$	568		$	13,426
Per Share Data:
Net income available (loss allocated) to common stockholders, basic	$	0.01		$	0.00		$	(0.01	)	$	(0.02	)	$	0.39		$	0.01		$	0.47
Net income available (loss allocated) to common stockholders, diluted	$	0.01		$	0.00		$	(0.01	)	$	(0.02	)	$	0.39		$	0.01		$	0.47
Book value per common share	$	1.30		$	1.27		$	1.26		$	1.25		$	1.39		$	1.30		$	1.39
Performance Ratios:
Return on average assets	0.24		%	(0.02		)%	(0.26		)%	(0.56		)%	7.97		%	0.06		%	1.26		%
Return on average common equity	2.86		%	(0.21		)%	(3.08		)%	(7.21		)%	95.78		%	0.67		%	23.61		%
Efficiency ratio	95.52		%	109.26%			117.12%			132.40%			163.86%			102.04		%	176.92		%
Non-interest income to net interest income and non-interest income	28.65		%	27.56%			25.25%			27.10%			28.53%			28.14		%	28.16		%
Capital:
Total equity to total assets	8.55		%	8.63%			8.56%			8.24%			8.12%			8.55		%	8.12		%
Liquidity, Yields and Rates:
Interest-bearing cash - average balance	$	8,997		$	13,653		$	34,075		$	68,964		$	122,499		$	11,312		$	161,343
Investment securities - average balance	247,459			272,563			330,094			329,385			322,747			259,941			268,872
Loans - average balance	673,175			604,298			550,749			529,406			547,499			638,927			550,010
Average Earning Assets	$	929,631		$	890,514		$	914,918		$	927,755		$	992,745		$	910,180		$	980,225
Pure deposits2 - average balance	$	455,407		$	446,820		$	452,495		$	454,379		$	431,988		$	451,138		$	420,824
Core deposits3 - average balance	622,636			624,365			640,177			653,044			648,373			623,496			643,482
Customer deposits4 - average balance	757,704			773,336			801,827			829,926			847,007			765,477			843,596

	2nd Quarter			1st Quarter			4th Quarter			3rd Quarter			2nd Quarter			Year-to-Date
	2014			2014			2013			2013			2013			June 30, 2014			June 30, 2013
	(in thousands, except per share amounts and full-time equivalent employees)
Brokered deposits - average balance	84,021			70,204			84,143			90,323			111,801			77,150			138,245
Total deposits - average balance	$	841,725		$	843,540		$	885,970		$	920,249		$	958,808		$	842,627		$	981,841
Total loans to total deposits	76.01		%	71.85		%	68.02		%	58.76		%	56.59		%	76.01		%	56.59		%
Yield on earning assets	3.86		%	3.85		%	3.53		%	3.57		%	3.20		%	3.86		%	3.26		%
Rate on customer deposits (including impact of non-interest bearing DDAs)	0.37		%	0.41		%	0.48		%	0.56		%	0.63		%	0.39		%	0.66		%
Cost of deposits	0.59		%	0.65		%	0.74		%	0.84		%	0.94		%	0.62		%	0.99		%
Rate on interest-bearing funding	0.68		%	0.78		%	0.73		%	1.01		%	1.11		%	0.72		%	1.15		%
Net interest margin, taxable equivalent	3.30		%	3.21		%	2.89		%	2.71		%	2.27		%	3.26		%	2.26		%
Non-Interest Income:
Service Charges on Deposits	$	769		$	741		$	800		$	798		$	763		$	1,510		$	1,500
POS Fees	439			401			420			401			398			840			769
BOLI	235			351			239			238			241			586			484
Mortgage Banking Income	279			180			208			420			211			459			507
Trust	235			200			188			193			187			435			334
Other	376			369			165			242			236			745			456
Net Gains on Sales of Loans	450			22			—			—			—			472			—
Net Gains on AFS sales	247			371			168			—			154			618			154
Total Non-Interest Income	$	3,030		$	2,635		$	2,188		$	2,292		$	2,190		$	5,665		$	4,204
Non-Interest Expense:
Salaries and Benefits	$	5,225		$	5,274		$	5,503		$	5,807		$	5,665		$	10,499		$	11,274
Occupancy	776			820			799			891			794			1,596			1,612
Furniture and Fixtures	520			557			544			656			595			1,077			1,144
Professional Fees	690			599			417			533			706			1,289			1,307
FDIC insurance assessments	336			311			150			150			1,000			647			2,000
Write-downs on OREO and repossessions	76			309			375			374			309			385			1,623
Losses (Gains) on OREO, repossessions and fixed assets, net	(15		)	10			57			(116		)	(153		)	(5		)	(294		)
Non-performing asset expenses, net	184			221			450			488			1,142			405			3,018
Data processing	506			588			517			628			503			1,094			1,069
Communications	147			150			172			141			142			297			270
Debit card fees	232			258			181			207			201			490			419
Intangible asset amortization	49			48			57			67			71			97			145
Printing and supplies	150			207			121			213			176			357			314
Advertising	135			134			65			89			59			269			156
Insurance	303			325			251			523			946			628			1,351
Other	787			634			491			546			422			1,421			1,006
Total Non-Interest Expense	$	10,101		$	10,445		$	10,150		$	11,197		$	12,578		$	20,546		$	26,414
Asset Quality:
Net (recoveries) charge-offs	$	(470	)	$	228		$	(754	)	$	(32	)	$	374		$	(242	)	$	1,352

	2nd Quarter			1st Quarter			4th Quarter			3rd Quarter			2nd Quarter			Year-to-Date
	2014			2014			2013			2013			2013			June 30, 2014			June 30, 2013
	(in thousands, except per share amounts and full-time equivalent employees)
Net loan (recoveries) charged-offs to average loans, annualized	(0.14		)%	0.15		%	(0.55		)%	(0.02		)%	0.27		%	(0.08		)%	0.50		%
Non-accrual loans	$	4,891		$	6,027		$	7,203		$	6,803		$	8,628		$	4,891		$	8,628
Other real estate owned and repossessed assets, net	$	7,725		$	7,075		$	8,213		$	8,678		$	10,549		$	7,725		$	10,549
Loans 90 days past due	$	1,083		$	854		$	928		$	509		$	332		$	1,083		$	332
Non-performing assets (NPA)	$	13,699		$	13,956		$	16,344		$	15,990		$	19,509		$	13,699		$	19,509
NPA to total assets	1.35		%	1.42		%	1.67		%	1.58		%	1.83		%	1.35		%	1.83		%
Non-performing loans (NPL)	$	5,974		$	6,881		$	8,131		$	7,312		$	8,960		$	5,974		$	8,960
NPL to total loans	0.91		%	1.14		%	1.39		%	1.37		%	1.65		%	0.91		%	1.65		%
Allowance for loan and lease losses to total loans	1.43		%	1.52		%	1.80		%	2.00		%	2.27		%	1.43		%	2.27		%
Allowance for loan and lease losses to NPL	157.35		%	133.70		%	129.14		%	146.33		%	137.28		%	157.35		%	137.28		%
Period End Balances:
Loans, excluding HFS	$	659,539		$	604,859		$	583,097		$	534,627		$	542,019		$	659,539		$	542,019
Allowance for loan and lease losses	$	9,400		$	9,200		$	10,500		$	10,700		$	12,300		$	9,400		$	12,300
Intangible assets	$	233		$	282		$	330		$	388		$	455		$	233		$	455
Assets	$	1,012,685		$	980,505		$	977,574		$	1,011,855		$	1,066,649		$	1,012,685		$	1,066,649
Total deposits	$	867,709		$	841,832		$	857,268		$	909,848		$	957,811		$	867,709		$	957,811
Common stockholders' equity	$	86,566		$	84,654		$	83,649		$	83,388		$	86,654		$	86,566		$	86,654
Total stockholders' equity	$	86,566		$	84,654		$	83,649		$	83,388		$	86,654		$	86,566		$	86,654
Common stock market capitalization	$	144,594		$	138,601		$	153,187		$	138,534		$	135,469		$	144,594		$	135,469
Full-time equivalent employees	264			275			285			313			327			264			327
Common shares outstanding	66,633			66,635			66,603			66,603			62,428			66,633			62,428
Average Balances:
Loans, including HFS	$	673,175		$	604,298		$	550,749		$	529,406		$	547,499		$	638,927		$	550,010
Intangible assets	$	265		$	313		$	363		$	405		$	476		$	289		$	537
Earning assets	$	929,631		$	890,514		$	914,918		$	927,755		$	992,745		$	910,180		$	980,225
Assets	$	1,006,143		$	967,624		$	993,447		$	1,016,919		$	1,070,895		$	986,988		$	1,062,181
Deposits	$	841,725		$	843,540		$	885,970		$	920,249		$	958,808		$	842,627		$	981,841
Common stockholders' equity	$	85,613		$	84,340		$	84,125		$	79,382		$	89,069		$	84,979		$	56,870
Total stockholders' equity	$	85,613		$	84,340		$	84,125		$	79,382		$	92,658		$	84,979		$	56,870
Common shares outstanding, basic - wtd	65,731			65,726			66,603			62,600			55,174			65,728			28,542
Common shares outstanding, diluted - wtd	65,737			65,726			66,603			62,600			55,176			65,732			28,565
1 Certain amounts were reclassified between non-interest income and non-interest expense to conform with the current presentation.
2 Pure deposits are all transaction-based accounts, including non-interest bearing DDAs, interest bearing DDAs, money market accounts and savings accounts.
3 Core deposits are Pure deposits plus customer certificates of deposits less than $100,000.
4 Customer deposits excluded brokered deposits.

First Security Group, Inc. and Subsidiary

Consolidated Financial Highlights

Non-GAAP Reconciliation Table

(unaudited)

	2nd Quarter		1st Quarter		4th Quarter		3rd Quarter		2nd Quarter			Year-to-Date
	2014		2014		2013		2013		2013			June 30, 2014		June 30, 2013
	(in thousands, except per share data)
Total stockholders' equity	$	86,566	$	84,654	$	83,649	$	83,388	$	86,654		$	86,566	$	86,654
Effect of preferred stock	—		—		—		—		—			—		(32,660		)
Common stockholders' equity	$	86,566	$	84,654	$	83,649	$	83,388	$	86,654		$	86,566	$	53,994
Average total stockholders' equity	$	85,613	$	84,340	$	84,125	$	79,382	$	92,658		$	84,979	$	56,870
Effect of average preferred stock	—		—		—		—		(3,589		)	—		(36,175		)
Average common stockholders' equity	$	85,613	$	84,340	$	84,125	$	79,382	$	89,069		$	84,979	$	20,695