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First Security Group Inc. Reports Operating Results (10-Q/A)

November 16, 2010 | About:
10qk

10qk

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First Security Group Inc. (FSGI) filed Amended Quarterly Report for the period ended 2010-06-30.

First Security Group Inc. has a market cap of $17.6 million; its shares were traded at around $1.0728 with and P/S ratio of 0.2.

Highlight of Business Operations:

Our internal review identified a total of $818 thousand of OREO write-downs that were not reported in the appropriate accounting periods. The internal review also assessed the compliance with our OREO policies. Our policies require an initial appraisal to determine the fair value of the property at the time of foreclosure. The initial fair value becomes the cost basis of the asset. Subsequent to the initial valuation, an updated appraisal is required on at least an annual basis. Our internal review determined that 27 properties were subject to new appraisals during the fourth quarter of 2009 and the first quarter of 2010. Of these properties, two appraisals were received in the fourth quarter of 2009 and the remaining 25 appraisals were received subsequent to March 31, 2010. Additionally, the two appraisals received in the fourth quarter of 2009 indicated write-downs totaling $222 thousand, however, these write-downs were not recorded until after a change in personnel on July 1, 2010. In the opinion of management and the Audit/Corporate Governance Committee, the control deficiencies related to the administration of OREO could have led to a material misstatement of the consolidated financial statements, and thus, we have amended our assessment over internal controls over financial reporting to indicate that a material weakness existed as of December 31, 2009.

As of June 30, 2010, we had total consolidated assets of $1.3 billion, total loans of $851.4 million, total deposits of $1.2 billion and stockholders equity of $136.8 million. For the three and six months ended June 30, 2010, our net loss available to common shareholders was $2.6 million and $4.3 million, respectively, resulting in basic and diluted net loss of $0.17 per share for the quarter and $0.27 per share for the year-to-date period.

As of June 30, 2009, we had total consolidated assets of $1.2 billion, total loans of $968.5 million, total deposits of $1.0 billion and stockholders equity of $172.5 million. For the three and six months ended June 30, 2009, our net loss available to common shareholders was $1.9 million and $3.2 million, respectively, resulting in basic and diluted net loss of $0.12 per share for the quarter and $0.21 per share for the year-to-date period.

For the three and six month periods ended June 30, 2010, net interest income decreased by $1.5 million and $2.1 million, respectively, and noninterest income decreased by $86 thousand and $233 thousand, respectively, compared to the same periods in 2009. For the three and six months ended June 30, 2010, noninterest expense increased by $1.9 million and $2.3 million, respectively, compared to the same periods in 2009. The decline in net interest income is primarily attributable to the shift in earning assets from loans to noninterest cash partially offset by reductions in rates on interest bearing liabilities. Noninterest income decreased primarily due to lower deposit fees while noninterest expense increased primarily due to higher expenses associated with nonperforming assets, including write-downs, losses and holding costs. These increases were partially offset by reductions in salary and benefit expense. Full-time equivalent employees were 333 at June 30, 2010, compared to 353 at June 30, 2009.

We reported a net loss to common stockholders for the three and six month periods ended June 30, 2010 of $2.6 million and $4.3 million compared to a net loss for the same periods in 2009 of $1.9 million and $3.2 million, respectively. In the second quarter of 2010, basic and diluted net loss per share was $0.17 on approximately 15.7 million weighted average shares outstanding. On a year-to-date basis, basic and diluted net loss per share was $0.27 on approximately 15.7 million weighted average shares outstanding.

Net interest income (the difference between the interest earned on assets, such as loans and investment securities, and the interest paid on liabilities, such as deposits and other borrowings) is our primary source of operating income. For the three months ended June 30, 2010, net interest income decreased by $1.5 million, or 14.7%, to $9.0 million compared to $10.5 million for the same period in 2009. For the six months ended June 30, 2010, net interest income decreased by $2.1 million, or 10.1%, to $18.6 million for the period ended June 30, 2010, compared to $20.7 million for the same period in 2009.

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